Alison Frankel

We’re less than three months away from Manhattan federal judge Lewis Kaplan’s trial to determine whether an Ecuadorean court’s $18 billion judgment against Chevron for contaminating the Lago Agrio region of the rainforest is enforceable in the U.S. In the declaratory judgment proceeding, Chevron’s lawyers at Gibson, Dunn & Crutcher will argue, as they have for the last 18 months, that the Ecuadorean judgment was the result of political and public relations chicanery, much of it committed by the plaintiffs lawyer who spearheaded the Ecuadoreans’ case, Steven Donziger. But according to Donziger’s lawyers at Keker & Van Nest, Judge Kaplan won’t give them or their client a chance to be heard as the declaratory judgment case races to trial.

On Thursday, Keker filed its third motion asking Judge Kaplan to reconsider a May 31 ruling limiting Donziger’s participation in the case. “The exclusion of Donziger from full intervention in this ‘do-over’ trial has reached the point of absurdity,” Keker partner Elliot Peters wrote in the 11-page Donziger filing. “The trial will be about him, and he won’t be there to defend himself against Chevron calumny.”

“This is ironic, in the bitter sense,” Peters told me in an interview Friday. “The U.S. court is denying due process to a litigant in a case in which the U.S. gets to decide whether the court of a different sovereign nation denied due process.”

The controversy over Donziger’s participation arose in May, after Judge Kaplan split Chevron’s 2010 suit against Donziger and several other witnesses into two pieces — a declaratory judgment action to determine the enforceability of the Ecuadorean judgment and racketeering claims against Donziger and the other defendants for their allegedly fraudulent prosecution of the Ecuadorean case. Gibson Dunn then re-filed the declaratory judgment piece of the original case against Donziger as a separate suit, without naming Donziger as a defendant. Judge Kaplan subsequently concluded that Donziger couldn’t intervene in the declaratory judgment action because he wasn’t a party, didn’t have a financial interest in the outcome, and couldn’t repair any damage to his reputation in the separate racketeering case.

The judge granted Donziger’s lawyers the right to cross-examine deposition witnesses testifying directly about his conduct, but said that was all Keker & Van Nest could do. Though Kaplan said he might revisit the ruling, he denied two July reconsideration motions by Keker & Van Nest. The transcript of an August 2 phone conference shows that those two motions hadn’t swayed the judge at all. At the end of the conference, John Keker said, “Your honor, can I say something?” Kaplan replied: “No, Mr. Keker. You’re not in the case for this purpose.You’re being given the courtesy of being conferenced in but the scope of your intervention has been fixed.”

Nevertheless, Keker & Van Nest filed Thursday’s motion in yet another attempt to change Judge Kaplan’s mind. Keker partner Peters argued that Chevron’s latest witness lists and subpoenas, filed after the August 2 conference, made it clear that the oil company is trying to relitigate the Ecuadorean case, which necessarily means a re-examination of Donziger’s conduct in the declaratory judgment trial. “If what actually happened in Ecuador matters at all to the court’s decision, the court should let Donziger intervene, grant the Lago Agrio plaintiffs’ motion to continue, and let the parties conduct a real, not show, trial,” the Keker & Van Nest brief said.

“The judge’s [May 31] ruling gave us no rights, but prevents us from appealing,” said Peters, explaining why Keker & Van Nest keeps coming back to Kaplan. “What’s the harm of allowing Donziger in the litigation? Why are we engaged in this charade that he can’t participate in a trial about his conduct?”

The Lago Agrio plaintiffs, who are now represented by Smyser, Kaplan & Veselka in the declaratory judgment proceeding, support Donziger’s intervention. “Judge Kaplan encouraged Chevron to file the lawsuit against Steven Donziger and when Donziger demanded an immediate jury trial Judge Kaplan all but directed Chevron to drop him as a defendant,” said plaintiffs spokewoman Karen Hinton in an e-mail statement. “Now he won’t let Donziger anywhere near his courtroom. This is turning into a home-cooked judicial bailout for Chevron.”

Chevron counsel Randy Mastro of Gibson Dunn doesn’t seem too worried that Judge Kaplan will let Keker & Van Nest into the case. In addition to Judge Kaplan’s two rejections of Keker motions to reconsider his May ruling, the U.S. Court of Appeals for the Second Circuit has already turned down two Donziger bids to review Kaplan’s order. “Donziger’s lawyers have taken so many bites of the apple that they’ve bitten through the core,” Mastro quipped. He said there’s no reason for Donziger to participate in the declaratory judgment trial, any more than Gibson Dunn should be a party to the case. “It’s ludicrous to suggest that Donziger has independent status to appear as a party in a proceeding to determine the enforceability of the judgement,” Mastro said. “We’re merely the lawyers.”

I’d say the odds of Judge Kaplan reversing course are slim, but the judge did offer a rare (though tiny) win to the Ecuadorian plaintiffs Thursday. In a one-paragraph order, Kaplan quashed Chevron’s most recent subpoena to the “Donziger entity” as “overly broad and perhaps ambiguous.”

For more of Alison’s posts, please go to Thomson Reuters News & Insight

Follow Alison on Twitter

It’s been more than 15 years since e-mail began to enliven (or blight, depending on your perspective) the discovery process. By now — despite some notable fiascos (see, for instance, here and here) — we’ve got well-established case law to guide lawyers and their clients in e-mail production. Too bad that’s yesterday’s means of communication. Today it’s all about Twitter, Facebook, and Google+, whatever that is. So to celebrate establishing a Twitter account for On the Case (@AlisonFrankel), I figured I’d look at the e-discovery frontier of social media.

The news isn’t very good. What little consideration the courts have given to social media discovery has been in the context of postings by individuals, not corporations. And all signals indicate that social media data is broadly discoverable. As Gibson, Dunn & Crutcher explains in its just-published e-discovery report, courts continue to find that when you post to Facebook, Twitter, or their equivalents, you give up the expectation of privacy, even if you’ve sent private messages or set up restrictions on who can see your profile. Judges are increasingly likely to order litigants to provide access to their social media accounts and to preserve their posts. In May, for instance, a Pennsylvania state court judge ruled that a personal injury plaintiff had to turn over even his private Facebook posts to the defense.

It’s no giant leap from that kind of ruling to a looming problem for businesses. As corporations venture into social media to promote their brands and reach out to clients and customers, they have to be prepared to face the same discovery demands. In late July, a Symantec flash poll of 1,225 information tech executives reported that “social media incidents” — such as employees posting confidential corporate information – cost businesses an average of $4.3 million, of which more than $650,000 was attributed to litigation costs. That’s just the beginning, though, according to Symantec, which says corporations face increasing risk of scrutiny for their social media posts. E-discovery of such posts is a certainty, according to Symantec. (Caveat emptor: Symantec has an ulterior motive for predicting social media e-discovery doom. On Monday the company introduced a new version of its e-mail archiving software that includes social media archiving as well.)

But Symantec isn’t alone. The tech consulting firm Gartner has said that by 2013, “half of all companies” will have faced e-discovery demands for material from social media sites. Social media e-discovery precedent is “a patchwork,” Gartner says, and there’s no reason to expect “clear guidance from courts or regulators in the near future.” Gartner analyst Debra Logan (who didn’t respond to my request for an interview) warned, “In e-discovery, there is no difference between social media and electronic or even paper artifacts. The phrase to remember is ‘if it exists, it is discoverable.’” (In a prescient post in January, Sheppard Mullin’s e-discovery blog wrote about Citigroup’s pioneering program to archive Twitter data as it moves to Twitter-based customer service.)

So what does the prospect of untold reams of social media discovery material mean for lawyers? The same kind of information-overload headaches lawyers faced at the dawn of e-mail discovery, according to Ian Wilson, the CEO of the e-discovery software company Servient. (Wilson is also a lawyer.) Wilson posits a nightmare scenario of lawyers being forced to plough through spools of Twitter posts — not just official corporate postings, but, in all likelihood, posts by corporate employees who may not even realize their material is discoverable — to find Tweets that are potentially related to litigation. (Wilson said Servient can ease the pain with software to help lawyers screen out irrelevant posts.)

“There’s a new mass of information, and we have to figure out what to do with it,” Wilson told me. “It’s even more burdensome that e-mail.”

For more of Alison’s posts, please go to Thomson Reuters News & Insight

Follow Alison on Twitter

The damages claims in Irving Picard’s pursuit of the banks that allegedly helped Ponzi schemer Bernard Madoff are so outsized that even a simple two-page letter from a federal judge can lead to a $2 billion kerfuffle. On Tuesday, Manhattan federal district court judge Colleen McMahon sent a letter to lawyers for Picard, the bankruptcy trustee for Bernard L. Madoff Investment Securities, and to lawyers for UBS, which is a defendant in two of Picard’s suits. UBS’s counsel at Gibson, Dunn & Crutcher had moved in June to transfer two Picard suits naming the bank as a defendant out of bankruptcy court and into federal court; Judge McMahon, who is overseeing Picard’s case against JPMorgan Chase, agreed to take the cases on July 7 and began requesting information, by letter, from Picard counsel at Baker & Hostetler and UBS counsel at Gibson Dunn.

To understand Judge McMahon’s July 19 letter — and how it was misinterpreted — it’s important to know that in the two actions naming UBS defendants, Picard is asserting different causes of action and seeking different amounts of money. In the case known as Luxalpha, Picard and Baker & Hostetler claim that UBS breached its fiduciary duty and aided and abetted fraud. That suit demands $2 billion from UBS and other defendants. The other case, known as LIF, is a clawback action demanding the return of all the money the bank and other defendants redeemed from Madoff or earned in fees, a total of $550 million, according to Picard. Though the press release announcing the LIF suit refers to “alleged financial fraud” by UBS, the suit actually claims only unjust enrichment and another common-law cause of action as an alternative to the clawback theory.

In a July 14 letter, Judge McMahon told Baker & Hostetler and Gibson Dunn that she needed more explanation of how the LIF and Luxalpha cases intersected and overlapped, and warned the lawyers that she wasn’t going to slow down the JPMorgan case to address complications in the UBS suit. In response, the Picard lawyers decided to simplify matters, reasoning that if they dropped the alternative-theory common law claims in the $550 million LIF case, there would be no reason for the case to stay in federal court. Picard could simply go after the $550 million in a bankruptcy court clawback action.

Baker & Hostetler’s letter explaining its decision to drop LIF claims to Judge McMahon isn’t in the docket. But the judge entered into the record her July 19 letter, in which she notes (rather cryptically unless you know the background) that Picard “has withdrawn his non-bankruptcy claims.”

On Wednesday morning, Bloomberg put out a hot story, reporting that Picard “may drop $2 billion in claims against UBS AG,” and quoting a bankruptcy lawyer who’s not involved in the Madoff litigation saying that Picard may have made a tactical decision to retreat from bigger claims. Bloggers who picked up the story reported that Picard was only going to pursue clawback claims against UBS. (See here and here.) Bloomberg updated its story to indicate that UBS’s shares were up in both Switzerland and the United States “after the withdrawal of Picard’s claims was reported.”

But according to Picard’s lawyers, he hasn’t given up a penny of his demands against UBS. Oren Warshavsky of Baker & Hostetler told OTC Wednesday that the common-law claims Picard dropped from the $550 million LIF suit “were alternative theories of recovery,” to the bankruptcy-court clawback theory. “By dismissing the two common-law causes of action, our goal is to streamline the case and effect judicial economy. We did not diminish the amount sought in any way,” he said.

Moreover, Picard hasn’t dropped any claims in the $2 billion Luxalpha fraud case against UBS, in which both sides will now presumably brief the very serious questions of standing and pre-emption that Judge McMahon is considering in Picard’s JPMorgan case.

I contacted the editor of the Bloomberg story, asking for comment on my reporting that Picard hadn’t, in fact, dropped any valuable claims. “Our story is based on Judge McMahon’s letter to counsel filed in the district court docket yesterday,” he replied in an e-mail. Bloomberg updated its story Wednesday afternoon to include a comment from Picard’s spokesperson stating that the dropped claims don’t impact the damages sought against UBS. Bloomberg also reports that the bankruptcy lawyer quoted in early versions of the story had reviewed “Picard’s original suit against UBS” (it doesn’t say which one) and concluded, “The trustee ‘will get large sums of money using garden bankruptcy law, but he is giving up at least $2 billion based on common and state law claims.’”

UBS’s lawyers at Gibson Dunn didn’t respond to requests for comment.

There’s going to be big news coming soon in Picard’s cases against the banks. Judge Jed Rakoff has promised to rule by the end of this month on the threshold question of whether the trustee has standing to sue the banks that allegedly abetted Madoff’s fraud. If Rakoff agrees with the banks, that’s a titanic defeat for Picard.

But the trustee dropping duplicative claims to keep his case in the friendlier confines of bankruptcy court? Not so much.

(Reporting by Alison Frankel)