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Dejoria v. Maghreb Petroleum Exploration, S.A.

United States Court of Appeals, Fifth Circuit

August 15, 2019

JOHN PAUL DEJORIA, Plaintiff - Appellee

          Appeal from the United States District Court for the Western District of Texas

          Before JOLLY, COSTA, and ENGELHARDT, Circuit Judges.


         In 1999, philanthropist, environmental activist, and haircare and liquor tycoon John Paul DeJoria was attempting to achieve yet another title: oil magnate. It did not go well. What started as a project that promised to provide Morocco with decades of energy independence ended with a Moroccan court's levying a judgment north of $100 million against DeJoria and his business partner. Whether Texas should recognize that foreign judgment is now the centerpiece of this decades-long dispute. In fact, proving that it is often harder to collect a judgment than win one, this is the second time the question of the judgment's validity has come before us. This time around we decide whether an interim change in the Texas recognition law violates the state's constitutional ban on retroactive laws. If not, we must determine whether the district court properly followed this court's 2015 mandate and whether it properly applied the new law.


         The facts of this case are littered across the pages of the Federal Reporter. See DeJoria v. Maghreb Petroleum Expl., S.A., 804 F.3d 373 (5th Cir. 2015); Skidmore Energy, Inc. v. Maghreb Petroleum Expl., S.A., 337 Fed.Appx. 706 (9th Cir. 2009); Skidmore Energy, Inc. v. KPMG, 455 F.3d 564 (5th Cir. 2006). Because this court has already described the background of this corner of the dispute, we will do our best not to spill unnecessary ink. See DeJoria, 804 F.3d at 377-78. The winding path the case followed after our court's 2015 remand will spill enough as it is. For now, suffice it to say that in 1999 DeJoria and his business partners started Lone Star Energy Corporation in Morocco with the help of King Mohammed VI's first cousin. The enterprise hoped to discover oil reserves in Northeastern Morocco. The prospects looked good-so good that the King took to Moroccan airwaves to announce that the country would soon be in possession of "copious and high-quality" oil that would allow Morocco to be self-sufficient for 30 years. The King's announcement made the Moroccan stock market jump more than five percent in anticipation of the expected riches.

         But when the promised reserves did not materialize, the project quickly soured. DeJoria and his business partner were forced off Lone Star's board, and, fearing for their lives because of an alleged death threat, fled Morocco, never to return.

         Not long after their ouster, DeJoria and his associates were sued in Moroccan commercial court by Lone Star's new management (now called Maghreb Petroleum Exploration, S.A.) and its major investor, Mideast Fund for Morocco. Maghreb, the term we will use to collectively refer to those two entities, alleged that DeJoria and his partners mismanaged Lone Star and fraudulently induced investment in the doomed oil project. Seven years later, the Moroccan court returned a large judgment for Maghreb. It dismissed claims against five of the seven defendants, placing the blame-and the bill for 969, 832, 062.22 Moroccan dirhams[1]-squarely on DeJoria and his partner.

         Before going further, a little bit about the legal backdrop is helpful. In order to collect its winnings from DeJoria's assets in the United States, Maghreb must convince an American court to recognize and enforce the Moroccan judgement.[2] Recognition of foreign-country judgments is a matter of state law and was once mostly governed by principles of comity. See Hilton v. Guyot, 159 U.S. 113, 163-64, 180-81 (1895). In some jurisdictions, comity is still the rule. See, e.g., Kwongyuen Hangkee Co., Ltd. v. Starr Fireworks, Inc., 634 N.W.2d 95, 96 (S.D. 2001). But most states have codified their recognition standards and procedures by enacting the 1962 Uniform Foreign Money Judgments Recognition Act[3] or its 2005 successor, the Uniform Foreign-Country Money Judgments Recognition Act.[4] Both acts make foreign judgments that are final and conclusive where rendered "enforceable" in the relevant state court just like another state's judgment would be. Unif. Foreign-Country Money Judgments Recognition Act § 7(2), U.L.A. (2005) (West); Unif. Foreign Money Judgment Act § 3, U.L.A. (1962) (West). Although these acts presumptively treat properly filed foreign judgments as enforceable, exceptional circumstances can rebut that presumption. Some of those exceptions are mandatory, others discretionary. If the rendering court did not have personal jurisdiction over the judgment debtor, for instance, the state court (or federal court sitting in diversity) cannot recognize the foreign judgment. 2005 Unif. Act § 4(b)(2); 1962 Unif. Act § 4(a)(2). Other grounds for nonrecognition, like fraud in obtaining the judgment, instead give the American court the option of not recognizing the foreign judgment. 2005 Unif. Act § 4(c)(2); 1962 Unif. Act § 4(b)(2).

         So, in 2013, Maghreb came to the United States seeking recognition of the Moroccan judgment.[5] DeJoria resisted in several ways. At the time, Texas had adopted (with slight modification) the 1962 Uniform Recognition Act. See Tex. Civ. Prac. & Rem. Code § 36.001-08 (Vernon's 2015). That law included ten nonrecognition grounds. DeJoria pressed seven of them. The district court focused on only one avenue to nonrecognition. It determined that the Moroccan judgment was "rendered under a system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law." Id. § 36.005(a)(1). Because this was a mandatory nonrecognition ground, the district court refused to recognize the Moroccan judgment and dismissed the case.

         We reversed. DeJoria, 804 F.3d at 389. The panel held that, under Texas's version of the 1962 Uniform Recognition Act, DeJoria could not obtain nonrecognition by showing he was denied due process or impartial tribunals in his case, but instead had the much greater burden of showing that Morocco's legal "system as a whole" was so deficient that no Texas court should ever recognize a Moroccan judgment. Id. at 381.[6] And although the prior panel's inquiry focused on whether the Moroccan judicial system could provide Americans fair proceedings, it remarked that "the record does not establish that the King actually exerted any improper influence on the Moroccan court in this case." Id. at 382 n.9. The case was remanded.

         Back before the district court, and in front of the magistrate judge to whom the matter was referred, the parties immediately began to squabble over the scope of that court's power on remand.[7] DeJoria was adamant that he should still be allowed to push for nonrecognition on grounds not addressed by the Fifth Circuit. Maghreb disagreed and moved for entry of judgment. The district court denied Maghreb's motion, agreeing with DeJoria that he could still attempt to establish other grounds for nonrecognition.

         While the sound and fury continued apace in the trial court, a second front in this dispute opened, this time in the Texas legislature. With the testimonial aid of one of DeJoria's lawyers, the 2017 legislative session was considering updating the Recognition Act to the 2005 uniform act. Among other changes, the new law would add two discretionary grounds for nonrecognition: a court would be able to deny recognition if "the judgment was rendered in circumstances that raise substantial doubt about the integrity of the rendering court with respect to the judgment" or, more importantly in this case, if "the specific proceeding in the foreign court leading to the judgment was not compatible with the requirements of due process of law." 2005 Unif. Act § 4(c)(7)-(8).

         These substantive differences between the old and new law were not the focus of hearings on the bill. Instead, a change not found in the new Uniform Law nor in the versions of that law passed by other states drew the most attention. The drafters had made the law retroactive to pending cases. The only pending case the legislators were told about was this one. Despite the concern of at least one legislator that the law was going to change the outcome of this case midstream, the law was adopted with the retroactivity provision. 2017 Tex. Sess. Law Serv. Ch. 390 (S.B. 944) (Vernon's), codified at Tex. Civ. Prac. & Rem. Code § 36A.001-11.

         With his legislative victory in hand, DeJoria returned to the district court to inform it of the change in Texas law. Although he argued that nonrecognition was warranted on multiple grounds, the district court again focused on only one. Finding the new law did not run afoul of the Texas Constitution's prohibition of retroactive laws, this time the court granted DeJoria's motion for nonrecognition after determining that the specific proceedings leading to the judgment against him were incompatible with the requirements of due process.[8] To reach that decision, the district court readopted many of the case-specific findings underlying the order this court had reversed. But it also made new findings: that DeJoria was unable to attend the Moroccan proceedings, that he was unable to obtain counsel to represent him in those proceedings, and that, although the Moroccan court relied on an expert's opinion to determine damages, that expert lacked independence. The court again dismissed the case. Maghreb again appealed.


         We have jurisdiction over this case owing to the diversity of the parties, so we apply Texas substantive law. Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). In doing so, we are bound by the decisions of the Supreme Court of Texas. Comm'r v. Bosch's Estate, 387 U.S. 456, 465 (1967). But when no decision of that court directly addresses the case before us, we are forced to make an Erie guess, doing our best to write the opinion the Texas high court would if it had the chance.[9] Meador v. Apple, Inc., 911 F.3d 260, 264 (5th Cir. 2018).

         We must make such a guess to determine which of the Uniform Recognition Acts applies. The Texas Constitution provides that "[n]o bill of attainder, ex post facto law, retroactive law, or any law impairing the obligation of contracts, shall be made." Tex. Const. art. I, § 16. Although phrased as an absolute prohibition, "[m]ere retroactivity is not sufficient to invalidate a statute." Robinson v. Crown Cork & Seal Co., Inc., 335 S.W.3d 126, 139 (Tex. 2010) (quotation omitted). Texas courts have tailored the scope of the prohibition to "protect[] settled expectations and prevent[] abuse of legislative power." Id. Three factors determinine whether a law runs afoul of those objectives: "the nature and strength of the public interest served by the statute as evidenced by the Legislature's factual findings; the nature of the prior right impaired by the statute; and the extent of the impairment." Id. at 145. The nature and extent of the interference with a party's rights loom particularly large. For that reason, "changes in the law that merely affect remedies or procedure, or that otherwise have little impact on prior rights, are usually not unconstitutionally retroactive." Id. at 146; see also Univ. of Tex. Sw. Med. Ctr. at Dallas v. Estate of Arancibia, 324 S.W.3d 544, 548 (Tex. 2010) ("Statutes . . . that do not deprive the parties of a substantive right . . . may be applied to cases pending at the time of enactment.").

         The new law's limited interference with Maghreb's legitimate rights resolves the question before us. Unlike Robinson-the seminal Texas case on retroactivity-this is not a case in which a law that allowed a party's recovery was changed to "abrogate their claim." Robinson, 335 S.W.3d at 148. It is not even certain that the law as it stood before the adoption of the updated act would have led to recognition of the Moroccan judgment. As we mentioned, the district court agreed to allow DeJoria to press several arguments for nonrecognition after this court returned the case to its hands.[10] Because the passage of the new act made it unnecessary to address those claims, we do not know how likely they were to succeed. Maghreb's expectation that it would prevail was, in other words, not yet settled. See Union Carbide Corp. v. Synatzske, 438 S.W.3d 39, 58 (Tex. 2014) (upholding retroactive application of a law because the plaintiff's "recovery was not yet predictable" at the time the law went into effect).

         The bigger point, though, is that the retroactive law does not abrogate Maghreb's claim. It does not strip Maghreb of the ability to seek recognition of the Moroccan judgment. It just gives a district court the ability to deny recognition if it finds the judgment was obtained in proceedings that were incompatible with the requirements of due process. So the only right that has been impinged is the right to automatic recognition of a judgment obtained in proceedings that denied the judgment debtor fundamental fairness. To state that "right" is to show why we cannot recognize it, let alone allow its protection to sink a state statute. Robinson, 335 S.W.3d at 146 ("[C]ourts must be mindful that statutes are not to be set aside lightly."). Indeed, the absurdity of lending a court's power to the vindication of fundamentally unfair proceedings is why the 2005 Uniform Act recognizes an absence of due process as one of the rare situations when an American court may not recognize a foreign judgment. It is also noteworthy that the Supreme Court of Texas has only upheld challenges to the retroactive application of a law on four occasions, all of which dealt with laws that revived expired claims or fully extinguished vested rights. Tenet Hospitals Ltd. v. Rivera, 445 S.W.3d 698, 708 (Tex. 2014) (collecting cases). The updated recognition act does neither.

         We are mindful that the whiff of home cooking also pervades the Texas side of this case. There is a deep irony in allowing DeJoria to contend he was denied due process in Morocco when it was his lobbying efforts that changed the rules of the game midway through the proceedings in the United States. Indeed, the Supreme Court of Texas has been suspicious of retroactive laws that inure to the benefit of only one company or individual.[11]Robinson, 335 S.W.3d at 149. But in the retroactivity context as in others, "unfair does not always equal unconstitutional." Id. at 160 (Willett, J. concurring). And it cannot be said that a state's desire to provide immediate protection to the due process rights of its citizens is not ...

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