Federal appeals court orders $123 million Moroccan judgment enforced

Casablanca, Morocco. (Eve Coulon/Bloomberg News)

As I blogged last August, a federal district court in Texas refused to enforce a $123 million judgment from a Moroccan court, on the grounds that the Moroccan judgment "was not rendered under a system that provides impartial tribunals and procedures compatible with due process." But Wednesday, the U.S. Court of Appeals for the 5th Circuit disagreed, holding that the Moroccan system was good enough. Here is the district court's objection:

A foreign judgment cannot be recognized in Texas if it was "rendered under a system which does not provide … procedures compatible with the requirements of due process of law." Tex. Civ. Prac. & Rem.Code § 36.005(a)(l). The term "due process" in this context does not refer to the "latest twist and turn of our courts" regarding procedural due process norms, because it is not "intended to reflect the idiosyncratic jurisprudence of a particular state." Soc'y of Lloyd's v. Ashenden, 233 F.3d 473, 476-77 (7th Cir. 2000) (interpreting an identical provision of the Uniform Foreign Money Judgments Recognition Act under Illinois law). Instead, "this provision has been interpreted …to mean that the foreign procedures [must only be] 'fundamentally fair' and … not offend against 'basic fairness."'

The "international due process standard" first described by Judge Posner in Ashenden sets a very low bar for enforcement. The virtue of this construction—and one of the reasons that so many courts have adopted the standard—is that any country that has a history of commitment to the rule of law will pass the test. Given this fact, it is not surprising that the vast majority of courts faced with claims that a foreign court system did not provide adequate due process to warrant enforcement have found that the issuing court in fact provided sufficient due process to justify recognition.

Yet, from time to time, judgments are rendered against Americans in countries "whose adherence to the rule of law and commitment to the norm of due process are open to serious question." Where there is evidence that a country's judiciary is dominated by the political branch of government or by an opposing litigant, or where a party cannot obtain counsel, secure documents, or secure a fair appeal, recognition of a foreign judgment may not be appropriate. See, e.g., Bank Melli Iran v. Pahlavi, 58 F.3d 1406, 1411-12 (9th Cir.1995); Choi v. Kim, 50 F.3d 244, 249-50 (3d Cir.1995); Banco Minero Ross, supra, 172 S.W. at 715; Bridgeway Corp. v. Citibank, 45 F.Supp.2d 276, 286-88 (S.D.N.Y.1999).

A close examination of Morocco's legal system reveals structural and practical issues that are not present in countries like England, France, or South Korea. While Morocco has made serious strides in many areas and appears to have a populous genuinely desirous of and committed to establishing a societal framework founded upon the rule of law, the Moroccan royal family's commitment to the sort of independent judiciary necessary to uphold the rule of law has and continues to be lacking in ways that raise serious questions about whether any party that finds itself involved in a legal dispute in which the royal family has an apparent interest-be it economic or political-in the outcome of the case could ever receive a fair trial.

1. Moroccan Judges Are Not Independent And Are Susceptible To Being Pressured By Members Of The Royal Family.

In September of 2010, USAID released its "Morocco Rule of Law Report." Spanning a total of 66 pages, the report touches on a broad array of topics including many that are directly relevant to the Court's inquiry in this case.

Right off the bat, the authors of the report paints a bleak picture of the state of the rule of law generally, and the functioning of the judicial system specifically, in Morocco. In the last sentence of the very first paragraph of the report's Executive Summary, the authors observe that among Moroccan citizens, "there is a widely held perception that corruption is tolerated, that a political and security elite act with impunity, and that strong actions are taken against those who would challenge power."

Before launching into the body of the report, though, the authors provide the reader with seven bullet points intended to broadly describe their findings. The first bullet point reads: "Judicial independence is lacking due to a number of factors, including deficiencies in both law and practice …[t]he roles of the Ministry of Justice (MOJ) and the King further complicate this issue." (Emphasis in original). The last bullet point is equally ominous. It simply states: "Corruption is one of the most significant challenges confronting Morocco."

The USAID report's findings with respect to the Moroccan judiciary -­ especially those related to the subject of judicial independence—are particularly relevant to the Court's inquiry in this case. The authors describe the current judicial system as "permeable to political influence" and go on to explain that "the mechanisms through which judges are appointed, promoted, sanctioned, and dismissed leave them [Moroccan judges] vulnerable to political retribution." As a result, "the judiciary still suffers from persistent complaints that it is plagued with corruption, is not independent or accountable, does not have effective mechanisms for enforcement, and is encumbered by delays."

The judiciary's struggle to remain independent is in part a result of structural factors. While the 1996 Constitution guarantees judicial independence, the judiciary remains under the administrative control of the Ministry of Justice, which of course answers directly to the King. Moreover, the Constitution does not establish the judiciary as an autonomous entity.

That the judiciary is not structurally insulated from the other political branches of government is unremarkable, at least in the context of other international judicial systems. In fact, the Moroccan Constitution's language relating to the judiciary is modeled on France's Constitution. Unfortunately, members of Morocco's judiciary must also contend with forces that do not exist in France. Specifically, "[j]udicial independence [in Morocco] is further complicated by the King's role." Not only are all judgments rendered by Moroccan courts issued in the name of the King, but the King also presides over the Conseil Superieur de la Magistrature (High Judicial Council), which is the body that appoints, disciplines, and promotes judges.

Additionally, per Article 24 of the Moroccan Constitution, the King appoints the Minister of Justice. Given that the MOJ sits on the High Judicial Council, this gives the King considerable indirect influence over the makeup of the judiciary since "[t]he MOJ exercises significant influence over the appointment, discipline, transfer, and promotion of judges." This fact "makes judges beholden to the MOJ not only for their initial appointment but for their continued job security as well, with obvious negative implications for judicial independence." …

Indeed, in March of 2011—two years after the Moroccan Court issued its judgment against DeJoria—Morocco's very own Foreign Minister all but confirmed the veracity of the USAID report's findings pertaining to judicial independence in Morocco. Speaking to an audience at the Brookings Institute in Washington DC, Foreign Minister Taieb Fassi-Fihri, described Morocco's continuing problem with "phone call justice." Judicial independence, he explained, "is not the reality today, because (there are) some calls from time to time, from the Justice Department to some judge."

Together, the USAID report and the foreign minister's comments paint a picture of a judicial system in which judges feel tremendous pressure to render judgments that comply with the wishes of the royal family and those closely affiliated with it. Yet perhaps the most powerful piece of evidence that all is not well in the Moroccan judicial system came from the Moroccan judges themselves. On October 6, 2012, roughly 1,000 Moroccan judges staged a sit­ in in front of the Moroccan Supreme Court demanding more independence for the judiciary. With them, the protesting judges carried a petition signed by 2,200 Moroccan judges—roughly 2/3rds of the country's total judges—demanding structural reforms to guarantee their independence from the King. The gesture speaks for itself, but it is worth noting that every judge that signed the aforementioned petition did so knowing that by publicly opposing the King, they were opening themselves to precisely the kinds of retribution discussed by the USAID report.

2. The King's Actions In 2007 Reveal That The King Actively Sought To Shape The Public's Perception Of His (And Dejoria's) Role In The Talisint Oil Project Through Intimidation.

MPE/MFM do not dispute the fact that the King could intervene in the legal process if he wishes to do so. They do not deny that Skidmore played an important role in the process that ultimately lead the King to give his ill fated speech announcing the existence of large, exploitable oil reserves in Morocco. They do not dispute that the Prince of Morocco himself received shares (however small the interest) in the company Skidmore created in Morocco for the purpose of facilitating its aims and objectives there. MPE/MFM do not even quibble with the assertion that DeJoria had personal contact with members of the royal family, including the King himself, in advance to the creation of the partnership between the Moroccans and Skidmore ….

Nevertheless, MPE/MFM argue that the Court need not worry about these factors since DeJoria's case simply did not matter enough to the King or royal family to warrant genuine concern that the royal family would corrupt the process. After all, MPE/MFM note, the Prince's financial stake in MPE was too small to matter. Moreover, according to MPE/MFM, there is no evidence that "the King or anyone else in Morocco these days cares about [DeJoria] at all or even remembers who he is or the bad acts he perpetrated."

As a general matter, MPE/MFM's suggestion that the circumstances surrounding the case do not warrant real concerns that the King or royal family corrupted the judicial proceedings is simply not credible. For one, the Prince's "insignificant" financial interest (MPE/MFM claim that the Prince owns 0.00026% of MPE) is not insignificant at all. Even assuming that MPE would only receive 50% of the settlement award of $122.9 million, the value of the Prince's ownership interest in the company would be boosted by at least $15,977. Given that the Prince appears to have paid zero consideration in return for his ownership interest in Armadillo (now MPE), such an award would represent quite a nice windfall.

As for MPE/MFM's suggestion that there is no evidence that the King particularly cared about DeJoria or his role in the Talsint oil project, the evidence plainly suggests otherwise.

On Monday, January 27, 2007, "Le Journal," a Moroccan daily newspaper, ran a feature story under the headline "The Talsint Oil Lie." Citing a letter sent by Skidmore Chairman (and DeJoria partner) Michael Gustin to the King and other top officials, the article "accused the King and some officials of bribery and disinformation" in regards to Skidmore's exploration and attempted production of oil in south eastern Morocco in 2000.

Neither the story nor the paper would survive for very long. The next day, Le Journal suddenly retracted the story, stating (without any meaningful explanation) that everything they had published was untrue. The paper also announced—again without any explanation—that it would voluntarily go out of circulation for an undisclosed period of time. Two days later, a sister publication reported that the author of the "offensive" Le Journal article (who also served as Le Journal's editor-in-chief) and Le Journal's publisher were both compelled to appear at the Justice Center so that they could be interrogated by criminal prosecutors about their involvement with the story.

Unsurprisingly, it appears that the above series of events was not an aberration. The King has a history of suspending (and punishing) publications that displease him.

Indeed, when Le Journal resumed publishing, it was not the only news publication that was re-emerging after a lengthy suspension. Shortly after Le Journal returned to print, so too did a magazine called Nishan. Nishan was reportedly suspended from circulation for a period of two months by a Moroccan court for "publishing jests that were deemed offensive to King Mohammed VI and Islam." The article also noted that the editor of the offending issue of Nishan, along with another former member of the magazine's editorial board, was sentenced by a Moroccan judge to three years prison with probation, along with a $9,500.00 fine, for his role in "offending the King."

The King may or may not have disliked DeJoria personally, but the lengths his government went to silence and punish Le Journal for suggesting, in public, that the King's involvement and sponsorship of the Talsint oil project may not have been completely aboveboard certainly suggests that the King cared a great deal about how his involvement in the project was presented to the public. Moreover, the government's response revealed that the King's government was willing to intimidate and retaliate in order to protect that public image.

Consider now the lawsuit against DeJoria and his partners. Lawsuits are legal vehicles for apportioning blame. Lawsuits also tell stories. In the underlying lawsuit, the Moroccans accused DeJoria and his partners of being fraudsters. The implication of that allegation, if true, is that DeJoria and his partners lied to their partners and mismanaged the company. Yet the inverse is also true: the implication of a finding absolving DeJoria and his partners of any liability would suggest that DeJoria and his partners had dealt fairly with the Moroccans … and that they were all equally responsible for the failure of the project.

Given the narrative power that the verdict would undoubtedly have, MPE/MFM's suggestion that a man who cared enough about maintaining his image to intimidate and prosecute a whole paper into submission had no interest in the outcome of a case which could either re­ enforce his favored image or, alternatively, make him appear foolish if not downright dishonest for having promised so much oil during his now infamous speech.

These facts would have been readily apparent to any judge presiding over this case. Given the King's history of retaliation, not only against judges who displease him but against anyone who threatens his narrative relating to his involvement in Talsint, the Court cannot conceive of any set of circumstances in which the presiding judge in the underlying case would not have felt tremendous pressure to side with MPE/MFM. The Prince had an economic interest. The King's behavior suggests a strong preference that DeJoria be portrayed as a fraudster who misled the King (since, if DeJoria did not, the King appears dishonest, incompetent, or both in retrospect).

Whether or not the King, Prince, or some other official picked up the phone and ordered the judge to find against DeJoria is, in some sense, beside the point. Even if no such phone call was ever made, the Court nevertheless cannot, in good conscience, conclude that Morocco provided Mr. DeJoria with adequate due process to warrant enforcement in this country.

Judges are not stupid people oblivious to outside pressures. As evidenced by the mass judicial protests, Moroccan judges are keenly aware that their livelihoods (present and future) depend on remaining in the good graces of the King and the royal family. Given this fact, along with the circumstances outlined at length surrounding this case, the likelihood that DeJoria could have or did receive a fair hearing in which the outcome was not pre-ordained is too minimal to permit the Court to overlook the serious issues with both the system and the application present in this case….

"[A] common sense reading of the evidence" in this case unequivocally supports the conclusion that John Paul DeJoria could not have expected to obtain a fair hearing in Morocco had he attempted to fight the charges against him. While the evidence plainly suggests that Morocco's judges wish to obtain the freedom from pressure necessary to impartially conduct the business of the court system, the evidence also reveals that any judge presiding over DeJoria's case would have had to ignore either an explicit or implicit threat to his career—if not to his safety and well-being—in order to find against MPE/MFM.

Perhaps the evidence did not ever present the judge with this hard choice, but the Court's job is not to determine whether the judge in the underlying case reached the right decision. Instead, the Court is tasked with deciding whether, based on the evidence, DeJoria or some similarly situated party could have received adequately fair procedures to warrant enforcement. The answer to this question is no. Absent an act of tremendous bravery by the judge, there is no conceivable set of facts or circumstances in which DeJoria could have prevailed in the underlying case. Such a proceeding is not, was not, and can never be "fundamentally fair."

And here's the Fifh Circuit's reasoning for reversing the district court's decision:

Under the Texas Recognition Act, a foreign judgment is not conclusive and is thus unenforceable if "the judgment was rendered under a system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law." "[T]he statute requires only the use of procedures compatible with the requirements of due process[. T]he foreign proceedings need not comply with the traditional rigors of American due process to meet the requirements of enforceability under the statute." That is, the foreign judicial system must only be "fundamentally fair" and "not offend against basic fairness." This concept sets a high bar for non-recognition…. "A case of serious injustice must be involved." …

The court's inquiry under Section 36.005(a)(1) focuses on the fairness of the foreign judicial system as a whole, and we do not parse the particular judgment challenged. …

To justify non-recognition of the Moroccan judgment, DeJoria argues that Morocco's judiciary is made up of judges beholden to the King and therefore lacks independence. Under the Moroccan Constitution, Morocco is an executive monarchy headed by a King who serves as the supreme leader. As described in a 2003 World Bank publication (the "World Bank Report"), the King has the final authority over the appointment of judges. A United States Agency for International Development report (the "USAID Report") observes that the Moroccan judicial system is "permeable to political influence" and that judges are "vulnerable to political retribution."

State Department Country Reports also question the independence of the Moroccan judiciary. For example, the 2009 State Department Country Report explains that "in practice the judiciary … was not fully independent and was subject to influence, particularly in sensitive cases." Moroccan courts also battle a public perception of ineffectiveness. In 2012, nearly 1,000 Moroccan judges protested for "greater independence for the judiciary." Though this evidence led the district court to find that Morocco's judicial system was not compatible with the requirements of due process, we conclude that it does not present the entire picture.

Azzedine Kabbaj, a Moroccan attorney who has been practicing for thirty-five years, testified that Moroccan judges must pass an admissions test and complete two years of judge-specific training. Kabbaj noted that the Moroccan system "places great emphasis" on providing "actual notice" of lawsuits to defendants, allows for numerous challenges to the appointments of experts, and gives defendants a de novo appeal after an initial judgment. Abed Awad, an adjunct professor at Rutgers University School of Law, further explained that the procedures followed in Moroccan commercial courts resemble those followed in United States courts. The law firm of DeJoria's expert advertised Morocco's judicial system as "adher[ing] to international standards."

The same USAID Report cited by DeJoria notes that the King's government "has made judicial reform one of its key objectives," explains that the "rule of law" is a "critical factor" in Morocco's development, and observes that the Moroccan government "is making strides" toward building a state reliant on the rule of law. The USAID Report, while acknowledging fundamental concerns about judicial independence, concludes that the "Monarchy's interest in reforming the justice sector is a positive sign." The World Bank Report describes the advances in Morocco's judicial system as "indisputable" and recognizes Morocco's "enhanced drive toward an independent judiciary." Finally, the State Department has recognized that the Moroccan government has implemented reforms intended to increase judicial independence and impartiality.

The Texas Recognition Act does not require that the foreign judicial system be perfect. Instead, a judgment debtor must meet the high burden of showing that the foreign judicial system as a whole is so lacking in impartial tribunals or procedures compatible with due process so as to justify routine non-recognition of the foreign judgments. DeJoria has not met this burden. Based on the evidence in the record, we cannot agree that the Moroccan judicial system lacks sufficient independence such that fair litigation in Morocco is impossible. [Footnote: Although our inquiry focuses on Morocco's judicial system, we also observe that the record does not establish that the King actually exerted any improper influence on the Moroccan court in this case. For example, the Moroccan court (1) appointed experts, (2) took seven years to reach a decision, (3) awarded a lesser judgment than the expert recommended, and (4) absolved five defendants—including DeJoria's company Skidmore—of liability.] The due process requirement is not "intended to bar the enforcement of all judgments of any foreign legal system that does not conform its procedural doctrines to the latest twist and turn of our courts." Thus, the record here does not establish that any judgment rendered by a Moroccan court is to be disregarded as a matter of course.

Even under DeJoria's characterization, the Moroccan judicial system would still contrast sharply with the judicial systems of foreign countries that have failed to meet due process standards. For example, in Bank Melli Iran v. Pahlavi, the Ninth Circuit refused to enforce an Iranian judgment and concluded that the Iranian judicial system did not comport with due process standards. The court relied on official reports advising Americans against traveling to Iran during the relevant time period and identifying Iran as an official state sponsor of terror. Further, the court noted that Iranian trials were private, politicized proceedings, and recognized that the Iranian government itself did not "believe in the independence of the judiciary."

Judges were subject to continuing scrutiny and potential sanction and could not be expected to be impartial to American citizens. Further, "revolutionary courts" had the power to usurp and overrule decisions of the Iranian civil courts. Attorneys were also warned against "representing politically undesirable interests." Based on this evidence, the court concluded that the Iranian judicial system simply could not produce fair proceedings.

Similarly, in Bridgeway Corp. v. Citibank, the Second Circuit declined to recognize a Liberian judgment rendered during the Liberian Civil War. There, the court observed that, during the relevant time period, "Liberia's judicial system was in a state of disarray and the provisions of the Constitution concerning the judiciary were no longer followed." Further, official State Department Country Reports noted that the Liberian judicial system—already marred by "corruption and incompetent handling of cases"—completely "collapsed" following the outbreak of fighting. Id. Because the court concluded that there was "sufficiently powerful and uncontradicted documentary evidence describing the chaos within the Liberian judicial system during the period of interest," it refused to enforce the Liberian judgment.

Pahlavi and Bridgeway thus exemplify how a foreign judicial system can be so fundamentally flawed as to offend basic notions of fairness.10 Unlike the Iranian system in Pahlavi, there is simply no indication that it would be impossible for an American to receive due process or impartial tribunals in Morocco. In further contrast with Pahlavi, there is no record evidence of a demonstrable anti-American sentiment in Morocco; in fact, American law firms do business in Morocco. While the judgment debtor in Pahlavi could not have retained representation in Iran, Skidmore—a co-defendant in the Moroccan case—did briefly retain Moroccan attorney Azzedine Kettani until a conflict of interest forced his withdrawal. One expert opined that it is "not at all uncommon" for Moroccan attorneys to represent unpopular figures in Moroccan courts.

Bridgeway presents an even more stark contrast. Morocco's judicial system is not in a state of complete collapse, and there is no evidence that Moroccan courts or the Moroccan government routinely disregard constitutional provisions or the rule of law. Because Morocco's judicial system is not in such a dire situation, it does not present the unusual case of a foreign judicial system that "offend[s] against basic fairness ." …

The Moroccan judicial system does not present an exceptional case of "serious injustice" that renders the entire system fundamentally unfair and incompatible with due process. The district court thus erred in concluding that non-recognition was justified under Section 36.005(a)(1) of the Texas Recognition Act.