HOUSTON, August 16, 2019 – Baker Botts’ Appellate practice received a momentous affirmance from the Fifth Circuit Court of Appeals for firm client entrepreneur and philanthropist John Paul DeJoria, founder of Paul Mitchell hair products and Patron tequila. The opinion is believed to be the first time a U.S. court has refused to recognize a foreign judgment under the 2005 Uniform Foreign Country Money-Judgment Recognition Act because the specific foreign proceeding violated a defendant’s due-process rights.
The case stems from an oil-exploration venture in which Mr. DeJoria and partners invested with a company connected to the Moroccan Royal Family. Mr. DeJoria was sued by the Moroccan company in Moroccan court on false charges of fraud and mismanagement. The Moroccan court issued a $123 million judgment against Mr. DeJoria. The proceedings leading to that judgment were deeply unfair: Mr. DeJoria was unable to obtain counsel or to appear personally in the trial, due to death threats and the politically sensitive nature of the case. The Moroccan court cycled through “independent experts,” before finding a fifth expert who recommended substantial damages. The Moroccan company sought to enforce the judgment against Mr. DeJoria in the United States in federal district court in Austin, Texas.
After the Western District of Texas refused to recognize the Moroccan judgment, the Fifth Circuit initially reversed that order on appeal. Shortly thereafter, however, the Texas Legislature amended the Texas Uniform Foreign Country Money-Judgment Recognition Act in 2017 specifically to ensure that foreign judgments obtained in violation of an individual's due-process rights may not be enforced in Texas courts. Applying the updated statute on remand, Magistrate Judge Andy Austin and Judge Robert Pitman in the Western District of Texas held that the Moroccan judgment could not be recognized under the Texas Uniform Foreign Country Money-Judgment Recognition Act because the judgment was obtained in violation of Mr. DeJoria's right to fundamental due process.
On appeal, the appellants (1) claimed that the amended statute was unconstitutionally retroactive, (2) alleged that the prior Fifth Circuit opinion was dispositive of the case, and (3) challenged the district court’s findings of fact relating to the due-process violations.
In a published opinion, Judge Gregg Costa, writing for a unanimous panel, concluded that the amended Texas recognition act was constitutional, despite its application to pending cases at the time it was enacted. The Court held that the act was not unconstitutionally retroactive because the only right that has been impinged is the “dubious” right to “recognition of a judgment obtained in proceedings that denied the judgment debtor fundamental fairness.”
The Court also held that the district court’s factual findings regarding the partiality of the Moroccan proceeding and Mr. DeJoria’s inability to obtain counsel or personally appear were neither clearly erroneous nor precluded by the Fifth Circuit’s prior opinion.
As the Court summarized the case in closing, “despite the seeming complexity of this case—royal intrigue, a foreign proceeding, almost a billion dirhams at state—it ends up being resolved on one of the most basic principles of appellate law: deference to the factfinder.”
The Baker Botts team that represented Mr. DeJoria before the Fifth Circuit and previously in the district court, the U.S. Court of Appeals for the Fifth Circuit, and the Supreme Court of the United States was, Aaron Streett (Partner, Houston); Mark Little (Senior Associate, Houston); and Travis Gray (Associate, Houston). Baker Botts served as co-counsel with a team from Enoch Kever PLLC, which includes former Texas Supreme Court Justice Craig Enoch and partners Gary Zausmer and Melissa Lorber.
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To schedule an interview with the lawyers involved with this case, please contact Sheena Cochran.
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