John Paul DeJoria Lobbied for Law that Saved Him From $123M Moroccan Judgment
The U.S. Court of Appeals for the Fifth Circuit recounted that John Paul DeJoria attempted in 1999 to add “oil magnate” to his achievements, but “it did not go well.”
Circuit Panel Comprises; JOLLY, COSTA, and ENGELHARDT, Circuit Judges.
GREGG COSTA, Circuit Judge:
John Paul DeJoria, the businessman behind Paul Mitchell hair products and tequila maker The Patrón Spirits Co., won’t have to pay a $123 million judgment against him in Morocco, thanks to an American appellate ruling in his favor.
“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,” the U.S. Court of Appeals for the Fifth Circuit wrote, before siding with DeJoria in the nine-figure dispute.
DeJoria won based on a 2017 law—for which he had lobbied—that applied retroactively to pending cases and changed how Texas courts could recognize foreign judgments. A question in the appeal was whether the retroactive law was unconstitutional under the Texas Constitution.
DeJoria’s Houston lawyer, Baker Botts partner Aaron Streett, called the win “an important victory.”
“The U.S. court system upheld the important principle that no American should suffer at the hands of a foreign court proceeding that’s fundamentally unfair,” Streett said.
The opinion in DeJoria v. Maghreb Petroleum Exploration explained that DeJoria and his business partner had launched Lone Star Energy Corp. in Morocco, hoping to discover oil reserves and make the country self-sufficient for 30 years. The project soured when they didn’t find the reserves. DeJoria lost his place on the board and the company sued him.The court’s ruling recounted that DeJoria had attempted in 1999 to add “oil magnate” to his achievements, but, “It did not go well,” wrote Judge Gregg Costa.
In the end, the court issued the judgment against DeJoria and his business partner. To get the money, Maghreb had to convince a U.S. court to recognize and enforce the foreign judgment, but DeJoria resisted. The district court found the Moroccan judgment came from a system that doesn’t have impartial tribunals or procedures to give due process of law, but the Fifth Circuit in 2015 remanded, finding that DeJoria must prove more.
Retroactive law
In 2017, DeJoria lobbied the Texas Legislature to pass legislation to change how Texas law recognized foreign judgments. Lawmakers made the change retroactive to pending cases. Arguing under the new law, the court ruled for DeJoria, finding the Moroccan proceeding lacked due process. Maghreb appealed.
The Texas Constitution prohibits retroactive laws, noted the Fifth Circuit, but it ruled the retroactive law here isn’t unconstitutional.
“The new law’s limited interference with Maghreb’s legitimate rights resolves the question,” the opinion said. “This is not a case in which a law that allowed a party’s recovery was changed to ‘abrogate their claim.’”
Before the new law, DeJoria was already raising a due process challenge. It wasn’t clear then whether Maghreb would prevail, the opinion said.
Maghreb argued on appeal that because DeJoria failed to participate in the Moroccan proceedings, he lost the opportunity to complain about them. But the Fifth Circuit made “short work” of that argument, noting the trial court’s ruling found DeJoria was afraid for his safety because of the death threat, he couldn’t find a lawyer to take his case because his interests were adverse to the Moroccan royal family’s interests, and the Moroccan court went through five experts before landing on one who found Maghreb had substantial damages.
“Maghreb has not shown clear error,” the opinion said, affirming the trial court’s ruling.
Susman Godfrey partner Geoffrey Harrison of Houston, who represented Maghreb, wrote in an email that the ruling was “a stunning disappointment.”
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HOUSTON (October 1, 2015) — The U.S. Court of Appeals for the Fifth Circuit yesterday reversed a district court’s refusal to recognize a $123 million judgment issued by a commercial court in the Kingdom of Morocco. Under the Fifth Circuit’s ruling, the Moroccan judgment is “conclusive” and “enforceable in the same manner as a judgment of a sister state that is entitled to full faith and credit.”
In 2002, plaintiffs Maghreb Petroleum Exploration, S.A. (“MPE”) and Mideast Fund for Morocco, Limited (“MFM”) filed suit in Morocco and alleged that billionaire John Paul DeJoria – Forbes magazine’s 234th richest person in America – committed wrongful acts and induced them to invest tens of millions of dollars in a Moroccan oil exploration company that DeJoria and others had formed.
Claiming his life would be endangered if he returned to Morocco, DeJoria chose not to participate in the Morocco lawsuit. Instead, his U.S.-based company asked a Texas federal court to enjoin the Morocco lawsuit, but the court declined.
In 2009, the Morocco court entered judgment for approximately $123 million in favor of MPE and MFM and against DeJoria. DeJoria sought to avoid liability by filing another lawsuit in Texas and, this time, argued that the Morocco judgment should not be recognized in Texas. The district court agreed with DeJoria and refused to enforce the Morocco judgment.
In a 3-0 decision authored by Chief Judge Carl E. Stewart, the Fifth Circuit yesterday reversed, and held that DeJoria did not meet his burden to establish non-recognition. The Fifth Circuit explained that “Morocco’s judicial system as a whole is ‘fundamentally fair’ and inoffensive to basic notions of fairness,” noted that DeJoria’s own expert advertised Morocco’s judicial system as “adher[ing] to international standards,” cited international reports praising Morocco’s judicial system, and noted that American law firms (including DeJoria’s own law firm in this case) have offices in Morocco.
The Fifth Circuit also rejected DeJoria’s “alternative grounds for non-recognition,” and explained that “DeJoria had actual notice of the Moroccan lawsuit” which “more than satisfie[s] his due process rights” under Morocco law and “even under the stricter requirements of American due process.”
Geoffrey L. Harrison, a partner in Susman Godfrey LLP’s Houston office, served as lead counsel for MPE and MFM and argued the appeal in the Fifth Circuit, called the Morocco lawsuit “a commercial dispute among sophisticated business entities” and said “the Fifth Circuit’s 3-0 decision properly recognizes that Morocco’s judicial system adheres to international standards of impartiality, due process, and fundamental fairness in accordance with the Texas Recognition Act. The Court’s decision confirms that Moroccan judgments are worthy of recognition, and international companies confidently may rely on Morocco’s judicial system.”
Harrison added: “The Fifth Circuit promptly issued its thorough and well-reasoned opinion just four weeks after oral argument. We appreciate the Court’s attention and diligence in this important case.”
MPE and MFM are represented by Geoffrey L. Harrison, Kenneth E. McNeil, and John P. Lahad of Susman Godfrey LLP; and Roger D. Townsend of Alexander, Dubose, Jefferson & Townsend LLP.
DeJoria is represented by Brian J. Hurst, Eugenie R. Rogers, Nicholas O. Kennedy, and Michael A. Pollard of Baker & McKenzie, LLP; Craig T. Enoch and Melissa A. Lorber of Enoch Kever PLLC; and John C. Carsey of Minton, Burton, Bassett & Collins.
The case is John Paul DeJoria v. Maghreb Petroleum Exploration, S.A. and Mideast Fund for Morocco, Limited, No. 14-51022; In the United States Court of Appeals for the Fifth Circuit.
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