“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.”
These first two sentences of an opinion issued Thursday by the U.S. Court of Appeals for the Fifth Circuit appear to be the understatement of the year regarding DeJoria, a co-founder of Paul Mitchell hair products and The Petrón Spirits Company.
The opinion is tied to a two-decade legal dispute in which DeJoria’s interests were pitted against the Moroccan royal family, he received death threats, and he was hit with a $123 million judgment because he was unable to obtain counsel to represent him in Moroccan court.
Thursday’s opinion is also 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.
In the colorful, 21-page unanimous opinion, written by Circuit Judge Gregg Costa, the Fifth Circuit affirmed a lower court ruling that determined DeJoria’s due process rights were denied.
“Despite the seeming complexity of the case — royal intrigue, a foreign proceeding, almost a billion dirhams at stake — it ends up being resolved on one of the most basic principles of appellate law: deference to the factfinder,” Judge Costa wrote.
The opinion of the panel, which also included Circuit Judges Kurt Engelhardt and Grady Jolly, was the second time for the Fifth Circuit to made a ruling in the case as a result of an updated law that the Texas Legislature adopted in the middle of the litigation.
Here’s a timeline of the case, per the Fifth Circuit’s opinion and other court records:
1999: DeJoria and his business partner, Michael Gustin, start Lone Star Energy Corporation in Morocco with the help of King Mohammed VI’s first cousin. The enterprise hoped to discover oil reserves in Morocco. The project had so much promise that the king of Morocco made a public announcement that the country would soon possess “copious and high-quality” oil that would allow Morocco to be self-sufficient for 30 years.
2002: The renamed company, Maghreb Petroleum Exploration, and its primary funder, Mideast Fund for Morocco Limited, sue DeJoria in Moroccan court shortly after ousting him and Gustin from the company. By this point, the promised reserves had not materialized, which made the project quickly sour. DeJoria and his associates promptly fled Morocco because of an alleged death threat. The lawsuit alleges DeJoria mismanaged the company and duped the Middle Eastern and Moroccan participants into investing in the venture. They have the support of the Moroccan royal family.
2009: A Moroccan court awards Maghreb the equivalent of $123 million in U.S. dollars. By this point, DeJoria had not been able to substantially defend himself in the litigation because no lawyer in Morocco or elsewhere would agree to represent him. This included a French lawyer with Moroccan law experience who said it would be “unsafe and unwise for any lawyer” or “any sane person,” for that matter, to participate in a case that so closely touched the royal family’s interests. DeJoria’s general counsel was also advised not to come to Morocco.
Throughout the litigation, the Moroccan court cycled through multiple “independent experts” before finding one — the fifth in the case — who recommended substantial damages against DeJoria.
2013: Maghreb moves the dispute stateside, requesting an Austin federal judge in the U.S. District Court for the Western District of Texas to recognize the foreign judgment.
2014: U.S. District Judge James Nowlin dismisses Maghreb’s lawsuit, determining that the proceedings in Moroccan court denied DeJoria his due process rights. Maghreb immediately appealed.
2015: The Fifth Circuit reverses Judge Nowlin’s ruling and remands certain matters back to the trial court. The panel’s reasoning was tied to the 1962 version of the Uniform Recognition Act, the version of the law that the State of Texas recognized at the time. Under certain provisions, the court ruled that DeJoria held the greater burden of proof to show that Morocco’s legal system was so deficient that no Texas court should ever recognize a Moroccan judgment.
2017: The Texas Legislature decides to adopt the 2005 version of the Uniform Recognition Act, which adds two new grounds for nonrecognition of foreign judgments by U.S. courts: 1) the foreign judgment was rendered in circumstances that raise substantial doubt about the integrity of the foreign court, and 2) if the foreign proceedings were not compatible with the United States’ due process rights.
Most importantly, the 2005 version of the law became retroactive to pending cases. DeJoria immediately notified the district court of the change in the law.
2018: U.S. Magistrate Judge Andrew Austin recommends that the new district judge on the case, Robert Pitman, deny recognition of the foreign judgment based on Texas’ adoption of the 2005 law. Judge Pitman follows the recommendation and makes new findings of facts in DeJoria’s favor. Maghreb appeals again.
2019: The Fifth Circuit issues Thursday’s opinion in favor of DeJoria and determines that the district court reached the right conclusion. “District court judges, who do the lion’s share of the work in our federal system, do not dig through voluminous records only to have courts like this one restart the factfinding from scratch,” the opinion says. “Instead of redoing their work, we defer to their findings so long as they take a permissible view of the evidence.”
DeJoria’s legal team expressed its satisfaction with the Fifth Circuit’s new ruling.
“We were delighted to represent Mr. DeJoria in vindicating his rights in this case and we are very pleased that this important precedent will protect due process rights,” Baker Botts appellate partner Aaron Streett, DeJoria’s lead lawyer, told The Texas Lawbook.
Susman Godfrey partner Geoffrey Harrison, who represents Maghreb, did not return a call seeking comment.
Other Baker Botts lawyers on DeJoria’s legal team included Houston associates Mark Little and Travis Gray. Baker Botts served as co-counsel with a team from Enoch Kever that included former Texas Supreme Court Justice Craig Enoch and partners Gary Zausmer and Melissa Lorber.