Extortion Holds Up Ecuador Verdict Against Chevron
MANHATTAN (CN) - A $9.5 billion judgment against Chevron in Ecuador was "procured by corrupt means," a federal judge said Tuesday in a nearly 500-page ruling granting an injunction.
"Justice is not served by inflicting injustice," U.S. District Judge Lewis Kaplan wrote. "The ends do not justify the means. There is no 'Robin Hood' defense to illegal and wrongful conduct. And the defendants' 'this-is-the-way-it-is-done-in-Ecuador' excuses - actually a remarkable insult to the people of Ecuador - do not help them."
His ruling runs 497 pages with another 87 pages of appendices, and singles out Steven Donziger, an American attorney for the Ecuadoreans and the principal target of Chevron's racketeering claims.
"The wrongful actions of Donziger and his Ecuadorian legal team would be offensive to the laws of any nation that aspires to the rule of law, including Ecuador - and they knew it," Kaplan wrote. "Indeed, one Ecuadorian legal team member, in a moment of panicky candor, admitted that if documents exposing just part of what they had done were to come to light, 'apart from destroying the proceeding, all of us, your attorneys, might go to jail.' It is time to face the facts."
Donziger was nevertheless quick to highlight the limitations of the ruling, which he called "a far cry from what Chevron wanted."
"It does not block enforcement of the Ecuador judgment," Donziger said in a statement. "Nothing in Judge Kaplan's ruling will prevent my clients from pursuing the judgment's enforcement in other countries. The villagers deserve justice, and I am confident they will get it despite Chevron's effort to flout the rule of law."
While the injunction is indeed limited in scope, Kaplan also imposed a constructive trust that is "not limited geographically," Chevron's attorney Randy Mastro, with Gibson Dunn & Crutcher, said in a telephone press conference.
Government agencies in Ecuador are closed to celebrate the national holiday of Carnaval, a Catholic holiday immediately before Lent marked by massive street celebrations. Officials there have not issued a statement on the ruling. Meanwhile, the Ecuadoreans' spokesman Han Shan indicated that the defendants who are not U.S. citizens intend to ignore the ruling. The New York and Washington-based lawyers in the defense team also plan to appeal to the 2nd Circuit.
Tuesday's ruling marks a long-anticipated coda to a major phase of litigation that has spanned two decades and three continents.
Its roots in 1993 took shape when indigenous Ecuadoreans and farmers brought a federal suit against Chevron's predecessor Texaco in New York, alleging extensive environmental and public health damages in the Amazon. Chevron brought about the next front of litigation eight years later by taking the case to a court in the Ecuadorean city of Lago Agrio, where the drilling occurred.
A judge there ordered Chevron to pay billions on Feb. 14, 2011.
Days before that verdict, Chevron sued the lawyers, plaintiffs and associates involved in that case back in New York, claiming their adversaries extorted them by bribing a judge and fixing the scientific studies.
The Ecuadoreans repeatedly and unsuccessfully sought to recuse Kaplan for alleged bias and obtained a minor win in early 2012 when the 2nd Circuit invalidated Kaplan's first injunction as "radical."
Chevron's claims finally made it to trial late last year, and the parties recently finished submitting post-trial briefs to supplement the voluminous record.
The oil company hailed the ruling as a "resounding victory."
"This ruling is a resounding victory for Chevron and our stockholders," Chevron said. "It confirms that the Ecuadorian judgment against Chevron is a fraud and the product of a criminal enterprise. Steven Donziger and his associates can now be held accountable and will not be allowed to profit from their illegal acts. Any court that respects the rule of law will find the Lago Agrio judgment to be illegitimate and unenforceable."
Donziger has never been accused of criminal wrongdoing with this or any other case.
In a telephone press conference, Chevron's general counsel Hewitt Pate joined Gibson Dunn's Mastro emphasized plans to use Kaplan's lengthy ruling while having other courts and an arbitration panel reject the Ecuadorean verdict.
"It's the fact-findings here that are critically important," Pate said.
He emphasized that getting such a written record was why Chevron pursued their claims in front a judge alone.
Before November's trial, Kaplan ruled that Donziger and his associates did not have a right to a jury because Chevron only sought an injunction instead of money damages. The Ecuadoreans charged that the oil company made the decision because it thought Kaplan would be a more receptive audience.
Chevron countered that a jury verdict does not include a written opinion, which they wanted to share with other enforcement courts in Canada, Brazil and Argentina, and with an arbitration panel in the Hague.
Neither Mastro nor Pate took a firm stance on whether Chevron ever intended to try the remaining charges before a New York jury.
Kaplan's ruling came as no surprise to the Ecuadoreans, their spokesman said.
"The affected communities long ago gave up hope that a U.S. court would provide them relief from Chevron's contamination, which has taken their loved ones, poisoned their lands, and imperiled their cultures," Shan said in a statement.
Donziger meanwhile said Kaplan let his personal "implacable hostility" toward him cloud his ruling.
"With all due respect to the court, this is an appalling decision resulting from a deeply flawed proceeding that overturns a unanimous ruling by Ecuador's Supreme Court," Donziger said in a statement. "We believe Judge Kaplan is wrong on the law and wrong on the facts and that he repeatedly let his implacable hostility toward me, my Ecuadorian clients, and their country infect his view of the case."
Kaplan did, however, note that Donziger started his work "with a desire to improve conditions in the area in which his Ecuadorian clients live."
"To be sure, [Donziger] sought also to do well for himself while doing good for others, but there was nothing wrong with that," the opinion states. "In the end, however, he and the Ecuadorian lawyers he led corrupted the Lago Agrio case."
The ruling credits Chevron's allegation that the Ecuadoreans bribed the first Lago Agrio judge to hear the case, Alberto Guerra, to ghostwrite the judgment for the last, Nicolas Zambrano.
Guerra testified for Chevron pursuant to a contract including at least $326,000, the services of an immigration attorney and a car.
Acknowledging that "Guerra's credibility is not impeccable," Kaplan added that his account was "corroborated extensively by independent evidence."
"Donziger and Zambrano provided no credible evidence to support their versions of what transpired," the opinion states (emphasis in original).
Reached at New York's LaGuardia Airport for a flight to Washington, Donziger's appellate attorney Deepak Gupta said that he did not have the chance to fully peruse the mammoth ruling, which he nonetheless called a "troubling decision" by a judge to "appoint himself [for] a world-wide fact-finding mission."
Although he said his appeal would include "the facts and the law," Gupta indicated that it would lean more heavily on procedural concerns like jurisdiction and whether the racketeering statute Chevron filed permits the relief Kaplan granted.
"It is already immediately clear that there are serious legal defects in this decision, and it is unlikely to stand up on appeal," Gupta said.
Anticipating today's defeat, Donziger had tapped Gupta for his appeal back in January. Gupta said the timing and length of the ruling shows that Kaplan got started on it before the parties had even concluded briefing.
After trial ended in December, the parties filed the final post-trial briefs on Jan. 22. Donziger also moved to dismiss and for a stay in February.
Mastro did not say whether he or his colleague Ted Olson would handle appellate arguments.
A Washington-based partner at Gibson Dunn, Olson argued before the 2nd Circuit last year to keep the trial on track, with Kaplan at the helm. The circuit agreed with Olson's position that any appeal of Kaplan's decision could wait until after trial.