MANHATTAN (CN) - After months of delay, the 2nd Circuit explained Thursday why it struck down a "radical" injunction that would block Ecuadorean natives from collecting an $18 billion environmental verdict against Chevron anywhere in the world.
"The story of the conflict between Chevron and residents of the Lago Agrio region of the Ecuadorian Amazon must be among the most extensively told in the history of the American federal judiciary," according to the 30-page opinion authored by Judge Gerard Lynch.
Spanning nearly two decades, it began when a group of Ecuadorean aborigines sued Chevron's predecessor Texaco in Manhattan federal court in 1993, for what they call the "Amazon's Chernobyl." The lawsuit charged that Texaco's drilling from 1964 to 1992 decimated rainforest lands, polluted the groundwater and sparked cancer clusters in a region home to 30,000 people.
Texaco attacked the New York venue choice and pushed to dismiss the case in favor of the Amazonian region of Lago Agrio, Ecuador. That aim succeeded after Chevron acquired Texaco in 2001. But the Lago Agrio court nevertheless slapped the oil giant with an $18.2 billion verdict on Feb. 14, 2011.
Shortly before the decision, Chevron condemned the Ecuadorean court system as politicized and corrupt, and sued the Ecuadorean plaintiffs in the Southern District of New York for extortion.
That case fell onto the docket of U.S. District Judge Lewis Kaplan, who quickly ordered the Ecuadoreans' attorneys to turn over their case files, granted a temporary worldwide injunction on collection of the award, and fast-tracked a trial to make the injunction permanent.
The 2nd Circuit struck down the injunction and halted the trial on Sept. 19, 2011, but its opinion on the case was just filed Thursday.
The 30-page opinion blasts Kaplan for "presuming" his order had such wide jurisdiction.
"It is a particularly weighty matter for a court in one country to declare that another country's legal system is so corrupt or unfair that its judgments are entitled to no respect from the courts of other nations," Lynch wrote for a three-judge panel. "That inquiry may be necessary, however, when a party seeks to invoke the authority of our courts to enforce a foreign judgment.
"But when a court in one country attempts to preclude the courts of every other nation from ever considering the effect of that foreign judgment, the comity concerns become far graver. In such an instance, the court risks disrespecting the legal system not only of the country in which the judgment was issued, but also those of other countries, who are inherently assumed insufficiently trustworthy to recognize what is asserted to be the extreme incapacity of the legal system from which the judgment emanates. The court presuming to issue such an injunction sets itself up as the definitive international arbiter of the fairness and integrity of the world's legal systems.
"The district court opinion here nowhere addresses the legal rules that would govern the enforceability of an Ecuadorian judgment under the laws of France, Russia, Brazil, Singapore, Saudi Arabia or any of the scores of countries, with widely varying legal systems, in which the plaintiffs might undertake to enforce their judgment. Nor is it clear how a conclusion that the judgment may not be enforced in New York, based on analysis of a New York statute that undertakes to address nothing more than whether New York will recognize the judgment, could authorize a court sitting in New York to address the rules applicable in other countries, or to enjoin the plaintiffs from even presenting the issue to the courts of other countries for adjudication under their own laws. Nothing in the New York statute, or in any precedent interpreting it, authorizes a court to enjoin parties holding a judgment issued in one foreign country from attempting to enforce that judgment in yet another foreign country.
"We need not address here whether and how international comity concerns would affect a hypothetical effort by a state to vest its courts with the authority to issue so radical an injunction. There is no such statutory authorization, for New York has authorized no such relief," the opinion states.
Though Kaplan must reverse the injunction, he need not recuse himself from the remaining anti-racketeering claims.
Chevron saw this as a silver lining.
"The Second Circuit's opinion is a narrow procedural ruling that may change the order in which courts address the fraud being perpetrated in the Lago Agrio case, but it will not affect the ultimate outcome," spokesman Justin Higgs said in a statement. "In fact, the Second Circuit acknowledges the extensive evidence of fraud submitted by Chevron."
Chevron's fraud allegations are parsed for several pages of the opinion, but the court did not draw any conclusions.
"The merits of that dispute are not now before us," the opinion states.
An attorney for the Ecuadoreans blasted Chevron's fraud allegations as an "international smear campaign."
"Instead of confronting its environmental despoliation, Chevron has engaged in an international smear campaign of lawyer- and court-bashing," Craig Smyser of Smyser Kaplan & Veselka said in a statement. "As a result of the 2nd Circuit's opinion today and the confirmation of the Ecuadorian trial court's judgment by the Ecuadorian appellate court, the wheels of the law are bringing Chevron to justice."
Chevron vowed to continue its racketeering claims against the Ecuadorean plaintiffs and before a tribunal at The Hague.
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