MANHATTAN (CN) - Chevron's own law firm could scuttle the efforts to negate a $9.5 billion oil-spill judgment from the Amazon in a Friday hearing for different clients, its Ecuadorean adversaries say.
Gibson, Dunn & Crutcher has been on Chevron's front lines since 2009, two years before a court in Lago Agrio, Ecuador, ordered the oil giant to pay billions to repair environmental damage and public health issues in the rainforest region of Sucumbios, where Texaco drilled for decades.
The firm labeled that judgment as extortionate and sought an injunction in the Southern District of New York against collection of the award under federal anti-racketeering law.
Denying the allegations against them, lawyers for the Ecuadoreans have argued that RICO law does not permit the injunctive relief even if Chevron's claims were true.
Other Gibson Dunn lawyers seem to have adopted that very position in an unrelated case defending debt-collector clients, the Ecuadoreans say.
In the case of Monique Sykes v. Mel Harris and Associates LLC, four plaintiffs accused a debt-buying company, a law firm, a process-service company and others of scheming to net fraudulent default judgments against them and more than 100,000 other consumers.
On Dec. 4, 2012, Judge Denny Chin certified the Sykes class on claims carrying the possibility of injunctive relief, declaratory relief and damages. A 2nd Circuit judge himself, Chin nevertheless presided over Sykes in the Southern District of New York by designation.
The defendants in that case retained appellate lawyers from Gibson Dunn, whose Washington-based partner Miguel Estrada signed his name to a 52-page 2nd Circuit brief rife with arguments long made by advocates for the Ecuadoreans.
"Indeed, the text and history of the RICO statute show that Congress affirmatively decided not to authorize private injunctive claims - a conclusion that the Ninth Circuit and the United States have correctly reached," the brief states. "This court has twice remarked that RICO 'likely' was not intended to provide private parties injunctive relief. It should now confirm that private RICO claims for injunctive relief fail as a matter of law, and thus that district courts cannot certify a class action raising such claims."
Oral arguments in the Sykes case are slated to hit the Manhattan-based federal appeals court on Friday morning.
If the 2nd Circuit agrees with Gibson Dunn's position in that case, its ruling could force U.S. District Judge Lewis Kaplan to dismiss Chevron's case, the Ecuadoreans say.
The seven-week trial in Chevron's RICO case ended in late November, and Judge Kaplan has not yet issued a ruling. The parties recently finished submitting post-trial briefs, and the voluminous record of the case means a verdict seems far from imminent. Any appeal of the decision by the losing party would also go to the 2nd Circuit.
Chevron's lead adversary Steven Donziger indicated in a phone interview that his legal team plans to make Judge Kaplan aware of the Sykes case in a court filing later today.
"I nearly fell off my chair when I saw this brief," Donziger said, referring to the Sykes filing.
Chevron denied that "a separate Gibson Dunn team, in a different case, involving different clients" poses a concern for its RICO claims.
"The legal community has been aware of both sides of the open issue about private RICO injunctive relief for years," Chevron spokesman Morgan Crinklaw said.
Crinklaw also predicted that the U.S. Supreme Court would resolve the legal issue once and for all once Judge Kaplan grants Chevron an injunction.
"The silliness of this stunt is demonstrated by the fact that plaintiffs' long-time counsel, Emery Celli, is the law firm arguing for private RICO injunctive relief in the same separate case about which they now complain," Crinklaw said in an email (emphasis in original).
Though Emery Celli once reportedly stood to collect 10 percent of the Lago Agrio verdict as a representative of the plaintiffs from that case in Chevron's discovery assault, the firm withdrew its representation of that group on Feb. 7, 2011, days after Chevron filed its RICO suit. Emery Celli is not and never was involved in Chevron's RICO case.
Gibson Dunn's ties to Chevron meanwhile appear forged in fire.
"After paying a single law firm what might be a record-breaking amount of fees, I am surprised Chevron did not receive a little more loyalty from the Gibson Dunn law firm," Aaron Page, an attorney for the Ecuadoreans, said in a statement. "This brief basically kicks the legs out from under Chevron's RICO case."
Chevron has paid Gibson Dunn more than $1 billion in legal fees since the firm took the case in 2009, the Ecuadoreans estimate.
Indeed, the American Lawyer magazine's Michael Goldhaber wrote in an article titled "The Costly Battle" that Chevron is spending $400 million per year in litigation fees over the Ecuadorean oil.
Christopher Gowen, a member of Donziger's legal team, remarked in a statement that this development could create a sticky situation for Chevron's law firm.
"Gibson Dunn is correct to argue that there is no injunctive relief for a private party under the RICO statute," said Gowen, who serves as a legal ethics professor at American University. "The problem for the firm is that by doing so they acknowledge that their prosecution of the Chevron v. Donziger case has been a complete waste of their client's time and money and an abuse of the civil justice system. While I was troubled by the ethical conduct of Gibson Dunn on behalf of Chevron throughout the trial, I never imagined a day where their unethical conduct would destroy their own client's case."
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