Chevron Faces New 2nd Circuit Showdown

MANHATTAN (CN) - The 2nd Circuit fast-tracked arguments for May in Chevron's battle against a $19 billion judgment it faces for oil contamination in Ecuador.

In 2011, an Ecuadorean court ordered Chevron to compensate an indigenous group that had been affected by decades of drilling in the Amazon, attributed to Chevron's subsidiary Texaco.

Shortly before the ruling, Chevron accused their adversaries of rigging the case through bribery, ghostwriting and extortion. The company then launched a legal campaign on three continents to block the award, hold its adversaries liable and glean evidence in wide-ranging discovery.

Chevron pierced the confidentiality of sought-after documents by convincing several federal judges that the crime-fraud exception applied.

Relying on the new evidence, U.S. District Judge Lewis Kaplan issued an injunction blocking the award and set a trial date to make his ruling permanent. When the 2nd Circuit intervened early last year, it dissolved the worldwide injunction as "radical," ordered dismissal the declaratory judgment count, and warned Kaplan that New York could have no sway over all other jurisdictions and countries.

Kaplan dismissed the count as ordered but continued to prepare for a case to decide whether the judgment was enforceable through the remaining counts.

Patton Boggs, a Washington-based firm that represents the Ecuadoreans, claimed that Kaplan's actions violated the "spirit," if not also the letter, of the appellate order. The firm petitioned for a writ of mandamus, a heightened appeal to seek recusal. Chevron slammed the request as "a last-ditch maneuver to try to derail the litigation and ask for expedited consideration."

Though relief is considered unlikely, Circuit Judge Susan Carney granted the motion to expedite this appeal without explanation on Monday, in a two-sentence order.

Barring a reversal on appeal, Chevron continues to fight the clock to block collection of the judgment, as the Ecuadoreans petition for their assets in Brazilian, Argentinian and Canadian courts.

After two years of discovery, Chevron allegations have come into clearer focus, with bank deposit slips pointing to the alleged bribery and forensic evidence suggesting that a portion of the Ecuadorean judgment came from an outside document.

Possibly adding to this arsenal, Kaplan ordered Patton Boggs to turn over privileged files, even though the firm protested that it did not participate in the trial in Ecuador.

Kaplan rejected that argument as "facile and misleading" on March 15, noting that the firm helped strategize how to collect a judgment weeks before the ruling came into effect in Lago Agrio, Ecuador.

"[Patton Boggs] was well aware of Chevron's fraud allegations when it joined the LAP team - indeed it was brought on to combat them - and understood Chevron's intention to fight this matter vigorously," he wrote, using shorthand for Lago Agrio plaintiffs. "Any failure to have anticipated that its involvement could lead to discovery obligations and expenditures on its own behalf, if there was such a failure, would have reflected an uncommon lack of foresight."

On the other coast, a California court slowed Chevron's juggernaut by quashing subpoenas against Amazon Watch, an environmental group that the oil company claims is a "non-party co-conspirator."

U.S. Magistrate Judge Daniel Cousins ruled that environmental group was engaged in free speech, not law-breaking.

To protect the documents, Amazon Watch representative Kevin Koenig testified in a declaration: "[Disclosure] would compromise our advocacy strategies, compromise the safety of some of our indigenous partners, and severely limit our ability to speak out and educate the general public about Amazon issues as per our mission. And it would greatly hinder even basic communication within Amazon Watch about Chevron or our other campaigns knowing that the target of our campaigns would potentially be privy to our thinking, planning, and strategizing."

Koenig also told the court that Chevron "followed, videotaped, and photographed" him in a campaign to harass him, making him fear for his safety.

Cousins said this alleged espionage "speaks to the strength of the First Amendment interests at issue."

This is not the first time Cousins heard accusations that Chevron spied on their adversaries to get an edge in the case.

In 2009, Chevron released surreptitiously taped footage it obtained of two men posing as contractors and meeting with the judge presiding over the case in Ecuador. One of the cameramen was former Chevron contractor Diego Borja; the other was Wayne Hansen, a former drug felon.

Chevron claimed that the tapes implicated Judge Juan Nunez in a bribery scheme and insisted that it received the footage unsolicited.

Ecuador tested the San Ramon-based oil giant's assertion with a lawsuit in California. It noted that Hansen sent an email to a Chevron investigator weeks before the release of the videos.

Hansen's email stated: "If I do not hear from the oil co. by July 17, 09 I must think I have been left out and I am to do what and think what ... I have been dooped."

Another email, sent to an investigative firm representing Borja, apparently indicated that Hansen ducked a subpoena by waltzing off to Peru.

On Aug. 5, 2011, U.S. District Judge Charles Breyer ruled that these emails were too thin a basis for a crime-fraud ruling, but he ordered for investigation in the matter to continue.

Today, nearly two years later, neither party would publicly speculate why there has been no further ruling. Chevron's fraud claims are heading toward another appellate showdown, and the Ecuadoreans' counterclaims have stalled in a holding pattern on both coasts.

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