(CN) – Two federal courts have rejected the appeals of consultants seeking to quash Chevron’s subpoenas in a $27 billion environment contamination lawsuit against the oil giant in Ecuador.
The 5th Circuit in Houston ruled that 3TM must submit to a limited foundational deposition, while a federal judge in San Diego ruled that E-Tech International, a New Mexico corporation, and William Powers, a petroleum engineer, must produce documents and give deposition testimony.
Chevron is in the seventh year of fighting a $27 billion lawsuit in Lago Agrio, Ecuador, over alleged environmental contamination by Texaco, which became a Chevron subsidiary in 2001. As the case concludes in Lago Agrio, Chevron has filed subpoenas all over the United States to prove that its due process has been violated in Ecuador.
Chevron is also pursuing international arbitration to prove that its prosecution in Ecuador is an abuse of the criminal justice system and violates the Bilateral Investment Treaty between the United States and Ecuador and the United Nations Commission on International Trade Law.
In both cases, the consultants appealed the subpoenas on the grounds of privilege and jurisdiction, but both courts found little evidence to support the consultants’ arguments.
In the Texas case, the Ecuadorian plaintiffs appealed a federal judge’s decision to let Chevron depose 3TM, a Houston-based consultancy firm.
“In our view, the district court did not abuse its discretion,” 5th Circuit Judge Fortunato Benavides wrote for the three-judge panel.
The plaintiffs’ consultant, Stratus, retained 3TM to assist in mediation and settlement discussions with Chevron in 2007, according to the ruling. Chevron claimed that 3TM and Stratus produced an environmental impact report that was entered into the Lago Agrio trial by a court-appointed neutral expert, Richard Stalin Cabrera Vega.
The lower court ordered the plaintiffs to produce a list of documents passed to Cabrera, but that ruling was modified to a foundational deposition, limited to “whether 3TM collaborated with Cabrera” and “the extent to which 3TM recognizes its work in the Cabrera report.”
3TM claimed that, to its knowledge, no documents were given to Cabrera, and that the company is shielded from deposition as a non-testifying consultant.
Benavides agreed with the federal judge that any privilege was waived for documents that 3TM passed to Cabrera, because testifying experts like Cabrera must submit a report disclosing data they considered in reaching their conclusions.
“Although work product immunity is not automatically waived by disclosure of protected material to third parties, disclosure does waive protection if it ‘has substantially increased the opportunities for potential adversaries to obtain the information,'” Benavides wrote.
The plaintiffs also argued that 3TM is protected from discovery under Ecuadorian law, but Benavides wrote that they did not point “to any ‘judicial, executive or legislative declaration’ that clearly demonstrates that allowing discovery in this case would offend Ecuadorian judicial norms.”
Benavides also called it “senseless” to require Chevron to seek 3TM documents from Cabrera, “given the plaintiffs’ denial that they provided any such documents to Cabrera and Cabrera’s interest in denying receipt of 3TM material.”
The judge added “that similarities between the Cabrera report and 3TM work product are only relevant to the extent that they collectively show that Cabrera more likely than not incorporated 3TM work product into his report.”
If Chevron and the plaintiffs still disagree over the findings, “the district court may review the Cabrera report and any relevant 3TM work product in camera to help it determine whether a waiver occurred,” the ruling states.
In the San Diego case, E-Tech and Powers argued that Chevron’s subpoena should be thrown out because of procedural errors, privilege and improper jurisdiction, but Chief U.S. District Judge Irma Gonzalez found little merit in the claims.
Gonzalez backed Magistrate Judge William McCurine in his refusal to quash Chevron’s subpoena.
McCurine did not rule on the motion regarding E-Tech, which argued that the subpoena was improper because it did not reside in the Southern District of California. Chevron filed a parallel application in New Mexico against E-Tech and voluntarily dismissed E-Tech from the California action on Sept. 7.
“The fact the Ecuadorian court has permitted Chevron to submit evidence tends to demonstrate Chevron’s application is not an attempt to circumvent the proof-gathering restrictions of Ecuadorian law,” Gonzalez wrote. “Respondents have cited no authority establishing that a party such as Chevron, which has successfully obtained a dismissal from a United States court under the doctrine of forum non conveniens, is precluded from pursuing domestic discovery for use in the foreign action” under federal law.
Powers also failed “at a fundamental level” to prove that testifying or turning over documents would violate his privilege, Gonzalez ruled.
She wrote that even if privilege and work product protection exists, Powers waived those privileges in communications with Cabrera.
“Furthermore, the court is persuaded by the reasons explained by Magistrate Judge McCurine as well as other U.S. courts who have addressed the issue, that the crime-fraud exception applies,” Gonzalez wrote. “There is ample evidence in the record that the Ecuadorian Plaintiffs secretly provided information to Mr. Cabrera, who was supposedly a neutral court-appointed expert, and colluded with Mr. Cabrera to make it look like the opinions were his own.”
Gonzalez also dismissed the respondents’ claims of procedural irregularity, finding that Chevron properly served its subpoenas.