Over the past six weeks inside a Manhattan courtroom, Chevron (CVX) has dumped a mountain of damning evidence before U.S. District Judge Lewis Kaplan in an effort to undermine a multibillion-dollar pollution verdict the company incurred in Ecuador in 2011. Chevron wants Kaplan to rule that New York-based plaintiffs’ attorney Steven Donziger lied, fabricated evidence, and even blackmailed an Ecuadorian judge as part of an elaborate shakedown. On top of all that, the oil company has produced troubling indications that Donziger’s legal team ghostwrote the contamination judgment.
And still, Chevron could eventually lose this case.
After closing arguments Tuesday, there’s not much doubt how Kaplan will rule. Presiding over the civil trial without a jury, Kaplan has sent every signal a judge can send—interim opinions, comments from the bench, etc.—that he’s on his way to finding Donziger liable for several varieties of fraud.
Although he denies wrongdoing, Donziger concedes he’s going down. The lawyer’s spokesman, Chris Gowen, said yesterday afternoon via e-mail that Donziger considers it “a ‘foregone conclusion’ that Kaplan will rule in favor of Chevron, given his bias and the fact he excluded all key evidence about Chevron’s environmental contamination relied on by the Ecuador court to find the company liable. Judge Kaplan ran a show trial to inject his own politics into a case that allows him to spread those views around the world.”
It’s not clear exactly what “politics” Team Donziger refers to. Kaplan, a 68-year-old former corporate law firm partner, was nominated in 1994 by then-President Bill Clinton, a Democrat, and as a trial judge he has supervised an eclectic array of criminal prosecutions, terrorism cases, and civil suits. Kaplan has a reputation for being smart, independent-minded, and, in the classic manner of a federal trial judge, imperious toward the mere mortals who appear before him. Whatever Donziger has in mind, his side’s snarling about “bias” and a “show trial” is not the sort of talk designed to ingratiate. Donziger has his eye on the U.S. Court of Appeals for the Second Circuit, which oversees Judge Kaplan.
Despite the questionable way he pursued the two-decade-old litigation over U.S. oil industry pollution in the rain forest in Ecuador, Donziger has some entirely respectable arguments on appeal. Chevron’s attempt to use the federal Racketeer Influenced and Corrupt Organizations Act, or RICO, to squelch Donziger’s victory in Ecuador requires an expansive interpretation of the 1970 anti-mob statute—one that the Second Circuit may be queasy about, even if Judge Kaplan isn’t.
Donziger can’t enforce his Ecuadorian verdict in Ecuador because Chevron has no assets there. Instead, he and allied lawyers are trying to enforce the judgment—now valued at $9.5 billion—in countries where the company does have assets: Canada, Argentina, and Brazil. Chevron wants Judge Kaplan to brand Donziger’s Ecuadorian lawsuit a “racketeering enterprise” so that the company can dissuade these countries from enforcing the verdict. To accomplish that, Chevron appears to have convinced Judge Kaplan that what Donziger calls vigorous litigation and activism was, in fact, an elaborate extortionate RICO violation involving corrupt Ecuadorian witnesses, judges, and lawyers.
RICO, however, is a complicated statute originally intended to put American gangsters in prison. Congress didn’t envision it would be used to scrutinize the legitimacy of far-flung Latin American contamination lawsuits. On appeal, Donziger will doubtless argue that Chevron improperly seeks to stretch RICO to apply to actions overseas. The company will answer the “extraterritoriality” defense by stressing that Donziger masterminded his plot from his Manhattan home office by using e-mail, cell phone, and the occasional old-fashioned envelope (read: wire and mail fraud).
Donziger will also tell the Second Circuit that while RICO allows private plaintiffs to sue for money damages, Chevron improperly seeks “equitable relief”—legalspeak for a court order banning him and his clients from ever profiting from their alleged fraud. Whether RICO permits anyone other than the government to get equitable relief is a live question in the federal courts. It’s a law school exam puzzler that will require the Second Circuit to parse competing precedents and split statutory hairs. In other words, Donziger has a fighting chance.
Fortifying this highly technical-sounding attack on Chevron’s expected trial victory is a more thematic argument: The Second Circuit should be wary of setting a broad precedent that allows corporate defendants to condemn an aggressive mass lawsuit as extortion. After all, lawsuits by definition are a form of civilized extortion: Pay me a fat settlement or I’ll break your knees, figuratively speaking, in court. Chevron and the corporate interest groups cheering it on have said explicitly that the case against Donziger is meant as a lesson (threat?) to overeager plaintiffs’ lawyers everywhere. The Second Circuit may not want to amplify that message.
In light of these potential appeal arguments, what’s Chevron’s most effective defense of its imminent trial victory? I know what it’s not. It’s not a stirring call for a bold expansion of RICO. Chevron’s brief to the Second Circuit would go something like this:
Rest assured, your honors, most mass-tort suits aren’t racketeering conspiracies and aren’t vulnerable to a table-turning RICO counterattack. That’s because most plaintiffs’ lawyers aren’t Steven Donziger. They don’t threaten judges. Their former scientific advisers don’t disavow their technical work. Their former co-counsel don’t accuse them of ethical lapses and deceit. Their ex-financiers don’t call them liars.
Somewhere, your honors, there’s a line where what looks like a lawsuit becomes a fraudulent conspiracy. Fortunately, you don’t have to say precisely where that line is or how many suits go too far. You don’t have to set a precedent or expand RICO. All you have to say is that what happened in this case in Ecuador was definitely over the line. This ruling is good for today and today only.
Judge Kaplan is expected to rule early next year. Later in 2014, the Second Circuit will have its say. This one is worth watching.