Attorney Steven Donziger won an $18 billion pollution verdict against Chevron. But is he clean enough to collect?
On Feb. 14, Steven R. Donziger won a legal victory of extraordinary proportions. In a small town in eastern Ecuador, a provincial judge in a storefront courtroom ordered Chevron (CVX) to pay $18.1 billion for the benefit of Donziger's clients, thousands of Amazon villagers who blame the U.S. company's predecessor for pollution related to oil drilling in the rainforest. On the all-time roster of environmental recoveries, the Chevron judgment—if it were ever collected—would rank second only to BP's (BP) promised $20 billion fund to compensate victims of the 2010 Gulf of Mexico oil spill.
BP, of course, acted in response to hundreds of lawsuits, some filed by famous and powerful class-action lawyers, not to mention dire threats from the Obama Administration. Before taking on Chevron in a brawl that started 18 years ago, Donziger had never brought, let alone won, a civil lawsuit. Not a supermarket slip-and-fall, not a simple contract-gone-sour—nothing. A former public defender, his past clients included thieves and crack dealers. Today he works from a brief-cluttered two-bedroom apartment he shares with his wife and four-year-old son on Manhattan's Upper West Side. "I have tremendous professional respect for Steven," says Michael Brune, executive director of the Sierra Club. "He is the driving force behind what's probably the most important environmental lawsuit in the world seeking to hold an oil company accountable for its actions."
Donziger has a Harvard law degree and no shortage of ambition. Still, the notion that he could marshal the resources to get this far against the nation's third-largest corporation (after Wal-Mart (WMT) and ExxonMobil (XOM)), pal around with green-friendly celebrities like Daryl Hannah and Trudie Styler, and become a hero to environmentalists worldwide is about as likely as a neophyte physician eradicating malaria.
The alternate scenario may be even more improbable. According to Chevron, Donziger is a serial fraud artist.
Faced with the attorney's virtuoso maneuvering in Ecuador, the oil company changed strategy in the fall of 2009. It turned to Gibson, Dunn & Crutcher, a Los Angeles-based law firm that had recently rescued Dole Food (DOLE) from billions of dollars of pesticide liability in Nicaragua. Gibson Dunn advertises its ability to turn the tables on plaintiffs who secure foreign judgments against American companies. Unleashed by Chevron, a team from the firm led by Randy M. Mastro, a former mob prosecutor and protégé of Rudolph Giuliani, trained its fierce attention on Donziger.
Gibson Dunn dug up evidence of a disturbing nature. A scientific expert formerly employed by the plaintiffs protested in a deposition that his name had been signed to a report he had not written, which was then submitted as evidence to the Ecuadorian court. Another technical expert, supposedly a neutral one working for the Ecuadorian judge, had some of his findings drafted for him by the plaintiffs' American advisers. Gibson Dunn won U.S. court orders forcing Donziger and his allies to surrender reams of confidential documents, including his personal diary. A filmmaker was obliged to turn over outtakes from a documentary on the Ecuador case, some of which showed Donziger boasting about pressuring the Ecuadorian trial judge. "The only language that I believe this judge is going to understand," the lawyer says in one vignette, "is one of pressure, intimidation, and humiliation."
Last year, Gibson Dunn brought its evidence haul to the attention of federal judges in the U.S. One, Lewis A. Kaplan of New York, wrote in an opinion in November: "Donziger's own words raise substantial questions as to his possible criminal liability and amenability to professional discipline." Following Kaplan's implicit invitation, Gibson Dunn in February slammed Donziger, his Ecuadorian lawyer allies, and their clients with a civil racketeering suit. On Mar. 7, Gibson secured a preliminary injunction from Kaplan blocking enforcement of the $18.1 billion verdict.
Gibson Dunn's court papers seek to transform Donziger from a humanitarian firebrand into the mastermind of a conspiracy "to extort, defraud, and otherwise tortiously injure" a corporation with a market capitalization of $208 billion, more than three times the size of Ecuador's annual economic output. On its website, the 1,000-attorney firm is marketing what might be called the Donziger Defense as a template other U.S. companies can purchase to combat social-reform suits filed overseas. "When faced with significant non-U.S. and cross-border litigation," the site promises, "members of the Transnational Litigation Group work with their clients to respond to these often massive and multifaceted assaults with more than a series of defensive tactics, but rather an affirmative strategy to ultimately end the litigation."
Chevron would be foolish to underestimate Donziger. What may resemble a mismatch between a heavyweight and a flyweight is turning into a tag team bout—one that still has many rounds to go. With the lure of billions in potential damages and hundreds of millions in legal fees, Donziger has attracted a well-connected corporate law firm in Washington, D.C., Patton Boggs, to help his clients collect on the Ecuadorian verdict. John W. Keker, an acclaimed white-collar defense lawyer, has jetted in from San Francisco to represent him in the New York racketeering suit. And even as controversy intensifies over his tactics, Donziger continues to draw financial backing from the likes of Burford Capital, a hedge fund based in the U.K. that invests in lawsuits to share in the proceeds. "Every allegation of Chevron's can be rebutted with facts," says Donziger's spokeswoman, Karen Hinton. "The case has been carried out according to rules established in Ecuador. The judge [in Ecuador] has found that Chevron has extremely dirty hands and in fact tried to delay and undermine the trial in Ecuador."
However the confrontation ends, it will have implications far beyond Latin America because Donziger has rewritten the rules for how to sustain far-flung environmental litigation. In addition to Burford, his investors include Russell DeLeon, an old friend who accumulated a fortune in the online-poker business. "Steven has made some mistakes along the way and said some questionable things, but he has also been tireless, absolutely unrelenting," says the Sierra Club's Brune. "This has become a key battle." It has also become a test of how far a corporation can go in counterattacking a persistent plaintiffs' lawyer whose advocacy leads to a monster verdict, negative press coverage, scathing blog posts, and consumer protests. Less clear is whether all the intricate legal choreography will do anything to clean up the rainforest or improve the lives of Amazonians.
Bordering the Pacific Ocean at the Equator and wedged between Colombia and Peru, Ecuador collects more than half its $14 billion in annual export revenue from petroleum. Texaco began exploring and drilling in the Oriente region of eastern Ecuador in 1964. Twelve years later the government of Ecuador became the majority owner of a consortium under which Texaco continued to run all drilling, waste-disposal, and pipeline operations. Texaco remained the operator until 1990, when the national oil company, Petroecuador, assumed hands-on management. In 2001, Chevron acquired Texaco; Chevron itself has never drilled in Ecuador.
No one disputes that over a 26-year span, Texaco's operations sullied the rainforest. The question is the extent of the contamination, who bears responsibility for it, and what lasting harm, if any, it has caused. Texaco dumped billions of gallons of wastewater and other potentially hazardous drilling byproducts in the Oriente, according to Ecuadorian court records. It left behind unlined containment pits of petroleum and other contaminants. The company worried that it was making a mess. An internal Texaco memo entitled "Reporting of Environmental Incidents" and dated July 17, 1972, instructed employees in Ecuador to disclose "only major events." The document defined a major event as "one which attracts the attention of the press and/or regulatory authorities or in your judgment merits reporting." The memo adds: "No reports are to be kept on a routine basis and all previous reports are to be removed from Field and Division Offices and destroyed." (Kent Robertson, a Chevron spokesman, says the 1972 memo was superseded by later written instructions requiring Texaco workers to report pollution "as promptly as possible.")
In 1993 a suit was filed against Texaco in federal court in New York, seeking compensation for a group of Amazon settlers and indigenous people for environmental damage and illnesses the plaintiffs attributed to oil pollution. The claimants called themselves Los Afectados, or the affected ones, and among their ranks were members of the Cofan and Quichua tribes. The lead plaintiffs' attorney, Ecuadorian-born Cristobal Bonifaz, happened to be the father of a friend of Donziger's from Harvard. Two years out of law school, Donziger eagerly signed on to help with the suit.
Texaco fought back on procedural grounds, contending that New York was not the proper place to contest events in the Amazon. Ecuadorian courts were competent to hear the case and would have better access to witnesses and evidence, the company insisted. In 2002, shortly after Texaco became part of Chevron, the company got its wish on the venue issue. A federal appeals court in New York dismissed the U.S. suit on the condition that Texaco accepted the jurisdiction of the Ecuadorian judiciary.
While it was fending off the suit in New York, Texaco signed a settlement in 1995 with the Ecuadorian government and Petroecuador. The American company committed to clean up about a third of the drilling sites, a fraction reflecting its ownership share during the latter stages of the oil consortium. Over the next three years, Texaco said that it spent $40 million removing waste and restoring the forest. And in 1998, the government formally released Texaco "from any liability," concluding that it had "fully performed" its obligations. The oil company seemed to have the imbroglio in the Amazon under control.
It did not. Donziger, backed by environmental nonprofits in the U.S., as well as by Kohn Swift & Graf, a well-to-do plaintiffs' class-action firm in Philadelphia, was itching to renew the fight. Ecuadorian courts have traditionally been inhospitable to mass injury litigation, but in 1999 the legal climate began to shift: Ecuador enacted a new environmental statute that opened the door to complex cleanup suits, and Donziger maintained that the release Texaco had obtained from the government did not preclude legal action on behalf of individuals.
After receiving his undergraduate degree in 1983 from American University in Washington, D.C., Donziger, who speaks Spanish, moved to Managua to work as a reporter for United Press International covering the Nicaraguan civil war. The son of a successful businessman, he had grown up in middle-class comfort in Jacksonville, Fla. His mother, a civic activist, worked as a volunteer advocate for farm workers, and her dedication influenced the trajectory of her son's career. Enrolling at Harvard Law School in 1987, he gravitated toward human-rights classes and criminal law. Three years later he took a job as a staff lawyer with the Public Defender Service in Washington, representing mostly young black men accused of street crime. He left the defender service after two years to serve as executive director of a criminal justice commission sponsored by the National Center on Institutions and Alternatives. That led to his editing The Real War on Crime, a book published in 1996 by Harper Perennial. The work decried what it depicted as America's overly punitive and counterproductive emphasis on incarceration. Among the few angels in the hellish account are poorly paid public defenders "who may carry 350 cases or more at a time, and have several different trials scheduled for the same day."
Donziger declines to be quoted on the record, citing the racketeering suit against him and his attorney's advice. During a long midafternoon conversation, he sips steaming English breakfast tea in a near-empty Manhattan restaurant. He has a cold and speaks with a husky scrape to his voice. Slouching in his seat, he looks weary, a byproduct of nine-hour flights to and from Ecuador. At 49, he is a large man, 6-foot-4, and going gray on top. He describes inheriting control of the case from his friend's father, who was unenthusiastic about protracted tropical legal combat. As Donziger talks about representing rainforest fishing families plagued by modernity, he sits up straighter and grows animated. He spices his delivery with self-deprecating asides about a personality that ranges, in his estimation, from very thoughtful to very obstinate.
He knows his character is on trial, and the idea irritates him. Some of the same attributes that have propelled him toward his seemingly impossible goals—zealous devotion to the unfortunate, scorn for legal convention, affection for publicity—now endanger his lawsuit. Depending how his struggle with Gibson Dunn unfolds, these traits could ultimately threaten his law license. They could even undermine the credibility of the kind of social-reform litigation to which Donziger has devoted his professional life.
In 2003, the oil-pollution suit against Chevron restarted in a beaten-down former drilling camp called Lago Agrio, or Sour Lake—named after the Texas town where Texaco first hit oil in the early 1900s. Donziger has spent one week out of four there ever since, coordinating a team of Ecuadorian lawyers and activists and serving as the plaintiffs' field general, cheerleader, and public face. He tramps around the jungle collecting evidence and helps arrange public events featuring tribesmen in traditional dress and face paint. Local Ecuadorian lawyers file the papers and argue in the provincial court in Lago Agrio, which shares a concrete building with a shoe store and a beauty salon.
Donziger's team contends that for decades, thousand of residents of the Oriente have suffered maladies ranging from intestinal disease to skin ailments to fatal cancer. They attribute this suffering to the dumping of toxic gunk from oil drilling and the tainting of drinking water. As Bloomberg Markets magazine reported in December 2008, one court-ordered technical report on file in Lago Agrio concludes that Texaco's pollution caused 2,091 cases of cancer among residents and led to 1,401 deaths from 1985 to 1998. The same engineers and biologists who compiled those numbers found that Texaco had polluted streams and drinking water in a 1,920-square-mile area.
Chevron questions the accuracy of the court-ordered report and denies responsibility for any illnesses. The company says there is no credible scientific evidence linking Texaco's pollution in the Oriente to human disease. Not a single cancer case can be definitively tied to drilling, Chevron argues. "Studies that say otherwise are wrong, if not fraudulent," says spokesman Robertson. Chevron asserts that many of the plaintiffs' health complaints stem not from rogue hydrocarbons but from bacterial contamination caused by poor sanitation.
Apart from the legal and scientific questions of what has caused disease in the region, Chevron contends that Texaco long ago cleaned up the pollution for which it was responsible. The Ecuadorian government bears liability for any remaining oil pits and other contamination, the company maintains. Chevron puts great weight on the release it received from Ecuador in 1998; the Ecuadorian judiciary, however, has agreed with the plaintiffs that the government did not—and could not—waive individuals' right to sue.
Chevron also notes that for the past two decades any fresh pollution in the Oriente has been caused entirely by Petroecuador. Citing Ecuadorian press reports and other sources, Chevron says the national oil company has been responsible for more than 1,400 spills since 2000 alone. Petroecuador has constructed more than 270 new reserve pits in the last three years, Chevron adds. If the plaintiffs have a beef, the company argues, it is with the government of Ecuador and its national oil company—neither of which Donziger's clients have sued.
Petroecuador has conceded publicly that it released wastewater into the environment from 1990 until 2007. The company has said it has improved its practices since then and made progress cleaning some sites. Two Petroecuador spokesmen did not respond to separate requests for comment. Donziger has acknowledged that the Ecuadorian oil producer is partially responsible for pollution in the Oriente. Hinton, his spokeswoman, says that the Lago Agrio plaintiffs are not obliged to sue all the alleged wrongdoers.
As a practical matter, American environmentalists and lawyers going after Ecuador in the country's own courts would obviously generate political friction. And there is no question that big U.S. oil companies have deep pockets. Recognizing those realities, lawyers for the plaintiffs signed an agreement back in November 1996 with the Ecuadorian government, agreeing to waive any claims against the country or Petroecuador.
The collision of perspectives that has played out since 2003 in Lago Agrio would be unrecognizable to anyone schooled in American jurisprudence. The provincial court, which acts without a jury, presided for several years over contentious mass excursions to remote oil pits and drilling stations. With everyone swatting insects, dueling scientific experts took soil