Chevron Bid to Block Judgment Rejected by Appeals Court

A U.S. appeals court blocked Chevron Corp. (CVX) from using a New York law to try to bar a group of Ecuadorians from collecting on an $18 billion judgment in an environmental damage lawsuit.

The appeals court today reversed a lower-court order, saying Chevron can’t use the law against the plaintiffs before they try to collect.

“Chevron will have its opportunity to challenge the judgment’s enforcement under this act at such time, if any, as judgment-creditors seek to enforce the judgment in New York,” a three-judge panel of the Manhattan-based court said today.

In March, U.S. District Judge Lewis Kaplan in Manhattan issued a ruling that barred Ecuadorean residents in the Amazon River Basin from enforcing an $18 billion judgment awarded by a court in their country until a separate suit by Chevron against the villagers and their lawyers is decided.

“Chevron believes this corrupt judgment will be unenforceable in any country that adheres to the rule of law and we will continue to defend Chevron’s interests against any attempts to enforce the fraudulent judgment,” San Ramon, California-based Chevron said in a statement.

Chevron was ordered Feb. 14 to pay as much as $18 billion in compensatory and punitive damages for Texaco Inc.’s alleged dumping of toxic drilling wastes in the Ecuadorian jungle from 1964 to about 1992. The ruling came in an 18-year-old lawsuit decided by a judge in Lago Agrio, a provincial capital near the Colombian border.

‘Grave Injustice’

“A grave injustice against the Ecuadorians has been set right by today’s 2nd Circuit ruling,” Karen Hinton, a spokeswoman for the plaintiffs, said in a statement. “It rebukes Chevron’s abusive legal tactics of the past two years.”

Chevron says it cleaned up its portion of the oil fields and was released from pollution claims against Texaco in an agreement with the government of Ecuador. Chevron acquired Texaco in 2001.

The case is Chevron Corp. v. Naranjo, 11-1150, U.S. Court of Appeals for the Second Circuit (Manhattan).

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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