Chevron Ruling Blocks $8.6 Billion Order in Ecuador Fight

  • Ecuadorians’ lawyer loses appeal of Chevron fraud judgment
  • Lower court found bribery, fabricated evidence in lawsuit

Chevron Corp. won a victory in its long-running battle over toxic waste in Ecuador after an appeals court found the American lawyer representing indigenous villagers committed fraud and barred him from enforcing an $8.6 billion award.

"Even innocent clients may not benefit from the fraud of their attorney," the appeals court in Manhattan said Monday, referring to claims that the Ecuadorians’ lawyer had faked evidence and offered bribes. The appeals court upheld a lower-court ruling.

The defeat of lawyer Steven Donziger on appeal could influence the outcome of the storied legal dispute, which was documented in the 2009 film “Crude” and continues to play out in courts around the world. Ecuadorians are seeking to seize Chevron assets because the company has refused to pay on a judgment awarded in 2011 by an Ecuadorian court.

It is unlikely to be the last twist in the saga, which began in 1993 when American lawyers sued over pollution which they say affects 30,000 indigenous villagers in the oil-rich Lago Agrio region.

The original suit claimed Chevron was financially responsible for pollution of the Amazon rain forest by Texaco Inc. from the 1960s through the early 1990s. Texaco, which was acquired by Chevron in 2001, allegedly filled hundreds of unlined waste pits in the bio-diverse region with toxic, cancer-causing drilling materials rather than following standard industry practice of pumping it into wells deep underground.

‘Corrupt Actions’

The no-holds-barred legal battle has involved Donziger’s personal diary and prompted powerful Washington law firm Patton Boggs (now Squire Patton Boggs) to throw up its hands and withdraw from the case. It has also tested the bounds of racketeering law as a means of defense against a judgment in a foreign court.

The appeals court on Monday said the case "reveals a parade of corrupt actions" by Donziger.

Deepak Gupta, an attorney for Donziger, said the appeals court decision was “unprecedented in American law."

“The decision hands well-heeled corporations a template for avoiding legal accountability anywhere in the world," Gupta said. “And it throws the entire international judgment-enforcement framework out the window.”

R. Hewitt Pate, Chevron’s general counsel, said in a statement, “This decision, which is consistent with the findings of numerous judicial officers in the United States and South America, leaves no doubt that the Ecuadorian judgment against Chevron is the illegitimate and unenforceable product of misconduct.”

Karen Hinton, a spokeswoman for the Ecuadorian plaintiffs,“We are shocked by the decision" and will be “exploring all options for further appeal.”

“As disappointed as we are, this ruling will not deter the Ecuadorians, their lawyers and their supporters from aggressively seeking justice in Canada and in other countries where litigation is underway to seize Chevron assets,” she said, in a statement.

‘Criminal Acts’

Chevron hasn’t argued against the actual pollution of the rain forest. It maintains the judgment against it was achieved by a racketeering scheme and a "string of criminal acts" by Donziger and other attorneys he worked with in Ecuador. Besides, it already paid $40 million to clean up its share of the drilling contamination, the company said.

Chevron, based in San Ramon, California, was initially ordered to pay $19 billion by an Ecuadorian court in 2011. The award was later reduced to $8.6 billion, the appeals court said. Chevron has refused to pay. It brought a racketeering case in New York against Donziger to challenge the award.

After a 2013 trial, U.S. District Judge Lewis Kaplan sided with Chevron, finding the lawyer and his colleagues had used fabricated evidence, promised bribes and ghostwrote court documents. The ruling barred Donziger and his associates from collecting on the judgment because “the decision in the Lago Agrio case was obtained by corrupt means.”

Donziger appealed, arguing that international comity -- or the requirement that a U.S. court recognize a ruling of a foreign jurisdiction -- barred Chevron from challenging the judgment. He also said Chevron’s evidence contradicted its allegations, and that the company was out to “demonize” him.

Meanwhile, Ecuadorians have sued Chevron in Brazil, Argentina and Canada, trying to seize assets there to satisfy the judgment.

‘Crude’

"Crude," by filmmaker Joe Berlinger, featured Donziger prominently. The Harvard Law School graduate started working on behalf of the Ecuadorians in the late 1990s and gradually rose to a position as a strategist and fundraiser. Working with a group of activists, he also drew media attention to the pollution dispute.

Chevron won access to hundreds of hours of outtakes from the film, which it contended showed Donziger acting inappropriately.

In court filings, Chevron called him "a liar, con man, and criminal who has headed a racketeering enterprise targeting Chevron as its deep-pocketed victim." The company has said his associates ghostwrote a trial judgment for an Ecuadorian judge and promised to pay him $500,000 to release it as his own.

Donziger, who won support for his cause from celebrities such as musician Sting and his wife, Trudie Styler, argued the company was unfairly targeting him in an effort to avoid paying for billions of dollars’ worth of harm.

He has said he did nothing wrong in Ecuador and that any aggressive tactics he may have used were no worse than Chevron’s actions. A spokesman for Donziger’s Ecuadorian clients described them as being “out-gunned on a profound level” against the oil company.

The case is Chevron v. Donziger, 14-0826, U.S. Court of Appeals for the Second Circuit (Manhattan).

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