Amazon Crusader. Chevron Pest. Fraud?Paul M. Barrett
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 and water samples while lawyers accused their opponents of distorting the data. In 2007 the court replaced this peripatetic free-for-all with a more streamlined process. A neutral expert, Quito-based engineer Richard Stalin Cabrera Vega, was asked by the court to estimate the extent of oil pollution. In March 2008, Cabrera set the amount of damages at $16 billion. Ten months later he raised the figure to $27 billion.
Chevron scoffed at the estimates. "We're going to fight this until hell freezes over," spokesman Donald Campbell said in May 2009. "And then we'll fight it on the ice." This strategy makes perfect sense in financial terms. Even if Chevron is spending tens of millions of dollars a year on legal fees—a conservative estimate on which the company won't comment—the expenditure doesn't approach the annual interest on a potential multibillion-dollar payment to the plaintiffs. (The prolonged legal fight doesn't exactly sync with Chevron's current cross-media advertising campaign—launched in October 2010—promoting common ground it shares with people around the world. "Oil companies should support the communities they're a part of," one of the ads states.)
During eight years of skirmishing in the tropics, Donziger has dexterously scrambled to finance and publicize his case. Lacking a corporate treasury, or even a conventional law office, he turned to other sources of support. Kohn Swift, the Philadelphia plaintiffs' firm, has helped with legal chores in the U.S. and, more importantly, kicked in about $7 million. In exchange, Kohn Swift was promised half of any legal fees. With a proven record of litigating large, intricate cases, the Philadelphia firm lent Donziger credibility in legal circles. He has also tapped his mogul friend Russell DeLeon for more than $1 million. The pair met at Harvard. DeLeon, whose business pursuits include PartyGaming, an online-gambling company headquartered in Gibraltar, stands to collect up to 6 percent of the combined Donziger-Kohn legal fees, according to a plaintiffs' memo entitled "Confidential Investment Document" and dated Apr. 14, 2009. Funds for the Lago Agrio plaintiffs have also come from Burford Capital, a publicly listed hedge fund based on the Isle of Guernsey that describes itself on its website as "one of the largest dispute financiers in the world." In August 2010, Burford was negotiating with Donziger over a commitment of up to $15 million, according to e-mail and term sheets available in U.S. court records.
For political and media counsel, Donziger has relied on Hinton, a former Democratic aide in Washington who runs her own public relations firm, and Chris Lehane, a prominent consultant who served as a spokesman and opposition-research specialist in the Clinton White House and for Al Gore's Presidential campaign in 2000. Hinton has been paid fees; Lehane has worked on a contingency basis, with a promise of 2 percent of the Donziger-Kohn fee, the April 2009 memo shows. Hinton says that the returns promised some of the financiers and consultants have shifted recently but declines to provide specifics.
The U.S. nonprofits Amazon Watch and Rainforest Action Network have vigorously advertised the Lago Agrio litigation and facilitated endorsements from celebrities such as Daryl Hannah and Trudie Styler, both strong critics of Chevron. Visits to the Oriente by the actresses have drawn favorable press attention but complicated Donziger's mission. "Trudie is a kind, passionate woman, proud to be the wife of a famous singer and not shy about using that status to help," he noted in his diary on May 25, 2007. (Styler's husband is the pop performer Sting.) On one occasion, Donziger wrote, the entourage surrounding Styler inconvenienced a crowd of local Ecuadorians while she shopped for gifts. "None of these people had heard of Sting and could have given a damn," the lawyer observed.
He also mused about the rewards for his exertions. "I cannot wait to get off the plane and see my fellow soldiers—often the only people I feel who get me," the lawyer wrote in his diary in April 2007 on his way to Quito. "I want to look in their eyes and see if they understand the enormity of what this team has accomplished."
His greatest publicity coup came when he pitched his case to Joe Berlinger, a well-known documentarian. Berlinger spent three years working with the lawyer on a film called Crude: The Real Price of Oil. Donziger's friend DeLeon helped finance the project and received formal credit as a producer. Released in 2009, Crude won film festival awards and rave reviews. Manohla Dargis of The New York Times called it "a forceful, often infuriating story about Big Oil and little people." Interspersed with shots of jungle waterways besmirched by glistening petroleum are scenes of villagers telling of relatives' cancer deaths. Sitting next to Donziger in one scene, Styler declares: "These people have been systematically poisoned."
At another point in Crude, Donziger, dressed in a gray business suit, tells the camera, "We're going down to have a little chat with the judge today. This is something you would never do in the United States. But Ecuador, you know, this is how the game is played. It's dirty." What follows is a chaotic scrum of attorneys and activists in the office of an elderly Ecuadorian judge who appears dismayed, if not downright terrified. Donziger, the tallest person in the small room, is shouting in Spanish and jabbing a finger in the direction of an opponent. "You are a corrupt lawyer!" he bellows. "You are a corrupt Texaco lawyer!"
"Steven was frustrated by Chevron's efforts to improperly influence the judge and generally corrupt the trial," says Hinton, his spokeswoman. "He has no regrets for calling out the Chevron lawyers for acts of corruption. He does regret some of his comments on film, but they were made in moments of frustration as he pursued an against-all-odds battle to ensure a fair trial for his clients."
As the film crew shadowed Donziger in Lago Agrio and Quito, the capital, the lawyer showed little hesitation about playing to the camera. Privately, he had twinges of apprehension. "Sometimes I feel I am letting Berlinger in too much," he wrote in his diary on Feb. 4, 2007.
By 2009, Gibson Dunn was transforming Dole Food's toxic tort crisis in Nicaragua into a stunning corporate victory. The company faced billions of dollars in judgments in Nicaragua based on claims that pesticide used in the 1970s had caused sterility in former banana farm workers. Gibson dug out evidence that some plaintiffs were coached to lie about their employment and supposed injuries— revelations that ultimately caused American judges to refuse to enforce verdicts against Dole. U.S. judges also threw out suits pending against Dole concerning alleged wrongdoing in Colombia and the Ivory Coast. On its website and via press coverage, Gibson Dunn let other potential clients know about its success. Chevron took notice.
Mastro, the Gibson Dunn partner put in charge of the Chevron engagement, learned about brass-knuckled investigation under the supervision of Rudolph Giuliani. In the 1980s, when Giuliani was the headline-making Manhattan U.S. Attorney, Mastro prosecuted organized crime cases as one of his senior assistants. When Giuliani moved to City Hall as mayor in 1994, he hired Mastro as his chief of staff and later promoted him to Deputy Mayor for Operations. At 54, Mastro has wavy white hair and a dapper beard. His Santa-Claus-in-Brooks-Brothers look is misleading. This is a lawyer who has tangled successfully with organized crime families over control of New York's notorious private carting industry and the Fulton Fish Market.
Seeking to undermine foreign judgments against its corporate clients, Gibson Dunn has honed the use of an obscure legal tool. Title 28, Section 1782, of the U.S. Code allows a litigant to seek a federal court order for testimony or documents that might be useful in a proceeding overseas. Attorney-client privilege applies to a Section 1782 inquiry, but the protection can be overcome if targeted attorneys discuss their legal strategy publicly—for example, in a documentary film—or are accused of fraud.
Since January 2010, Gibson Dunn has filed 20 separate 1782 petitions in 16 different federal courts. The onslaught has resulted in the revelation of tens of thousands of pages of formerly confidential records, e-mails, memos, and Donziger's personal diary.
Some of this evidence has cast an unflattering light on Donziger's tenure as el jefe of the war against Chevron. Charles W. Calmbacher, a former paid technical expert for the plaintiffs, said in a deposition in March 2010 that an environmental-damage assessment filed with the Ecuadorian court in his name was not in fact his work. "I did not reach these conclusions, and I did not write this report," Calmbacher said under oath. He testified as well that Donziger told him that "he wanted the answer to be that there was contamination and people were injured … [b]ecause it makes money. That's what wins the case." Hinton counters that "the plaintiffs stand by the validity of the scientific evidence in the report and deny that they did anything wrong or deceitful in connection with Calmbacher."
There were more disturbing revelations. Gibson Dunn demanded that Berlinger turn over hundreds of hours of outtakes from Crude. Donziger's earlier anxiety that he had allowed the filmmaker too much access now proved painfully correct. Backed by a group of big media companies that participated as "friends of the court," Berlinger resisted on First Amendment grounds. In July 2010, the federal court of appeals in New York ruled for Chevron. In a decision viewed as a major defeat for advocacy filmmaking, the court noted that Berlinger had not acted as an independent journalist—and, as a result, did not enjoy free-press protection. His "making of the film was solicited by the plaintiffs in the Lago Agrio litigation for the purpose of telling their story," the court said, and he had even made changes to the film at the plaintiffs' request.
Gibson Dunn has deftly exploited the outtakes in its Section 1782 investigation. Berlinger left out of the released version of his film a series of provocative statements by Donziger. These included: "Science has to serve the law practice; the law practice doesn't serve science," and, "I once worked for a lawyer who said something that I have never forgotten: 'Facts do not exist. Facts are created.' Ever since that day, I realized how the law works." Hinton plays down the significance of the outtakes. Some of Donziger's comments "were said in jest; others were hyperbole and inappropriate," she says. "But they have nothing to do with the underlying facts of the case."
Beneath the bluster, though, lay deeper problems. The outtakes allegedly confirmed a suspicion Chevron had long harbored—that the Ecuadorian court's "neutral" expert had relied on inappropriate assistance from the plaintiffs. The unused material from Crude showed that two weeks before his appointment by the court in March 2007, the expert, Richard Cabrera, had met with Donziger and local Ecuadorian lawyers for the plaintiffs. One of Donziger's Ecuadorian colleagues says on film: "The work isn't going to be the expert's. All of us bear the burden." Donziger then describes how U.S.-based consultants for the plaintiffs would prepare a "draft report" for Cabrera. Looking at the expert, Donziger says, "Richard, of course, you really have to be comfortable with all that, and we'll also define the support the expert needs." As the meeting ends, Donziger exults, "We could jack this thing up to $30 billion in one day."
At a meeting the following day, the outtakes show, some of the plaintiffs' consultants suggest that there is a lack of evidence that contamination from waste oil pits had spread to surrounding groundwater. Donziger responds: "You can say whatever you want, and at the end of the day, there's a thousand people around the courthouse, you're going to get what you want." He adds: "This is all for the court just a bunch of smoke and mirrors and bulls--t."
When one of the plaintiffs' consultants comments that it had been "bizarre" to have Cabrera at the previous day's strategy session, Donziger instructs the adviser not to discuss the topic. Then the lawyer tells the documentary camera operator that these comments are off the record.
The plaintiffs' lawyers' contacts with Cabrera "can seem unusual to an American not used to practice in a foreign country with a civil code," Hinton says. "The plaintiffs provided Cabrera with materials that he was free to accept or reject—no different from judges in the U.S. who can accept or reject findings of fact or conclusions of law submitted by the parties."
By the time the outtakes surfaced, Donziger had another major problem: He had fallen out with his financial backer Joseph C. Kohn of Kohn Swift. They had argued over money and control of the case. Kohn had opened a line of communication to Chevron about a settlement. When Donziger learned that the company wouldn't even talk about a $1 billion resolution, he told Kohn to drop the preliminary negotiations. In an Aug. 9, 2010, letter addressed to plaintiffs' lawyers in Ecuador, Kohn complained that he and his firm had been "deceived" by "Donziger's conceit and naiveté, a dangerous combination which is leading the case rapidly towards disaster." Kohn added: "I am also shocked by recent disclosures concerning potentially improper and unethical, if not illegal, contacts with the court-appointed expert, Mr. Cabrera, which are coming out in the U.S. discovery proceedings." Jim Rohn, a lawyer representing Kohn, says his client behaved appropriately throughout the case and would not comment.
Hinton says Kohn was at fault. "The correspondence shows that Kohn tried to coax the clients to accept a lowball settlement while he was withholding case expenses to pressure them to do so," she asserts. "The clients did not want to settle on the terms proposed by Kohn."
On Feb. 8, Randy Mastro appeared at the federal courthouse in lower Manhattan to ask Judge Kaplan to issue a temporary restraining order blocking an anticipated judgment against Chevron from the court in Ecuador. Mastro argued that his client needed time to pursue its suit against Donziger under the civil provisions of the Racketeer Influenced and Corrupt Organizations Statute. Enacted in 1970, the RICO law was designed to be used against organized crime syndicates, but lawyers have invoked it in numerous commercial disputes, as well. "You have seen the Crude outtakes," Mastro told the judge. "This is an opportunity to prevent an extortion and fraud from being effectuated."
Donziger represented himself at the hearing but declined to argue. Sheldon Elsen, another New York lawyer, spoke for the interests of the Lago Agrio plaintiffs. "What you have is a big bucks corporation who knows their way around the world, who said, 'We will abide by the judgments of the courts of Ecuador,' " Elsen declared. "Now they are coming in crying, 'We don't want a judgment against us.' " Then Elsen added: "Now, Mr. Donziger may be a knave and a thief; I don't know whether he is or he isn't. Some of the things he said, I'm glad I was not representing him." (That was the last time Elsen represented the Lago Agrio plaintiffs.)
Judge Kaplan, a voluble jurist nominated by President Bill Clinton in 1994, ruled immediately from the bench. He granted the restraining order forbidding the plaintiffs from trying to collect any judgment they might win in Ecuador. It was highly unusual for a federal judge to block the effect of a foreign court's action before it occurred. (He has since turned his order into a preliminary injunction, which remains in effect.) Kaplan didn't rule on the merits of the environmental claims; in fact, he stressed that he didn't know much about the underlying equities. He didn't sound sympathetic, however: "Among the obvious facts here are that the Ecuadorian plaintiffs are in this for money. They may be in it for other things, but they are in it for money."
Leaving aside his clients' aims, this seems like a misdiagnosis of Donziger's motivation. He has been paid a total of about $1 million since 2003, which works out to $125,000 annually for round-the-clock, 365-days-a-year labor. Even with the Feb. 14 judgment, the odds remain iffy that he will collect a fat paycheck by class-action standards. His diary indicates that what drives him has more to do with true devotion and an ornery refusal to quit than it does with the accumulation of lucre. "I think it is a miracle how much we have accomplished with so little," he wrote in May 2006. "But in the end of the day that means nothing if we don't win."
On Feb. 14, six days after Kaplan's blocking order, the court in Lago Agrio issued a judgment for about $9 billion. In a truly odd twist, Judge Nicolas Zambrano said he would double the verdict unless Chevron promptly apologized. Chevron refused, pushing the total to $18.1 billion.
Judge Zambrano essentially embraced the plaintiffs' view of the case. In a 188-page ruling, he held the company responsible for water and soil contamination caused by Texaco, as well as illness, deaths, and economic losses that he determined had been caused by the pollution. The dollar amount was $2 billion more than the lower of the two damage estimates by court-appointed expert Cabrera. Eighteen billion dollars is big money, even for Chevron. The company had $17.1 billion in cash and cash-equivalents at the end of December, according to a Jan. 28 statement.
In the middle of his long opinion, Zambrano notes in passing that Donziger has made "disrespectful statements" about the Ecuadorian courts. The judge said he was not going to attribute that behavior to the plaintiffs themselves. Zambrano also acknowledged Chevron's allegation about the expert Cabrera being compromised. The judge said he was looking into that charge but had not relied on Cabrera's report in reaching his judgment.
Both sides say they will appeal—Chevron to reverse the verdict, the plaintiffs to seek more in damages. Ecuadorian judicial authorities haven't indicated how they will respond to the nascent racketeering litigation in New York or to Judge Kaplan's preliminary injunction forbidding execution of the judgment.
Donziger has lined up muscular legal support for the continuing fight. If Kaplan's injunction is set aside, Washington's Patton Boggs has at the ready a 30-page strategy for seizing Chevron assets around the world. Indeed, Kaplan has said he issued his temporary order in part because Patton Boggs, on behalf of the plaintiffs, seems so eager to seize Chevron assets. Patton Boggs entitled its memo "Invictus," after a Victorian poem favored by Nelson Mandela ("My head is bloody, but unbowed").
John Keker, the lawyer who has agreed to defend Donziger in the racketeering case, is one of the nation's best-known white-collar defense attorneys. A former U.S. Marine Corps platoon leader wounded in Vietnam, he has a reputation for searing cross-examination. In a preliminary response to the Gibson Dunn RICO suit, the Lago Agrio plaintiffs accuse Chevron of "a campaign of fraud, intimidation, and abuse of legal process unlike the world has ever seen before." The plaintiffs say they will offer evidence of improper ties between the oil company and the Ecuadorian military and of instances when Chevron has attempted to manipulate the Ecuadorian judiciary by deploying undercover operatives. The company denies these allegations.
The cycle of legal hostilities shows no sign of ending. Watching from the sidelines, Professor Arthur Miller, an authority on complex litigation at New York University School of Law, says the drama reminds him of Jarndyce v. Jarndyce, the lawsuit that consumes everyone it touches in Charles Dickens's Bleak House. He has a point: As the mud flies, the degradation at the heart of the Chevron case grows increasingly obscure. Everyone agrees that the rain forest is despoiled and poor people who live in huts are sick. Not much has been done to help them. Certainly the litigation has yet to improve their lives in any material way. "The lawyers, meanwhile, are running around the periphery of this case," says Miller. "The merits are getting lost."