U.S. Court's Extraordinary Moves to Halt Enforcement of Verdict against Chevron in Ecuador: Why?

In early February, a week before a court in Ecuador passed down a historic $9.5 billion judgment against Chevron for massive environmental contamination in the Amazon, lawyers for the oil giant went to the U.S. District Court in New York, seeking an order to stop enforcement of the anticipated verdict.

As a major cover story in this week's Business Week magazine reports, Judge Lewis Kaplan granted a temporary restraining order immediately.

According to Business Week:

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."

This past Monday, Judge Kaplan turned his order into a preliminary injunction, a move that Karen Hinton, U.S.-based spokeswoman for the Ecuadorian communities ravaged by Chevron's contamination lambasted in a statement:

This decision is a slap in the face to the democratic nation of Ecuador and the thousands of Ecuadorian citizens who have courageously fought for 18 years to hold Chevron accountable for committing the world's worst environmental disaster. The trampling of due process in the court's refusal to consider key evidence or hold a hearing to determine the facts is an inappropriate exercise of judicial power that will harm the United States' relationship with Latin America and other parts of the world. It disregards the scholarly and comprehensive 188-page opinion of Ecuadorian Judge Nicolas Zambrano, a well-respected member of Ecuador's judiciary. It also ignores key evidence that Chevron has committed a series of frauds in Ecuador to cover up its unlawful misconduct.

We want to emphasize that after appeals in Ecuador the Ecuadorian plaintiffs retain their full right to lawfully enforce the judgment of their own country's courts in any of the dozens of nations around the world where Chevron has assets. In the meantime, we will appeal the decision on multiple grounds.

But besides being "a slap in the face" of the Ecuadorian victims of Chevron's abuses, the ruling by Judge Kaplan also seems like an extraordinary abuse of power.

First of all, Kaplan ordered the preliminary injunction in connection to a RICO suit that Chevron has brought against the Ecuadorian plaintiffs and their lawyers, including U.S.-based human rights attorney Steven Donziger, accusing them of being part of a grand international conspiracy to extort the company. Chevron brought the case in Kaplan's courtroom after successfully getting Kaplan to order filmmaker Joe Berlinger to turn over all the outtakes from Crude, a documentary about the legal battle against Chevron. And it was Kaplan that ordered Steven Donziger to turn over his entire 17-year case file, including personal diaries, and every email he has sent anyone in connection with the efforts to hold Chevron accountable. Kaplan even ordered Donziger to sit for almost two weeks of depositions with Chevron attorneys, and appointed a Special Master to oversee the depositions who transcripts show to be openly hostile to Donziger.

Having sat through hearings in Judge Kaplan's courtroom on a number of occasions, I've seen the judge's almost visceral distaste for Donziger. In fact, it was Kaplan who invited Chevron to file a RICO suit in the first place!

Here's Judge Kaplan speaking from the bench during a hearing on Chevron's motion to depose Donziger back in September, 2010:

“The object of the whole game, according to Donziger, is to make this so uncomfortable and so unpleasant for Chevron that they’ll write a check and be done with it. . . . So the name of the game is, arguably, to put a lot of pressure on the courts to feed them a record in part false for the purpose of getting a big judgment or threatening a big judgment, which conceivably might be enforceable in the U.S. or in Britain or some other such place, in order to persuade Chevron to come up with some money. Now, do the phrases Hobbs Act, extortion, RICO, have any bearing here?”

Of course, Chevron took the big fat hint and filed its unbelievable RICO suit, and that led to Kaplan's order this week that includes this significant passage:

Absent a preliminary injunction, Chevron would be forced to defend itself and litigate the enforceability of the Ecuadorian judgment in multiple proceedings. There is a significiant risk that assets would be seized or attached, thus disrupting Chevron’s supply chain, causing it to miss critical deliveries to business partners, damaging “Chevron’s business reputation as a reliable supplier and harm the valuable customer goodwill Chevron has developed over the past 130 years,” and causing injury to Chevron’s “business reputation and business relationships.”

And while I don't have the transcript in front of me, I also recall Judge Kaplan making similar remarks during the hearing at which he ruled immediately from the bench granting a temporary restraining order. There, he said, Chevron faced imminent and irreparable harm, which would also harm the public interest, as the company is important to delivering commodities so important to the smooth functioning of our economy.

Stunning.

The job of determining whether a particular sector of the economy or individual industry demands extraordinary legal protection belongs to Congress, not the courts. This is de facto policy-making on behalf of one specific corporation from the bench, and should be shocking to anyone who cares about the basic checks and balances in our political system. Besides, the idea that Chevron faces "irreparable harm" is ludicrous. We're talking about one of the largest companies on the planet, which had $17 billion in cash or cash equivalents on hand according to last quarter's financial statement.

And yesterday, Ecuador's Ambassador to the United States Luis Gallegos weighed in too, expressing "consternation that a U.S. court has elected to pass judgment on Ecuador's courts - especially since it was the courts of the United States that chose to have this litigation resolved in Ecuador."

As reported by The New York Times:

In his statement, Gallegos pointed out that the case was heard in Ecuador only because Texaco had requested it be moved there from the Southern District of New York.

Kaplan's lengthy opinion "does not accurately reflect upon or credit the independence of the Ecuadorian judiciary," Gallegos said.

The statement, which stressed that the Ecuadorean government was not commenting on the merits of the Lago Agrio case, included examples of what the embassy called the judiciary's "history of independent judgments."

Several of the cases mentioned featured Chevron or Texaco as a party.

One was a win for Texaco in 2000 in an income tax case. Another was a 2002 case in which Chevron won motions to dismiss against the Ecuadorean government in what the statement described as three "civil cases." Chevron also won $1.5 million in a case against the government, the statement said.

The Times story notes that Judge Kaplan's preliminary injunction order makes "numerous references" to a report on Ecuador's judiciary commissioned by Chevron and submitted to the court by the oil company. What the Times story doesn't say is that it appears that the report –– by lawyer, politician, and newspaper columnist Vladimiro Alvarez Grau –– is the only thing Judge Kaplan relies on for his analysis of Ecuador's judiciary. Alvarez, it turns out, is an outspoken critic and fierce political opponent of Ecuadorian President Rafael Correa. I'm sure Alvarez is "impressively credentialed," as Kaplan notes in his ruling, but it's disturbing that a U.S. judge would rely solely upon a single, one-sided, self-serving report submitted by Chevron for his analysis of Ecuador's entire judicial system.

But here I am again, a few hundred words into an article about this issue without more than a glance toward the plight of the communities throughout Chevron/Texaco's former drilling fields.

Cofan indigenous leader Emergildo Criollo smells for petroleum contaminants in a stream near his home in Ecuador's Amazon rainforest. Photo by Caroline Bennett

After nearly 17 years of litigation, they finally prevail in their legal battle, only to have a U.S. judge – from the same courts from which Chevron successfully fought to get the case moved to Ecuador, mind you – telling them that they can't enforce the judgment.

Law Professor Arthur Miller is given the proverbial last word in the lengthy Businesses Week article I mentioned above. He is considered perhaps the nation’s foremost expert on Civil Procedure – the rules of the litigation game. He is known for opening his classes on the subject at NYU and Harvard Law with the dramatic statement that given a choice in court between having the facts on his side or mastery of procedure, he’d take procedure and beat you every time.

And yet, it is Miller who laments at the end of the piece, that the "merits are getting lost" in this epic legal battle over who will ultimately pay to clean up the ongoing environmental and public health catastrophe gripping the oil-ravaged Ecuadorian Amazon. And by "merits," he means the facts.

In its legal war of attrition to evade accountability, it seems that Chevron has mastered the "procedure" in the courts, making this case about everything besides the "merits," the facts, the indisputable mountains of evidence that buttress the 188-page verdict delivered by the courts in Ecuador on February 14th.

The Ecuadorian judge, Nicolas Zambrano, based his decision on voluminous technical data submitted by both sides, concluding, quite simply, that during its years of operations, Texaco had the means to employ safer methods of oil exploration, but chose to cut costs to increase its profit margin, and in doing so, imperiled lives.

And now, thousands of men, women, and children continue to suffer cancers and other oil-related illnesses. Their water is poisoned. And the pollution remains all around them.

How long will courts in the U.S. allow "procedure" to trump the "merits" of the communities need for a cleanup, and Chevron's responsibility for providing it? How long until justice prevails?

– Han

Han Shan is coordinator of Amazon Watch's Clean Up Ecuador Campaign

Chevron Found Guilty In Amazon Pollution Case

Cross-posted from The San Francisco Chronicle's City Brights blog.

On Monday, after 17 years of intense legal battle, Chevron, the second largest oil company in the United States, was found guilty by Ecuadorian courts for massive environmental contamination of the Amazon and was ordered to pay a fine of $9 billion in damages. This represents the largest judgment ever against a U.S company for environmental contamination and marks the first time that indigenous and farmer communities have successfully won a judgment in foreign courts against an American company for environmental crimes abroad.

Background:

From 1964 to 1990 Chevron (formerly Texaco) operated a large oil concession in the northeastern region of the Ecuadorian Amazon, reaping billions of dollars in profits before pulling out of Ecuador in 1992.

Chevron has admitted during the long-running trial in both US and Ecuadorian courts that it created a system of oil extraction that led to the deliberate discharge of approximately 18 billion gallons of chemical-laden "water of formation" into the streams and rivers of Ecuador's Amazon, home to six indigenous groups.

Over the course of more than two decades of operations, Chevron abandoned more than 900 unlined waste pits gouged out of the jungle floor that leech toxins into soils and streams; contaminated the air by burning the waste pits; dumped oil along roads; and spilled millions of gallons of pure crude from ruptured pipelines. Internal company documents demonstrate that Chevron officials ordered field workers to destroy records of oil spills. The company refused to develop an environmental response plan or pipeline maintenance program, and Chevron never conducted a single health evaluation or environmental impact study despite the obvious harm it was causing.

Crude oil left by Texaco (now Chevron) in the Amazon rainforest.

As a result of Chevron's pollution, several indigenous groups in Ecuador have been decimated and more than 9,000 people are at significant risk of contracting cancer in the coming decades, according to reports submitted to the court. Scientific evidence submitted during the trial definitively proves that all of Chevron's 378 well and production sites, most of which were built in the 1970s, are extensively contaminated.

The Verdict in Ecuador

The historic multi-billion verdict against Chevron, which reported a net profit of $19 billion last year, is a tremendous step forward for the Ecuadorian communities who have been suffering for decades from Chevron's contamination. However, as expected, oil giant Chevron has vowed to appeal the decision and continue their scorched earth legal and public relations campaign, designed to exhaust the plaintiffs' resources, portray the case and the courts in Ecuador as corrupt, and, in the end, evade enforcement of the multi-billion verdict.

In the wake of the court ruling on Monday, the Goldman Environmental prize winning attorney Pablo Fajardo, who represents the indigenous and farmer communities of the Ecuadorian Amazon, released a statement highlighting Chevron's "intentional and unlawful contamination of Ecuador's rainforest." Here is a brief excerpt:

"Rather than accept responsibility, Chevron has launched a campaign of warfare against the Ecuadorian courts and the impoverished victims of its unfortunate practices. We call on the company to end its polemical attacks and search jointly with the plaintiffs for common solutions. We believe the evidence before the court deserves international respect and the plaintiffs will take whatever actions are appropriate consistent with the law to press the claims to a final conclusion."

Oil industry analysts and environmental law experts have weighed in on the precedent-setting nature of the historic ruling in Ecuador.

According to a story filed by the Los Angeles time, John van Schaik, an oil analyst at Medley Global Advisors in New York, said: "...the fact that the Lago Agrio court ruled in favor of the plaintiffs sends a signal to oil companies that, more than ever, they need to be good corporate citizens. The ruling shows that times have changed, and companies need to take environmental concerns seriously."

In a Bloomberg report, Robert Percival, a law professor and director of the environmental law program at the University of Maryland School of Law in Baltimore, said: "The case really sends a message that companies operating in the undeveloped world cannot rely on a compliant government or lax environmental rules as a way of permanently insulating themselves from liability."

Since acquiring Texaco in 2001, Chevron's legal and public relations strategy with respect to Ecuador, has been motivated not only by a desire to avoid a massive multi-billion payout, but also by the broader implications this case has for the future of the global extractives industry. More to the point, Chevron's scorched earth tactics have been designed to delay and disrupt the outcome of the long-running environmental trial in Ecuador, but also, and perhaps more importantly, to demonstrate clearly to communities around the world that the pursuit of justice against multinational corporations is futile.

But now the judgment is in. Chevron has been found guilty of massive environmental crimes in the Amazon. The San Ramon based oil giant has been ordered to pay a multi-billion dollar judgment.

Over the next weeks and months, the oil industry and right-wing press outlets will continue to laud Chevron's bravado, encouraging the oil major to undermine the rule of law in Ecuador and condemn the affected people of the Amazon to years of continued suffering.

And the question to all of us is: How far have we come as a people? Will the 21st century be a time where the greed of a few tramples the hopes of the many? Or will justice trample greed?

What we can be sure of is that the indigenous and farmer communities of the Ecuadorian Amazon will continue, against all odds, in their heroic struggle for clean water, health and a brighter future.

– Mitch

Mitch Anderson is the Corporate Campaigns Director at Amazon Watch

More Fireworks as Lawyers for Ecuador Plaintiffs Fire Back at Chevron

It feels more and more like a cliché to even note, but there have been more fireworks in the monumental, marathon litigation over Chevron's contamination in the Amazon.

Only days after Chevron turned around and sued the victims of its abuses in Ecuador's rainforest, accusing them of racketeering and extortion for demanding cleanup, lawyers for the Ecuadorian plaintiffs fired back. Patton Boggs, the high-profile DC law firm now representing the plaintiffs filed its own suit yesterday, accusing Chevron and its lawyers at Gibson Dunn of "tortiously interfering" with the firm's representation of the Ecuadorians. Tortious interference is a matter of common law and is also referred to as intentional interference with contractual relations.

This is exactly where it gets into a bunch of legalistic mumbo-jumbo for most people (including yours truly) but Patton Boggs' press release announcing the filing of its suit lays bare Chevron's legal manipulations for the sideshow they are. The Complaint referred to in the beginning is Chevron's latest legal assault on the Ecuadorians, their preposterous RICO suit:

What is clear from the Complaint is that Chevron has little interest in litigating the merits of the claims, brought by the indigenous people of Ecuador, that its predecessor Texaco’s conduct has caused an ecological disaster in an environmentally sensitive rainforest the size of the State of Rhode Island. Rather, Chevron wants to litigate about the behavior of the lawyers, consultants, and spokespersons who have dared to represent these people during the past 18 years. Chevron simply cannot escape three glaring facts: (1) the trial is in Ecuador, under Ecuadorian law and procedure, because Chevron fought for seven years to have the case moved from a federal court in New York to an Ecuadorian court; (2) Chevron’s attacks on the relationship between certain representatives of the plaintiffs and an expert appointed by the Ecuadorian court ignore the reality that ex parte communications are permitted in Ecuador, and that the Ecuadorian court, by written order, allowed both sides to submit additional expert reports -- confirming the court’s right to consider or not consider the report of the questioned expert; (3) Chevron succeeded in its demand that a new judge be appointed in the Ecuadorian proceeding. Therefore, Chevron’s liability will be determined in the court of its choosing, after having a complete right to submit additional expert reports in September (Chevron submitted twelve), and before a new and impartial judge appointed at Chevron’s request. It is in this context that Chevron now seeks to derail the Ecuadorian trial with the aid of the very American courts that it previously asked not to hear the case.

Of course, getting lost in all this -- as usual -- is the reality for thousands of men, women, and children in the Ecuadorian Amazon who lack water that won't make them ill (or possibly kill them). Their decades-long struggle for justice, dignity, and a better future is treated increasingly like a sideshow to the courtroom battles on which their fate may rest.

Members of the Kichwa indigenous community of Rumipamba listen to their names being read on the complaint from the lawsuit Chevron filed against them last week, accusing them of racketeering and extortion for their efforts to hold the company accountable. Photo by Kevin Koenig/Amazon Watch

– Han

Han Shan is the Coordinator of Amazon Watch's Clean Up Ecuador Campaign

Chevron's 'Kitchen Sink Defense' in Ecuador Includes Suing Victims of its Pollution

As you may have learned from my article here on Wednesday, Chevron's legal attacks reached new heights of outrageousness this week. With appalling arrogance, Chevron is suing the victims of its contamination in Ecuador in the same U.S. court from which it argued successfully to remove the original environmental lawsuit some ten years ago.

As Pablo Fajardo, lawyer for the plaintiffs in Ecuador, said:

“This is what a corporation does when it feels cornered and trapped. It lashes out against everyone in its way. The Ecuadorian plaintiffs have been treated as if they don’t exist or have a voice by Chevron’s endless discovery of core litigation strategy in U.S. courts.”

Pablo was named in the RICO lawsuit along with other colleagues, and the 47 "named plaintiffs" in the environmental lawsuit.

Human rights lawyer Marco Simons of EarthRights International wrote an article providing some analysis of this extraordinary and abusive legal attack by Chevron. He calls Chevron's tactics "The Kitchen Sink Defense"

He writes:

But three extraordinary things jumped out from my quick look at Chevron's complaint. First, while Chevron seeks orders that would prevent the plaintiffs from enforcing any judgment against them, nothing in their complaint establishes that Chevron is not responsible for environmental damage in the Ecuadorian Amazon. What Chevron is trying to do is to use alleged misconduct by the plaintiffs' lawyers to absolve them of any responsibility; a sort of judicial get-out-of-jail-free card. In fact, Chevron probably can't ask the US court to decide whether they're responsible for the environmental damage--the plaintiffs filed that case in New York fifteen years ago, and it was Chevron (or Texaco, at the time) that successfully moved it to Ecuador.

Actually, the original lawsuit was filed in 1993. And in arguing to have the case dismissed under forum non conveniens, Chevron submitted fourteen affidavits attesting to the competency, independence, and transparency of the Ecuadorian courts and judicial system. The company then promised to submit to jurisdiction in Ecuador, where the plaintiffs re-filed the suit in 2003, and also promised to abide by any verdict in the case, subject only to standard appeals process.

But I digress. Marco continues his analysis of Chevron's RICO complaint:

One telling fact here is that Chevron only sued some of the plaintiffs' lawyers--they did not, for example, sue Patton Boggs, which is now heading up the U.S. team supporting the Lago Agrio litigation. That seems like an acknowledgment that the Lago Agrio litigation itself is not fraudulent, even if Chevron thinks some of the tactics employed by some of the lawyers have been.

Read the rest of Marco's analysis of Chevron's latest legal attacks at the EarthRights International blog, and stay tuned for more as this develops.

– Han

Han Shan is the Coordinator of Amazon Watch's Clean Up Ecuador Campaign

Chevron Adds Insult to Injury with Latest Attacks on Victims of Company's Pollution in Ecuador

On Tuesday, February 2nd, Chevron filed a lawsuit in the Southern District of New York accusing the 47 named plaintiffs in a monumental environmental lawsuit against the company of engaging in racketeering and extortion in their efforts to demand cleanup of the company's contamination of their land in Ecuador's Amazon region. Several of their lawyers and consultants on the case are also named as defendants. Chevron names Amazon Watch as well as our founder and Executive Director Atossa Soltani as "non-party co-conspirators" in the complaint.

Amazon Watch issues the following statement in response to Chevron's outrageous accusations:

Chevron is adding insult to injury with its heinous attacks on the indigenous and campesino communities who have already suffered for decades from the company's criminal misconduct in Ecuador.

More than 17 years after the Ecuadorians sued to demand cleanup of one of history's worst oil disasters, Chevron is now persecuting the victims of its pollution in the same U.S. court from which the company successfully removed the case nearly a decade ago.

We are appalled to be named in Chevron's legal assault, but will not be intimated by this corporate bullying. We stand in solidarity with the victims of Chevron's ongoing and apparently escalating abuse, and will stand with them until they get the justice they have sought for too long.

This attack by Chevron is merely the latest in a pattern of abusive legal tactics by the company. Chevron can no longer deny the mountain of unassailable scientific evidence that the company is guilty of massive contamination of the rainforest environment, which has caused an epidemic of cancer and other illnesses for local residents. Facing an imminent verdict from Ecuador's courts in the environmental lawsuit, Chevron is lashing out against the plaintiffs and their allies in Ecuador and the U.S. with increasingly desperate attacks.

Once again, we call on Chevron's management and Board of Directors to put an end to its abusive tactics in this case. Until Chevron takes responsibility for its oil disaster in the Amazon, it will remain an indelible stain on the oil giant and the legacy of those who work to deny justice to the communities suffering from the company's abuses.

Above: some of the people Chevron is accusing of racketeering & extortion for daring to demand the company clean up its toxic mess in their ancestral territory. Photo by Lou Dematteis

Watch for reactions from the Ecuadorians named in Chevron's suit, as well as analysis from activists, the media, and law experts, in future posts.

– Han

Han Shan is Coordinator of Amazon Watch's Clean Up Ecuador Campaign