Caso Chevron

4 Takeaways From Chevron's Win In $9.5B Pollution Battle

Law 360 - Keith Goldberg 15/08/2016

The Second Circuit on Monday handed Chevron Corp. a huge win in its long-running legal battle over alleged drilling pollution in the Amazon rainforest when it backed a lower court's conclusion that a $9.5 billion judgment against the energy giant in Ecuador was fraudulently produced and couldn't be enforced.

Here, legal experts identify four key takeaways from the appeals court's ruling.

Chevron's Corruption Claims Are on Firmer Legal Ground

A Second Circuit panel said in a published opinion that it had no basis for overturning U.S. District Judge Lewis A. Kaplan's March 2014 decision that the 2013 judgment stemming from a lawsuit alleging Texaco Inc., which Chevron bought in 2001, dumped crude oil into the Amazon rainforest during a decadeslong oil-drilling operation was obtained through “egregious fraud.”

Chevron had sued attorney Steven Donziger, who represented the so-called Lago Agrio plaintiffs in the lawsuit filed in Ecuador, for allegedly bribing the Ecuadorean court and ghostwriting the judgment it issued.

“It's hard to describe a decision which ratifies the validity of a lower court ruling that condemned the judicial system of a foreign country that is not an enemy of the U.S. as narrow,” said George Mason law professor Michael Krauss, a consistent critic of Donziger and the Ecuadorean case. “What this does show is that Judge Kaplan was not some rogue judge going out on a limb.”

The Second Circuit also noted that Donziger and his clients Hugo Camacho Naranjo and Javier Piaguaje Payaguaje, two plaintiffs representing indigenous Ecuadorean communities, didn't challenge the sufficiency of the evidence to support Judge Kaplan's findings that the judgment was obtained through “fraud, coercion and bribery.”

Instead, they claimed that Chevron lacked standing to challenge the Ecuadorean judgment, and that the district court's ruling violated international comity principles and wrongly allowed Chevron to seek relief against Donziger, Naranjo and Payaguaje, arguments the Second Circuit rejected.

“I think what stunned me is that Donziger didn't contest any of the factual findings of the lower court,” Vermont Law School environmental law professor Pat Parenteau said. “This is some of the most outrageous conduct by a lawyer that I've ever seen, but all of his arguments were legal: standing, judicial estoppel, etc.”

Don't Be Too Quick to Move Cases out of U.S. Courts

Attorneys for Donziger have blasted the Second Circuit for allowing a company that lost a case in another country to come to the U.S. to fight a foreign court's judgment. But experts wonder if Chevron is regretting its push to fight the pollution case in Ecuadorean courts rather than U.S. courts, and if the Second Circuit is regretting signing off on that move back in 2002.

“The conclusion [at the time] was the courts of Ecuador were capable of rendering a fair judgment, and it turns out that was wrong,” Parenteau said. “Sending the case to Ecuador was the wrong call.”

The decade-plus of resulting litigation and the ultimate conclusion that the Ecuadorean judgment was fraudulently obtained should serve as a lesson to companies, plaintiffs and U.S. courts that they shouldn't be so quick to kick a case from the U.S. to another country if they don't have a full picture of how its judicial system operates, Parenteau said.

“Maybe the presumption ought to be if there's jurisdiction and a nexus in the U.S., the case should be tried here,” Parenteau said. “Maybe the victims in all of this would have gotten their day in court.”

Global Efforts to Enforce the Judgment Are on Life Support

Representatives for Donziger and the Lago Agrio plaintiffs vowed to continue efforts to get the judgment enforced in non-U.S. courts, and the Second Circuit noted in its opinion that the lower court's ruling left Donziger and other Lago Agrio plaintiffs free to seek enforcement in other courts around the world.

But Second Circuit's backing of Judge Kaplan's conclusions will reverberate loudly through those non-U.S. courts, experts say.

“The core of this is a judgment that is a fraud,” Parenteau said. “That would almost be a universally recognized basis for not enforcing a judgment.”

Last year, Canada's Supreme Court gave plaintiffs representing Ecuador's indigenous communities the green light to pursue enforcement of the judgment in Canadian courts. However, a Canadian court has yet to rule on whether the judgment is enforceable. The Second Circuit's opinion doesn't carry any precedential value north of the border, but it could be pretty persuasive, experts say.

“I think it holds tremendous intellectual value in Canada because of the completeness of both the Second Circuit and district court decisions,” Krauss said. “If this was a 10-page ruling, that's one thing, but this opinion was so exhaustive, it will help the Canadian courts quite a bit.”

RICO Is a Viable Weapon to Fight Foreign Judgments

In backing Judge Kaplan's judgment, the Second Circuit also backed his conclusion that the actions of Donziger and others constituted racketeering as defined by the Racketeer Influenced and Corrupt Organizations Act. In doing so, the appeals court validated the use of RICO to fight foreign judgments, experts say.

“Part of the racketeering allegation was the bribing of a judge in a foreign country; that doesn't mean you're immune to RICO,” Krauss said. “American multinationals that do business in countries beset by corruption can breathe a sigh of relief that if they are condemned to judgments, they will have due recourse in American courts against the enforceability of those judgments.”

Chevron's ability to make its RICO allegations stick should send a chill up the spine of plaintiffs attorneys who might fancy their chances to be better in non-U.S. courts perceived to be friendlier to their clients, according to Parenteau.

“This is a cautionary tale of major proportions,” Parenteau said. “Be careful of who you sue and where you sue, because that may blow up in your face.”

That being said, the Chevron case involves allegations of significant governmental corruption to secure a massive judgment against a single company. Identifying a similar pattern of behavior is a high bar for a company to clear if it wants to make a compelling RICO argument, according to Krauss.

“There's a very hefty burden of proof,” Krauss said.

Chevron is represented by Theodore B. Olson, Randy M. Mastro, Andrew E. Neuman, Caitlin Halligan and William E. Thomson of Gibson Dunn.

Donziger is represented by Deepak Gupta and Jonathan E. Taylor of Gupta Wessler PLLC, Gregory A. Beck, and Justin Marceau and John Campbell of the University of Denver Sturm College of Law.

Naranjo and Payaguaje are represented by Burt Neuborne of the New York University School of Law.

The case is Chevron Corp. v. Donziger, case number 14-826, in the U.S. Court of Appeals for the Second Circuit.

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Fuente Original