Redefine Mass Litigation Over Oil Spills, Work Hazards

Can Corporations Use RICO Law to Combat Plaintiffs' Lawyers?

Bloomberg Business 20/04/2015

Since it was enacted in 1970, federal prosecutors have used the Racketeer Influenced Corrupt Organizations (RICO) law for its original purpose: dismantling mob syndicates. Over the years, though, the law has become a weapon in commercial litigation, as well.

On Monday, April 20, the influential U.S. Court of Appeals for the Second Circuit in New York will hear arguments on whether companies may use RICO to go after plaintiffs' attorneys whose lawsuits allegedly evolve into extortion schemes. How the New York court rules in a case involving Chevron and oil pollution in Ecuador could redefine the terms of mass litigation over such ills as pollution, workplace hazards, and job discrimination. Here are the key issues:

The facts: oil in the rainforest, chicanery in court

In 2011, Steven Donziger, a New York-based plaintiffs' attorney, won a multibillion-dollar judgment on behalf of Ecuadorian farmers and indigenous tribe members harmed by oil pollution in the Ecuadorian Amazon. The defendant, Chevron, claimed that Donziger used dishonest means to win that judgment, which today is worth about $9.5 billion. Invoking RICO, Chevron countersued Donziger and his clients in federal court in New York. In March 2014, U.S. District Judge Lewis Kaplan ruled in Chevron's favor, finding that Donziger's team had fabricated evidence, promised bribes, and even ghostwrote critical court documents—conclusions that Donziger disputes. Kaplan issued an unusual order barring Donziger and the Ecuadorians from ever profiting from their ill-gotten rainforest victory.

The law: policing an errant lawyer, or another country's judicial system?

Chevron refuses to pay up in Ecuador. The company has no assets in the tiny Andean nation that the plaintiffs could seize. As a result, Donziger's team seeks to enforce the judgment in other countries where Chevron does have assets: Canada, Argentina, and Brazil. The oil company plans to use the RICO judgment as a shield in those enforcement proceedings. That's why Chevron sought the racketeering verdict—to preclude enforcement of any Ecuadorian verdict.

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