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Chevron's U.S. win in Ecuador case looms over cases elsewhere

A waste pit filled with crude oil left by Texaco drilling operations years earlier lies in a jungle clearing near the Amazonian town of Sach
A waste pit filled with crude oil left by Texaco drilling operations years earlier lies in a jungle clearing near the Amazonian town of Sach

By Mica Rosenberg

NEW YORK (Reuters) - Ecuadorean villagers who are trying to get billions of dollars from Chevron Corp for pollution in the Amazon jungle are ready to refocus their fight on pending suits in other countries after a setback in the United States.

A scathing judgment issued by a U.S. judge this week against their lawyer will cast a long shadow over cases filed in Canada, Brazil and Argentina, where the plaintiffs are seeking Chevron assets as payment because the oil giant no longer has a presence in Ecuador.

U.S. District Judge Lewis Kaplan handed down a 500-page decision that found American lawyer Stephen Donziger used "corrupt means" to help villagers from the Lago Agrio region win the historic $18 billion judgment against Chevron in Ecuador in 2011. The damage award was later revised down to $9.5 billion. While Kaplan's decision bars Donziger and the villagers from enforcing the Ecuadorean ruling in the United States, it is not binding in pending cases elsewhere.

Of the three cases, the Canadian one seems to have progressed the farthest, with an appeals court there ruling in December that the province of Ontario was a proper jurisdiction for the plaintiffs to press the company to pay up. Chevron has asked for an appeal of that ruling to be heard by Canada's Supreme Court.

Vaughan Black, a professor at the Schulich School of Law in Halifax, Nova Scotia, thinks Kaplan's ruling will resonate if the Canadian case ends up being considered on its merits.

"Basically an Ontario court would have to look at all the evidence again and start at the beginning," Black said. "I suppose there is always the possibility that they could take a different view of which witnesses were credible, but the New York court didn't even think it was a close call. So it doesn't look very promising for the Ecuadorean plaintiffs."

The sprawling environmental case stretches back to the 1990s, when the villagers first tried to seek compensation for contamination in northeastern Ecuador by Texaco starting in 1964. Chevron acquired Texaco and for 20 years has been fighting the case as well as Donziger, who has spent most of his career representing the Ecuadorean plaintiffs.

The foreign courts will ultimately have to decide how to weigh the evidence presented against Donziger, which Kaplan said proved the judgment in Ecuador was tainted by fraud, against the underlying claims of the villagers who say they were sickened by decades of pollution.

The cases in Argentina and Brazil are moving slowly. But the Ontario appeals court in December reversed a lower court decision and found Canada should be a forum to hear Ecuadoreans' claims.

Chevron has resisted the Ecuador plaintiffs at every turn. "We're going to fight this until hell freezes over. And then we'll fight it out in the ice," a company spokesman once said.

"Chevron's wish is granted," the December 17 Ontario Court of Appeal decision said, referring to the spokesman's quote. "After all these years, the Ecuadorean plaintiffs deserve to have the recognition and enforcement of the Ecuadorean judgment heard on the merits in an appropriate jurisdiction. At this juncture, Ontario is that jurisdiction."

CAST A SHADOW

Canada's Supreme Court could decide whether to grant a hearing of the appellate decision in May, according to Canadian legal experts. If it takes up the case, the Supreme Court will likely only consider the narrow question of Canadian jurisdiction.

Should the Supreme Court agree with the appellate decision, the entire case will go back to the original court, said Schulich's Black.

That's when Chevron could bring to bear reams of documents it introduced in the New York case, including Donziger's personal notebook, purporting to show he ultimately corrupted the case by submitting fraudulent evidence, bribing a judge, ghost-writing the judgment and covering up his wrongdoing.

In the Canadian case, Donziger is not representing the 47 Ecuadorean plaintiffs who are standing in for the larger community of 30,000 affected residents.

"The U.S. court can't annul the Ecuador judgment," said Sara Seck on the Faculty of Law at Western University in London, Ontario. "It casts a shadow on it, but it's going to be up to Canadian courts to decide what to do."

Chevron believes Judge Kaplan's ruling in the Southern District of New York will be a game changer for the cases being fought in foreign courts.

"No judge in any country that respects the rule of law will entertain the enforcement of the corruption judgment," Chevron's General Counsel R. Hewitt Pate said on a call with reporters. "I think the opinion will carry great weight. ... We will share the contents of the opinion with the other judges in Argentina, Brazil and Canada."

But Donziger's camp says making the ruling available will not be enough to sway the other proceedings.

BRAZIL, ARGENTINA TO COME

In 2011, Kaplan issued a decision blocking the plaintiffs from trying to enforce the Ecuadorean judgment anywhere in the world, but the 2nd U.S. Circuit Court of Appeals in New York overturned that ruling.

In his opinion on Tuesday, Kaplan carefully said his order against Donziger "does not 'disrespect the legal system ... of the country in which the judgment was issued' or those of 'other countries' in which the (Lago Agrio plaintiffs) now, or later may, seek to enforce the judgment."

Donziger's lawyer Deepak Gupta said he would appeal Kaplan's decision and the villagers would continue to battle it out abroad.

In Brazil, the villagers' case is waiting to be heard by a court, said Chevron spokesman Morgan Crinklaw.

In Argentina, the Supreme Court reversed a freezing of Chevron's Argentine assets last year, but the enforcement case is still pending, he said. Chevron brought the case to the International Court in the Hague in 2009, claiming it was denied justice in Ecuador. That arbitration is ongoing.

In a confidential memo produced as part of the New York trial, Patton Boggs - the law firm that became involved in 2010 to help Donziger enforce the Ecuador judgment - suggests 24 countries where the plaintiffs could potentially study options to enforce the Ecuador judgment.

"We don't have a system where one single trial judge, whether they are in New York or anywhere else can appoint themselves a worldwide fact-finding commission and essentially preclude or persuade other courts not to enforce a judgment," Gupta said. He said he could not comment on the memo or on what future efforts there might be to try to enforce the judgment in other countries.

Alan Lenczner, the lawyer representing the Ecuadorean plaintiffs in Canada, said Kaplan's ruling has "zero" impact on the ongoing proceedings in Canada.

The case still faces two jurisdictional questions before it is even heard on the merits. One is whether Canada can enforce a foreign judgment, and the other is whether a Chevron subsidiary in the country can be held responsible for the parent's action.

If the plaintiffs can win the court battle, they hope to recover in Canada as much of the Ecuadorean judgment as possible.

Ultimately, all the international legal wrangling has left the real victims of the legacy of environmental damage out in the cold, said Judith Kimerling, an environmental law professor at The City University of New York, Queens College. Kimerling represents a group of indigenous Ecuadoreans suing Donziger in New York state court for unjust enrichment and seeking to recover resources to clean up the polluted area.

"There are real people with real injuries and legitimate claims behind all this," Kimerling said. "It is a very sad day for the victims and for the environment because it makes it more difficult for them to get remedies."

(Additional reporting by Joseph Ax in New York and Euan Rocha in Toronto; Editing by Howard Goller and Frank McGurty)

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