In an extraordinary opinion running nearly 500 pages, U.S. District Court Judge Lewis Kaplan this week threw a monkey wrench into the cogs of a long running, sensationalistic and spectacularly abusive lawsuit against NAM member Chevron that originated in the Amazonian rain forest, took a side trip to Hollywood, bounced back and forth between Ecuadorian and U.S. courts, and hit a roadblock in Judge Kaplan’s courtroom. It was a clear victory for the rule of law.
The underlying case involves a claim for environmental damages arising from oil production activities in Ecuador and was brought by a group of U.S. plaintiffs lawyers on behalf of a class of Ecuadorian citizens, first in U.S. court and then in Ecuadorian court. The site at issue was operated by the state oil company, PetroEcuador, with a Texaco subsidiary, later acquired by Chevron, as a minority partner. Before ceasing operations in Ecuador more than 20 years ago, Texaco spent $40 million to remediate the site and was released from liability by the Ecuadorian government. PetroEcuador maintained control of the site from that point forward.
Quarterbacked over a period of more than a decade by plaintiffs’ lawyer Steve Donziger, the case involved a massive public relations campaign, including a feature length movie screened at Sundance, the involvement of NGOs, public support and appearances by various celebrities, and—as revealed in the pages of Judge Kaplan’s opinion—wholesale fraud. The opinion, available here, reads like a Grisham novel, detailing Donziger’s role in falsifying evidence, bribing the Ecuadorian judge, ghostwriting expert reports and seeking to induce an SEC investigation of the company. Ultimately, these tactics resulted in an $18 billion verdict against Chevron in an Ecuadorian court, later reduced to $9.5 billion. But it never had the intended effect of causing Chevron to back down to this elaborate extortion.
Judge Kaplan of the Southern District of New York, finding merit in Chevron’s RICO claim against plaintiffs’ attorney Donziger, has held that the Ecuadorian court’s verdict is not enforceable because it was obtained through fraud. The fight is not over, as the company must continue to battle enforcement in other jurisdictions; however, this ruling is ample evidence of why no nation that respects due process and the rule of law should entertain enforcement of this ill-gotten judgment. NAM’s amicus briefs in earlier, related stages of the litigation can be found here, here, and here.
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