Category

Briefly Legal

More than a Lawsuit: A Circle of Political Pressure Against Chevron

By | Briefly Legal, Energy, Trade | No Comments

Chevron’s Dilemma: Creating an Untenable Situation for a Multinational – Winter 2009

Chevron held its annual stockholders meeting in San Ramon, Calif., today, and environmental activists again demanded that the company settle a lawsuit brought against it in Ecuador. But new documents show these demands, like most before them, to be serving not justice but instead the pecuniary interests of a small group of contingency-fee lawyers and their allies.

The U.S. trial lawyers suing Chevron over alleged environmental damage in Ecuador have worked from a sophisticated political and PR plan that has sought to use Congress, state governments and major media and even directly influence President Obama to force the oil company into a settlement.

Documents obtained by Chevron in court proceedings* reveal the true nature of the campaign against the company: It’s not about using the law to find the truth, but rather applying the maximum amount of political pressure to extort billions of dollars from the U.S. corporate target. From those billions, the American contingency-fee attorneys and their operatives would take a huge share for their own enrichment.

Effectively using the discovery process to delve deep into the scheme, Chevron has uncovered sufficient proof of wrongdoing to bring a federal racketeering suit against the key actors behind the shakedown lawsuit.

Evidence of fraud at the heart of the anti-Chevron campaign has led a U.S. federal judge to block any effort by the “Lago Agrio” plaintiffs and their U.S. lawyers to collect on an $18 billion judgment handed down by an Ecuadorian court against the San Ramon, California company.

Chevron is the target because the company acquired Texaco in 2001; Texaco had operated in Ecuador’s Amazon in a consortium with the state-owned oil company, Petroecuador, from the 1960s until 1992. Texaco remediated any environmental damage before it left Ecuador, while Petroecuador continued operations (and pollution).

The campaign against Chevron is multifaceted and organized. We have referred to it as the “combine,” an alliance of trial lawyers, politicians, activists and supportive media. But the lawyers themselves depict the campaign as an encirclement, orchestrating numerous actors to pressure the company toward a settlement.

Above right is a chart created in January 2009 by Andrew Woods, an attorney who works with the Amazon Defense Coalition, the PR front group for New York trial lawyer Steven Donziger, his team of contingency-fee attorneys and the Ecuadorian plaintiffs suing Chevron. The document’s title is “Chevron’s Dilemma: Creating an Untenable Situation for a Multinational – Winter 2009.” (Click for a larger picture.)

Chevron submitted the chart on April 26 to the U.S. District Court for the Southern District of New York, one of a batch of 29 new submissions to support the company’s motion to hold Donziger in contempt for failing to disclose tens of thousands of documents he was under court order to make available to Chevron.

Each of the circles represents one of pressure points the lawyers are bringing to bear as they attempt to create “an untenable situation” for Chevron.

There’s the circle for “Crude,” the documentary-style film that director Joe Berlinger originally claimed was an independent and balanced exploration of the effects of oil development on Amazonian Indians. But New York trial lawyer Steven Donziger originally sold him on the project and subsequently Berlinger has conceded he let the lawyers make key editorial decisions to avoid undermining their storyline that Chevron is evil. In the circle you can see how the legal team planned to use the film:

“Crude” Film

  • To be shown in local communities of the [Chevron] Board of Directors; Can generate media attention in home communities of BOD members.
  • To be shown on Capitol Hill in coordination with Rep. McGovern
  • Potential screening in White House.

Rep. McGovern is Jim McGovern (D-MA), one of the lawyers’ key allies on Capitol Hill. He spoke at a showing of the film in downtown Washington in October 2009, recalling a trip he had made to Ecuador — here’s a photo of the Congressman with Donziger in the jungle — and describing his efforts to bring President Obama into the anti-Chevron fight. “Ramp up the pressure!” McGovern urged the crowd at the Landmark E-Street Theatre. (See earlier Shopfloor posts on the movie.)

President Obama gets his own circle [below right], denoted, “Ongoing pressure of new administration publicly unfriendly to big oil companies.” Not just unfriendly to big oil companies, the President was a Harvard Law School classmate and former basketball playing buddy of Steven Donziger. How about that for an avenue of influence?

The trial lawyers knew they had an ally. As a Senator, Obama joined Sen. Patrick Leahy in writing a letter in 2006 to then-U.S. Trade Representative Rob Portman, highlighting the cause of the Amazonian Indians against Chevron. The Senators rejected any efforts to tie U.S. trade preferences for Ecuador to the country’s treatment of Chevron in the litigation, telling Portman: “While we are not prejudging the outcome of the case, we do believe the 30,000 indigenous residents of Ecuador deserve their day in court.”

That being the corrupted and politicized courts of Ecuador, which in February produced a $18 billion judgment against the company.

While the White House has stayed out of the issue publicly, the Obama Administration continued to support trade preferences for Ecuador, despite the continued assault on democratic institutions and U.S. interests by the leftist government of Rafael Correa. Read More

Tort Costs, a Competitive Disadvantage

By | Briefly Legal, Economy | No Comments

The House Judiciary Subcommittee on the Constitution held a hearing Tuesday, “ Can We Sue Our Way to Prosperity?: Litigation’s Effect on America’s Global Competitiveness.” The testimony by Paul J. Hinton, vice president of NERA Economic Consulting, proved the answer to be, “No. No we cannot sue our way to prosperity. But we can sue ourselves into a global competitive disadvantage.”

From Hinton’s prepared statement:

One NERA study I directed on Tort Liability Costs for Small Businesses shows that tort costs are not borne evenly throughout the economy. Small businesses bear a relatively larger share of tort costs than larger businesses. For example, businesses with less than $10 million in revenues in 2008 represented

Paul Hinton

only 22 percent of U.S. business revenues but incurred 83 percent of tort costs. This is economically important because small businesses generate the majority of net new jobs, 65 percent over the past 17 years.The costs of the U.S. tort system may have effects on businesses similar to an implicit tax. The economic literature on the effects of taxes on business activity is instructive in identifying the effects of higher costs of business on economic development. This literature as well as surveys of business attitudes describe how business decisions on where to make investments and add jobs are sensitive to local costs of doing business. Tort liability costs may also affect the growth of existing businesses within the 50 states.

In another NERA study, I worked with colleagues to examine how relatively higher tort costs in the U.S. affect international competitiveness. We compared the growth of productivity in the manufacturing industries affected by asbestos litigation in the U.S. since the late 1980s to productivity growth of the same industries in other industrialized countries. We found that productivity growth in the U.S. industries affected by asbestos litigation was 0.5 percent per year slower than their counterparts in other countries. Over the period of study from 1987 to 2000, the lower U.S. productivity growth amounted to lost GDP of over $300bn, with $51bn of that loss realized in 2000. Read More

NLRB: Don’t Litigate Boeing in Public! That’s Our Job.

By | Briefly Legal, Economy, Labor Unions | One Comment

Lafe Solomon, acting general counsel, National Labor Relations Board, May 9, 2011, statement on Boeing case: “We hope all interested parties respect the legal process, rather than trying to litigate this case in the media and public arena.

Nancy Cleeland, NLRB spokeswoman, interview with The Street, May 18, 2011:

“We are not telling Boeing they can’t build planes in South Carolina,” Cleeland clarified, in an interview. “We are talking about one specific piece of work: three planes a month. If they keep those three planes a month in Washington, there is no problem.” Beyond the ten planes, she said, Boeing could build whatever it wants in South Carolina.

Cleeland said the hysteria ought to be tamped down because the ruling’s implications are not as broad as opponents seem to believe.

It’s arrogance for a government agency to tell its critics to shut up and let the process work, and then comment about how those critics are being hysterical. Very arrogant.

No Signs of Abating: Furor Over NLRB’s Complaint Against Boeing

By | Briefly Legal, Economy, Labor Unions | One Comment

Sundry…

  • Three House members from South Carolina took to the House floor Monday to express their opposition to the National Labor Relations Board’s unprecedented complaint against Boeing for locating new production facilities for the 787 Dreamliner in South Carolina instead of unionized Washington State. The remarks by Reps. Trey Gowdy, Jeff Duncan and Mick Mulvaney are available here.
  • Richard Trumka, the AFL-CIO president, presented a well-structured, vigorous defense of the NLRB on the Boeing issue in his speech last week at the National Press Club. Trumka said: “While Boeing and the Chamber of Commerce may not like it, the law of the land protects working people who exercise that right against any retaliation by their employers.” And that was it. Reporters did not follow up in the Q&A, showing more interest in football.
  • The issue is playing nationally. Rep. Tom Price (R-GA), a strong supporter of manufacturing, raised the NLRB issue in remarks last week at the Marietta Rotary Club. He said: “The National Labor Relations Board has moved in a destructive direction in regards to job creation, not just in favoring unions, but in telling airplane manufacturer Boeing that it was proposing not to all allow it to move a manufacturing facility from Washington, which is pro-union, to South Carolina, which is a right-to-work state, because it would, ‘harm union activities.’ Boeing has determined it works best for them to move part of its manufacturing capability to South Carolina. Think about what that means. Washington power brokers can pick winners and losers.”

The Economist: President Should Condemn the ‘Loony-Left’ NLRB

By | Briefly Legal, Economy, Labor Unions, Transportation | No Comments

From a leader (editorial) in the latest Economist, “Don’t bully Boeing, Barack,” with the secondary headline, “Want to prove you are ‘pro-business’? Condemn a loony-left complaint against America’s biggest exporter.”

The NLRB is an autonomous body, but its board members are appointed by the president. Under a Democratic president, American businesses expect a more pro-union line, but the agency’s recent militancy is shocking, reminiscent of “loony-left” posturing in Britain in the 1970s. Not only does the agency in effect claim the power to tell firms where they may build factories. It is also suing two states (Arizona and South Dakota) where voters have decided that workers should be guaranteed a secret-ballot election before their workplace is unionised. Mr Obama has so far said nothing about any of these cases. The president claims he understands business. Condemning the NLRB would be a good way to prove it.

The magazine also covers the National Labor Relations Board’s complaint against Boeing in an article, “A watchdog bites: A federal agency bashes Boeing“:

Businesspeople everywhere in America are stunned. Employers have a constitutional right to whinge about unions (and vice versa). They are not allowed to punish strikers—by sacking them, for example. But Boeing has done nothing of the sort. No work has been transferred from Boeing’s Puget Sound plant to South Carolina, nor have any IAM members lost their jobs. In 2007 Boeing announced that it would build seven 787s per month in Puget Sound; two years later, to handle the backlog of orders, it announced an expansion to South Carolina. The backlog is so large that Boeing is increasing its workforce at Puget Sound, not cutting it.

We’d like to see a First Amendment expert address the issue mentioned above, the constitutional right to criticize labor. Articles and blog posts have raised the issue, but we have yet to see a full examination of the free speech implication in the NLRB’s complaint.

On Boeing, Defending NLRB’s ‘Process’ Fails as Serious Argument

By | Briefly Legal, General, Labor Unions, Transportation | No Comments

Few Democratic members of Congress have spoken up on the National Labor Relations Board’s unprecedented and extreme complaint against The Boeing Company for making a reasonable, legitimate management decision by building new production facilities in South Carolina. It’s a tough decision to defend, so those commenting have relied on a “process” argument — let the process work.

Senate Majority Leader Harry Reid hailed the NLRB as an example of the “checks and balances” envisioned by the Founding Fathers. Sen. Tom Harkin (D-IA) levied accusations, claiming, “Powerful corporate interests are pressuring Members of this body to interfere with an independent agency rather than letting it run its course.”

On Thursday, it was Sen. Richard Blumenthal’s turn to come to the Senate floor to defend the NLRB. The Connecticut Democrat made the most coherent, seriously framed argument based on process we’ve seen: “The NLRB and Lafe Solomon, the acting general counsel, have not only the right but the responsibility to investigate and act where the facts and the law establish a right and obligation to do so. So no one should be trying to prejudge this case before it goes before the administrative judge, and no one should be seeking a pass from the appropriate process, and no one should be seeking to intimidate or to interfere with this lawful proceeding. I come to the floor today because of the prospect of exactly that danger  occurring.”

Yet one specific example Blumenthal cites is the decision by Chairman Darrel Issa (R-CA) of the House Oversight Committee to request documents on the Boeing complaint from the NLRB. But that’s the only example. Otherwise, the Senator seems to objecting to other elected officials publicly criticizing a federal agency.

These actions and some others are an attack on the integrity of the NLRB, an attack on its ability to make decisions and enforce the law as the Congress has instructed it and required it to do based on decisions involving the facts and the law alone. The NLRB is part of our justice system, and it should be given the opportunity to do justice in this instance. It should be given the opportunity to protect fairness and peace at the workplace, which is ultimately its mandate and its very solemn responsibility, and its tradition.

The NLRB is part of our justice system? Really? It does not behave that way. You have the NLRB’s public affairs office issuing press releases announcing the agency’s rulings against business and posting “Fact Checks” that are just political spin. Lafe Solomon commented publicly on the case, restating Boeing’s supposed offenses, before he retreated behind the protection of “let the process work.”

The agency is behaving as a political actor, and the complaint against Boeing is so at odds with the board’s mandate, solemn responsibility and tradition — to use Blumenthal’s terms — that silence would be an abdication of Congress’ oversight and policymaking responsibilities. If the NLRB’s complaint stands, the federal government will replace management in determining company locations and hiring. Such a radical restructuring of the U.S. economy and such an extreme expansion of federal power is at heart a policy matter, which in our system of government is the purview of Congress.

When an agency runs amok like the NLRB has done, it has abandoned process. That’s why the process arguments made by its defenders are just beside the point.

Former Democratic NLRB Member Decries Boeing Complaint

By | Briefly Legal, Economy, Labor Unions | No Comments

Rounding up the most recent news and commentary about the National Labor Relations Board’s complaint against The Boeing Company for locating new production facilities in South Carolina instead of the unionized Puget Sound region…

At Slate.com, Dave Weigel interviews Bill Gould, a former Democratic member appointed to the NLRB by President Clinton. From “Air Rage

“The Boeing case is unprecedented,” he says. “I agree with much of what this board has done and is likely to do, but I don’t agree with what the general counsel has done in the Boeing case. The general counsel is trying to equate an employer’s concern with strikes that disrupt production and make it difficult to make deadlines—he’s trying to equate that with hostility toward trade unionism. I don’t think that makes sense.”

Radio talk show host Hugh Hewitt asks Senate Republican Leader Mitch McConnell (R-KY) about NLRB’s move against Boeing.

MM: Unbelievable, isn’t it? The federal government is now, through the NLRB, going to tell you where you can locate your plant. You know, a lot of these big, global businesses, their response to that might be well, I’ll locate my plant in Mexico. I mean, I think that this is truly outrageous. This is the same administration who has now tried to introduce politics into the procurement process by making people who do business with the government reveal their political support for candidates. This is a Chicago-style thuggish administration. In other words, agree with us, or we’ll find a way to punish you. Read More

Sunshine in Litigation Act, Polished Up a Little

By | Briefly Legal | No Comments

The Senate Judiciary Committee has reported out a purportedly improved version of S. 623, the Sunshine in Litigation Act, but the legislation could still cast a cloud over the handling of business documents in federal court proceedings.

The original bill would permit plaintiffs’ lawyers to pry open sealed settlement agreements and documents closed under a judge’s order by asserting they could affect public safety or health. Trial lawyers have lobbied for the bill because it would make easier for them to acquire materials to use in alarmist campaigns against a company’s reputation. The legislation would make the discovery process even more expensive, useful leverage against a company to force a settlement.

In its new version (text of substitute amedment), the Sunshine in Litigation Act does the same thing, just with a few exemptions built in. Sen. Herb Kohl (D-WI) outlined the changes in his committee statement (which we’ve transcribed here): Read More

Sen. Alexander: NLRB’s Boeing Complaint Helps Send Jobs Overseas

By | Briefly Legal, Economy, Labor Unions | One Comment

In a Senate floor speech Tuesday, Sen. Lamar Alexander (R-TN) discussed U.S. competitiveness and the trend of “on-shoring” manufacturing jobs as described in the recent Economist article, “Moving back to America –The dwindling allure of building factories offshore.”

Unfortunately, the health care law adds to business costs, and the United States has the highest corporate tax rate in the world, Alexander noted. Now, the National Labor Relations Board’s complaint against The Boeing Company sends a clear signal to large companies: Beware doing business in a United States burdened by this kind of anti-competitive government action.

[We] have a regulation from the National Labor Relations Board that may have the effect of law for 2 to 5 years that says it is prima facie evidence of an unfair labor practice if a company that is producing in a union State expands or moves to a right-to-work State. This is an assault on every middle-income Tennessean and on millions of middle-income Americans who have manufacturing jobs–certainly, everyone in the 22 right-to-work States. But as the Boeing chief executive said, it could be just as much of a disincentive to a State such as Michigan or Illinois or some other State that does not have a right-to-work law because why would you put a plant in Michigan if later you would not be allowed to put it in Tennessee? Read More