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Chevron Gains a Victory in Ecuador Lawsuit Following U.S. District Judge’s Decision

Date: Apr 5, 2012

Chevron Loosed From $22M Bond In Ecuador Pollution Fight

A New York federal judge freed Chevron Corp. on Monday from a $21.8 million bond linked to a now-overturned injunction on an $18 billion Ecuadorean pollution judgment against Chevron, slamming Patton Boggs LLP’s attempts to collect on the bond.

U.S. District Judge Lewis Kaplan ordered Chevron to post the bond to compensate the Ecuadorean defendants in case the preliminary injunction, issued in March 2011, was later overturned. The Second Circuit vacated the preliminary injunction in September.

In Monday’s ruling, Judge Kaplan pointed out the $18 billion judgment against Chevron was unenforceable anyway throughout the entire period the preliminary injunction was in effect because an appeals court in Ecuador did not uphold the judgment until Jan. 3.

“The defendants do not claim any injury flowing from the fact that they were enjoined from seeking to enforce the judgment because, by their own admission, they were not free to have done so at any time during which the injunction was in effect,” Judge Kaplan said.

Judge Kaplan also blasted Patton Boggs, which represents some Ecuadoreans in the fight over the $18 billion judgment, for trying to collect on the bond through a New Jersey lawsuit brought on behalf of the law firm.

“The plaintiff law firm in the New Jersey action has no legally sufficient claim on the bond — either there or here — because the bond runs in favor only of the defendants in this action,” Judge Kaplan said, adding that attorneys’ fees are not recoverable on a preliminary injunction bond even if it is overturned on appeal.

With the New Jersey suit, Patton Boggs sought to collect fees incurred fighting the injunction and additional damages for what it called Chevron’s malicious prosecution. The firm argued that Judge Kaplan’s order had left the Ecuadoreans holding a judgment with inadequate resources to enforce it and left counsel like Patton Boggs with unpaid bills.

Chevron has accused Patton Boggs of engaging in forum-shopping to avoid Judge Kaplan.

The New York judge essentially agreed, saying none of the defendants in the lawsuit nor Patton Boggs had submitted claims for damages in his court even though it had the most familiarity with the dispute.

“They must live with the consequences of their tactical decision to forgo that opportunity,” Judge Kaplan said.

Randy Mastro, a Gibson Dunn & Crutcher LLP attorney representing Chevron, said Judge Kaplan called it “exactly right.”

“Once again, Patton Boggs has engaged in blatant forum-shopping and gotten called on it by courts,” Mastro said. “That lawsuit never should have been brought in New Jersey, and Chevron has moved to transfer it.”

The high-profile dispute centers around a judgment in a suit brought by a group of indigenous Ecuadoreans called the Lago Agrio plaintiffs, who claimed a Chevron predecessor dumped crude oil in the Amazon decades ago, causing residents to develop cancer and destroying natural resources.

Judge Kaplan’s injunction stopped the Ecuadoreans from collecting their judgment — not just in New York, but in any court in the world — after the oil giant raised concerns that a class of Ecuadorean citizens might have won a verdict against the company through fraud and judicial corruption.

However, the Second Circuit overturned the injunction, remarking that New York’s law on the recognition of foreign judgments was meant to help litigants collect on judgments, not make New York into a one-stop forum for blocking foreign rulings.

Attorneys for the Ecuadorean defendants and Patton Boggs were not immediately available for comment on Tuesday.

Chevron is represented by Randy Mastro, Andrea Neuman, Kristen Hendricks, Scott Edelman and William Thomson of Gibson Dunn & Crutcher LLP.

The defendants in the New York suit are represented by John Keker, Elliot Peters, Christopher Young, Jan Nielsen Little, Matthew Werdeger, Nikki Vo, Paula Blizzard and William Hicks of Keker & Van Nest LLP, by Ty Doyle, Craig Smyser and Larry Veselka of Smyser Kaplan & Veselka LLP, and by Julio Gomez of Gomez LLC.

The case is Chevron Corp. v. Steven Donziger et al., case number 1:11-cv-00691, in the U.S. District Court for the Southern District of New York.

The New Jersey case is Patton Boggs LLP v. Chevron Corp., case number 2:12-cv-00901, in the U.S. District Court for the District of New Jersey.

-Law360, April 3, 2012