The New York judge overseeing Chevron’s racketeering suit over a $19 billion Ecuadorean pollution judgment dismissed claims between the company and environmental consultant Stratus Consulting Inc. on Monday following a settlement the remaining defendants have derided as an “extraordinary capitulation.”
U.S. District Court Judge Lewis Kaplan on Monday denied the nonsettling defendants’ bid for discovery on the agreement and rejected their contention that he should examine the agreement to determine if the parties are “guilty of professional or criminal misconduct,” saying his discretionary scope in such matters is limited.
Although Stratus and Chevron entered into the agreement in March, the dismissal of claims between the parties has been held up by those nonsettling defendants — who have suggested the agreement was improperly coerced by Chevron — over a disputed clause in the deal requiring court approval and a debate over the extent to which the court is empowered to provide such approval.
“Despite all of the sound and fury, this is a straightforward matter,” Judge Kaplan said. “This is a private agreement among private parties, who have a perfect right to settle their private lawsuit as they see fit.”
The $19.2 billion judgment concerns dumping of crude oil in the Amazon rainforest allegedly caused by Texaco Inc., which merged with Chevron in 2001. The Ecuadoreans, known as the Lago Agrio plaintiffs, say the pollution caused residents to develop cancer and destroyed natural resources.
Craig Smyser of Smyser Kaplan Veselka LLP, who represents the remaining defendants, noted Tuesday that his side did not have any objection to the dismissal of Stratus from the suit, but said the terms of the settlement raised a number of suspicions.
“When we read the settlement, there were several terms that caused people a lot of concern,” Smyser told Law360 on Tuesday. “Most importantly, it’s a gag order. It forbids Stratus, the key environmental scientific consultant working for the Ecuadorean plaintiffs, from voluntarily speaking or writing about the litigation in any public forum.”
Smyser said the deal does not involve any monetary exchange, and that Chevron simply has agreed to cease a purported defamation campaign against Stratus in exchange for forbidding Stratus scientists “from saying anything about the truth about what they found in Ecuador” without Chevron’s permission or a court order.
Judge Kaplan’s order established that the dismissal of claims will be vacated if either Chevron or Stratus submit written notice by April 12 that the settlement has not become effective.
“My view is that the court correctly decided it is not in the business of approving private settlements between parties,” Smyser said. “We resisted the settlement on those grounds, and we’ll see if Chevron and Stratus decide to move ahead without that approval.”
In its New York suit attempting to invalidate the heavily contested judgment, Chevron has accused attorney Steven Donziger and the Lago Agrio plaintiffs of violating the Racketeer Influenced and Corrupt Organizations Act in connection with an alleged global extortion campaign.
Last May, Judge Kaplan stripped Chevron’s claims of tortious interference, trespass to chattels and unjust enrichment against Stratus in that suit, but left intact racketeering and extortion claims.
U.S. District Court Judge Lewis Kaplan has set an Oct. 15 trial date for the New York RICO suit.
The Ecuadoreans have accused Judge Kaplan and the New York district court of wrongfully attempting to hinder efforts to enforce the judgment through asset freezes in Argentina, Brazil and Canada, and moved in March to boot him from the case over allegations that he has conducted himself as the “transnational arbiter” of the disputed judgment in defiance of rulings by the Second Circuit.
On Monday, the Second Circuit granted a bid for expedited consideration of a petition for writ of mandamus filed by Ecuadorean plaintiffs seeking to remove Judge Kaplan from the dispute, saying the appeals panel would consider the petition next month.
Chevron is represented by Gibson Dunn & Crutcher LLP.
The Lagos Agrio plaintiffs are represented by Smyser Kaplan & Veselka LLP.
Stratus is represented by Silver & Deboskey PC and Zeichner Ellman & Krause LLP.
The case is Chevron Corp. v. Donziger et al., case number 1:11-cv-00691, in the U.S. District Court for the Southern District of New York.
By Gavin Broady-Law 360, April 9, 2013
