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Forbes – Judge Calls Chevron Verdict Product Of `Egregious Fraud,’ Unenforceable

Date: Mar 4, 2014

A federal judge in New York today slapped a stern order on attorney Steven Donziger and the Ecuadorean villagers he claims to represent, prohibiting them from capitalizing in U.S. courts on a $9 billion judgment he says was the product of “egregious fraud.”

In a terse, 5-page judgment, U.S. District Judge Lewis Kaplan ordered Donziger to hand over his stock in Amazonia, a Gibraltar corporation he set up to hold proceeds of the judgment, and prohibited him and his clients from seeking payment through any U.S. court. Kaplan didn’t preclude Donziger from seeking money in courts outside the U.S., but the judgment, if upheld, would eliminate his most potent legal weapon against the California-based oil company.

The decision ends, for now, an acrimonious and extremely expensive legal war between Donziger and Chevron that was waged in multiple courts across the country as Donziger sought to collect on the judgment by an Ecuador court while Chevron sought to prove it was obtained through fraud. Kaplan, in a 497-page opinion issued along with his judgment, detailed the many ways Donziger is accused of manipulating the Ecuadorean legal system to obtain the judgment, including hiring U.S. environmental consultants to write the trial judge’s opinion.

Donziger accused Texaco, the operator of a vast drilling concession in Ecuador’s Oriente region, of using substandard methods that spread pollution throughout the jungle. Chevron says Ecuador’s state-owned oil company, Petroecuador, was majority owner of the enterprise for most of that time and continued to pollute long after it ejected Texaco from the country in 1992.

Upon consideration of all of the evidence, including the credibility of the witnesses – though several of the most important declined to testify – the Court finds that Donziger began his involvement in this controversy with a desire to improve conditions in the area in which his Ecuadorian clients live. To be sure, he sought also to do well for himself while doing good for others, but there was nothing wrong with that. In the end, however, he and the Ecuadorian lawyers he led corrupted the Lago Agrio case.

The judge also ordered Donziger and the Ecuadorean plaintiffs to pay Chevron’s costs, which could be impossible even given the lawyer’s deep-pocketed private funders. Donziger said he’d appeal — an avenue left open by Judge Kaplan — and called it “an appalling decision resulting from a deeply flawed proceeding that overturns a unanimous ruling by Ecuador’s Supreme Court.”

“We believe Judge Kaplan is wrong on the law and wrong on the facts and that he repeatedly let his implacable hostility toward me, my Ecuadorian clients, and their country infect his view of the case,” Donziger said.

The decision illustrates the limits of comity, or international respect for the decision of another country’s courts. Donziger originally sued Texaco over toxic waste in the Ecuador jungles in New York but Chevron, which later acquired Texaco, got the case transferred to Ecuador in 2001. In theory Chevron agreed to abide by whatever the Ecuadorean courts decided but in reality New York and federal law offer powerful protections against defendants who believe they are the victims of an improper or fraudulent procedure in another country.

Chevron sued Donziger for civil racketeering in New York and Kaplan agreed with most of the claims, revealing a visceral dislike for Donziger, a fellow Harvard Law School graduate.

The Court assumes that there is pollution in the Orienté. On that assumption, Texaco and perhaps even Chevron – though it never drilled for oil in Ecuador – might bear some responsibility. In any case, improvement of conditions for the residents of the Orienté appears to be both desirable and overdue. But the defendants’ effort to change the subject to the Orienté, understandable as it is as a tactic, misses the point of this case. The issue here is not what happened in the Orienté more than twenty years ago and who, if anyone, now is responsible for any wrongs then done. It instead is whether a court decision was procured by corrupt means, regardless of whether the cause was just. An innocent defendant is no more entitled to submit false evidence, to coopt and pay off a court-appointed expert, or to coerce or bribe a judge or jury than a guilty one. So even if Donziger and his clients had a just cause – and the Court expresses no opinion on that – they were not entitled to corrupt the process to achieve their goal.

Kaplan’s judgment comes as human-rights activists face increasing difficulty pressing their claims against corporations they accuse of aiding and abetting in pollution and rights violations in foreign countries. Earlier this year, the U.S. Supreme Court rejected a lawsuit filed in California against Mercedes-Benz owner Daimler AG alleging complicity in Argentinian human-rights abuses in the 1970s, capping a string of such rulings making U.S. courts less hospitable to foreign plaintiffs.

The decision also vindicates Chevron’s scorched-earth litigation tactics, which included a pledge by a Chevron executive to “fight this until Hell freezes over—and then we’ll fight it out on the ice.” Donziger and his financial backers logically believed Chevron would eventually settle for a nice sum — anything less than $100 million, and Donziger’s ostensible clients would get little to nothing — but with threat of costs now hanging over him he’ll be lucky to come out of it even.