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Judge Nixes Donziger’s Allegations Of Fraud Against Chevron in Ecuador Case

Date: Jul 30, 2013

A New York federal judge threw out extortion and fraud counterclaims in Chevron Corp.’s racketeering suit over a $19 billion Amazon pollution judgment, ruling Monday that defendant Steven Donziger wasn’t entitled to damages over alleged misrepresentations due to failure to state a claim.

Donziger, who represents indigenous residents who sued Chevron in Ecuador, claims that the company made false allegations in litigation it brought against him and that he suffered reputational and monetary damages in defending himself against the claims.

But U.S. District Judge Lewis A. Kaplan held that Donziger didn’t allege that the defense costs were incurred because he relied upon the alleged falsehoods.

“This allegation of injury caused by the alleged fraud is curious in view of [Donziger’s] concession that he does not complain of any ‘actionable representations … to’ him,” Judge Kaplan ruled Monday. “But the counterclaim does not allege that [Donziger] was deceived by any of the alleged misrepresentations or omissions, let alone that he suffered out-of-pocket loss by reason of such deception.”

Donziger and the Ecuadorians are on bitter terms with Judge Kaplan, having previously filed a writ of mandamus seeking to remove him from the dispute. They claimed the judge has a biased pattern of ruling in favor of Chevron.

The Second Circuit has asked Donziger for a legal brief in his defense, a move rarely taken by an appellate court of a sitting judge, a Donziger representative said Monday.

Monday’s ruling came less than two weeks after the judge rejected a bid by Donziger, who is representing himself, to pause the suit while he obtained new counsel or prepared to try the case on his own.

The Ecuadorians claimed that an affiliate of Texaco Inc. — now owned by Chevron — dumped crude oil in the Amazon decades ago that caused residents to develop cancer and destroyed natural resources. The Ecuadorians, known as the Lago Agrio plaintiffs, won a $19.2 billion judgment in the case.

Chevron’s suit, brought in February 2011, asserts claims under the Racketeer Influenced and Corrupt Organizations Act and seeks a declaration that any judgment in the Ecuador lawsuit would stem from fraud and could not be enforced. It is also asking for damages in the suit, which is set to go to trial Oct. 15.

Donziger countered that Chevron, in an attempt to undermine the Lago Agrio litigation, made misrepresentations and omissions to courts and the media with video recordings it released in 2009 showing a Lago Agrio judge saying he would rule against Chevron and deny any appeals.

Donziger also accused Chevron of misrepresenting scientific evidence and quoting RICO lawsuit defendants out of context, among other allegations. He argued that California state law applied to his extortion counterclaim, while Chevron claimed that New York state law applied instead.

Judge Kaplan held Monday that it didn’t matter whether New York or California law applied to the extortion counterclaim, because the claim was insufficient as a matter of law in either state.

Karen Hinton, spokeswoman for Donziger, said Monday that the judge’s decision was further proof of bias.

“This ruling is the latest of dozens of examples of [Judge Kaplan’s] bias toward the rainforest communities of Ecuador and their attorneys,” she said. “Judge Kaplan’s actions are preventing the real crimes in Ecuador — the extensive evidence of Chevron’s massive contamination of the rainforest and the company’s fraud to cover it up — from coming out in his courtroom.”

Attorneys for Chevron didn’t immediately respond Monday to requests for comment.

Chevron is represented by Randy M. Mastro, Andrea E. Neuman, Scott A. Edelman and William E. Thompson of Gibson Dunn & Crutcher LLP.

Donziger is representing himself in the litigation.

The case is Chevron Corp. v. Donziger et al., case number 2:11-cv-00691, in the U.S. District Court for the Southern District of New York.

By Kurt Orzeck-Law360, July 29, 2013