Ted Olson, of Gibson Dunn, right, addressing the media after the U.S. Supreme Court heard arguments in a same-sex marriage case challenging California’s Prop 8. March 26, 2013. Photo by Diego M. Radzinschi/THE NATIONAL LAW JOURNAL.
An attorney’s fraud in pursuing environmental claims justified an injunction blocking plaintiffs in Ecuador from collecting a $9 billion judgment against Chevron Corp. in the United States, a federal appeals court held Monday.
Deciding the long-simmering case, the U.S. Court of Appeals for the Second Circuit said plaintiffs lawyer Steven Donziger led a legal team guilty of “a parade of corrupt actions.” The appellate panel upheld the injunction entered in 2014 by Southern District Judge Lewis Kaplan that prevented plaintiffs from collecting on the judgment in U.S. courts.
Donziger’s lawyer, Deepak Gupta of Gupta Beck, released a statement Monday calling the decision “unprecedented in American law.”
“Never before has a U.S. court allowed someone who lost a case in another country to come to the U.S. to attack a foreign court’s damages award,” Gupta said. “The decision hands well-heeled corporations a template for avoiding legal accountability anywhere in the world. And it throws the entire international judgment-enforcement framework out the window.”
The 127-page decision in Chevron v. Donziger, 14-826, is a victory for Chevron’s Gibson, Dunn & Crutcher legal team, led by partner Theodore Olson, and caps a saga that the Second Circuit said in a prior opinion “must be among the most extensively [chronicled] in the history of the American federal judiciary.”
Donziger was the lead lawyer for some 30,000 indigenous residents of the Lago Agrio region in Ecuador who alleged that Texaco Petroleum, which became a Chevron subsidiary in 2001, failed to remediate devastating environmental pollution from oil exploration.
Monday’s ruling by Judges Amalya Kearse, Barrington Parker and Richard Wesley means that the plaintiffs will be unable to attach Chevron’s assets in the United States to collect on the judgment. To the extent the plaintiffs are seeking to attach assets abroad, courts in foreign nations now have the considerable force of Kaplan’s opinion before them, including what the circuit said were Kaplan’s “unchallenged findings of fact as to the fraud, coercion, and bribery engaged in” by the Lago Agrio plaintiffs’ legal team.
Those findings included that a judge in Ecuador was bribed $500,000; that a critical opinion on the damages award, and other judicial opinions, were ghostwritten at the direction of the plaintiffs’ legal team; and that a supposedly neutral expert report was altered.
“If there was ever a case warranting equitable relief with respect to a judgment procured by fraud, this is it,” Kaplan wrote in 2014.
Chevron vice president and general counsel R. Hewitt Pate said in a statement: “This decision, which is consistent with the findings of numerous judicial officers in the United States and South America, leaves no doubt that the Ecuadorian judgment against Chevron is the illegitimate and unenforceable product of misconduct.”
Donziger’s undoing was propelled by the movie “Crude”—a documentary that Donziger solicited about the Lago Agrio litigation.
Kaplan enforced a Chevron subpoena for hundreds of outtakes of “Crude,” which showed Donziger, among other comments, disparaging the Ecuadorean judiciary, saying, “It’s their birthright to be corrupt.”
The conflict dates back decades; plaintiffs initially filed suit in federal court in New York against Texaco in 1993. The case was dismissed on forum non conveniens grounds in 2001 and Donziger and his legal team sued in Ecuador in 2003.
They secured a judgment in 2011 for $17 billion but that award was knocked down when punitive damages were eliminated on appeal. Chevron sets the current award at $9.5 billion, while the Second Circuit used the figure $8.646 billion in its opinion.
Kaplan’s injunction prevents the Lago Agrio plaintiffs from enforcing the judgment anywhere in the United States and imposes a constructive trust on any property they receive anywhere in the world that is traceable to the Ecuadorian judgment.
At oral argument before the Second Circuit in 2015, Donziger’s attorney argued that Chevron lacked standing to sue for racketeering and that Kaplan did the plaintiffs wrong by blocking enforcement anywhere in the United States.
Arguing for Chevron, Olson told the panel that Kaplan was well within his equitable powers in granting relief.
Karen Hinton, a spokeswoman for the plaintiffs, said “We are shocked by the decision.”
“As disappointed as we are, this ruling will not deter the Ecuadorians, their lawyers and their supporters from aggressively seeking justice in Canada and in other countries where litigation is underway to seize Chevron assets,” Hinton said.
New York University law professor Burt Neuborne argued at the circuit for two representative Ecuadoreans, Hugo Gerardo Camacho Naranjo and Javier Piaguaje Payaguaje, who were held by Kaplan in Chevron’s racketeering case to have ratified Donziger’s fraud.
The Lago Agrio representatives claimed they were unaware of Donziger’s misconduct and were “unsophisticated client-principals, following the lawyer’s lead.”
“They were in the dark entirely,” Neuborne said.
Kearse, who authored the court’s unanimous ruling, said ”even innocent clients may not benefit from the fraud of their attorney.”
Mark Hamblett can be reached at [email protected]. Twitter: @Mark_Hamblett
