U.S. judge rules for Chevron in Ecuador pollution case


John Watson,chief executive of Chevron, speaks at the annual IHS CERAWeek conference in Houston, Texas. Watson said his company won a "resounding victory" after a U.S. district judge squashed a judgment against the company that was handed down by an Ecuadorean court. (Rick Wilking/Reuters)

A federal judge ruled Tuesday that a multibillion-dollar judgment against Chevron in an Ecuadoran court was the product of a fraud and racketeering effort orchestrated by a New York-based lawyer and that the judgment should not be enforced.

The 485-page decision by U.S. District Judge Lewis A. Kaplan was a resounding victory for Chevron and a setback for the plaintiffs, who have been waging a two­-decade-long battle to make the California-based oil giant pay damages for polluting a region of Ecuador’s Amazon known as Lago Agrio.

“The saga of the Lago Agrio case is sad,” Kaplan wrote. He said that the plaintiffs, indigenous people living in Ecuador’s Amazon, “received the zealous representation they wanted, but it is sad that it was not always characterized by honor and honesty as well.”

Steven Donziger, the U.S. attorney for the Ecuadoran plaintiffs, called Kaplan’s ruling “an appalling decision” and vowed to appeal. Chevron’s general counsel, Hew Pate, said the company would “keep doing the things to defend our shareholders until we don’t have to do them any more.”

The sprawling legal battle grew out of allegations that Texaco, later acquired by Chevron, left toxic pits full of drilling waste behind in Lago Agrio between 1964 and 1992 and that the company should be responsible for the cleanup and damages to the health of the indigenous people. Chevron says that Texaco, which left Ecuador before its acquisition, did its share of cleaning up the pits under agreements with the Ecuadoran government and the state oil firm, which has continued to pollute the area.

An Ecuadoran court said that Chevron owed $19 billion, although the country’s supreme court later reduced the judgment to $9.5 billion. Since Chevron has no assets in Ecuador, the plaintiffs are trying to collect the money in other countries. Those efforts have drawn support from the Washington law and lobbying firm Patton Boggs in return for a share of any awards or settlement.

But Tuesday, Kaplan agreed to block those efforts and ordered the establishment of a trust that would collect any payments from the Ecuadoran judgment obtained by Donziger or any of the Ecuadorans’ representatives.

“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,” Kaplan wrote. “In the end, however, he and the Ecuadorian lawyers he led corrupted the Lago Agrio case.”

Kaplan said that they “submitted fraudulent evidence” and “coerced one judge, first to use a court-appointed, supposedly impartial, ‘global expert’ to make an overall damages assessment and, then, to appoint to that important role a man whom Donziger hand-picked and paid.”

“If ever there were a case warranting equitable relief with respect to a judgment procured by fraud, this is it,” Kaplan wrote.

Donziger said Kaplan’s ruling stemmed from “a deeply flawed proceeding that overturns a unanimous ruling by Ecuador’s supreme court.” He blamed the judge’s “implacable hostility toward me, my Ecuadoran clients, and their country.” He said that his clients would continue seeking to enforce the Ecuadoran court judgment.

Han Shan, a spokesman for the Ecuadoran plaintiffs, said in a statement that “the affected communities long ago gave up hope that a U.S. court would provide them relief from Chevron’s contamination, which has taken their loved ones, poisoned their lands, and imperiled their cultures.” Shan added: “It is time for Chevron to end its abusive efforts at evading justice, and restore the indigenous people and villagers who suffer from the company’s terrible legacy.”

Kaplan said those issues were beside the point in this case.

“The issue here is not what happened . . . more than twenty years ago and who, if anyone, now is responsible for any wrongs then done,” Kaplan wrote. “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.

Kaplan said that “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.”

The litigation land war between Donziger and Chevron has drawn in other players, including Patton Boggs, which joined the Ecuadoran plaintiffs’ team in 2010 and has led efforts to enforce the Ecuadoran judgments in other countries.

Randy Mastro, a partner at Gibson Dunn representing Chevron, said the company would pursue fraud claims against Patton Boggs, alleging that the D.C. firm helped conceal fraud that contributed to the Ecuadoran judgment. Those fraud claims are part of a separate matter, however. Patton Boggs played no part in defending Donziger in the racketeering case.

Rick Talisman, general counsel at Patton Boggs, said the firm “was neither a party nor trial counsel in the Donziger case, and no witnesses from our firm were called to testify.” He said it was “inappropriate” to comment, but noted that Kaplan had “not made any findings that Patton Boggs engaged in any wrongdoing.”

Steven Mufson covers energy and other financial news.
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