It’s a monumental battle of wills, money and egos.
The oil giant Chevron, the third-biggest U.S. company by revenue, has sued Patton Boggs, the nation’s premier legal and lobbying firm, for concealing and promoting fraudulent information in a case that was born in the jungles of the Amazon.
Chevron has also convinced a New York federal judge to allow it — despite protests from Patton Boggs about attorney-client privilege — to take the extraordinary step of examining thousands of pages of the law firm’s internal communications regarding its client, indigenous people from Ecuador’s Amazon who are suing Chevron.
The stakes in the related cases are enormous, in dollars and reputation. Chevron, which spends scores of millions of dollars a year on image advertising, is facing an $18.2 billion judgment handed down by an Ecuadoran court for health and environmental damages caused by hundreds of leaky pits filled with thick, gloppy toxic waste from oil drilling. The unlined pits, the plaintiffs say, were left by Texaco, a U.S. oil company that packed up and quit Ecuador in 1992. Chevron acquired Texaco — and this mess — in 2001.
Patton Boggs is one of Washington’s most storied law firms, known as much for its lobbying prowess as litigation skills, and whose normal haunts are the halls of Congress rather than the jungles or courts of Ecuador. In 2012, it earned $45.8 million in lobbying fees, nearly 50 percent more than the No. 2 firm. It began advising the Ecuadoran plaintiffs in early 2010. Now, it finds itself being sucked deeper into a costly, prolonged and possibly embarrassing morass. Former allies in the case have turned against it. The firm is no longer fighting for its clients alone, but for its own name.
“If someone seriously suggests that [the] 50-year-old law firm of Patton Boggs would wreck, would risk its professional reputation for a group of Ecuadorans whose case we feel strongly about, that we would be involved in a broad fraud, I suggest whoever might believe that: I have a bridge in New York I might like to try to sell them,” Patton Boggs partner James E. Tyrrell Jr. said in a Washington district court last year.
Chevron’s lead attorney, Randy M. Mastro — former mob prosecutor, Rudy Giuliani protege and head of litigation at Gibson, Dunn and Crutcher — retorted: “Your Honor, Mr. Tyrrell asks the question, would Patton Boggs be risking their reputation on these Ecuadoran plaintiffs. . . . The answer, unfortunately, from their own documents, is yes. The answer is: A firm getting a contingency fee on $18.2 billion will do a lot of things that shock the conscience. And what they did here shocks the conscience.”
When Patton Boggs signed onto the Ecuador case in early 2010 at the suggestion of a hedge fund looking into financing the litigation, it wrote a memorandum titled “Invictus” — borrowing the title of a 19th-century poem that culminates with the famous lines “I am the master of my fate/I am the captain of my soul.” In it, Patton Boggs outlined a strategy to pursue international Chevron assets to enforce the $18.2 billion judgment, “with the ultimate goal of effecting a swift and favorable settlement.”
But this case wasn’t like other sticky problems that Patton Boggs had solved by striking deals. “Tommy thought he and Chevron’s counsel could sit down and work this out,” a prominent Washington lawyer, who spoke on the condition of anonymity to protect his business relationships, said about firm titan Thomas Boggs.
Chevron, which has no operations in Ecuador but has them in dozens of other countries, has taken a stand and says it won’t submit to what it calls extortion.
Among the recent highlights from Chevron’s battle with Patton Boggs:
●Chevron says in court filings that Patton Boggs knew early on that a key report about environmental damage in Ecuador was false and that it had hired a U.S. consulting firm to, as one Patton Boggs lawyer put it in an e-mail, “cleanse” the report by providing a new study.
●Another U.S. consulting firm that worked for the Ecuadoran plaintiffs recently disavowed its own assessments and, in a settlement with Chevron, called the process of calculating damages “tainted.”
●A hedge fund that invests in complex litigation in return for a stake in any eventual settlement or damage awards, and which gave $4 million to cover the fees that Patton Boggs was charging the Ecuadorans, said in an April affidavit that “the representations that Patton Boggs made to us . . . during our diligence process were false and misleading.”
Patton Boggs denies all of these allegations, calling the hedge fund’s affidavit “a sham” and “apropos of nothing, other than spinning a seedy narrative.” It adds that the environmental consulting firm renounced its work under pressure from Chevron, which it says had been trying to destroy the consultants’ business by writing disparaging letters to its other clients. And it says that Chevron has deployed lawyers and public relations experts to distract attention from its liability for the waste in Ecuador.
“You would think it would be difficult for an oil company that contaminated a Rhode Island-size swath of the Amazon to portray its opponents as brigands and pirates,” Tyrrell said in an interview. “They’ve obviously spent untold millions of dollars to change the story.”
“It sounds like very ugly litigation,” said Geoffrey Hazard, a professor specializing in ethics at San Francisco’s Hastings College of Law. “Patton Boggs is a firm of recognized standing. This is accusing them of fraud, and that’s going to be bitterly fought.” (Hazard has advised the hedge fund on unrelated matters.)
How long could this struggle go on? Consider: Chevron has fought in court for two decades against the Ecuadorans’ New York lawyer Steven Donziger, a determined solo practitioner who turned their case into a cause celebre and whom Chevron is now accusing of racketeering.
The legal battle — waged in dozens of courts in six countries — could drag on for years.
That’s going to take money. Chevron’s pockets are deep; it has a market capitalization of $230 billion. It is now spending $250 million a year on the case, by Tyrrell’s estimates. Chevron would not disclose its legal costs. A Chevron exhibit filed in New York said that the company has used as many as 2,000 lawyers, legal aides and investigators from about 60 firms, including 114 from Gibson Dunn and 98 from Kroll.
In Argentina, one of the countries where its assets are being pursued, Chevron hired seven top litigation firms, according to an opposing attorney, who estimates that the 48 named Ecuadoran plaintiffs — mostly members of indigenous tribes — have spent less than $30 million worldwide since the case began.
The well-tailored pockets of Patton Boggs aren’t as deep. Earlier this year, the firm laid off 65 people, 30 of them lawyers, to save $14.7 million; it also said it would be “adjusting partner headcount,” booting some to raise sagging profits-per-partner. This month, 17 partners left, most from the Dallas office.
In the Ecuadoran case, Patton Boggs is investing its own sweat equity, charging reduced rates in return for a share of any settlement. Just producing the documents that Chevron subpoenaed cost more than $2 million, Tyrrell said.
Earlier, as costs mounted, a Philadelphia law firm Kohn, Swift & Graf that originally bankrolled the plaintiffs’ case, providing cash in return for a chunk of any payment, dropped out, amid quarrels with Donziger over tactics.
Donziger’s defense lawyers Keker & Van Nest dropped him in May saying in a court filing that he owed them $1.4 million. “This is an extraordinary case, which has degenerated into a Dickensian farce,” John W. Keker said. “Through scorched-earth litigation, executed by its army of hundreds of lawyers, Chevron is using its limitless resources to crush defendants and win this case through might rather than merit.”
Chevron spokesman Kent Robertson responds: “Our response to the Lago Agrio litigation has been proportionate to the fraud that’s been committed against the company and our shareholders.”
Patton Boggs takes the case
How Patton Boggs ended up here is a tale of how the old boy network works in the elite legal world. And it involves an unusual niche — hedge funds that invest in complex litigation in the hope of sharing a big payday.
In November 2009, a New York firm seeking financing for the Ecuadoran plaintiffs contacted Burford Capital, run by Christopher Bogart, a former general counsel of Time Warner and litigator at the white shoe firm of Cravath, Swaine & Moore. Burford is the world’s biggest institutional source of litigation financing, with a $300 million fund.
Burford’s partners met Donziger, the plaintiffs’ dogged U.S. lawyer who needed fresh backing. Before investing, however, Burford wanted a “highly regarded U.S. litigation counsel” involved, according to a Bogart court filing.
James E. Tyrrell Jr., a partner at the Newark office of Patton Boggs and a member of the firm’s executive committee, was the obvious choice. He and four top executives at Burford had been partners at Latham & Watkins.
In an affidavit filed in April, Bogart says Tyrrell was “an advocate and enthusiast of litigation funding.” He also handled complex cases. He had been lead counsel defending New York City against health claims regarding ash from the World Trade Center collapse, and he defended corporations in suits involving Agent Orange, asbestos and silicone breast implants. In what now seems an unfortunate phrase, he was known as the “master of disaster.”
Moreover, Patton Boggs had provided Burford with rent-free office space in New York for its first year, adding to the goodwill.
By early 2010, Patton Boggs was in. And that fall, Burford invested $4 million in the case, with plans for two further tranches of $5.5 million each. In return, it would get 5.545 percent of the settlement amount. Even if the settlement fell short of the billions expected, Burford would receive a minimum of $55.5 million, a handsome return on its investment. Bogart in his affidavit cited “our substantial confidence in Jim Tyrrell” and “our special relationship with and respect for Jim and Patton Boggs.”
Then the special relationship soured. On Sept. 29, 2011, Burford sent Donziger and the Ecuadoran lawyers a letter complaining about omissions in the Invictus memo, though it did not address the letter to Patton Boggs.
“We believe that you and particularly your U.S. representatives engaged in a multi-month scheme to deceive and defraud in order to secure desperately needed funding,” the letter said, “all the while concealing material information and misrepresenting critical facts in the fear that we would have walked away had we known the true state of affairs.”
Oily riches, and waste, in the jungle
To understand what went wrong, it helps to know a bit about the saga that began in another land, in another age.
Texaco signed an exploration agreement with Ecuador in 1964 and struck oil in 1967. In TV ads, the oil company boasted about its efforts to tap oil from the jungle. It built roads and named a small desultory town Lago Agrio, Spanish for “Sour Lake,” after the spot in Texas where Texaco made a giant discovery in 1903. State-owned Petroecuador increased its ownership stake to 62.5 percent in 1976. The consortium accounted for half of the country’s gross domestic product. In 1992, the concession expired and Texaco left; Petroecuador took over 100 percent ownership. A dispute over nearly a half-billion dollars that Chevron says it is owed by Ecuador’s government remains unresolved.
During that period, the Texaco-led venture had tossed oil and drilling waste in hundreds of open pits, some of which trickled into the moist soil and nearby rivers. The pits remain, and so do basic questions: To whom do they belong? And who is responsible for cleaning them?
In 1993, U.S. lawyers filed class-action cases in the southern district of New York on behalf of 30,000 Ecuadorans in the Lago Agrio region, alleging that they suffered increased rates of cancer, birth defects and other ailments.
In 1995, the government of Ecuador and Texaco agreed to a cleanup plan. Texaco spent $40 million remediating 160 of the roughly 900 pits, and Petroecuador was responsible for the rest. When the work was completed, the government released Texaco from future claims. But, Tyrrell says, the release didn’t cover lawsuits by private individuals, though he says Texaco tried unsuccessfully to get such language included.
Chevron announced its $36 billion acquisition of Texaco in 2000, creating the world’s fourth-largest oil company.
In 2001, a New York court dismissed the Ecuadorans’ eight-year-old case, saying jurisdiction belonged in Ecuador.
So in 2003, four dozen of the plaintiffs filed a new suit in Ecuador. Donziger, who had handled the New York case, led efforts alongside local Ecuadoran lawyers. In 2009, Donziger invited filmmaker Joe Berlinger to visit Ecuador and make a documentary. The result, titled “Crude: The Real Price of Oil,” focused largely on Donziger’s thoughts, doubts and strategies for galvanizing public opinion and influencing Ecuador’s judges. Vanity Fair printed a sympathetic profile of Pablo Fajardo, one of the Ecuadoran lawyers. Trudie Styler, the wife of the rock musician Sting, also visited.
After years of toil, the legal team members became minor celebrities and won attention to a problem, but whose problem was it?
Chevron said Texaco fulfilled its obligations under the 1995 settlement and blamed Petroecuador for failing to clean up the remaining pits and for further polluting drilling sites and pipeline routes in the two decades since Texaco’s exit. The company, after years of arguing against U.S. jurisdiction, said that Ecuador’s judiciary was both corrupt and cowed by the leftist president Rafael Correa, who was elected in 2007 and who embraced the plaintiffs’ cause.
Chevron also took issue with the findings of a key report, written by Richard Cabrera, a local geological engineer appointed to be an independent expert by a court in Ecuador. He estimated damages of $27 billion. Chevron says the bulk of the Cabrera report had been “ghostwritten” by Donziger and firms Donziger hired and that parts of the judge’s ruling contained “verbatim passages” from the plaintiffs’ lawyers’ unfiled internal documents.
“I am not, nor will I be, subject to the views or whims of either of the parties,” Cabrera said later in a statement to the court in Ecuador. “I act in accordance with rulings by the judge, with the law and with my principles.”
Unlike a deposition in the United States, Cabrera answered questions in writing. Chevron says it hired a linguistics expert who said that Fajardo wrote or guided Cabrera’s replies. Hinton called the analysis “hocus pocus.”
“We’re going to fight this until hell freezes over,” Chevron spokesman Don Campbell said in a 2009 interview with the Global Post. “And then we’ll fight it out on the ice.”
Chevron asked an international arbitration panel to intervene in 2009. It also turned to 15 U.S. courts for subpoenas to compel testimony and search the files of the plaintiffs’ consultants and lawyers. It took advantage of a controversial legal tactic that says U.S. courts can force testimony or document production to assist foreign courts or tribunals.
It took depositions from Donziger and Berlinger and obtained outtakes from “Crude,” despite concerns about First Amendment rights. An amicus brief filed in the U.S. Court of Appeals for the 2nd Circuit in New York on behalf of news organizations (including The Washington Post) said giving Chevron outtakes “severely undermines the continued vitality of a journalist’s privilege” and it “imperils not only the rights of the filmmakers before this Court but those of all who engage in news reporting and filmmaking, and ultimately all who read and view their efforts.”
Chevron said that the film and the outtakes showed efforts to threaten a judge in Ecuador and inflate damage estimates. “The only language that I believe this judge is going to understand is one of pressure, intimidation and humiliation,” Donziger says in one clip.
Karen Hinton, a spokesman for Donziger, said he did nothing improper and that he believed in the strength of scientific evidence. She said his “admittedly hyperbolic comments reflected frustration” with Chevron’s tactics.
Then in 2011, Ecuador’s Judge Nicolas Zambrano — the sixth jurist on the case — awarded the plaintiffs about $9 billion — to be doubled unless Chevron paid up and apologized. The company refused.
By that time, Chevron had filed a civil claim in New York under the Racketeer Influenced and Corrupt Organization Act — originally designed to pursue mobsters — against the Ecuadoran plaintiffs and Donziger, calling their case an “extortionate scheme.” Patton Boggs was named as a nonparty co-conspirator, but not a defendant. That eventually gave Chevron a reason to ask the judge to order Patton Boggs to turn over internal documents.
“It’s an opportunity for them to say bad things. We’re not a party, so we can’t defend ourselves,” Tyrrell said. “It’s a pretty despicable thing to do.”
A lobbying powerhouse
Patton Boggs brought a lot to the Ecuadorans’ table. Few law firms boast its reputation in Washington. Lobbyists may be widely denigrated, but they are also widely deployed.
“The right to petition the government dates to the Magna Carta,” Thomas Hale Boggs Jr., the firm co-founder, told the Washington Lawyer in a 2009 interview. “The truth is, lobbyists shed light on important issues. Lobbyists are the voices of the people, many of whom would not otherwise be heard before Congress.”
With Patton Boggs, people — and corporations — are heard. In 2012, the firm’s top lobbying clients included securities dealers, health-care providers and the Mars candy company. Its third-biggest lobbying client, who paid $920,000, was the tycoon Bidzina Ivanishvili, now prime minister of Georgia and who this year jailed two political foes for corruption.
Other clients include Exxon Mobil, Royal Dutch Shell, Raytheon and Goldman Sachs.
Boggs was born to politics, the son of Louisiana congressman and House majority leader Thomas Hale Boggs Sr. and Lindy Boggs, who succeeded her husband after he died. After working in the Lyndon B. Johnson administration, Boggs went to law school and joined James Patton as the sixth lawyer of the firm that became Patton Boggs.
“We learned very quickly that if you combine legal disciplines with lobbying, you have a much better chance of getting something accomplished than if you just lobby,” Boggs told the Washington Lawyer. Along the way, Boggs worked on legislation for the Trans-Alaska Pipeline System and the Chrysler bailout in the late 1970s.
Boggs often cemented relationships by hosting duck hunting parties at Tobacco Stick, his 425-acre preserve on the Eastern Shore. He has sold the preserve but owns a farmhouse nearby. By 2012, the firm had 550 lawyers in seven U.S. and two Mideast offices. The firm grew through acquisitions, too. In 2010, it bought the lobby shop of John Breaux, the former centrist Democratic senator from Louisiana, and former GOP Senate leader Trent Lott of Mississippi.
Patton Boggs was representing Ecuador, which had won preferential trade treatment in 2009. Breaux Lott was representing Chevron, which wanted to take it away. Chevron dropped the firm in July. Though Patton Boggs had taken on the Lago Agrio plaintiffs in spring 2010, it only revealed that in a November court filing.
Patton Boggs also hired practically the entire Latham & Watkins office in Newark, led by Tyrrell, already well known at Patton Boggs. One former partner recalls Boggs urging him to call Tyrrell for advice when he was at Latham.
“I asked what are the five things we need to worry about, and I was really impressed,” says the former partner, who spoke on the condition of anonymity to protect business relationships.
Now Tyrrell has lots to worry about.
A fierce advocate for Chevron
One headache for Tyrrell and Patton Boggs: Mastro. A former prosecutor, the Ivy League-educated Mastro was chief of staff and deputy mayor under Giuliani in New York. He is, as a New Yorker article called him, combative, “even by the pugilistic standards of the New York bar.”
From the corner office of Gibson Dunn on the 48th floor of the MetLife Building, he has represented Martina Hingis, Xerox, Home Depot, Amazon and Bear Stearns, to name a few. More recently he thwarted Mayor Michael Bloomberg’s plans to reform the taxi industry, move the Fulton Fish Market and build a stadium on Manhattan’s West Side.
Chevron hired the firm in 2009 after the firm helped Dole Food fight off $2.1 billion in judgments from Nicaraguan courts over illnesses allegedly caused by pesticides on banana farms.
“If you ever want a textbook example of a travesty of justice, it’s this $18 billion Ecuadoran judgment against Chevron,” Mastro said in an interview.
He has approached this case more like the criminal prosecutor he once was. “Randy is going at this the same way he would a mafia case,” said a prominent Washington lawyer, by targeting the links in his opponents’ case and “flipping them” one by one.
He also has fared well with Judge Lewis A. Kaplan, a federal court judge in the Southern District of New York, who has granted subpoenas of the “Crude” documentary outtakes and of hundreds of thousands of pages of Donziger’s notes, tax returns, diaries and computer files.
One of Kaplan’s orders — a worldwide injunction against enforcement of the Ecuador judgment — was tossed out by the Court of Appeals for the 2nd Circuit. Patton Boggs has asked the appeals court to remove Kaplan — its fourth attempt. It asked for an unusual writ of mandamus, an intervention before the lower court case concludes. The appellate court has asked for briefs from Gibson Dunn and Kaplan.
Criticism of the Cabrera report
At the heart of Chevron’s case against Patton Boggs lies the report of Cabrera, the court-appointed expert. It was Cabrera who raised the stakes in the litigation by pushing damage estimates to stratospheric levels, first to $16 billion and later to $27 billion.
Chevron alleges that Patton Boggs knew at the time of closing arguments in Ecuador that the report was rife with faults and fraud, yet proceeded to build on it. It points to two other law firms that did not want to be involved. The Philadelphia lawyer Kohn said in an August 2010 letter that he was “shocked by recent disclosures concerning potentially improper and unethical, if not illegal, contacts with the court-appointed expert, Mr. Cabrera.”
Patton Boggs says witnesses have changed their stories under pressure from Chevron. Moreover, the court in Ecuador did not rely exclusively on the Cabrera report and that there is other damning evidence against Chevron.
Chevron’s case has gained strength in recent months, with witnesses making striking new statements of irregularities and ethical lapses.
In April, Stratus Consulting, which did environmental research for Donziger in 2008, disavowed its own findings, including damage estimates. In a settlement of a suit brought by Chevron, Stratus also agreed not to comment further on the Lago Agrio litigation.
Douglas Beltman of Stratus said in court papers that based on a meeting with Cabrera “and a review of his background, Cabrera lacked the skill, qualifications and experience to conduct or review a multi-disciplinary environmental damages assessment himself.” Beltman said that Stratus, at Donziger’s behest, disregarded lower soil remediation estimates and did not visit any of the waste pits.
Beltman also said Stratus drafted 11 of the 24 annexes in the Cabrera report. He said that Donziger told Stratus to say that the annexes were written by the “Cabrera Technical Team.” In his statement, Beltman said “misattribution of authorship is not standard practice for Stratus.” Two people involved have left the firm.
Donziger says that it isn’t unusual in complicated, technical cases in the United States or Ecuador for both sides to provide a judge with background or explanations that often find their way verbatim into a judgment. “They’re taking something that is customary and acting like just because it’s happening in Ecuador under a different legal system that it’s sinister, and it’s not,” he said in an interview. Later, his spokesman Hinton added, “The job of a lawyer is to get a full recovery for his or her clients consistent with the extent of the damages.”
Earlier, Stratus accused Chevron of seeking to ruin the firm’s business, which included many government agencies. Beltman sent a letter on April 3, 2012, to Environmental Protection Agency head Lisa P. Jackson saying that Chevron has “filed a series of false charges against Stratus.” In an Oct. 23, 2012, letter, a Chevron executive urged the chair of the Portland Harbor Trustee Council to “sever ties” with Stratus, which was doing a natural resource damage assessment of the harbor site in Oregon. The letter said there was “extensive evidence of corrupt activity on the part of Stratus.”
On its Web site, Stratus now says, “The disavowals of this work contained in the recent declarations of two former Stratus Consulting employees were based on the understanding that the process in Ecuador was tainted.”
Chevron says that Patton Boggs knew that, too, and that that is why the firm hired the Weinberg Group, a Washington-based scientific consulting firm, to do its own assessment of the damages in Ecuador — part of the “cleansing” process. Chevron alleges that Weinberg did this without traveling to Ecuador or collecting additional evidence, yet the firm suggested there was more than $113 billion in damages. Chevron is suing Weinberg, too.
“The Patton Boggs firm came in not only to salvage the fraud, but to perpetuate it,” Mastro said in a hearing in Washington on the question of discovery. He said Patton Boggs brought in the Weinberg Group “as the front man.”
Weinberg did not return calls or e-mails asking for comment. Tyrrell said that “ ‘cleansing’ wasn’t intended to be pejorative” and Weinberg had limited time to produce its study.
Another blow came from an affidavit filed May 8 by David L. Russell, president of Georgia-based Global Environmental Operations, consultants who worked for the plaintiffs in 2004 and said they were “lying about the environmental conditions there.” Russell said,“I saw no evidence of any widespread health effects caused by oil contamination from Texaco and no evidence of drinking water contaminated with petroleum from Texaco’s operations.”
The gravity of the doubts surrounding the Cabrera report had not found its way into the 2010 Patton Boggs Invictus memo. There, Patton Boggs had dismissed Chevron’s “bluster” and “singular fixation” on the report. It said that Chevron had declined opportunities to provide Cabrera with information of its own. “The damage is plain to see,” the memo said, adding that Chevron “cannot undermine the soundness of plaintiffs’ science.”
But as new details emerged, Burford’s partners grew upset and believed Tyrrell had deceived them. In his recent affidavit, Bogart attached notes of a January 2011 telephone conversation with Tyrrell, who said that Donziger “was a fool” and that Patton Boggs was “evaluating what to do.” But Tyrrell added, according to the notes, that it was “difficult to believe that no award of significant damages” would come about.
Tyrrell feels betrayed. He says that Burford maintained warm relations, recommending him for work for Time Warner while Tyrrell arranged a meeting for a Burford partner with Boggs over a state-level lobbying matter. As late as October 2012, Tyrrell says, he had breakfast with Bogart at the Four Seasons to discuss future opportunities and a conference in Paris where they would both speak. “I think we can set all things Ecuador over to one side and not have them interfere with an ongoing relationship,” Bogart wrote to Tyrrell in an e-mail.
Moreover, Burford had managed to sell part of its stake in the Ecuador case and received $4 million, what it had invested.
“We were astonished to find they had changed sides as early as January 2011,” Tyrrell said, “before the RICO case had even been filed.” He said, “Bogart’s April 17, 2013, declaration was the first I had ever heard of Burford accusing Patton Boggs of misconduct, and, of course, that declaration changed everything.”
A scramble to collect the judgment
Donziger says that in the late 1990s, the Ecuadoran plaintiffs decided among themselves that they would accept a settlement offer of a bit more than $100 million.
But Chevron has dug in its heels, insisting that Texaco cleaned up the sites for which it was responsible. Chevron chief executive John Watson, who has adamantly opposed settling, was deposed Thursday.
“Are we surprised to be where we are today?” Tyrrell said. “We are surprised.”
The payment of $19 billion (including interest) from Chevron would be the second biggest environmental damage payout in history after BP’s estimated $40 billion for the 2010 Gulf of Mexico oil spill. Chevron had $21.9 billion in cash and marketable securities at the end of 2012, but the sum is nearly twice as much as Chevron’s annual U.S. capital spending budget. It has not set aside any reserve in case it loses.
Citing “defects associated with the Ecuadorian judgment,” Chevron said in its most recent 10K filing with the Securities and Exchange Commission: “Management does not believe an estimate of a reasonably possible loss (or a range of loss) can be made.”
If Chevron prevails, Patton Boggs and its partners could face dire consequences. Chevron could seek actual and punitive damages for intentional misconduct. Even back in a Jan. 27, 2011, conversation with Burford, according to Bogart’s notes, Tyrrell had spoken of “enormous financial pressure at PB.”
“Patton Boggs was forced to treat this case very differently in terms of bringing its own resources to bear as a result of Chevron’s direct attacks on Patton Boggs,” Tyrrell said. “Here we have to defend ourselves and our clients.”
That’s why the scramble is on to collect on the $18.2 billion judgment. The plaintiffs’ legal team has asked courts to allow the seizure of Chevron assets in Canada, Argentina and Brazil. Even a partial victory in one country would cover mounting fees and breathe new life into the plaintiffs’ team.
So far, however, the efforts have yielded nothing. A Canadian court rebuffed a bid to seize Chevron assets there, which include conventional crude oil production and output from Alberta’s oil sands. It said that Chevron’s subsidiaries are separate companies. An appeal was filed June 3; a decision is expected by year’s end.
This year, an Argentina court ordered that $240 million a year be siphoned from a Chevron oil and gas venture and into an escrow account pending further rulings. But on June 4, Argentina’s Supreme Court court threw out the order.
Enrique Bruchou, a Buenos Aires lawyer for the plaintiffs, said in March that a similar effort in Colombia was “in the briefcase,” but it has not been filed yet. A Chevron venture produces 60 percent of the country’s natural gas needs. Brazil, where Chevron was on the hot seat after a small offshore oil spill, is another target.
Other parts of the sprawling legal war, including the fraud allegations against Patton Boggs, will unfold over the coming months. By early August, the two sides and Kaplan must all file briefs with the U.S. Court of Appeals for the 2nd Circuit on whether a new judge should take over the RICO case, which will probably go to trial in October. A tribunal at the Permanent Court of Arbitration in The Hague will hear arguments in January.
Two sides, standing firm
Each side portrays itself as the upstanding principled party.
“I think it is enormously important that a law firm with the credibility of Patton Boggs has maintained strong support for affected communities in the rain forest in their effort to clean up Chevron’s pollution,” said Donziger, who has devoted much of his career to the case. “The involvement of Patton Boggs allows communities with almost no money to marry up with a team of hugely talented American lawyers so that they have a realistic chance against one of the world’s most powerful companies.”
He said Chevron was trying to intimidate Patton Boggs. “What Chevron is doing is suing lawyers for litigating,” he said. “They are trying to scare lawyers from representing victims of their own misconduct. . . . I think that’s very bad for the legal profession and our democracy.”
But Chevron and its lawyers cast it in a different light. “We have to fight every step of the way, and I can’t put a timeline on that,” Chevron’s Watson said in a Feb. 1 earnings call. “What I can tell you is we are not going to reward people that have committed crimes against us.”
“The truth will out,” Mastro said, borrowing from Shakespeare’s “The Merchant of Venice.” He said, “There are some principles that should be inviolate. And one of them is that one shouldn’t be pressured into settling baseless lawsuits.” He added, “I could not feel more strongly about this case. It is shocking to me that such an audacious scheme could be perpetrated.”
But when will the truth out? Patton Boggs said Chevron’s tactics are prolonging the epic fight, taking “us straight down the rabbit hole: litigation about lawyers’ conduct vis-a-vis litigationthat is itself about lawyers’ conduct vis-a-vis yet another litigation. This cycle has to end.”
And when the cycle ends in court, the oil waste littering Ecuador’s rain forests will probably still be waiting for cleanup crews.