US Supreme Court rejects oil giant’s attempts to block an $18bn judgment in a case over pollution in the Amazon jungle.

Oil giant Chevron has lost a US Supreme Court bid to block an $18.2bn judgement against it in Ecuador in a case over pollution in the Amazon jungle.

The court did not give any explanation for Tuesday’s decision, which rejected Chevron’s appeal of a lower court ruling.

The lower court in January had thrown out an injunction blocking enforcement of the Ecuadorean judgement.

The decision is the latest in a nearly two-decade conflict between the second largest oil company in the US and residents of Ecuador’s Lago Agrio region over claims that Texaco, bought by Chevron in 2001, contaminated the area from 1964 to 1992.

The battle has spawned litigation cases in numerous courts both inside and outside the US.

Oil companies are watching the case closely because it may affect other cases accusing companies of polluting the areas where they operate.

Chevron claims that the judgement, imposed by an Ecuadorean court in February 2011, was fraudulent and unenforceable under New York law.

In March 2011, a federal judge in New York issued a worldwide injunction blocking enforcement of the judgement.

But on January 26, the 2nd US Circuit Court of Appeals in New York overturned the ban, finding that Chevron had been premature to challenge the judgement.

No authority

The 2nd Circuit court said Chevron, based in San Ramon, California, could challenge it “only defensively, in response to attempted enforcement,” which the Lago Agrio residents had not attempted, and might never attempt, in New York.

The appeals court also said that the US judge did not have the authority to stop courts in other countries from enforcing the judgement.

The Ecuadorean plaintiffs are currently trying to enforce the judgement in Canada and Brazil.

In its appeal to the Supreme Court, Chevron said it was entitled to raise an anticipatory defence in US courts to
pre-empt any enforcement efforts.

It also said such defences are necessary in light of the “disturbing trend” in which lawyers win big money judgements
against US companies in corrupt foreign courts, and then seek to enforce them in countries where the companies operate.

“While Chevron is disappointed that the Court denied our petition, we will continue to defend against the plaintiffs’ lawyers’ attempts to enforce the fraudulent Ecuadorean judgement, and to further expose their misconduct,” Chevron said in an emailed statement.

The company is pursuing a racketeering suit against Steven Donziger, a New York lawyer, and a group of Ecuadoreans and environmental groups that helped win the judgement, accusing them of intimidation and extortion.

Lower profits

Chevron has also challenged the judgement before an international arbitration panel under a trade agreement between the US and Ecuador.

The panel is scheduled to begin hearing the dispute in November.

The judgement included $8.6bn of environmental damages, which an Ecuador court more than doubled because Chevron failed to make a public apology.

In July, damages in the case were increased to $19bn.

Meanwhile, Chevron warned that third-quarter profits would be “substantially lower” than the previous quarter as a hurricane and maintenance curbed its oil and gas output, and a fire hit its refining arm.

The company said that the key crude unit at its oldest refinery in Richmond, California, would remain offline through the fourth quarter after it was badly damaged in an August 6 fire.

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Ecuador court deals Chevron fresh blow in pollution case

Reuters – http://www.reuters.com/article/2012/10/16/ecuador-chevron-idUSL1E8LGMYO2...

16 October 2012

• Chevron says it will challenge court decision

• Plaintiffs hail “first step” toward collecting $19 bln

Ecuadorean plaintiffs on Tuesday said an order issued by a court in the Andean country lets them seize some $200 million worth of assets belonging to Chevron in a new legal blow to the No. 2 U.S. oil company.

The plaintiffs from villages in the oil-rich Amazon won an $18.2 billion case against the oil giant over claims that Texaco, bought by Chevron in 2001, contaminated the area from 1964 to 1992. Damages were increased to $19 billion in July.

Among the assets ordered turned over are $96.3 million that Ecuador’s government owes Chevron, money held in Ecuadorean bank accounts by Chevron, and licensing fees generated by the use of the company’s trademarks in the country, the plaintiffs said.

“This is a huge first step for the rainforest villagers on the road to collecting the entire $19 billion judgment,” Pablo Fajardo, the lead lawyer for the communities, said on Tuesday, a day after the order was issued.

The battle between Chevron and the Ecuadorean plaintiffs has lasted for nearly two decades and is being fought in courts both inside and outside the Andean country.

Last week the U.S. Supreme Court rejected an attempt by Chevron to preemptively block enforcement efforts in the United States. Earlier this year the plaintiffs filed lawsuits in Brazil and Canada in a bid to enforce the ruling.

The plaintiffs accuse Texaco of causing illnesses among locals by dumping drilling waste in unlined pits. Chevron denies the accusations and says Texaco properly cleaned up all the pits for which it was responsible.

The company claims that the judgment, imposed by an Ecuadorean court in 2011, was fraudulent and unenforceable.

James Craig, a spokesman for Chevron, said the company intends to challenge the latest ruling, which was issued by a court in the Amazon town of Lago Agrio.

“Today’s order is not surprising, since the plaintiffs have shown they are able to get any order they wish granted by the Lago Agrio court. In the past the plaintiffs’ lawyers have been involved in ghost-writing orders for the court,” Craig said.

Chevron is pursuing a racketeering suit against a New York attorney, Steven Donziger, a group of Ecuadoreans and environmental groups that helped win the judgment, accusing them of intimidation and extortion.

It has also challenged the judgment before an international arbitration panel under a trade agreement between the United States and Ecuador. The panel is scheduled to begin hearing the dispute in November.

Oil companies are watching the case closely because it may affect other cases accusing companies of polluting the areas where they operate. (Reporting by Eduardo Garcia; Editing by Daniel Wallis and Tim Dobbyn)

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Chevron Fails to Squelch $19 Billion Ecuador Verdict

By Paul Barrett – http://www.businessweek.com/articles/2012-10-09/chevron-fails-to-squelch...

9 October 2012

You can sometimes tell the potential importance of an appeal to the U.S. Supreme Court by who shows up to cheer from the sidelines. That’s certainly the case with Chevron v. Naranjo. The case concerns an obscure-sounding question of civil procedure yet drew friend-of-the-court, or “amicus,” briefs from two of the largest pro-business trade groups in Washington.

Despite backing from the National Association of Manufacturers and the U.S. Chamber of Commerce, Chevron (CVX) failed to convince the Supreme Court to intervene in a pending pollution lawsuit in which a provincial court in Ecuador in 2011 imposed a landmark verdict against the oil company. The damages assessed against Chevron now total $19 billion, making the judgment the largest of its kind in history.

Without commenting on the merits of the case, the U.S. Supreme Court today let stand a federal appeals court ruling that a New York trial judge exceeded his authority when he blocked a group of Ecuadorean farmers and Indians from seeking to collect the $19 billion award anywhere in the world.

Vowing never to pay a dime, Chevron has accused the plaintiffs’ lawyers of obtaining the gargantuan judgment by means of an elaborate fraud. With the U.S. Supreme Court staying out of the fray for the moment, the fight now continues in courts in New York, Brazil, and Canada.

If this all seems a tad complicated, it’s not you. The case would give Oliver Wendell Holmes a case of vertigo.

It began in 1993, when American lawyers representing residents of the Ecuadorean rain forest sued Texaco in federal court in New York, accusing the U.S. company of turning a large swath of the Amazon into an industrial wasteland in the 1970s and ’80s. Texaco fought the case on procedural grounds for nine years, ultimately persuading the federal judiciary that the dispute belonged in Ecuador. In 2001, Chevron acquired Texaco and stepped into its shoes as the defendant, even though Chevron had not operated in Ecuador and Texaco had departed the Andean country in 1992.

Ecuador did not provide the hospitable legal venue that the oil company anticipated. A sequel case began in a rain-forest courthouse in 2003, leading, eight years later, to the historic verdict favoring the plaintiffs. Chevron, meanwhile, returned to the federal court in New York with what amounted to a counterattack against the plaintiffs’ legal team led by an American solo practitioner named Steven Donziger.

The company filed a civil racketeering suit against Donziger, alleging that he had masterminded a conspiracy involving Ecuadorean judges and court officials, who relied on fabricated evidence to defraud a deep-pocketed American multinational.

Lewis Kaplan, the federal judge in New York presiding over Chevron’s racketeering suit, has made it crystal clear in court that he sympathizes with the oil company and distrusts Donziger. In fact, Kaplan granted Chevron an order that would have blocked the plaintiffs from collecting on their Ecuadorean court victory anywhere in the world. The Second U.S. Circuit Court of Appeals in New York said that Kaplan couldn’t issue such a global order. Chevron appealed the Second Circuit ruling, and today the Supreme Court declined to hear the case.

The justices’ action, although it doesn’t address the substance of the case, effectively eliminates one avenue for Chevron to avoid liability. The company has refused to pay the judgment in Ecuador. Since Chevron does not have any bank accounts or other assets in Ecuador, the plaintiffs have now filed separate collection actions seeking liens against Chevron assets in Brazil and Canada.

Chevron, based in San Ramon, Calif., said in an e-mailed statement that while it was “disappointed that the court denied our petition, we will continue to defend against the plaintiffs’ lawyers’ attempts to enforce the fraudulent Ecuadorian judgment and to further expose their misconduct.”

Donziger and the plaintiffs have denied any wrongdoing. They say Chevron’s racketeering suit is a smoke screen intended to obscure a legitimate verdict issued in Ecuador. Donziger has filed his own fraud claims against Chevron in federal court in New York.

The business groups that supported Chevron’s appeal to the Supreme Court argued in their amicus briefs that the U.S. judiciary does have the authority to protect American companies against allegedly fraudulent verdicts obtained in foreign courts. The injunction barring collection of the Ecuadorean judgment “preserved the ability of U.S. courts to ensure that the international legal system is not tainted and unnecessarily burdened by efforts to enforce an allegedly invalid foreign judgment obtained through an alleged scheme of fraud that originated in the United States,” the National Association of Manufacturers contended in a brief filed by the corporate law firm Sidley & Austin. In addition to NAM and the U.S. Chamber of Commerce, Halliburton (HAL), the large oil-field services company, also filed an amicus brief supporting Chevron. (You can examine the Supreme Court docket here.)

Despite the urging of these outside business interests, the justices decided not to open yet another front in the 19-year battle over who, if anyone, will pay to clean up the Ecuadorean rain forest. Given the stakes, though, it is unlikely that this is the last time the Chevron pollution case will arrive on the Supreme Court’s doorstep.
Barrett, an assistant managing editor and senior writer at Bloomberg Businessweek, is author, most recently, of GLOCK: The Rise of America’s Gun.