Chevron in Ecuador

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Third Circuit Issues Not-So-Veiled Rebuke to Judge Kaplan in Lago Agrio Litigation Against Chevron

By Susan Beck, American Lawyer
25 May 2011

The U.S. Court of Appeals for the Third Circuit ruled Wednesday on an interesting discovery sideshow in Chevron's titanic Lago Agrio environmental litigation. Chevron is fighting to obtain files of former lead plaintiffs counsel Joseph Kohn of Kohn, Swift and Graf, which the oil giant hopes to use to buttress its fraud allegations against the plaintiffs. The appellate court rebuffed Chevron's attempt – but that's not what caught our attention about the ruling: The Third Circuit panel also aimed a not-so-subtle rebuke at Manhattan federal district court judge Lewis Kaplan and his handling of the epic dispute between the oil company and indigenous people in the Amazon rainforest.

First the background: After the Lago Agrio plaintiffs won an $18 billion judgment against Chevron in an Ecuadorian court last year, Chevron and its lawyers at Gibson, Dunn & Crutcher mounted an aggressive effort in U.S. courts to block enforcement of the judgment. They found a receptive audience in Judge Kaplan, who in March issued an injunction barring any attempts by the plaintiffs to collect. Judge Kaplan stated in his 131-page ruling that Chevron's had raised serious questions as to whether the judgment was procured by fraud in a corrupt Ecuadoran judicial system. The U.S. Court of Appeals for the Second Circuit has refused to stay the injunction and is slated to hear an appeal of Judge Kaplan's ruling.

Meanwhile, in pursuit of evidence of the plaintiffs lawyers' alleged fraud, Gibson Dunn asked Philadelphia federal district court judge Jan DuBois to order Kohn to turn over materials relating to his legal work and financial support for the Lago Agrio plaintiffs. Chevron had argued that the plaintiffs had waived their attorney client privilege by letting filmmakers for the documentary Crude observe attorney meetings with clients. Judge DuBois agreed.

The Third Circuit, in a 44-page ruling, held that the presence of the filmmakers during certain client meetings did not waive privilege for all attorney-client communications with Kohn. The court remanded the case for the lower court to consider Chevron's argument that it should have access to certain items in Kohn's file under the crime-fraud exception. But the court expressed skepticism of many of Chevron's fraud allegations, and even appeared to rebut some of those claims.

Most startling, however, Judge Thomas Ambro (who was joined by Judges D. Michael Fisher and Morton Greenberg) made a point of offering some stinging words about American judges that don't respect the judicial systems of other countries.

"The Chevron applicants are asking that American courts make a finding that the attorneys in a civil case in Ecuador can control the Ecuadorian criminal justice system. Though it is obvious that the Ecuadorian judicial system is different from that in the United States, those differences provide no basis for disregarding or disparaging that system. American courts, though justifiably proud of our system, should understand that other countries may organize their judicial systems as they see fit."

Patton Boggs partner James Tyrell Jr., who represents the plaintiffs in both the Second and Third Circuit litigation, predictably praised the decision. "I think [the Third Circuit's] cautionary language will be loudly heard by the Second Circuit when they decide whether it was appropriate for Judge Kaplan to hear this case," Tyrell told us. "We're pleased and hope the tide is beginning to turn." He added: "You can read a lot into what the Third Circuit said about the legitimacy of Judge Kaplan's decision."

Plaintiffs spokesperson Karen Hinton issued a statement that read in part: "These sober comments [of the Third Circuit] stand in stark contrast to the derogatory remarks made by New York Southern District Court Judge Lewis Kaplan about the integrity of Ecuador's judiciary system. . . .Today's decision once again illustrates how Judge Kaplan--who is actively trying to undermine the case of the Ecuadorians as documented in a recent motion seeking his recusal--has become more and more of an extremist in the federal judiciary given his rulings on the Ecuador case."

Gene Schaerr of Winston & Strawn represented the Republic of Ecuador, which also appealed Judge DuBois's ruling to the Third Circuit. He declined to comment.

We contacted lead Chevron lawyer Randy Mastro of Gibson Dunn but did not hear back. A Chevron spokesperson stated: "Chevron will continue its efforts to expose the full extent of the plaintiffs' lawyers' criminal and fraudulent conduct."