Chevron's Goose to Face a Gander by Ecuador

By Adam Klasfeld, Courthouse News Service
19 February 2013

Evidence that Chevron used to avert responsibility for oil contamination in the Amazon may also serve to support the $19 billion verdict, the 5th Circuit ruled.

Residents of the Amazonian rainforest, who call themselves the Afectados, or "affected ones," have been engaged in a two-decade battle with Chevron over oil drilling by its predecessor, Texaco, between 1964 and 1992.

When Chevron acquired the Texas-based company in 2001, it also inherited a lawsuit filed by dozens of those residents.

As the parties litigated in Lago Agrio, Ecuador, Chevron quickly contested the court's jurisdiction and claimed that an earlier settlement agreement with Ecuador precluded the lawsuit.

Its opponents countered that Chevron broke the terms of that settlement by conducting a "sham" remediation.

Rejecting Chevron's challenge almost exactly two years ago, the Lago Agrio court slapped the oil giant with a multibillion-dollar verdict.

Chevron condemned the judgment as fraudulent in lawsuits on three continents, appealing the verdict in Ecuador, filing extortion claims in New York and pursuing international arbitration in Europe.

In the latter arbitration, Chevron claims that Ecuador had violated the Bilateral Investment Treaty (BIT) by letting the case advance.

Since that time, the BIT claimed jurisdiction over the case, and both parties are currently gathering evidence for proceedings on whether Chevron received a fair shake in Ecuador.

Under U.S. law, federal courts can issue discovery orders forcing parties involved in "foreign or international tribunals" to turn over information that would be useful in those proceedings.

The 5th Circuit, a New Orleans-based federal appeals court, found that Chevron cagily straddled this language to get Ecuador to cough up documents while protecting its own.

Chevron convinced "multiple jurisdictions" to force Ecuador to turn over discovery because the BIT constituted an "international tribunal," Judge Edith Jones wrote for the three-judge panel.

Taking the opposite position in the Southern District of Texas, however, Chevron swatted away subpoenas that Ecuador filed against company's top technical expert, John Connor, and his Houston-based company, GSI Environmental.

A federal judge quashed the subpoenas, deferring to Chevron's arguments that the BIT did not qualify as a "tribunal" – when Ecuador wanted evidence for it.

The 5th Circuit ridiculed that position in its 12-page opinion on Wednesday.

"Why shouldn't sauce for Chevron's goose be sauce for the Ecuador gander as well?" Jones asked.

She sent the discovery back to Texas on remand, instructing the judge not to credit Chevron's "inconsistent positions."

Aaron Page, a lawyer for the Ecuadoreans, told Courthouse News that Connor's scientific findings absolving Chevron lie at the heart of the company's arguments that justice was denied in Ecuador.

"John Connor was really the architect of that whole thing," Page said. "They submitted a big report by John Connor to the arbitration panel. They can really open up a whole can of worms."

He added that Chevron has paid Connor's company "at least $8 million," more than half for his work in Ecuador.

Connor eventually submitted more than 200 pages based on clean samples taken at "strategic locations," such as upstream of a contamination site, and had dirty samples shipped out to another lab, Page said.

Chevron did not respond to a request for comment.

Back in New York, Chevron signaled that it would be willing to revise the allegations and demands of its anti-racketeering lawsuit against the Ecuadoreans, if the presiding federal judge gives the company a preliminary judgment in their favor.

In a filing last month, Chevron offered to drop its claim that the Lago Agrio case was a "sham litigation," which would have allowed the Ecuadoreans to show jurors the evidence linking Texaco to the Amazon pollution.

Chevron's motion states the company intends instead to prove that their adversaries pursued the case in a "corrupt and fraudulent manner."

Meanwhile, another litigant has declared a pox on both houses.

A group of Ecuadoreans known as the Huaorani had moved to intervene in Chevron's extortion suit late last year, but U.S. District Judge Lewis Kaplan found that such intervention "would delay and complicate the resolution of an already complicated case."

He added that the tribe was "free to pursue" their claims in New York state courts.

Apparently following that suggestion, their attorney, Judith Kimerling, filed a 47-page complaint in New York County Supreme Court on Wednesday.

It says the so-called Afectados currently include mainly representatives of the Secoya and Kichwa people – and U.S.-based lawyers and environmental groups that do not represent their interests.

Kimerling, a City University of New York professor and respected human rights advocate, is the author of Amazon Crude, which The New York Times described as the "Silent Spring of Ecuador."

Karen Hinton, a spokeswoman for the Ecuadoreans, called the Huaorani's new lawsuit "baseless," and said that members of the tribe have failed to intervene in the case on multiple occasions.

Any money that her clients might ultimately collect will be held in a trust to clean up the contamination zones and mitigate health impacts in the region, she added.

"All of the residents will benefit," she said in a statement.