Chevron in Ecuador

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Ecuadoreans Want Judge Kaplan off of $19B Chevron Dispute

By Gavin Broady, Law360
6 March 2013

Ecuadorean plaintiffs seeking to enforce a $19.2 billion pollution judgment against Chevron Corp. petitioned the Second Circuit on Tuesday, seeking to remove New York district Judge Lewis Kaplan from the case and accusing the court of systematically evading the appellate court's prior ruling.

The indigenous Ecuadoreans say Chevron and the New York court have engaged in a concerted and relentless effort to frustrate the Second Circuit's January 2012 decision finding that the company could not use New York law preemptively to block the worldwide enforcement of judgments from courts it has accused of corruption.

The disputed judgment was handed down by an Ecuadorean court over pollution in the Amazon rain forest allegedly caused by Texaco Inc., which merged with Chevron in 2001. The Ecuadoreans have sought to enforce the judgment by seeking asset freezes in Argentina, Brazil and Canada, efforts they say the district court is wrongfully attempting to hinder.

"Despite this court's unambiguous ruling, the district court has created for itself at least two separate paths to reanimate Chevron's dismissed claim and render the very declaration of 'nonrecognition' that this court forbade," the petition said. "The district court has left no doubt that its aim is to provide Chevron with ammunition to improperly attempt to resist enforcement in other countries."

In a statement provided to Law360 on Wednesday, Chevron spokesman Kent Robertson dismissed the petition as last ditch maneuvering that should be rejected by the court, noting that the move represents the plaintiffs' "third bite at this particular apple."

Tuesday's petition claims that while the Ecuadoreans have not sought recognition of the judgment in New York, the district court is nonetheless relentlessly pursuing such a declaration despite the Second Circuit's ruling that such a declaration would be "an affront to international comity."

To this end, the district court has not only wrongly construed a collateral estoppel defense asserted by the Ecuadoreans as seeking recognition of the judgment under New York law, but it has further manufactured a claim not found in Chevron's complaint to set aside that judgment, according to the petition.

The Ecuadoreans also objected to the district court's characterization of their refusal to seek recognition of the judgment in New York as tantamount to bad faith forum shopping, noting that the Second Circuit unambiguously found that the plaintiffs had "complete discretion as to where and when to seek recognition."

Tuesday's petition also urged the Second Circuit to reassign the case, saying Judge Kaplan has continued to conduct himself as the "transnational arbiter" of the disputed judgment in defiance of the appeals court's prior ruling through his insistence on requiring the Ecuadoreans to litigate the recognizability of the judgment.

"The ever-present international comity issues in this litigation render the consequences of the district court's defiance uncommonly serious," the petition said. "If this court's opinion did not sufficiently clarify for the district court that it has no right to act as an international super-appellate court, nothing will."

Chevron has mounted an extensive legal effort in the U.S. to avoid paying damages to the Ecuadoreans. The company claims the plaintiffs took advantage of Ecuador's supposedly corrupt justice and political system in order to win a fraudulent judgment and then go after Chevron's assets worldwide.

Judge Kaplan issued an injunction in March 2011 stopping the plaintiffs from collecting their judgment in any court in the world, but the Second Circuit overturned that injunction the following September.

Building on that ruling, the appeals court held in its January 2012 ruling that New York's law on the recognition of foreign judgments was meant to help litigants collect on judgments, not make New York into a one-stop forum for blocking foreign rulings.

In November, an Argentine judge embargoed Chevron's assets in that country in the first asset freeze order the claimants secured outside their home territory of Ecuador.

Chevron's efforts to reverse that freeze were rejected in January, but in February an international tribunal at The Hague ruled that Ecuador has breached its obligations under U.S. treaties and international law in aiding efforts to enforce the disputed judgment worldwide.

Representatives for the Ecuadoreans dismissed the tribunal's finding as unenforceable and noted that the panel had rejected a key request by Chevron to declare judgment unenforceable as a matter of international law.