Chevron in Ecuador

The archive of the Clean Up Ecuador campaign website

Chevron Law Firm Gibson Dunn Concedes that Legal Basis for RICO Case Against Ecuadorians Is Invalid

Gibson Dunn argues to 2nd Circuit a position on RICO directly contrary to one it is taking before Judge Kaplan

Donziger and Associates
Contact: Karen Hinton at +1.703.798.3109

New York, NY – In a stunning development, the corporate law firm leading Chevron's campaign to evade a $9.5 billion Ecuador court judgment has filed briefs before a federal appeals court conceding that the oil giant's RICO case in the United States lacks a valid legal basis and might be fatally flawed.

Lawyer Miguel Estrada from Chevron's outside law firm Gibson Dunn & Crutcher will argue tomorrow in a separate case before a key appellate court that the RICO statute does not permit private parties to seek injunctive relief—the exact same relief sought by Chevron to block the Ecuador judgment in a controversial RICO case currently pending before federal judge Lewis A. Kaplan. If Gibson Dunn wins the argument before the appellate court, it likely would foreclose its other client Chevron from obtaining the relief it seeks in its own case. (Judge Kaplan has yet to decide Chevron's claims.)

It is highly unusual—and likely unethical—for a law firm to represent two different clients with opposite positions in the same court such that one can be prejudiced, as is the case here. Estrada will argue the point before the Second Circuit Court of Appeals, which has authority over all New York federal trial judges, including Judge Kaplan. Any decision that Kaplan makes likely will end up before the Circuit.

The Estrada brief, filed in a case known as Sykes v. Harris involving allegations of fraud in the collection of credit card debt, can be read here. Key passages that show how Chevron's attorneys at Gibson Dunn contradict the company's legal position in the Ecuador matter before Judge Kaplan can be found at to the top of p. 16 and at pp. 44-50.

In the Sykes briefs, Gibson Dunn lawyer Miguel Estrada asserts that "the RICO statute does not afford injunctive relief to private parties." It is also the same position taken repeatedly by another prominent Gibson Dunn attorney and the former Solicitor General of the United States, Ted Olson.

"Indeed, the text and history of the RICO statute show that Congress affirmatively decided not to authorize private injunctive claims—a conclusion that the Ninth Circuit and the United States have correctly reached," Gibson Dunn's Estrada wrote in the Sykes brief. "This Court... should now confirm that private RICO claims for injunctive relief fail as a matter of law."

In the RICO case before Kaplan, Gibson Dunn argued for the very relief that it also says was barred by Congress when it passed the statute. That case is being run by Gibson Dunn lawyer Randy Mastro, the former Deputy Mayor of New York City under Rudolph Giuliani, and current attorney to scandal-plagued New Jersey Governor Chris Christie.

In the firm's post-trial brief in the Ecuador case submitted in December, Gibson Dunn asserted that "the text of the [RICO] statute provides a clear answer that private plaintiffs can seek equitable relief in civil RICO actions... Any contrary conclusion would be 'inconsistent with the text, legislative history, and purpose of RICO...' "

In filing the Sykes briefs before Judge Kaplan, Donziger again asked the court to dismiss Chevron's case on the grounds there is no injunctive remedy authorized under the RICO statute or a New York state fraud statute.

"Gibson Dunn's briefs in Sykes solidify our position that the Chevron RICO case was never more than a press stunt orchestrated to retaliate against the Ecuadorian villagers who held the company accountable for its wrongdoing," said Christopher Gowen, a member of Donziger's legal team and a professor of ethics at The Washington College of Law at American University in Washington, D.C.

Chevron, which reportedly has paid Gibson Dunn in excess of $1 billion in legal fees on the Ecuador matter since 2009, has every right to feel betrayed, said Aaron Page, a human rights attorney who has represented the Ecuadorian communities for several years.

"After paying a single law firm what might be a record-breaking amount of fees, I am surprised Chevron did not receive a little more loyalty from the Gibson Dunn firm," said Page. "This stunning brief basically kicks the legs out from under Chevron's RICO case. It also demonstrates how the top appellate lawyers at Gibson Dunn like Miguel Estrada are not buying the interpretation of the RICO statute that Randy Mastro is trying to sell to Judge Kaplan."

Chevron has enlisted well over 100 lawyers at Gibson Dunn to work on the RICO case in a campaign to block the $9.5 billion adverse judgment from Ecuador's courts, which came down in 2011 in the venue where the oil giant fought for the trial to be held. Central to that strategy is Gibson Dunn's claim that the entire case in Ecuador was a "sham."

Donziger and the Ecuadorians vigorously dispute the allegations, which they maintain are nothing more than a smokescreen to distract attention from Chevron's own environmental crimes and fraud as found by Ecuador's courts, said Page. During the trial in Ecuador, Chevron did not dispute evidence that it dumped billions of gallons of toxic waste into the rainforest.

(For background on the evidence against Chevron, see this summary; this video overview; and this 60 Minutes segment).

For years, Donziger and his clients have argued that RICO was not applicable to activity involving a litigation in another country and that the case would have been dismissed long ago but for Judge Kaplan's hostility toward the villagers and their lawyers. Judge Kaplan repeatedly has made disparaging remarks about Ecuador's courts and has called the villagers the "so-called" plaintiffs. (A legal filing related to Kaplan's bias is available here).

Donziger's argument that RICO should be dismissed took on added urgency last September when Chevron dropped all money damages claims on the eve of trial to avoid a jury, leaving injunctive relief as its only available remedy. But, given that the RICO statute does not authorize injunctions, Donziger argued in an unusual post-trial motion to dismiss that for this reason and others the case was meritless.

Gowen noted that while the ethics rules allow some leeway for lawyers to make different arguments for different clients, a clear ethical conflict arises in a situation where a law firm is arguing at the appellate level for an interpretation of law that it knows will destroy or seriously weaken another client's case at the trial level.

"Gibson Dunn is correct to argue that there is no injunctive relief for a private party under the RICO statute," said Gowen. "The problem for the firm is that by doing so they acknowledge that their litigation of the Chevron v. Donziger case was a complete waste of its client's time and money and an abuse of the civil justice system."

Gibson Dunn, which markets itself as a highly aggressive law firm that can "rescue" its corporate clients from tricky legal situations, has experienced a series of devastating setbacks since entering the Ecuador case on behalf of Chevron in 2009. Since then, Chevron lost the underlying trial in Ecuador and was hit with a $19 billion judgment, the largest in history for an environmental case; lost a first-level appeal in Ecuador; lost before Ecuador's Supreme Court, which cut the punitive damages, reducing the total to $9.5 billion, while nonetheless unanimously affirming the finding of liability; and lost before a Canadian appellate court, which recently ordered an enforcement action to proceed against the oil giant's subsidiaries in that country.

Chevron also faces enforcement actions filed by the villagers in Brazil, Argentina, and Ecuador. Gibson Dunn lawyer Mastro also has become embroiled in ethical problems of his own, being sanctioned by a federal judge and accused of witness tampering on behalf of Chevron. See this analysis for background on Mastro's ethical problems.

Chevron problems also come on top of major resistance by prominent shareholders to its Ecuador litigation strategy and harsh criticism from more than 40 advocacy groups that the company is using RICO to violate the First Amendment rights of its critics.