Thursday, February 13, 2014

How Chevron Might Have A Lawsuit Against Its Own Law Firm for Blowing the RICO Case

Chevron's "Dream Team" at the Gibson Dunn law firm has yet to come up with an explanation for its monumental mistake last week in undermining the company's RICO case against Ecuadorian villagers and their lawyers.  Chevron's team leader at Gibson Dunn, partner Randy Mastro, usually loves spinning to the media.  But even he has gone radio silent.

Last Friday, another partner at Gibson Dunn—Harvard Law School graduate Miguel Estrada—argued before a panel of judges from the 2nd Circuit Court of Appeals in Manhattan. The case being heard that day had nothing to do with the plight of Ecuadorians living with the toxic legacy of Chevron's pump-and-dump oil operations in their rainforest lands.

But the hearing itself—or at least one of the key arguments made—may have an enormous impact on the Chevron-Ecuador case.

From the blog of DC-based EarthRights International yesterday:
Chevron probably isn’t too happy with Randy Mastro and the rest of its dream team at Gibson Dunn & Crutcher right now. Gibson Dunn represents Chevron in its “sue the victims” case against a group of Ecuadorian villagers and their attorneys. The Ecuadorians won a $9.5 billion judgment in Ecuador against the company for massive pollution, and Chevron retaliated by filing a law suit under the Racketeering and Corrupt Organizations Act (RICO), claiming the Ecuadorian judgment was obtained through fraud.

Last week, however, in a completely separate case, Gibson Dunn may have shot the Chevron case in the foot, arguing to the Second Circuit Court of Appeals that a private party can’t seek an injunction under RICO. This is the opposite of the argument they’ve made in Chevron’s RICO lawsuit in the district court in New York.
Of course, in its retaliatory RICO lawsuit against the Ecuadorians and their longtime legal advocate Steven Donziger, Chevron is in fact seeking an injunction.

As Donziger told Law360 last week:
Chevron made three strategic decisions that together strip it of standing: refusing to challenge its liability for the pollution in Ecuador, dropping its damages claim in order to escape a jury trial and asking for a tailored injunction that only blocks Donziger and his Ecuadorean co-defendants from a cut of the multibillion-dollar judgment, rather than a worldwide anti-enforcement injunction.
Donziger and the Ecuadorians have argued all along that the RICO statute does not permit private parties to seek injunctive relief. Of course, Chevron—or more accurately, Gibson Dunn's Mastro —has repeatedly argued the opposite. Meanwhile, Judge Lewis A. Kaplan, who has brazenly promoted the Chevron RICO lawsuit, seems to think it's an open question. 

Back to EarthRights International's recent post:
If it is indeed an open question, it may not be open for much longer.

Last Friday, in Sykes v. Mel Harris, Gibson Dunn urged the Second Circuit to “confirm that private RICO claims for injunctive relief fail as a matter of law” – in other words, private plaintiffs cannot seek injunctions under RICO. If Gibson Dunn wins that argument, the decision will control Chevron’s case against Donziger and will doom Chevron in the lower court.
This, of course is a major Catch-22 for Chevron, as reporter Adam Klasfeld at Courthouse News wrote last week.  Klasfeld concluded that Gibson Dunn's Estrada could "scuttle [Chevron's] efforts" to fight off its $9.5 billion liability in the Ecuador case.

Klasfeld's article concludes with a quote from Christopher Gowen, a professor of ethics at the Washington College of Law at The American University in Washington, D.C.  a member of Donziger’s legal team, Gowen said:
"Gibson Dunn is correct to argue that there is no injunctive relief for a private party under the RICO statute," said Gowen, who serves as a legal ethics professor at American University. "The problem for the firm is that by doing so they acknowledge that their prosecution of the Chevron v. Donziger case has been a complete waste of their client's time and money and an abuse of the civil justice system. While I was troubled by the ethical conduct of Gibson Dunn on behalf of Chevron throughout the trial, I never imagined a day where their unethical conduct would destroy their own client's case."
The EarthRights blog points out that Gibson Dunn has a conflict of interest. And the party with standing to complain is none other than Chevron, the oil company that reportedly has paid the firm in excess of $1 billion for its work on the Ecuador case. EarthRights points out that Chevron might have a whopper of a legal claim against none other than Mastro and his partners.

That would be the ultimate poetic justice: Mastro himself might have to pay part of Chevron's obligations to its victims in Ecuador, should the villagers succeed in recovering their judgment.

For additional analysis on this shocking development, read this press release from Donziger's law firm:

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

And this legal motion filed recently by Donziger and his counsel in the RICO case:

Reply Motion in Support of Donziger’s Motion to Dismiss

In the above Reply Motion, Deepak Gupta, Steven Donziger’s appellate lawyer, attached Gibson Dunn’s Merits Brief in the Sykes v. Mel Harris case in which Gibson Dunn's Estrada spells out exactly why private parties cannot seek injunctive relief under RICO.

Advice to Gibson Dunn: Mr. Estrada and Mr. Mastro need to be re-educated about their ethical obligations.