Chevron in Ecuador

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Ecuadoreans' Lawsuit Against Chevron Might Need a U.S. Retrial, Judge Suggests

Judge Richard Wesley asked lawyers whether they would support a retrial of a 2011 ruling against the company by an Ecuadorean court

By Nicole Hong, Wall Street Journal
20 April 2015

A long-running legal fight between Chevron Corp. and residents in Ecuador may need yet another round in court, a federal appeals judge suggested on Monday.

The possibility came up at an appeals hearing that pitted Chevron against New York lawyer Steven Donziger, the attorney who won a record $9.5 billion environmental-damage award against the oil company in a legal battle that has dragged on for more than 20 years.

On Monday, U.S. Circuit Judge Richard Wesley asked lawyers on both sides whether they would support a retrial in the U.S. of a 2011 ruling by an Ecuadorean court, which found that Chevron was responsible for the pollution. Chevron has denied liability and last year won a ruling from a New York judge that Mr. Donziger's victory had been obtained through bribery and fraud.

"Does this court have the authority to order a retrial?" Judge Wesley asked one of the lawyers, suggesting that this has never been done before in the U.S., although he said it has been done in British courts.

Speculation about a retrial was one of many twists and turns in Monday's appeals hearing in downtown Manhattan, which lasted about an hour and a half.

The ruling at issue on Monday wasn't the 2011 decision in Ecuador, but rather last year's ruling by U.S. District Judge Lewis Kaplan, who said Mr. Donziger and his team couldn't actually profit from the $9.5 billion award or enforce it in the U.S. because it was tainted by corruption. Judge Kaplan's ruling came at the end of a six-week trial in Manhattan where Chevron accused Mr. Donziger of bribing judges and fabricating evidence to get a favorable judgment in Ecuador. Mr. Donziger denies these allegations.

A decision by the appeals court on Judge Kaplan's ruling may not come for months.

Mr. Donziger represented a group of Ecuadorean plaintiffs who sued Texaco Inc. in 1993 and alleged that Texaco's oil drilling led to pollution in the Amazon rain forest that sickened local residents. Chevron inherited the lawsuit when it acquired Texaco in 2001.

Theodore Olson, who argued for Chevron, opposed the idea of a retrial, while Deepak Gupta and Burt Neuborne, lawyers for Mr. Donziger and the Ecuadorean plaintiffs, were in favor. "That's a very original idea," Mr. Neuborne responded, saying he would "absolutely" support a retrial.

During Monday's arguments, Mr. Gupta of Gupta Beck PLLC, who represents Mr. Donziger, said Judge Kaplan's ruling was problematic because U.S. courts should not decide whether judgments produced in foreign courts are "worthy of recognition." This could "provoke friction" among different legal systems and encourage disappointed litigants around the world to seek another chance in U.S. courts, he said.

Meanwhile, Mr. Neuborne, a professor at New York University Law School representing two Ecuadorean villagers, focused his argument on whether the plaintiffs in Ecuador should be punished for the alleged misconduct of Mr. Donziger, their lawyer. Judge Kaplan's ruling bars the Ecuadorean plaintiffs from profiting from the $9.5 billion award, but they are allowed to try to enforce it in jurisdictions outside the U.S.

Mr. Olson of Gibson Dunn & Crutcher LLP responded that the Ecuadorean plaintiffs knowingly withheld documents from Chevron and that Judge Kaplan determined the plaintiffs supported the "fraudulent acts" of Mr. Donziger. Mr. Olson said Judge Kaplan was within his bounds to deny individuals like Mr. Donziger "the ability to profit from their wrongdoing."

The questioning from the three-judge panel was dominated by Judge Wesley, who was especially interested in a parallel legal battle in an international arbitration tribunal, where Chevron has accused Ecuador of denying the company a fair trial. He criticized Chevron for asking both the tribunal and a U.S. District Court to decide whether Ecuador's judicial system was corrupt, questioning what would happen if the tribunal makes a decision that conflicts with Judge Kaplan's.

The lawyers' arguments on Monday were highly technical at times and waded into such issues as whether a federal antiracketeering law allows private parties like Chevron to seek non-monetary relief, such as an injunction on the $9.5 billion award. The judges often alluded to the complex nature of the case throughout the hearing.

At one point, Judge Wesley asked Mr. Olson of the whole legal dispute, "How much longer do you think this will last?"