The Global Lawyer: After the Donziger Trial, Chevron Can Rest Easy
If Chevron outside counsel Randy Mastro of Gibson, Dunn & Crutcher has any regret after the Chevron Corporation v. Donziger trial, it could only be that he didn't request a jury. To any objective observer, the Manhattan bench trial was a rout. Virtually all of Chevron's claims about serial deception by the lawyers who sued it in Ecuador were persuasive and corroborated. Virtually none of Chevron's opponents' explanations were plausible or corroborated. Their star witness, the Ecuadorian ex-judge Nicolas Zambrano, wearing a winter cap with an Angry Birds insignia, flailed on the stand at the most basic questions about the opinion he claims to have written. Chevron nemesis Steven Donziger, who is a master of public relations outside the courtroom, responded with evasions. (Click here for background on the case and links to trial coverage.)
In a few months U.S. District Judge Lewis Kaplan will issue a doorstop opinion that reflects these evidentiary realities. In due course the arbitrators hearing the meta-dispute between Chevron and Ecuador will do the same. Donziger may win points now or on appeal about the U.S. law implications of Kaplan's findings of fact, and Ecuador may win points about the international law implications of the arbitration tribunal's findings of fact. But the facts will stand. And regardless of their formal legal effect, the facts will neutralize the Ecuadorian judgment against Chevron, now valued at $9.5 billion. Somewhere along the line as Chevron made its case in U.S. court, the Ecuadorian judgment became unenforceable for laughability. If Donziger's dreams of recovery weren't already dead, they died with the gasps in the gallery when the judge in the Angry Birds cap drew blanks about his own purported decision.
By all rights, the Ecuadorian award should be disregarded by enforcing courts around the world. But that doesn't mean the courts should credit every Chevron argument against enforcement. Until yesterday, the leading enforcement rulings only bolstered the doctrine of corporate separateness that stands as a barrier to legitimate plaintiffs recovering against corporations for human rights offenses by their affiliates. A Dec. 17 ruling by the Ontario Court of Appeal clears the way for a more deserving denouement.
Working their way through the top of the alphabet, the Ecuadorian judgment holders have sought enforcement in Argentina, Brazil, Canada, and Ecuador. Relatively little is at stake in Ecuador because Chevron left the country. Brazil has moved too slowly to matter. That leaves Argentina and Canada as the bellwether states for enforcement.
In Argentina, on June 4, the country's Supreme Court unfroze some $2 billion in assets owned by Chevron's Argentine subsidiaries. Imposing legal consequences on entities that never received a hearing in Ecuador, it reasoned, would be a denial of procedural due process and a violation of Argentine public policy. Manuel Gomez of Florida International University, who has written an essay on the Chevron "global chase," says that the same logic is very likely to defeat the pending attempt to enforce the Ecuadorian final judgment in Brazil.
In Canada, on May 1, the Ontario Superior Court stayed the Ecuadorian plaintiffs' enforcement action. The court held that the plaintiffs "have no hope of success in their assertion that the corporate veil of Chevron Canada should be pierced," because corporate formalities were observed, and because there were no allegations of fraud or illegal activity by Chevron Canada. Anil Hargovan of New South Wales University, who studies the comparative law of veil piercing, says that view is likely to prevail if the veil-piercing issue is fully litigated, because it's a straightforward application of the corporate law philosophy that dominates in Ontario, as in the British commonwealth generally.
A strong reluctance to pierce the corporate veil reigns in both commonwealth and civil law jurisdictions. However, a movement is afoot in Europe to impose "foreign direct liability" on parent companies for failing to properly supervise the environmental or human rights policies of their operating subsidiaries. (As I've noted elsewhere, this argument has been accepted by the English courts in Chandler v. Cape, and rejected pending appeal in the Dutch case of Akpan v. Shell). Separately, a trend is underway in Latin American nations like Peru and Argentina to import more flexible American standards of veil piercing. Dante Figueroa of Wöss & Partners, a comparative law scholar who has documented the trend, calls the Chevron case "a missed opportunity to move in the direction of U.S.-style veil piercing."
The way I'd put it is that—at least until now—Chevron has shored up the formalist view of corporate separateness, which stands as one of the foremost obstacles to corporate accountability for international human rights offenses. While the Ecuadorian plaintiffs' lawyers continue to wrap themselves in the corporate accountability flag, they have driven their clients into a ditch and harmed the larger cause, by tarring all international human rights plaintiffs and making law that can be used against them.
Then came the Chevron saga's latest surprise—the Ontario Court of Appeal's ruling on Tuesday. The panel vacated the Superior Court's stay on procedural grounds, ruling that the trial judge should not have reached out to dispose of the case on a rationale that wasn't argued. The Ecuadorian plaintiffs find new hope in the ruling, and they may be right to discern glimmers of sympathy for their cause. But the appeals court expressed no view on veil piercing. And it certainly expressed no view on the variegated fraud that Chevron chronicled through overwhelming and unrebutted evidence during the seven-week New York trial. The only hope I see is that the Ecuadorian judgment gets a more proper burial in a forum of the plaintiffs' choosing.
The Canadian court chose a local metaphor, and granted Chevron's wish to "'fight it out on the ice.'" My own wish is that we now get to see a substantive overtime—including an accounting of the plaintiffs' fraud—rather than a procedural shootout.