Ecuador Court Slashes Chevron Award but Upholds Liability
Ecuador's highest court on Tuesday reasserted that country's role in Chevron Corporation's epic legal battle over oil pollution in the Amazon.
With a Manhattan federal trial still underway in Chevron's fraud case against the environmental plaintiffs and their U.S. lawyer, Ecuador's National Court of Justice halved the $19 billion jackpot the plaintiffs obtained in 2011. But the justices backed a lower Ecuadorian court's finding that Chevron is liable for rainforest pollution, and they blasted Chevron's attacks on Ecuador's judiciary in New York and elsewhere.
In a 222-page ruling, the Ecuadorian court nixed $9.5 billion in punitive damages even as it called Chevron's request that the judgment be nullified a "judicial absurdity." The award stemmed from allegations that Texaco was responsible for contaminating the Lago Agrio region of Ecuador for three decades. Chevron acquired Texaco in 2001.
The decision still leaves Chevron on the hook for $9.5 billion. But if the oil company's lawyers at Gibson, Dunn & Crutcher get their way in the ongoing fraud and racketeering trial in Manhattan, the size of the award will be academic. As we've exhaustively reported, Chevron claims the Lago Agrio judgment was a titanic fraud engineered by the Amazon plaintiffs and their lawyers, including New York attorney Steven Donziger.
"The Lago Agrio judgment is as illegitimate and unenforceable today as it was when it was issued nearly three years ago," a Chevron spokesman said in a statement. "The only judicially proper decision the National Court of Justice could have taken on Chevron's cassation appeal would have been to declare the Lago Agrio proceeding null and to void the illegitimate judgment in its entirety."
Christopher Gowen, a lawyer who is advising Chevron's opponents in the New York case, said in an emailed statement that Tuesday's ruling means Chevron is out of appellate options. "This represents the absolute final ruling in this case and Chevron … now must pay the award against them allowing for the clean up of [the] Amazon to finally begin."
The Ecuadorian plaintiffs have been trying to enforce the judgment in Argentina, Brazil and Canada since 2011, but they have had little luck to date. In May, a Toronto judge halted an enforcement action by the plaintiffs trying to nab some of Chevron's $12 billion in Canadian assets, arguing that the provincial court was the wrong venue because plaintiffs didn't have a claim against the company's Canadian subsidiary. (Alan Lenczner, a well-known commercial litigator, is handling the plaintiffs' case. The ruling has been appealed.)
One month later, Argentina's high court suspended an eight-month freeze on Chevron's assets in that country on similar grounds. Sergio Bermudes is representing plaintiffs in the Brazilian action; enforcement, even if successful, could take three to five years to percolate through the Brazilian system.
Meanwhile, in New York, Chevron this week was nearing completion of its case against Donziger and his allies in the Lago Agrio litigation. (Donziger is representing himself but also has tapped Zoe Littlepage of Houston's Littlepage Booth and Richard Friedman of Seattle-based Friedman Rubin. Luis Gomez of Gomez LLC represents Donziger's Ecuadorian co-defendants.) Last week featured testimony from Nicolas Zambrano, the Ecuadorian trial judge in whose name the 2011 judgment was issued. Under intense questioning from Gibson Dunn's Randy Mastro, Zambrano was unable to recall basic details about the decision, bolstering Chevron's claims that the ruling was actually "ghostwritten" by the plaintiffs themselves.
Chevron's accusations against Zambrano—part of a general indictment of Ecuador's judiciary as corrupt and unfair—aroused the ire of the country's top court in Tuesday's decision. The justices noted that Chevron pushed to have the pollution case heard in Ecuador to begin with, and then went on to attack the proceedings "not in legal or respectful [terms] … but rather via abuses and insults." Chevron, the court wrote, "lodg[ed] allegations domestically and internationally that not only did the court lack jurisdiction and competence, but, without providing any proof, that the administration of justice was dishonest and corrupt … An accusation which this court rejects."
"The right to a defense is not a carte blanche that anything goes," the justices added.