Chevron Suffers Canadian Setback in Amazon Pollution Case

, The Litigation Daily

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The Ecuadorians holding a $9.5 billion environmental judgment against Chevron Corporation got some welcome news on Tuesday, when an Ontario court revived their attempt to collect the mega-award in Canada.

In a 29-page decision, the Court of Appeals for Ontario lifted a stay on an enforcement action brought by the Ecuadorians and their lawyers. Reversing a lower court judge, the appellate panel concluded that Ontario's courts can—and should, as a matter of fairness—rule on whether the Amazon plaintiffs can seize Chevron assets in Canada.

"This case cries out for assistance, not unsolicited and premature barriers," Judge James MacPherson wrote on behalf of a three-judge panel.

To be clear, Chevron isn't being ordered to pay up—at least not yet. Tuesday's ruling deals with threshold jurisdictional issues. The case will now be remanded to the trial court, where Chevron will have a chance to argue against recognition of the Ecuadorian judgment, which was recently halved in value from $19 billion to $9.5 billion. Chevron's lawyers argue that Chevron Canada's assets can't be used to satisfy its parent's liability. And, as readers following the Ecuador litigation and enforcement actions are well aware, Chevron maintains that the judgment was tainted by fraud and bribery. (Chevron is currentlyawaiting a bench verdict in its fraud and racketeering case against Ecuadorian plaintiffs counsel Steven Donziger in U.S. district court in Manhattan.)

The trial judge, Ontario Superior Court Justice David Brown, clearly didn't want to wade into the Chevron quagmire. In a May 1 ruling, he conceded that Canada has jurisdiction to hear the enforcement action. But he issued a permanent stay in the case, invoking a provision of Canadian law that allows judges to freeze "oppressive or vexatious" lawsuits. In Brown's view, it's obvious that the plaintiffs won't be able to pierce the corporate veil separating Chevron Canada and Chevron Corp. And in any event, an enforcement action should be heard across the border in the U.S., Brown wrote.

In Tuesday's ruling, the appeals court criticized Brown for presuming that the plaintiffs can't succeed in their enforcement effort. The court also disagreed with the idea that Canada shouldn't get involved in the case.

"The motion judge's stay in a major case involving poor and vulnerable residents, one of the world's largest corporations, a long and difficult process in a foreign court and a huge damages award was entirely his own construct; no party sought it," the panel wrote. "After all these years, the Ecuadorian plaintiffs deserve to have the recognition and enforcement of the Ecuadorian judgment heard on the merits in an appropriate jurisdiction."

In a statement, Chevron said it's weighing an appeal to the Supreme Court of Canada. "If the Ecuadorian plaintiffs truly believed in the validity of the Ecuadorian judgment, they should seek enforcement in the United States, where Chevron resides, rather than targeting assets of the company's subsidiaries that are not parties to the Ecuadorian litigation," the company wrote. "They are aware that in the U.S., however, they would be confronted by the fact that eight federal courts have already found the Ecuador trial to be tainted by fraud."

Alan Lenczner of Lenczner Slaght Royce Smith Griffin argued for the Ecuadorian plaintiffs. Chevron is represented in the Canadian litigation by Clarke Hunter, Anne Kirker and Robert Frank of Norton Rose Fulbright. Chevron Canada is represented by Benjamin Zarnett, Suzy Kauffman and Peter Kolla of Goodmans LLP. Gibson, Dunn & Crutcher is lead counsel for Chevron in the U.S.

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