Tuesday, August 6, 2019

End of the Road for Ecuadorian Villagers in Their Fight Against Chevron?

This is the case that keeps on giving – both blog posts and reader interes - although the legal saga that has generated all of those words may have come to an end.

Earlier this year, the Supreme Court of Canada refused to hear an appeal from a decision of the Ontario Court of Appeal that had dismissed all claims seeking to enforce an Ecuadorian judgment against an indirect subsidiary of Chevron Corporation in Ontario. The SCC’s dismissal of the Ecuadorian villagers application for leave to appeal meant that the appeal court’s ruling that Chevron Canada is a separate legal entity from Chevron Corp., has ended the litigation here in Canada.  Subsequently, US and Canadian media have reported that the Ecuadorian plaintiffs have now settled their action against Chevron by agreeing to dismiss their Ontario enforcement proceedings and to pay costs to Chevron.  The plaintiffs’ other enforcement actions have been dismissed by courts in Brazil, Argentina and Gibraltar.  Further, an international tribunal in The Hague found that the U.S. $9.5 billion judgment that the Ecuadorian courts had rendered against Chevron had been procured through fraud, bribery and corruption and were based on claims that had already been settled and released by Ecuador years earlier.  As a result, the tribunal concluded that the Ecuadorian judgment violated international public policy and should not be recognized or enforced by the courts of other countries.

U.S. courts had already found that the Ecuadorian judgment against Chevron was a product of fraud and racketeering and had prohibited the judgment from being enforced in the United States.  In addition, U.S. District Judge Lewis Kaplan ordered Chevron’s U.S. lawyer Steven  Donziger to pay Chevron $3.4 million U.S. in attorney’s fees.  Donziger told news services that his total liability in fines add up to about U.S. $10 million.

Chevron had filed a Racketeer Influenced Corrupt Organizations Act (“RICO”) lawsuit against Donziger and his law firm alleging that they had engaged in multiple acts of extortion and money laundering, wire fraud, witness tampering, bribery and obstruction of justice to procure the Ecuadorian judgment.  Justice Kaplan found in Chevron’s favour and held Donziger in contempt for breaching the RICO judgment.  The RICO judgment prevented Donziger from profiting from his fraud by selling interests in the Ecuadorian judgment.  The court found that Donziger had used a large portion of the U.S. $2.3 million that he had raised personally.  U.S. $1.5 million went to directly or indirectly to Donziger or into related accounts.

Donziger told news organizations that the costs sanction against him was based on a bogus case by Chevron.  “Chevron has used 60 law firms and 2,000 lawyers to attack me because I helped win a landmark environmental judgment in Ecuador against the company for dumping billions of gallons of toxic waste in indigenous and ancestral lands.”

A Brief History of the Proceedings

In 1993, a group of Ecuadorian citizens of the Oriente Region of the Amazon river basin filed a class action lawsuit in the U.S. Federal Court against Texaco and in 1994 a group of Peruvian citizens living downstream from the Oriente Region also filed a class action lawsuit against Texaco in U.S. Federal Court.  Both complaints alleged that between 1964 and 1992, Texaco’s oil operations had polluted the rainforests and rivers in Ecuador and Peru resulting in massive environmental damage and damage to the health of those who lived in the region.  In 2002, the U.S. Federal Court dismissed both lawsuits on forum non-conveniens grounds holding that Ecuador was the more appropriate forum for litigating these claims.  Texaco agreed that the courts in Ecuador and/or Peru would have jurisdiction over the plaintiffs’ claims.

In 2003, the villagers brought a class action lawsuit against Texaco (which had been acquired by Chevron in 2001) in Ecuador alleging severe environmental contamination of the land where Texaco had conducted its oil operations.  The plaintiffs alleged that this contamination had led to increased rates of cancer as well as other serious health problems for residents of the region. 

In early 2008 an independent expert recommended to the court that Chevron should pay between $7 and $16 billion U.S. in compensation for the pollution. In November 2008, the expert increased his damage estimate to $27 billion U.S.  In 2008 Chevron reportedly lobbied the U.S. government to end trade preferences with Ecuador over the lawsuit.  Following allegations of judicial  misconduct, the original trial judge recused himself from the case and a new judge was appointed.  In September 2010 the plaintiffs submitted a new damages assessment stating that the costs had risen to between $90 and $103 billion U.S.

In February 2011 the Ecuadorian judge issued a ruling against Chevron in the lawsuit.  Chevron was ordered to pay U.S. $8.6 billion in damages and clean-up costs with damages increasing to $18 billion if Chevron did not issue a public apology.  Chevron reported publicly that it believed that the ruling was illegitimate and unenforceable and filed an appeal.  In January 2012 a panel of three judges from the Ecuadorian Provincial Court of Appeal upheld the ruling.  Chevron subsequently appealed to Ecuador’s National Court of Justice. In October 2012 the Ecuadorian court issued an order permitting the plaintiffs to seize about $200 million of Chevron’s assets located in that country.  However, later the Ecuadorian Supreme Court upheld the August 2012 ruling for environmental damage but reduced the damages to $9.5 billion U.S.  Chevron further appealed to Ecuador’s National Court of Justice in the Constitutional Court and in 2019 the court upheld the U.S. $9.5 billion judgment against the company.

On September 26, 2013, I reported that Chevron had obtained a global anti-enforcement injunction against the plaintiffs in the United States District Court in New York.  However, the US Court of Appeal, Second Circuit reversed the injunction and held that the plaintiffs could seek to enforce the Ecuadorian judgment in any country in the world where Chevron had assets.

On a motion in the Ontario Superior Court of Justice, Justice Brown (as he was then) stayed the enforcement proceedings against the defendants, which included Chevron Canada.  That ruling was later set aside by the Ontario Court of Appeal which held that the plaintiffs did not deserve to have their entire case fail on the basis of an argument that had not even been made on the motion and allowed the enforcement action against Chevron to proceed in Ontario.  That decision was later upheld by the Supreme Court of Canada.  However, going back to court, the Ontario Court of Appeal eventually determined that Chevron Canada could not be held to answer for a judgment against Chevron because to do so would ignore the corporate separateness of Chevron Canada as a multi-level subsidiary of Chevron.

Patricio Salazar, one of the lawyers for the Ecuadorian villagers, said that the Supreme Court of Canada’s ruling left the U.S. parent company Chevron as the sole defendant and the plaintiffs would proceed immediately to trial to force Chevron to comply with the Ecuadorian judgment.



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