Court Rules Environmentalist Suit Against Chevron Tainted by Fraud

Oil company wins RICO suit against attorneys seeking to enforce multibillion-dollar judgment

Chevron sign
March 4, 2014

A massive civil judgment against a U.S. oil company was obtained by fraud and cannot be enforced in American courts, a federal judge ruled Tuesday in a major blow against the environmentalist plaintiffs.

The ruling is a win for oil company Chevron, which has battled for years a multibillion-dollar judgment obtained in Ecuador. The company called the decision "a resounding victory for Chevron and our stockholders."

The company has no assets in the country, so plaintiffs have sought to enforce the judgment elsewhere, including in the United States. Chevron filed a racketeering suit against the plaintiffs’ attorneys in an attempt to prevent enforcement in the United States.

The Tuesday decision from a U.S. district court in New York makes it highly unlikely that Chevron will be forced by American authorities to pony up the $9.5 billion sought by the plaintiffs.

"The decision in the Lago Agrio case was obtained by corrupt means," Judge Lewis Kaplan wrote in his decision. "The defendants here may not be allowed to benefit from that in any way."

Lago Agrio is the region of Ecuador allegedly contaminated by oil company Texaco in the course of drilling activities in the area. Texaco was acquired by Chevron in 2001, and the latter assumed its legal liabilities.

Chevron has maintained that the Ecuadorian court’s $19 billion judgment against the company, issued in 2011 and since reduced to $9.5 billion, was the result of illegal coordination between the plaintiffs’ attorneys, Ecuadorian judges, scientific experts, and the administration of Ecuadorian President Rafael Correa.

Kaplan’s ruling substantiates those claims. His decision "confirms that the Ecuadorian judgment against Chevron is a fraud and the product of a criminal enterprise," Chevron said in a statement.

According to the ruling, attorney Steven Donziger and his legal team, which won the 2011 judgment in Ecuador, bribed a judge in that country, ghostwrote scientific studies for ostensibly neutral court experts, and actively conspired to break the law.

"One Ecuadorian legal team member, in a moment of panicky candor, admitted that if documents exposing just part of what they had done were to come to light, ‘apart from destroying the proceeding, all of us, your attorneys, might go to jail,’" Kaplan wrote.

The decision, which runs nearly 500 pages, presents an account of illicit collusion by the plaintiffs’ attorneys in their campaign against Chevron.

"This case is extraordinary," Kaplan wrote. "The facts are many and sometimes complex. They include things that normally come only out of Hollywood."

Donziger and his team will almost surely appeal the decision, but it deals a devastating blow to their attempts to enforce the Lago Agrio judgment.

The decision will likely elicit outrage and condemnation from Correa, who has vehemently criticized Chevron and backed environmentalist efforts to sue the company and enforce the Ecuadorian judgment abroad.

The president frequently went to bat for Donziger and his allies, even promising to personally call the judge presiding over the lawsuit, according to Kaplan’s decision.

Correa, who is frequently denounced by international human rights observers, previously attacked the Washington Free Beacon for reporting on the Chevron trial and the corruption that pervades his administration.