Chevron Loses Another Round In Legal Battle Over Ecuador Rainforest Contamination

U.S. Federal Appeals Court Rejects Attempt to Shift Liability

Amazon Defense Coalition

Amazon Defense Coalition
Contact: Paul Paz y MiƱo: +1 510.281.9020 x302,

New York, New York - A three-judge panel for the U.S. Court of Appeals for the Second Circuit in New York today denied an attempt by Chevron to shift its multi-billion dollar liability to Ecuador's government for the massive environmental contamination it caused in the Amazon rainforest.

The unanimous panel found that Chevron's claim was "without merit".

Chevron faces a potential $16.3 billion liability in the long-running case, which was first filed in U.S. federal court in New York in 1993 against Texaco and is currently on trial in the Ecuador town of Lago Agrio. After years of pre-trial motions, the proceeding shifted to Ecuador in 2003 after Chevron argued it would be a more appropriate forum.

Chevron bought Texaco in 2001 and will bear any liability in the case, which is expected to be decided next year.

In March of this year an independent expert appointed by the Ecuador court found that Chevron was responsible for the dumping of 18 billion gallons of toxic waste into Amazon waterways and the abandonment of more than 900 waste pits. The dumping happened when Texaco was the exclusive operator of an oil consortium in the Amazon from 1964 to 1990.

Local residents have complained for years of severe health problems, including cancers and spontaneous miscarriages. Five indigenous groups say they are struggling for survival and have been displaced from most of their ancestral lands.

The court-appointed expert, Richard Cabrera, assessed damages between $7.2 billion and $16.3 billion.

The appeals court decision stems from an effort by Chevron to force Ecuador's government into a binding arbitration to determine who should be responsible for the liability. Chevron claims it received a release from the government from all further responsibility for clean-up in 1995 after it performed a limited remediation, but Ecuador claims that the release on its face expressly excluded third-party claims of the type being pressed in the civil lawsuit.

The ruling in New York upheld a federal trial court decision by United States District Court Judge Leonard B. Sand that found no legal basis for Chevron's claims that (1) Ecuador was bound by a 1965 Joint Operating Agreement between Texaco and Gulf which Ecuador never signed; and that (2) Ecuador was obligated by the Joint Operating Agreement to arbitrate the dispute over the release with Chevron and to indemnify Chevron with respect to any judgment in the civil lawsuit in Ecuador.

The ruling is yet another blow to Chevron's strategy to avoid liability in Ecuador. In the past year, the company has had a motion to dismiss the Ecuador case denied, seen two of its lawyers indicted in Ecuador for fraud related to a purported clean-up, and lost a major lobbying battle in Congress over the extension of trade benefits to Ecuador.

Ecuador was represented by C. MacNeil Mitchel (NY) and Eric W. Bloom (DC) at Winston & Strawn. Chevron was represented by Thomas F. Cullen and Louis K. Fisher of Jones Day in Washington, D.C.

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