By Adam Klasfeld, Courthouse News Service
21 May 2012
New York, NY – Chevron met with unusual resistance as a federal judge narrowed its lawsuit against a group of Ecuadoreans fighting to collect $18 billion for an oil contamination.
Indigenous Ecuadoreans and their supporters have battled for nearly two decades to hold Chevron liable for years of drilling in the rainforest region of Lago Agrio done by its predecessor Texaco.
Though an Ecuadorean court ordered Chevron to pay $18 billion in early 2011 for vast environmental and public health reparations, the oil giant turned to the Southern District of New York with extortion claims against their Ecuadorean opponents.
Within two years, U.S. District Judge Lewis Kaplan blocked the judgment with a preliminary injunction, gave the green light for Chevron to pursue the lawsuit, and ordered the Ecuadoreans to expose practically their entire 18-year case file.
Calling him "Chevron's greatest ally," the Ecuadoreans have tried unsuccessfully to push Kaplan off the case.
In April 2011, Kaplan had called the issue of enforceability of the $18 billion judgment outside of Ecuador "the core of this case."
"Once that issue is decided, one way or another, it is likely that the rest of the case will vanish or at least pale in significance," he wrote.
But the 2nd Circuit dissolved Kaplan's injunction, threw out that "core" and gave the jurist judge another shot at sorting out Chevron's remaining claims.
Since the appellate ruling, Kaplan has been more measured about handing Chevron favorable rulings, refusing earlier this year to let Chevron seize the assets of the attorneys for their Ecuadorean adversaries.
Chevron later renewed that request, and Kaplan rebuffed the company again on May 14.
Both sides rushed to declare victory over a second ruling Kaplan released that day, which trimmed the charges of Chevron's RICO suit.
Though two charges were tossed, Kaplan wrote that Chevron's extortion claims were "more than sufficient," and also gave the green light to money laundering, obstruction of justice, witness tampering and other charges.
"Chevron is pleased with the court's order, which upholds the core of Chevron's RICO claim on every predicate criminal act asserted by the company," the company's lawyer Hewitt Pate said in a statement.
Karen Hinton, a spokeswoman for the Ecuadoreans, claimed that Chevron was spinning "major legal setbacks" because Kaplan allegedly signaled that the oil giant would lose their surviving claims.
As evidence, she pointed to a densely worded paragraph in one of Kaplan's orders, which relies on precedent from Morrison v. National Australia Bank Ltd., a 2010 in which the Supreme Court barred federal securities fraud suits in the U.S. for securities traded on a foreign stock exchange.
Kaplan said Morrison raises "a question concerning whether and to what extent Chevron may recover under RICO for injuries sustained in whole or part as a result of evens that occurred outside the United States."
Indeed, the 2nd Circuit had pointed to insufficient jurisdiction when it threw out Chevron's earlier case.
Most of Chevron's RICO case rests on allegations that the Ecuadoreans' lawyers arranged for an independent expert report to be ghostwritten, fabricated evidence to win the case in the Amazon, and then flexed political and media muscle back in the United States to collect the money.
Hinton says Chevron will have to find evidence of extortion in lobbying and public relations efforts if it has to limit its focus to the United States.
"If that becomes against the law, then most of New York and much of D.C. will shut down," Hinton told Courthouse News.
The spokeswoman says Kaplan also intimated that Chevron's extraterritorial claims would fail.
Kaplan wrote: "Suffice it to say for present purposes that Chevron on the present record has not established that it is likely to prevail on its claim that the money it spent to defend the case in Ecuador and to obtain evidence in the United States for that purpose.
Hinton interpreted this line as Kaplan "signaling to Chevron, 'You don't have much of a case. You'd better figure this out.'"
But Chevron noted that the many charges Kaplan characterized as "more than sufficient" showed a vote of confidence in its case.
"If anything, the opinion signifies that Chevron's case has merit," Chevron spokesman Justin Higgs told Courthouse News. "As such, we look forward to progressing the claims."
The Ecuadoreans, who call Chevron's extortion lawsuit a "publicity stunt" to distract from environmental disaster, say they are prepared to file their own fraud counterclaims related to the company's apparent association with a convicted drug trafficker who videotaped a Lago Agrio judge.
Though Chevron denies any ties to former felon Wayne Hansen, the Ecuadoreans uncovered an email Hansen sent the oil company's investigator that says he needed "to hear from a real player with a plan for Wayne."
A judge sealed that email, first reported by Courthouse News, after it was filed publicly.
Higgs insisted that Chevron would not be intimidated by another lawsuit.
"We are not concerned about a countersuit," Higgs said. "The plaintiffs' representatives are the ones that committed fraud, not Chevron. We are confident that these truths will be brought to light as the process unfolds."