Ecuadorian Plaintiffs Say Chevron Withdrawing "Sham" Litigation Claim; Company Denies Move

By Jessica M. Karmasek, Legal Newsline
20 February 2013

New York, NY – Pointing to a federal court filing last month, the Ecuadorian plaintiffs suing Chevron Corp. contend the oil giant is withdrawing its claim that an $18 billion-plus judgment against it was the result of "sham" and "objectively baseless" litigation.

The Ecuadorians, referencing a Jan. 4 procedural filing in the U.S. District Court for the Southern District of New York, this week called the move a "significant tactical retreat" that will likely hurt the company's efforts to resist international enforcement actions.

The plaintiffs contend the move also is, in effect, conceding that there is evidence that the company caused pollution in the country.

"This move severely weakens Chevron's ability in enforcement actions to attack the Ecuador judgment, which is premised on extensive evidence the oil company committed massive contamination in Ecuador," the plaintiffs' lead lawyer Pablo Fajardo said in a statement Tuesday.

Last year, an appellate court in Ecuador upheld the $18 billion-plus judgment against Chevron for its "intentional contamination" of the country's rainforest.

The adverse ruling was issued by a panel of three temporary judges presiding over the proceedings in the Provincial Court of Justice of Sucumbios in Lago Agrio.

The ruling, which stems from an environmental lawsuit involving Texaco Petroleum Company, confirmed a lower court's ruling in February 2011.

The lower court had found the oil giant liable for dumping billions of gallons of toxic waste into the Amazon, causing an outbreak of disease and decimating indigenous groups.

Chevron, which has vowed never to pay the judgment, subsequently filed its racketeering lawsuit, alleging that the Ecuador suit has been used to threaten the oil company, mislead U.S. government officials, and harass and intimidate its employees – all to extort a financial settlement from the company.

According to the Ecuadorians, the "sham litigation" argument was the centerpiece of Chevron's racketeering suit in the New York federal court, which is slated for trial in October.

Craig Smyser, who is representing the Ecuadorians in the action, said Tuesday the latest procedural retreat is "certain" to weaken Chevron's claims in the case.

The Ecuadorians contend Chevron withdrew the "sham" and "objectively baseless" litigation claim at the suggestion of Judge Lewis Kaplan as a way to avoid having to release internal documents during discovery in New York that might prove it engaged in an "elaborate ruse" to cover up evidence of its own pollution.

Kaplan has been accused of bias against the Ecuadorians and of trying to engineer a verdict in Chevron's favor.

"Chevron's withdrawal of this claim underscores the lengths the company will go to suppress the truth about its environmental crimes even though that truth obviously exists in its own internal files," said Humberto Piaguaje, who coordinates the litigation for the 80 indigenous and farmer communities who live in an area allegedly contaminated by the company's operations.

Smyser agreed, "The change reflects an adjustment to Chevron's trial strategy to avoid having the jury hear and see evidence of its contamination of the rainforest and use of substandard drilling practices."

Chevron spokesman Kent Robertson said in an email late Tuesday that the company – which has consistently denied the merits of the Ecuadorians' environmental allegations and continues to do so – has "not withdrawn anything, let alone a claim," in its racketeering action.

"We continue to pursue our fraud and extortion claims, and continue to maintain that the Lago Agrio litigation was a ‘sham,' as the evidence shows that it was – the plaintiffs' lawyers bribed the ‘independent' court appointed expert and ghostwrote his report. And then, when that fraud was exposed, they bribed the judge and ghostwrote the judgment," Robertson said.

Last month, Chevron filed whistleblower testimony in the New York federal court revealing that representatives for the Ecuadorians promised a $500,000 bribe to the judge who issued an $18 billion judgment against Chevron.

In the testimony, Albert Guerra, who presided over the environmental case against Chevron when it was first filed in 2003, reveals he was paid thousands of dollars by the plaintiffs' lawyers and a subsequent judge, Nicholas Zambrano, for illegally ghostwriting judicial orders issued by Zambrano and steering the case in the plaintiffs' favor.

"It is and has always been Chevron's position that the supposed merits of the Lago Agrio litigation are not relevant to the New York racketeering action," Robertson said.

Karen Hinton, a spokeswoman for the Ecuadorians, has described Guerra's affidavit as completely false and badly tainted by Chevron's contract with Guerra, which required the company to pay him more than $300,000 and re-locate Guerra and his family to the United States.

Hinton said late Tuesday that Chevron also is "angling" to get Kaplan to issue a fraud ruling from the bench, instead of conducting a jury trial – and sooner than October, to beat the clock ticking in Argentina.

"We completely expect Kaplan to give Chevron what it wants – a ‘fraud' ruling – but we do not believe it will matter in the enforcement countries, and we believe it will be overturned by the (U.S. Court of Appeals for the) Second Circuit," she said.

Hinton pointed out that Chevron has said it will withdraw its damages claims against lawyer Steven Donziger, who represented the Ecuadorian plaintiffs for the 18-year history of the case, if Kaplan would rule from the bench on the fraud claim, completely avoiding a jury trial.

She said Kaplan also would have to dismiss Donziger's counterclaims, which ask for damages.

"We assume Kaplan will do this soon," Hinton said.

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