NYC Retrial of Chevron Pollution Case Floated by 2nd Circuit Judge

By Adam Klasfeld, Courthouse News Service
20 April 2015

Already stretching more than two decades and three continents, the multibillion dollar litigation against Chevron for oil devastation to the Amazon may unexpectedly return to the place where it all began.

"We can order you to go to retrial in the Southern District [of New York]," Judge Richard Wesley told an uncomfortable Chevron attorney in the ceremonial courthouse on Monday.

Responding to the blockbuster remark, Chevron's lawyer Ted Olson, from Gibson, Dunn & Crutcher, said he "could not consent" to the idea. Two attorneys representing the company's opponents – Deepak Gupta of the firm Gupta Beck and New York University professor Burt Neuborne – told the judge that they are open to it.

It was New York, more than two decades ago, where Ecuadorean rainforest villagers first sued Chevron's predecessor Texaco for what they describe as an environmental catastrophe.

Roughly eight years into the case, Chevron had it brought to the Ecuadorean rainforest city of Lago Agrio, named after Texaco's former headquarters in Sour Lake, Texas.

Though the transfer relied on Chevron agreeing in New York courts to submit to the jurisdiction of Ecuador's judiciary, the oil giant had a different tune as it awaited the ultimately "adverse" verdict.

Insisting the Ecuadorean litigation was nothing more than a "shakedown," Chevron returned to New York to sue the Ecuadoreans, their attorney Steven Donziger and his colleagues under a statute usually used against mob bosses.

Although it filed civil allegations, Chevron has repeatedly alleged criminal wrongdoing that Donziger denies as the spin of elaborate corporate retaliation scheme produced by testimony "paid for" by the oil giant.

At the Monday hearing, Chevron attorney Olson listed off some of Donziger's alleged "crimes," including bribery, perjury and obstruction of justice.

In 2013, U.S. District Judge Lewis Kaplan credited these charges in finding that the $9.8 billion verdict was "procured by corrupt means."

Wesley, who made Monday's déjà vu proposal of retrying the pollution case in New York, appeared deeply skeptical that Kaplan had the authority to issue his ruling.

In an earlier version of Chevron's case, Wesley sat on the panel that voided an injunction preventing the collection of the Ecuadorean judgment anywhere on the globe. He and his colleagues agreed three years ago that Kaplan had no authority to issue such a "radical" decree.

When Donziger's attorney Gupta praised that decision, Wesley made a quip that provoked laughter in the court: "I did my best."

That decision ultimately caused Kaplan to limit the reach of his ruling to the parties that Chevron sued.

This did not seem to mollify Wesley's concerns Monday.

Referring to his legal research with his law clerks, Wesley told Chevron's lawyer, "We cannot find any case where there's been a collateral attack on a foreign judgment."

Wesley is not the only appellate judge on the panel who heard a prior appeal of this case.

Two years ago, Judge Barrington Parker rejected a motion to unseat Kaplan as too biased for Chevron to handle the case. He also sat on the appellate court that upheld Chevron's subpoena against documentary filmmaker Joseph Berlinger for footage of his documentary "Crude" that hit the cutting room floor.

Signaling a possible split among the panel, Parker made multiple comments Monday indicating he was convinced by Kaplan's findings in his ruling.

In one remark, Parker told Donziger's attorney Gupta that his team did not contest the facts of Kaplan's ruling in court.

While Gupta mostly argued the case on the law, his legal team's briefings spend dozens of pages attacking those determinations.

Responding to Parker, Gupta noted Chevron's allegations rest largely on the "purchased testimony of a single judge": Chevron's star witness Alberto Guerra, whom Chevron has compensated with at least $326,000, an immigration attorney and a car.

Kaplan wrote that corroborating evidence outweighed Guerra's credibility problems.

Meanwhile, Gupta told the appeals court that new "forensic evidence" analyzing the computer hard drives of the Ecuadorean judge whose name appears on the verdict against Chevron vindicates his client of ghostwriting the verdict.

First reported on Courthouse News, the evidence shows that an apparent draft of the judgment on the computer of Ecuadorean Judge Nicolas Zambrano, whose name appears on the judgment against Chevron.

Donziger believes the finding debunks Chevron's allegation that his legal team ghostwrote the judgment.

Since this evidence never entered the New York record, Chevron opposed a bid for the panel to consider it, and the panel has not yet decided on whether to officially give it judicial notice.

The third member of the panel, Judge Amalya Kearse, is an appointee of Jimmy Carter who has never presided over Chevron's racketeering case.

An award-winning bridge player, Kearse played her cards close to the chest during the appellate argument. The one question Kearse asked did nothing to reveal where her sympathies lie.

Aside from the sordid racketeering allegations, most of the arguments revolved around arcane details what precedent Kaplan's ruling would hold if it is upheld.

A legal controversy still rages over whether the anti-racketeering statute Chevron used can be deployed against foreign litigation, and the Ecuadorean government denounced Kaplan's decision as "imperialism" that disregards findings of their two appellate courts.

When Chevron's lawyer Olson disparaged Ecuador's judiciary, Judge Wesley raised his voice and pointedly asked: "So, why did you go there?"

Olson argued that Ecuador's judiciary could not be trusted because its president Rafael Correa allegedly had his "thumb, hand and fist on the scales of justice."

Skeptical, Wesley noted at one point that Chevron prevailed in Ecuador's courts three times in other cases.

Professor Neuborne, who represents Donziger's former Ecuadorean clients Hugo Camacho Naranjo and Javier Piaguaje, noted that Ecuador's trajectory from the time Chevron asked to litigate there until today has been toward democracy.

Unlike in 2003, Ecuadorean judges are "not appointed by a military junta," he said.

"If that's all Judge Kaplan's decision stands on, it stands on sand," he added.

Moreover, Neuborne noted that Chevron alleged misconduct only on the trial-court level.

He also argued that his clients cannot be liable for accusations against their lawyers.

"It beggars reality to suggest indigenous people in the Ecuadorean rainforest are going to monitor their attorney ... [and discover] surreptitious acts of fraud," he said.

"The reality of this world that Chevron builds here is a world that cannot exist," Neuborne later added.

Kaplan's judgment prevents Neuborne's clients from getting any "benefit" from the Ecuadorean judgment, an order that the professor noted could include a cleanup of their rainforest habitats.

"Of course, they would benefit from it," Neuborne said. "Their environment would be remediated."

Even if the decision is overturned, Chevron wants the appellate court to leave the factual findings intact to fight enforcement battles in Canada, Brazil and Argentina.

It also wants to use the judgment in its arbitration against the Ecuadorean government in the Permanent of Arbitration in The Hague.

Roughly three-week-long hearings in that arbitration are slated to begin Tuesday in Washington.

If the tribunal in that case rules against Chevron, it could also contradict Judge Kaplan's rejection of Ecuador's judiciary, Wesley noted.

Wesley's suggestion of a New York retrial added another potential shakeup to the puzzle.

Referring to this, Professor Neuborne told the judge: "You should be an academe," to laughter in the court.

The judges reserved decision on the case, and a capacity crowd of spectators left the site of one of the year's most anticipated and unpredictable appellate hearings.

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