U.S. Supreme Court Deals Blow to Chevron on Ecuador Pollution Case in Latest RICO Decision

New York, NY – Chevron last week suffered a major setback when a U.S. Supreme Court decision sharply curtailed the use of a racketeering statute the company had been using in a last-ditch effort to delay enforcement of an $11 billion pollution judgment won by Ecuadorian villagers, according to a new legal filing.

The decision by the high court, in a case against RJR Nabisco over cigarette smuggling in Europe, severely undermines the oil giant's attempt to use the U.S. "racketeering" statute (known as RICO) to target Ecuadorian villagers and their counsel and to evade paying the clean-up judgment, said lawyers for the villagers in their court submission. The villagers are currently enforcing their judgment against Chevron's assets in Canada, where a critical court hearing is set for early September.

Deepak Gupta, who represents U.S. attorney Steven Donziger – the longtime counsel to the rainforest communities in the underlying pollution case – made the submission last Friday to the United States Court of Appeals for the Second Circuit asserting that the RJR decision further "underscores why Chevron cannot win" its appeal in RICO case. (For background on the many additional reasons why Chevron's RICO case is fatally flawed, see this appellate brief and this summary document.)

The RJR decision "further limits private RICO actions by requiring proof of a quantifiable, redressable and domestic injury – something Chevron has steadfastly refused to identify," Gupta said. The RJR decision also made clear that the RICO statute could not be used to attack a final judgment from a foreign court, as Chevron has tried to do in the Ecuador case, Gupta added in the letter.

The RJR case is "another nail in the coffin" of Chevron's RICO-based retaliation case, said Aaron Page, a U.S. lawyer for the villagers.

"Chevron's RICO case in Ecuador already was doomed because of its countless legal excesses and absurd factual findings," Page said. "Now, the Supreme Court has ruled you can't bring a RICO case, even a legitimate one, based on harm that took place abroad. This is another example of why Chevron's RICO case should have been thrown out on day one."

In the RJR case, the Supreme Court ruled that RICO could not apply to conduct outside the United States and therefore dismissed the cigarette smuggling claims.

Chevron's RICO claims in the Ecuador case – which were rejected by Ecuador's Supreme Court in a 5-0 decision – are similar in that they concern conduct that took place outside the United States during the trial against the oil giant. The villagers won their judgment in Ecuador in 2010 after Chevron insisted the trial be held there.

As part of a retaliation strategy, Chevron in 2010 sued the villagers and their lawyers under RICO in a controversial case now being reviewed by the New York federal appellate court. Chevron's theory was that the Ecuador pollution case was "sham litigation" because the trial court decision was ghostwritten, charges that were vigorously denied by the plaintiffs and ultimately disproven by an independent forensic examination of the judge's computer.

In Canada, that nation's Supreme Court recently ignored Chevron's RICO claims and ruled in a unanimous decision that the collection action against the company's assets could proceed. In all, 18 separate appellate judges in three countries have affirmed all or parts of the judgment in favor of the villagers.

The latest Supreme Court RICO decision comes at a time when Chevron's defenses in the 22-year pollution case have been weakening.

Chevron's main witness against the villagers, Alberto Guerra, recently admitted to lying under oath in the RICO trial after the company paid him $2 million and coached him for 53 consecutive days before allowing him to testify. As said, the company's allegation that the court judgment was ghostwritten by the plaintiffs (a claim made by Guerra after being paid by Chevron) fell apart after an independent forensic examination proved the judge had opened and save the Word document that became the judgment hundreds of times.

Separately, a Chevron whistleblower video disclosed by Amazon Watch showed company scientists laughing while devising plans to hide the company's oil pollution in Ecuador from the court – behavior the plaintiffs have asserted is fraud.

In Canada, the villagers are also moving forward aggressively to seize Chevron's assets as cancer rates in the affected area where the company operated continue to skyrocket.

Chevron, under the watchful eye of Canada's courts, recently was forced to surrender extensive internal company information related to its Canadian operations which are estimated to have a value of at least $15 billion. In a new twist, Chevron is trying to argue that the villagers cannot seize the company's Canadian assets because they are held by a wholly-owned subsidiary. (Chevron previously had sold its assets in Ecuador during the trial there.)

Chevron has hired four separate law firms to handle the Canada action, where a critical five-day hearing is scheduled for September 12. Chevron has used at least 60 law firms and more than 2,000 lawyers in the case since its inception in 1993.