Jessica M. Karmasek May 2, 2013, 4:30pm

TORONTO (Legal Newsline) -- Nearly a year after a group of Ecuadorian plaintiffs filed a lawsuit against Chevron Corp. in Canada, a judge of the Superior Court of Justice in Ontario has stayed the suit.

Judge David M. Brown, in his 42-page decision issued Wednesday, said the plaintiffs "have no hope of success in their assertion that the corporate veil of Chevron Canada should be pierced and ignored so that its assets become exigible to satisfy a judgment against its ultimate parent."

Brown said there is "no basis in law or fact for such a claim."

"Ontario courts should be reluctant to dedicate their resources to disputes where, in dollar and cents terms, there is nothing to fight over," he wrote.

"In my view, the parties should take their fight elsewhere to some jurisdiction where any ultimate recognition of the Ecuadorean judgment will have a practical effect."

Last May, the Ecuadorian plaintiffs hit Chevron with the lawsuit in hopes the company would comply with a $19 billion judgment against it.

The lawsuit targets the oil giant and various subsidiaries, of which hold significant assets in the country, over its damage to the Amazon rainforest.

In addition, Canada has a law that allows interest to run on a foreign judgment during the enforcement process, potentially adding to the judgment already facing the company.

The Ecuadorians have argued they were forced to file the enforcement action because Chevron refuses to pay the judgment imposed by an Ecuadorian court in February 2011.

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

In January 2012, an appellate court in Ecuador upheld the $19 billion judgment for Chevron's "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 stems from an environmental lawsuit involving Texaco Petroleum Company, which merged with Chevron more than 10 years ago.

Chevron, which has vowed never to pay the hefty judgment, filed a racketeering lawsuit in a New York federal court in 2011 in response.

The company alleges 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.

Chevron maintains that the $19 billion judgment is a product of "bribery" and "fraud," and is "illegitimate."

"We are pleased with today's decision from Judge Brown," the company said in a statement Wednesday. "The Ontario Superior Court ruled that it ought not to entertain the plaintiffs' claims on the evidence before the court. This is a significant setback to the Ecuadorian plaintiffs' worldwide enforcement strategy, given that it is premised on seeking to enforce the judgment against assets of Chevron Corporation subsidiaries that were not even parties to the Ecuadorian litigation."

Chevron continued, "The plaintiffs should be seeking enforcement in the United States -- where Chevron Corporation resides. In the U.S., however, they would be confronted by the fact that eight federal courts have already found the Ecuador trial tainted by fraud."

Meanwhile, lawyers for the Ecuadorian plaintiffs vowed Wednesday to appeal the Canadian ruling.

"It cannot be right that a multinational company that operates entirely through subsidiaries is immune from the enforcement of a judgment in Canada, particularly where the subsidiary is 100-percent owned and provides some of the billions of dollars that Chevron pays out in dividends each year and even more billions in share buybacks," Alan Lenczner, principal lawyer in Toronto for the Ecuadorians, said in a statement.

"Chevron Corp itself earns no money. All its earnings and profits come from subsidiaries including, importantly, Chevron Canada."

Pablo Fajardo, principal lawyer for the plaintiffs in Ecuador, claims Chevron is simply trying to hide behind its corporate structure to avoid its responsibility to clean up the "extensive" toxic contamination it left behind in Ecuador.

"We strongly disagree with the motions judge in Canada, who, we feel, went beyond his authority in staying our action based not on the merits of our legitimate judgment but, at least in part, on avoiding protracted litigation," Fajardo said in a statement.

"The judge's decision does not affect the merits of our judgment in Ecuador. In the meantime, Chevron and its layers of subsidiaries have assets in more than 100 countries around the world and one, Argentina, already has frozen assets against a subsidiary in clear disagreement with this order.

"This is a minor setback that we hope will be corrected on review, but no single country will ever determine the enforceability of our judgment."

From Legal Newsline: Reach Jessica Karmasek by email at

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