Second Circuit rules against Chevron in Ecuador case

Jessica M. Karmasek Sep. 20, 2011, 7:50am


NEW YORK (Legal Newsline) -- The U.S. Court of Appeals for the Second Circuit on Monday ordered that a preliminary injunction blocking worldwide enforcement of an $18 billion judgment against Chevron Corp. be vacated.

According to its two-page order, the Second Circuit also stayed an upcoming November trial by U.S. District Judge Lewis Kaplan that Chevron sought on the enforceability of the judgment.

Karen Hinton, spokeswoman for the Ecuadorian plaintiffs suing Chevron, said late Monday that the ruling is an "affirmation" of what her clients have said all along.

"Chevron abused the law, and Judge Kaplan rushed to judgment without considering the overwhelming evidence against the oil giant. The Second Circuit panel acted appropriately in halting any further proceedings until the appellate court can fully consider the issues," she said.

"We call on Chevron to meet its legal, moral and fiduciary responsibilities, and clean up the pollution it left behind in Ecuador's Amazon."

Jim Tyrell, the Patton Boggs attorney who argued for the Ecuadorians before the Second Circuit last week, said he was "very excited" about the court's decision.

"It represents a triumph of the rule of law over the sensationalism created by Chevron's PR department," he said.

In February, an Ecuadorian court found Chevron liable for dumping billions of gallons of toxic waste into the Amazon, causing an outbreak of disease and decimating indigenous groups. Damages were found to be up to $18 billion.

Chevron, which has vowed never to pay the judgment, filed a 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.

In March, Kaplan issued an injunction blocking enforcement of the judgment.

In a statement Monday, Chevron noted that the Second Circuit vacated the preliminary injunction after receiving a written representation from the Ecuadorian plaintiffs' lawyers that they would not attempt to enforce the Ecuadorian judgment during the pendency of the first instance appeal in Ecuador -- "a promise the Ecuadorian plaintiffs repeatedly refused to make to the trial court before and since the preliminary injunction first issued," the oil company said.

While it is "disappointed" that the November trial has been stayed, the company said it remains committed to its "consistent goal" -- obtaining judicial review on the merits of the Ecuadorian plaintiffs' lawyers' fraud before they are allowed to attempt enforcement of the Ecuadorian judgment.

Chevron said it remains "confident" that once the full facts are examined, the judgment will be found unenforceable and those who procured it will be required to answer for their misconduct.

"There is no legitimate evidence supporting any finding of liability against Chevron because Texaco Petroleum Company cleaned up its share of environmental impacts in Ecuador and the remaining impacts are the responsibility of the government of Ecuador and its state-owned oil company, Petroecuador," it said.

Chevron also noted that the Second Circuit's order has no effect on the Feb. 9 order for interim measures issued by the Bilateral Investment Treaty Arbitration Tribunal presiding over Chevron's claims against Ecuador in the Permanent Court of Arbitration in The Hague.

"The Treaty Arbitration Tribunal's order continues to require Ecuador to take all measures at its disposal to suspend or cause to be suspended the enforcement or recognition within and without Ecuador of any judgment against Chevron in the Lago Agrio case pending further order of the tribunal," Chevron said.

However, the company said its lawsuit against the plaintiffs and their representations for violations of the federal RICO statute, common law fraud and other laws will continue.

"Chevron's claims are supported by overwhelming evidence -- documented in the Ecuadorian plaintiffs' lawyers' own documents and in their lawyers' own statements caught on videotape -- that the Lago Agrio plaintiffs' lawyers made corrupt payments to an Ecuadorian court official from a secret bank account, forged expert reports that were submitted in the name of court experts and contained fraudulent data, and even participated in the fraudulent drafting of the Ecuadorian court's judgment," it said.

Also as part of its order Monday, the Second Circuit denied the Ecuadorians' petition for a writ of mandamus, seeking to compel the recusal of Kaplan.

The plaintiffs have repeatedly asked for Kaplan to remove himself from the case, arguing he has been in Chevron's corner from the get-go. He has refused.

"(B)ias cannot be inferred from a mere pattern of rulings by a judicial officer, but requires evidence that the officer had it in for the party for reasons unrelated to the officer's view of the law," the appeals court wrote, citing a past case ruling.

From Legal Newsline: Reach Jessica Karmasek by email at

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