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Judge asks U.S. for opinion on injunction in Ecuador lawsuit

By Jessica M. Karmasek | Feb 9, 2011


NEW YORK (Legal Newsline) - A federal judge is seeking the opinion of the U.S. Department of State in a lawsuit filed by Chevron Corporation last week.

Chevron filed its lawsuit on Feb. 1 against a group of trial lawyers and consultants who, it says, are leading a fraudulent litigation and public relations campaign against the company under the Racketeer Influenced and Corrupt Organizations, or RICO, Act and other state and federal laws.

Chevron's RICO claim addresses what it calls "pervasive misconduct" relating to the defendants' efforts to extort money from the company "using the pendency of a lawsuit in Lago Agrio, Ecuador, directed and funded by American trial lawyers and their allies," Chevron said in a recent statement.

The company's suit alleges that the defendants, and certain "non-party co-conspirators," have used the Ecuador lawsuit to threaten Chevron, mislead U.S. government officials, and harass and intimidate Chevron employees -- all to extort a financial settlement from the company.

Among those named in Chevron's suit are New York City-based plaintiffs' lawyer Steven Donziger; his Ecuadorian colleagues Pablo Fajardo and Luis Yanza; their front organizations, the Amazon Defense Front and Selva Viva; and Stratus Consulting, a Boulder, Colo.-based consulting firm retained by the plaintiffs' lawyers to "secretly prepare a damages report that was then presented as having been written by an allegedly independent, court-appointed expert," the company said.

Chevron asked for a temporary restraining order and preliminary injunction against the defendants over the weekend. The 83-page memorandum, filed Feb. 5, follows an order to show cause filed by the company on Feb. 3.

U.S. District Judge Lewis A. Kaplan, for the Southern District of New York, granted the temporary restraining order on Tuesday. However, an argument on the motion for the preliminary injunction is set for Feb. 18.

In an order filed Wednesday, Kaplan said the motion "may implicate relations between the United States and Ecuador and, in addition, raise issues in which the United States has an interest."

Should the State Department wish to express a position, he said, one should be received by Tuesday.

All parties were directed to provide the department with all filings and papers by no later than the close of business Thursday.

The injunction, Chevron said, is necessary to maintain the status quo, "which Defendants plan to alter to Chevron's detriment as soon as the Ecuadorian court renders its judgment by mounting a 'multiple front' assault of 'prejudgment attachments' and enforcement proceedings abroad to 'compound the pressure'" on the company to pay them off.

Chevron goes on to argue that permanent injunctive relief is proper where a defendant has committed or intends to commit a RICO violation, and "exhibits a reasonable likelihood of committing future violations."

"Defendants have engaged in a multi-year, many-pronged conspiracy to extort a multi-billion dollar payment from Chevron through sham litigation, fraud, money laundering, obstruction, witness tampering, and a massive campaign of false publicity," the company wrote.

"They have sustained this conspiracy despite significant setbacks, including exposure of their fraudulent conduct, and have responded by merely upping the ante of claimed damages.

"Defendants' persistence shows that it is not merely a likelihood, but a virtual certainty, that, if not enjoined, they will continue to engage in racketeering activity."

Chevron said a judgment in the Ecuador lawsuit is "imminent." In December, the court reissued the "autos para sentencia," which formally closed the evidence and vested the court with authority to enter a judgment at any time.

"Defendants' own words make clear that a judgment for the Lago Agrio plaintiffs is a foregone conclusion," the company wrote. "All that remains to be publicly revealed is the judgment's precise amount."

However, that judgment would be considered unrecognizable and unenforceable, Chevron argues.

"There is an overwhelming likelihood of success in establishing the unenforceability of any Lago Agrio judgment against Chevron because Defendants have relied on fraud to obtain any such judgment and the Ecuadorian judicial system fails to provide a fair and impartial tribunal or basic guarantees of due process," it wrote.

Absent injunctive relief, Chevron contends it will suffer "irreparable harm." Kaplan agreed.

The company alleges that the defendants have prepared to launch multiple enforcement actions and asset seizures around the world, and that they are already assembling a team to seize assets and boats where Chevron subsidiaries operate.

"The costs of even a temporary seizure of Chevron's assets or those of its subsidiaries could be substantial, and unlikely to be remediable after the fact," Chevron wrote.

Public interest also strongly weighs in favor of an injunction, the company argues.

If the court cannot grant Chevron injunctive relief, the company said at the very least it has raised some "serious questions" about the defendants' conduct and their entitlement to relief.

From Legal Newsline: Reach Jessica Karmasek by e-mail at jessica@legalnewsline.com.

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