Attorneys want Chevron's $21.8M bond increased

By Jessica M. Karmasek | Apr 5, 2011


NEW YORK (Legal Newsline) - Chevron is divesting itself of overseas assets that could be used to enforce the $9.5 billion legal judgment against it, lawyers for the Ecuadorian plaintiffs said in a brief submitted to a New York federal court last week.

The plaintiffs requested U.S. District Judge Lewis Kaplan increase a Chevron bond of $21.8 million to reflect the value of the assets recently sold, which they say surpasses at least $1.7 billion. The court filings are part of a motion to stay a preliminary injunction issued by Kaplan pending an appeal to the U.S. Court of Appeals for the Second Circuit.

Kaplan's preliminary injunction order aims to prevent the Ecuadorian plaintiffs and their counsel from taking any steps to enforce the legal judgment against Chevron issued Feb. 14. The 188-page judgment against Chevron in Ecuador was based on a 200,000-page trial record of more than 64,000 scientific sampling results and inspections of more than 100 former oil production sites.

Before issuing his order, Kaplan did not review the Ecuador trial record or even read the Ecuador trial court decision, said Karen Hinton, spokeswoman for the plaintiffs.

"We find Judge Kaplan's apparent bias against Ecuador shocking to the say the least," Hinton said in a statement, noting Ecuador's U.S. Ambassador expressed "concern" over the ruling.

Kaplan required Chevron to post a $21.8 million bond as a condition of granting the preliminary injunction. But the amount "pales" next to the potential $9.5 billion judgment the company is facing in Ecuador, Hinton said.

"While the Ecuadorian plaintiffs and their counsel may be unable to take any steps to even prepare for (separate from initiating) enforcement proceedings, the preliminary injunction allows Chevron a generous window of time within which to divest itself of overseas assets that might be used to enforce the Ecuadorian judgment," Julio C. Gomez and Carlos A. Zelaya II wrote for the Ecuadorian plaintiffs in a 22-page brief filed Thursday.

In a sworn declaration to Kaplan, Gomez said Chevron has reached an agreement to sell $1.7 billion in assets located in the United Kingdom and that, during the past year, Chevron has made plans to divest of assets in more than 20 other countries, including 174 gas stations, an equity interest in a refinery and aviation and industrial fuels assets in parts of the Caribbean and Central America.

"Chevron appears to be taking advantage of Judge Kaplan's favorable ruling to divest itself of assets in countries that it fears would treat the Ecuadorian judgment with the respect due to a sovereign nation's courts," Hinton said.

She added, "If Chevron's actions are standard business transactions and are not related to its legal liabilities -- as the company has indicated -- then the company should be amenable to posting a bond consistent with the size of the assets it has liquidated to provide some security that it is not attempting to escape its legal obligations."

Chevron's liquidation of international assets is particularly notable, Hinton said, given the company's "blatant" efforts in recent years to strip all of its assets out of Ecuador in anticipation of an adverse judgment in the country.

Given Chevron's legal maneuvering, the Ecuadorian plaintiffs will have to enforce the $9.5 billion judgment in countries where the company does have assets once the judgment is appealed in Ecuador, she said.

In its 29-page response filed Friday, Chevron said the plaintiffs' request for a stay of all proceedings pending appeal is "unsupported" and would "substantially harm" its legitimate interests.

"It is just another tactic in their long-running strategy of delay. At the same time that their cohorts assert their intention to disobey this Court's preliminary injunction in the near future, the (Lago Agrio Plaintiffs) Representatives claim that Chevron should just trust in their good offices to respect that Order, and thus there is no legitimate need for a final -- as opposed to preliminary -- finding of unenforceability," it said.

"But any such trust would be unreasonable, since their Ecuadorian co-conspirators and American spokespersons insist that this Court's Order is 'completely... unenforceable, inapplicable for countries other than the United States.'"

Chevron argues it needs the court's final decision as "quickly as reasonably possible," and that the plaintiffs' only claimed harm -- "the routine expenditure of resources that accompanies all litigation" -- is "insufficient to warrant the 'extraordinary remedy'" of a stay of proceedings.

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

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