NEW YORK (Legal Newsline) - A federal judge, in an order filed Tuesday, is allowing Chevron Corp.'s suit against a group of Ecuadorian plaintiffs to move forward.
In his 97-page ruling, Judge Lewis Kaplan of the U.S. District Court for the Southern District of New York wrote that some actions of the courts in Ecuador "unquestionably were tainted" but could not say, at this point, if an $18 billion judgment against the oil giant cannot be enforced in New York.
Chevron refuses to pay the judgment imposed by an Ecuadorian court last year.
In February 2011, the court found the company liable for dumping billions of gallons of toxic waste into the Amazon, causing an outbreak of disease and decimating indigenous groups.
The ruling stems from an environmental lawsuit involving Texaco Petroleum Company, which merged with Chevron more than 10 years ago.
In January, an appellate court in Ecuador upheld the $18 billion judgment for Chevron's "intentional contamination."
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.
Chevron, which has vowed never to pay the hefty judgment, filed a racketeering lawsuit in the New York federal court last year in response.
In its RICO suit, 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 $18 billion judgment is a product of "bribery" and "fraud," and is "illegitimate."
"The company does not believe that the Ecuador judgment is enforceable in any court that observes the rule of law," it said in a statement in May.
In March 2011, Kaplan had issued an injunction blocking enforcement of the judgment.
However, that September, the U.S. Court of Appeals for the Second Circuit ordered that the injunction be vacated.
Since then, the Ecuadorians have asserted affirmative defenses of res judicata and/or collateral estoppel in the RICO suit.
Chevron, in response, moved for partial summary judgment dismissing the defenses to the extent that they are based on the judgment -- on the theory that the judgment is not entitled to recognition or enforcement and therefore would not be entitled to "preclusive effect" even if the other bases for preclusion were satisfied.
The company based its motion on contentions that the judgment is not entitled to recognition because it was procured by fraud; constitutes an unenforceable penalty; and was rendered against it despite the fact that the Ecuadorian courts lacked personal jurisdiction over it.
In the alternative, Chevron argued that the res judicata-collateral estoppel defense is without merit under the law of former adjudication without regard to the recognizability and enforceability of the judgment.
In their response, the Ecuadorians argued that the res judicata-collateral estoppel defense does not raise the judgment as preclusive of this action or any issue here; that they do not seek recognition or enforcement of the judgment in New York; and that Chevron's motion therefore is moot or without merit.
In his order this week, Kaplan concluded that the Ecuadorians' position is "incorrect."
He also concluded that Chevron's motion must be denied insofar as it rests on the premise that the $18 billion judgment is not recognizable or enforceable and, regardless of recognizability or enforceability, insofar as it rests on the law of collateral estoppel.
However, Kaplan granted the company's motion to the extent that it seeks dismissal of the res judicata defense.
"The crux of the motion is the contention that the Lago Agrio judgment should not be recognized or enforced by reason of fraud," the judge wrote.
"As the foregoing demonstrates, the LAPs' procurement of the termination of judicial inspections, the adoption of the global assessment, and the appointment of (expert Richard Stalin) Cabrera (Vega) all unquestionably were tainted."
He continued, "The secret participation of the LAP team in Cabrera's activities and its secret drafting of the bulk of Cabrera's report were tainted as well."
Moreover, the judge said there are "serious questions" concerning the preparation of the judgment itself.
"But it cannot be said at this stage of the proceedings that Chevron is entitled to a determination in its favor as to the recognizability and enforceability of the judgment or the collateral estoppel defense in view of the issues as to whether any of this materially affected Chevron's ability fully to present its defense or corrupted the judicial process so as to warrant such a determination," Kaplan wrote.
Kent Robertson, a spokesman for Chevron, said in an email Tuesday that the judge's ruling "clears the way" for the company to challenge the enforceability of the judgment in the federal court.
Meanwhile, Karen Hinton, a spokeswoman for the Ecuadorians, said Tuesday her clients viewed Kaplan's decision as "yet another setback" for Chevron.
"The rainforest communities in Ecuador who have fought to hold Chevron accountable will continue to take all necessary and proper legal measures to seize Chevron assets to ensure that their legal rights are vindicated and that Chevron complies with its legal obligations," she said in a statement.
"We also note that Kaplan's refusal to grant Chevron's request that the Ecuador judgment be rendered unenforceable on summary judgment is yet another rebuke to the oil giant's fabricated fraud charges -- this time by a judge favored by Chevron who has shown a consistent bias against the indigenous and farmer communities who for decades have fought to hold Chevron accountable for criminal misconduct that has decimated their cultures and caused widespread health and economic problems to thousands of people."
In rejecting the "heart" of the company's request for summary judgment, Hinton said the judge rendered a ruling "consistent" with recent decisions of appellate courts in both the United States and Ecuador, which determined that no U.S. court has the legal authority to block enforcement of the Ecuador judgment.
"We remind observers that the proceedings before Judge Kaplan are and will be irrelevant to the enforcement proceedings now underway in Canada, Brazil and other countries where such actions might be filed," she added.
In May, the Ecuadorians hit Chevron with another lawsuit, this time in Canada, in hopes the company would comply with the $18 billion judgment.
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 said they were forced to file the enforcement action because Chevron refuses to pay the judgment imposed by the Ecuadorian court last year.
From Legal Newsline: Reach Jessica Karmasek by email at firstname.lastname@example.org.