In March, Chevron (CVX) won an unusual racketeering verdict in federal court in New York that thrilled many members of the corporate defense bar. The company obtained a ruling that discredited an earlier multibillion-dollar pollution judgment against Chevron in Ecuador. Corporate advocates praised the New York ruling as a model of how to combat allegedly fraudulent class actions. Late on Oct. 1, Chevron made a lengthy appellate filing seeking to preserve its victory.
The most surprising thing about Chevron’s 185-page brief is that the San Ramon (Calif.)-based oil company concedes (on page 65) that its antagonists raise at least one “legitimate” issue on appeal. Not that the company surrenders on the point—it most certainly does not—but in a legal war of uncommon bitterness that has persisted for 21 years, an admission that the other side has raised even a single question worth consideration seems shocking.
Before getting to the particulars, a brief recap: In 2011, Steven Donziger, a New York plaintiffs’ attorney, engineered a record $19 billion verdict against Chevron for ecological and human harm linked to oil production in eastern Ecuador in the 1970s and 1980s. Ecuadorian appellate courts upheld Chevron’s liability but halved the damages to a still-substantial $9.5 billion. Contending that it had been unfairly blamed, Chevron refused to pay and fought back. The company sued Donziger in federal court in New York under the Racketeer Influenced and Corrupt Organizations (RICO) Act. After a six-week trial in late 2013, U.S. District Judge Lewis Kaplan ruled in March of this year that Donziger’s legal-and-media campaign against Chevron had indeed evolved into a shakedown featuring fabricated scientific evidence, forged documents, coercion, and bribery.
Donziger has continued to deny wrongdoing. He has accused Chevron of using RICO to avoid a hefty penalty in Ecuador, and he has appealed the racketeering verdict. The crux of Donziger’s appeal is threefold:
1.) Judge Kaplan relied on the testimony of a corrupt Ecuadorian judge who testified about soliciting bribes and ghostwriting another judge’s court rulings.
2.) Whatever fraud may have infected the original $19 billion Ecuadorian verdict, appellate judges in that country took a fresh look at the evidence and independently affirmed Chevron’s culpability.
3.) Kaplan exceeded his authority when he issued an order saying that Donziger and his clients may not profit from their ill-gotten Ecuadorian verdict.
Donziger’s clients—thousands of poor Ecuadorian farmers and indigenous tribe members—have a fresh lawyer in the RICO appeal. That attorney, Burt Neuborne, a professor at New York University Law School, has taken the case without pay and, in his filings, distanced himself from Donziger. Even if Donziger deserves condemnation, Neuborne has argued in a separate brief, the Ecuadorian pollution victims require reparation. Neuborne has embraced the contention that the Ecuadorian appellate process cured whatever irregularities tainted the Ecuadorian trial.
In its response, Chevron argued that Kaplan’s 485-page RICO verdict relied on a mountain of factual evidence that Donziger committed fraud. Kaplan conceded the credibility questions hovering over the corrupt Ecuadorian judge who supported Chevron’s version of events. Kaplan determined, however, that independent evidence corroborated the dubious judge’s testimony. On this matter, and other questions about Kaplan’s factual findings, Chevron is likely to prevail. Federal appellate courts rarely second-guess a U.S. district judge’s factual determinations, especially after there has been a long trial with extensive live testimony.
(Bloomberg Businessweek)
