Biglaw, Environment / Environmental Law, Keker & Van Nest, Litigators, S.D.N.Y.

An $18 Billion Legal Battle Rages On

Chevron has hired some high-priced talent to help it fight a questionable judgment down in Ecuador.

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Under what circumstances would you see Gibson Dunn and Keker & Van Nest going up against each other? They’re two of the top litigation firms in the country, known for racking up victories in trial and appellate courts across the land. But they don’t come cheap.

Well, what if the issue was the enforceability of an $18 billion judgment, obtained in a foreign jurisdiction, that the plaintiffs are trying to enforce here in the United States? A highly questionable judgment, which the defendants are challenging on the grounds that it was the product of fraud and falsified evidence?

Yesterday, Judge Lewis Kaplan (S.D.N.Y.) handed down a whopper of an opinion — almost 100 pages — in the case of Chevron Corp. v. Donziger. The opinion is long and complex, addressing a host of complicated and technical issues of civil procedure. I was struck by the caption and cover page:

Look at the appearances on the left-hand side. That’s an impressive roster of attorney talent: five Gibson lawyers, led by Randy Mastro, co-chair of litigation at GDC, going up against eight Keker lawyers, led by founding partner John Keker. Imagine all the billables being racked up in this matter!

UPDATE (5:10 PM): The original version of this story incorrectly stated that Gibson and Keker were on the same side of the litigation. We have corrected the error. This is a clash of the titans, not a dream team.

The stakes are high, so the robust staffing is understandable. Here’s a report on Judge Kaplan’s ruling, from the Associated Press:

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A judge who once tried to stop collection worldwide of an $18 billion environmental judgment in Ecuador against energy company Chevron continued his criticisms of the award on Tuesday in litigation that seeks a declaration that the judgment was the product of fraud.

U.S. District Judge Lewis Kaplan in Manhattan said some of the actions involving courts in Ecuador “unquestionably were tainted” before the award was announced in February 2011, but he said it was too soon to say the judgment cannot be enforced in New York. His order last year banning enforcement of the judgment worldwide was overturned by a federal appeals court that said he had overstepped his authority.

A judge in Ecuador imposed the judgment for pollution that occurred when oil company Texaco was operating in the Ecuadorean rainforest, between 1972 and 1990. Texaco became a Chevron subsidiary in 2001. Chevron has long claimed that a 1998 agreement Texaco signed with Ecuador after a $40 million cleanup absolves it of liability. Ecuadoreans say the agreement did not protect the company from the claims of individuals, and they say the cleanup was fraudulent.

Now the ball is back in Judge Kaplan’s court. As we mentioned back in May, the judge handed Chevron a partial victory by allowing much of the company’s racketeering and conspiracy case against plaintiffs’ lawyer Steven Donziger to go forward.

This time around, there was additional good news for Chevron. Again from the AP:

In a lengthy written ruling, Kaplan recounted some of Chevron’s claims that the Ecuador ruling resulted from fraud, including that a key report cited in the judgment was drafted in substantial part by the plaintiffs’ team. He said the evidence that the report and subsequent responses were “tainted by fraud” was unchallenged. He said the report and its relationship to the judgment were “disturbing.”

Both sides claimed victory. Here is Chevron’s take:

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[Yesterday], the U.S. District Court in New York rejected the Lago Agrio plaintiffs’ attempt to avoid a ruling on the validity of their fraudulent judgment and made important factual findings about the plaintiffs’ fraud and misconduct. In a 97-page opinion, Judge Kaplan rejected the effort of the Ecuadorian plaintiffs and their lawyers to abruptly drop some of their arguments in Chevron’s RICO case in order to avoid a ruling against them, calling this tactic an “unworthy pretense.” The court examined the record and issued findings that plaintiffs’ lawyers engaged in activities that “tainted” the Lago Agrio trial, further observing that “there are serious questions concerning the preparation of the judgment itself.” Judge Kaplan denied Chevron’s motion for immediate summary judgment on whether the Ecuador judgment is enforceable under New York law, instead requiring further legal and factual submissions prior to a final ruling. Chevron intends to press forward with its racketeering and fraud case until the perpetrators of the judicial fraud are held accountable for their actions.

And here is how the Ecuadorian plaintiffs reacted:

A spokeswoman for Ecuadoreans who sued Chevron over the damage to their lands called it a victory that the judge didn’t immediately rule in Chevron’s favor.

“The real news here is that Judge Kaplan blinked,” said the spokeswoman, Karen Hinton. “He admits fraud hasn’t been proven and the Ecuador judgment can be enforced.”

Well, to be technical, Judge Kaplan didn’t quite rule that “the Ecuador judgment can be enforced.” The Chevron press release is more accurate: “Judge Kaplan denied Chevron’s motion for immediate summary judgment on whether the Ecuador judgment is enforceable under New York law, instead requiring further legal and factual submissions prior to a final ruling.”

So which side really prevailed? Check out the 97-page opinion for yourself, as well as links to additional news coverage, on the next page.

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