How Chevron's Watson Fought Landmark Legal Battle — And Won

Investor's Business Daily - John Shu 25/10/2017

Photo: ChiefExecutive.net

Chevron recently announced that John Watson, who has served as chairman and CEO for 7-1/2 years, will retire early next year and be replaced by Mike Wirth in a long-planned transition. Watson will be remembered for many accomplishments. One of the major legal issues under Watson's leadership was Chevron's courageous decision to fight notorious plaintiff's attorney Steven Donziger and his fraudulent multibillion-dollar lawsuit against the oil giant.

The long legal saga ended earlier this summer (at least in the United States) when the U.S. Supreme Court summarily denied Donziger's certiorari petition in a single sentence.

Donziger had asked the Court to review his 2016 loss at the 2nd Circuit. In 2014, the U.S. District Court in Manhattan (Judge Lewis Kaplan, a Clinton appointee) found Donziger and his co-defendants liable for very serious civil racketeering charges.

Chevron's decision to fight Donziger and the Supreme Court's denial is important because, going forward, unscrupulous plaintiffs' attorneys who engage in a pattern of illegal acts to obtain their verdicts can and will be held liable for them.  For those unfamiliar with this case, Chevron successfully sued Donziger and his co-defendants in civil court for violating the Racketeer Influenced and Corrupt Organizations Act, commonly known as RICO.

The RICO statute specifically provides for a private right of action. Chevron proved at trial that Donziger used an existing "enterprise" to order, commit or conspire to commit multiple illegal acts such as mail and wire fraud, bribery, blackmail, extortion, and money laundering. Donziger committed them in order to win a fraudulent $19 billion verdict against Chevron in Ecuadoran court for alleged pollution in northeastern Ecuador.

At the trial, Chevron submitted deposition testimony of 22 witnesses along with 4,000-plus documents, and called 25 live witnesses.  Chevron also submitted into evidence incriminating scenes and outtakes from "Crude," an emotion-tugging 2009 documentary film that Donziger commissioned to exert media pressure. The facts and evidence that Chevron submitted at trial were so solid that Donziger did not challenge them on appeal.

Judge Kaplan found Donziger liable under RICO and prohibited Donziger from profiting from his ill-gotten Ecuadoran judgment. Judge Kaplan wrote a detailed 485-page opinion, laying out how Donziger used "corrupt means" and "egregious fraud" to obtain the Ecuadoran court verdict against Chevron, and stated that "(i)f ever there were a case warranting equitable relief with respect to a judgment procured by fraud, this is it."

Donziger could not enforce his fraudulently obtained Ecuadoran judgment in Ecuador itself because Chevron has no assets there. He cannot enforce the judgment in the United States because he is permanently enjoined from doing so. Thus, Donziger has tried to enforce the judgment in other countries such as Argentina, Brazil and Canada — with little success so far.

In fact, last week Donziger abandoned his efforts in Brazil, where the Brazilian Federal Public Attorney recommended against Donziger's position, and relied on Judge Kaplan's factual findings to do so. In Canada, a lower court ruled that the plaintiffs cannot enforce the judgment against Chevron Canada, which is a subsidiary.

Now an appeals court has ruled that the plaintiff's must deposit nearly a million dollars Canadian (over $800,000 U.S.) as security costs for their appeal.

"In my view, the Ecuadorean plaintiffs have not demonstrated that their appeal has a good chance of success," Judge Gloria Epstein wrote in the opinion.

Now that both the 2nd Circuit and the U.S. Supreme Court affirmed Judge Kaplan's factual findings, however, Donziger will have an even more difficult time in those and other countries. This is because any court in any country with any semblance of rule of law must consider all of Donziger's numerous predicate offenses that Judge Kaplan listed. It is unlikely that a court would enforce a judgment obtained through illegal means.

The severity of Donziger's fraudulent behavior can be seen by the fact that several federal judges in the U.S. District Court for the Southern District of New York recently submitted a disciplinary complaint against Donizger to the Bar Association. His offenses — which include bribing and coercing judges, perjury, witness tampering, and obstruction of justice — directly harm the very heart of any legal system and should be addressed appropriately.

The U.S. Supreme Court left open the legal question of whether RICO permits private parties to obtain permanent injunctive relief in civil actions. Regardless of how other U.S. Circuit Courts of Appeal or the U.S. Supreme Court may rule on this larger legal question in the future, Chevron's RICO case against Donziger is final.

Donziger is liable for multiple RICO violations and permanently enjoined from enforcing his fraudulently obtained Ecuadoran judgment in the U.S.  Plaintiffs' lawyers who wish to emulate Donziger now know that they can be held liable for fraudulent shakedown attempts.