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The Second Circuit Makes Chevron v. Donziger

Law - Michael D. Goldhaber 15/08/2016

To this day, half the Internet portrays Steven Donziger as a hero for suing Chevron Corporation in Ecuador. As the accomplished filmmaker Joe Berlinger put it in a public radio interview only two weeks ago, “It’s a very complicated story.” Well, it’s certainly a messy story. But as a matter of epistemology, law and morality, it’s always been simple. On Monday the U.S. Court of Appeals for the Second Circuit laid it out with admirable clarity. Donziger lied and cheated his way to a multibillion-dollar Ecuadorean judgment against Chevron.

A 500-page trial ruling in 2014 found Steven Donziger and his team in Ecuador liable for countless acts of litigation fraud. Both books on the case (by me and the esteemed Paul Barrett) agree that the facts of the litigation fraud are mostly indisputable. And in court, they weren’t disputed. While Donziger and his allies kept smearing U.S. district judge Lewis Kaplan in podcasts, they never renewed their charges of bias on appeal (despite the Second Circuit inviting them to do so). And most devastatingly — in their 325 pages of appeal briefs — they never challenged the trial court’s factual account. “[Y]ou choose not to take [it] on,” noted Judge Barrington Parker Jr. at argument. “You don’t take it on at all.” The appellate ruling pounds on that point in both its opening and closing paragraphs.

The Second Circuit delivers its own words in a tone of dispassionate legal certainty. But a ruling that affirms Kaplan on every point channels the trial judge’s passion by constantly quoting him with added emphasis. Simply reading the Second Circuit’s “emphasis ours” passages produces a remarkable and devastating text.

The appeal judges begin with an extended highlight of Kaplan’s wise preface (excerpted here in part):

The Court assumes that there is pollution in the Oriente.… [But an] innocent defendant is no more entitled to submit false evidence, to coopt and pay off a court-appointed expert, or to coerce or bribe a judge or jury than a guilty one. So even if Donziger and his clients had a just cause–and the Court expresses no opinion on that–they were not entitled to corrupt the process to achieve their goal…. The wrongful actions of Donziger and his Ecuadorian legal team would be offensive to the laws of any nation that aspires to the rule of law, including Ecuador – and they knew it.

Amid page after page underscoring Kaplan’s damning prose, the appeal judges muster one pretty quotable line of their own: “The record in the present case reveals a parade of corrupt actions by the [plaintiffs’] legal team, including coercion, fraud, and bribery”. If you wish only to view that parade’s highlights, the best grandstands are on pages 13-14, 70, and 96-97 of the appellate opinion.

Donziger’s lawyer says he’s examining all options for review. To be sure, he has a ready-made circuit split on equitable relief under RICO. But Chevron can counter that a cert petition is moot, because the Second Circuit found equitable relief equally well grounded in common law. By the court’s count, this is the U.S. judiciary’s 57th rumination on Chevron in Ecuador. It will likely be the last.

What will be the legal result? Since the Second Circuit previously rejected a global injunction on enforcement under New York’s Recognition Act, Gibson, Dunn & Crutcher cleverly asked Kaplan to impose a constructive trust for Chevron’s benefit on any judgment funds that appellants might collect outside the U.S. I like to call this remedy an “anti-collection injunction.” The Second Circuit bought it as a form of “limited, non-global” equitable relief.” Formally, it applies only to Donziger and his two Ecuadorean clients who didn’t default in Kaplan’s court. But in practice, it’s equivalent to a global enforcement injunction. If the other 46 Ecuadorean plaintiffs try to collect on their judgment, Chevron will surely argue that they are acting in concert, and ask the enforcing court to impose a constructive trust.

Of course, now that the Second Circuit has affirmed Kaplan’s facts so resoundingly, the Ecuadorean parties are unlikely to get that far. And if Chevron wins its pending treaty arbitration, it can demand that Ecuador indemnify it for any damages that the plaintiffs somehow collect.

As I have argued at length, another consequence should be ethical discipline for Steven Donziger. The surface complexity of the narrative is no more an excuse for ethical inaction than it is an excuse for ideological blindness. As the Second Circuit quotes Kaplan on one point: “Donziger’s conduct with respect to the Fajardo Declaration was obstruction of justice, plain and simple.” Scratch the surface, read the Second Circuit’s 127 pages, and it’s not complicated.

Every time Donziger has lost over the past five years, well-meaning supporters have scorned the decision makers as “corporately inclined.” This is an affront to reason. As the Second Circuit eloquently affirms, Kaplan was merely following the facts. Although litigation fraud has no political valence, some may find it noteworthy that two of the appeal judges (Barrington Parker and Amalya Kearse) are African-Americans originally appointed by Democrats, and the third (Richard Wesley) overruled Kaplan earlier in the case. Judge Kearse also laid the foundation of alien tort jurisprudence, and that’s perfectly appropriate. Like the human rights jurists who filed an amicus brief against Donziger, she knows that there’s no tension between promoting human rights, and policing the integrity of its advocates.

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