Chevron Canada And Ecuador: The Ontario Court Of Appeals Gets An Easy Case

Forbes - Michael I. Krauss 20/04/2018

Osgoode Hall Courts of Law, Toronto. Photo: Forbes

The Chevron/Ecuador saga may be on life support in Brazil, Argentina, and the United States, but it is still alive and breathing (if not actually kicking) in Toronto, Canada.  [Full disclosure:  though I was born in New York, my folks moved to Toronto when I was a young child.  I grew up there and my mother still lives there. That's it for disclosure.  I have no link to plaintiffs or defendants in the Chevron case.]

For those (few?) who know nothing about this saga, please use the appropriate links to see my numerous earlier columns.  Here's a highly abbreviated version:  Texaco operated a joint venture with a state enterprise in Ecuador.  Texaco left the joint venture, performed a cleanup that Ecuador declared complete, and was certified by Ecuador as being free of any liability.  Years passed, the Ecuadorean state enterprise continued to operate the site alone, and much terrible pollution did occur.  Meanwhile, in the USA, Chevron Corp. bought Texaco.  Then Ecuadorean natives, backed by a US attorney and their government, sued Chevron for billions.  They obtained a judgment for $9.5 Billion against Chevron Corp. in Ecuador's supreme court, but as Chevron Corp. had no assets in that country, they had to seek to enforce the decision in the USA.  Alas, the entire Ecuadorean process was tainted by corruption -- in fact, the original Ecuadorian court ruling was ghost-written and the product of bribes, according to exhaustive findings by the United States District Court, which refused to enforce the judgment stateside. The Wall Street Journal termed it the “legal fraud of the century.”

Brazilian and Argentine authorities have since agreed with the United States District Court that the Ecuadorean judgment is tainted and must not be enforced. What's Canada got to do with this?  Chevron Corp. has no assets in Canada, but that hasn't stopped plaintiffs from trying their hand in the Great White North.  Plaintiffs want to enforce it against Chevron Canada, a company that never had any activity in Ecuador and that didn't buy Texaco.

I am not responsible for my brother's, or my cousin's, or my father's, or my grandfather's, misbehavior, even if we have the same last name.   Chevron Canada is not responsible for the nonexistent misbehavior of Chevron Corp  (the one decision that actually blamed Texaco for the pollution was found to have been corruptly purchased).  Plaintiffs' Canadian case was dismissed by the Ontario trial court in 2017, and should be a no-brainer for the provincial Court of Appeals, which just heard arguments on April 17 and 18.

The plaintiffs were accompanied to the Court of Appeals by Native Canadians who support them.  "Investor rights should not supersede indigenous rights," declared Perry Bellegarde, national chief of the Assembly of First Nations, who came to watch the proceedings and show support for the Ecuadorean natives.   Mr. Bellegarde is surely right about that, but there are no indigenous rights to the assets of a company that did them no harm.  The Rule of Law guarantees the protection of the rights of all, indigenous or not, and we are all in jeopardy if that Rule of Law is discarded.  And a fundamental principle of the Rule of Law is that corporations are distinct juridical entities and that unless one company is fraudulently created it is not liable for the misdeeds (not that there have been any misdeeds, the author repeated, his face getting bluer and bluer) of another.  No evidence has been presented that Chevron Canada was a shell created to hide Chevron Corp's Ecuadorean liability, and no evidence could be presented for such a claim because it is laughably false.  Chevron Canada is a legitimate company that searches for and markets oil and gas inside Canada.  It has no liability for pollution that occurred in a country where it has never operated.

Those sympathetic to Chevron Corp. (which, face now totally blue, I repeat is not the main defendant in the Ontario case) note that one of the witnesses to the fraudulent Ecuadorean process, trial judge Eduardo Guerra, has recanted his sworn admission to have taken bribes to decide in plaintiffs' favor.  Sorry, his recantation is of no import.  United States District Judge Kaplan had expressly rejected any idea that Chevron's defense depended on Guerra.  Judge Kaplan wrote, “As the Court’s opinion makes clear, this Court would have reached precisely the same result in this case even without the testimony of Alberto Guerra."   The judge noted that Guerra and his immediate family had had to be relocated by Chevron to the United States because of "serious risks to personal safety and security had they remained in Ecuador.” Obviously, Guerra still has family in his native country and he is vulnerable.  His testimony was of marginal import, as there was overwhelming evidence of fraud.

So the Ontario plaintiffs have three problems. Their first problem is that the court is being asked to hold X (Chevron Canada) liable for the alleged tort of Y (Chevron Corp) when X is absolutely not legally responsible for Y's actions.  The second problem is that Y was itself found liable by a kangaroo court in Ecuador.  The third problem is that Ontario courts, unlike their Ecuadorean counterparts, have a reputation for abiding by the Rule of Law, which is why Canada in general (and Ontario in particular) have been safe places in which to invest.

The plight of the Ecuadorean natives is a very sad one.  They likely have only their own socialist government to blame for their real health problems.  Their desperate efforts to tar Chevron bring shame on them and on their country.

Michael Krauss is Professor of Law at the Antonin Scalia Law School of George Mason University, and is a nationally known scholar of Tort Law and Legal Ethics. His home page is here.