Justice Prevails Again, Hopefully For Good, In Ecuador v. Chevron

Forbes - Michael I. Krauss 15/08/2016

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Law Prof. I write about Torts, Legal Ethics & Foreign Policy Issues

Those whose ideology leaves them convinced that large corporations despoil the earth find the notion that Chevron (through its predecessor Texaco) despoiled large areas of Ecuador attractive. What does it matter that Texaco was only a minority shareholder in a petroleum development project in fact controlled by the Ecuadorean government? What does it matter that when that Ecuadorean government corporation wished to take over the project in its entirety, it agreed that Texaco would remediate the environmental damage it had done and that the national Ecuadorean petroleum company would remain responsible for the site in the future? What does it matter that that Ecuadorean company then despoiled the area to the enormous detriment of local inhabitants? What does any of this matter, when there is money to be got from a wealthy American corporation that never even set foot in Ecuador? Why, a little false testimony here, a massive bribing of a judge there, and voila!, a $9.5 billion dollar Ecuadorean supreme court award against Chevron results.

I have gone over the history of this sordid affair in several previous postings here on Forbes. In the past month two additional nails have been hammered into the coffin of the duplicitous plaintiffs in this case. First, Ecuador paid Chevron over $100 million last month, following an international arbitral ruling that it had reneged on its remediation agreement with Chevron. Ecuador had outrageously threatened to pay this amount directly to the plaintiffs who had won the fraudulent Ecuadorean tort judgment against Chevron, but clearly the country’s legal advisors must have told their client that such payment would have been null and void as regards its debt to Chevron CVX +1.52%. Second, Ecuadorian attorney Pablo Fajardo, who had received a 2008 CNN “Hero award” for his “side-by-side” work with disgraced plaintiffs’ attorney Steven Donziger in the obtention of the Ecuadorean judgment against Chevron, was fired by the Amazon Defense Front, the organization that would have administered and controlled the award were it ever paid. Fajardo had obviously been less zealous than the ADF desired in blocking payment of that arbitral award to Chevron. Third, and most prominently, on Sept. 7 a panel of the United States Court of Appeals for the Second Circuit unanimously upheld the judgment of District Court judge Kaplan that the award obtained against Chevron was the product of bribery, coercion, and fraud. The panel confirmed that Donziger had committed extortion, money laundering, wire fraud, Foreign Corrupt Practices Act violations, witness tampering and obstruction of justice. The court ratified Judge Kaplan's compassion for Ecuadoreans harmed by pollution, which did not blind him to the massive corruption committed by Donziger and Fajardo:

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.

Every time I have posted about this case I have been the target of vitriolic “comments” (some of which I have deleted from the Forbes site because of their vulgarity) accusing me of being a lackey of corporate interests. What rubbish! I have never taken a cent from Chevron — my interest is in protecting the Rule of Law, which an American lawyer has so egregiously violated in his rapacious search for billions. This unanimous Second Circuit decision (the three-judge panel included two African-American judges appointed by Democratic presidents) is a tremendous ratification of those of us who have decried Donziger’s abuse.

In May 2015, Brazil’s Deputy Prosecutor General recommended to the Superior Court of Justice that the fraudulent Ecuadorian judgment not be recognized for enforcement in that country. In December 2015, the Supreme Court of Gibraltar issued a judgment against Amazonia Recovery Ltd., a Gibraltar-based company set up by Donziger to receive and distribute funds resulting from the fraudulent Ecuadorian judgment. The Gibraltar court awarded Chevron $28 million in damages and issued a permanent injunction against Amazonia, preventing the company from assisting or supporting the case against Chevron in any way. Now the United States Court of Appeals has issued a 127-page ratification of the prohibition on enforcement of the fraudulent Ecuadorean ruling that, I believe, will shortly be relied on by Canadian courts in rejecting Donziger’s efforts to enforce it in that country.

When Steven Donziger is disbarred and imprisoned, the final chapter in this sordid story will have been written, and the final triumph of the Rule of Law over this Ecuadorean corruption can be celebrated.

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