Ontario Upholds Rule of Law, Rebuffs Claim Against Chevron Canada

The Ontario Superior Court of Justice has struck yet another blow for the Rule of Law.

Forbes - Michael I. Krauss 23/01/2017

Foto: Forbes

Foto: Forbes

The court yesterday dismissed an effort to enforce a judgment fraudulently obtained against Chevron Corporation in Ecuador, against the Canadian assets of a different company, Chevron Canada Limited.

Those unfamiliar with this saga need merely read earlier columns of mine to become familiarized with the details of this sordid tale of judicial corruption.  In addition, Paul M. Barrett's excellent Law of the Jungle  gives you all the background you need.  Here's the skeletal version:

• Texaco operated an oilfield in Ecuador as a minority partner with a petroleum company belonging to the Government of Ecuador.

• Texaco ended its participation, spent millions cleaning up discharges it had emitted, and received a total legal release from the Government of Ecuador.

• The Government of Ecuador never cleaned up its own extensive discharges and in fact likely considerably worsened the situation.  Many Ecuadoreans were sickened, likely by pollution created after the departure of Texaco.

• After Texaco had left Ecuador, Chevron Corporation merged with Texaco.

• An American attorney launched a suit in the US against Chevron Corporation on behalf of 30,000 Ecuadoreans.  The suit was dismissed, as the US was found to be an inappropriate forum when all witnesses were located in Ecuador.  The American attorney then refiled the suit in Ecuador, and proceeded to bribe Ecuadorean judges to render and even ghost-write a multi-billion-dollar verdict against Chevron.

• Movie stars were enlisted to travel to Ecuador and dip their hands in oil-soaked earth, as if that provided evidence that Chevron were responsible for the damage. Ecuadorian President Rafael Correa, who had already declared Ecuador's national debt illegitimate and announced that the country would default on over $3 billion worth of bonds, joined in the effort to extract billions from Chevron.

• Chevron, which has never operated in Ecuador or owned any assets there, refused to pay the fraudulently obtained judgment. Going on the counterattack, it filed a RICO (the Racketeering Influenced and Corrupt Organizations Act) suit against Donziger in US District Court. The judgment of that court detailed the massive fraud against the company and found that Donziger had engaged in multiple violations of RICO.Crimes committed against Chevron Corporation included extortion, money laundering, wire fraud, witness tampering and obstruction of justice.That District Court ruling was confirmed by a panel of the Second Circuit Court of Appeals.  The outcome of that trial is that the plaintiffs are not allowed to enforce the Ecuadorean judgment in the United States.  So they have gone to foreign courts to try to enforce it.

• Brazilian and Argentine authorities have advised their own judicial systems not to enforce the Ecuadorean judgment in their countries, because of the massive fraud.

Chevron Corporation does no business in Canada and had no assets to be attached there.  So the US attorney sued Chevron Canada Limited, a corporation removed by seven levels from Chevron Corporation.  Chevron Canada Limited is an operating company that explores for gas and oil in Canada.  It has never had any dealings in Ecuador. Nonetheless, plaintiffs claimed that Chevron Canada Limited was related enough to Chevron Corporation to be held liable for the amount of the Ecuadorean judgment (plus, of course, considerable interest). The attorney also asked the Ontario court to prohibit Chevron Corporation from using the considerable evidence of fraud, which the attorney claimed would be insulting to Ecuador and violative of its sovereignty.,

Judge Hainey of the Ontario Superior Court of Justice would have none of it.  In a sober and extremely well-reasoned opinion, the judge ruled, in conformity with basic principles of liability respected around the civilized world, that the two corporations were distinct entities and that Chevron Canada Limited was not the defendant in the Ecuadorean case.  Nor was Chevron Canada Limited established to shield Chevron Corporation from its obligations in any way.  Nor was Chevron Canada Limited a "puppet" of Chevron Corporation.  The court dismissed the case against Chevron Canada Limited for these reasons.  It also held that, in the Canadian suit against Chevron Corporation itself, evidence of the Ecuadorean fraud would be fully admissible.

It must be galling to Mr. Donziger, to President Correa (he who treated Australian WikiLeaks founder Julian Assange as an anti-imperialist ally in 2012, opening the doors of Ecuador's embassy in London to shield him from extradition to Sweden to answer charges that he there raped two women), to the gullible movie stars who allied themselves to Donziger and Correa, and to the well-meaning but naive readers who condemn me every time I write about this, that so many countries stubbornly insist that the Rule of Law matters.  Well, it does matter.  Ecuadorian citizens have been harmed, quite possibly through the perfidy of a corporation controlled by their own government. That doesn't authorize the fraudulent spoliation of American shareholders and pension funds.

I'm still waiting for Bar discipline to be meted out, and for federal criminal authorities to follow up on the RICO violations noted by the United States District Court.

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.

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