U.S. Judge Halts Ecuador Damages Enforcement Against Chevron

By and | March 8, 2011

A U.S. judge Monday halted enforcement of an $18 billion award against Chevron Corp, siding with the oil company against Ecuadorean plaintiffs in a long-running dispute over Amazon rain forest pollution.

The move comes three weeks after an Ecuadorean court’s ruling against Chevron in what has become an international test case, watched closely by private-sector oil companies wary of potential damages claims elsewhere.

U.S. District Court Judge Lewis Kaplan, extending a Feb. 8 temporary restraining order that froze enforcement of any damages, issued a preliminary injunction preventing the Ecuadoreans from trying to collect damages outside their country.

A legal battle in several jurisdictions around the world, Kaplan wrote, would only make it more likely that Chevron would decide to settle.

“If Chevron were to yield to the coercion, the damage would have been done,” the New York judge wrote in his 127-page ruling. “Chevron would have paid a price for peace.”

Kaplan noted that the damages from the Ecuadorean court in Lago Agrio have more than doubled from $8.6 billion originally because Chevron has failed to make a public apology and when a payment to the Amazon Defense Front is included.

Kaplan’s move is only the latest in a 17-year-long legal battle in which rain forest residents argue that Texaco, bought by Chevron in 2001, is responsible for hazardous oil-drilling waste dumped on their land in the 1970s and 1980s.

Chevron says Texaco cleaned up all waste pits for which it was responsible before turning the sites over to state-owned oil firm Petroecuador, which still operates in the area.

Karen Hinton, a spokeswoman for the Ecuadoreans, argued that the plaintiffs still have the right to enforce judgment in “any of the dozens of nations around the world where Chevron has assets,” adding that they would appeal Kaplan’s decision.

In anticipation of a judgment in Ecuador in favor of the indigenous Ecuadorean farmers, Chevron has asked Kaplan to step in as part of a civil racketeering case it filed on Feb. 1 against them and their various supporters.

Kaplan, citing the Ecuadoreans’ stated intention to enforce the judgment globally, found there was a “significant risk that assets would be seized or attached, thus disrupting Chevron’s supply chain,” if he did not grant the preliminary injunction.

He ruled that the ultimate enforcement of any damages from the Ecuador case could be litigated in the United States.

“Chevron is not a fly-by-night operation about to flee the country,” he wrote, adding that the San Ramon, California-based company is a major enterprise, “quite able to pay the entire judgment” if it loses the case.

The racketeering lawsuit in New York, brought against some of the Ecuadorean plaintiffs, their Amazon Defense Front supporters, and their main U.S. lawyer Steven Donziger, is part of the company’s broad attack on their allegations.

Chevron has pilloried Donziger for his comments on corruption in Ecuador’s judicial system and his purported efforts to intimidate officials. The remarks came to light in an acclaimed documentary, “Crude,” and its outtakes, which were subpoenaed in U.S. litigation.

The Ecuadorean plaintiffs have actually appealed the Lago Agrio court’s decision, claiming more money was needed for cleanup efforts.

“The Lago Agrio plaintiffs’ lawyers should not be allowed to benefit from an Ecuadorean judicial system that does not provide due process and from a judgment that they have procured through fraud and corruption,” a Chevron spokesman said in a statement welcoming Kaplan’s decision.

The case against Texaco was originally filed in New York in late 1993, before it was dismissed and refiled in Ecuador a decade later, in a change of forum supported by Texaco.

The racketeering case is Chevron Corp v. Steven Donziger et al, U.S. District Court for the Southern District of New York, No. 11-0691.

(With additional reporting by Basil Katz in New York; Editing by Carol Bishopric and Richard Chang)

Topics USA Legislation New York Energy Oil Gas

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