Federal appeals court judges think Chevron may have overreached with efforts in U.S. to permanently strike down US$18B judgment in Ecuador for contaminating the rainforest

Rachel Carter

NEW YORK , September 16, 2011 (Associated Press) – NYC appeals judges put Chevron lawyer on defensive over $18 billion Ecuadorean judgment

Judges on a federal appeals court put a lawyer for Chevron Inc. on the defensive Friday, expressing skepticism that a Manhattan judge can shield the company from an $18 billion judgment in Ecuador for contaminating the rainforest.

The Ecuadorean plaintiffs want to stop a civil trial scheduled for November in New York that would determine whether the judgment handed down by an Ecuadorean judge in February was obtained fairly.

The three-judge panel of the 2nd U.S. Circuit Court of Appeals did not immediately rule on their request. But the judges made clear that they believe Chevron has overreached with its efforts to persuade a federal judge in New York to permanently strike down the judgment.

U.S. District Judge Lewis A. Kaplan barred collection of the award after concluding that Chevron was likely to prove that lawyers had manipulated a corrupt legal system in Ecuador to secure the judgment.

The award had followed nearly two decades of litigation. The Ecuadorean plaintiffs blamed the oil company Texaco for environmental contamination and illnesses resulting from its operation of an oil consortium from 1972 to 1990 in the Amazon. Texaco became a wholly owned subsidiary of Chevron in 2001.

Chevron has long argued that a 1998 agreement Texaco signed with Ecuador after a $40 million cleanup absolves it of liability. It claims Ecuador's state-run oil company is responsible for much of the pollution in the oil patch that Texaco quit more than two decades ago.

U.S. Circuit Judge Gerald E. Lynch suggested a ruling in the company's favor might set a precedent that would allow U.S. judges to "trump ... the law of every other country in the world."

The judge asked what right the company would have to any more than a declaration by a New York court that a judgment is not enforceable in New York under New York law.

"What in the New York law authorizes broader relief than that?" Lynch asked.

Chevron lawyer Randy Mastro repeatedly argued that the lawyers for the plaintiffs and the legal system in Ecuador engaged in violations so unprecedented and so egregious that it was fair for a Manhattan judge to protect the company.

"I've never seen a record so shocking of illegal conduct," Mastro said.

Judges Rosemary Pooler and Richard Wesley also expressed reservations about the jurisdiction of the New York courts.

Chevron claimed that the plaintiffs would rush to collect the judgment around the world even before an appeals process is completed in Ecuador. James E. Tyrrell, a lawyer for the Ecuadorean plaintiffs, blunted those claims by telling the appeals court judges that his clients would not pursue the award until the process is finished.

He also argued for the appeals court to remove Kaplan from the case, saying the judge had exhibited "an unwillingness to have an open mind."

In written arguments submitted to the court, Tyrrell wrote that Kaplan's decision banning collection "turns international judgment enforcement on its head. If upheld, the decision threatens not only to transform U.S. court into the world's judgment police, but also to encourage putative judgment debtors to file premature, pre-emptive declaratory judgment actions in their forum of choice."

In his own written arguments, Mastro said there was abundant evidence that the Ecuadorian judgment was fraudulent and that the plaintiffs "intend to use it to disrupt Chevron's operations around the world in order to force Chevron to pay them off."

John W. Keker, an attorney for a lawyer whose actions in the case are under scrutiny in the lower court, complained at the oral arguments about Kaplan's rulings.

"It's about to be a show trial," Keker said of the November trial. He predicted the plaintiffs were so damaged that they would spend the trial "tethered to a stake like a goat."

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