Gasoline pumps situated at a Chevron station in Milpitas, Calif., in February. A federal judge ruled that a record $9.5 billion environmental-damage award against Chevron was tainted. Associated Press
A federal judge ruled that a record $9.5 billion environmental-damage award againstChevron Corp. CVX -0.82% was tainted by the misdeeds of a lawyer leading the lawsuit, giving the oil giant a boost in its battle against a global effort to seize its assets.
In the latest twist in one of the longest-running legal battles in corporate history, U.S. District Judge Lewis Kaplan found that New York lawyer Steven Donziger and his litigation team engaged in coercion, bribery, money laundering and other misconduct aimed at securing a 2011 verdict against the company in Ecuador.
The judge’s decision bars Mr. Donziger and his two Ecuadorean co-defendants from profiting from the award and excoriates the plaintiffs’ attorney, who has spent the bulk of his legal career pursuing the case.
The judge concluded that Mr. Donziger and his team fabricated evidence, promised $500,000 to an Ecuadorean judge to rule in their favor, ghostwrote much of the final verdict in the case and took other actions that “perverted” the course of justice.
“The wrongful actions of Donziger and his Ecuadorean legal team would be offensive to the laws of any nation that aspires to the rule of law, including Ecuador—and they knew it,” Judge Kaplan wrote in a 485-page decision issued Tuesday morning.
“Donziger—in his own words—went over ‘to the dark side’ by recruiting and paying new experts to pose as ‘independent monitors’ and to criticize the settling experts’ conclusions to the court without disclosing that the [Ecuadorean plaintiffs] were paying them,” Judge Kaplan wrote. “Moreover, it must be noted that Donziger did not address—much less offer any innocent explanation of—these events, either in his written direct testimony or on the witness stand.”
Mr. Donziger plans to appeal the New York ruling, calling the opinion “an appalling decision resulting from a deeply flawed proceeding that overturns a unanimous ruling by Ecuador’s Supreme Court.”
“I’m a man of honor and integrity, and those who know me and work with me will vouch for that,” Mr. Donziger said in an interview on Tuesday. “I am a zealous advocate for my clients. I would never bribe a judge or perpetrate a fraud.…Ultimately I think the Court of Appeals will reverse this decision and whatever damage caused to my reputation will be restored.”
If the ruling stands, it would vindicate Chevron’s aggressive efforts to undermine the Ecuador verdict in a case that has been closely watched by multinational companies.
The declaration by a U.S. judge that the judgment was fraudulently obtained could provide the company with greater leverage in foreign courts where the plaintiffs are attempting to enforce the 2011 verdict by targeting Chevron’s assets.
“Having a judgment like this from a reputable court in the United States will certainly be helpful to prevent enforcement actions elsewhere,” John Watson, Chevron’s chief executive, told reporters at the IHS CERAWeek energy conference in Houston.
In his ruling, Judge Kaplan called the case “extraordinary,” including “things that normally come only out of Hollywood—coded emails among Donziger and his colleagues describing their private interactions with and machinations directed at judges and a court-appointed expert, their payments to a supposedly neutral expert out of a secret account, a lawyer who invited a film crew to innumerable private strategy meetings and even to ex parte meetings with judges…”
Judge Kaplan’s opinion won’t end the costly legal fight over decades-old pollution from oil exploration in the Amazon rain forest. The dispute has spanned two decades and spilled into courts around the globe. An international arbitration tribunal in The Hague is weighing Chevron’s request for a finding that Ecuador, not the oil company, is liable for any environmental damage.
The case is rooted in Ecuador’s oil-rich jungles, where drilling waste seeped out of pits dug by energy companies that began operating there in the 1960s. Texaco Inc. had drilled in the region in partnership with Ecuador’s state-owned energy firm and cleaned up a portion of the waste to settle claims by the government in the 1990s. But its efforts didn’t clean up the waters of Lago Agrio, a village in northeastern Ecuador whose name means “sour lake.” Residents claimed they were sickened by the pollution and sought to hold Texaco accountable.
Chevron, which has never operated in Ecuador, inherited the lawsuit when it bought Texaco in 2001.
Chevron has denied liability for any environmental damage, and accused Mr. Donziger and others who represented the plaintiffs of attempting to extort billions from the company. The lawsuit ultimately resulted in a $19 billion judgment, which was later affirmed by an Ecuadorean high court but scaled back to $9.5 billion. Chevron is appealing that ruling.
In 2011 the company sued Mr. Donziger and the Ecuadorean plaintiffs for fraud and racketeering, leveling an array of accusations, all of which Mr. Donziger and his two Ecuadorean co-defendants denied.
During a six-week trial in Manhattan federal court last fall, the oil company’s lawyers used Mr. Donziger’s own words in emails, diary entries and film outtakes to portray him as the mastermind of a transnational scheme to soak the oil giant by paying off court officials, fabricating evidence and, ultimately, ghostwriting the final Ecuador verdict.
Evolution of a Case
- 1964: Texaco Petroleum Co. begins drilling for oil in Ecuador as part of a consortium
- 1990: State-owned PetroEcuador takes over the consortium’s oil operations
- 1992: Texaco ends operations in Ecuador
- 1993: Ecuadorean residents sue Texaco in U.S. federal court over oil pollution
- 1995: Texaco signs agreement with Ecuadorean government to clean up pollution
- 1998: Texaco completes the cleanup
- 2001: Chevron Corp. acquires Texaco
- 2003: Ecuadorean residents sue Chevron in Ecuador court
- 2011: Chevron sues Ecuadorean plaintiffs’ lawyer Steven Donziger in U.S. court
- 2011: Ecuadorean court awards the plaintiffs about $18 billion in damages
- 2013: National Court of Justice in Ecuador affirms verdict but reduces damages to $9.5 billion
- March 2014: Chevron wins U.S. court case against Mr. Donziger
In his opinion, Judge Kaplan noted that Mr. Donziger personally stands to gain more than $600 million in contingency fees and, potentially, control over billions that would go to the plaintiffs were the judgment collected.
“Donziger’s self interest extends beyond money,” the judge wrote, citing Mr. Donziger’s personal notebook on April 4, 2007, which read in part: “Important people interested in us. A new paradigm of not only a case, but how to do a case. Chevron wanting to settle. Billions of dollars on the table. A movie, a possible book. I cannot keep up with it all.”
On Tuesday, the judge ordered Mr. Donziger and his two co-defendants to turn over all property “traceable” to the Ecuadorean judgment to a trust to be set up on behalf of Chevron, and barred them from seeking to enforce the Ecuador verdict in any U.S. court.
Deepak Gupta, Mr. Donziger’s appellate lawyer, said the law is unclear on whether private parties such as Chevron can obtain remedies other than monetary damages under the federal antiracketeering statute.
Mr. Donziger’s defense team has accused Chevron of engaging a multimillion-dollar “scorched-earth” campaign and leveled their own charges of bribery against the company, which it denies. His lawyers portrayed Mr. Donziger as a lawyer whose zeal for his clients’ cause stopped short of criminal behavior, and said there was no intent to defraud the Ecuadorean courts.
Tuesday’s ruling, while a big win for Chevron, isn’t likely to stop the Ecuadoreans from attempting to seize the company’s property in countries where it operates. The Ecuadorean plaintiffs have filed lawsuits seeking to collect the verdict in Canada, Argentina and Brazil.
Han Shan, a U.S. spokesman for the Lago Agrio plaintiffs in Ecuador, said they “do not accept this court’s jurisdiction nor this ruling,” adding that the focus is now on enforcing their judgment in other countries. “The affected communities long ago gave up hope that a U.S. court would provide them relief from Chevron’s contamination, which has taken their loved ones, poisoned their lands, and imperiled their cultures,” he said.
In a conference call Tuesday, Chevron lawyers said the company would translate the lengthy opinion and furnish it to courts around the world where enforcement actions are pending.
“Some time ago I quit believing there would be some seminal moment to a conclusion,” said R. Hewitt Pate, Chevron’s general counsel, adding that only the government of Ecuador could bring the litigation to an end by having “constructive discussions.”
Mr. Donziger, in the interview, said it was time for both sides to come up with a solution for cleaning up the environmental damage that launched the case in the first place. “At some point this case and this battle really should end,” he said.
Corrections & Amplifications
U.S. District Judge Lewis Kaplan concluded that lawyer Steven Donziger and his team promised $500,000 to an Ecuadorean judge to rule in their favor. An earlier version of this article incorrectly said Judge Kaplan concluded Mr. Donzinger and his team promised the money to rule in Chevron’s favor.