THE PINK DOLPHIN: Appeals Court Upholds Sanctions Against Donziger Over Ecuador Chevron Judgment
Appeals Court Upholds Sanctions Against Donziger Over Ecuador Chevron Judgment
The Second Circuit Court of Appeals left intact crippling sanctions against attorney Steven Donziger ordering him to turn over to Chevron CVX +0.68% any proceeds from an $8.6 billion judgment by an Ecuadorean court the oil company says he obtained through fraud and corruption.
The federal court of appeals in New York, in a 127-page ruling, accepted the findings of U.S. District Judge Lewis Kaplan , who in a 2014 decision called the Ecuadorean environmental judgment the product of “egregious fraud.” Among other things, the court found Donziger and his team had secretly written the judgment and offered the Ecuadorean judge $500,000 to sign it.
As punishment, Kaplan issued an injunction against Donziger and two Ecuadorean co-defendants prohibiting them from attempting to enforce the judgment in the U.S. and creating a constructive trust for Chevron’s benefit to hold any proceeds they obtain from a court elsewhere in the world.
Donziger sued Texaco, later bought by Chevron, starting in 1993 over claims the oil company had polluted vast swaths of the Ecuadorean jungle while operating a concession there from the 1970s to 1990. After years of legal wrangling Chevron succeeded in shifting the case to Ecuador, only to lose a multibillion-dollar judgment after a new left-wing government threw its weight behind the plaintiffs, some 30,000 villagers in the polluted area. Donziger won a $17.3 billion judgment, later cut in half, in 2011.
Donziger calls Chevron’s scorched-earth litigation campaign against him “retaliatory and abusive.” He argued Chevron lacked standing to pursue the case because it didn’t suffer any damages and was precluded, under the doctrine of judicial estoppel, from challenging the Ecuadorean judgment given the legal arguments it had made earlier to move the case from New York. He also argued the judge’s global injunction wasn’t allowed under RICO and the violated principles of international comity, or mutual respect.
The three-judge panel of the Second Circuit rejected all of his arguments.
In sum, there can be no doubt that Chevron had standing to initiate the present action. Its initial Complaint alleged numerous corrupt and fraudulent acts on the part of Donziger and other defendants that were expressly designed to extract money from Chevron, either through the entry of a judgment against it by the Lago Agrio court or through a settlement.
Donziger also argued Chevron’s claims were effectively moot since there was no connection between his team’s actions at the trial court and the decision of the appeals court to affirm the judgment. The Second Circuit rejected that, saying the Ecuadorean appeals court had adopted the judge’s ruling practically verbatim, only eliminating the punitive damages. It also rejected claims by Donziger’s Ecuadorean co-defendants that the New York court didn’t have personal jurisdiction over them, saying their U.S. lawyers had stonewalled attempts to get documents in the case.
The Second Circuit noted that it wasn’t asked to decide a case about pollution in the Ecuadorean jungle; there is little question drilling operations there left behind tons of oil and byproducts in the ground. But Chevron argued it had never drilled in Ecuador and Ecuador’s state-owned oil company, PetroEcuador, was majority owner of the project practically from the beginning. Texaco left the country after its concession expired in 1992 and even Donziger’s experts turned up extensive evidence of benzene and other short-lived chemicals in the ground suggesting PetroEcuador has continued to pollute the area.
Donziger had a financial incentive to make Texaco solely liable for the pollution, the Second Circuit found. He’d reached a secret agreement with PetroEcuador to surrender any amounts Chevron won from the Ecuadorean company to help pay for remediation. Donziger himself stood to earn $545 million in fees if he collected the entire $8.7 billion judgment.
The appeal drew superstar talent. Chevron was represented by Ted Olson of Gibson, Dunn & Crutcher while Donziger was represented by Deepak Gupta, a former senior lawyer with the Consumer Financial Protection Bureau who has argued prominent cases before the U.S. Supreme Court including AT&T T -0.63% v. Concepcion.
Donziger attracted a string of law firms and investors who came to regret their involvement in the case, including Philadelphia personal-injury attorney Joe Kohn, who bankrolled Donziger until a bitter falling out in 2010; and online poker magnate J. Russell De Leon, a Harvard classmate of Donziger’s. Chevron used the trove of internal documents it obtained from Donziger to pursue his backers, winning humiliating settlements including $15 million from the Washington law firm Patton Boggs, which engineered Donziger’s global strategy for collecting on the judgment.
Gustavo López Ospina
Pieter Jan Brouwer
Assistant: Emilia Romero
SELVA Vida Sin Fronteras acknowledges Kevin Schafer’s important contribution towards protecting the highly endangered Amazon pink fresh water dolphin. Title photographs of our “The Pink Dolphin” were taken by Mr. Schafer.