A Chevron gas station
Photograph by Justin Sullivan—Getty Images
By Roger Parloff
April 20, 2015

The 22-year-long, picaresque narrative of the environmental dispute between residents of the Ecuadorian Amazon and Texaco—acquired by Chevron (CVX) in 2001—took yet another unexpected jog today.

A federal appeals court was hearing a much-anticipated oral argument at which New York attorney Steven Donziger was challenging the civil judgment he was saddled with by U.S. District Judge Lewis Kaplan a year ago. Kaplan found that the $9.5 billion environmental judgment Donziger won against Chevron from a provincial court in Lago Agrio, Ecuador, in 2011 was procured through a pattern of racketeering—including bribery, fraud, extortion, obstruction of justice, and other criminal offenses. He forbade Donziger and his clients from trying to enforce the judgment in the U.S., and issued orders designed to prevent Donziger or his clients from profiting from Donziger’s alleged crimes.

The unexpected turn came when the presiding judge of the three-judge panel asked several questions that obviously blindsided both sides, including one that, if he was serious, could keep litigation chugging for another 22 years.

Before a crowd that spilled over into two overflow rooms equipped with closed-circuit hookups, Circuit Judge Richard Wesley, a George W. Bush appointee, stunned the parties by asking them if they thought his court had the power to order the entire environmental dispute retried from scratch, but this time in Manhattan instead of in Ecuador. And assuming it did, he added, would they want the court to issue such an order?

(Judge Kaplan found, among other things, that Chevron could not receive a fair trial from the Ecuadorian judiciary in light of its politically compromised judiciary and the politicized nature of the case. An environmental case against Texaco was, in fact, originally filed in Manhattan back in 1993, but that one was dismissed by the U.S. courts in 2002 for having been filed in the inappropriate forum—the implication being that Ecuador would be the right place for it. That led to another version of the suit being refiled in 2003 in Lago Agrio—the one that led to the judgment Kaplan found to have been fraudulently procured.)

Wesley’s was a bizarre question, both because the attorneys had had no time to consult with their clients, but also because it was hard to imagine what Wesley’s proposal would even mean logistically. (Clearly Judge Wesley and his colleagues have no power to annihilate the $8.6 billion judgment procured against Chevron in Ecuador, a judgment that Donziger’s co-counsel are currently trying to enforce in the courts of Canada, Argentina, and Brazil.)

Donziger’s counsel, Deepak Gupta of Gupta Beck, told Wesley that his court had the power to order a retrial in America, and he purported to welcome Wesley’s proposed action. So did Burt Neuborne, the New York University School of Law professor who is representing two of the named plaintiffs in the underlying Lago Agrio case.

Theodore Olson of Gibson Dunn & Crutcher, representing Chevron, said he “couldn’t agree” to such a proposal.

Wesley was also very concerned about another hypothetical question that neither side had even briefed: What if an ongoing international arbitration that Chevron initiated against the Republic of Ecuador in 2009—which will decide, among other things, whether the Lago Agrio trial that generated the $8.6 billion judgment was fair—happened to reach a result that was inconsistent with the one Judge Kaplan reached, and which Wesley’s court was now being asked to affirm? “What happens if there’s a different result?” he asked.

He asked whether Donziger or the Lago Agrio plaintiffs had ever asked to stay the case before Kaplan until after the arbitration tribunal ruled—they hadn’t, everyone agreed—and wondered aloud whether he should request additional briefing on that point.

Wesley asked about 95% of the questions at the argument. The other panelists gave no sign of sharing his hobby horses, however. Circuit Judge Barrington Parker, who asked only a handful of questions, seemed to be tending toward affirmance, citing Judge Kaplan’s “meticulous” ruling and Donziger attorney Gupta’s failure to argue that any of Kaplan’s key findings were “clearly erroneous”—the high hurdle parties face when trying to overturn a district judge’s factual findings on appeal.

The remaining circuit judge, Amalya Kearse, asked only a single question, and it dealt with the impact of Kaplan’s order on Donziger’s clients in Ecuador, as opposed to its impact on Donziger himself. Judge Wesley, too, appeared far more concerned about Kaplan’s power to bind Donziger’s clients than about his power to bind Donziger himself.

“This is a tort action brought against Donziger,” he said. “You live here,” he said to Gupta, referring to his client. “We have jurisdiction over you.”

Prior to the argument, many observers had expected the key issue in the argument to be whether a private plaintiff, like Chevron, suing under the Racketeer Influenced and Corrupt Organizations Act (RICO)—the law Chevron invoked to sue Donziger—can win an injunction, which is the form of relief Kaplan issued on Chevron’s behalf. (Injunctions are court orders, as opposed to, for instance, damages awards.) The Ninth Circuit Court of Appeals, based in San Francisco, has previously ruled that RICO doesn’t authorize injunctions in private civil cases—only damages awards—while the Seventh Circuit, based in Chicago, reached the opposite outcome.

But the issue only came up briefly toward the end of today’s one-and-a-half-hour argument, when it was raised by Judge Parker. Olson told him why he thinks RICO authorizes injunctions in private cases, Parker agreed, and no other judge or lawyer touched the issue.

Though the case record was filled with lurid factual allegations—bribery, secret bank accounts, intimidation of judges, speaking in code, fabrication of evidence—the argument was surprisingly academic in tone. The one exception was an angry outburst from Wesley triggered when Gibson Dunn’s Olson tried to argue that Chevron was not bound by representations Texaco had made to federal judges about submitting to jurisdiction in the Ecuadorian court. “I’m not terribly interested in legalistic arguments” about the details of Chevron’s merger agreement with Texaco, he said, his voice shaking with emotion. Chevron had made commitments “in front of the federal court,” he said, Chevron was bound by them.

 

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