Chevron Wins Ruling Blocking $8.6 Billion Order in Ecuador Fight

(Bloomberg) -- Chevron Corp. won a victory in its long-running battle against Ecuadoreans and the zealous American lawyer who represented them, as an appeals court barred the attorney from enforcing in the U.S. an $8.6 billion award because he won it through deceit.

"Even innocent clients may not benefit from the fraud of their attorney," the appeals court said Monday.

The defeat of lawyer Steven Donziger on appeal could influence the outcome of the storied legal dispute, which was documented in the 2009 film “Crude” and continues to play out in courts around the world. Ecuadoreans are seeking to seize Chevron assets because the company has refused to pay on a judgment awarded in 2011 by an Ecuadorean court.

It is unlikely to be the last twist in the saga, which began in 1993 when American lawyers sued over pollution which they say affects 30,000 indigenous villagers in the oil-rich Lago Agrio region.

The original lawsuit, filed in 1993, contended that Chevron should be held financially responsible for pollution of the Amazon rain forest by Texaco Inc. from the 1960s through the early 1990s. The company filled hundreds of unlined waste pits in the bio-diverse region with toxic, carcinogenic drilling materials rather than following standard industry practice of pumping it into wells deep underground, Ecuadoreans and the activists who represent them said.

‘Criminal Acts’

Chevron, which bought Texaco in 2001, hasn’t argued against the actual pollution of the rain forest. It maintains the judgment against it was achieved by a racketeering scheme and a "string of criminal acts" by Donziger and other attorneys he worked with in Ecuador. Besides, it already paid $40 million to clean up its share of the drilling contamination, the San Ramon, California-based company said.

Chevron was initially ordered to pay $19 billion by an Ecuadorean court in 2011. The award was later reduced to $8.6 billion, the appeals court said. Chevron has refused to pay. It brought a racketeering case in New York against Donziger to challenge the award.

After a 2013 trial, U.S. District Judge Lewis Kaplan sided with Chevron, finding the lawyer and his colleagues had used fabricated evidence, promised bribes and ghost wrote court documents. The ruling barred Donziger and his associates from collecting on the judgment because “the decision in the Lago Agrio case was obtained by corrupt means.”

Donziger appealed, arguing that international comity -- or the requirement that a U.S. court recognize a ruling of a foreign jurisdiction -- barred Chevron from challenging the judgment. He also said Chevron’s evidence contradicted its allegations, and that the company was out to “demonize” him.

The case is Chevron v. Donziger, 14-0826, U.S. Court of Appeals for the Second Circuit (Manhattan).

To contact the reporter on this story: Patricia Hurtado in Federal Court in Manhattan at pathurtado@bloomberg.net To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net Andrew Martin.

Copyright 2016 Bloomberg News.

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