Law Review: Case against Chevron dealt a setback

Throughout the bitterly fought legal battle over allegations that Chevron despoiled hundreds of square miles of once-pristine Amazon jungle in eastern Ecuador, rife as it is with charges of fraud and corruption, the plaintiffs consistently have argued their science is sound and the Ecuadoran judicial system is well-equipped to evaluate it.

But on March 7, their case was dealt a severe setback.

U.S. District Judge Lewis Kaplan, ruling in Manhattan, unleashed a withering broadside barring the plaintiffs, at least for the moment, from seeking to enforce an $18 billion judgment handed down by an Ecuadoran judge against Chevron.

"There is ample evidence of fraud in the Ecuadoran proceedings," Kaplan said, in a verbal slap that brought protests not only from the plaintiffs, but the Ecuadoran ambassador to the United States, Luis Gallegos.

The Feb. 14 award against Chevron Corp. is important because it is the largest environmental judgment in history. The case also has special resonance in Philadelphia because it was partly litigated and largely financed and overseen by the prominent Center City plaintiffs firm of Kohn, Swift & Graf P.C. Over the years, the firm has spent $7 million on the case, in addition to lawyer time.

Kohn Swift withdrew from the case in late 2009 amid a dispute with the lead lawyer in Ecuador, Steven Donziger, a Harvard-trained lawyer later shown on videotape discussing strategies for intimidating local judges and in one scene joking about the assassination of a judge.

The firm says it withdrew from the case before it learned of Donziger's videotaped commentary, along with charges of fraudulent conduct by the plaintiffs' team in Ecuador.

But those on the plaintiffs' side, on the defensive for months after the release of the videotapes, are starting to give as good as they have been getting.

They have asked, unsuccessfully, for Kaplan to recuse himself because of alleged bias.

And they haven't been shy about telling Kaplan how they really feel.

"Kaplan relies on Chevron," contended Karen Hinton, a spokeswoman for the plaintiffs, who added provocatively that Chevron "ghostwrote" the judge's opinion. "Everything that Chevron says, he repeats in his order. He is being biased."

Kohn Swift is now the subject of a discovery motion by Chevron, which is seeking to examine about 13,000 pages of its internal communications in the case.

That issue is before the U.S. Court of Appeals for the Third Circuit in Philadelphia. The Kohn Swift says it has no objection to releasing the documents, but the move is being resisted by lawyers for the plaintiffs, indigenous people from the Amazon rain forest in eastern Ecuador, and the government of Ecuador. They argue that disclosure of the documents would breach important confidentiality principles.

The environmental damage allegedly took place as a result of drilling in the region by Texaco from the mid-1960s to 1992. The litigation became Chevron's problem when the companies merged in 2001.

To read through Kaplan's opinion and the briefing papers of plaintiffs' lawyers is like viewing inhabitants of two entirely separate, if parallel, universes.

Where Kaplan sees evidence of coercion and intimidation by plaintiffs' lawyers, the plaintiffs' representatives see only the passionate if overblown rhetoric of lawyers and others fighting for their clients.

Where Kaplan concludes that the plaintiffs used bogus expert reports to buttress their case, the plaintiffs insist their science not only is sound, but largely derived from information that Chevron itself supplied.

In his 126-page opinion, Kaplan says that two scientific reports on site inspections had been altered, without the knowledge of the author, and that an ostensibly neutral court-appointed expert named Richard Cabrera had been offered a job by the plaintiffs if they won.

Kaplan's criticism of Ecuador's leftist president, Rafael Correa, is particularly tough. He accuses him of subjecting judges to an atmosphere of intimidation. Noncompliant judges in Ecuador are threatened with violence, removed from office, or subject to prosecution, Kaplan says, drawing heavily on the report of a Chevron expert witness.

"Against this backdrop of chronic political interference with the Ecuadoran courts, President Correa consistently has expressed strong feelings about, and demonstrated great interest in, the plaintiffs' lawsuit against Chevron," Kaplan wrote. "In these circumstances, it is reasonable to infer, at least at this preliminary stage, that this is the type of highly politicized case that ... will not receive fair and impartial treatment in Ecuadoran courts."

The plaintiffs say they will appeal Kaplan's decision, and contend they will take steps to enforce the judgment, in jurisdictions outside the United States if necessary.

What looks to Kaplan like fraud, they say, is simply the way the Ecuadoran judicial system works.

Yes, the neutral court-appointed expert, Cabrera, received reports from a plaintiffs' consultant and adopted them as his own, but experts are free to do so, indeed are expected to, in Ecuador.

Hinton maintained that there is no evidence of widespread corruption in the Ecuadoran judicial system and that the expert opinion filed by Chevron laying out problems of intimidation and political interference was written by one of Correa's most prominent opponents, Vladimir Alvarez Grau.

"Asking Alvarez to opine on the state of affairs under Correa is like asking Karl Rove to rate the credibility of a Democratic administration," Hinton said.

On such debatable points, where argument and point of view can weigh heavily, the plaintiffs have been vocal in trying to dig themselves out of the hole that opened up last year as videotapes of and e-mails from Donziger began to emerge in which he comments on the alleged corruption of the judiciary in Ecuador.

What they haven't been able to do is explain away Donziger's videotaped comments, e-mails, and journal entries, which Kaplan himself points to in his finding that the Ecuador judiciary is vulnerable to political pressure and corruption.

That, Chevron's attorneys say, makes whatever result that may emerge from Ecuador highly suspect.