Thursday, May 12, 2011

Chevron and the Invictus Memo

Karen Hinton of Hinton Communications, the spokeswoman for the Ecuadorian plaintiffs reported that last Tuesday at the 2nd Circuit Court of Appeals on the Ecuadorians’ motion to stay U.S. Judge Lewis Kaplan’s preliminary injunction against the $18 billion judgment against Chevron in Ecuador for massive oil contamination, an appeals court judge correctly speculated that Chevron’s law firm, Gibson Dunn, has its own “Invictus” memo, and Chevron’s Randy Maestro argued that Ecuador’s court system has recently become politicized. In fact, reports and ratings concerning the country’s judiciary have been the same since at least 2001. Language in State Department reports has not changed in the past decade, and Transparency International’s 2010 Corruption Perceptions Index rated Ecuador 2.5 out of 10, compared to 2.3 in 2001. In other words, corruption is now less of an issue in Ecuador than it was in 2001 when Chevron, as well as the Southern District Court of New York, praised the court system.

The following is a report from the New York Law Journal by Mark Hamblett.

Attorneys Spar Over Impact of Injunction in Chevron Case

Mark Hamblett
New York Law Journal
May 11, 2011

The legal slugfest over an $18 billion environmental judgment against Chevron in Ecuador moved to the U.S. Court of Appeals for the Second Circuit yesterday, with arguments about how to handle Southern District Judge Lewis A. Kaplan's wide-ranging injunction blocking enforcement of the judgment.

James Tyrrell Jr. of Patton Boggs, appearing for the "Lago Agrio" Ecuadorans who won the judgment against Chevron in Ecuador in February, implored a three-judge motions panel to lift that portion of the judge's March 7 preliminary injunction that he said prevents the Ecuadorans from funding and planning enforcement actions in courts around the world.

Mr. Tyrrell said he was not expecting the court to immediately stay the "extraordinary" injunction. Instead, he asked Judges Ralph Winter, Rosemary Pooler and Barrington Parker to grant an expedited appeal on the injunction before a merits panel.

A merits panel, Mr. Tyrrell indicated, would not only vacate the injunction but also derail a racketeering suit scheduled for trial before Judge Kaplan in November in which Chevron is attacking the $18 billion judgment as procured by fraud with the aid of a corrupt Ecuadoran judiciary in an alleged conspiracy led by New York lawyer Steven Donziger, who represented the citizens suing Chevron in Ecuador.

Meanwhile, Mr. Tyrrell told the judges yesterday that he needed, immediately, a stay of the part of Judge Kaplan's injunction that prevents him from consulting with his clients and planning for and funding enforcement actions.

Mr. Tyrrell said there has been "a race set up by Chevron" between the appellate court and the district court, and a "rush to judgment" to "try the Ecuadoran judiciary" by scheduling an expedited racketeering trial for November.

But Chevron lawyer Randy Mastro of Gibson Dunn & Crutcher said the expedited trial is needed because the real strategy of the Ecuadoran plaintiffs and Patton Boggs is to "extort" a settlement won by fraud from the oil giant by filing multiple enforcement actions and attaching Chevron assets around the world, especially in countries ready to grant such relief, like Venezuela and Argentina.

The Lago Agrio citizens and their attorneys, Mr. Mastro said, "are going to violate the injunction" by obtaining prejudgment attachment of assets so they are ready to swoop in the second an appeals court in Ecuador upholds the $18 billion judgment.

The citizens' lawyers both in Ecuador and elsewhere planned to do so, Mr. Mastro said, at the direction of Patton Boggs, which is why it was important for Judge Kaplan to block Patton Boggs from giving advice or arranging funding for enforcement.

But Mr. Mastro got some push-back from the panel yesterday, starting with Judge Winter, who had a question on timing.

"How much of all these horrible things are going to occur between now and when the merits panel hears the appeal?" he asked Mr. Mastro.

Mr. Mastro has filed a series of discovery actions in courts across the United States, including before Judge Kaplan, seeking information to attack and undermine a judgment obtained through the alleged conspiracy led by Mr. Donziger.

He said the Lago Agrio citizen plaintiffs, some of whom he turned into defendants in the racketeering case, will move on the affirmation of the judgment, or a lifting of Judge Kaplan's injunction, in "a red hot second."

But Judge Parker wanted to know if Mr. Mastro was sure that the "non-final" judgment in Ecuador that is still under appeal in that country can be the basis for attachment in other countries.

Mr. Mastro said that was exactly the strategy as revealed by the Patton Boggs memo called "Invictus," cited by Judge Kaplan in March in Naranjo v. Chevron Corp., 11-1264, detailing a "strategy to put pressure on Chevron" with a blizzard of attachments in multiple jurisdictions and force a massive settlement.

Judge Pooler was not impressed with Mr. Mastro's portrait of a nefarious legal conspiracy.

"Chevron has brought at least 20 actions in this country," she said, "and I can't believe there isn't a mirror image of this memo" at Gibson Dunn.

Judge Pooler also pressed Mr. Mastro on his denigration of the Ecuadoran judicial system, especially given the origins of the litigation.

The claims for personal injury, property damage and environmental contamination were originally brought in the Southern District against Texaco, whose stock was later acquired by Chevron.

In Aguinda v. Texaco, 93 Civ. 7527, the defendant oil company persuaded Judge Jed. S. Rakoff in 2001 to dismiss based on forum non conveniens after arguing that Ecuador was the more appropriate forum. The dismissal was upheld by the Second Circuit in 2002.

"You were the ones who wanted to try it in Ecuador," Judge Pooler said. "You wanted to get the case out of the Southern District and into Ecuador."

Judge Parker said he was sitting in White Plains as a district judge at the time and "I recall Texaco was in my court trying to get this case" to Ecuador.

Mr. Mastro said that "we did believe at the time" Ecuador was the better forum but "times have changed."

"You think times have changed that much in Ecuador?" Judge Parker asked.

"Absolutely," Mr. Mastro said, "The quality of justice in Ecuador is among the lowest in the world."

Mr. Tyrrell also had pressed that point, saying Texaco "fought for eight years" to get out of New York by extolling the high quality of the judiciary in Ecuador.

Now, he said, because of Judge Kaplan's injunction, clients have stopped paying their bills in a pending case in Washington, D.C., and other cases because of the block on funding, and advising on anticipated enforcement actions—and his clients cannot afford to undertake "massive discovery" in advance of November, when Chevron plans "to put the entire Ecuadorian judiciary on trial."

"In the interim, we would be bled dry—we simply don't have the resources to go through" a merits argument on the injunction on a non-expedited basis, Mr. Tyrrell said. "Existing contracts have been broken. Chevron has succeeded in that."

"There's no reason for us to hemorrhage blood we don't have," Mr. Tyrrell said, and it would not hurt Chevron to proceed on a narrower injunction on an expedited basis.

Photo Credits: Green Energy News


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