By Nicole Hong
A long-running legal fight between Chevron Corp. and residents
in Ecuador may need yet another round in court, a federal appeals
judge suggested on Monday.
The possibility came up at an appeals hearing that pitted
Chevron against New York lawyer Steven Donziger, the attorney who
won a record $9.5 billion environmental-damage award against the
oil company in a legal battle that has dragged on for more than 20
years.
On Monday, U.S. Circuit Judge Richard Wesley asked lawyers on
both sides whether they would support a retrial in the U.S. of a
2011 ruling by an Ecuadorean court, which found that Chevron was
responsible for the pollution. Chevron has denied liability and
last year won a ruling from a New York judge that Mr. Donziger's
victory had been obtained through bribery and fraud.
"Does this court have the authority to order a retrial?" Judge
Wesley asked one of the lawyers, suggesting that this has never
been done before in the U.S., although he said it has been done in
British courts.
Speculation about a retrial was one of many twists and turns in
Monday's appeals hearing in downtown Manhattan, which lasted about
an hour and a half.
The ruling at issue on Monday wasn't the 2011 decision in
Ecuador, but rather last year's ruling by U.S. District Judge Lewis
Kaplan, who said Mr. Donziger and his team couldn't actually profit
from the $9.5 billion award or enforce it in the U.S. because it
was tainted by corruption. Judge Kaplan's ruling came at the end of
a six-week trial in Manhattan where Chevron accused Mr. Donziger of
bribing judges and fabricating evidence to get a favorable judgment
in Ecuador. Mr. Donziger denies these allegations.
A decision by the appeals court on Judge Kaplan's ruling may not
come for months.
Mr. Donziger represented a group of Ecuadorean plaintiffs who
sued Texaco Inc. in 1993 and alleged that Texaco's oil drilling led
to pollution in the Amazon rain forest that sickened local
residents. Chevron inherited the lawsuit when it acquired Texaco in
2001.
Theodore Olson, who argued for Chevron, opposed the idea of a
retrial, while Deepak Gupta and Burt Neuborne, lawyers for Mr.
Donziger and the Ecuadorean plaintiffs, were in favor. "That's a
very original idea," Mr. Neuborne responded, saying he would
"absolutely" support a retrial.
During Monday's arguments, Mr. Gupta of Gupta Beck PLLC, who
represents Mr. Donziger, said Judge Kaplan's ruling was problematic
because U.S. courts should not decide whether judgments produced in
foreign courts are "worthy of recognition." This could "provoke
friction" among different legal systems and encourage disappointed
litigants around the world to seek another chance in U.S. courts,
he said.
Meanwhile, Mr. Neuborne, a professor at New York University Law
School representing two Ecuadorean villagers, focused his argument
on whether the plaintiffs in Ecuador should be punished for the
alleged misconduct of Mr. Donziger, their lawyer. Judge Kaplan's
ruling bars the Ecuadorean plaintiffs from profiting from the $9.5
billion award, but they are allowed to try to enforce it in
jurisdictions outside the U.S.
Mr. Olson of Gibson Dunn & Crutcher LLP responded that the
Ecuadorean plaintiffs knowingly withheld documents from Chevron and
that Judge Kaplan determined the plaintiffs supported the
"fraudulent acts" of Mr. Donziger. Mr. Olson said Judge Kaplan was
within his bounds to deny individuals like Mr. Donziger "the
ability to profit from their wrongdoing."
The questioning from the three-judge panel was dominated by
Judge Wesley, who was especially interested in a parallel legal
battle in an international arbitration tribunal, where Chevron has
accused Ecuador of denying the company a fair trial. He criticized
Chevron for asking both the tribunal and a U.S. District Court to
decide whether Ecuador's judicial system was corrupt, questioning
what would happen if the tribunal makes a decision that conflicts
with Judge Kaplan's.
The lawyers' arguments on Monday were highly technical at times
and waded into such issues as whether a federal antiracketeering
law allows private parties like Chevron to seek non-monetary
relief, such as an injunction on the $9.5 billion award. The judges
often alluded to the complex nature of the case throughout the
hearing.
At one point, Judge Wesley asked Mr. Olson of the whole legal
dispute, "How much longer do you think this will last?"
Write to Nicole Hong at nicole.hong@wsj.com
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