By Sara Randazzo
Chevron Corp. was fixated on roses.
The giant U.S. oil company objected last June when Washington
proposed allowing duty-free rose imports from the world's poorest
countries, including Ecuador.
A decade earlier, an Ecuadorean court had blamed Chevron for oil
pollution and told it to pay $9.5 billion in damages, one of the
largest-ever penalties of its kind.
Chevron had since proved the verdict fraudulent, it told the
U.S. Trade Representative. But Ecuador refused to render it
unenforceable despite an order to do that from an international
arbitration tribunal. Letting Ecuador save money on flowers after
blatant "acts of defiance" would tell the world the U.S. rewards
bad behavior, the oil company said.
Chevron lost the war of the roses. But it still hasn't paid a
cent of the Ecuadorean judgment, and says it won't stop legally
battling until it can ensure that it never has to.
"We're going to fight this until hell freezes over, and then
we'll fight it on the ice," a former Chevron general counsel,
Charles James, said before his retirement in 2010, a remark that
became a watchword at the company.
His successor, R. Hewitt Pate, said this spring that "only the
government of Ecuador could deliver a final resolution of this
case," by nullifying the verdict.
Big companies that see lawsuits against them as unfounded often
reach a point, after losing a court ruling or two, when settling
seems the sensible course. Chevron never did. Twenty-eight years
after the Ecuador case was filed, 10 years after it came to a
verdict and seven years after Chevron got a different court to find
egregious misbehavior by a plaintiffs' lawyer, Chevron fights on --
pressing to make sure that lawyer doesn't profit from the case,
hiring attorneys in countries where it operates and where
plaintiffs might try to collect, trying to force Ecuador to pay its
legal costs and, as with the roses, asking the U.S. government to
penalize Ecuador in the trade arena.
Chevron's opponents also refuse to back down, making the case
what appears to be the oil industry's longest-running legal
slugfest. Aspects of it have been heard by some 100 judges in 36
courts in seven countries. By Chevron's estimate, it has cost the
company nearly $1 billion, including 1.5 million hours of its
staff, advisers' and attorneys' time. Executives and lawyers who
worked on the case have retired or died since it began.
Although the oil industry's era of global power seems to have
peaked, for Chevron part of that era -- costly, intractable
environmental-pollution litigation -- continues unabated. The
Ecuador legal fight has lasted even longer than the one that
followed the Exxon Valdez oil spill in Alaska.
Well before Chevron lost the damage verdict in 2011, it set out
to turn the tables on the litigants. It subpoenaed or sued dozens
of people who had helped the plaintiffs' side, legal records show,
and unearthed damaging video clips about the plaintiffs' legal
team's activities from documentary-film outtakes. Chevron's lawyers
obtained the personal notes of the lead plaintiffs' lawyer, Steven
Donziger, and used his own words against him.
The company scored a seminal victory in 2014 when a federal
judge in New York found that Mr. Donziger and others on his team
had offered a bribe to a judge in Ecuador and had ghost-written the
Mr. Donziger's New York law license was revoked. He faces a
criminal contempt-of-court trial this month over his refusal to
turn over records to Chevron as ordered. His bank accounts were
frozen. He has been under house arrest for nearly two years, unable
to leave his Manhattan apartment without court permission, an ankle
bracelet tracking his every move.
In December, Mr. Donziger shouted out his window to supporters
gathered below to mark his 500th day of detention. "What is
happening to me is a sign of our success," he said, using a
bullhorn: "This is a corporate playbook that is designed really by
Chevron and the entire fossil-fuel industry to silence advocacy."
Below his window hung a sign saying "SOS Free Steven!"
The company's strategy "is to pulverize me personally, to
criminalize me, " Mr. Donziger said in an interview. "This idea
they've won and I've lost is their view, not my view."
Chevron is asking the tribunal that ordered Ecuador to void the
verdict -- a panel of the Permanent Court of Arbitration at The
Hague -- to also order nearly $800 million of Chevron's legal costs
to be paid by Ecuador, a country whose gross domestic product is
about half of Chevron's stock-market value.
Íñigo Salvador Crespo, an Ecuador justice official whose agency
represents the country in the dispute, declined to comment, saying
to do so could compromise its legal strategy. A newly elected
president of Ecuador who hasn't yet taken office, Guillermo Lasso,
didn't respond to requests for comment on the dispute.
Chevron officials say they have punched back so hard, for so
long, because they found fraud in the litigation and because
Ecuador in the 1990s granted a release from liability after a
"This was never for Chevron one of these things where we added
up potential liability and said we have to fight this because the
number is too much," Mr. James, the former general counsel, said in
To some longtime observers of the case, it looks more like a
grudge match with Mr. Donziger, who has refused to concede anything
despite a series of court losses. "They're making an example of
him," said Ted Folkman, an attorney who has closely followed the
legal battle. As the years go on, he said, "it's not being done for
reasons that look rational."
Chevron's Mr. Pate said the company has no choice but to
continue defending itself because the "perpetrators of the fraud"
refuse to acknowledge court and arbitration findings.
Chevron's defense and Mr. Donziger's personal case have
overshadowed the original plaintiffs, natives of the forested
northeast of Ecuador, who say their drinking water and quality of
life remain damaged by oil drilling.
"Chevron wants to talk about the injustices they have suffered.
Steven wants to talk about the injustice he is suffering. Who is
talking about the people on the ground and how they've been
affected?" said Judith Kimerling, a professor of environmental law
and policy at the City University of New York's Queens College,
whose research in Ecuador inspired the original lawsuit.
Chevron inherited the already eight-year-old dispute in 2001
when it acquired Texaco Inc., which operated in Ecuador from the
1960s to 1990 in partnership with government-run Petroecuador. They
drilled in an area of the Amazon occupied only by native people and
migrant farmers, and gave it the name Lago Agrio.
Texaco spent $40 million on local cleanup and obtained a
liability release from Ecuador's government in the 1990s. Chevron
says that means any remaining pollution is the responsibility of
its state-owned former partner.
A group of Amazonians sued Texaco in 1993 in federal court in
New York, saying they were sickened by water and air polluted from
the oil operations. Texaco said the suit belonged in Ecuador, a
judge agreed, and a new suit was filed there in 2003. This suit
took advantage of a newly passed Ecuadorean law that allowed
individuals to sue not only for harm to themselves but also for
damage to the environment.
Mr. Donziger, a former public defender fluent in Spanish, joined
the plaintiffs' team early on and became the face of the case in
Ecuador, with a strategy that relied heavily on swaying public
opinion. He rallied activists in front of the Lago Agrio
courthouse. A documentary film crew followed him as he barged into
judges' offices to make demands.
The plaintiffs' side brought journalists to villages where
residents lived alongside drilling waste in unlined pits. Chevron
put on counter-tours to sites reflecting Texaco's cleanup.
Around 2009, Chevron adopted a strategy of trying to show that
plaintiffs' lawyers were acting improperly. It hired Gibson, Dunn
& Crutcher LLP, a law firm that had helped Dole Food Co. defeat
litigation by Nicaraguan banana farmers who claimed to be left
sterile by Dole pesticides; Gibson Dunn convinced a U.S. judge
lawyers had recruited plaintiffs who weren't sterile or didn't even
work on a Dole banana property.
For Chevron, a Gibson Dunn team led by Randy Mastro, once a top
aide to Rudy Giuliani when he was New York City mayor, probed every
aspect of the plaintiffs' case. Using an obscure court process
called Section 1782, which allows parties to seek evidence in the
U.S. to help with foreign lawsuits, Gibson Dunn gained access to
troves of internal documents from people who had worked with the
Chevron secured the outtakes of a documentary film on the case
and turned up clips such as one where Mr. Donziger recounted a
favorite quote to colleagues: "Facts do not exist. Facts are
It also amassed evidence that Mr. Donziger and his team had
pressured Ecuadorean judges to rule in their favor and secretly
wrote the bulk of the report of a court-appointed outside expert
who said Chevron should pay $27.3 billion.
Mr. Donziger said the plaintiffs' activities followed Ecuadorean
In a conference room in lower Manhattan in 2010, Gibson Dunn
pitched federal prosecutors on the idea of criminally prosecuting
Mr. Donziger. They declined, figuring this was a squabble between a
corporation and well-funded adversaries that wasn't worth their
limited resources, said a person familiar with the meeting.
Chevron then civilly sued Mr. Donziger and his team under the
Racketeer Influenced and Corrupt Organizations Act, a federal law
often used against mobsters. It filed the RICO suit on Feb. 1,
Two weeks later, a judge in Ecuador handed down the verdict
against Chevron, then doubled the damages to $19 billion after
Chevron refused an order to apologize. It was later reduced back to
$9.5 billion but otherwise upheld by the Ecuadorean courts.
With Chevron refusing to pay, and having no assets in Ecuador,
the plaintiffs tried unsuccessfully to collect in places where the
oil company operated, such as Argentina, Brazil and Canada. Chevron
hired lawyers around the world to resist such efforts.
Its strategy was vindicated in March 2014 when, after a civil
trial in New York, a federal judge issued a 485-page opinion
concluding that Mr. Donziger and his team had submitted false
evidence in Ecuador, paid off a court-appointed expert and
ghost-written much of his opinion, and promised $500,000 to an
Ecuadorean judge to rule in their favor. Even if they sought to
help native people, Judge Lewis Kaplan wrote, "they were not
entitled to corrupt the process to achieve their goal."
The ruling came with ramifications: Mr. Donziger couldn't try to
enforce the Ecuadorean judgment in the U.S. and he couldn't profit
from it; he had to relinquish his 6.3% interest in any payout.
Mr. Donziger appealed the ruling and lost. "I believe it is
invalid, though I recognize courts have found otherwise," he
Chevron lawyers filed motions every time they thought Mr.
Donziger might be violating the judge's orders. An example was when
he asked a hedge-fund firm to finance efforts to collect the
damages in return for a share of them.
A portfolio manager at Elliott Management Corp. said Mr.
Donziger told him the plaintiffs had raised $33 million, and 15% to
20% of the damage award was committed to investors and others.
Elliott turned him down, the portfolio manager said in a sworn
affidavit. A spokesman for Elliott declined to comment.
Chevron also told the court Mr. Donziger had hired an executive
coach and agreed to pay him 0.007% of whatever was collected from
Chevron, out of Mr. Donziger's share. Chevron said that violated
the ban on his profiting from the verdict.
He argued it didn't, but in May 2019, Judge Kaplan found Mr.
Donziger in civil contempt of court. The judge said he violated
orders by not turning over all of his electronic devices and email
accounts for imaging, for failing to relinquish his stake in the
damage award and for his deal with the executive coach.
Two months later, Judge Kaplan ordered a trial to determine
whether Mr. Donziger should be held in criminal contempt of court
for continuing to ignore the orders.
The Manhattan U.S. attorney's office, to which the judge
referred the criminal matter, declined to pursue it. In an unusual
procedure, Judge Kaplan then appointed a private lawyer to serve as
prosecutor and assigned another U.S. district judge, Loretta
Preska, to handle the case, which is set for trial starting May 10.
It was Judge Preska who put Mr. Donziger under house arrest,
deeming him a flight risk.
A state appellate court had already suspended Mr. Donziger's law
license. He requested a public hearing on that. There, 15 witnesses
testified about the honest human-rights lawyer they said they knew,
among them Pink Floyd frontman Roger Waters, a co-founder of
Greenpeace and an indigenous Ecuadorean leader. Chevron sent a team
A New York judicial official found Mr. Donziger posed no threat
to the public and recommended letting him keep his license.
Describing him as "often his own worst enemy," the official said:
"The extent of his pursuit by Chevron is so extravagant, and at
this point so unnecessary and punitive."
The opinion wasn't binding. New York state's appellate court
said the official was too dismissive of the severity of the
misconduct, and it disbarred Mr. Donziger last August. He is
seeking an appeal of the decision.
For years, Chevron separately pursued an international
arbitration case. It argued that Ecuador's government had violated
an investment treaty with the U.S., both by not upholding the
liability release granted in the 1990s and later by allowing a
fraudulent court verdict to stand.
In 2018 the international arbitration panel sided with Chevron.
It ordered Ecuador to wipe out all consequences of the court
verdict and preclude anyone from enforcing it, on grounds it was
Though Ecuador hasn't done this, Chevron officials point to
instances where, they say, its representatives have admitted the
verdict was fraudulent.
In one, Ecuador's ambassador told the U.S. Trade Representative
in a letter last July that Ecuador had been in touch with
authorities in countries where plaintiffs sought to enforce what
she called "the fraudulent Lago Agrio judgment."
The letter from the ambassador, Ivonne Baki, added that Ecuador
didn't know what steps it could take to satisfy the arbitration
order, saying its laws and international law constrained it from
intervening in the court system. Efforts to reach Ms. Baki for
comment were unsuccessful.
Investors in Chevron appear to have largely ignored the
judgment's potential financial impact. But its chief executive,
Michael Wirth, continues to face questions about the case.
At a virtual shareholders' meeting in May 2020, the actor Alec
Baldwin told the CEO Chevron was using shareholders' money to
personally attack Mr. Donziger. Mr. Wirth called Mr. Baldwin's
summary of the case false and offensive, saying: "Mr. Donziger is
an adjudicated racketeer."
There have been no settlement discussions since 2012. At a
meeting that year, held while the damage award was temporarily
doubled to $19 billion, Mr. Pate walked out after the plaintiffs'
side proposed a nearly $10 billion settlement, according to Mr.
Donziger. Chevron didn't dispute that account.
Said Dylan Mefford, a California attorney who worked on the case
as a Gibson Dunn associate: "Both sides genuinely felt the others
--Ryan Dube and Silvina Frydlewsky contributed to this
Write to Sara Randazzo at email@example.com
(END) Dow Jones Newswires
May 02, 2021 13:26 ET (17:26 GMT)
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