Monday, August 26, 2013

Chevron Strikes Back in Litigation: Ecuadorean Court Has A Cow

A fascinating July article in the Wall Street Journal examined how energy giant Chevron is fighting back against what it perceives to be an unfair court judgment against it. The litigation began when Texaco (since acquired by Chevron) allegedly caused environmental damage in Ecuador. Chevron’s lawyers succeeded in thwarting the plaintiffs’ attempt to bring suit in the United States. In 2011, however, the plaintiffs were able to win a gigantic $18 billion award against Chevron in Ecuadorean court.

Chevron has since fought the judgment in protracted litigation in the U.S., attempting to overcome the effective presumption in American courts that judgments from a foreign court are to be honored absent fraud or abuse. Large corporations contesting foreign legal judgments is common; what makes Chevron’s case noteworthy is the way it has retaliated against the plaintiffs. For example, Chevron filed for arbitration under a U.S.-Ecuador treaty that provided it with the right to extensive discovery of documents held by the plaintiffs. Chevron argues that these documents reveal impermissible collusion between the plaintiffs and the Ecuadorean court. In addition, Chevron sued the plaintiffs, their counsel, the law firm Patton Boggs, and their expert witnesses under the federal Racketeer Influenced and Corrupt Organizations (“RICO”) Act.

Chevron’s tenacity has paid some dividends. Expert witnesses for the plaintiffs in the Ecuadorean litigation, as well as a judge in the same litigation, have acknowledged the validity of some of Chevron’s arguments. However, Chevron remains embroiled in litigation with Patton Boggs. The law firm has an obvious incentive to protect its reputation against the racketeering charge, as well as a contingency fee from the Ecuadorean judgment that could be worth as much as $450 million.

To date, some estimates are that Chevron has used over 2,000 lawyers in the litigation, undoubtedly resulting in huge legal bills. Nonetheless, the company’s fierce resistance to the Ecuadorean judgment may end up saving it money in the long run if it deters future would-be plaintiffs.

Other News: Court Has Cow Over Bad Estate Planning