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January 31, 2011 5:36 PM

The Global Lawyer: The Mystery of the Ghostwritten Report

Posted by Michael D. Goldhaber

From The Am Law Litigation Daily

U.S. court discovery has become one of Chevron Corporation's favorite tools to try to undermine the gargantuan environmental damages suit filed against the oil company by tribespeople in Ecuador for alleged pollution of the Amazon jungle. Last summer, we suggested that Chevron's then-inchoate discovery might be more significant than the failed effort to block discovery with the First Amendment, which the rest of the press was obsessing over. Since that time, the federal courts have indulged in a veritable orgy of rulings under 28 U.S.C. section 1782--the once-obscure law that provides for U.S. discovery in aid of foreign proceedings. As this unprecedented discovery campaign reaches its later phases, it is time to take stock.

By year-end, Chevron had prevailed in all nineteen of the discovery motions that it filed against individuals associated with the Ecuadorian plaintiffs. Likewise, the Republic of Ecuador, which is supportive of plaintiffs but denies Chevron's charge of collusion, won all three discovery motions that it filed against individuals whom it associates with Chevron. This is a staggering amount of successful 1782 activity. For comparison, in our review of the literature, we count only nine other cases of discovery in aid of arbitration since the Supreme Court opened the door in 2004, and three of those efforts failed. (This count excludes discovery in aid of nonarbitration proceedings.)

Ecuador would like to depose the men who, in spring 2009, secretly recorded videos of the Ecuadorian judge then presiding in the case that suggested he had prejudged the case. Plaintiffs, who call the filming a Chevron dirty trick, say that these men are on the lam, and accuse Chevron of helping to obstruct justice. Chevron says that's nonsense. Meanwhile, its lawyers at Gibson, Dunn & Crutcher have deposed two lawyers and fourteen consultants who have worked for the plaintiffs, as well as the filmmaker who filmed the plaintiffs' team in action for the controversial 2009 documentary Crude. (Two other lawyers who have worked for plaintiffs have not yet been deposed.)

Chevron's central contention is that the plaintiffs' team secretly ghostwrote the global damages report submitted to the Ecuadorian court by expert Richard Cabrera, who was avowedly independent. The two main 1782 arenas have been Denver, where Chevron established extensive contacts between Cabrera and plaintiffs' consultants at Stratus Consulting, and New York, where Chevron obtained outtakes from the film and dug its claws into lead U.S. plaintiffs' lawyer Steven Donziger. Although depositions and electronic discovery are unheard of in international arbitration, and in most foreign proceedings, Donziger is on his fourteenth day of deposition through the magic of section 1782. On January 24, Judge Kaplan ordered Donziger to hand over his computer hard drive.

From a legal journalist's perspective, among the most intriguing of the produced documents is an e-mail discussing 1782 strategy among plaintiffs' lawyers at Patton Boggs, Motley Rice, and Emery Celli Brinckerhoff & Abady. The e-mail is notable not only for the light it sheds on plaintiffs' 1782 strategizing, but for what it suggests about the accuracy of Chevron's Cabrera allegations, and for its felicity of expression.

"I wonder whether we do better by explaining that we authored the report--rather than letting Chevron tell that story like Nancy Drew," e-mailed Emery Celli's Andrew Wilson on June 15, when Chevron's discovery was just underway. Emery Celli partner Jonathan Abady says that quoting this e-mail in isolation "mischaracterizes internal discussions that led to a comprehensive disclosure in Ecuador in June 2010." Chevron argues that the plaintiffs' disclosures were far from comprehensive.

The fullest possible disclosure would certainly have been wise, especially as federal district court judge Lewis Kaplan of the Southern District of New York stripped Donziger of privilege a few months later, and laid out the defense's litigation strategy for the world to see.

Discovery reveals that four small firms that were retained to support plaintiffs in the 1782 proceedings, including Washington, D.C.'s Constantine Cannon, withdrew because of concerns about the Cabrera report. Philadelphia's Kohn, Swift & Graf, which long financed the litigation, withdrew in November 2009, mainly over differences in settlement strategy. In addition, Joseph Kohn wrote a furious letter to Donziger in August 2010, claiming that Donziger deceived him about the Cabrera report.

Three U.S. firms that entered the case during 1782 proceedings did not withdraw. An August 26, 2010, document revealed in discovery indicates that all have a financial stake in the Ecuadorian litigation's outcome. According to the document--an attachment in a e-mail to Donziger--the advocates and funders in the dispute are entitled to 30 percent of a final recovery. Of that amount, Motley Rice would receive 16.5 percent, Emery Celli 10 percent, and Patton Boggs 10 percent. The law firms declined to comment on their fees as a matter of policy.

Plaintiffs appear to have ignored the Nancy Drew warning. They opted instead to "fight hard on all fronts all the time and concede nothing, buy as much time as possible." This is how Donziger described his team's 1782 strategy in a discovered e-mail. ("Both sides in this nearly two-decade long litigation have advocated vigorously for their clients," Emery Celli's Abady said.) Chevron argues that plaintiffs' team wished to delay embarrassing revelations in U.S. discovery proceedings until after the close of evidence in the Ecuadorian trial. That trial closed evidence on December 17 (after closing and reopening in September). The parties have submitted final written arguments this month, and a judgment could issue at any time.

Donziger has conceded in his recent depositions that plaintiffs' consultants substantially wrote the global damages report for the expert's consideration, and that the expert essentially adopted their text verbatim. Plaintiffs representatives have argued that Chevron's fraud allegations are a distraction from the evidence at trial, and that only the Ecuadorian court should decide whether the Cabrera report consitutes a fraud and, if so, whether the whole trial has been tainted. To maximize enforceability of a potential judgment, plaintiffs have submitted six damages reports to supersede Cabrera's.

"It is surprising to me: the litigation tactics pursued on behalf of these plaintiffs to block, obstruct, and delay in the face of such damning and incontrovertible evidence in Ecuador," said Chevron outside counsel Randy Mastro of Gibson Dunn. "I think a lot of lawyers would have felt compelled to withdraw under such circumstances."

Abady said this remark is "misguided but consistent with the company's efforts to intimidate any lawyer or law firm from assisting residents of the Ecuadorian Amazon in their efforts to secure representation and to obtain remediation for the devastating pollution Chevron has caused in Ecuador."

"The discovery of legal documents in U.S. courts about an ongoing case impacting the health and well-being of indigenous people in Ecuador is unprecedented and should be of concern to anyone who cares about the environmental and human rights of people who have suffered at the hands of multinational corporations," said plaintiffs spokesperson Karen Hinton. She added: “Chevron’s release to the news media of e-mails and documents obtained during discovery includes core litigation strategy. In allowing this endless discovery, the court has treated the Ecuadorian plaintiffs as if they do not exist or have a voice. This latest Chevron attack is designed to intimidate the plaintiffs’ lawyers with the hope they will quit the case, leaving the indigenous people without the means to defend themselves."

The immense quantity of information that has surfaced in discovery cannot be summarized here. Nor will we try to anticipate the legal consequences. For now, Chevron has used the 1782 process to tell its story in the public, by making documents available for columns like this one. This is only salutary, as there is evidence suggesting that plaintiffs wished to suppress that story until they could obtain judgment in Ecuador.

The Chevron litigation in Ecuador has now created 1782-friendly law in seventeen federal districts, and greatly publicized the doctrine. Arbitration poobahs lament that arbitration was created in part to avoid the excesses of U.S. court discovery. But surely any client in Chevron's position would do the same thing: Hire Nancy Drew, and cite 1782.

For an archive of our extensive past coverage, including the film outtakes, click here.

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