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February 9, 2011 9:54 AM

Chevron Wins TRO Barring Ecuadorian Plaintiffs and Their Lawyers from Attempting to Enforce Ecuadorian Judgment

Posted by Michael D. Goldhaber

The unprecedented litigation over Chevron's alleged contamination of the Ecuadorian rainforest took a stunning turn Tuesday when Manhattan federal district court judge Lewis Kaplan granted Chevron's request for a 14-day temporary restraining order against the Ecuadorian plaintiffs suing the company in the Provincial Court of Justice of Sucumbios, as well as the plaintiffs' Ecuadorian and U.S. lawyers. The TRO enjoins the Ecuadorians and their lawyers from in any way advancing enforcement of an Ecuadorian court judgment, or an attachment based on such judgment, until Judge Kaplan can rule on Chevron's request for a preliminary injunction to the same effect. A hearing on the preliminary injunction is scheduled for Feb. 17.

The ruling is the result of a show cause order Chevron requested in its Feb. 1 racketeering case against the Ecuadorians and many of their lawyers and experts, which is itself a related case to the Manhattan federal district court discovery action Chevron and its lawyers at Gibson, Dunn & Crutcher are pursuing against the tribespeople's longtime lead U.S. attorney, Steven Donziger.

Ruling from the bench at the conclusion of a two-hour hearing Tuesday afternoon, Judge Kaplan concluded that the risk of irreparable harm to Chevron was "quite high." He pointed to Donziger's deposition testimony that a judgment in Ecuador could issue at any moment, and relied extensively on a memo written under the code name Invictus by lawyers at Patton Boggs, which joined the litigation on behalf of the Ecuadorians in late 2010. The Invictus memo, produced during the Donziger discovery, lays out the strategy of aggressively attaching Chevron assets in multiple jurisdictions around the world, even before any recognition judgment is issued. "Plaintiffs appear to intend to use multiple legal proceedings around the world to exert pressure above and beyond the merits of the lawsuit," Judge Kaplan concluded.

As part of his analysis in granting the restraining order, the judge also examined the likelihood that Chevron will succeed on the merits in obtaining a declaration that any judgment in Ecuador is unenforceable. Judge Kaplan ruled preliminarily that Chevron had raised "serious questions" as to the enforceability of such a judgment, based on its arguments that the judgment was procured by fraud and the Ecuadorian judicial system lacks due process.

Randy Mastro of Gibson Dunn represented Chevron at Tuesday's hearing. Mastro screened highlights of Donziger's videotaped deposition testimony and of documents obtained in the Donziger discovery. Chevron's evidence was intended to show the plaintiffs' alleged fraud in arranging the appointment of the purportedly neutral Ecuadorian damages expert Richard Cabrera, and secretly ghostwriting the Cabrera report that called for a $27 billion judgment against Chevron.

Notwithstanding plaintiffs' arguments that their contacts with Cabrera were lawful and appropriate, Mastro screened e-mails suggesting that the Ecuadorian plaintiffs lawyers tried to hide their relationship with the court-appointed expert. Chevron's evidence indicated that plaintiffs lawyers used secret e-mail accounts and code words to communicate about their interactions with Cabrera. On March 30, 2010, one of the junior Ecuadorian counsel sent an e-mail to Donziger and the two Ecuadorian leaders of the plaintiffs' team, saying that if the plaintiffs' relationship with Cabrera emerged in U.S. discovery, it might destroy the Ecuadorian proceeding and send all the Ecuadorian lawyers to jail. (The plaintiffs have argued that the view of one frightened young lawyer is not dispositive of Ecuadorian law.)

Steven Donziger appeared on his own behalf at Tuesday's hearing but chose not to speak. Judge Kaplan denied an earlier request by Donziger to adjourn the hearing because he had not obtained counsel.

Sheldon Elsen of Orans, Elsen, Lupert & Brown appeared for the Ecuadorian plaintiffs, but informed the court that the plaintiffs response brief he signed was actually authored by Patton Boggs, because Elsen lacked the resources to produce such an ambitious effort on two days notice. (The plaintiffs' lead counsel through most of the New York discovery proceedings, Emery Celli Brinckerhoff & Abady, moved to withdraw from the case on Monday.)

Elsen argued that to enjoin the Ecuadorian plaintiffs would raise extraterritoriality issues similar to those addressed by the U.S. Supreme Court in Morrison v. National Australia Bank, but Judge Kaplan rejected the analogy as inapt.

Elsen also argued that the court lacked personal jurisdiction over the Ecuadorian plaintiffs because they conducted no business in New York. But Judge Kaplan responded that Elsen's clients had hired New York attorney Donziger as their agent--"He's their New York office," the judge said--and through Donziger conducted extensive lobbying, legal, and public relations campaigns in the U.S.

When Elsen tried to dissociate the Ecuadorian plaintiffs from Donziger, Judge Kaplan cautioned that any allegations of misconduct have yet to be adjudicated.

Chevron counsel Mastro told us in an e-mail statement after the hearing that his side is "very pleased" that Judge Kaplan granted the TRO. "We look forward to the preliminary injunction hearing later this month," the statement says. "Through our discovery efforts, we have uncovered a travesty of justice in Ecuador and exposed a shocking scheme to target a U.S. company. To be able to present this evidence to a U.S. court concerned about fairness and due process is heartening. And to obtain this much-needed emergency relief is very gratifying."

Karen Hinton, a spokesperson for the Ecuadorian plaintiffs, said the plaintiffs had no comment on Judge Kaplan's ruling, but would let their response brief speak for itself.

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