The World

September 22, 2010 1:45 PM

Back for More in Ecuador

Posted by Michael D. Goldhaber

Clarification: The sixth paragraph of this story has been revised to clarify that the San Francisco court was describing Ecuador's argument, rather than adopting it.

On Friday, Ecuadorian judge Leonardo Ordonez, who currently presides over the case where indigenous plaintiffs seek to hold Chevron Corporation liable for pollution of the Amazon river basin, closed the evidentiary phase of the trial, as plaintiffs released a new damages recommendation of $90 to $113 billion.

Chevron has sought to discredit the damages figure previously embraced by plaintiffs--up to $27 billion--by attacking the credibility of the court-appointed expert who recommended the figure (click here and here for previous reports on the matter). Far from rolling over, plaintiffs have doubled down, and doubled down again.

The close of evidence in Ecuador came a day after a San Francisco federal magistrate granted a motion by Ecuador for discovery under 28 U.S.C. section 1782 in aid of a foreign tribunal, and ordered the deposition of the man who produced the videotape that Chevron has cited as evidence of judicial prejudice and corruption. It was a turning of the tables for Chevron, which has won 1782 motions from coast to coast.

On the two biggest-ticket items, plaintiffs' damages numbers greatly exceed the earlier recommendations of controversial court-appointed expert Richard Cabrera. To calculate the cost of cancer deaths, the new upper-range figure of about $70 billion is based on a projection of both past and future deaths allegedly attributable to oil pollution in a large region surrounding the oil concession. (Cabrera had counted only past deaths.) To calculate unjust enrichment, the plaintiffs reached a new upper-range figure of about $38 billion by multiplying the amount that the oil company allegedly saved through cutting corners by a factor of four. Plaintiffs reason that this is necessary to deter similar conduct because they estimate the oil company ran only a 25 percent chance of being penalized.

With a maximum claim of $113 billion, the suit against Chevron, first filed in U.S. court in 1993, arguably takes the title of world's biggest dispute from the arbitration filed against Russia by the former shareholders of Yukos Oil Company.

The San Francisco ruling, ordering the deposition of the videotaper Diego Borja, was based on evidence that, in the court's words, suggested to Ecuador "that Mr. Borja was not an innocent third party who just happened to learn of the alleged bribery scheme but rather was a long-time associate of Chevron whom Chevron would pay for any favorable testimony."

Ecuador points to an audiotape, recorded by an old friend of Borja's, in which Borja repeatedly boasted that Chevron promised him a future reward for sharing his judicial videotapes. In one passage, Borja bragged to his friend: "[B]efore I give them the things they said, 'Look, we can't give you money because you can't go and buy evidence as if they sold it in the supermarket. . . . So they said, instead of giving you money, we can give you other things. . . . What we can do is. . . . You're our business partner, you get it? Now, that little word means a lot of things, right? . . . I mean it's a brass ring this big, brother."

Ecuador's lawyers at Winston & Strawn argue that deposing Borja will help them to defend the treaty arbitration filed by Chevron against Ecuador in the Permanent Court of Arbitration, where Chevron seeks a declaration that the company is not liable for damages in Ecuador, and an order that Ecuador indemnify Chevron.

Chevron denies the allegation that it promised to reward Borja for sharing his videos. Spokesperson Kent Robertson adds: "They've offered no evidence of any kind that casts any doubt on the authenticity of the videos or explains the judge's improper participation in the meetings. [T]heir 'investigation' [only] confirms that Chevron had no involvement whatsoever in planning or recording the meetings."

As for the plaintiffs' damages recommendation, Chevron rejects it wholesale. In Chevron's view, Judge Ordonez acted without authority in closing the evidence phase of the trial, because Chevron has asked him to recuse himself for declining to examine its new allegations arising out of U.S. discovery, including purported evidence that plaintiffs ghostwrote Cabrera's report. (The plaintiffs maintain that they violated no Ecuadorian law and that Chevron also engaged in ex parte contacts.) Ecuadorian law bars judges from ruling while recusal motions are pending. Ideally, Chevron would like the close of evidence to be delayed until it can complete its U.S. discovery.

Chevron's lawyers at Gibson, Dunn & Crutcher; Jones Day; and King & Spalding have long characterized the Ecuadorian court as politicized and biased, which plaintiffs deny. In the event that plaintiffs obtain a judgment against Chevron and seek to collect it, the company will continue to press its evidence of fraud in the treaty arbitration, and in enforcement proceedings. A judge need only have "substantial doubt about the integrity of the court" to refuse enforcement under the U.S. Uniform Foreign-Country Money Judgments Recognition Act. (The actual standard will depend on where plaintiffs try to collect.)

But as last week's developments make plain, plaintiffs are not content to play defense, and after 17 years, they are not giving up. The Ecuadorian court estimated in June that it would be ready to rule some time between February and April 2011. Get ready for year 18 of the world's biggest dispute.



Chevron Follows Up Its Blockbuster Release with a Sequel
September 21, 2010    

Chevron Wields U.S. Discovery as a Weapon in Ecuadorian Litigation
July 27, 2010


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