January 24, 2012 11:30 AM

Ecuador Update: One Door Shuts, Another Opens, and Chevron Lists Its Law Firms—All 39 of Them

Posted by Michael D. Goldhaber

Last week, after an intermediate Ecuadorian appellate court affirmed last year's $18 billion judgment against Chevron over oil pollution in the Amazon, we noted that Chevron had three near-term strategies to halt enforcement by the Ecuadorian plaintiffs. Well, two down, one to go.

The first option failed on January 6, when Manhattan federal district court judge Lewis Kaplan rejected Chevron's attempt to get a preemptive order to attach any assets the plaintiffs might collect. Then, on January 19, the U.S. Court of Appeals for the Second Circuit rejected Chevron's bid for a second shot at restoring Judge Kaplan's previous decision to enjoin the plaintiffs from enforcing the Ecuadorian judgment. In a brief order, the Second Circuit denied a motion by Chevron to reargue the issue and to vacate the appellate court's September decision canceling Judge Kaplan's injunction.

This may suggest that the Second Circuit's problems with a U.S. anti-foreign-suit injunction in this context go beyond ripeness--and that the U.S. injunction will never be restored. "The Ecuadorian communities affected by Chevron's contamination are one step closer to justice as a result of today's ruling," plaintiffs' spokesperson Karen Hinton stated with satisfaction. "Chevron's legal options to evade the Ecuador judgment continue to narrow."

In the near term that leaves Chevron angling to ensure that its ongoing arbitration against Ecuador in The Hague will stop the $18 billion judgment from becoming final and enforceable. The precise form of that argument was unveiled Friday in a press release announcing Chevron's decision to appeal the $18 billion judgment to Ecuador's National Court of Justice. As Chevron explained: "Based on the [arbitral] Tribunal's order, Chevron has asked that the Ecuadorian [intermediate] appellate court take all steps to suspend enforcement of the Lago Agrio judgment until further order of the Tribunal, including suspension of any requirement that Chevron post a bond to prevent enforcement of the judgment during the [current appeal]. Any demand that Chevron post a bond in this case would be a violation of Ecuador's international obligations under the order of the [Bilateral Investment Treaty] Tribunal, and Chevron has no obligation to post such a bond."

Plaintiffs' spokesperson Hinton quickly responded: "It is the position of the [Amazonian] communities that the relief Chevron is seeking is beyond the scope of the authority given the arbitration, and in any event would violate Ecuador's laws and international treaties protecting the fundamental human rights of indigenous groups and others who continue to suffer from the abuses visited upon them by Chevron. These rights include the right to life and the right to seek legal redress."

All of these legal developments, meanwhile, threaten to overshadow some very juicy law firm gossip. In a recent discovery filing, Chevron disclosed that it is employing no fewer than 39 law firms in the Ecuador matter (including four law firms representing the related individual defendants, but not including non-U.S. counsel retained in connection with potential enforcement actions). By the Ecuadorian plaintiffs' count (which we did not verify), Chevron employs close to 500 outside lawyers or paralegals to counter their claims.

Among the 39 law firms listed are 15 Am Law 100 firms—Akin Gump; Ballard Spahr; Boies, Schiller; Crowell; Gibson Dunn; Holland & Knight; Jones Day; King & Spalding; Mayer Brown; Nutter McClennen; Pillsbury; Schulte Roth; Skadden; Sonnenschein; and Steptoe—and four smaller firms that qualify for the NLJ 250.

According to the plaintiffs' unverified count, Chevron lists 60 lawyers from Gibson, Dunn & Crutcher alone. The plaintiffs estimate that Gibson Dunn charged Chevron $250 million in 2010, and the same amount again in 2011, but they don't explain their calculations. This number seems at least two times too high, since according to The American Lawyer's published figures Gibson Dunn's total litigation billings in 2010 were approximately $595 million. Moreover, 60 lawyers would represent only a bit over 10 percent of Gibson Dunn's 575-lawyer litigation department.

When queried, Gibson Dunn's Theodore Boutrous, Jr., e-mailed: "We're not going to respond to Ms. Hinton's irresponsible press releases, which are filled with false statements and blatant distortions, including regarding legal costs. We are litigating to stop this fraudulent case from going any further and to stop the plaintiffs' lawyers from causing Chevron to incur any more costs as a result of their bad-faith activities."

Boutrous added: "Chevron will also continue to prepare to resist any efforts by the plaintiffs to enforce the judgment in other countries in the event Ecuador chooses to defy the [arbitral] tribunal's order. Chevron has uncovered overwhelming evidence of fraud and does not believe that the Ecuador ruling is enforceable in any court that observes the rule of law."

In other words, Chevron is hardly out of options. If the company's third effort to preempt enforcement fails, it will then contest enforcement, while it seeks final arbitral remedies and pushes its New York RICO action against the Ecuadorian plaintiffs' lawyers. That's good news for the company's 39 law firms, and climbing.

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