Comity of Errors: Second Circuit Reverses Chevron Ruling

Federal judges have considerable power, but their influence wanes beyond U.S. borders.

The Second Circuit Court of Appeals ruled today that U.S. District Judge Lewis A. Kaplan "overstepped his authority" when he tried to block enforcement of an $18 billion judgment against Chevron worldwide, reports The Washington Post.

The case, Chevron v. Naranjo, involves an environmental dispute between Ecuadorans and Chevron over allegations that Texaco, now a wholly-owned subsidiary of Chevron, extensively polluted the Lago Agrio region of Ecuadorian Amazon. The Ecuadorans claim that Chevron is liable for the damages.

The Lago Agrio plaintiffs (LAPs) have been battling Texaco, (and now Chevron), over the alleged damage for almost two decades. Chevron spent $40 million on remediation pursuant to a settlement that Texaco finalized with the Ecuadorian government in 1998. The LAPs then initiated a new lawsuit against Chevron in Ecuador, which resulted in a nearly $18 billion judgment against Chevron last year.

Chevron turned to Judge Kaplan for an order to block the LAPs from collecting the money until a U.S. federal court determined if the judgment was obtained fairly.

The Second Circuit Court of Appeals reversed Judge Kaplan's order barring the LAPs from collecting the judgment because it raised international comity concerns.

"It is a particularly weighty matter for a court in one country to declare that another country's legal system is so corrupt or unfair that its judgments are entitled to no respect from the courts of other nations. That inquiry may be necessary, however, when a party seeks to invoke the authority of our courts to enforce a foreign judgment."

In particular, the court was criticized that the order was speculative because Chevron is still appealing in Ecuador, and the LAPs had not attempted to collect against Chevron in New York.

"When a court in one country attempts to preclude the courts of every other nation from ever considering the effect of that foreign judgment, the comity concerns become far graver. In such an instance, the court risks disrespecting the legal system not only of the country in which the judgment was issued, but also those of other countries, who are inherently assumed insufficiently trustworthy to recognize what is asserted to be the extreme incapacity of the legal system from which the judgment emanates."

Related Resources:

• Chevron v. Naranjo (Second Circuit Court of Appeals)
• Comity or Tragedy? 2nd Circ. Nixes NY Parking Tax Challenge (FindLaw's Second Circuit blog)
• Chevron loses injunction in $18 billion Ecuador case (Reuters)
• Chevron Ecuador: Oil Giant Fined 8.6 Billion by Ecuadoran Judge (FindLaw's Decided)