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Court Hears Appeal In $9 Billion Chevron Ecuador Debacle

By Casey C. Sullivan, Esq. on April 23, 2015 | Last updated on March 21, 2019

More than 22 years ago, environmental advocates accused Texaco, later acquired by Chevron, of polluting the Amazonian rainforest homeland of 30,000 Ecuadorians. Since then, the controversy has produced reams of media coverage, a well-received documentary, and a judgment of nearly $9 billion against Chevron.

It also produced a three hundred page court opinion finding that the billion dollar judgment to be based on fraudulent evidence, bribery and deceit -- and preventing enforcement of the judgment under an anti-racketeering statute often used for mobsters, not environmental lawyers.

Polluted Rainforest, Polluted Proceedings

Steven Donzinger originally brought case against Chevron and pursued it vehemently for years. After an Ecuadorian court found for the plaintiffs and entered a judgment just shy of $9 billion, Chevron moved to prevent its enforcement under the United States' Racketeering Influenced and Corrupt Organizations Act. In March of last year, Judge Lewis Kaplan, of the Southern District of New York, found for Chevron in an opinion, almost 400 pages long, that found the Ecuadorian proceedings to be marred by corruption, bribery and injustice.

Judge Kaplan enjoined Donzinger from pursuing the Ecuadorian judgment. The Second Circuit heard Donzinger's appeal this week.

Actually, the Forum is Conveniens After All

One of the major hurdles facing Chevron appeal is the fact that it chose Ecuador in the first place. When the legal battle over the rainforest pollution began, in 1993, Chevron objected to American jurisdiction and convinced courts to declare that Ecuador was the proper venue. Now that Chevron's chosen venue has produced an unfavorable outcome, the company wants U.S. courts to stop its enforcement. Before reaching the most substantive issues, the Second Circuit will have decide if Chevron is now estopped from challenging that judgment.

Does RICO Even Allow The Relief Chevron Seeks?

More substantively, one of the main issues the court will have to address is whether RICO allows a private party to obtain an injunction. Currently, courts are perfectly split on the issue. The Ninth Circuit does not allow equitable relief for private plaintiffs under RICO, while the Seventh Circuit has. The district court sided with the Seventh, finding that the statute's provision granting courts jurisdiction to "prevent and restrain" RICO violations authorizes injunctive relief, while its private damages provision allows for private actions.

Whether the Second Circuit agrees with Kaplan's interpretation or not, some commentators predict that the question will soon reach the Supreme Court, be it through this trial, or another.

This May Be Just the Beginning

To complicate matters, judge Richard Wesley seemed to leave both sides stumped when he asked them whether the court could simply order that the dispute be retried -- this time in New York, rather than Ecuador.

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