Earlier this month, a federal judge in the Southern District of New York spun a new twist in the long-standing legal battle over environmental contamination in the Lago Agrio region of Ecuador. In a 485-page ruling, Judge Lewis Kaplan ruled that lawyers leading the Lago Agrio plaintiffs’ prosecution of claims against Chevron (which acquired the alleged contaminator, Texaco) used corrupt means to secure an $18 billion judgment from an Ecuadorian court. See Chevron Corp. v. Donziger et al, S.D.N.Y. 11-00691.
The 2011 multi-billion dollar judgment was supposed to compensate Ecuadorian Amazon rainforest residents for environmental contamination allegedly caused by oil development in the region. Since Chevron does not have assets in Ecuador, lawyers for the plaintiffs have tried to enforce the Ecuadorian judgment in the United States, Brazil, Argentina, and Canada. Judge Kaplan’s ruling stymied enforcement efforts in the United States.
The ruling came after a six-week trial during which Chevron alleged that the Lago Agrio plaintiffs’ legal team committed fraud and racketeering. The court found evidence of fraudulent submissions to the Ecuadorian court, judicial bribery, and that the opinion ordering the $18 billion judgment was ghost-written. The ruling goes on to state that the Ecuadorian judgment is not entitled to recognition in the United States because “at the time the Ecuadorian courts’ decisions in the Lago Agrio case were rendered, the judicial system was not fair or impartial and did not comport with the requirements of due process.” See p. 419 of Ruling. In arriving at that particular decision, Judge Kaplan cited outtakes from a 2009 movie in which Steven Donziger, a U.S. attorney who represented the Lago Agrio plaintiffs, said that all Ecuadorian judges are corrupt.
Recognizing that principles of international comity were implicated in its ruling, the court noted that “The transnational elements of the case make it sensitive and challenging.” See p. 2 of Ruling. But, the court went on: “Comity and respect for other nations are important. But comity does not command blind acquiescence injustice, last of all acquiescence within the bounds of our own nation.” See p. 3 of Ruling.
In a separate ruling issued on the same day, Judge Kaplan ordered that a constructive trust be imposed on any assets of Donziger and two other defendants that are traceable to the foreign judgment and prevented those defendants from enforcing the Lago Agrio judgment in the United States.
For his part, Donziger has promised an appeal.
Leaving aside the “Hollywood” nature of the allegations in the case against the Lago Agrio plaintiffs’ legal team, Judge Kaplan’s ruling highlights the challenge of enforcing a foreign judgment issued out of a fledgling or struggling justice system. Although these difficulties come at the end of a legal battle, they emphasize the critical importance of forum selection strategy and early motion practice, including forum non conveniens proceedings, international litigation.