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Ecuador News

Judges from two countries battle over Ecuador villagers’ case against Chevron Oil

By the Amazon Defense Coalition

A U.S. federal trial judge, apparently reacting to Canadian appellate judges who seem willing to allow Ecuadorian villagers the chance to seize Chevron assets to comply with their $12 billion pollution judgment, has just issued a second extraordinary “global injunction” from his Manhattan courtroom purporting to bar collection of the Ecuador judgment anywhere in the world — including in Canada, where the villagers have won three consecutive appellate court victories.

The problem, legal experts point out, is that the U.S. judge’s jurisdiction is not “global” but is restricted to the U.S.

Controversial U.S. trial judge Lewis A. Kaplan on Monday issued the unusual order — called “unlawful” by the villagers and an affront to the sovereignty of other countries — following a tough week for Chevron before the Ontario Court of Appeals in Toronto. A three-judge panel of that court on April 18 essentially shut down a Chevron lawyer who tried to leverage Kaplan’s discredited 2014 “racketeering” (or RICO) decision against the Ecuadorians to block the collection effort in Canada. Chevron also was hit with new evidence in the hearing that it has engaged in what might be a major tax-avoidance scheme in Canada by using it subsidiary to funnel billions of dollars to the foreign governments of Nigeria and Indonesia, potentially exposing the company to further liability.

Oil waste pool allegedly left behind by Texaco Oil (now Chevron) in Ecuador’s Amazon region.

Kaplan, who is known to closely track the Canadian proceedings, entered a so-called default judgment in Manhattan against 45 Ecuadorian villagers who refused to accept his jurisdiction and never appeared in the RICO matter despite being named by Chevron as defendants. The default judgment follows Kaplan’s refusal to address evidence that he relied for his RICO findings on a Chevron witness paid at least $2 million by the company who later admitted lying on the stand after being coached for 53 days by Chevron lawyers at the Gibson Dunn firm, which itself has been charged with ethical violations — including the fabrication of evidence — on numerous occasions. (Click here.)

In the default order, Kaplan purported to impose a “constructive trust” requiring the 45 Ecuadorians to turn over any assets they collect from Chevron “anywhere in the world” back to the company — a direct attack on the sovereignty of courts in Ecuador (where the original judgment issued) and the courts of Canada, where the indigenous villagers are enforcing their judgment, said Anton Tabuns, a Canadian lawyer who represents the Ecuadorians. In effect, Kaplan is ordering Canadian appellate judges who might rule in favor of the villagers to ignore their own rulings, a proposition that violates international law, said Tabuns.

“This seems like an utterly bizarre ruling that in our view further undermines Judge Kaplan’s credibility,” said Tabuns. “I don’t think Canadian judges or judges in any country are going to be impressed by a repeated attempt to impose an unprecedented global injunction by a U.S. trial judge who seems intently focused on helping Chevron.”

Protesters at a Chevron stockholders meeting in California.

Tabuns also said the Kaplan decision is “legally meaningless” not only because it will be ignored in Canada but also because the 45 named plaintiffs have no personal right to any funds, which will be placed in trust to clean-up the billions of gallons of toxic oil waste Chevron dumped when it operated in Ecuador from 1964 to 1992. (See this summary of the overwhelming evidence against Chevron as found by Ecuador’s courts, and this summary of cancer rates in the area.)

Kaplan’s latest decision follows two failed attempts by Chevron to dismiss the Canadian enforcement action on technical grounds. The first – a jurisdictional challenge – was rejected unanimously by Canada’s Supreme Court in 2015. (That decision is here.) The second, a Chevron attempt to use a $1 million costs order on the impoverished Indigenous groups to stop the enforcement litigation, also was rejected unanimously by the Ontario Court of Appeal last October.

A decision from the Ontario court from last week’s hearing, expected in a few weeks, will determine whether the Ecuadorians can seize assets held by Chevron’s wholly-owned Canadian subsidiary; Chevron, to evade its liability to the people of Ecuador, has claimed the assets should be immunized from collection despite the fact 100% of the shares of the subsidiary are owned by Chevron. Chevron lawyers, who once threatened the villagers with a “lifetime of litigation” if they persisted in pursuing their claims, have used at least 60 law firms and 2,000 lawyers on the case.

The RICO case has been called a Chevron-orchestrated “fraud” by the plaintiffs and is part of the company’s SLAPP-style intimidation model designed to silence its critics, said Patricio Salazar, the lead Ecuadorian lawyer on the case who represents the Amazon Defense Coalition of Ecuador (FDA), the group enforcing the judgment. An earlier Kaplan attempt in 2011 to impose a so-called global injunction barring enforcement of the judgment — issued without as much as an evidentiary hearing — was overturned unanimously by a U.S. appellate court and opposed by 36 law scholars from 11 countries. (This time, it is unlikely Kaplan’s purported global injunction will be appealed because the 45 Ecuadorians refuse to recognize the jurisdiction of U.S. courts.)

(For more on Chevron’s discredited U.S. racketeering case, see here and here. For how Chevron lawyer Larry Lowenstein tried to mislead Canada’s courts about the case, see here. For a criminal referral letter of Chevron to the U.S. Department of Justice over the witness payments, see here.)

“In his effort to rescue Chevron, Judge Kaplan is once again claiming jurisdiction over the entire world to try to block enforcement of the judgment by the indigenous peoples the company harmed,” said Salazar. “His latest ruling reflects a Trump-like mentality of U.S. judicial dominance and in our view is wholly inappropriate for the civilized world. It is a decision that misaligns incentives by favoring polluters like Chevron over law-abiding corporations and thereby undermines fair competition.”

In the Canadian proceeding last week, Chevron packed one side of the courtroom for the hearing with roughly 20 lawyers but the company ran into strong headwinds from judges who must decide whether the Ecuadorians can gain access to a wholly-owned Chevron subsidiary (called Chevron Canada) that holds enough assets to pay the entirety of the Ecuador judgment. Chevron has vowed never to pay the Ecuador judgment despite accepting jurisdiction in Ecuador.

Highlights from last week’s hearing in Toronto – which was widely reported in the Canada press (see here and here) include:

**The Canadian judges essentially shut down Chevron’s lead lawyer, Larry Lowenstein, when he tried to review Kaplan’s “racketeering” judgment.  “We presume the judgment in Ecuador to be valid,” said Justice Ian Nordheimer. “I’m not sure where this argument is taking you.” Lowenstein then quickly took a seat.

**Alan Lenczner, a lawyer for the Ecuadorians, disclosed stunning new evidence that Chevron’s subsidiary (Chevron Canada) was under the control of Chevron and was not independent, as the company maintains as part of its effort to immunize the subsidiary from the collection action. Lenczner disclosed that Chevron has used Chevron Canada to funnel $3.3 billion annually to the governments of Nigeria and Indonesia, with the profits from the operations in those countries flowing directly back to Chevron in the United States rather than to the Canadian subsidiary.

“Other than day-to-day operations, Chevron Canada has no significant authority to engage in its core and fundamental business,” said Lenczner. “Every step has required (outside) approval.”

**The judges also asked Chevron Canada lawyer Benjamin Zarnett whether Chevron had any interest in Chevron Canada given that the company owes 100% of the shares of its subsidiary. Zarnett’s response: “Corporations are separate legal entities even if they’re part of a group. It’s not an economic reality, but it’s a legal reality.”

**When the judges asked Lenczner about the Kaplan findings, he directed a full-throated attack on the RICO decision by pointing out that Chevron paid its star witness Guerra who later admitted under oath that he lied. Kaplan also relied on a limited record that did not include the voluminous evidence of Chevron’s environmental contamination in Ecuador.

“The U.S. case is irrelevant and has no probative value in Canada,” said Lenczner.

**Chevron also was dealt a blow when two of Canada’s leading Indigenous leaders attended the hearing in support of six Ecuadorian leaders who were present. The Canadian leaders included Perry Bellegarde, Canada’s current National Chief who leads the Assembly of First Nations, considered the world’s most powerful indigenous confederation; and Phil Fontaine, the thrice-elected National Chief of Canada. Fontaine visited the impacted area in Ecuador last year along with Canadian Grand Chief Ed John; both were harshly critical of Chevron’s misconduct.

The evidence of an apparent Chevron tax-avoidance scheme using its wholly-owned Canadian subsidiary as the vehicle is also highly disturbing, according to Salazar.

“It appears Chevron is paying virtually no tax in Canada by sending billions of dollars of profits generated in the country to foreign governments, and then writing it off as a business expense,” said Salazar, the Ecuadorian lawyer on the case. “Chevron appears to be using Chevron Canada to cheat Canadians out of tax revenue while it cheats Indigenous peoples in Ecuador out of their compensation for causing damage to their ancestral lands.”

Kaplan, who has a lifetime judicial appointment, has a long history of demonstrated bias against the Ecuadorians and their counsel and has been criticized in online forums as a “judicial bully” who is pro-business. He not only refused to seat a jury for the first time in U.S. history in a civil RICO case, he claimed the lawsuit itself was “not bona fide litigation”. He also referred to the indigenous villagers as “the so-called plaintiffs” and allowed Chevron to present secret witnesses not subject to cross-examination. Kaplan also refused to hear the voluminous scientific evidence (including 105 expert evidentiary reports) relied on by Ecuador’s courts to find the company guilty. (For background on the RICO decision, see here.)
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Credit: CSR Wire, www.csrwire.com