For more than two decades, public interest lawyer Steven Donziger has been at the heart of an unprecedented modern-day David and Goliath legal saga pitting indigenous Ecuadorian villagers against a global oil giant, with billions of dollars at stake. Last week, the story took another twist.
The United States Court of Appeals for the Second Circuit affirmed a lower court’s decision finding that, in helping his clients win a 2011 victory against Chevron in an Ecuadorian court, Donziger and his team engaged in bribery and fraud. On account of this wrongdoing, the court blocked enforcement in the United States of the plaintiffs’ $8.6 billion award, raising doubts that the 30,000 claimants will ever see any money for environmental and health damages. Because the defendant lacks assets in Ecuador, the plaintiffs must attempt to enforce the judgment in the United States or another country where Chevron has assets.
According to Fordham Law Professor Howard Erichson, an expert in complex litigation, the case is one of the most intriguing transnational legal disputes he has ever seen. Professor Erichson notes four particularly interesting features of the long-running case.
Donziger filed the original suit not in Ecuador but in the United States District Court for the Southern District of New York. He brought the case in the United States because he worried that Ecuador’s judicial system, with a reputation for corruption, would provide Texaco an unfair advantage. Texaco moved to dismiss the case on the grounds that the case belonged in Ecuador, not the United States. Rejecting Donziger’s argument that the courts of Ecuador would not handle the case adequately, Texaco won dismissal from the United States court.
Thrown out of the court in New York, Donziger refiled the lawsuit in Ecuador. In 2011 he won a judgment of nearly $18 billion—reduced to around $9 billion on appeal—for environmental damage in the Lago Agrio region between 1965 and 1990. Chevron, which acquired Texaco in 2001, refused to pay the judgment, arguing that the Ecuadorian judgment was illegitimate.
Instead, Chevron brought its own lawsuit against Donziger, under the federal Racketeer Influenced and Corrupt Organizations (RICO) Act, in the U.S. District Court for the Southern District of New York. Chevron claimed in Chevron v. Donziger that Donziger and his team bribed, coerced, and defrauded their way to a victory in Ecuador’s courts. The company asked the U.S. court to rule that the Ecuadorian judgment was unenforceable.
“The irony blows me away,” Erichson said. “The plaintiffs wanted to litigate in New York, but the defendant insisted that the case should be handled in Ecuador and convinced the U.S. court that Ecuador’s courts would do just fine. So the plaintiffs went to Ecuador, where they won big. And then the defendant turns around and says that the Ecuadorian judgment cannot be trusted. Maybe the original dismissal was correct, and maybe the later refusal to enforce the judgment was correct, but it just goes to show how complicated and surprising forum selection can be. In international forum selection, be careful what you wish for.”
The Plaintiffs’ Lawyer
While attending Harvard Law School, Stephen Donziger became fascinated with the plight of people living near the Lago Agrio region of Ecuador affected by oil drilling-related environmental damage. His fascination morphed into a career-long case.
“There’s a Captain Ahab side to this story. He has been chasing this whale of a case for 23 years, and it is still just out of reach,” Erichson observed.
Erichson does not see the story simply as an object lesson in legal ethics, although he thinks there are important lessons for lawyers about the dangers of corruption when dealing with unfamiliar legal systems. In Donziger, he also sees the story of a lawyer committed to a cause and willing to persevere. Erichson hopes that his law students will see in the story the possibility of pursuing passion and justice while also, perhaps, pursuing a big payday.
“There are career paths where you can try to make a difference in the world and make money doing it,” Erichson explained.
Among the short cuts taken by the plaintiffs’ lawyers, according to last week’s ruling, were bribing a judge, ghostwriting the findings of a supposedly neutral expert, and ghostwriting the judge’s decision.
“Sadly, the merits of the underlying environmental dispute have largely disappeared in the shadow of the dispute over corruption in the handling of the litigation,” Erichson said. “I wish the focus could be on environmental harm in the Lago Agrio region and whether Chevron ought to bear legal responsibility for it. But if the U.S. courts are correct that the plaintiffs’ lawyers obtained the judgment fraudulently, I have to agree with their reluctance to permit enforcement of the judgment. Ultimately, the answer has to be that you cannot engage in fraud, corruption, or bribery.”
Neither the fear Texaco would cheat to win the case nor the fact that the plaintiffs originally wanted the case tried in New York excuses his behavior as a lawyer bound by legal ethics codes, Erichson said.
Transnational Legal Disputes in National Legal Systems
This case highlights the problem of trying to resolve transnational legal problems in legal systems that are defined by national borders, Erichson noted.
Over the dispute’s life, both the United States and Ecuadorian legal systems have taken turns weighing in on the liability of a U.S. corporation for environmental contamination abroad.
“It doesn’t make sense to see this as solely a United States problem or solely an Ecuadorian problem,” Erichson said. But in a world where legal disputes overwhelmingly are handled within national legal systems—Erichson notes international arbitration as a notable exception—“transnational disputes like the one between Chevron and the Ecuadorian plaintiffs are not resolved by an international dispute resolution system but rather by a process that can include a messy interplay of multiple systems.”
The Second Circuit’s ruling does not necessarily mark the end of the road for the plaintiffs. It remains to be seen whether the plaintiffs will be able to obtain review of that ruling either by the full Second Circuit or by the Supreme Court. It also remains to be seen whether the plaintiffs will succeed in enforcing their judgment in Canada, Argentina, or elsewhere. Twenty-three years after the original lawsuit was filed, the Chevron-Ecuador dispute is far from over.