A law firm strategy memo persuaded a federal judge yesterday to block enforcement of a potential multi-billion dollar judgment against Chevron for environmental damage caused by a predecessor oil company in Ecuador.
Southern District Judge Lewis Kaplan issued a temporary restraining order that would prevent Ecuadorean plaintiffs and their law firm, Patton Boggs, from seeking to enforce in New York a massive award that a court in Ecuador is expected to issue against the oil company.
Judge Kaplan said that a Patton Boggs memo, code-named “Invictus,” outlines the strategy to follow immediately upon announcement of any judgment: the filing of motions to enforce that judgment in multiple jurisdictions, including Russia and South Korea, and the use of maritime attachments to seize assets.
While the assets would be seized ostensibly to satisfy the judgment, Judge Kaplan, who read portions of the memo aloud during a hearing that stretched over two hours yesterday, said the real reason was to force Chevron into an early settlement.
The judge said he was convinced that the unusual restraining order, issued even before a judgment has been announced, was proper because of the “plaintiffs’ announced strategy to cause as much disruption as possible.”
The dispute stems from a suit brought in Ecuador by Ecuadorean natives to hold Chevron responsible for environmental degradation and health problems from pollution allegedly left unremedied by its predecessor, Texaco, some 19 years ago.
The case initially came before Judge Kaplan as Chevron sought to enforce subpoenas seeking outtakes and other materials from documentary filmmaker Joseph Berlinger, who, on the solicitation of plaintiffs’ attorney Steven Donziger of New York, filmed “Crude,” a documentary on the prosecution of the environmental case in Ecuador.
Judge Kaplan last year ordered the outtakes produced to lawyers for Chevron, led by Randy Mastro of Gibson Dunn & Crutcher. The judge rejected a claim the outtakes were protected by the journalist’s privilege and said they were highly relevant to Chevron’s claim that Mr. Donziger had attempted to improperly influence the judicial system in Ecuador and helped instigate criminal charges against two Chevron attorneys.
The release of the outtakes set in motion a process that led to subpoenas, enforced by Judge Kaplan, for both the deposition of Mr. Donziger and the production of documents.
Among the documents produced by Mr. Donziger, Mr. Mastro said yesterday, was the “Invictus” memo.
Mr. Mastro on Feb. 1 filed a racketeering suit against Mr. Donziger and the Ecuadorean plaintiffs. Chevron Corp. v. Donziger, 11-cv-00691.
Judge Kaplan’s order was issued over the argument of Sheldon H. Elsen of Orans Elsen Lupert & Brown, who was retained over the weekend by two Ecuadorean plaintiffs to fight Mr. Mastro’s motion for a temporary restraining order and preliminary injunction to block the enforcement of a judgment by Ecuador.
Mr. Elsen said Judge Kaplan lacked the jurisdiction to issue the order and he argued that Mr. Mastro had no right to file a racketeering suit against Mr. Donziger and the plaintiffs to enforce U.S. racketeering laws for conduct that occurred abroad.
Mr. Elsen said “Mr. Donziger may be a knave and thief” and that his Ecuadorean clients did not authorize Mr. Donziger’s actions, but that did not mean the court had jurisdiction.
Mr. Mastro told the court that this was an “extortion scheme orchestrated by a New York attorney to extort money from a U.S. corporation.”
Mr. Elsen took exception, saying Chevron’s goal “is to leave these peasants with their land ruined.”
But Judge Kaplan said it was clear he had the jurisdiction to entertain the lawsuit and the power to issue the restraining order, although he acknowledged that he had to think “long and hard” before issuing an order in such an “unusual circumstance.”
“What seems to be going on,” he said, was that the Ecuadorean plaintiffs and their lawyers planned to “use this worldwide, full court press” to extract a settlement. He said courts of equity have long viewed multiplicitous actions, with their potential for chaos and inconsistent judgments, as the basis for an injunction.
Quoting from what he said was “a very long and thorough memo,” the judge read a long list of a number of jurisdictions where Patton Boggs said it might seek enforcement, including Russia, South Korea and other countries where the firm could use its “longstanding relationships” to call on governments that might be helpful in enforcing the Ecuadorean judgment against Chevron.
“Now, nobody here was born yesterday, cases are settled because of leverage,” he said, but there were a number of other factors at work here, including the apparent intent of the plaintiffs to use multiplicitous actions to “exert pressure” above and beyond the limits of the law.
The judge said that the oil company would suffer irreparable harm by having shiploads of oil and gasoline being seized by maritime attachment.
Another factor, he said, was that “Ecuadorean courts do not, in general, and have not, in this case, afforded an impartial tribunal.”
Finally, the judge said there was the public interest. He called Chevron “a company of considerable importance to our economy” that employs thousands of people and supplies needed commodities.
And while the judge said he did not denigrate the interests of the plaintiffs in Ecuador, they would not be harmed by a restraining order, which must issue to avoid “helter skelter disruption for the sake of disruption.”
Mr. Donziger was in court yesterday but did not speak.
A hearing on the preliminary injunction is scheduled for Feb. 17.
James Tyrrell of Patton Boggs could not be reached for comment.
@|Mark Hamblett can be reached at email@example.com