For the Ecuadorians who hold a $19 billion environmental judgment against Chevron Corporation over oil sludge in the Amazon, a mandamus petition to the U.S. Court of Appeals for the Second Circuit was the last best hope of avoiding an Oct. 15 trial on Chevron’s accusations of wholesale fraud. But on Thursday the Second Circuit rejected the petition just hours after oral arguments, crushing the Ecuadorians’ hopes and clearing the way for trial.
The Ecuadorians and their lawyers are scrambling to enforce their judgment worldwide, even as they prepare to defend themselves against Chevron’s fraud and racketeering claims in New York. They argued Thursday that U.S. District Judge Lewis Kaplan was biased toward Chevron and was ignoring the Second Circuit’s own directive from January 2012, when the appeals court ruled that Kaplan lacked the power to declare the $19 billion judgment unrecognizable.
The Ecuadorians had hoped for a reprise of their last trip to the circuit, when the court roughed up Chevron at oral arguments and then vacated Kaplan’s injunction blocking enforcement of their jackpot judgment. But Thursday’s panel was a different story.
Representing the Amazonians, James Tyrrell of Patton Boggs argued that Kaplan had violated the letter or spirit of the Second Circuit’s mandate by reanimating “the very declaration of non-recognition that the Court forbade” and trying to “end-run” an appeals ruling he found constricting.
Arguing for Chevron, Theodore Olson of Gibson, Dunn & Crutcher mocked what he called “a recusal motion disguised as a reassignment motion tacked on to an empty made-up mandamus proceeding.” In contrast to Olson, who spoke virtually without interruption, Tyrrell was disrupted by a constant stream of skeptical questions. In particular, each of the three circuit judges queried why the Amazonians’ arguments needed to be addressed pretrial.
“Why decide today?” asked Judge Debra Ann Livingston.
“If you’re right and Kaplan was out of the box,” Judge Barrington Parker told Tyrrell, “then you can come back and get it set aside later.”
Judge Peter Hall chimed in: “Why is this not remediable on final appeal?”
In substance, Tyrrell complained that Kaplan had reinserted the validity of the Ecuadorian judgment as an issue in the New York trial by refusing to let the Ecuadorians withdraw their defense of collateral estoppel, and by contemplating a “set-aside” of the Ecuadorian judgment.
Citing a recent order by Judge Kaplan, Olson responded that if the Ecuadorians wish to avoid litigating collateral estoppel, all they need to do is not press it at trial. As for the possibility of a “set-aside,” Olson echoed Kaplan in denying that it is part of the case.
Instead, said Olson, the equitable relief sought by Chevron in its fraud case is to enjoin the Ecuadorians from profiting from their wrongdoing. When asked by Parker if this relief was legally problematic, Tyrrell replied that it was not—but that fraud against the Ecuadorians may not be pleaded in New York based on third-party reliance.
Hall concluded by reiterating the panel’s invitation to raise this and other arguments on final appeal from the Oct. 15 trial. Soon afterward, the panel formally denied the Ecuadorians’ petition in a one-paragraph order.