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EDITORIAL: Banana republic v. Chevron

Ecuador teams up with trial bar to loot American oil company

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For nearly a decade, U.S. trial lawyers have been itching to capture their share of a multibillion case against Chevron. They teamed up with the government of Ecuador in finding a judge in the banana republic willing last year to slap a $19 billion judgment against the San Ramon, Calif.-based firm for alleged environmental damages. Now the lawyers' goal is to locate a court that would enforce collection of this massive sum. It's such a sleazy cash grab that a former member of the Ecuadorean legal case defected earlier this month.

Fernando Reyes is a petroleum engineer who had served as an expert witness on the anti-Chevron side. In a Dec. 12 declaration filed with a U.S. court, "I had grown increasingly uncomfortable, especially with the plaintiffs' insistence that Chevron be held as the sole responsible party." He noticed the endeavor was more about ensuring a big payday for the attorneys involved than justice. "Plaintiffs' counsel continued increasing the amount of damages they wanted the expert to establish against Chevron, mentioning even as much as $10 billion, which I considered to be completely ludicrous," said Mr. Reyes.

Grasping for jackpot justice, the lawyers spun a tale tailor-made for gullible American liberals: Big, bad Chevron needs to pay because it came in and despoiled the pristine rain forests of a defenseless South American country while stealing precious natural resources. The real story doesn't fit that narrative. From 1964 to 1992, Texaco (which later merged with Chevron) was the junior partner in an oil exploration venture with PetroEcuador, which is owned by the government of Ecuador. In 1998, Ecuador signed papers certifying Texaco had properly taken care of any environmental concerns where it had been operating.

The certification didn't matter. In 1999, Ecuadorean officials retroactively rewrote the statutes, enabling the lawyers to go after the American company for the things it had done in full compliance with the law and in partnership with the government of Ecuador itself. The leftist government of President Rafael Correa has been eager to employ whatever shady tactics it took to grab those funds.

Most American courts haven't fallen for it. U.S. Magistrate Judge Dennis L. Howell said it best in a 2010 ruling: "While this court is unfamiliar with the practices of the Ecuadorean judicial system, the court must believe that the concept of fraud is universal, and that what has blatantly occurred in this matter would in fact be considered fraud by any court." Though six of his colleagues around the country have reached the same conclusion, the plaintiffs have been shopping their case seeking judgments in other jurisdictions such as Argentina, Brazil and Canada.

The prevalence of international forum shopping highlights the danger of New York's Uniform Foreign Money-Judgments Recognition Act, which allows American companies to be held hostage by corrupt foreign judges. The 2nd U.S. Circuit Court of Appeals ruled earlier this year that even with the evidence of fraud in the Chevron case, the statute didn't allow a district court to throw out the meritless suit. That just guarantees unscrupulous trial lawyers can keep racking up the billable hours, distracting companies from doing their job.

The Washington Times

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