U.S. Court Hears Appeal on Halted Ecuadorean Damages Award

By Basil Katz | September 19, 2011

A U.S. appeals court on Friday sharply questioned whether a New York federal judge had the legal authority to prevent enforcement of an $18 billion damages award against Chevron Corp in the company’s long-running environmental battle with residents of the Ecuadorean rain forest.

“Are you saying that a New York court is in charge of deciding that we will not tolerate a South African judgment, procured by fraud, and enforced in Russia?” appeals court judge Gerald Lynch asked a Chevron attorney.

The complicated, two-decade-long fight, is being waged in courts both in Ecuador and the United States. The residents say Texaco, bought by Chevron in 2001, is responsible for hazardous oil-drilling waste dumped on their land in the 1970s and 1980s.

Chevron says Texaco cleaned up all waste pits for which it was responsible before turning the sites over to state-owned oil company Petroecuador, which still operates in the area.

In February, an Ecuadorean judge ordered Chevron to pay the residents $18 billion. Then in March, U.S. District Judge Lewis Kaplan issued a preliminary injunction freezing enforcement of the judgment in any country outside Ecuador.

Both Chevron and the residents are appealing the award in Ecuador, although the case has yet to make its way to the country’s highest court.

Plaintiff lawyer James Tyrrell asked judges Lynch, Rosemary Pooler, and Richard Wesley, to prevent a November bench trial in the United States, where Kaplan is to determine whether to extend his injunction.

Tyrrell argued that Kaplan had overstepped the purview of New York courts, and that he had in any event intervened far too early as Ecuador courts are still considering the damages judgment.

An attorney for Chevron, Randy Mastro, urged the judges on Friday to let Kaplan’s injunction stand because it prevented the Ecuadoreans from “going to locations where they can disrupt Chevron’s operations,” even before the judgment is final.

Chevron has also filed a wide-ranging racketeering lawsuit against some of the Ecuadoreans and their longtime legal advisor, Steven Donziger, saying they illegally pressured the Ecuadorean legal system to render a judgment in their favor.

The oil company has pilloried Donziger for his comments on corruption in Ecuador’s judicial system and his purported efforts to intimidate officials. The remarks came to light in an acclaimed documentary, “Crude,” and its outtakes, which were subpoenaed in U.S. litigation.

(Reporting by Basil Katz; Editing by Eileen Daspin and Gunna Dickson)

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