The Law of the Jungle in Chevron’s $19 billion pollution case in Ecuador

May 9, 2013
Obsession
Energy Shocks
May 9, 2013

This post has been updated with a statement from Steven Donziger, the principal lawyer for the plaintiffs.

The tables have turned so many times in a $19 billion Ecuadoran pollution judgment against Chevron that it is hard to know who is on top, and how long they will remain there. On May 7, the Ecuadoran plaintiffs won the latest legal maneuver after a series of setbacks. The ruling, by a New York magistrate, orders Chevron CEO John Watson to submit personally to questioning by the plaintiffs’ lawyers.

It is no trivial victory. If you are the CEO of a Big Oil company, men who often see themselves, and are treated, as heads of state, it can be a humiliating exercise to be questioned in an aggressive way by a barely deferential outsider.

Yet it could be Pyrrhic. Over the last month or so, it is Chevron that has landed the blows, bruising the reputations of US and UK environmental, investment and legal groups associated with the plaintiffs. To some, the Ecuadoran side looks to be standing on seriously wobbly legs.

It is quite a reversal of fortunes, and among those who have whiplash are the reporters covering the story. But we will get to that.

First, the story goes back to 1993, when Steven Donziger, a Harvard-trained New York lawyer, began working on a huge class-action lawsuit against Chevron for polluting the Ecuadoran rain forest. As a point of fact, Chevron itself sullied nothing in Ecuador, but in 2001, it bought Texaco, which did admittedly pollute the country. In 1995, Texaco signed a remediation agreement with the Ecuadoran government in which it agreed to conduct a massive cleanup. Three years later, after spending what it said was $40 million on the remediation, Texaco was released from liability by Ecuador.

But Donziger went on with the case, ultimately winning a $19 billion judgment from a provincial Ecuadoran judge. Chevron has refused to pay, so Donziger has proceeded to attempt to seize the company’s assets in Argentina, Brazil and Canada.

Now, over the last month, Chevron has taken the offensive. In April, Stratus Consulting, a Colorado environmental group whose expertise helped to underpin Donziger’s case abruptly disavowed its work. Douglas Beltman, who handled the work for Stratus, said he had been misled.

Then, UK hedge fund Burford Capital, which had been funding Donziger’s case in the hopes of a big payday, withdrew from the case, accusing Donziger of “mounting evidence of fraud and misconduct.” On May 2, John Keker, a San Francisco-based white collar lawyer representing the plaintiffs, petitioned the federal court to allow him to withdraw from the case. Houston lawyer Craig Smyser, who was also working with the plaintiffs, withdrew his services as well. Finally, a Canadian judge shut down Donziger’s attempts to collect the Ecuadoran judgment there.

Against all of that, Donziger’s courtroom triumph on May 7 seemed a slender reed. The new narrative—one in which Donziger is no longer the legendary David against Chevron’s Goliath, but a conniving fraudster—has gained momentum. Update: In an email exchange today, Donziger disputed that the Ecuadoran case has become weaker. He said:

There is no doubt we have received some blows of late from Chevron, but it does not change the fundamental validity of the underlying case which is based on multiple corroborating layers of scientific evidence pointing to Chevron’s liability for creating a humanitarian disaster in Ecuador. Chevron’s allegations that the legal case is a fraud are preposterous and have been rejected repeatedly by courts in Ecuador and the U.S. The judgment against Chevron is based on the indisputable fact that the company deliberately dumped billions of gallons of toxic waste into the Amazon as a cost-saving measure, with devastating public health consequences for indigenous communities that continue to this day. Chevron needs to comply with court orders that it clean up its contamination.  That would be a far better use of its funds than paying hundreds of lawyers to try to attack the human rights advocates who have succeeded in holding the company accountable.

For reporters covering the drama, the turn of events has been turbulent as well. Among them are Paul Barrett, an assistant managing editor at Bloomberg BusinessWeek whose well-received Glock was published in 2012. Crown commissioned Barrett to write a new book called Amazon Justice on the Chevron story, scheduled for publication in winter of 2014. The description at his agent’s website is angled sympathetically from Donziger’s side. But Barrett told me in an email exchange today that his “view has shifted over time, as I have done more reporting.” Barrett’s most recent reporting for his magazine is a blow-by-blow account of how Donziger’s case, as he wrote in this piece, “is disintegrating.”

Barrett’s publishers have pushed up publication of the book to early 2014. Its new title: Law of the Jungle.

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