Five Reasons Why Judge Kaplan’s Decision in Chevron’s RICO Case Is Fatally Flawed And Will Be Reversed


Five Reasons Why Judge Kaplan’s Decision in Chevron’s
RICO Case Is Fatally Flawed And Will Be Reversed

March 2014

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Judge Lewis A. Kaplan’s decision in favor of Chevron is deeply flawed both legally and factually and resulted from a bench trial overseen by a judge who repeatedly demonstrated his animus toward the Ecuadorian villagers and their counsel.  From our perspective, Judge Kaplan’s decision has no credibility – it is void for lack of jurisdiction and ruthlessly distorts the truth.  In an unprecedented display of judicial overreach, Judge Kaplan tried to use his Manhattan courtroom to reverse a unanimous decision from Ecuador’s Supreme Court involving questions of Ecuadorian law. Judge Kaplan’s decision is also in open defiance of a prior decision in the very same case from the Second Circuit Court of Appeals, which barred him from ruling as he did on the validity of a foreign country’s judgment.

During the seven-week RICO trial, Judge Kaplan made a mockery of the rule of law.  He refused to seat a jury and then let Chevron’s army of lawyers use the jury room as a private office.  He then repeatedly denied the defendants the opportunity to present the voluminous and unassailable scientific evidence that proves the Ecuador judgment is valid.  He also refused evidence that Chevron repeatedly attempted to corrupt and sabotage the proceedings in Ecuador because it knew it was losing on the merits.  We seriously doubt Judge Kaplan wrote all of his 500-page decision after the close of evidence; he appears to have constructed it over the course of several months, cribbing most of the material from Chevron’s own briefs and exhibits while almost completely ignoring our own. Tellingly, Judge Kaplan refused to even read the official record from the Ecuador trial that was relied on by the Ecuadorian courts to find Chevron liable.

Here are five reasons why Judge Kaplan’s decision is fatally flawed, unlikely to survive appeal, and unlikely to have a wider impact on enforcement actions in other jurisdictions:

1. Judge Kaplan’s implacable bias against Mr. Donziger and the Ecuadorians undermines his credibility and negates the validity of his ruling

On the eve of Chevron’s RICO trial, it became clear the oil company was too scared to put its case before a jury of impartial fact finders. Chevron dropped billions of dollars in damages claims to ensure that only Judge Kaplan would decide the case alone.  Why?  Here is just one example of how Judge Kaplan viewed the dispute, in his own words:

The imagination of American lawyers is just without parallel in the world. . . . [W]e used to do a lot of other things. Now we cure people and we kill them with interrogatories. It’s a sad pass. But that’s where we are. And Mr. Donziger is trying to become the next big thing in fixing the balance of payments deficit. I got it from the beginning. . . .
 
The object of the whole game, according to Donziger, is to make this so uncomfortable and so unpleasant for Chevron that they’ll write a check and be done with it . . . . [T]he name of the game is . . . to persuade Chevron to come up with some money.

This was not a one-off comment: Judge Kaplan repeatedly made inappropriate comments about the villagers who sued Chevron (for example, referring to them as “so-called” plaintiffs), their case (for example, stating that it was not “bona fide” litigation), and their U.S. lawyer Mr. Donziger (for example, calling him a “field general” rather than a lawyer).

Incredibly, when Chevron filed its RICO case in February 2011 – after Judge Kaplan made these inappropriate comments – Judge Kaplan, instead of recusing himself, assigned the case to his own court rather than let it be randomly assigned to an impartial judge as is the custom in the federal judiciary.  (Recently, the same appellate court that will review Judge Kaplan’s decision reassigned the matter involving the historic verdict in the famous “stop-and-frisk” case relating to the New York City Police Department because a trial judge did the same thing.)

Given this history, it is understandable why Chevron was desperate to have Judge Kaplan decide the case alone.  Sure enough, Judge Kaplan stuck to Chevron’s script throughout the RICO trial, excluding essentially all evidence that contradicted Chevron’s narrative.  Judge Kaplan refused to any evidence related to Chevron’s contamination of the Amazon rainforest, and he struck the bulk of Mr. Donziger’s testimony, which is available in full here.  While Chevron has certainly enjoyed its ride on Judge Kaplan’s bandwagon, that ride is nearly over.  Chevron now will have to justify this offensive proceeding to the Second Circuit Court of Appeals.

2. Especially after Chevron dropped its damages claims to avoid a jury, Kaplan had no legal authority to issue his decision

While Judge Kaplan distorted most of the facts in the case to fit his preconceived notions, the main reason that we believe the decision will be reversed on appeal is because it openly flouts core legal precedent and principles that bar Judge Kaplan from doing what he did.

First, when on the eve of trial Chevron panicked and dropped all money damages claims to avoid a jury, it stripped Judge Kaplan of subject matter jurisdiction because there is no legally cognizable “case or controversy” as required by the U.S. Constitution.  That is, while Chevron might get a caffeinated kick out of reading Judge Kaplan’s decision, it does not provide Chevron any meaningful legal relief.  It will almost certainly be reversed on appeal and ignored by foreign enforcement courts, largely because its conclusions are not supported by the evidence and Judge Kaplan was so evidently biased.  See Mr. Donziger’s Jan. 22 motion to dismiss for more detail.

Second, the law is clear that a private party can only use the RICO statute to obtain money damages, not to act as an Attorney General and seek judicial injunctions barring some sort of activity, as Chevron is doing here.  The United States government and even Chevron’s own lawyers, including the renowned Supreme Court advocate Theodore B. Olson, have consistently agreed with this position. But seeking money damages would have required Chevron to submit the case to a jury.  Given that a jury likely would have rejected its claims, Chevron and Judge Kaplan decided to push ahead on an unlawful injunction-only RICO claim that has no precedent in U.S. law and is almost certain to be vacated. See pages 57-59 of Mr. Donziger’s Dec. 23 post-trial brief and pages 19-22 of Mr. Donziger’s Jan. 21 post-trial reply for more detail.

Third, the decision is a flagrant violation of international comity, the principle that holds that the courts of one country must give respect to the courts of another.  An earlier attempt by Judge Kaplan to block the Ecuador judgment was vacated unanimously on appeal for violating this principle.  In his latest decision, Judge Kaplan repeats the same mistake. He essentially tries to overrule the Ecuadorian Supreme Court on questions of Ecuadorian law.  He also impugns the entire Ecuadorian judiciary based on the testimony of one witness who is also a political opponent of Ecuador’s current president.  U.S. courts in similar circumstances have justifiably rejected opinions of foreign courts that impinge on their sovereignty; likewise, Ecuador’s courts have rejected Judge Kaplan’s ruling.  The Second Circuit is keenly attuned to international comity issues and is highly unlikely to let Judge Kaplan’s wholesale attack on a foreign judiciary stand. For more detail, see pages 52-55 of Donziger’s Dec. 23 post-trial brief and pages 11-15 of Donziger’s Jan. 21 post-trial reply.

3. “Bribery”: Judge Kaplan’s finding that the trial judge was “bribed” is based on corrupt and unreliable evidence

The only direct testimony supporting Chevron’s key claim—i.e. that the Ecuadorian plaintiffs’ legal team “bribed” the trial judge to allow them to write the opinion—comes from Alberto Guerra, a disgraced former Ecuadorian judge and probably one of the most openly corrupt witnesses ever to blight an American courthouse.  His entire testimony violated U.S. law, which prevents witnesses from being paid for their testimony.  See this pre-trial motion to impose terminating sanctions on Chevron for corrupting the trial; this Oct. 30 motion to strike and pages 31-42 of Donziger’s Dec. 23 post-trial brief.  Among the key facts about Guerra:

  • He admits he accepted and paid bribes throughout his legal career, both as a practicing lawyer and as a sitting judge.
  • He was removed as a judge for misconduct.
  • In early 2012, he was nearly destitute and desperate to join his son and daughter living in the United States (his son illegally), but had no basis for immigration.
  • At that time, a high-profile news story broke about an Ecuadorian judge accepting a decision written by a party and given to him on a flash drive.  Guerra approached Chevron seeking payment with exactly the same story: he claimed he had evidence that the plaintiffs wrote the judgment and gave it to the judge on a flash drive.
  • Chevron lawyer Andres Rivero and Chevron investigator Yohi Ackerman immediately paid him $18,000 in cash for his story, in violation of ethical rules against paying fact witnesses.  Chevron later paid him another $30,000 in cash.  It then entered into an agreement to pay him $12,000 a month for at least two years and perhaps indefinitely.
  • Chevron operatives then bought Guerra a car, auto insurance, and health insurance. Company lawyers then moved Guerra, his wife, and his younger son and his son’s entire family to the United States and hired lawyers to get them green cards.  The incentives for Guerra to say anything to keep the money flowing are painfully obvious.
  • Guerra could never produce the flash drive.  His computers did not turn up even a single email from Pablo Fajardo, the lead lawyer for the affected communities in Ecuador.  And he claims to have “lost” his calendar during the year that he said he was in a meeting with Mr. Donziger where discussion of the “bribe” took place.
  • Guerra’s testimony changed constantly depending on new evidence. Other documents he produced to substantiate his account appear blatantly forged.
  • In his decision, Judge Kaplan admitted Guerra was corrupt. Yet Judge Kaplan decided to credit Guerra’s testimony anyway.  Otherwise, there would be no high-profile “bribery” finding to hinge his illegal injunction on.

Judge Kaplan’s embrace of this admittedly corrupt testimony over other contradictory evidence is indefensible.

4. “Fraud”:  Three layers of courts in Ecuador rejected Chevron’s “fraud” claim.

Chevron’s “fraud” claim is based primarily on the fact that the lawyers for the rainforest communities publicly claimed a court-appointed damages expert, Dr. Richard Cabrera, was “independent” when they paid him and drafted most of his report.  But under the rules of the Ecuadorian trial process – rules that Judge Kaplan tried to interpret even though he does not speak Spanish and has no expertise in the Ecuadorian legal system – lawyers for the communities were allowed and indeed encouraged to work with Dr. Cabrera. The law required that they exclusively pay Dr. Cabrera given that they were the only party that asked for his report; Chevron exclusively paid for its own experts in similar circumstances. Neither Chevron nor Judge Kaplan can cite to any Ecuadorian law or rule prohibiting these interactions.  Instead, Chevron and Judge Kaplan try to demonize the Ecuadorian legal process for an audience unfamiliar with how it works. To the extent that the “fraud” claim is based on how the lawyers for the communities subsequently characterized or “touted” the expert in press releases and other public statements, Judge Kaplan’s decision ignores the following key facts:

  • The Ecuadorian plaintiffs were entitled to call the expert “independent” because that was his technical status before the Ecuadorian court.  At the end of the day, his role was to exercise his independent judgment in deciding whether or not to sign the final report drafted for him, which is what he did.
  • In the Ecuador trial, Chevron routinely paid and collaborated with “court-appointed” experts and touted their work to the court and to the public as “independent.”
  • Public statements characterizing the expert as independent were statements of opinion fully protected by the First Amendment, both as plain speech and as petitioning activity.
  • Most importantly, the evidence used by Dr. Cabrera was submitted largely by Chevron itself. The court received over 60,000 contamination sample results which found massive illegal levels of toxins.
  • While Chevron claims the statements were misleading, it never claimed to actually be misled.  Instead, its theory is that others—third parties such as journalists—were misled.  But New York law clearly prohibits “fraud” claims to be brought on behalf of third-parties; Judge Kaplan simply ignored this body of law.  See pages 67-68 of Mr. Donziger’s Dec. 23 post-trial brief and pages 22-27 of Mr. Donziger’s Jan. 21 post-trial reply for more detail.
  • Chevron tries to claim that the plaintiffs “bribed” Dr. Cabrera because his invoices were paid outside the court process.  But as Mr. Donziger explained repeatedly, all monies paid to Dr. Cabrera were for work performed and the payment methods were appropriate and consistent with custom and practice in Ecuador.

The most important fact about Chevron’s “fraud” claim with regard to Dr. Cabrera, however, is that Chevron was able to fully present its evidence to the Ecuadorian trial court, appellate court, and Supreme Court.  These courts—unlike Judge Kaplan—are intimately familiar with Ecuadorian laws, norms, and customs.  All three levels of Ecuadorian courts to hear the case rejected Chevron’s claims with regard to the Cabrera report.  Moreover, to prevent Chevron from sabotaging the trial process, the trial court struck the controversial court-appointed expert from the record even though it did not find it was the product of fraud.   The court then relied on the 105 other technical reports submitted to find Chevron liable and impose damages. In short, Chevron’s manufactured claims with respect to Dr. Cabrera’s report were addressed by the Ecuadorian courts and are of no significance at this stage of the proceeding, except to Judge Kaplan.

5. “Extortion”: Kaplan’s disturbing “extortion” finding illegally criminalizes core First Amendment activity

Perhaps the most dangerous part of Judge Kaplan’s decision— a part that even Judge Kaplan tries to downplay—is his finding that the advocacy of Mr. Donziger and the Ecuadorian plaintiffs in press releases and legal filings, the holding of public demonstrations, and other acts to express their views and to “pressure” the company to clean up its contamination in Ecuador were criminal predicate acts.  The decision, if not reversed, criminalizes what lawyers, activists, and citizens do every day to hold corporations accountable for their misconduct.

This is exactly what Chevron designed its RICO case to do.  As explained in a recent letter signed by over 40 of the country’s leading environmental and civil rights organizations, Chevron has used RICO “to cast its victims and virtually anyone who has supported their campaign, or been critical of Chevron – including NGOs, journalists, and responsible investors – as criminals.”  It continues:

Chevron also targeted nonprofit environmental and indigenous rights groups and individual activists with subpoenas designed to cripple their effectiveness and chill their speech. By asserting that its most vocal critics are “conspirators” in efforts to bring Chevron to account for its environmental and human rights abuses, Chevron has attempted to force organizations to turn over all their internal planning and strategy documents and the identities of their supporters, who may then find themselves the target of further legal action.

Chevron has already been sanctioned by some courts for this: in 2013, a federal court quashed the main subpoena against an NGO, calling it a threat to free speech; years earlier, another federal court threw out a Chevron lawsuit against a former lawyer for the Ecuadorians as a “SLAPP” suit aimed at dissuading “public participation” and ordered Chevron to pay the lawyer’s defense fees and costs.

Judge Kaplan’s attempt to crack down on free speech—blogging, press releases, public advocacy—runs afoul of the Constitution.  As the U.S. Supreme Court has held: “[s]peech does not lose its protected character . . . simply because it may embarrass others or coerce them into action.”  The First Amendment also robustly protects “petitioning activity” such as lobbying government officials or anything associated with pursuing a legal case under what is called the Noerr-Pennington immunity doctrine.  The only way around the doctrine is for Chevron to prove that the entire underlying legal case (the Ecuador environmental lawsuit) was a “sham.”  But, to protect itself from evidence of its own contamination that clearly proves the case in Ecuador was not a sham and was instead based on overwhelmingly and unassailable scientific evidence, Chevron expressly told Judge Kaplan that it was not making such a claim.

It is worth adding that Karen Hinton, who served as the U.S. spokesperson for the Ecuadorians, testified that her press releases and public statements were based on the overwhelming evidence of Chevron’s contamination submitted to the court. Ms. Hinton was trying to demonstrate that her comments about Chevron’s actions in Ecuador were accurate and, therefore, protected by her First Amendment rights.   But Judge Kaplan struck the vast majority of her testimony and refused to let in evidence of Chevron’s contamination to prove Ms. Hinton’s press releases were accurate.  He then concluded those press releases were part of an “extortionate” campaign directed at Chevron.

Conclusion

Chevron’s numerous public relations firms are operating on all cylinders trying to convince people that Judge Kaplan has the final word on the case.  This is simply not true.  Along these lines, a few additional points are in order:

  • Judge Kaplan’s decision is fatally flawed and highly likely to be reversed on appeal.  The trial was fundamentally unfair, fell far short of minimum standards of due process, and violated the rights of the Ecuadorians and Mr. Donziger.
  • While Chevron will continue to argue that Judge Kaplan’s “findings of fact” should be used even if the case is reversed, the argument likely will not be persuasive for foreign courts given the numerous flaws in the trial.   The communities and Mr. Donziger also plan to ask that the “findings of fact” be thrown out on appeal.
  • There are currently four jurisdictions outside the United States where the communities are pressing claims against Chevron assets to force the company to comply with the Ecuador judgment.  Chevron has to win every one of these actions – and others that might be filed – to avoid paying for the court-ordered clean-up.  The chances that Chevron will win every enforcement action are miniscule.
  • Judge Kaplan’s injunction expressly does not affect foreign courts deciding whether to enforce the Ecuadorian judgment.  Foreign courts will use their own laws to decide whether to enforce the Ecuador judgment.  Unlike what happened in New York, we believe foreign judges will not be biased.
  • Indeed, in many countries, Judge Kaplan’s over-the-top attacks on the Ecuadorian judiciary will not be received well and could easily backfire against Chevron.
  • The Ecuador judgment has been affirmed by the Ecuadorian Supreme Court.  Even Judge Kaplan did not challenge the fact that massive contamination still exists at Chevron’s former operations sites in the Ecuadorian Amazon.

The historic campaign for justice being waged by the Ecuadorian rainforest communities and their allies around the world – including many of Chevron’s own shareholders — will not stop until Chevron’s contamination is cleaned up properly and those affected are made whole.  For Chevron, there is no running away from the law or the facts.  It has on its hands a humanitarian and ecological crisis of its own making for the entire world to see, as documented now by hundreds of independent journalists.  (See, for example, this summary of the evidence; this video on the case and this 60 Minutes segment.)  Delaying enforcement actions and retaliating against lawyers and victims will not make the underlying contamination go away, nor will it erase the company’s rapidly growing financial risk and reputational harm stemming from its failure to abide by the law.

Legal Team for the Ecuadorian Communities
March 2014