September 09, 2013 Articles

The Contamination of the World's Largest Pollution Judgment

The $19 billion judgment against Chevron is unraveling.

By L. Mark Walker – September 9, 2013

For now, it is still the world's largest pollution judgment: the $19 billion Ecuadorian judgment against Chevron for pollution of the Amazon rainforest. But the pollution judgment is unraveling—the victim, it seems, of contamination—contamination by fraud and corruption. The latest shocking revelations may be the judgment’s death knell. But first some background.

A Long and Tortured History
In 1964, the Republic of Ecuador granted an oil-and-gas concession to Texas Petroleum Co. (TexPet), a fourth-tier subsidiary of Texaco, Inc. Over time, beginning in 1974, Ecuador's state-owned oil company, Petroecuador, became a co-owner in the concession. In 1990, Petroecuador became the operator of all of the wells and in 1992 became their sole owner. Over 400 wells were drilled while TexPet owned an interest in the concession.

In 1993, a group of Ecuadorian indigenous inhabitants of the Amazon rainforest filed a lawsuit against Texaco in federal court in New York. Styled Aguinda v. Texaco, Inc. (Aguinda I), the case was brought as a putative class action on behalf of 30,000 Ecuadorian nationals claiming that TexPet's operations had polluted the Amazon rainforest and rivers. The lawsuit sought billions of dollars for remediation and cleanup.

Texaco promptly moved to dismiss on grounds of forum non conveniens. In response, theplaintiffs argued that Ecuador's judiciary was corrupt and, therefore, that Ecuador was an inadequate forum. Although it would later rue the day, Texaco countered by praising the Ecuadorian courts and insisting that Ecuador would provide an adequate forum. Almost nine years later, in 2002, Texaco got what it wanted—its motion to dismiss was granted. In the meantime, several important events had transpired.

In 1995, TexPet entered into a comprehensive settlement agreement with the Ecuadorian government. In the settlement, Ecuador represented that all of the claims asserted inAguinda I belonged to the government and that the government was releasing all of them in exchange for TexPet's performance of specified environmental remediation. TexPet spent three years and $40 million to conduct the agreed cleanup. In 1998, Ecuador agreed that all of the required remediation work had been fully performed and, thus, that all claims against TexPet and its related companies were released.

In 2003, after Aguinda I had been dismissed, the plaintiffs refiled their lawsuit in Ecuador (Aguinda II). Chevron was now named as a defendant by virtue of its acquisition of Texaco in 2001.

In 2005, Steven Donziger, the lead American lawyer for the plaintiffs, solicited award-winning filmmaker Joseph Berlinger to make a documentary film about Aguinda II. Berlinger was given virtually unlimited access to the plaintiffs' attorneys and experts. In shadowing them, Berlinger was allowed to film conversations among plaintiffs' counsel about trial strategy and to record what would have otherwise been privileged communications and attorney work product.

The end result was a documentary entitled Crude: The Real Price of Oil, which premiered in 2009 at the Sundance Film Festival. The film may ultimately be the undoing of the $19 billion judgment. In 2010, Chevron sought discovery in several U.S. courts under 28 U.S.C. § 1782 in aid of its defense in the Ecuadorian lawsuit. It was through these proceedings that Chevron obtained "outtakes" from Crude—that is, footage that did not make it into the final cut of the film—as well as the deposition testimony of some of plaintiffs' experts and attorneys, including Donziger. The section 1782 discovery began to expose the fraud and corruption underlying the judgment.

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