US Court Rules for Chevron in Ecuador Rainforest-Damage Case

Ecuadorean plaintiffs cannot collect a $9 billion judgment in the U.S. against Chevron for rainforest damage, a federal appeals court ruled Monday, upholding a judge’s finding that the judgment was obtained through bribery, coercion and fraud.

The 2nd U.S. Circuit Court of Appeals in New York said U.S. District Judge Lewis A. Kaplan had the authority after a trial to rule in March 2014 as he did. It noted, however, that Kaplan’s decision doesn’t invalidate the Ecuadorian judgment and doesn’t stop the enforcement of the judgment outside the U.S.

In a decision written by Circuit Judge Amalya Kearse, a three-judge panel rejected the argument by the Ecuadorean plaintiffs that they were not aware of wrongdoing by lawyers in the case and should not be held responsible.

“There is no authority suggesting that a party ignorant of its attorney’s fraudulent actions may enforce a fraudulently procured judgment,” the panel said. “Even innocent clients may not benefit from the fraud of their attorney.”

The case resulted from a long-running court battle between Amazon rainforest residents and oil companies.

San Ramon, California-based Chevron had long argued that a 1998 agreement Texaco signed with Ecuador after a $40 million cleanup absolves it of liability. It claims Ecuador’s state-run oil company is responsible for much of the pollution in the oil patch that Texaco quit more than two decades ago. The Ecuadorean plaintiffs said the cleanup was a sham and didn’t exempt third-party claims.

In February 2011, a judge in Ecuador issued an $18 billion judgment against Chevron in a lawsuit brought on behalf of 30,000 residents. The judgment was for environmental damage caused by Texaco during its operation of an oil consortium in the rainforest from 1972 to 1990. Chevron later bought Texaco.

Ecuador’s highest court in 2014 upheld the verdict but reduced the judgment to about $9.5 billion.

When Kaplan ruled, he said it did not matter that the villagers were pursuing a just cause.

“There is no ‘Robin Hood’ defense to illegal and wrongful conduct. And the defendants’ ‘this-is-the-way-it-is-done-in-Ecuador’ excuses — actually a remarkable insult to the people of Ecuador — do not help them,” he wrote.

Lawyers did not immediately respond to requests for comment.