Plaintiffs Seek Removal of Judge Lewis Kaplan From Their Case

Judge Lewis A. Kaplan

Ecuadorans in Chevron Lawsuit Seek Kaplan's Recusal for Bias
Mark Hamblett, NY Law Journal, 04-28-2011
Lawyers seeking to enforce an $18 billion environmental damages judgment against Chevron in Ecuador have asked Southern District Judge Lewis A. Kaplan to recuse himself.

In the latest salvo in what has become a worldwide legal and public relations battle, two attorneys allege that Judge Kaplan has expressed "prejudicial and untenable conclusions without a trial or an evidentiary hearing" and has "lost all semblance of impartiality" in the case.

Judge Kaplan in March issued a preliminary injunction blocking enforcement of the $18 billion judgment, finding merit in Chevron's claims that the judgment may have been procured through fraud.

The recusal motion was filed by New York attorney Julio C. Gomez and New Orleans attorney Carlos A. Zelaya, who represent two Ecuadorian plaintiffs who prevailed in Ecuador but were named by Chevron in a racketeering suit the oil company brought against attorney Steven Donziger (pictured below).

Mr. Donziger led the charge for plaintiffs in Ecuador in the so-called Lago Agrio litigation that climaxed on Feb. 14 when an Ecuadorian court ordered the $18 billion award for environmental contamination caused by Chevron's predecessor oil company in Ecuador, Texaco, from 1964 to 1992.

The award is now being appealed in Ecuador.

Chevron's racketeering suit, Chevron Corp. v. Donziger, 11-cv-691, filed by Randy Mastro of Gibson Dunn & Crutcher, alleges that Mr. Donziger conspired with others to corrupt the judicial system in Ecuador and win billions of dollars in damages from the company.

Mr. Donziger himself had filed an earlier motion asking Judge Kaplan to get off the case (NYLJ, March 3). In that motion, which the judge denied, Mr. Donzinger claimed Chevron manipulated the court's case assignment system to get before Judge Kaplan and that the suit should have been assigned instead to Judge Jed S. Rakoff, who nine years ago dismissed the initial action brought in the Southern District against Chevron on the basis of forum non conveniens. That ruling led the plaintiffs to bring suit in Ecuador.

Judge Kaplan become embroiled in the fight between the oil company and the Ecuadorian plaintiffs in 2010, when Chevron filed discovery motions under USC §1782, seeking to derail the expected damages award against it. Chevron sought to enforce subpoenas of Mr. Donziger and others to glean information it claimed would show the award was the result of fraud.

Judge Kaplan has since issued a series of rulings in Chevron's favor, first in the discovery litigation and then in the racketeering case.

On May 6, 2010, he ordered documentary filmmaker Joseph Berlinger to turn over outtakes of "Crude," a film about the litigation the judge said was solicited by Mr. Donziger (NYLJ, May 7, 2010). The judge then directed Mr. Donziger to turn over documents and e-mails, and appear for a deposition in two orders issued on Oct. 20 and Nov. 30, 2010.

After Chevron filed the racketeering case on Feb. 1, Judge Kaplan, on Feb. 8, less than one week before the $18 billion Lago Agrio award was announced, issued a temporary restraining order blocking enforcement of any award (NYLJ, Feb 9).

The judge cited a memo by Patton Boggs, one of the firms hired by the Ecuadorian plaintiffs to help enforce the judgment. He said the memo, code-named "Invictus," outlines a deliberate strategy to "cause as much disruption as possible" by launching simultaneous actions against Chevron in courts throughout the world and the use of maritime attachments to "coerce" a settlement.

Judge Kaplan said there was evidence that Ecuador does not provide impartial tribunals that comport with due process and the judgment may have been procured by fraud.

The judge followed the restraining order with a preliminary injunction on March 7, when he held that Chevron was likely to prevail at trial on its claim the judgment was neither recognizable nor enforceable.

Judge Kaplan went on to deny the Ecuadorian plaintiffs a stay of that ruling pending appeal. On April 22, Patton Boggs, along with Messrs. Gomez and Zelaya, filed papers with the U.S. Court of Appeals for the Second Circuit, asking for a stay of the preliminary injunction pending an expedited appeal.

Patton Boggs, led by James E. Tyrrell Jr., claims in Naranjo v. Chevron Corp., 11-1150-cv, that Judge Kaplan lacked the authority to issue the injunction, calling it "unprecedented preliminary relief of extraordinary scope."

Mr. Tyrrell also alleges that the injunction prevents the Ecuadorian plaintiffs from speaking with counsel about potential enforcement actions in other countries.

In a related skirmish before Judge Kaplan, Mr. Mastro filed a sanctions motion against Patton Boggs and two other law firms in January for purporting to represent 48 Lago Agrio plaintiffs without authorization. Mr. Mastro claims that Mr. Donziger confirmed at a recent deposition that the firms have not executed retainer agreements with the plaintiffs, a claim the plaintiffs' firms dispute.

In an April 7 letter to Judge Kaplan, Mr. Mastro states that Mr. Tyrrell has not appeared before the judge in the racketeering case, but has now appeared before the Second Circuit in a piece of "gamesmanship" to avoid both appearing before Judge Kaplan and being sanctioned.

Mr. Tyrrell said yesterday, "it is not appropriate for me to comment on why individual lawyers representing Lago Agrio plaintiffs appear in different actions."

Patton Boggs, Motley Rice and other firms are engaged in litigation in 20 different actions in 16 courts in the United States.

Judge's 'Jaded View'?

The latest recusal motion by Messrs. Gomez and Zelaya faulted Judge Kaplan for his "jaded view" of the Ecuadorian proceedings and a "profound disrespect for the Ecuadorian judicial system."

"The court accepted without question Chevron's description of the Lago Agrio litigation as an entrepreneurial scheme engineered by counsel 'to hit Chevron as hard as they can,'" the lawyers for the Ecuadorian clients state in their motion.

The attorneys claim the judge is prejudiced against their case and has "engaged in a pattern of inequitable and overly harsh treatment of defendants, more than sufficient to create the appearance of bias."

They quote the judge as saying during a hearing that he understood "that Chevron never did business in Ecuador…that Texaco was out of Ecuador for years before they acquired Texaco…and that Texaco has been out of Ecuador for 19 years and that whatever happened since 1992 has been on the watch of the Ecuadorian-owned oil company."

They also charge that the judge, "propelled by his conviction that the Ecuadorian plaintiffs are engaged in an elaborate hoax," went on to "invite Chevron to bring this action."

Mr. Mastro yesterday called the recusal motion "meritless."

"All Judge Kaplan has done is make rulings based on uncontroverted evidence and every time he's been affirmed by the Second Circuit, most recently with the appellate court going out of its way to praise his handling of these matters," Mr. Mastro said.

Mark Hamblett can be contacted at mhamblett@alm.com.