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Chevron Corp.'s aggressive push to overturn a $19 billion environmental judgment in Ecuador is beginning to convert some of its legal adversaries into allies.
The energy titan is trying to undermine the case brought by residents of Ecuador, who in 2011 won a verdict there finding the company responsible for contamination of the country's oil-rich rainforests.
Chevron, which argues that the judgment was obtained by fraud, has sought to bolster its claims by recently convincing a firm that helped bankroll the plaintiffs' legal fight, and another firm that conducted research for the plaintiffs, to side with Chevron instead.
Both firms now criticize the actions of lawyers representing the Ecuadorians, who Chevron has accused of racketeering and fraud in New York federal court. The Ecuadorian plaintiffs and their lawyers deny Chevron's charges.
The defections aren't likely to undo the Ecuador judgment, among the largest environmental verdicts in history, or end the 20-year-old litigation, legal experts say. But they illustrate the effectiveness of Chevron's counteroffensive.
Burford Capital Ltd., a London-based firm that invests in plaintiffs' litigation, said Wednesday it had been misled by lawyers for the Ecuadorians when it provided them with $4 million in 2011. Burford says the lawyers concealed their role in writing a 2008 report calculating monetary damages based on environmental contamination, which was submitted to the Ecuador court as the work of an independent expert.
The plaintiffs' team acknowledges it drafted language for the court-appointed expert. "Both sides were invited to submit material, consistent with how court-appointed experts were treated by the parties throughout the trial," said a spokesman for the Ecuadorians. Burford, he added, was informed of Chevron's criticism of the report before it invested.
Patton Boggs LLP, one the main law firms representing the Ecuadorian plaintiffs, said it is "fully confident that it has acted appropriately and ethically."
Stratus Consulting Inc., a Denver-based environmental researcher hired by plaintiffs to help draft the damages report, earlier this month disavowed the report's conclusions in settling a legal dispute with Chevron. A Stratus executive said the damages amount was "tainted and not supported by reliable scientific bases" in an affidavit filed in New York federal court.
Stratus has felt the heat of Chevron's counter assault. Stratus's insurance providers successfully argued they wouldn't be responsible for paying legal costs in a fraud case brought by Chevron. And Chevron has urged at least one Stratus client to terminate its contract with the firm.
Kent Robertson, a spokesman for Chevron, said the San Ramon, Calif., oil company's actions have been "proportionate to the magnitude of the fraud that's being committed against our company."
As recently as February, Stratus had accused Chevron of trying to financially destroy it by seeking large damages against the firm. But last week, Stratus dropped its claims against Chevron. Stratus didn't respond to requests for comment or written questions.
In the settlement, Stratus agreed to provide Chevron with more documents related to the Ecuador litigation and even waive some privileged communications with its attorneys. Chevron agreed not to accuse Stratus of wrongdoing in public or privately to its clients and to take down materials critical of the firm on websites it owns.
Representatives of the plaintiffs say the report at issue has no bearing on the judgment because the Ecuadorian judge didn't consider it in delivering the verdict. They contend that Stratus's recent statements contradict previous testimony by its employees.
Chevron inherited the lawsuit with its 2001 acquisition of Texaco Inc., which the Ecuadorian plaintiffs accused of sickening them by improperly disposing of waste between 1964 and 1990. Chevron is appealing the 2011 verdict in Ecuador and seeking to block its enforcement through an international tribunal in The Hague.
In addition, Chevron is fighting plaintiffs' attempts seize its assets in Canada, Brazil and Argentina as they seek to collect the Ecuador court's judgment. In October, an Argentine judge froze some of the assets of Chevron's subsidiaries in the country, a ruling Chevron has appealed.
Chevron's recent legal maneuvers, however, have uncovered new evidence that "has put the case in a very different light than when the Ecuadorian judgment came down," said Theodore Folkman, a lawyer at Boston-based Murphy & King who follows the case.
Chevron has formidable financial resources to fund its litigation. In 2012, it booked $26 billion in profit, ending the year with $21 billion in cash on hand.
Lawyers for the plaintiffs, by contrast, have acknowledged concerns about their finances in recent pleadings in the fraud case filed by Chevron in New York . Last month, one law firm representing Ecuadorian plaintiffs said it is owed more than $1 million in fees and costs.
Copyright (c) 2013 Dow Jones & Company, Inc.
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