Last year, Chevron Corporation released a video purporting to show an Ecuadorian judge in the act of being bribed and admitting bias in a pollution case against Chevron. The company has made the incident a centerpiece in an international legal campaign to void a multi-million dollar judgment against it.
Now Chevron has hired an outside law firm, Gibson, Dunn & Crutcher, to handle its Ecuador legal problem. That firm recently defended Dole Food Company in a workplace pollution suit by attacking the foreign judges, the plaintiffs and their U.S. lawyers. The similarity between the Chevron and the Dole suits and the way they've been handled so far is striking, and should serve as a warning to the plaintiffs in Ecuador.
The Dole Workplace Pollution Cases
The Dole Food Company, Inc. bought the Central American banana plantations of Standard Fruit Company in the 1960s. When its banana trees became infested with worms, the company began spraying them with a pesticide called dibromochloropropane, or DBCP.
In 1977 the EPA suspended use of DBCP and in 1979 banned it in the U.S. because regular exposure to the chemical was found to cause sterility in men. Dole insists that it adhered to EPA guidelines, and did not use DBCP in the U.S. after it was banned. Yet it did use the chemical longer than other companies—and didn't stop entirely in Nicaragua until 1980 (two years before it pulled its banana production from the country). After the pesticide was suspended, Dow discontinued shipments. But in a move that later proved problematic, Dole demanded that the manufacturer continue to ship its remaining stock to Nicaragua and elsewhere—even agreeing to indemnify Dow against future claims.
Significant legal problems ensued: In 1992 Dole settled for $21 million with 1,000 Costa Rican plaintiffs who had brought suit in Texas. Two years after that settlement, Dole was hit with 26,000 new claims filed in more than a dozen jurisdictions; Dole settled with 11,500 plaintiffs in 2006 on undisclosed terms.
However, in 2007 a new set of legal problems prompted a different approach. There were thousands of new claims in Costa Rica, Ecuador, Panama, Honduras, Guatemala, Ivory Coast, and Hawaii, and Dole had lost other cases in Nicaragua to the tune of $2 billion. The company decided to start bringing the cases to the U.S. The first of these was Tellez v. Dole, which began in July 2007. At issue was the claim of 54 Nicaraguan plantation workers that they'd been rendered sterile while working on Dole's banana plantations in Nicaragua 30 years earlier as a result of exposure to DBCP. The trial jury came back with a $5 million award, including punitive damages, for six of the plaintiffs, an outcome that was not to Dole's liking.
At that point, fortune began to smile on the company. Dole's investigators in Nicaragua produced a witness who said he had worked for the plaintiff's lawyer in Nicaragua, and had helped to recruit and train people who would falsely claim to have been injured in Dole's employ. Specifically, he said he knew that two of the six winning plaintiffs had never worked on for Dole. Although the person subsequently refused to repeat his claims in the U.S. under oath, his claims were influential in the judge's post-trial decision to throw out the punitive damages.
This success convinced Dole. Midway through the trial, Dole had hired Theodore Boutrous, Jr., of Gibson, Dunn & Crutcher as a special counsel and expert on punitives, and told him to work with the litigation team. In preparation of the next U.S. trial, Dole put Gibson, Dunn & Crutcher in charge of the whole effort. Even though Dole had been actively investigating the cases for years with little success, the Gibson, Dunn & Crutcher personnel found 17 Nicaraguan witnesses willing to testify for Dole in the U.S., revealing a nefarious plot:
[The plaintiffs' lawyers] had hired captains to recruit plaintiffs with a promise that they would one day share the judgments. In order to "train" men... who knew nothing about banana plantations, the lawyers and their team had prepared lectures, booklets, and videos to help their clients pass for actual workers. They even hired buses to take the men on "field trips" to plantations. And they charged their clients a small fee for these services—even though most were desperately poor and, after years of promises, still haven't seen a dime.
Evidence backing up plaintiffs claims was faked... Documents purporting to be plantation captains' sworn statements confirming that plaintiffs worked under them were mass produced in the [plaintiffs'] law office. Laboratories reported the sperm counts of "sterile" men who had fathered numerous children since those tests. Men signed sworn statements denying the paternity of their own children. And, incredibly, they even had to pay for the documents.
Some witnesses testified that a Nicaraguan judge was not only aware of the conspiracy, she was a participant. [Dole's lawyers] found that the judge, who presided over the Osorio v. Dole trial (now the subject of the enforcement dispute in Florida), convened a meeting that included plaintiffs lawyers and advised them to vary the men's sperm counts to make the evidence look more credible.
Despite claims the Dole had bribed some of the witnesses, the U.S. trial judge dismissed the remaining pending Nicaraguan cases. That decision has been echoed by a federal district court judge's refusal to enforce a $98 million Nicaraguan judgment against Dole, partly based on the evidence of fraud and corruption that Gibson Dunn uncovered, and by a state judge's dismissal of suits against Dole by more than 650 Dole workers in the Ivory Coast. In the Ivory Coast case: Dole officers in Europe "were contacted" by a man who claimed he had helped with the case in the Ivory Coast by illegally collecting semen samples from Ivorian peasants and otherwise skirting the law. After the Gibson Dunn team deposed the man, the plaintiff's attorney,Raphael Metzger of the Metzger Law Group, withdrew from the case:
Metzger told the Litigation Daily that Nassoue's claims of fraud were completely false. He said Nassoue, a paralegal working on the ground in Africa, decided to torpedo the case after Metzger refused to give him a financial stake in its outcome. When Nassoue went to Dole, Metzger said, his allegations fed into the narrative of fraud that Gibson Dunn had established in the Nicaraguan cases. He said the firm was forced to withdraw from the cases because its lawyers had become potential witnesses to an alleged fraud and could not ethically continue to represent the plaintiffs without their expressed consent. Obtaining that consent from hundreds of Ivorian peasants was impossible, he said. "As a result," said Metzger, "these unfortunate folks who have meritorious claims and are are severely injured are not going to get any redress, partly because Scott Edelman has fraud fever."
The judge subsequently told the plaintiffs to "find new counsel or make an appearance on their own behalf," and after a hearing came and went with no word from the Ivorians, the cases were dismissed.
This leads to the final step in the Dole plan:
In the long run, a settlement... pushed through in Honduras may be just as important as the win in L.A. It's a model that [Dole] would love to replicate elsewhere, including Nicaragua. Ten years in the making, it was a 2006 agreement with banana workers and the Honduran government. Men who present evidence that they worked on a Dole plantation, and that a company-approved doctor confirmed their sterility, receive payments that range from $1,500 to $6,000 (depending on the level of impairment). Settling, of course, precludes suing, and plaintiffs lawyers like Scott Hendler, who represents workers who want to litigate these claims in U.S. courts, deride the agreement as a "cynical effort to prevent those cases from going to lawyers who would pursue significantly greater value."
The Chevron Amazon Pollution Case
Chevron owes its Ecuador legal problems to its acquisition of Texaco. Beginning in 1964, Texaco Oil carried on oil extraction operations in Ecuador first in a joint venture with Gulf Oil Corporation and later with the state-owned oil company, Petroecuador. As part of this operation, Texaco dumped 18.5 billion gallons of "formation water"--the water left over when crude oil is taken from underground wells--into open pits that fed into rivers and streams.
When Texaco ended its operations in the country it negotiated a cleanup plan with the Ecuadorian government and in 1998, representatives of Texaco, Ecuador's environmental minister, and the head of Petroecaudor signed a final agreement certifying the remediation process and releasing Texaco from any liability.
However, Ecuador now says that the remediation contract was executed with fraudulent tactics and that Chevron had "misrepresented the environmental status of the producing and shut-down oil fields" to the Ecuadorian government. The Ecuadoran government alleges that, as part of the remediation, Texaco covered pits of formation water with dirt instead of cleaning them up and that hydrocarbons lace the soil around the pits.
Chevron subsequently lost a class action suit on behalf of residents of the area who claim personal injury because of the environmental effects of the failed remediation process, but while waiting for a judge to confirm the $25 billion judgment declared against the it, the company has released video tape purportedly showing the judge taking a bribe related to another matter, and the judge has resigned from the case.
The video was made surreptitiously and possibly illegally by an Ecuadorian contractor and an American businessman once employed by an energy consulting firm with ties to Chevron; Chevron is apparently paying the legal expenses of both men. The American 'businessman' behind the video is a convicted drug dealer and con-man. Both he and the other video participant are receivng financial support from Chevron.
As a result of the video, Chevron is calling for the Ecuadorian court to annul all the judge's rulings. That would include the $27 billion damage assessment against the company. Chevron has also gone after the Ecuadoran plaintiffs' original lawyer, filing a $4 million claim against him for his role in filing a separate civil suit against the company in April 2006.
Chevron Legal Staff
The in-house legal department at Chevron seems to be led primarily by retired Bush administration lawyers. Vice president and general counsel
is R. Hewitt Pate, former assistant attorney general for the Antitrust Division of the U.S. Department of Justice. From 2001 to 2003, as deputy assistant attorney general in the Antitrust Division, responsible for energy, transportation, and other regulatory matters, he participated in submission of an amicus brief on the side of Texaco in Supreme Court appeal of a ninth circuit anti-trust decision.
Pate took over at Chevron for Charles A. James who became executive vice president. James has been known as a Carl Rovian character: according to Andrew Woods, "James once told law students at Berkeley that Chevron will fight 'until hell freezes over, and then skate on the ice'". James served at the Federal Trade Commission from 1979-1985 in several positions, including Assistant to the Director of the FTC's Bureau of Competition (1983-1985). In 1989 he joined the first Bush administration as a Deputy Assistant Attorney General in the Antitrust Division. He was Acting Assistant Attorney General for several months in 1992. He later was Assistant Attorney General for the Antitrust Division in 2001 and 2002, the period in which Texaco and Chevron merged to form ChevronTexaco Corporation without interference from the FTC or the Justice Department.
In April, 2008, James hired William "Jim" Haynes II as chief corporate counsel, reporting to James, responsible for managing the 45-attorney legal department. As Pentagon General Counsel under Ashcroft, Haynes was primarily responsible for development of legal framework of the Bush administration torture program. One recommendation for Haynes' hiring may have been that he was familiar with Cristobal Bonifaz, lead attorney for the Ecuadorian plaintiffs.
The in-house legal team is now matched in intensity and killer instinct by their lead defense team, Gibson, Dunn & Crutcher, which The American Lawyer recently named Litigation Department of the Year:
Time and again in 2008-09, blue-chip clients in desperate straits have turned to Gibson Dunn lawyers to get them out of trouble at every stage, from subpoena to summary judgment to U.S. Supreme Court final appeal. The litany is breathtaking: helping Dole Food Company, Inc., end a costly war of attrition with Nicaraguan plaintiffs, and uncovering a nasty pattern of fraud in the process; beating back massive, reputation-gutting employment class actions for Wal-Mart Stores, Inc., and United Parcel Service, Inc.; persuading the Supreme Court, on behalf of a teetering West Virginia mine owner, that a state judge must recuse himself if he took money from one of the parties in his last campaign -- a now obvious point that was in the couldn't-be-done category two years ago. "I call them lifeboat lawyers, because our careers depend on them," says Wal-Mart executive vice president and former general counsel Thomas Mars. For those rescues, and a broader record of excellent work for hard-pressed clients, The American Lawyer names the firm its Litigation Department of the Year.
The Bottom Line
So that's the Chevron/Gibson, Dunn & Crutcher pattern: refuse to pay foreign courts' judgements, bring outstanding cases to the U.S., accuse the plaintiffs and their lawyers of fraud, impugn the foreign judges and the legal systems in which they operate, and finally, preclude future difficulties by settling with potential plaintiffs for pennies on the dollar.
A lot depends on the outcome of these tactics, as illustrated by SmartMoney's evaluation of the company:
Perhaps most worrisome is Chevron's ongoing legal dispute in Ecuador, where Texaco, which it purchased in 2001, is accused of contaminating rain forests with toxic petroleum waste. The case could result in $27 billion of damages for Chevron, but any restitution probably wouldn't be due in a lump sum. And Chevron attorneys have presented evidence of bribery in the trial.
That, plus the no-holds-barred proclivities of both the in-house and the external Chevron legal teams, means that anyone associated with the other side of the cases here will need to prepare for an all-or-nothing fight.