The Ecuadorian plaintiffs were dealt a noteworthy setback yesterday when the Superior Court of Ontario, stating that their assertions had “no basis in fact or law,” indefinitely stayed their attempt to recognize and enforce the judgment issued by Ecuador’s courts in Canada.

Premised on seeking to enforce the judgment against assets of Chevron Corporation subsidiaries that were not even parties to the Ecuadorian litigation, this decision is a significant impediment to the plaintiffs’ worldwide enforcement strategy.

The reason the plaintiffs have not filed– nor are they likely to– enforcement actions in the U.S. -where Chevron Corporation is headquartered- is because they know the judgment they obtained would not hold up to scrutiny in the U.S., where eight federal courts have already found the Ecuador trial to be tainted by fraud.

Since filing for enforcement and recognition in May of 2012, the plaintiffs’ lawyers and affiliates have touted Canada as a country that gives appropriate deference to judgments of foreign courts. Pablo Fajardo, attorney for the Lago Agrio plaintiffs said, “We chose Canada to go to first because it’s a country that has a great tradition of upholding foreign decisions and because its judiciary as a whole is well respected around the world.” The Ecuadoreans lead lawyer at Patton Boggs, James Tyrrell echoed the same sentiment in saying, “We’ve carefully selected the jurisdictions that we believe would be favorable for enforcement of the Ecuadorean judgment.” They went on to state that they believe that “Canadian judgments can be enforced on a streamlined basis in other Commonwealth nations.”

The ruling by Canada’s world-class and respected judiciary, should, if they are taken at their word, force the plaintiffs to concede that this development is potentially devastating to their legal strategy of seeking to launder the Ecuadorian judgment through Canada and courts of other Commonwealth nations.

The already bad year (see here, here and here) for the plaintiffs’ lawyers, just took another turn for the worse.

The Ontario Superior Court of Justice has stayed ( see opinion here ) an action initiated by a group of Ecuadorian plaintiffs seeking to have a judgment of an Ecuadorian court against Chevron Corp. recognized and enforced in Ontario.  In doing so, the court stated:

“ the plaintiffs have no hope of success in their assertion that the corporate veil of Chevron Canada should be pierced and ignored so that its assets become exigible to satisfy a judgment against its ultimate parent.  There is no basis in law or fact for such a claim.… Ontario courts should be reluctant to dedicate their resources to disputes where, in dollar and cents terms, there is nothing to fight over.  In my view, the parties should take their fight elsewhere to some jurisdiction where any ultimate recognition of the Ecuadorean judgment will have a practical effect.”

In response, Chevron Corporation issued the following statement:

“We are pleased with today’s decision from Justice Brown. The Ontario Superior Court ruled that it ought not to entertain the plaintiffs’ claims on the evidence before the court. This is a significant setback to the Ecuadorian plaintiffs’ worldwide enforcement strategy given that it is premised on seeking to enforce the judgment against assets of Chevron Corporation subsidiaries that were not even parties to the Ecuadorian litigation.”

“The plaintiffs should be seeking enforcement in the United States – where Chevron Corporation resides.  In the U.S., however, they would be confronted by the fact that eight federal courts have already found the Ecuador trial tainted by fraud.”

Meanwhile, Chevron Corp. has made additional notable progress in the legal proceedings in the United States exposing the fraudulent nature of the plaintiffs’ judgment.  This evidence further demonstrates that the judgment is illegitimate and should be unenforceable in any court that respects the rule of law.  Evidence of the plaintiffs’ fraud includes:

• A former Ecuadorian judge has admitted his role in orchestrating the fraudulent judgment against Chevron and a half-million-dollar bribery scheme.
• Stratus Consulting, the lead environmental consultants to the Ecuadorian plaintiffs’ lawyers, provided sworn declarations (here and here), highlighting the lack of scientific merit to the plaintiffs’ damage claims.
• Another of the plaintiffs’ lawyers’ environmental consultants, Dr. Charles Calmbacher, has testified that plaintiffs’ evidence was being falsified from the very outset of the trial.
• Litigation hedge fund Burford Capital has provided a sworn declaration outlining the firm’s knowledge of the plaintiffs’ lawyers’ misconduct, testifying that the proceeding is irredeemably tainted by fraud.

Chevron Corp. remains committed to holding the plaintiffs’ lawyers accountable for their misconduct and demonstrating the judgment is the product of a corrupted judiciary.

A British litigation fund that backed the Ecuadorean plaintiffs who secured a $19 billion pollution judgment at the heart of Chevron’s New York racketeering lawsuit on Wednesday struck a deal with the energy giant, saying Patton Boggs LLP duped it into investing in the case.

Burford Capital Ltd. renounced its interest in the litigation in exchange for a mutual release of claims with Chevron, saying it was “deeply concerned” about mounting evidence of fraud and misconduct it alleges have permeated the Ecuadorean judgment and subsequent litigation.

In a declaration filed Wednesday, Burford chief executive Christopher Bogart claims the litigation hedge fund would not have invested $4 million in the Ecuadorean’s legal efforts were it not for their faith in Patton Boggs and lead partner Jim Tyrrell, faith he says proved misplaced when evidence of deception later emerged.

“The Lago Agrio litigation is far afield of Burford’s usual investment matters, and Burford explicitly undertook this investment because of our substantial confidence in Jim Tyrrell,” Bogart said. “As we later learned, the representations that Patton Boggs made to us … during our diligence process were false and misleading in several respects.”

The ties between Burford and Tyrell go back to Tyrell’s days as a Latham & Watkins LLP partner, where he worked alongside four firm partners who would later go on to occupy senior positions with the fund, and it was Tyrell and Patton Boggs’ assumption of leadership in the litigation that “transformed it as an investment possibility,” Bogart said.

The ongoing dispute concerns a group of indigenous Ecuadoreans who say crude oil allegedly dumped in the Amazon rainforest by Texaco Inc., which merged with Chevron in 2001, caused residents to develop cancer and destroyed natural resources.

Chevron has mounted a New York Racketeer Influenced and Corrupt Organizations Act suit seeking to squash the judgment, claiming it is the product of extortion and fraud on the part of attorney Steven Donziger and the so-called Lago Agrio plaintiffs he represents.

Burford, which terminated its funding of the plaintiffs in 2011 amidst concerns of legal improprieties but maintained a financial stake in the litigation, said it was denied the full disclosure to which it was entitled under its funding agreement, particularly with respect to a key damages assessment underlying the unprecedented Ecuadorean judgment.

The fund’s exit from Chevron’s RICO comes less than a week after that assessment, known as the Cabrera Report, was disavowed by an environmental firm hired by Donziger to evaluate the extent and effect of Chevron’s alleged pollution in the Amazon. Chevron has long claimed the report was ghostwritten by the plaintiffs to inflate the eventual damages figure.

While Donziger has maintained that his side’s contact with court-appointed damages assessment expert Richard Stalin Cabrera Vega was limited and allowable under Ecuadorean law, the testimony of two Stratus Consulting Inc. representatives on Friday indicated that the report was “fatally tainted” by Donziger’s influence.

“Chevron believes that Burford has acted responsibly after becoming aware of the fraud, bribery and extortion perpetrated here, and Chevron is pleased that Burford has taken this further action of disclaiming any interest in this matter,” Chevron Vice President and General Counsel Hewitt Pate said in a statement.

In its own statement, Burford praised Chevron’s efforts in the ongoing litigation as “instrumental in bringing to light the facts.”

A representative for the Lago Agrio plaintiffs told Law360 on Wednesday that efforts to discredit the Cabrera report were little more than a public relations gesture, saying the Ecuadorean judge who issued the disputed award excluded the report from consideration in response to Chevron’s objections and that the report therefore had no bearing on the final judgment.

The representative further dismissed the Burford testimony and the Stratus disavowal as a “sideshow” designed to “intimidate and malign” the Lago Agrio plaintiffs, adding that they would not curtail ongoing efforts to secure the Ecuadorean court’s judgment.

“Burford’s dissatisfaction flows out of an old dispute, dating back to 2011, over money they think they are entitled to, and the plaintiffs’ unwillingness to agree,” the representative said. “Dressed up as a complaint about misconduct, it is, at its core, just a disagreement about money.”

Burford’s allegations follow a series of recent setbacks for the Ecuadoreans, including Stratus’ exit from the litigation last week and a magistrate judge’s recommendation Monday that Donziger’s extortion and fraud counterclaims against Chevron be dismissed.

The Ecuadorians are currently seeking to enforce the judgment through asset freezes in Argentina, Brazil and Canada, and have sought to remove U.S. District Court Judge Lewis Kaplan from his role presiding over the New York RICO suit over his purported attempts to hinder those efforts.

Judge Kaplan has set an Oct. 15 trial date for the suit.

Representatives for Patton Boggs and for the Ecuadoreans did not immediately respond to a request for comment Wednesday.

Chevron is represented by Gibson Dunn & Crutcher LLP.

The Lagos Agrio plaintiffs are represented by Smyser Kaplan & Veselka LLP.

The case is Chevron Corp. v. Donziger et al., case number 2:11-cv-00691, in the U.S. District Court for the Southern District of New York.

By Gavin Broady-Law360, April 17, 2013

Stratus Consulting has provided sworn declarations outlining the firm’s knowledge of the plaintiffs’ lawyers’ misconduct in the ongoing environmental litigation in Lago Agrio, Ecuador as well as testifying that there is no scientific merit to the plaintiffs’ damages claims against Chevron Corp. (NYSE: CVX) and Texaco Petroleum (TexPet).

Chevron recently settled pending fraud and extortion claims against Boulder, Colo.-based Stratus.  Stratus had been the lead environmental consultants to the plaintiffs’ lawyers in the trial.

“We are pleased that Stratus came forward to reveal the truth.  We call on others with knowledge of the fraud tainting the trial in Ecuador to come forward and do the right thing,” said Hewitt Pate, Chevron vice president and general counsel.

In sworn declarations (here and here), Stratus details the role the firm and the plaintiffs’ lawyers played in drafting the supposedly independent damages report of Richard Cabrera, which serves as an evidentiary basis of the 2011 judgment against Chevron in Ecuador.  Testimony also provides a direct account of lead plaintiffs’ lawyer Steven Donziger’s control of the “Cabrera Report” process and the pressure Donziger applied to contrive damages attributed to Chevron.  In filings submitted in the Southern District of New York today, Stratus’s representatives state:

• “Stratus is not aware of any scientific evidence that people in the former concession area are drinking water contaminated with petroleum.”

• “At no time while working on the Ecuador Project did I see any data supporting a finding of groundwater contamination from TexPet operations…”

• “I am not aware of any scientific data that shows that any adverse health effects are caused by contamination from petroleum operations in the Oriente.”

• “…the conclusion that there were 1,400 ‘excess cancer’ deaths near the oil operations area is invalid and unsupported.”

• “I am not aware of any credible scientific evidence that supports the statement that cancer rates were up to 30 times higher than normal, or that the incidence of childhood leukemia was found to have reached alarming levels.”

• “I am not aware of credible scientific evidence that more than 9,000 people in the area of oil operations in Ecuador are going to contract cancer in the coming decades or that links any such incidence to oil operations.”

• “I am not aware of any credible scientific evidence that supports the statement that TexPet’s operation of the concession ravaged thousands of square miles of once-pristine rainforest, that it poisoned the environment of tens of thousands of people, or that it decimated indigenous tribes who lived in the region.”

• “I disavow any and all findings and conclusions in all of my reports and testimony on the Ecuador Project.  I deeply regret that I allowed myself and my company to be used in the Lago Agrio Litigation in the way that we were…”

Stratus is the latest instance of individuals and groups formerly aligned with the plaintiffs either accusing the plaintiffs’ lawyers of fraud or providing firsthand accounts of corruption tainting the trial and judgment.  In January, a former Ecuadorian judge came forward to admit his role in orchestrating the fraudulent judgment against Chevron.  It was also revealed that Burford Capital, one of the largest financial backers of the plaintiffs, accused the plaintiffs’ lawyers of fraud and other misconduct in connection with their pursuit of their case.  In December, a former environmental consultant to the plaintiffs came forward with additional proof of fraud and the fabrication of evidence on the part of the plaintiffs’ lawyers.

Chevron’s RICO claim is set for trial on October 15, 2013.

Reuters is reporting today that “The Ecuadorean judge who issued an $18.2 billion verdict against Chevron Corp has denied bribery allegations made by another judge who presided over the landmark pollution case in the South American country, according to a court filing on Thursday.

“Nicolas Zambrano had been accused in a U.S. court-filed sworn statement by Alberto Guerra, a fellow judge who heard the case in Ecuador in 2003 and 2004, of taking a $500,000 bribe from the plaintiffs.”

Zambrano’s allegations are false and completely uncorroborated.  As he admits in his affidavit, this would not be the first time Zambrano has lied about his work on the judgment.

On the other hand, Mr. Guerra’s account is corroborated by hard evidence: computer, bank (here, here, here, and here), and shipping records, as well as the plaintiffs’ lawyers’ own internal e-mails (here, here, and here).  Moreover, Mr. Guerra’s testimony supports what the evidence already proves – the plaintiffs’ lawyers wrote the judgment.  Information from eight internal plaintiffs’ documents appears in 60 pages of a 188-page judgment.  There is no innocent explanation for this and Zambrano provides no plausible explanation for it – let alone evidence.

How does Zambrano explain the shipping records?  How does Zambrano explain drafts of at least a dozen orders he issued residing on Mr. Guerra’s computer?  Zambrano’s affidavit is silent when it comes to the evidence.  More to the point, the affidavit is notable for nothing more than what it omits.

Consider all that is known:

• From Dr. Charles Calmbacher, the plaintiffs’ lead expert at the beginning of the trial, we know the plaintiffs’ court reports were being fabricated.
• From Dave Russell, the plaintiffs’ lead technical advisor, we know the evidence didn’t support the plaintiffs’ lawyers’ claims.  Russell told plaintiffs’ lawyers that their testing was “self- defeating” and “counterproductive.” He went on to admit that Texaco’s environmental cleanup was “performing as designed.”
• From Fernando Reyes, another environmental expert working for the plaintiffs, we know how the plaintiffs’ lawyers’ aborted their self-defeating evidence collection process and replaced it with another rigged in their favor.
• From the plaintiffs’ lawyers’ documents produced under court-ordered discovery, we know that three separate law firms aligned with the plaintiffs withdrew citing ethical concerns, and a fourth firm stated, “it appears not only that Cabrera and plaintiffs can be charged with a ‘fraud’ respecting the former’s report…”
• One of the plaintiffs’ Ecuadorian lawyers admitted in an e-mail that if evidence of their collusion and fraud was exposed, “all of us, your attorneys, might go to jail.”
• From Kohn, Swift, and Graf, the law firm that invested $7 million in the plaintiffs’ case, we know that they believe their co-counsel engaged in fraud.
• From Burford Capitol, the hedge fund that invested $4 million in the plaintiffs’ case, we know that they believe the plaintiffs’ lawyers’ engaged in fraud.

Eight U.S. federal judges have found evidence of the plaintiffs’ representatives’ misconduct tainting the trial.  Zambrano’s only shot at collecting his promised half million dollar bribe is if he dives even further into bed with the plaintiffs’ lawyers.