Chevron is winning a 20-year legal battle tainted by fraud.

Twenty years after being sued in a US court over alleged environmental damages in Ecuador, Chevron appears closer than ever to victory.

“The conclusion that the Ecuadorian lawsuit against Chevron was fraudulent has been well documented, and it has been confirmed in the judgment of the international investment community, which sees now that Ecuador is not a safe place to invest,” says Jodi Hanson Bond, Vice President for the Americas, U.S. Chamber of Commerce.

Although the case long seemed to be a classical case of an evil oil-spilling company against poor Indian defendants in Ecuador, Chevron has successfully shown that it instead has been a case of an ambitious trial lawyer in the United States, Steve Donziger, who tried to use fraud and threats to force the US oil producer to pay billions of dollars for the alleged wrongdoing.

“U.S. coverage of the case has not been flattering to the Ecuadoran legal system, but the Chevron case has done more to shine the light on things like unethical lawyers and the new trend of investors, like hedge funds, financing large class action lawsuits,” says Glenn Waldman, Managing Partner at Heller Waldman.

While the original case was thrown out from a US court in 2002, the plaintiffs subsequently sued Chevron in Ecuador, where they were able to get a favorable verdict in February 2011. A court in Lago Agrio, Ecuador sentenced Chevron to pay a $8 billion fine, which was subsequently raised to $18 billion when Chevron refused to make a public apology, as required by the original ruling.

Since Chevron has few assets in Ecuador itself, plaintiffs have sought to get courts in Argentina, Brazil, Canada and other jurisdictions to freeze the US oil firm’s assets.

Chevron’s Texaco unit operated a joint venture with PetroEcuador from 1964 to 1990, when the Ecuadorian company took over management of the oil field. Texaco continued with a minority stake in the consortium until 1992.  When Texaco left Ecuador completely in 1992 it undertook a $40 million remediation and in 1998, the government of Ecuador declared that the remediation was completed according to the terms and parameters agreed upon and released Texaco from any future liability.

However, with active support from Rafael Correa – Ecuador’s president since January 2007  –  the lawsuit against Chevron advanced until the 2011 verdict.

CHEVRON VICTORIES

This year, Chevron has scored several major victories over the plaintiffs.  In April, Stratus Consulting – the main environmental expert used by plaintiffs – acknowledged that there is no scientific merit to the damages claims.  It also said it was aware of misconduct by the plaintiff’s lawyers. (See the amazing statements here).

Also, in April, Burford Capital Limited announced that it had been fraudulently misled to finance the Patton Boggs law firm in connection with its litigation work for the plaintiffs. “Recent developments in the case should also be a deterrent to the participation of third party litigation funders, investment companies that finance lawsuits in exchange for a portion of the judgment, in frivolous and fraudulent cases,” Bond says.

Chevron is now suing Patton Boggs for fraud and deceit.

And last week, an Argentine court unfroze Chevron assets that had been seized at the request of plaintiffs trying to get the US oil company to pay the Ecuador fine.

Meanwhile, Donziger has now lost both his own lawyers defending him against Chevron’s counter suits as well as his longtime spokeswoman Karen Hinton, according to Forbes.

“The lawsuit began to unravel when Chevron’s lawyers discovered that Donziger’s team had ghostwritten an expert’s environmental report that the Ecuadoran court relied on in making decisions,” Waldman points out. “This is a clear no-no.”

FIGHTING BACK

The revelations of the ties between the court-appointed expert, Richard Cabrera, and the plaintiffs was the result of a massive effort by Chevron to fight the lawsuit rather than settle.

“Many foreign investors are quietly cheering on Chevron’s efforts to uncover the truth behind the questionable legal judgments they have faced in Ecuador,” says John Price, Managing Director, Americas Market Intelligence.  “If their efforts help dissuade other opportunists from pursuing frivolous legal cases against investors, then the future of foreign investment and technology transfer into Latin America will be much brighter.”

That has meant spending a small fortune on external lawyers and experts as well as internal re-allocation of resources.

“I doubt any other US multinational in Latin America has come anywhere near what Chevron has spent on attorneys, investigators and media consultants,” says Simon Strong, president of Tenacitas International and an expert on Andean affairs. “But Chevron is on the hook for an enormous sum and the current Ecuadorian government has its friends. I think it very unlikely the Ecuadorians’ claim will prosper in the US but some countries … view it sympathetically and will pressure their courts accordingly to freeze Chevron assets. So Chevron has had no choice but to fight what has become a global battle, on all fronts.”

Bond agrees. “This must be the costliest fight of its kind, but it’s part of an unfortunate trend of the U.S. plaintiffs’ bar trying to go global,” she says.

In Nicaragua, the government passed a law in 2000 that created conditions under which American companies, sued in cases arising from exposure to a pesticide used on banana plantations, were certain to lose the lawsuits, Bond points out. U.S. lawyers got involved in the litigation in Nicaragua, and judgments have been entered against the companies that now total over $2 billion.

“But there has been good news on this front,” she says. “To date U.S. courts have viewed the law as a significant deprivation of due process, and they have declined to enforce these judgments.”

And a court in California, ruling on cases that had been brought by the same lawyers directly into U.S. courts, found that many of the underlying personal injury claims were false and riddled with fraud. Finally, the Supreme Court’s April ruling in Kiobel v. Royal Dutch Petroleum rejected a scheme by class action trial lawyers to use the Alien Tort Statute of 1789 to make U.S. courts a legitimate forum for legal claims abroad even when no U.S. actors are involved, Bond says.

“The expense of this lawsuit and the intensity of Chevron’s defense may very well be unprecedented,” Waldman says.  “But it is not uncommon for firms to expend incredible resources litigating in two different locales, with one case pressing on in Latin America and another moving forward in the U.S….In a situation like this, a defendant like Chevron is pursuing two parallel objectives.  On the one hand, it wants very badly to win the lawsuit and avoid the possibility of a massive, share price altering judgment against it.  One the other hand, it also wants the rest of the world to understand that if you come after Chevron, the response you receive will be an overwhelming one.  This company will go at you ever way possible, including attacking your lawyers.  The idea is to make it so difficult to prevail against them that you will decide to target someone else.  Of the two objectives, this second is the more important one over the long haul.”

A DETERRENT FOR OTHERS?

So, can Chevron’s success serve as a deterrent to other lawsuits?

“The potential court rewards are so substantial that there will always be attorneys prepared to offer services on a largely contingency basis,” Strong says. “And the cases garner a great deal of media attention which is a nightmare for the corporation and an added strategic bonus for the attorneys and the plaintiffs.”

Waldman says Donziger may actually have lost by using the media so much.  “Donziger probably had plenty of good facts that he could have used to make his case, but he was trying it in the media, rather than in court,” he says.  “Using the media can be very powerful in gaining leverage in litigation, but you can’t undermine the fundamentals of your case in the courtroom.”

He believes the Chevron case won’t deter other lawsuits against U.S. multinationals for four reasons. First, each case is its own animal, with its own facts; second, while Donziger and the plaintiffs have not collected on the judgment that they won in Ecuador, they still won an $18 billion judgment that’s yet to be overturned; third, a corporation capable of writing massive checks will always be a target of litigation; and fourth, courtrooms all over the U.S., if not all over the world, are filled with egotistical litigators who believe that they will be able to outperform the last guy, even against incredible odds.

“The chance of winning a multi-billion dollar outcome will always attract someone to take a shot at the brass ring,” Waldman says.

ECUADOR’S IMAGE

Chevron’s revelations about the massive misconduct by Ecuadorian courts and several judges, has clearly weakened the image of the judiciary in the South American country.

“It’s telling that jurists in other countries have shown little regard for the ruling of their Ecuadorian peers,” Bond says. “Just last month, a Canadian court declined to enforce the award handed down in Ecuador against Chevron. Further, Argentina’s Supreme Court on June 4 lifted a freeze on Chevron’s assets in that country, rejecting a tie to the Ecuador case. These and other rulings — including in the United States — are a remarkable condemnation of this miscarriage of justice in Ecuador. “

However, other experts like Strong and Price believe the Ecuadorian judiciary already suffered from a poor image.  “Sadly, I doubt that many observers held it in high esteem to start with,” Strong says. “Judicial corruption and, perhaps to put it more politely, arbitrariness, are still endemic to the country and, to a greater or lesser degree, the region.”

Price concurs. “I’m not sure that image of Ecuadorian judiciary has suffered much, given that it was quite low to begin with,” he says.  “More accurately, the Chevron case has served to reinforce an already jaded view of jurisprudence in Ecuador.”

Most lawyers who are in the know about legal systems in South and Central America have never had a very positive opinion about how those systems operate, Waldman says.  “For all its twists and turns, the Chevron case neither improves, nor detracts from this general belief,” he says.

REDUCED FDI

While Correa has also done his part to scare off foreign investors, the Chevron case is seen as a key reason for the poor image Ecuador has among multinationals.

“Ecuador in 2012 received less foreign direct investment as a percentage of GDP than any other country in the region,” says Bond.  “Ecuador has languished near the bottom of these rankings for several years even as FDI in Latin America has boomed in countries that respect the rule of law, such as Mexico, Colombia, and Chile.”

Last year, Ecuador saw a 13 percent drop in foreign direct investment to $364 million. As a result, its FDI-GDP ratio is now only 0.49 percent, the lowest in Latin America and six times under the regional average, according to a a Latinvex analysis of FDI data from the United Nations Economic Commission for Latin America and the Caribbean and GDP data from the International Monetary Fund for 2012. Even without comparing FDI to its GDP, Ecuador fares dismally. Last year it had Latin America’s third-lowest FDI. Only countries like Paraguay and Haiti received less.

By Joachim Bamrud-Latinvex, June 12, 2013

BUENOS AIRES, Argentina — Argentina’s Supreme Court on Tuesday suspended a freeze on the Argentine assets of Chevron Corp. that had been ordered late last year following a suit by the winners of a $19 billion environmental judgment in Ecuador.

The high court accepted the appeal by the company and one of its subsidiaries against the November ruling by Argentine judge Adrian Elkuj freezing the assets.

“The appealing parties have not participated in the case against Chevron Corporation (in Ecuador) and are legally distinct units,” the court said in its ruling.

An Ecuadorean court ordered Chevron Corp. to pay $19 billion for oil contamination caused by Texaco Corp. in the Amazon rainforest between 1972 and 1990. Chevron bought Texaco in 2001 and inherited the problem.

The U.S.-based Chevron says it won’t pay because Texaco dealt with the problem before it was bought. Both sides have accused each other of fraud in the legal process.

The decision by Argentina’s top court is another blow to efforts to get Chevron to pay by appealing to courts outside of Ecuador.

Chevron has no assets in Ecuador, so the plaintiffs have filed suits in Canada, Brazil and Argentina seeking to force the company to pay there.

On May 1, a Canadian court dismissed the bid by Ecuadorean villagers to enforce the judgment in that country, ruling that it did not have jurisdiction.

Tuesday’s ruling is a relief not only for Chevron, but for the Argentine state energy company YPF since the two companies are working out a deal to jointly develop the vast Vaca Muerta shale oil and natural gas reserves in southwestern Argentina.

By Associated Press, June 4, 2013

Oil giant’s claims stem from the law firm’s representation of Ecuadorian plaintiffs bringing an environmental suit in Lago Agrio.

Since late 2010, Washington, D.C. law firm Patton Boggs has been poking a sleeping tiger. It has filed three peculiar federal lawsuits — in its own name, not on behalf of any client — against Chevron, the third-largest corporation in the United States. These cases have fared poorly; two were quickly dismissed, and a federal magistrate judge recommended tossing the third in March.

On Friday, the tiger awoke. Chevron (CVX) sought a federal judge’s permission to bring counterclaims against the 455-lawyer firm for alleged fraud and deceit for its conduct in representing the Amazon Defense Front, which obtained a $19 billion environmental judgment against the oil giant in Lago Agrio, Ecuador, in February 2011. Chevron also seeks to charge the firm with “malicious prosecution” for having pursued its three lawsuits in bad faith. Chevron seeks to hold the law firm liable for any damages Chevron suffers from the Front’s allegedly fraud-infested litigation, plus punitive and treble damages.

In a statement, Patton Boggs wrote: “Chevron’s proposed complaint against Patton Boggs is perhaps the starkest example yet of how Chevron will use its limitless resources to intimidate and harass anyone that dares to help the Ecuadorian Plaintiffs in their 20-year battle for justice … Patton Boggs has acted conscientiously, ethically and in good faith at all times since becoming involved in this case in 2010, and will not be intimidated by Chevron’s scare tactics.” (See the full document here.)

Patton Boggs began representing the Front in February 2010. The firm is being paid on a partial contingency fee basis, under an agreement that gives it a 2.4% stake in the Ecuadorian judgment, according to earlier filings by Chevron. Thus, the law firm theoretically stands to make about $450 million if the Ecuadorian judgment can ever be collected. (Chevron has virtually no assets in Ecuador.)

MORE: Ex-judge says he was bribed by Ecuadorians’ suing Chevron

Patton Boggs’s team working on the Lago Agrio case has been led by James Tyrrell, Jr., a regional managing partner of the firm’s New York and New Jersey offices and a member of its executive committee.

At the time Patton Boggs got involved in the matter, Chevron’s lawyers had just begun filing a series of U.S. court proceedings, known as Section 1782 actions, to attempt to expose fraud, fabrication of evidence, and other chicanery that Chevron claims the Front engaged in to obtain the Ecuadorian judgment. Patton Boggs’s task was, among other things, to assist the Front in resisting Chevron’s efforts to unearth such evidence.

Notwithstanding the Front’s and Patton Boggs’s efforts, Chevron eventually did obtain much of the evidence it sought, and in February 2011 it filed a civil Racketeer Influenced and Corrupt Organizations Act (RICO) case in Manhattan against the Front’s leaders, including its top U.S. lawyer and strategist, Steve Donziger. Last July, in a ruling on a partial summary judgment motion in that case, U.S. District Judge Lewis Kaplan found that the March 2011 Ecuadorian judgment was, in fact, “unquestionably … tainted” by fraud. More recently, in a discovery order in March 2013, he also found that there was “probable cause” to believe that Front representatives “bribed the Ecuadorian judge to obtain the result they wanted and, as part of the deal, wrote the judgment to which the judge put his name.”

(The Front has repeatedly and unsuccessfully sought to remove Judge Kaplan from the case, accusing him of bias in strident and borderline contemptuous terms.)

One of the reasons Judge Kaplan found it likely that the Ecuadorian judgment was ghostwritten by the Front’s lawyers is that it incorporates large passages that appear to have been lifted verbatim from internal Front legal memoranda that were never introduced into the Ecuadorian court record. In the proposed complaint, Chevron alleges that at least one of the lifted passages incorporates Patton Boggs’s own work product.

Thus, it alleges, “Patton Boggs either knew in advance of the ghostwriting of the judgment against Chevron or must have become quickly aware of it once Chevron began to make the evidence known, and yet Patton Boggs continued to further the fraudulent scheme … Despite the uncontradicted evidence to the contrary, Patton Boggs has falsely asserted in the U.S. that this judgment is legitimate and not the product of a corrupt process in which Patton Boggs and/or its co-counsel colluded with the Ecuadorian court or court experts.”

MORE: Litigation finance firm in Chevron case says Patton Boggs duped it

Another focus of Chevron’s proposed complaint is Patton Boggs’s alleged role in “direct[ing] the creation of a declaration” signed by Front lawyer Pablo Fajardo that was filed in a Section 1782 action in Denver federal court in May 2010.

In his March 2013 ruling, Judge Kaplan called the Fajardo declaration “a seriously misleading account of what had happened” and, again, found “probable cause” to believe that “at least some” of the Front’s representatives “had committed mail and/or wire fraud and obstructed justice … by formulating and filing” it. The Front later filed the Fajardo declaration in at least eight other U.S. courts around the nation, including Kaplan’s.

Also in dispute is a strategy Patton Boggs allegedly “orchestrated” of hastily seeking testimony from seven newly hired experts — known internally at Patton Boggs as the “cleansing” experts — and introducing their written testimony into the Ecuadorian court record in late 2010 in an effort to give the Ecuadorian court something to base its opinion upon other than a court-appointed expert’s report that Chevron alleges (and appears to have proven) was secretly ghostwritten by the plaintiffs lawyers.

Chevron alleges that the cleansing experts in fact simply relied on the fraud-tainted report and that Patton Boggs’s lawyers tried to conceal that fact.

Chevron also takes issue with Patton Boggs’s continuing attempts to enforce the Ecuadorian judgment in foreign courts, including, so far, those of Canada, Argentina, and Brazil, “despite overwhelming and un-rebutted evidence that the Ecuadorian judgment itself, and the [court-appointed expert's report] upon which it is based, were fraudulently ghostwritten by the LAPs’ own team.”

Finally, Chevron faults Patton Boggs for having helped the Front secure funding for its allegedly fraud-tainted litigation by allegedly misleading the investment fund Burford Capital, which specializes in litigation finance. Burford has since renounced its interest in the case and has accused both the Front’s leaders and Patton Boggs’s Tyrrell of having made false representations to lure it into the case. (Patton Boggs has responded in the past that it is “fully confident that it has acted appropriately and ethically.”)

Chevron’s proposed complaint is based on documents already in its possession that relate to Patton Boggs’s role in the case, but it is already in the process of trying to obtain many more documents from the firm. In March Judge Kaplan ordered Patton Boggs to begin turning over millions of pages of files in the case, finding that any attorney-client privilege was pierced by the so-called crime-fraud exception. He wrote: “PB participated heavily in certain critical activities that make it likely that it is an important and, in many respects, unique source of evidence of the alleged fraud that is available nowhere else and that at least some of the materials in its possession or control were in furtherance of crimes or frauds regardless of whether PB was aware of them.”

Chevron’s new proposed claims against Patton Boggs are not being leveled in the RICO case itself, which is scheduled to go to trial in October, but rather as a counterclaim in a case Patton Boggs itself brought against Chevron in Newark last year, which was transferred to Manhattan earlier this year.

MORE: Evidence of fraud mounts in Ecuadorian suit against Chevron

That case is the third of Patton Boggs’s suits against Chevron, which are the subject of Chevron’s “malicious prosecution” allegation against the firm. The string of Patton Boggs suits began in November 2010, when it sued Chevron seeking a preemptive declaration that Patton Boggs had no conflict of interest in representing the Front — though Chevron had not moved to disqualify it. (The potential conflict related to Patton Boggs’s July 2010 acquisition of the Breaux Lott Leadership Group, a lobbying firm that Chevron says was representing it with respect to its Ecuador litigation between 2008 and 2010.) Patton Boggs later added Chevron’s main outside counsel, Gibson Dunn & Crutcher, as a defendant, and also accused Chevron of “tortious interference with contract” for having allegedly interfered with the Front’s ability to find financing with which to pay Patton Boggs. U.S. District Judge Henry Kennedy, Jr., dismissed this and a second, nearly identical Patton Boggs suit against Chevron in April, July, and August of 2011, and an appeals court unanimously affirmed both dismissals in June 2012.

By then, Patton Boggs had filed the third suit against Chevron in Newark. This one had to do with a $21.8 million appeal bond that Judge Kaplan had required Chevron to post when, in March 2011, he granted a preliminary injunction barring the Front from trying to enforce the Ecuadorian judgment outside Ecuador. After the injunction was vacated by an appeals court in January 2012, Chevron asked Judge Kaplan to release the bond — i.e., give Chevron back the money it had posted.

Patton Boggs opposed Chevron’s motion, but instead of simply doing so in a motion before Judge Kaplan on the Front’s behalf, it filed an entirely new lawsuit in Newark on Patton Boggs’s own behalf. Later Patton Boggs added a “malicious prosecution” claim against Chevron for its having identified Patton Boggs as a “co-conspirator” (though not a defendant) in its RICO suit. In December 2012, Newark federal judge Esther Salas transferred the case to Judge Kaplan in Manhattan, criticizing Patton Boggs’s “jurisdictional maneuvering.” (Judge Kaplan released the bond in April 2012, and Patton Boggs has appealed that order.)

In March 2013, Magistrate Judge James C. Francis IV in Manhattan recommended dismissal of Patton Boggs’s third suit, and Patton Boggs has appealed to Judge Kaplan. Chevron’s new claims against Patton Boggs for fraud and deceit, filed today, come as counterclaims in that case.

It seems likely that Patton Boggs was already losing money from its representation of the Front — that was an underlying premise for all three of its lawsuits against Chevron — and the counterclaim against it by Chevron cannot help its situation. Patton Boggs did not respond to a request for comment on whether the Front was in arrears on payments owed to it.

Last week another of the Front’s U.S. law firms, Houston’s, Smyser Veselka & Kaplan, asked to withdraw from the RICO case, saying it was owed almost $1.8 million in fees. At the same time, Donziger’s law firm in that case, Keker & Van Nest — which the Front had also been paying, under the terms of its retainer agreement with Donziger — also asked to withdraw, saying it was owed more than $1.4 million in fees.

According to the Wall Street Journal, Patton Boggs laid off 65 lawyers and staff in late February, after a decline in profits. Its annual revenues were down 6.5% in 2012, the article said, while its profits fell 14%.

By Roger Parloff-Fortune, May 13, 2013

Chevron Corp. accused Patton Boggs LLP of fraud in New York federal court Friday, saying the firm conspired with a group of indigenous Ecuadoreans to cover up the extent to which an Ecuadorean court’s $19 billion pollution judgment was secured through bribery and corruption.

The energy giant claimed Patton Boggs has knowingly mounted an obstructionist campaign to conceal that the unprecedented judgment was secured through illegal interference and based on an inflated damage assessment secretly drafted by representatives for the so-called Lago Agrio plaintiffs. The firm’s contingency fee stake in the judgment could entitle it to hundreds of millions of dollars if the award is ever enforced.

Chevron has vowed to fight the judgment “until hell freezes over” and has launched a New York racketeering suit seeking to invalidate the award while also battling attempts by the Ecuadoreans to secure its enforcement through asset freezes in Latin America and Canada.

“Patton Boggs has stepped far beyond any proper role as ‘litigation counsel’ to the Lago Agrio plaintiffs, and has committed numerous tortious acts aimed at Chevron,” the company said Friday. “It has sought to defraud and mislead numerous courts, as well as federal and state governmental agencies and officials, Chevron’s shareholders, investors, analysts, and the media.”

In a statement Monday, a Patton Boggs representative said the counterclaims are “perhaps the starkest example yet” of Chevron’s efforts to flex its financial muscle in order to intimidate and harass those who are seeking to enforce the Ecuadorean judgment and in doing so divert attention from its alleged liability in the Amazon.

“This cynical strategy will not work,” the firm said. “We are proud that we have helped the indigenous and farming communities that have been so adversely impacted by Chevron’s actions. Patton Boggs has acted conscientiously, ethically and in good faith at all times since becoming involved in this case in 2010 and will not be intimidated by Chevron’s scare tactics.”

The counterclaims come in response to a February 2012 suit brought by Patton Boggs against Chevron in New Jersey seeking to collect a $21.8 million bond the energy giant posted when it obtained an injunction — later overturned — blocking the enforcement of the judgment. That case was transferred to New York in December.

The contested judgment involves damages for crude oil allegedly dumped in the Amazon rainforest by Texaco Inc., which the LAPs say caused residents to develop cancer and destroyed natural resources. Chevron inherited Texaco’s liability when the companies merged in 2001.

Among the counterclaims asserted by Chevron on Friday are allegations that Patton Boggs helped conceal the ghostwriting of the so-called Cabrera Report, a purportedly independent assessment of the scope of those crude oil damages that Chevron claims the Ecuadorean judge overseeing the litigation relied on in reaching the massive judgment. The oil company says the report was ghostwritten by the LAPs and their attorneys.

Patton Boggs took a hit in April when British litigation fund Burford Capital Ltd. renounced its interest in the litigation, specifically citing the Cabrera Report and saying the firm made several false representations to Burford in order to secure its $4 million investment.

Patton Boggs denied these allegations and maintained that the Ecuadorean judgment was fully supported by evidence.

The legitimacy of the Cabrera Report was further tarnished in April when Stratus Consulting Inc., which contributed to the report, disavowed its contributions after striking a deal with Chevron to escape racketeering and extortion claims in the RICO suit.

The extent to which the Cabrera Report played a role in the final judgment has been a source of conflict in the litigation, with Chevron maintaining that it was a key element of the award and the Ecuadoreans and their representatives claiming that the judge who issued the disputed award excluded the report from consideration in response to Chevron’s objections, and that it therefore had no bearing on the case’s outcome.

U.S. District Judge Lewis A. Kaplan, who is overseeing Chevron’s New York suit filed under Racketeer Influenced and Corrupt Organizations Act, has previously held that Chevron has established sufficient probable cause that the judgment was procured by illegal acts, citing those alleged acts in overruling work-product and attorney-client privilege protections under which Patton Boggs sought to avoid document disclosures in that suit.

In compelling the production of those documents, Judge Kaplan asserted that Patton Boggs “has had a hand in almost every major development” in the litigation.

The Ecuadoreans have made no secret of their belief that Judge Kaplan has exercised persistent bias against them, and have moved to boot him from the case over allegations he has attempted to hinder international enforcement efforts and conducted himself as “transnational arbiter” of the disputed judgment, in defiance of rulings by the Second Circuit.

The Second Circuit has granted a bid for expedited consideration of that petition and is set to look at it sometime this month. The RICO suit is set to go to trial Oct. 15.

Patton Boggs is represented by Leader & Berkon LLP.

Chevron is represented by Stern & Kilcullen LLC and Gibson Dunn & Crutcher LLP.

The case is Patton Boggs v. Chevron Corp., case number 1:12-cv-09176 in the U.S. District Court for the Southern District of New York. The RICO suit is Chevron Corp. v. Donziger et al., case number 1:11-cv-00691, in the U.S. District Court for the Southern District of New York.

By Gavin Broady-Law360, May 13, 2013

An Ontario judge on Wednesday halted efforts by a group of indigenous Ecuadoreans to pursue a $19 billion pollution judgment against Chevron Corp. through assets seizures there, saying the oil giant’s Canadian subsidiary is sufficiently independent and not party to the Ecuadorean dispute.

While Justice David Brown of the Ontario Superior Court of Justice in Toronto rejected Chevron’s arguments that his court lacks jurisdiction to hear the suit, he nonetheless stayed the case on the grounds that insufficient connection exists between Chevron and subsidiary Chevron Canada to warrant proceeding.

Justice Brown said the Ecuadoreans had not argued that Chevron Canada’s activities are in any way fraudulent or intended to conceal liability against its parent company, and that continued legal proceedings in Canada would be fruitless and wasteful because Chevron Corp. has no assets in the country to seize.

“The evidence disclosed that there is nothing in Ontario to fight over,” Justice Brown said. “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.”

The dispute is one of several international asset seizure lawsuits Ecuadoreans have filed in an effort to force Chevron to pay the $19 billion judgment an Ecuador court ordered against it in a long-running suit over pollution to the Amazon rain forest allegedly caused by Texaco Inc., which merged with Chevron in 2001.

Representatives for the Ecuadoreans released a statement Wednesday saying they will appeal the order.

“It cannot be right that a multinational company that operates entirely through subsidiaries is immune from the enforcement of a judgment in Canada, particularly where the subsidiary is 100% owned and provides some of the billions of dollars that Chevron pays out in dividends each year,” plaintiffs attorney Alan Lenczner said. “Chevron Corp itself earns no money. All its earnings and profits come from subsidiaries including, importantly, Chevron Canada.”

Justice Brown said in Wednesday’s order that he would consider lifting the stay should the plaintiffs present new evidence suggesting Chevron possesses or will possess assets in his jurisdiction.

Chevron spokesman Justin Higgs told Law360 on Wednesday that the company was pleased with the decision and characterized the ruling as a significant setback for the Ecuadoreans’ worldwide enforcement strategy.

“The plaintiffs should be seeking enforcement in the United States, where Chevron Corporation resides,” Higgs said. “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.”

Chevron has rejected the massive Ecuadorean judgment as the product of fraud, and mounted a New York Racketeer Influenced and Corrupt Organizations Act suit accusing the Ecuadoreans and their attorney, Steven Donziger, of securing the unprecedented award through extortion. Donziger and the Ecuadoreans have denied those allegations and shot back with fraud counterclaims of their own.

Despite its loss of the jurisdictional argument, Wednesday’s stay is a significant victory for Chevron, which has long maintained that it does not and will never have any real assets or presence in the country, and that foreign courts have no right to freeze the assets of subsidiaries when a judgment is entered only against the parent company.

In November, the Ecuadoreans’ Argentine counsel in Enrique Bruchou noted that the plaintiffs had specifically selected Canada as the venue for their first attempts to enforce the award outside Ecuador in an attempt to counteract Chevron’s allegations that they were trying to move the litigation to corrupt jurisdictions, citing unspecified world rankings listing Canada as one of the most judicially transparent nations in the world.

The Ecuadoreans have had better luck with their attempts to secure asset seizures elsewhere, having successfully obtained an attachment of the assets of two Chevron subsidiaries in Argentina. That freeze was obtained via a 1979 treaty between a number of Latin American countries specifically designed to facilitate such attachments and was upheld in January by an Argentine appeals court.

The plaintiffs are represented by Alan J. Lenczner and Paul-Erik Veel of Lenczner Slaght Royce Smith Griffin LLP and Pablo Fajardo.

Chevron Corp. is represented by Norton Rose. Chevron Canada is represented by Goodmans LLP.

The case is Daniel Carlos Lusitande Yaiguaje et al. v. Chevron Corp. et al., case number 12-cv-454778, in the Ontario Superior Court of Justice.

By Gavin Broady-Law360, May 1, 2013

A claim by a group of Ecuadorean villagers seeking to seize Chevron Corp. (CVX)’s Canadian assets was stayed by a judge in Ontario at Chevron’s request.

“Chevron does not possess any assets in this jurisdiction at this time,” Ontario Superior Court Justice David Brown said in a ruling today on the asset-seizure request filed in Toronto last year by lawyers for 47 Ecuadorean villagers.

A court in the Latin American country in 2011 found Chevron liable for 28 years of soil and water pollution near oil wells that ruined the health and livelihoods of Amazon rainforest dwellers. Since then, Ecuadorean farmers and fishermen have been trying to collect $19 billion in environmental damages from San Ramon, California-based Chevron, the world’s third-largest oil company.

“The parties should take their fight elsewhere to some jurisdiction where any ultimate recognition of the Ecuadorian Judgment will have a practical effect,” Brown said in his ruling.

The plaintiffs are seeking enforcement outside their home country because Chevron has no refineries, oil wells, storage terminals or other properties in Ecuador. Lawyers for the Amazon River basin residents asked the Ontario court for a judgment equivalent to $18.26 billion.

Chevron said it was pleased with the judge’s decision, according to a statement.

Chevron Fight

The plaintiffs plan to appeal, Alan Lenczner, principal lawyer in Toronto for the Ecuadorians, said in a statement.

“It cannot be right that a multinational company that operates entirely through subsidiaries is immune from the enforcement of a judgment in Canada, particularly where the subsidiary is 100 percent-owned and provides some of the billions of dollars that Chevron pays out in dividends each year and even more billions in share buybacks,” he said.

Chevron has refused to pay the judgment or entertain the notion of settlement talks because it maintains the ruling resulted from bribery and fraud, charges that lawyers and a spokeswoman for the plaintiffs have rejected.

Brown said the plaintiffs “have no hope of success” in their claim that Chevron’s Canadian subsidiary should be used to fulfill the judgment of the Ecuadorean court. In his decision, the Ontario judge noted Chevron’s determination to fight.

“Chevron is on record saying: ‘We will fight until hell freezes over and then fight it out on the ice.’ While Ontario enjoys a bountiful supply of ice for part of each year, Ontario is not the place for that fight,” Brown wrote in his ruling. “There is nothing in Ontario to fight over.”

Toxic Soil

The plaintiffs have filed similar asset-seizure motions against Chevron in courts in Brazil and Argentina.

The 2011 judgment by a provincial Ecuadorean court blamed decades of toxic soil and water contamination on Texaco Inc., which Chevron acquired in 2001. Texaco was found to have discharged into the environment saltwater and other byproducts of oil drilling. Texaco quit the country and its equipment was taken over by the Ecuadorean state oil company in 1992.

Brown stayed the plaintiffs’ claim in Canada, while allowing them the right to try again if they obtain new evidence that Chevron possesses assets in the court’s jurisdiction.

Exxon Mobil Corp. (XOM) is the world’s biggest oil company by market value, followed by PetroChina Company Ltd., according to data compiled by Bloomberg.

By Joe Carroll & Katia Dmitrieva-Bloomberg, May 1, 2013

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

While settling a dispute with Chevron, Burford Capital says it would never have financed Patton Boggs’ case against the oil giant if it weren’t for materially “false and misleading” statements by a Patton partner with whom it had a “special relationship.”

In the latest in a series of bombshell filings, Chevron today submitted a 26-page sworn declaration from the CEO of Burford Capital, a $300 million, publicly traded fund that in late 2010 agreed to finance Patton Boggs’s representation of the plaintiffs bringing an environmental suit against Chevron in Lago Agrio, Ecuador.

In it Burford CEO Christopher Bogart says his firm would never have invested in the case were it not for “false and misleading representations” made not only by Steve Donziger, the Lago Agrio team’s longtime New York lawyer, but also by Patton Boggs, a prominent Washington-based, AmLaw 100 law firm that agreed to take on the plaintiffs’ troubled environmental suit in February 2010 on a partial contingency basis. (Read the full declaration here.)

Burford relied, Bogart says, on a misleading analysis of the case made by Patton Boggs partner James Tyrrell, Jr., with whom, Bogart says, Burford had a “‘special’ and multifaceted relationship” at the time. Most of the misrepresentations Bogart alleges concern the extent to which Patton Boggs already knew that a crucial damages assessment drafted by a purportedly “neutral and independent” court-appointed expert in the case had, in reality, been secretly ghost-written by the Lago Agrio plaintiffs lawyers themselves.

Emails seeking comment from Tyrrell and other Patton Boggs attorneys were not immediately returned. Nor were emails to Donziger’s counsel, John Keker (who is in a court proceeding this morning) or the Lago Agrio plaintiff team’s spokesperson, Bill Hamilton of Fenton Communications.

Because an Ecuadorian provincial court issued an $18.2 billion judgment against Chevron in February 2011—later bumped up to $19 billion—Patton Boggs theoretically stands to collect hundreds of millions of dollars if the judgment can ever be enforced. The plaintiffs team is currently attempting to enforce it foreign courts, including those of Canada and Argentina.

Chevron is currently considering whether to bring fraud charges against Patton Boggs, the company stated in a Manhattan federal court filing Friday, and will make up its mind by May 10.

On October 31, 2010, Burford gave the plaintiffs $4 million in financing as the first tranche in what was planned to become a $15 million investment in the case. In exchange it received a 1.5% stake of any recovery, which was to rise to a 5.5% stake upon full funding.

But on February 1, 2011, Chevron (CVX) filed a civil RICO (Racketeer Influenced and Corrupt Organizations Act) suit in Manhattan federal court against Donziger, the Amazon Defense Fund, and others key figures involved in the Lago Agrio case, alleging wire fraud, extortion, money laundering, and obstruction of justice. U.S. District Judge Lewis Kaplan issued a preliminary injunction in March in a 131-page, 434-footnote ruling that detailed the disturbing state of the evidence against Donziger and his Ecuadorian collegues on the case at the time. (The injunction was later vacated on appeal jurisdictional grounds unrelated to Kaplan’s factual findings.)

Burford never made any follow-up investments.

Although Burford quickly resold most of its stake in the case in December 2010, it retained until today an upside interest in the outcome of the lawsuit. With today’s settlement, however, Burford turns that remaining stake over to Chevron. In this morning’s joint press release, Bogart says, “Burford stands by its clients in the face of aggressive litigation tactics by their opponents, but Burford does not sit still for being deceived or defrauded and has no interest in profiting from such conduct.”

Chevron’s general counsel, Hewitt Pate, in turn praised Burford in the joint statement for having “acted responsibly after becoming aware of the fraud, bribery, and extortion perpetrated here.”

In Bogart’s affidavit he argues that Burford was especially inclined to credit Tyrrell’s assessments of the case because of Tyrrell’s “special relationship” with the firm. To begin with, he writes, Tyrrell was, as a former partner at Latham & Watkins, close friends of four former Latham partners who then occupied senior positions at Burford.

“Tyrrell was also an advocate and enthusiast of litigation funding,” Bogart continues, extending “support to start-up funders.” For instance, Patton Boggs was providing Burford with rent-free office space at its New York office, which Tyrrell heads, at the time the Lago Agrio investment was negotiated, Bogart writes.

Last month Judge Kaplan ordered Patton Boggs to make voluminous productions of documents, finding that any attorney client privilege that might apply would be pierced due to the “crime fraud exception,” which applies when there is evidence that documents were made in furtherance of a crime or fraud. Though Judge Kaplan made no finding as to whether Patton Boggs itself had any actual knowledge of any crime or fraud, his 73-page ruling was tart in its rejection of the firm’s portrayal of itself as an unrelated outsider who, if it complied with the subpoena, would be forced to incur excessive and burdensome costs.

He wrote: “Here, [Patton Boggs] was well aware of Chevron’s fraud allegations when it joined the [Lago Agrio plaintiffs] team – indeed it was brought on to combat them – and understood Chevron’s intention to fight this matter vigorously. Any failure to have anticipated that its involvement could lead to discovery obligations and expenditures on its own behalf, if there was such a failure, would have reflected an uncommon lack of foresight.”

Burford’s investment in the controversial case—which, like most such investments, remained secret until disclosed through ancillary U.S. litigation brought by Chevron—was the subject of a May 2011 Fortune feature story which had been highly critical of the investment firm.  (See Have you got a piece of this lawsuit?)

While at least four federal court judges had already found “prima facie” evidence of fraud by the plaintiffs team at the time Burford invested, the quality and quantity of that evidence has strengthened geometrically since the filing of Chevron’s RICO case. Last July U.S. District Judge Lewis Kaplan in Manhattan ruled that “uncontradicted evidence” showed that the case had been “unquestionably … tainted” by this fraud. (See Chevron claims Patton Boggs tried to cover up a fraud)

In addition,Chevron has now also presented in its RICO case substantial evidence indicating that the entire 188-page, $18.2 billion judgment ruling was ghostwritten by the Ecuadorian plaintiffs lawyers themselves—an opportunity that was allegedly accorded to them after they agreed to pay two Ecuadorian judges $500,000 from the anticipated recovery. Chevron has shown, for instance, that at least one third of the judgment was plagiarized from internal plaintiffs memoranda that were never made part of the record in the case, and it has submitted an extensively corroborated affidavit from one of the two Ecuadorian judges in question.

(In reply, the Lago Agrio plaintiffs team submitted an unnotarized declaration from the other former judge, the titular author of the ruling, Nicolas Zambrano. In it Zambrano says he wrote the ruling himself and denies having accepted any bribe offer. But the Lago Agrio plaintiffs team has also indicated that Zambrano will probably refuse to submit to a deposition backing up his claim, rendering his declaration’s legal value dubious. Further, in his declaration Zambrano makes no attempt to explain away the voluminous corroborating evidence of ghostwriting that Chevron has submitted.

Similarly, in a terse, carefully worded affidavit the Lago Agrio plaintiffs’ chief U.S. lawyer Donziger has denied personal involvement in or knowledge of bribery or ghostwriting of the judgment, but has not denied that bribery and ghostwriting may have occurred. The other Amazon Defense Front defendants have defaulted by failing to appear in the RICO suit.)

Finally, just last week, the plaintiffs team’s environmental experts, Stratus Consulting of Boulder, Colorado, recanted all its scientific findings and conclusions in the case in exchange for being dropped as a defendant in the RICO suit. Its officials expressed regret for having “allowed the firm to be used the way it was.” (The Lago Agrio plaintiffs say Chevron “bullied” Stratus into the recantation by threatening it with “financial extinction.”)

By Roger Parloff-Fortune, April 17, 2013