Chevron s RICO Trial to Nowhere Eight Reasons Why Chevron s Case Does Not Have A Leg To Stand On

Chevron s RICO Trial to Nowhere Eight Reasons Why Chevron s Case Does Not Have A Leg To Stand On Summary Points **Should Chevron prevail before Judge Kaplan as we fully expect, given Kaplan s bias and the absence of a jury of impartial fact finders we believe any decision will have almost no chance of surviving appeal in the United States. Nor do we believe any decision by a U.S. judge with Kaplan s record will help Chevron block international enforcement actions which is the company s primary goal. If anything, Kaplan s efforts on behalf of Chevron are more likely to backfire against the company in foreign courts. The bottom line is foreign courts do not want to be told how to rule by a U.S. judge particularly one who did not provide a fair trial and who believes he can play the role of the world s appellate judge from his Manhattan courtroom, as explained below in more detail. **Operating in Ecuador under the Texaco brand, it is undisputed that Chevron contaminated a swath of the Amazon the size of Rhode Island. Judge Kaplan has steadfastly excluded evidence of this contamination in the RICO trial. But the Supreme Court of Ecuador just affirmed the judgment and held that it was supported by abundant evidence of contamination. So all of Chevron's allegations in Kaplan s court about what happened in the trial are not only wrong, but beside the point given that two appellate courts have unanimously affirmed the trial court judgment based on valid scientific evidence. * Chevron s RICO lawsuit and related political and lobbying campaign in the U.S. and other countries amounts to what is easily the most expensive corporate retaliation campaign in the history of human rights litigation. We estimate Chevron has spent at least $1 billion in the last four years to try to undermine the Ecuador judgment. Much of that money was directed to try to destroy Steven Donziger s reputation and to intimidate funders and lawyers from helping the affected communities. Chevron s strategy has failed. Mr. Donziger is unbowed by the combined efforts of Chevron and Judge Kaplan to inappropriately quash the Ecuador legal judgment and he will continue his lawful work on behalf of his Ecuadorian clients so they can receive a proper clean-up of their ancestral lands, adequate medical attention, and clean water. 1

Chevron s Legal Problems Related to RICO 1) Settled principles of international comity preclude the Court from even entertaining Chevron s preemptive attack on a sovereign nation s legal system. Judge Kaplan has no clear authority whatsoever to conduct this extraordinary proceeding or to grant any of the injunctive relief requested by Chevron. Chevron s RICO lawsuit is an unprecedented preemptive collateral attack on an Ecuadorian judgment, in favor of Ecuadorian citizens, arising from environmental pollution that occurred entirely in Ecuador. As U.S. federal Judge Rakoff said a decade ago when he sent the case to Ecuador at Chevron s insistence: this case has everything to do with Ecuador, and nothing to do with the United States. Aguinda v. Texaco, 142 F. Supp. 2d 534, 537 (S.D.N.Y. 2001). The case was re-filed in Ecuador because Chevron insisted that it be brought in Ecuador, and agreed to abide by the judgment of the Ecuadorian courts. Ecuador s National Court of Justice the supreme judicial authority of a co-equal sovereign nation has just issued a decision that repudiates every one of the arguments Chevron has made here as a basis for setting aside the trial court s judgment. That decision is entitled to respect by the United States and by every other nation in the world, just as an opinion of the Supreme Court of the United States is entitled to respect. And, as the Second Circuit Court of Appeals already has instructed this Court in this very case, any second-guessing about whether the judgment was procured by fraud or other improprieties must be left to those courts in which enforcement is sought. o o o To proceed without regard to the decision of Ecuador s National Court of Justice would be to render the appellate and supreme court proceedings in that nation a nullity. There is no allegation here that the appellate judges in Ecuador were bribed or biased or unqualified. Indeed, the National Court of Justice eliminated all punitive damages, cutting the judgment in half and belying any claim that they are in the pocket of the plaintiffs. There is no reason to think that Judge Kaplan is somehow more qualified than the judges of Ecuador to decide the various questions that Chevron has presented here about Ecuadorian procedural norms what ex parte contacts are appropriate, what proposed documents must be filed on the record, how lawyers involvement in drafting proposed expert reports must be disclosed. Those questions can only appropriately be considered within the context and legal culture of the system in which they arose. It is misleading and wrongheaded to try to judge them through an American lens, as Judge Kaplan is doing. Judge Kaplan has no business sitting in judgment of another nation s legal system; doing so interferes with our nation s foreign relations. Nor is he qualified to do so. In this trial, we heard testimony from a key political 2

opponent of the current President of Ecuador, criticizing the entire nation s judiciary. Should this Court as opposed to our President and State Department be in a position of condemning a nation s legal system based on political considerations? The answer is no. Imagine if the plaintiffs had lost in Ecuador, but were convinced that Chevron had committed various procedural improprieties in the Ecuadorian courts. Would they be able to bring a RICO action in the United States against Chevron over those allegations? To ask the question is to answer it. They would be laughed out of court. Judge Kaplan is employing a double standard to help Chevron in a way that he would never help Ecuadorian villagers. If a single trial judge in New York (or for that matter, in London, Nairobi, or Mumbai) can preemptively attack a judgment anywhere in the world, the principles of international comity that permit nations enforcement of one another s judgment fall apart. What prevents a judge in Ecuador (or France, or India, or Mozambique) from second guessing Judge Kaplan s rulings on cases dealing with domestic U.S. law? That s one reason why Judge Kaplan s expected ruling in favor of Chevron has little chance of gaining traction internationally and surviving appellate scrutiny in this country. 2) Chevron s proposed remedy an injunction barring enforcement of the Ecuador judgment runs directly counter to the Second Circuit s unanimous decision in Chevron v. Naranjo. In Naranjo, where the federal appellate court unanimously overturned Judge Kaplan in an earlier phase of this case, the Second Circuit wrote in relation to the issuance of an illegal injunction purporting to block the Ecuador judgment: It is a particularly weighty matter for a court in one country to declare that another country's legal system is so corrupt or unfair that its judgments are entitled to no respect from the courts of other nations. That is of course precisely the sort of declaration that Chevron wants from Judge Kaplan in its RICO case. According to the Second Circuit, the inquiry into the validity of a foreign judgment may be necessary when a party seeks to invoke the authority of our courts to enforce a foreign judgment. But it is manifestly unnecessary, and inappropriate, to make that inquiry in the situation here: where no party has sought to enforce the judgment in the United States. The Second Circuit also ruled as follows with respect to Judge Kaplan s prior decision: When a court in one country attempts to preclude the courts of every other nation from ever considering the effect of that foreign judgment, the comity concerns become far graver. In such an instance, the court risks disrespecting the legal system not only of the country in which the judgment was issued, but also those of other countries, who are inherently assumed insufficiently trustworthy to recognize what is asserted to be the extreme incapacity of the legal system from which the judgment emanates. 3

The Second Circuit also ruled that Judge Kaplan has no power to block international enforcement of the Ecuador judgment: The LAPs [or Ecuadorian communities who are the plaintiffs] hold a judgment from an Ecuadorian court. They may seek to enforce that judgment in any country in the world where Chevron has assets. It is unclear what is to be gained by provoking a decision [about whether the judgment would be enforceable here]. If such an advisory opinion were available, any losing party in litigation anywhere in the world could seek to litigate the validity of the foreign judgment in this jurisdiction. Chevron seeks just such an advisory opinion from this Court. The Second Circuit also decided that trying to block a foreign judgment without an enforcement action would unquestionably provoke extensive friction between legal systems by encouraging challenges to the legitimacy of foreign courts in cases in which the enforceability of the foreign judgment might otherwise never be presented in New York. There is no question that the proceedings before Judge Kaplan have provoked extensive friction between the Ecuadorian and American legal systems, and between this Court and legal systems around the world. 3) Chevron is judicially estopped from seeking the relief it seeks here by virtue of the promises it made when it sought to move the litigation to Ecuador. There is another major roadblock to the Chevron s plan to use U.S. courts to block a foreign country judgment. As the Second Circuit explained in Republic of Ecuador v. Chevron Corp., 638 F.3d 384, 399 (2d Cir. 2011) a separate appellate court decision related to Chevron s international arbitration against Ecuador -- Chevron agreed to abide by the judgments of the Ecuadorian courts as a condition of having the Aguinda case sent to Ecuador in 2001. Chevron reserved only one avenue for challenging the judgment here New York's Recognition of Foreign Country Money Judgments Act, which the Second Circuit described as Chevron s sole reserved route for Chevron to challenge any final judgment resulting from the Lago Agrio litigation. The Second Circuit has already reversed this Court s attempt to invoke the New York Act, so no other avenue remains aside from defenses to actual enforcement proceedings. 4) Chevron lacks both Article III standing and RICO standing (which imposes a stricter standard than Article III) and its claim is not ripe in any event Chevron has another problem it cannot show any actual injury from the judgment in Ecuador, a requirement to have standing to bring a case. Under the law, Chevron must show standing through actual economic injury, not future injury. First Pacific Bancorp, Inc. v. Bro, 847 F.2d 542, 547 (9th Cir.1988) (footnote omitted). We stated that [a]ppellants would bear the burden at trial of proving injury. Absent a showing sufficient to establish the existence of actual injury, summary judgment is required. Id. at 547 n. 11 (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986)) (emphasis added). We explained that by actual injury, we meant financial loss 4

or injury. Id. at n. 12. Berg v. First State Ins. Co., 915 F.2d 460, 464 (9th Cir. 1990) RICO standing is a more rigorous matter than standing under Article III. Denney, 443 F.3d at 266. In essence, statutory standing under RICO incorporates an enhanced ripeness requirement: a cause of action does not accrue under RICO until the amount of damages becomes clear and definite. Motorola, 322 F.3d at 135 (emphasis added) (quoting First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 768 (2d Cir.1994)); see Denney, 443 F.3d at 266 (same); Harbinger Capital Partners Master Fund I, Ltd. *237 v. Wachovia Capital Markets, LLC, 07 CV 8139, 2008 WL 3925175, at *4, 2008 U.S. Pist. LEXIS 67462, at *12 (S.D.N.Y. Aug. 26, 2008), aff'd, 347 Fed.Appx. 711 (2d Cir.2009) ( Plaintiffs lack statutory standing to sue under RICO, for their damages have yet to become clear and definite and are thus unripe. ). 5) RICO doesn t authorize private parties like Chevron to seek injunctive relief. Thus, Chevron lost its only available remedy under RICO when it dropped its damages claims to avoid a jury trial. RICO s civil remedies provision, 18 U.S.C. 1964, authorizes two causes of action: a public enforcement action for equitable relief by the Attorney General and a treble damages action by private parties. The Attorney General s right to sue for equitable relief derives from Section 1964(a) and (b), and those provisions, in combination, make the Attorney General s right exclusive. Section 1964(a) grants district courts jurisdiction to prevent and restrain violations of RICO by issuing the full range of appropriate orders available to courts of equity. 18 U.S.C. 1964(a). Section 1964(a) does not identify who can seek such relief, but Section 1964(b) does. That provision states that [t]he Attorney General may institute proceedings under this section and that, [p]ending final determination thereof, the court may enter interim restraining orders or take such other actions as it shall deem proper. 18 U.S.C. 1964(b). By empowering the Attorney General to institute proceedings under this section, Congress signaled its intent that the district court s equitable jurisdiction under Section 1964(a) must be invoked by the Attorney General. Congress further manifested its intent that the Attorney General alone may seek equitable relief by providing in subsection (b) that temporary equitable relief may be awarded [p]ending final determination of a proceeding instituted by the Attorney General for permanent equitable relief. There is no corresponding provision that authorizes a private party to institute proceedings under this section or to seek temporary equitable relief pending final disposition of a claim. Under Section 1964(a) and (b), therefore, the sole power to seek final and interim equitable relief against racketeering activities and enterprises is reposed in the Attorney General. Section 1964(c) authorizes private parties to sue for treble damages and attorney s fees, but does not authorize private parties to seek any other relief. The structure of those provisions demonstrates that Congress intended to vest the Attorney General with the exclusive authority to bring suit for equitable relief. Chevron s attempt to use the RICO statute for injunctive relief is a complete 5

outlier under the law and has little chance of surviving appeal if Judge Kaplan decides to adopt this approach. Congress s intent to withhold from private litigants the right to seek injunctive relief is confirmed by the treatment of the same issue under the antitrust laws. The Sherman Act, 26 Stat. 209-210, created a public equitable action and a private treble damages action. This Court interpreted that Act to foreclose a private injunctive action. Because Section 1964 tracks the language and structure of the Sherman Act in that respect, Congress is presumed to intend that Section 1964 similarly be interpreted not to authorize a private action for injunctive relief. RICO s purposes are fully consistent with the absence of a private right to seek injunctive relief. Congress authorized courts to grant the full range of equitable relief in civil RICO actions, including such dramatic steps as corporate reorganization and dissolution. 18 U.S.C. 1964(a). Congress logically vested the Attorney General with the exclusive authority to seek such relief. 6) Chevron must show proximate cause not remote, contingent or indirect cause. To state a claim under civil RICO, the plaintiff is required to show that a RICO predicate offense not only was a but for cause of his injury, but was the proximate cause as well. Holmes v. Sec. Investor Protection Corp., 503 U.S. 258, 268 (1992). Proximate cause... requires some direct relation between the injury asserted and the injurious conduct alleged. A link that is too remote, purely contingent, or indirec[t] is insufficient.' Hemi Group, LLC v. City of New York, 559 U.S. 1 (2010) (quoting Holmes, 503 U.S. at 268, 271, 274, 112 S.Ct. 1311). Lerner v. Fleet Bank, N.A., 318 F.3d 113, 122 (2d Cir. 2003) (Sotomayor, J.) ( As plaintiffs cannot show that defendants' alleged violations of 1962 proximately caused their injuries, they lack standing to pursue their RICO claims. ). This standard is impossible for Chevron to meet on the facts adduced at trial. The underlying judgment has been affirmed by two independent appellate courts. The first-level appellate court did a de novo review and found the evidence supported the judgment. There is no allegation that the appellate judges were bribed or otherwise unfit. Simply put, there is no proximate causation between the acts Chevron alleges were wrong and the result. 7) Litigation and litigation-related conduct cannot form a basis for a predicate offense under RICO. It is considered extremely improper for a party that lost a case to sue lawyers of the winning party for their actions litigating that very case, and that is particularly true under the RICO statute. As a policy matter, if Chevron is allowed to get away with its RICO strategy lawyers all over the country will be vulnerable to suit 6

just for bringing legal actions a reality with horrendous implications for both the human rights law community and corporate America. As a federal appellate court observed in a similar case: As in the initial Complaint most of the facts alleged in support of this claim relate to litigation and pre-litigation conduct alleged by plaintiff to have been extortionate. This Court has already rejected the notion that this conduct can form the basis of a claim for mail or wire fraud See Speigel v. Continental Illinois Nat'l Bank, 609 F.Supp. 1083 (N.D.Ill.1985), aff'd., 790 F.2d 638 (7th Cir.1986). The Spiegel Court, in a RICO action, stated, Congress could not have intended that the mail fraud statute sweep up correspondence between attorneys, dealing at arms' length on behalf of their parties, concerning an issue in pending litigation... Subjecting the letters in issue to the mail fraud statute would chill an attorney's efforts and duty to represent his or her client in the course of a pending litigation... [and] would, as it did here, give birth to collateral suits. Id. at 1089. See also Morin v. Trupin, 711 F.Supp. 97, 105 (S.D.N.Y.1989); D'Orange v. Feely, 877 F.Supp. 152, 156 (S.D.N.Y.1995); Capasso v. Cigna Ins. Co., 765 F.Supp. 839, 843 44 (S.D.N.Y.1991); Paul S. Mullen & Assocs., Inc. v. Bassett, 632 F.Supp. 532, 540 (D.Del.1986). Goldberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 97 CIV. 8779 (RPP), 1998 WL 321446 (S.D.N.Y. June 18, 1998) aff'd sub nom. Goldberg v. Merrill Lynch, 181 F.3d 82 (2d Cir. 1999) 8) Chevron cannot satisfy the requirements for injunctive relief under settled Circuit precedent. Any harm from the judgment is monetary harm. There is no showing that injunctive relief is required. Indeed, Chevron brought damages claims based on the very same allegations but dropped them on the eve of trial in order to eliminate the defendants jury trial rights. This move will be highly disfavored on appeal and undermines the legitimacy of whatever decision Chevron is able to wrest from Judge Kaplan. ## 7