U.S. judge halts damages enforcement against Chevron

SAN FRANCISCO Mon Mar 7, 2011 9:01pm EST

Workers clean up an oil waste pit owned by state petroleum company Petroecuador in Shushufindi, some 410 km (254 mi) east of Quito in this December 8, 2009 file photo. REUTERS/Guillermo Granja

Workers clean up an oil waste pit owned by state petroleum company Petroecuador in Shushufindi, some 410 km (254 mi) east of Quito in this December 8, 2009 file photo.

Credit: Reuters/Guillermo Granja

SAN FRANCISCO (Reuters) - A U.S. judge on Monday halted enforcement of an $8.6 billion award against Chevron Corp (CVX.N), siding with the oil company against Ecuadorian plaintiffs in a long-running dispute over Amazon rain forest pollution.

The move follows an Ecuadorian court's judgment last month that went against Chevron in what has become an international test case, watched closely by private-sector oil companies wary of potential damages claims elsewhere.

U.S. District Court Judge Lewis Kaplan, extending a February 8 temporary restraining order that froze enforcement of damages, issued a preliminary injunction preventing the plaintiffs from trying to collect on the judgment outside Ecuador.

A legal battle in several jurisdictions around the world, Kaplan wrote, would only make it more likely that Chevron would decide to settle.

"If Chevron were to yield to the coercion, the damage would have been done," the New York judge wrote in his 127-page ruling. "Chevron would have paid a price for peace."

Kaplan's is just the latest move in a 17-year-long legal battle in which rain forest residents say Texaco, bought by Chevron in 2001, is responsible for hazardous oil-drilling waste dumped on their land in the 1970s and 1980s.

Chevron says Texaco cleaned up all waste pits for which it was responsible before turning the sites over to state-owned oil firm Petroecuador, which still operates in the area.

Questions surround the enforcement of the Ecuadorian court ruling because Chevron has no assets in the country, but the second-largest U.S. oil company worries that the plaintiffs will try to collect on the judgment in other countries.

So in anticipation of a judgment in Ecuador in favor of the Ecuadorian farmers, Chevron asked Kaplan to step in.

Kaplan decided that the ultimate enforcement of any damages can be litigated in the United States.

"Chevron is not a fly-by-night operation about to flee the country," he wrote, adding that the San Ramon, California-based company is a major enterprise "quite able to pay the entire judgment" if it loses the case.

As part of its broad attack on the plaintiffs' allegations, Chevron filed a civil racketeering lawsuit in New York on February 1 against some Ecuadorian plaintiffs, their Amazon Defense Front supporters, and their main U.S. lawyer, Steven Donziger.

Kaplan noted that the damages from the Ecuadorian court in Lago Agrio have jumped to more than $18 billion, given that the award doubled due to a lack of a public apology from Chevron and when a payment to the Amazon Defense Front is included.

The plaintiffs have appealed the Ecuadorian court's decision, claiming more money was needed for cleanup efforts.

Their case against Texaco was originally filed in New York in late 1993, before it was dismissed and refiled in Ecuador a decade later, in a change of forum supported by Texaco.

The plaintiffs did not have an immediate comment on Kaplan's ruling on Monday.

(Reporting by Dan Levine and Braden Reddall, with additional reporting by Basil Katz in New York; editing by Carol Bishopric)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.