U.S. court hears Chevron's fraud claims in $9.5 bln Ecuador dispute

(Reuters) - Chevron Corp urged a U.S. appeals court on Monday to uphold a ruling finding that an American lawyer used corrupt means to secure a $9.5 billion pollution judgment in Ecuador.

A lawyer for Chevron told the 2nd U.S. Circuit Court of Appeals in New York that Steven Donziger, a U.S. lawyer who represented a group of Ecuadorians that sued the oil giant, pursued a case “shot through with fraud.”

“What happened here was a fraud on the Ecuadorian courts,” Theodore Olson, Chevron’s lawyer, said.

Olson asked the three-judge panel to uphold a ban on Donziger profiting from the case and from the attorney or villagers enforcing the judgment in the United States.

But Donziger’s lawyer said allowing Chevron to launch an “impermissible collateral attack” on a foreign judgment could prompt similar challenges in the future.

“The problem is, how do you write an opinion that does not open the door to attacks on judgments from around the world?” Deepak Gupta, Donziger’s lawyer, said.

The appeal follows years of litigation by the villagers, who sued Texaco, which Chevron later acquired, over contamination in the jungle around Lago Agrio, Ecuador, between 1964 and 1992.

The Ecuadoreans initially sued Chevron in federal court in Manhattan in 1993. After Chevron successfully argued the case should be heard in Ecuador, the villagers filed a new lawsuit there.

The case led to a $19 billion judgment against Chevron, which Ecuador’s highest court in 2013 slashed to $9.5 billion.

Chevron, meanwhile, sued Donziger and others in federal court in Manhattan, claiming the judgment was the product of fraud.

In 2014, U.S. District Judge Lewis Kaplan concluded that Donziger’s team used bribery, fraud and extortion to secure the judgment. He barred Donziger from profiting from it and banned its enforcement in the United States.

Chevron no longer has operations in Ecuador. But the plaintiffs have gone after its assets in Canada, Brazil and Argentina, and Kaplan’s ruling provided ammunition against those efforts.

On Monday, Circuit Judge Richard Wesley called the case “unmanageable.”

He said Kaplan’s findings, for example, could soon be contradicted by an arbitration panel set to hear Chevron’s claims against Ecuador that it was wrongly denied the right to a fair hearing.

Wesley asked if a solution might be to rewind the clock to have the case tried in New York as the Ecuadorians originally wanted.

“Why not order a retrial?” he asked. “Why not cleanse the question of fraud?”

The oral arguments on Monday lasted for more than an hour. The court has no deadline to rule, though Wesley said the judges would reach a decision “in due course.”

The case is Chevron v. Donziger, 2nd U.S. Circuit Court of Appeals, No. 14-826.