Lago Agrio: Donziger Strikes Back

There’s a major development in the Lago Agrio case to report today. Steven Donziger has moved for leave to amend his answer to assert counterclaims against Chevron. Until now, Chevron has been almost entirely on the offensive in the US courts, making serious allegations of misconduct in Ecuador against Donziger and others, and in my view at least, Donziger and his clients have not helped themselves by failing to meet the substance of at least some of the allegations. But now Donziger seeks to turn the tables and accuse Chevron of wrongdoing in Ecuador.

The merit of Donziger’s proposed amended answer is that it provides a vehicle to tell his story about Chevron’s conduct during the Lago Agrio litigation rather than just responding to Chevron’s story. Donziger begins with a retelling of the history of the Lago Agrio case from the initial rounds in New York to the moment in 2009 when, according to Donziger, Chevron realized it “could not hope to prevail on the merits given all of the evidence in the record regarding Texaco’s misconduct and the resulting environmental harm.” Donziger says Chevron set out to

weave a false and misleading narrative of fraud, collusion and corruption in connection with the Lago Agrio Litigation, and then propagate this fraudulent narrative through a massive public relations, lobbying, and collateral litigation campaign, in hopes of persuading the recipients of its false and misleading representations that the Lago Agrio Litigation was simply a part of “a disturbing phenomenon” of “U.S.-based plaintiffs’ lawyers colluding with corrupt foreign courts to fabricate whopping civil judgments against American companies, and then using the bogus judgments to try to coerce a big settlement.”

And Chevron sought to make Donziger

the principal protagonist in its fraudulent narrative in hopes of persuading the world that Donziger “orchestrate[ed] corruption, with the goal of obtaining a fraudulent multi-billion dollar judgment against Chevron” and that he was “at the center of a decades-long $27.3 billion fraud[.]”

Then comes the bill of particulars.

  • Chevron made clandestine recordings of Judge Juan Nuñez and claimed that the video showed judicial corruption. The video recording led to Judge Nuñez’s recusal. But in fact, the video did not show corruption at all—it was only Chevron’s misrepresentations about what had happened that led to the recusal. And Chevron, according to Donziger, lied about the two men, Borja and Hansen, who made the video of Judge Nuñez. In fact, he claims, they were paid Chevron agents.
  • Chevron misrepresented the facts of the environmental harm that resulted from Texaco’s operations in Ecuador. Donziger cites various press releases Chevron has published and then reprises some of the evidence of the environmental contamination from the Ecuadoran litigation.
  • Chevron misrepresented the testimony of the plaintiffs’ experts and the statements of one of the plaintiffs’ lawyers, Pablo Fajardo, on the Chevron website and elsewhere.
  • Chevron misrepresented the plaintiffs’ ex parte contacts with the supposedly independent court-appointed expert, Richard Cabrera.
  • Chevron misrepresented the Crude outtakes.
  • Chevron misrepresented the facts concerning the authorship of the Ecuadoran judgment. It alleged, falsely, that Donziger was involved in “ghostwriting” the judgment.

Donziger’s narrative is a good attempt to reverse the momentum of the fraud allegations in the litigation. I note, though, that the proposed counterclaim does not address all of the fraud allegations Chevron has made—I am thinking in particular of the allegation about the Calmbacher expert report, which Chevron (and Calmbacher himself) have called fraudulent.

But my main reaction to Donziger’s allegations is “meh.” The claims are for fraud and civil extortion, which I suppose is a tort under New York law. To the extent Chevron made its supposed misrepresentations in press releases or on its website, it’s difficult to see how they are actionable—Donziger is not asserting a claim for libel. To the extent Chevron made its supposed misrepresentations in the Ecuadoran proceedings, well, the plaintiffs won in Ecuador. To the extent Chevron made it supposed misrepresentations in Judge Kaplan’s court, I suppose that the judge or the jury will decide whether they are misrepresentations, and if they are, the judge or the jury will not credit them. So it’s not really clear to me what compensable harm Donziger claims to have suffered.

On a more technical level, the claim of fraud seems flawed to me because Donziger cannot claim that he relied on Chevron’s supposed misrepresentations, which is one of the ordinary elements of a fraud claim. Now, I don’t think Judge Kaplan is likely to dismiss the fraud claim on those grounds: as I noted in my post of May 15, 2012, Judge Kaplan, though skeptical of Chevron’s fraud claim, refused to dismiss it on the grounds that some older New York precedent suggests that a third party’s reliance on a fraudulent misstatement can support a claim.

About Ted Folkman

Ted Folkman is a shareholder with Murphy & King, a Boston law firm, where he has a complex business litigation practice. He is the author of International Judicial Assistance (MCLE 2d ed. 2016), a nuts-and-bolts guide to international judicial assistance issues, and of the chapter on service of process in the ABA's forthcoming treatise on International Aspects of US Litigation, and he is the publisher of Letters Blogatory, the Web's first blog devoted to international judicial assistance, which the ABA recognized as one of the best 100 legal blogs in 2012, 2014, and 2015.

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