Chevron Turns On Trillium, One Of Its Owners

The Lago Agrio plaintiffs and Steven Donziger were on the hot seat on Tuesday, but today it’s Chevron’s turn. One of Chevron’s shareholders is Trillium Asset Management. Trillium has been a regular sponsor of shareholder resolutions regarding Chevron’s environmental policies, and in May 2011 Trillium signed a letter with other shareholders calling on Chevron “to fully disclose to shareholders the risks to its operations and business from the potential enforcement of the Aguinda verdict” and to

reevaluate whether endless litigation in the Aguinda case is the best strategy for the company and its shareholders, or whether a more productive approach, such as reaching an equitable negotiated settlement, could be employed to protect shareholder investments and prevent any further reputational harm due to protracted litigation.

Trillium has also asked the SEC to investigate the adequacy of Chevron’s disclosures about the Lago Agrio case to investors.

Chevron has long accused Trillium of being “part[] of a campaign being directed by the American trial lawyers behind the case against Chevron in Ecuador to pressure our company into a large out-of-court settlement.” And Chevron has gone further: its lead lawyer, Randy Mastro, has called dissident shareholders, apparently including Trillium, “so-called shareholders.” Yikes! And now, Chevron has served a subpoena on Trillium and on a former Trillium employee, Simon Billenness, seeking documents relevant to Chevron’s claim of a supposed conspiracy. I haven’t been able to find the Trillium subpoena, but the Billerness subpoena is quoted at length on, and I assume that the two subpoenas are roughly similar.

To me this seems like a a sheer show of muscle. There is no claim as far as I can tell that Trillium or any other investor had anything to do with the supposed fraud in the Ecuadoran courts. The claim seems to be that there has been collusion between the investors and Donziger in order to put settlement pressure on Chevron. But assuming, as I do, that Trillium really does think that a settlement would be in Chevron’s interest, what’s wrong with that? Trillium doesn’t owe duties to Chevron; Chevron owes duties to Trillium. And “so-called shareholders?” Trillium is paying your bills, man!

Now, serving a subpoena on Trillium is not the same as accusing Trillium of wrongdoing, and no doubt the nominal goal of the subpoena is to uncover more evidence against Donziger and the other alleged RICO conspirators. Fair enough, but, first, it’s difficult to see how working with a like-minded shareholder to achieve a common goal could be part of a wrongful conspiracy (though RICO and other conspiracy laws can stretch the imagination in strange ways), and second, surely it is bad business to sic your lawyers on your owners. If there is evidence of collusion with Donziger, can’t Chevron obtain it via discovery from Donziger himself?

I don’t think the mindset behind these subpoenas is particular to Chevron, but is part of a larger phenomenon in American corporate law—managers too often lose sight of the fact that the shareholders own the company, and that it is the shareholders’ money that is used to pay the managers themselves, to litigate or to settle cases, and so forth.

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