Chevron Corp. scored a major legal victory last night when a federal judge ruled that plaintiffs who won an $8.6 billion judgment for pollution in Ecuador cannot seek to collect damages in the United States or in other countries.

U.S. District Judge Lewis Kaplan of the Southern District of New York issued a 131-page opinion explaining in detail his reasoning for granting a preliminary injunction.

Kaplan raised serious concerns about the legitimacy of the judgment against Chevron issued by a judge in Lago Agrio, Ecuador, last month for environmental damage caused by Texaco Petroleum Corp. before it was acquired by Chevron in 2001.

The injunction was a response to racketeering claims made by Chevron, which claims the entire case against it is an extortion scheme (Greenwire, Feb. 2).

Kaplan's ruling, in theory, prevents the plaintiffs from enforcing the Lago Agrio ruling anywhere outside Ecuador. It's a vital point because Chevron has no assets in Ecuador, so the plaintiffs were expected to look to the United States and other countries where Chevron operates.

The opinion (pdf) states that Kaplan's ruling is binding on various parties involved with the plaintiffs, including Steven Donziger, the American lawyer who has led the fight against Chevron since 1993. Donziger, the plaintiffs and other lawyers are now barred from "any action or proceeding, outside the Republic of Ecuador, for recognition or enforcement of the judgment previously rendered," Kaplan wrote.

The move was not unexpected, as Kaplan had already granted a temporary restraining order that had the same effect as the injunction while he considered Chevron's request (Greenwire, Feb. 9).

But the plaintiffs, who plan to appeal, say it's not clear whether Kaplan's ruling would prevent them from seeking to enforce the ruling in courts outside the United States.

The Ecuadorean plaintiffs and their lawyers in Ecuador maintain that "they are not under the jurisdiction of Judge Kaplan, and he does not have authority to enjoin them from seeking enforcement outside of the United States with non-U.S. attorneys," said spokeswoman Karen Hinton.

After the case goes through the appeals process in Ecuador, the plaintiffs still hope to "lawfully enforce the judgment of their own country's courts in any of the dozens of nations around the world where Chevron has assets," she added.

Chevron spokesman Kent Robertson welcomed the ruling.

The plaintiffs should not be able to profit from a ruling "that does not provide due process and from a judgment that they have procured through fraud and corruption," he said.

Among Kaplan's key considerations was whether the ruling in Ecuador deserves to be recognized by overseas courts.

Chevron has demonstrated that the legal system in Ecuador and the way in which the judgment was reached were questionable, Kaplan wrote.

"There is abundant evidence before the court that Ecuador has not provided impartial tribunals or procedures compatible with due process of law," he wrote.

The legal system in Ecuador has been corrupt for years, but "the situation has worsened" since leftist President Rafael Correa took office in 2007, Kaplan added.

Correa "continues to threaten and pressure judges at all levels, particularly those hearing suits that implicate government interests," he wrote.

Kaplan also noted evidence that the plaintiffs sought to use "pressure tactics" to influence the judge in Ecuador and helped prepare an independent expert's report that was introduced as evidence in the case.

In a separate order, Kaplan also rejected a request from Donziger that the case be transferred to a different judge, in part due to an assertion that Chevron inappropriately sought to have the case assigned to Kaplan in the belief that he is sympathetic to the company's position. The request was meritless, Kaplan said.

Click here (pdf) to read the opinion granting a preliminary injunction.

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