Big Penalties Loom for Chevron in Ecuador

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Observers of the proceedings in Ecuador, including Chevron, expect a ruling in favor of the plaintiffs. "We are anticipating an adverse judgment," says Chevron spokesman Donald Campbell. A court-appointed expert has recommended eye-popping damages of $27 billion, though that sum is not binding on the judge. Since Chevron has virtually no assets in Ecuador, plaintiffs will only be able to collect on a judgment if they can enforce it in the U.S. or elsewhere.

Dole: Pesticide Claims of $2 Billion

Chevron is already maneuvering to head off that prospect. In 2001 the company filed statements by 14 legal experts attesting to the competency and fairness of the Ecuadoran legal system as part of its effort to have Judge Rakoff dismiss the U.S. suit. Now it contends the opposite. A six-page legal memorandum by Chevron's outside law firm King & Spalding is titled "Timeline of the Demise of Ecuador's Judiciary," a process it says began in 2004. Leftist President Rafael Correa, elected in 2007, now holds sway over the courts, Chevron asserts. Correa has publicly appeared with Donziger and Ecuadorian lawyers who represent plaintiffs suing Chevron and has expressed sympathy for residents claiming harm from oil waste.

If Chevron does find the Ecuadoran claims back on U.S. shores in the form of an enforcement action, it will not be alone. In September, lawyers for a group of Nicaraguans who claim they were made sterile after exposure to pesticide on banana farms operated by Dole Food will appear at a hearing in federal court in Miami. They are seeking enforcement of a $95 million award made by a Nicaraguan court. In recent years, courts in that country have awarded roughly $2 billion in damages against Dole.

In 1995, Dole won dismissal of federal claims after arguing that courts in Nicaragua were fair and impartial. That, says Dole attorney Scott A. Edelman at Gibson Dunn & Crutcher in Los Angeles, was before a law went into effect in 2001 that "made trials in Nicaragua a farce." (Earlier this year, Dole got thousands of Nicaraguan pesticide claims thrown out of court in California after a state judge ruled they had been fabricated; Dole contends that many of the cases pursued in Nicaragua are also bogus.)

Says Mark Sparks, a Beaumont, Tex., attorney seeking to enforce the judgment in Florida: "Seems like American companies think foreign courts are fair until one of the foreign courts happens to find against them."

Orey covers corporations for BusinessWeek.

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