March 22, 2013
Goldhaber on the Chevron-Ecuador Litigation
At Corporate Counsel, there's an interesting piece by journalist Michael Goldhaber entitled Kindergarten Lessons from Chevron in Ecuador. Goldhaber, who has been following this massive and messy litigation for years, offers what he sees as some of the true and false lessons from the ongoing litigation concerning Texaco-Chevron's involvement in oil drilling in Ecuador.
In a nutshell, the litigation involves claims that a Texaco subsidiary caused environmental damage to the Oriente region of Ecuador. Plaintiffs originally sued in the Southern District of New York, but their suit was dismissed on grounds of forum non conveniens. Plaintiffs then filed a lawsuit in Ecuador and won an $18 billion judgment. Chevron contends that the Ecuadorian judgment was obtained by fraud and corruption, and has resisted enforcement of the judgment. Chevron sued plaintiffs' attorney Stephen Donziger and others, asserting RICO and fraud claims. An international arbitration tribunal weighed in pursuant to the Ecuador-US bilateral investment treaty. Plaintiffs are seeking to enforce the judgment in Canada, Argentina, Brazil and elsewhere. This mess of a litigation has been going on for nearly 20 years.
Goldhaber, in prior work, has articulated a strong view that the Ecuadorian judgment was the product of fraud and corruption. In the new article, Goldhaber takes as his starting point the Stanford Journal of Complex Litigation symposium that took place in February. He goes through the basic lessons offered by the participants -- plaintiffs' lawyer Graham Erion, defense lawyer Theodore Boutros, and a host of scholars including myself.
The strongest lesson (and here I am in complete agreement with Goldhaber): "Be careful what you wish for." The irony of this litigation is overwhelming. Texaco fought to have the case dismissed on grounds of forum non conveniens, arguing that Ecuador was a more appropriate forum. The plaintiffs argued that the Ecuadorian courts could not handle the case and that it should remain in the U.S. Ever since the massive judgment, however, the positions have been flipped -- with the plaintiffs insisting that the judgment deserves respect and the defendant contending that the Ecuadorian courts were corrupt. Goldhaber has referred to this as "forum shopper's remorse."
But I do not agree with Goldhaber's next step. Noting that "the abuse of transnational litigation would never have happened had the U.S. held on to the case," he suggests that the doctrine of forum non conveniens be altered to take into account the stakes and political significance of a case:
The great blunder in this dispute was to ship it to Ecuador in the name of forum non conveniens. The U.S. courts could have saved everyone a lot of grief had they recognized that a case is more prone to abuse when the issues are (a) high-stakes or (b) politicized. I learned from Russia's Yukos affair that, even if a weak judicial system has made significant progress, it does not deserve trust in a hot-button case of great magnitude. It was reckless to expect Ecuador (even if it had just adopted a new set of corruption reforms) to handle a huge case pitting gringo oil companies against indigenous rights. My modest suggestion is to incorporate these factors into the FNC analysis.
The adequate alternative forum prong of the forum non conveniens analysis is a low threshold, and deliberately so. A lawsuit alleging environmental harm to Ecuadorian land and medical harm to Ecuadorian citizens, and involving control over Ecuadorian natural resources, belongs in Ecuador. That is the very point of forum non conveniens. A U.S. court should be loath to say that it will hear the case in the U.S. because it thinks the Ecuadorian courts just cannot handle it. A judgment obtained by fraud should not be enforceable elsewhere, but this is better addressed ex post, which is exactly what the current litigation -- albeit in a rather ugly fashion -- is doing. But to have said, ex ante, that the case should be heard in the United States despite all of the public and private interest factors that pointed to Ecuador, would have been a mistake.
March 21, 2013
Stanley Chesley Disbarred
Stanley M. Chesley, one of the leading mass tort lawyers of his generation, was disbarred today by the Kentucky Supreme Court (court's opinion here). Chesley played an important role in many of the biggest mass torts of the past forty years: the Beverly Hills Supper Club fire, tobacco, breast implants, fen-phen, Bendectin, Bhopal, Lockerbie, Catholic church sex abuse, MGM Grand Hotel, San Juan Dupont Plaza, and other mass torts, as well as numerous antitrust and securities class actions. He was disbarred for his involvement in an aggregate settlement of Kentucky fen-phen claims. The court found that the lawyers violated rules of professional conduct by taking fees in excess of what their fee agreement provided, by including an inappropriate cy pres remedy that advantaged the lawyers rather than the clients, and by failing to comply with the disclosure and informed consent requirements of the aggregate settlement rule.
The Kentucky diet drug settlement also led to the disbarment and imprisonment of Kentucky attorneys William Gallion and Shirley Cunningham, as well as criminal, civil, and ethics proceedings and penalties for several other lawyers. For earlier coverage of the Kentucky fen-phen settlement dispute, see here, here, here, here, and here.
March 20, 2013
SCOTUS Oral Argument in Mutual Pharm. Co. v. Bartlett: Generic Pharmaceutical Manufacturers' Potential Immunity from Suit
Widener Law Symposium: Perspectives on Mass Tort Litigation
Widener University School of Law and the Widener Law Journal are presenting a day-long symposium, Perspectives on Mass Tort Litigation, on Tuesday, April 16, 2013 in Harrisburg, Pennsylvania. The Honorable Eduardo Robreno of the Eastern District of Pennsylvania will present a luncheon address, Federal Asbestos Litigation: Black Hole or New Paradigm? Other participants include Hon. Thurbert Baker (McKenna Long); Mark Behrens (Shook Hardy); John Beisner (Skadden); S. Todd Brown (SUNY Buffalo); Scott Cooper (Schmidt Kramer); Amaris Elliot-Engel (Legal Intelligencer); Michael Green (Wake Forest); Deborah Hensler (Stanford); Mary Kate Kearney (Widener); Randy Lee (Widener); Bruce Mattock (Goldberg Persky); Tobias Millrood (Pogust Braslow); Linda Mullenix (Texas); Christopher Robinette (Widener); Susan Raeker-Jordan (Widener); Sheila Scheuerman (Charleston); Victor Schwartz (Shook Hardy); William Shelley (Gordon & Rees); Aaron Twerski (Brooklyn); Nicholas Vari (K&L Gates); and Nancy Winkler (Eisenberg Rothweiler). I will also participate via Skype videoconference. Here's the brochure: Download Widener 2013 MTL Symposiu Brochure
March 19, 2013
US Supreme Court Opinion in Standard Fire Insurance Co. v. Knowles
In an opinion by Justice Breyer, the Court unanimously rejected a stipulation by a proposed class representative to limit recovery for the putative class to less than $5 million, in an apparent attempt by plaintiffs to avoid removal to federal court unde the Class Action Fairness Act. See also SCOTUSblog.