Court Lifts Injunction Barring Ecuador Collection of Chevron Judgment, Chinese Protests, Nuclear Power & TRAIN Act (by Bob Percival)

The long-running dispute between residents of Ecuador and the Chevron Corporation over the cleanup of oil pollution from drilling decades ago in Ecuador took a sudden turn last week. On Monday September 19 the U.S. Court of Appeals for the Second Circuit issued an order vacating a federal district court’s injunction barring enforcement of an Ecuadoran trial court’s $18 billion judgment against Chevron. The order was issued after the three judges hearing an appeal of injunction (Rosemary S. Pooler, Richard C. Wesley, and Gerald E. Lynch) expressed extreme skepticism over its legality at oral argument on September 16. The injunction had been issued by federal district judge Lewis Kaplan in March in response to a RICO lawsuit by Chevron accusing the plaintiffs of trying to shake down the company through a fraudulent conspiracy. The Second Circuit denied the plaintiffs’ request for a writ of mandamus removing Judge Kaplan from the case for bias, but it granted the plaintiffs’ motion for an order imposing a stay to prevent Judge Kaplan from proceeding with a November trial as a prelude to making the injunction permanent. The court indicated that it will issue an opinion explaining its order in due course.

Plaintiffs’ counsel assured the court at oral argument that they will not seek to enforce the Ecuadoran judgment until after review of it has been completed by an appellate court in Ecuador, which is expected to take several months. Thus the main impact of the court’s order is to shift the focus of the litigation for now back to the Ecuadoran courts. Some elements of the judgment are highly questionable, particularly the provision that what initially was an $8.6 billion judgment would double in size if Chevron did not immediately apologize to the people of Ecuador for its actions. Thus, if the Ecuadoran appellate courts are fair they should dramatically reduce the size of the judgment. But Chevron’s claim that the judgment was a product of fraud seems far-fetched. This is a case that should have been settled long ago, but the level of animosity between the parties is so high that this seems most unlikely at this point. Chevron (and its predecessor in interest Texaco) could have had this case decided by a U.S. federal court, which is where it initially was filed by the plaintiffs in 1993, but the company persuaded the U.S. court that Ecuador was a more convenient forum. For the last year or so Chevron’s legal strategy seems to have been to bleed the plaintiffs dry by filing actions in new venues including the Permanent Court of Arbitration in the Hague and several U.S. courts in aid of discovery on its fraud allegations. However, when the plaintiffs obtained financing from several hedge funds, the playing field was leveled so that it is now a battle between well-heeled U.S. law firms with Gibson, Dunn representing Chevron and Patton Boggs representing the Ecuadoran plaintiffs. Stay tuned, but do not expect a quick resolution of this case.

Four days of vehement protests by Chinese citizens about air and water pollution from a solar panel factory owned by the Zhejiang JinkoSolar Company resulted in the Chinese government temporarily shutting down production at the plant. Residents blame the plant, which is located in Haining city in eastern China, for an unusual number of cancer deaths in the area.

New York authorities have arrested 12 people in Chinatown on misdemeanor charges for illegally importing a rat poison that is 60 times more potent than the level considered safe under U.S. pesticide regulations. The pesticide, which contains the chemical brodifacoum, apparently was smuggled into the U.S. from China. U.S. EPA officials expressed particular concern about the impact of the illegal rat poison on young children. William K. Rashbaum, 12 Held in Sale of Pest Poisons, One 60 Times as Potent as the Legal Limit, N.Y. Times, Sept. 20, 2011, at A20.

Siemens, the largest energy conglomerate in Europe, announced that it will stop building nuclear powerplants anywhere in the world. The company had built 17 nuclear power plants in Germany, but it is now concentrating on its renewable energy division, which has experienced the fastest growth of any of its lines of business. Judy Dempsey, Siemens Ends Building of Nuclear Power Plants, N.Y. Times, Sept. 20, 2011, at B2. Russian authorities have decided to extend the life of the country’s nuclear power plants to 45 years from 30 years. These include 11 Chernobyl-era nuclear (RMBK) reactors designed to operate without containment vessels. RMBKs have been retired in Ukraine and Lithuania, but Russia has refused to bow to international pressure to shut down its aging reactors. David Crawford & Rebecca Smith, Russia to Extend Life of Aging Reactors, Wall St. J., Sept. 22, 2011, at A15.

On Friday September 23, the U.S. House of Representatives by a vote of 249-169 approved the Transparency in Regulatory Analysis of Impacts on the Nation (TRAIN) Act, which is designed to halt EPA Clean Air Act regulations. Fewer than 20 Democrats supported the legislation, which President Obama has threatened to veto. The TRAIN Act would block EPA rules from taking effect while establishing an interagency panel chaired by the Commerce Department to examine the impact of EPA rules on the economy. The legislation is not expected to pass the U.S. Senate.

During down time while in Boston for a family wedding last weekend, I attended the opening session of a Conference on the Constitutional Convention at Harvard Law School. Harvard law professor Larry Lessig and Tea Party Patriot founder Mark Meckler argued at the opening that both fed up conservatives and liberals should support using Article V of the Constitution to call a new convention to rewrite the world's oldest written constitution. I think it is a really bad idea, particularly at a time of extreme political polarization, to put our founding charter up for grabs. My fears were compounded when Texas law professor Sandy Levinson proposed that delegates to such a constitutional convention (that Congress is supposed to call after petitioned by two-thirds of the states) should be selected by lottery.