The Second Circuit in New York has affirmed Chevron Corp.’s judgment against attorney Steven Donziger for trying to extort billions of dollars from it by corrupting the Ecuadoran judicial process. This has been one of the most publicized RICO suits in history for a few reasons. First, because of the drama of a Fortune 100 company turning the tables and bringing a RICO suit against a do-gooding class action lawyer ostensibly trying to help indigent third world clients is unprecedented. And then there are the allegations of what Mr. Donziger and his environmentalist confederata0es did in their 20 plus year quest to get “justice” for their clients in Ecuador- bribe a judge, ghostwrite an expert report, corrupt the Ecuadoran legal system through intimidation, and drive down the price of Chevron’s stock in the process. Keep in mind Mr. Donziger grduated from Harvard Law School more than 20 years ago and has devoted his entire legal career to this cause, trying to get Chevron and its predecessor Texaco to pay billions for allegedly polluting an area of Ecuador. He first filed the class action in New York, and it was transferred to Ecuador where Donziger thought he might win even more money than he could in the U.S. legal system.
For a while he seemed to be right. He won a $8 billion judgment in Ecuador. And he had a deal to be awarded 6% of any money collected as his fee (potentially $500 million). But Chevron immediately sued him under RICO asking a court in New York to enjoin Donziger from enforcing the judgment or sharing in any royalties from it like a book contract, and damages against him for their attorneys’ fees for having to cope with a judgment it believed was induced by bribery and corruption. Ultimately, the case went to trial before Judge Lewis Kaplan who ruled in favor of Chevron finding Donziger violated RICO to obtain the Ecuadoran judgment, and enjoined him from enforcing it in the U.S.
There were two controversial aspects to the judgment, the injunction and the fact that some of the RICO violatinos, particularly extortion and mail fraud, occurred in Ecuador. This week the Second Circuit affirmed the judgment in all respects. The Court’s opinion is over 100 pages and does not make for easy reading. But it is very important in establishing RICO can be used against lawyers who carry out illegal schemes on behalf of their clients, that causation need not be as stringent as many had thought and that the extraterritorial bar can be lessened when a court wants to punish an American perpetrator. I’m very surprised the opinion does not even cite the Supreme Court’s recent decision in RJR Nabisco v. European Community, which allows some extraterritorial RICO cases to proceed. The Second Circuit seems simply not to be concerned at all with the fact that some of the illegal activity occurred in Ecuador.
We now know that injunctive relief is probably available in civil RICO cases (there is a 2-1 split with the Ninth Circuit, which is often overruled) and that the victim of “attempted extortion” can sue for its attorneys’ fees in fighting the attempt. All in all, this was a very expansive, pro-plaintiff decision. I expect Donziger’s lawyers will ask the Supreme Court to hear the case. But the only circuit split is on the minor question of injunctive relief, and only three circuits have weighed in. I don’t think the Court will hear it. Plaintiffs’ lawyers have been given a huge roadmap for worthy but creative new RICO cases.