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A PLAGUE ON BOTH THEIR HOUSES: A
MODEST PROPOSAL FOR ENDING THE
ECUADOREAN RAINFOREST WARS
Burt Neuborne∗
Long ago and far away, Texaco, an American energy corporation, is
alleged to have despoiled the natural environment of the Ecuadorean rainforest
while searching for and extracting oil.1 While the parties disagree strongly over
the precise scope of the damage caused by Texaco, there is widespread
agreement that significant environmental degradation took place, at least in part
because Texaco failed to follow established industry procedures designed to
limit environmental harm. Texaco apparently made money during the project’s
twenty-eight-year run from 1964-92, but the lives of thousands of indigenous
peoples whose culture—indeed whose very existence—was deeply intertwined
with the environment of the rainforest were radically disrupted, perhaps
permanently impaired, as the result of Texaco’s failure to take steps to limit
environmental damage.
“So what?” you may say. That’s usually the fate of weak bystanders
unlucky enough to be standing between a powerful corporation and large sums
of money. Nobody blinked, for example, in 2001 when an economically
powerful Chevron took over a financially weakened Texaco. Texaco’s
economic woes began in 1985 with a contractual dispute with rival Pennzoil
∗ Visiting Professor of Law, Stanford Law School (2013). Inez Milholland Professor of
Civil Liberties, NYU Law School. My thanks to Professor Deborah Hensler, Matt Woleske
and the other student editors for inviting me to participate in this symposium. It is just one
example of the warm welcome I received in my visit at Stanford.
1. When the oil exploration project began in 1964, Ecuador was ruled by a rightwing military dictatorship with little apparent interest in protecting the indigenous peoples of
the Amazon Basin. Formal democratic rule was re-established in Ecuador in 1979, but the
military continued to exercise substantial influence over the ensuing conservative civilian
governments. Beginning in 1988, and strongly accelerating in the first decade of the twentyfirst century, Ecuadorean politics moved sharply to the left, with a corresponding increase in
the political influence of indigenous peoples. The country is currently governed by a
stridently populist elected left-wing president, Rafael Correa. Unlike the United States,
where politics simply never affects judicial nominations or the outcome of litigation, I am
shocked to learn that President Correa has been charged with seeking to exercise undue
influence over the Ecuadorean judiciary by asserting the power to appoint friendly judges.
509
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over whether Texaco had unlawfully interfered with Pennzoil’s alleged oral
contractual agreement to buy Getty Oil. The dispute resulted in a huge Texas
state jury verdict for Pennzoil of more than $10 billion ($7.53 billion
compensatory; $3 billion punitive; plus prejudgment interest) that forced
Texaco into bankruptcy, and that ultimately resulted in a $3 billion settlement.2
Then, in 1996, just as Texaco was regaining its economic footing, it was
charged with widespread racial discrimination in hiring and promotion,
resulting in the payment of $176 million in compensation and the release of
embarrassing tape-recorded comments by ranking officials.3 Once Texaco was
seriously weakened by the prospect of a nationwide boycott, Chevron pounced,
making an offer to merge the two companies that Texaco couldn’t refuse. Why
should we be surprised, therefore, that Texaco and the right-wing military junta
that governed Ecuador in the 1960’s and much of the 1970’s muscled some
indigenous peoples aside and despoiled their land in the scramble for corporate
wealth?4 Except, that when financially strong Chevron swallowed financially
troubled Texaco in 2001, Chevron was obliged to follow a carefully charted
legal path designed to protect innocent bystanders.5 Is it impossibly naive to
dream that law also provides a path to protect the innocent indigenous
bystanders who live in the Ecuadorean rainforest?
As a matter of legal theory, a few utopian law professors and an occasional
visionary judge have described a world where Texaco’s relationship with the
indigenous peoples of the Ecuadorean rainforest would be governed by a
combination of domestic and international law, not by brute force.6 In the years
2. See Texaco v. Pennzoil Co., 792 S.W.2d 768 (Tex. Ct. App. 1987) (affirming jury
verdict, but reducing punitive damage award from $3 billion to $1 billion); Robert Mnookin
& Robert Wilson, Rational Bargaining and Market Efficiency: Understanding Pennzoil v.
Texaco, 75 VA. L. REV. 295 (1989).
3. Roberts v. Texaco, 979 F. Supp. 185, 190-93 (S.D.N.Y. 1997). See also BARIELLEN ROBERTS & JACK WHITE, ROBERTS V. TEXACO: A TRUE STORY OF RACE AND
CORPORATE AMERICA (1998). The tape recordings were made public on November 4, 1996.
A settlement in principle was announced later in the month.
4. Frankly, I find it hard to believe that a Texaco management that refused to follow
the rule of law in dealing with its competitors in Pennzoil or its black employees in Roberts
would care much about dealing fairly with indigenous peoples in the Ecuadorian rainforest.
5. For example, as a condition of approving the huge merger, the Justice Department
required Texaco to divest itself of most of its retail gas stations, spinning them off to Shell
Oil in order to assure that consumers continued to benefit from retail competition.
6. The authorities are canvassed in Sosa v. Alavarez-Machain, 542 U.S. 692 (2004)
(recognizing customary international law claims under 28 U.S.C. §1350 that are analogous
to piracy). See also Ryan Goodman & Derek P. Jinks, Filartiga’s Firm Footing:
International Human Rights and Federal Common Law, 66 FORDHAM L. REV. 463 (1997).
The applicability of the Filartiga/Sosa line of authority to foreign corporations charged with
violating customary international law was narrowed in Kiobel v. Royal Dutch Petrol., 133 S.
Ct. 1659 (2013) when the Supreme Court ruled that 28 U.S.C. § 1350 does not apply
extraterritorially to alleged violations of customary international law committed by foreign
corporations in foreign countries that do not affect American citizens. The applicability of
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since the Nuremberg tribunals, a number of lawyers—ranging from romantic
idealists to entrepreneurial venture capitalists—have sought to deploy
international and domestic legal norms on behalf of alleged victims of powerful
transnational corporations, often alleging that corporate resources had
overwhelmed or co-opted the capacity of fragile and/or corrupt local
governments to protect the interests of their weakest inhabitants.7 Sadly, as the
result of repeated institutional failures in both the United States and Ecuador,
coupled with dysfunctional behavior by lawyers for both sides described more
fully below, more than two decades of effort to subject the dispute over
Texaco’s duty to remediate the land to the rule of law has spiraled down to a
twenty-first century version of Bleak House, with lawyers on both sides
redoubling their efforts long after they have lost sight of what should be their
goal—a just resolution of the issue. An Ecuadorean court has entered a massive
$19.5 billion order of remediation (half compensatory, half punitive) against
Chevron.8 But Chevron has no assets in Ecuador and is vigorously defending
against efforts to enforce the remediation judgment against its assets in
Argentina, Brazil and Canada, charging that the Ecuadorean judgment was
procured by fraud, as well as attacking the judgment’s integrity in so-called
BIT arbitrations under the Investment Treaty between Ecuador and the United
States, and in a RICO action against the plaintiffs’ lawyers in the Southern
District of New York. To make matters even more complicated, challenges
have been filed to the manner in which lawyers for the plaintiffs have
represented many indigenous peoples who were swept up in the effort to launch
a massive aggregate litigation in an Ecuadorean legal system with little or no
experience with such litigation.
Interestingly, Chevron’s reaction to the Ecuadorian remedial judgment
closely tracks Texaco’s initial reaction to the huge Texas jury verdict in favor
of Pennzoil in the 1980’s. Despite having opted to try the Pennzoil case in
Texas state court (by failing to exercise its option to remove the case to federal
court), once Texaco lost in state court, the company turned on the Texas
judicial system. Texaco’s powerful public relations apparatus savaged the
presiding Texas state judge and local Texas counsel, claiming that the jury
verdict was the result of bias, corruption by the lawyers, and favoritism for a
the Act to American corporations operating abroad, or to United States citizens harmed by
the allegedly unlawful behavior of foreign corporations remains open
7. See generally Kiobel, 133 S. Ct. at 1659; Sarel v. Rio Tinto, PLC, 487 F.3d 1193
(9th Cir. 2007).
8. Simon Romero and Clifford Krauss, Ecuador Judge Orders Chevron to Pay $9
Billion,
N.Y.
TIMES,
Feb.
15,
2011,
at
A4,
available
at
http://www.nytimes.com/2011/02/15/world/americas/15ecuador.html.
An
intermediate
appeal court has affirmed the remediation order. Chevron’s appeal is pending before the
Supreme Court of Ecuador.
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Texas plaintiff.9 The company’s strident charges of bias and corruption in
Texas initially persuaded a judge in the Southern District of New York and
then the Second Circuit to enjoin the enforcement of the Texas judgment.10 The
Supreme Court eventually restored order by unanimously reversing the Second
Circuit’s interference in the Texas judicial process.11
Sound familiar? Substitute Ecuador for Texas and you have Chevron’s
current strategy in action. Like Texaco, Chevron opted to litigate in Ecuador.
Like Texaco, Chevron lost big and then cried foul, seeking to enjoin
enforcement of the judgment. Only, this time, there isn’t a convenient world
Supreme Court to restore order.12 I fear that if the Ecuadorean rainforest
litigation continues on its current downward spiral, it will be viewed as a
disgraceful failure, even by fair-minded lawyers for corporate defendants. The
purpose of this brief essay is to catalogue the Ecuadorian litigation’s currently
parlous state and to suggest an alternative matrix, modeled on the device,
described infra, developed to resolve the seemingly intractable dispute over
payment of compensation from German industry to WWII-era slave and forced
laborers, within which interested persons of good will can: (1) discuss the
extent of Texaco’s damage to the land; (2) discuss Chevron’s legal
responsibility to remediate the damage; (3) negotiate in good faith over the cost
and mechanics of remediation; and (4) begin the process of remediation free
from the bitterly adversarial dead-end in which the Ecuadorian rainforest
litigation is currently mired.
The most successful use of the legal system, thus far, to provide relief to
individuals harmed by allegedly unlawful transnational corporate behavior has
been the settlement of a series of American class actions arising out of the
Holocaust era13 resulting in the payment of more than $1.25 billion in
9. Confusingly, Pennzoil was a Texas corporation, while Texaco was from New
York. The trial record is full of innuendoes about the low moral tone of New York, as
compared with the honor of the Texas “oil patch.” I confess to sensing a whiff of antiSemitism in the emphasis placed by counsel on the Jewish names of the lawyers and bankers
who testified in support of Texaco’s version of the facts. Pennzoil’s lead counsel is reported
to have received a contingent fee of somewhere between $300 and $600 million. He
contributed $10,000 to the trial judge’s re-election campaign as the proceedings got
underway. Not a bad return on investment.
10. Texaco, Inc. v. Pennzoil Co., 626 F. Supp. 250, 262 (S.D.N.Y. 1986), aff’d 784
F.2d 1133 (2d Cir. 1986).
11. Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 15-17 (1987) (reversing federal court
injunction against enforcement of Texas judgment).
12. I am told by counsel in the case that Texaco attempted a similar scorched-earth
defense in Roberts v. Texaco, 979 F. Supp. 185 (S.D.N.Y. 1997), the racial discrimination
litigation, until the damning tape recordings of upper management’s racially biased
conversations surfaced.
13. The Holocaust-era litigation has generated a substantial literature. See JOHN
AUTHERS & RYAN WOLFFE, THE VICTIMS’ FORTUNE: INSIDE THE EPIC BATTLE OVER THE
DEBTS OF THE HOLOCAUST (2002) (a useful narrative of the Swiss bank litigation); MICHAEL
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compensation from Swiss banks to more than 400,000 victims of the banks’
allegedly unlawful behavior,14 and $5.2 billion to more than one million
BAYZLER, HOLOCAUST JUSTICE: THE BATTLE FOR RESTITUTION IN AMERICA’S COURTS (2003)
(the best single account of the litigation); STUART EIZENSTAT, IMPERFECT JUSTICE: LOOTED
ASSETS, SLAVE LABOR AND THE UNFINISHED BUSINESS OF WORLD WAR II (2003) (an
indispensable account of the diplomatic background to the Berlin Agreements terminating
the German slave labor cases); HOLOCAUST RESTITUTION: PERSPECTIVES ON THE LITIGATION
AND ITS LEGACY (Michael Bazyler & Roger P. Alford, eds., 2006) (reflective essays by
many of the key participants); MICHAEL R. MARRUS, SOME MEASURE OF JUSTICE (2009) (a
judicious critique of the wisdom and efficacy of the Holocaust litigation; Michael Bayzler,
Nuremberg in America: Litigating the Holocaust in United States Courts, 34 U. RICH. L.
REV. 1 (2000); Burt Neuborne, Preliminary Reflections on Aspects of the Holocaust Era
Litigation, 80 WASH. U. L.Q. 795 (2002); John Authers, Satisfaction Not Guaranteed, FIN.
TIMES MAG. BOOK REV., Aug. 23, 2003, at 30; Anne-Marie Slaughter & David Bosco,
Plaintiff’s Diplomacy, FOREIGN AFFAIRS, Oct./Sept. 2000, at 102; see also Burt Neuborne,
The Experience of the Holocaust Cases, in COMMON LAW, CIVIL LAW AND THE FUTURE OF
CATEGORIES (Janet Walker & Oscar Chase, eds., 2010) (urging the adoption of transnational
procedures in international human rights cases). For academic criticism of the litigation, see
Detlev Vagts & Peter Murray. Litigating the Nazi Labor Claims: The Path Not Taken, 43
HARV. INT’L L.J. 503 (2002). For criticism that the slave labor settlement did not go far
enough, see Libby Adler & Peer Zumbansen, The Forgetfulness of Noblesse Oblige: A
Critique of the German Foundation Law Compensating Slave and Forced Laborers of the
Third Reich, 39 HARV. J. ON LEGIS. 1 (2002). For an article questioning the legal theories in
the Swiss bank and German slave labor cases, see Michael Thad Allen, The Limits of Lex
Americana: The Holocaust Restitution Litigation as a Cul-De-Sac of International Human
Rights Law, 17 WIDENER L. REV. 1 (2011).
14. Four categories of victims shared in the Swiss bank settlement—(1) owners of
unpaid Swiss bank accounts opened prior to the Holocaust; (2) slave laborers who worked in
labor camps financed by Swiss banks; (3) victims of Nazi looting whose property was
“fenced” through Swiss banks; and (4) refugees who were denied entry into or discriminated
against in Switzerland because of their religious or ethnic status. I served from 1997-98 as a
principal court-appointed lawyer for the plaintiffs in the Swiss bank cases, and since 1999,
as court-appointed lead settlement counsel with responsibility for implementing the
settlement. The vast swamp of reported citations in the Swiss bank litigation include: In re
Holocaust Victim Assets Litigation (HSF-USA), 424 F.3d 132 (2d Cir. 2005), cert. denied,
547 U.S. 1206 (2006) (rejecting challenges to structure of settlement, and to cy pres
allocation and distribution plan); In re Holocaust Victim Assets’ Litigation, 424 F.3d 150
(2d Cir. 2005) (affirming denial of fees); In re Holocaust Victim Assets Litigation
(Disability Rights Org.), 424 F.3d 158 (2d Cir. 2005) (rejecting challenge to cy pres
allocation and distribution plan); In re Holocaust Victim Assets Litigation (Pink Triangle),
424 F.3d 169 (2d Cir. 2005) (rejecting challenge to cy pres allocation and distribution plan);
In re Holocaust Victim Assets Litigation, 282 F.3d 103 (2d Cir. 2002) (vacating restrictive
definition of Slave Labor II class, and remanding for determination of parties’ intentions,
resolved by stipulation on remand); In re Holocaust Victim Assets Litigation, 14 F. App’x
132 (2d Cir. 2001) (upholding Special Master’s allocation plan); In re Holocaust Victim
Assets Litigation, 225 F.3d 191 (2d Cir. 2000) (upholding definition of plaintiff-class in
settlement agreement to exclude Slav forced laborers); In re Holocaust Victim Assets
Litigation (Burt Neuborne), 2007 WL 805768 (E.D.N.Y. Mar. 15, 2007) (magistrate-judge
fee recommendation of $3.1 million); In re Holocaust Victim Assets Litigation (Burt
Neuborne), 528 F. Supp. 2d 109 (E.D.N.Y. 2007) (confirming magistrate’s fee
recommendation); In re Holocaust Victim Assets Litigation, 415 F. Supp. 2d 130 (E.D.N.Y.
2004) (rejecting attorneys’ fee application; rejecting challenge to cy pres allocation of looted
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surviving WWII-era slave and forced laborers for German industry.15 The
Swiss bank settlement was administered as an enormously complex but
otherwise garden-variety Rule 23(e) proceeding.16 Apart from a wistful hint of
what might have been if the rainforest case had not been off-loaded to Ecuador,
the Rule 23 Swiss bank proceedings have little or nothing to offer the parties in
the Ecuadorean litigation. The German slave-labor cases were not, however,
asset funds); In re Holocaust Victim Assets Litigation, 256 F. Supp. 2d 150 (E.D.N.Y. 2003)
(requiring Swiss bank payment of $5 million in compound interest on escrow funds); In re
Holocaust Victim Assets Litigation, 105 F. Supp. 2d 139 (E.D.N.Y. 2000) (describing, in a
comprehensive opinion, the Swiss bank litigation and upholding the fairness of the $1.25
billion settlement); In re Holocaust Victim Assets Litigation, 2000 U.S. Dist. LEXIS 20817
(E.D.N.Y. Nov. 22, 2000) (accepting Special Master’s plan of allocation and distribution); In
re Holocaust Victim Assets Litigation, 2000 U.S. Dist. LEXIS 15644 (E.D.N.Y. Aug. 9,
2000) (approving amendments to Settlement Agreement involving access to claims data and
establishment of insurance claims program). Thousands of orders in the Swiss bank case
resolving individual bank account claims are available on the official web site maintained by
the settlement classes. See SWISS BANKS SETTLEMENT, http://www.swissbankclaims.com/
(last updated May 9, 2013). The narratives accompanying each order provide a historical
window into the Nazi darkness.
15. More than one million surviving WWII slave and forced laborers for German
companies received compensation from the settlement fund of $5.2 billion. I served as a
principal counsel in the German slave labor litigation and, from 2000 to 2008, as one of two
United States appointees to the twenty-seven person Board of Trustees of the German
foundation created to distribute the settlement funds. Principal citations in the German slave
labor litigation include, for example: In re Austrian & German Holocaust Litig., 317 F.3d 91
(2d Cir. 2003) (upholding fee award in connection with establishment of German
Foundation); In re Austrian & German Holocaust Litig., 250 F.3d 156 (2d Cir. 2001)
(mandating dismissal with prejudice of Nazi-era cases pending against German banking
defendants in order to permit establishment of DM 10.1 billion foundation); In re Nazi Era
Cases Against German Defendants Litig.,198 F.R.D. 429 (D.N.J. 2000) (approving dismissal
with prejudice of forty-nine Nazi-era cases pending against German industrial defendants, in
return for creation of DM 10.1 billion German Foundation); Burger-Fischer v. Degussa, 65
F. Supp. 2d 248 (D.N.J. 1999) (dismissing German slave labor claims); Iwanowa v. Ford
Motor Co., 65 F. Supp. 2d 424 (D.N.J. 1999) (dismissing German slave labor claims). For
the unsuccessful effort to enforce the interest provisions of the Berlin Accords, see In re
Nazi Era Cases Against German Defendants Litig., 320 F. Supp. 2d 235 (D.N.J. 2004)
(dismissing complaint), rev’d, Gross v. German Found. Indus. Initiative, 456 F.3d 363 (3d
Cir. 2006) (rejecting political question, Act of State, and international comity defenses), on
remand, 499 F. Supp. 2d 606 (D.N.J. 2007) (dismissing complaint), aff’d, 549 F.3d 605 (3d
Cir. 2009) (holding Berlin Accords judicially unenforceable), cert. denied, 129 S. Ct. 2384
(2009).
16. I am informed by Judge Edward R. Korman, Jr., the federal judge who presided
over the Swiss bank litigation with great wisdom and insight, that $1.29 billion ($400,000
more than the settlement figure) has been or will shortly be distributed to the victims. Apart
from a $10 million grant to Yad Vashem in Jerusalem to assist in compiling a complete list
of Holocaust victims for posterity, all funds were distributed to or on behalf of actual
victims. Attorneys’ fees in the Swiss bank litigation were remarkably low, totaling less than
$10 million. I estimate that administrative expenses, including worldwide notice costs and
the operation of a substantial claims resolution facility in Zurich, will approximate $100
million, paid for by interest earned on the settlement fund.
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resolved as Rule 23 class actions. When German industry declined to enter into
a Rule 23(e) settlement that would have placed German companies under the
ongoing supervision of an American judge, the parties were obliged to chart
another path to settlement—the Berlin Accords17—that may provide a model
for ending the rainforest wars. Pursuant to the Berlin Accords, the parties
agreed to establish a German foundation, “Remembrance, Responsibility and
the Future,” funded by a $5.2 billion pre-negotiated contribution from German
industry and the German government (representing defunct industrial entities
owned by the Nazi Party and the SS), governed by a negotiated twenty-sevenperson international Board of Trustees representing the foundation’s varied
constituencies, to be staffed by non-political experts drawn principally from the
German civil service, and tasked with the duty of paying compensation in prenegotiated amounts to various categories of slave and forced laborers. In return
for the establishment and funding of the $5.2 billion foundation, German
industry received “legal peace” through dismissal of all pending WWII-era
individual slave and forced labor litigation with prejudice, and the execution of
an Executive Agreement between Germany and the United States (modeled on
the 1976 agreement with Iran that had secured the release of our embassy
hostages)18 designed to prevent future Holocaust-related litigation. Finally, and
importantly given the state of war that exists between the lawyers on both sides
in the Ecuadorean litigation, the German foundation took responsibility for the
payment of plaintiffs’ attorneys’ fees within a pre-negotiated
maximum/minimum range, with the precise amount to be set by two
arbitrators—Kenneth Feinberg, appointed by the lawyers, and Nicholas deB
Katzenbach, appointed by German industry. The arbitrators eventually awarded
legal fees totaling just over one percent of the foundation’s assets to numerous
plaintiffs’ attorneys, with the precise award dependent on the arbitrators’ views
of the relative value of each lawyer’s services to the success of the enterprise.
And it worked.19 From 2000 to 2008, the German foundation distributed in
excess of $6 billion to more than one million slave- and forced-labor victims
around the world at remarkably low cost. In short, the parties built a just and
17. United States-Germany: Agreement Concerning the Foundation “Remembrance,
Responsibility and the Future,” 39 INT’L LEGAL MATERIALS 1298 (2000). The Foundation
Law was enacted by the Bundestag on Aug. 12, 2000.
18. The 1976 executive order terminated all current or future legal claims against Iran
pending in United States courts in favor of an international arbitration forum established in
Algeria. The agreement was upheld in Dames & Moore v. Regan, 453 U.S. 654 (1981).
19. Much as I would like to take credit for the idea of the German foundation, the idea
was first broached by Roger Witten, who was acting as counsel for German industry. Stuart
Eizenstat, who served in those years as President Clinton’s Assistant Secretary of State and
Deputy Secretary of Commerce, was the invaluable government official who made the idea
work. Count Otto von Lambsdorff was Eizenstat’s indefatigable German counterpart. I am
assuming the existence of officials in both Ecuador and the United States with similarly
strong motivations to bring the Ecuadorean rainforest wars to a just close.
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efficient aggregate settlement system without courts. A similar vehicle—let’s
call it the Stanford Accords—could end the Ecuadorean rainforest wars.
The Berlin Accords consists of three interrelated sets of documents:
1. A Statement of Principles signed on July 17, 2000 by: (a)
representatives of German industry; (b) the principal lawyers for the
victims; (c) diplomats of eight interested nations, and (d) NGO’s
representing constituencies of victims, setting forth the terms of the
mixed economic, legal and diplomatic bargain between and among the
signatories. The Declaration recited: (a) German industry’s duty to
fund the foundation at DM 10 billion ($5.2 billion); (b) the allocation
and distribution formula agreed to by the victims’ representatives; (c)
the foundation’s pre-negotiated governance structure; (d) the terms of
a statute to be enacted by the Bundestag creating the German
foundation and codifying its governance and allocation rules; (e) the
lawyers’ duty to withdraw pending individual litigation with prejudice;
and (f) the duty of the United States and Germany to enter into an
executive agreement designed to block future litigation.
2. The Foundation Law enacted by the Bundestag on August 12, 2000
establishing the German foundation, “Remembrance, Responsibility
and the Future,” codifying both the terms of its governance structure
and the pre-negotiated formula for the distribution of its assets.
3. The text of an Executive Agreement between Germany and the United
States to be entered into once the German foundation was funded and
up-and-running, obliging the United States to seek dismissal of any
future United States litigation against German industry arising out of
claims of WWII slave and forced laborers.
The parties negotiated the Berlin Accords in three stages, rotating on a
monthly basis between Germany and the United States in meetings under the
auspices of the United States and German governments, who issued the formal
invitations to the participants. Given the level of mistrust that existed between
the parties, the first stage was devoted exclusively to agreeing on a mechanism
of settlement. The parties eventually agreed on the concept of a German
foundation staffed by non-political experts as a vehicle for compensating
victims, and an executive agreement designed to achieve lasting legal peace.
Then, they painstakingly negotiated the contents and structure of each vehicle.
Once confidence had been built by agreement on a vehicle for resolving
the dispute, the parties began the second stage, discussing the difficult question
of the size of German industry’s contribution to the foundation. During the
negotiations, the amount payable to the foundation increased from an original
offer of DM 1 billion to the final DM 10 billion figure.20 The parties turned to
20. The DM, the German currency that preceded the Euro, was valued at
approximately fifty cents (US) during the negotiation period.
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neutral academic experts in an effort to gauge the number and categories of
victims and spent more than six months arriving at the $5.2 billion
compromise. Representatives of the victims then agreed on a precise allocation
formula for its distribution.
Finally, in the third stage, diplomats negotiated the terms of the executive
agreement. Once the negotiations were completed, the parties gathered in
Berlin on July 17, 2000 to sign the three sets of documents that constitute the
Accords. There is no reason why persons of good will should not gather in
another agreed-upon location—why not Stanford?—to negotiate, and
eventually sign, similar documents ending the Ecuadorean rainforest wars. The
Stanford Accords could establish: (a) a rainforest remediation fund in the form
of a freestanding foundation; (b) the amount of Chevron’s contribution to a
rainforest remediation fund; (c) the ground rules for governing the fund and
staffing it with non-political experts capable of carrying out the remediation
efficiently and effectively; (d) the legal and diplomatic agreements needed to
grant Chevron lasting “legal peace”; and (e) an arbitration mechanism for
dealing with the thorny question of legal fees within a pre-negotiated
minimum/maximum range.
Or, we can continue down the current dead-end road. The road began
hopefully enough in 1993 in the Southern District of New York.21 Lawyers
seeking relief against transnational corporations have often turned to United
States courts in order to enjoy the benefits of: (1) a powerful, well-funded and
independent judiciary; (2) a well-developed legal system that seeks to place
plaintiffs and defendants on a level playing field; (3) the potential for classaction status; (4) the hope of broad discovery; and (5) the prospect of a very big
payday.22 I suspect that’s where the Ecuadorian rainforest litigation in the
Southern District of New York originally came from—one part romantic
idealism about protecting the weak; one part canny choice of forum; one part
money-making venture aimed at Texaco’s deep pockets. If the Southern
District case had followed its original path, American judges would have: (1)
grappled with difficult issues of fact involving the scope of the damage to the
land and possible issues of causation; (2) confronted novel questions about the
source and content of the governing environmental law, both Ecuadorean,
American, and international; and (3) ruled on the difficult Rule 23 procedural
issues raised by such a massive aggregate adjudication involving thousands of
unsophisticated indigenous peoples. It’s hard to know just how the story would
have ended; but however it ended, it would have been an exercise in the rule of
21. The original action against Texaco was filed in the Southern District of New York
in 1993. See Aguinda v. Texaco, Inc., 303 F.3d 470, 472-73 (2d Cir. 2002) (affirming
“[j]udgments of the United States District Court for the Southern District of New York
dismissing two putative class actions for forum non conveniens”) (parenthetical omitted).
22. See generally Kiobel v. Royal Dutch Petrol., 133 S. Ct. 1659 (2013); Sarel v. Rio
Tinto, PLC, 487 F.3d 1193 (9th Cir. 2007).
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law. Not everyone would have liked the outcome, but, whatever the outcome,
an insulated Article III adjudicatory official would have looked into the facts
and the law and would have pronounced judgment on the actions of an
American corporation abroad based upon the judge’s good faith understanding
of the facts and the governing law. From a rule of law perspective, you can’t
ask for more than that.
Sadly, however, a deep chasm emerged in the Ecuadorean rainforest
litigation between utopian legal theory and the real world—a chasm formed by:
(1) repeated institutional failure in the courts of the United States and Ecuador,
and in the quiet confines of international arbitration fora; (2) dysfunctional
behavior by the leading lawyers on both sides of the case; and (3) just plain
greed.
The institutional failure begins in the United States. In retrospect, the
Second Circuit’s decision in 2001 granting Texaco/Chevron’s request for a
forum non conveniens dismissal in favor of Ecuadorean courts was an
unmitigated disaster.23 Texaco/Chevron was almost certainly seeking to move
the dispute from a relatively level judicial playing field in the United States to
Ecuadorean tribunals that posed less of a threat to its bottom line.24 While
Texaco/Chevron’s lawyers assured the Second Circuit that Ecuador’s courts
were fully capable of managing the huge environmental litigation fairly and
efficiently, I suspect that the company’s executives expected that the massive
environmental case would founder in an underfunded, unsophisticated
Ecuadorean court system with neither experience in, nor legal structure for,
managing a huge aggregate environmental litigation. The folks at
Texaco/Chevron must also have looked forward to dealing with an Ecuadorean
government and judiciary that remained under the influence of the military
rulers who had worked with Texaco in the 1960’s and 1970’s and who had
granted Texaco a highly favorable release on its way out the door. The Second
Circuit swallowed Texaco/Chevron’s Kool-Aid and dismissed the case on
forum non conveniens grounds.
Institutional failure then followed the case to Ecuador, where the sheer
scope of the complex environmental litigation predictably overwhelmed a
23. See Aguinda v. Texaco, Inc., 945 F. Supp. 626 (S.D.N.Y. 1996) (granting forum
non conveniens dismissal), vacated and remanded sub nom., Jota v. Texaco, Inc., 157 F.3d
153 (2d Cir. 1998), on remand, Aguinda v. Texaco, Inc., No. 93-cv-5727, 2000 U.S. Dist
LEXIS 745 at *9 (S.D.N.Y. Jan. 31, 2000) (raising questions), Aguinda v. Texaco, Inc., 142
F. Supp. 2d 534 (S.D.N.Y. 2001) (granting forum non conveniens dismissal), aff’d, Aguinda
v. Texaco, Inc., 303 F.3d 470 (2d Cir. 2002).
24. I hasten to note that there was nothing morally wrong with the effort by
Chevron/Texaco’s lawyers to trump the plaintiffs’ choice of forum. That’s part of the
lawyer’s job. I assume that Chevron/Texaco’s American lawyers believed everything they
were told about the ability of Ecuadorean courts to process the litigation fairly and
efficiently. They probably also believed in Santa Claus.
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relatively unsophisticated and badly underfunded inquisitorial legal system25
with a long and unfortunate history of political influence and corruption.26 No
clear path to aggregate litigation existed.27 No tradition of an independent
judiciary provided backbone to the judges. Virtually no resources existed that
would permit an inquisitorial Ecuadorean judge to carry out expert scientific
assessments of the environmental damage and its precise cause. To Chevron’s
great discomfort, moreover, a seismic change in Ecuador’s politics took place
during the 1990’s shifting the political center of gravity away from the military
to left-wing populists, with a corresponding change in judicial tilt. Instead of
right-wing Ecuadorean officials and judges, Chevron found itself confronted
with what it perceived as left-wing firebrands. Buyer’s remorse quickly set in,
especially when an Ecuadorean trial court issued a $19 billion order of
remediation against Chevron.28 Faced with a huge Ecuadorean remediation
judgment, Chevron (mimicking the tactics of Texaco a quarter century ago in
Pennzoil) shifted its primary focus from the merits of the litigation to a
merciless assault on the legitimacy and integrity of the Ecuadorean judicial
system, and on the less-than-edifying antics of the plaintiffs’ lawyers.
The asymmetric availability of information concerning the parties’
activities in Ecuador bears telling witness to the disturbing behavior of
plaintiffs’ lead attorney in his self-described efforts to navigate and influence
what he characterized as a corrupt Ecuadorean judicial culture.29 But the record
25. An inquisitorial judicial system relies heavily on judicial initiative to gather
evidence and conduct the questioning of the parties. Once the record is complete, the
inquisitorial judge announces a result. An adversarial system leaves the gathering and
presentation of facts to the parties’ initiative, with the passive judge eventually choosing
which side’s story to believe. The difference in the role of judges in the two systems leads to
differences in judicial ethics. The dominant ethical obligation of an adversarial judge is
neutrality. An inquisitorial judge cannot remain neutral if she is to carry out her more active
responsibilities. Fair-minded, yes. But, neutral, no. One motif that runs through Chevron’s
assault on the Ecuadorean judiciary is the insistence on applying standards of adversarial
neutrality to measure the inevitably less neutral behavior of inquisitorial judges.
26. See Lawrence Hurley, Chevron Allegations About Justice System Strike a Nerve in
Ecuador, N.Y. TIMES, May 13, 2011 (discussing the feeling among “Ecuadoreans, most of
whom are at least vaguely familiar with the Lago Agrio case tend to agree the system can be
corrupt
and
easily
swayed
by
political
agendas”),
available
at
http://www.nytimes.com/gwire/2011/05/23/23greenwire-chevron-allegations-about-justicesystem-strike-5160.html?pagewanted=all.
27. Shortly after the case was filed in Ecuador, the legislature enacted an aggregate
litigation statute authorizing group litigation designed to remediate the land.
28. See Hurley, supra note 26 (“Some legal experts say Chevron has no right to
criticize the Ecuadorean courts because it was Chevron that asked the case to be transferred
here in the first place.”). The Ecuadorean judgment is divided equally into $9.5 billion in
compensatory, and $9.5 billion in punitive damages. I believe that the punitive component
would quickly be thrown overboard in any serious settlement negotiation.
29. PIXELDB, CHEVRON—DONZIGER PRESSURE INTIMIDATION HUMILIATIONCRUDE
FILM OUTTAKE [sic], YOUTUBE, http://www.youtube.com/watch?v=hVOOqBPIJsI (Apr. 2,
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also contains indications that Chevron’s behavior in Ecuador reflected the
‘Wild West’ nature of the prevailing judicial climate, especially in the years
before the shift in Ecuadorean political winds changed the political tilt of the
courts from right to left.30 Underfunded and inexperienced Ecuadorean judges
contributed to the institutional failure. Faced with extremely difficult factual
questions about the scope of the injury to the land and Texaco’s responsibility
for aspects of the damage, the essentially inquisitorial Ecuadorean fact-finding
process broke down. The Ecuadorean judiciary lacked the financial and
technical resources needed to conduct truly independent scientific investigation
into the complex factual issues raised by the litigation. Instead, the Ecuadorean
trial judge did what underfunded and unsophisticated inquisitorial judges often
do—he turned to the parties for dueling factual assessments, imposing a layer
of quasi-adversarial fact finding on the core of an inquisitorial process. In the
end, the inquisitorial presiding judge apparently believed the factual story
asserted by the plaintiffs and delegated to the plaintiffs and their agents the
power to draft the complex judicial findings and final opinion. I suspect that is
exactly what the beleaguered Ecuadorean trial judge would have done if he had
accepted Chevron’s version of the facts. Chevron’s experts would then have
been empowered to write a very different judgment, and the court would have
endorsed Chevron’s story. To lawyers in the United States trained in an
adversary system of justice, it seems monstrous for an inquisitorial judge to
delegate the power to draft the court’s judgment about contested facts and law
to one side of the case. But, in an underfunded inquisitorial system, there is a
certain logic to it, despite the obvious capacity for unfairness and abuse. The
real question that should be asked is whether the draft judgment prepared by
the winning party reflected the sincerely held views of the inquisitorial judge.
If so, there is no harm, no foul. As far as I know, nobody busy passing
judgment on the judgment has bothered to ask the Ecuadorean judge.
Institutional failure continued in the so-called BIT arbitrations commenced
by Chevron under investment treaties between Ecuador and the United States.
The private arbitrators permitted Chevron to attack the legitimacy of
Ecuadorean courts, the integrity of the victims’ lawyers, and the moral integrity
of the Ecuadorean trial judge without permitting the affected victims, the
accused lawyers, or the accused judges an opportunity to defend themselves in
person.31 The formal presence of the government of Ecuador is hardly an
adequate substitute for the right to defend oneself personally against damning
2013) (“The only language that I believe this judge is going to understand is that of pressure,
humiliation, and intimidation.”).
30. See Hurley, supra note 26.
31. See Chevron Corp. v. Republic of Ecuador, UNCITRAL Arb., PCA Case 2009-23,
available at http://www.pca-cpa.org/showpage.asp?pag_id=1408; Chevron Corp. v.
Republic of Ecuador, UNCITRAL Arb., PCA Case 2007-2 (2011), available at
http://www.pca-cpa.org/showpage.asp?pag_id=1432.
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allegations of bribery and corruption. The spectacle of private BIT arbitrators
solemnly condemning Ecuadorean courts as procedurally unjust while sitting as
closed, ex parte accusatory tribunals would be funny if so much were not at
stake.
Institutional failure tracked the case back to the United States when
Chevron persuaded a hyperactive federal judge in the Southern District of New
York to issue a preliminary injunction purporting to prevent the enforcement of
the Ecuadorean judgment anywhere in the world.32 Chevron claimed to be
shocked that the Ecuadorean judiciary was subject to political influence.
Chevron’s lawyers also affected outrage that the underfunded Ecuadorean
judiciary had allowed the plaintiffs to ghostwrite the final judgment and the
court’s ‘independent’ expert findings, and then merely endorsed them as
official documents.33 As with the BIT arbitrators, the federal judge did not
think it necessary to hear directly from the victims or the accused judges before
passing judgment on the process. After the Second Circuit vacated the
worldwide aspects of the injunction as beyond the district court’s power,34 the
district judge accepted Chevron’s invitation to ignore the merits and the victims
and to concentrate attention and resources on a RICO trial focusing on the
purported illegal activities of plaintiffs’ attorneys, proving the truth of the
maxim that the best defense is a good offense. The district court even went so
far as to deny independent lawyers for the victims an opportunity to intervene
in the RICO proceedings, thereby formally acknowledging the victims’
invisibility.35 Finally, in connection with the upcoming RICO trial and satellite
proceedings ancillary to the BIT arbitrations,36 American judges have granted
32. Chevron Corp. v. Donziger, 768 F. Supp. 2d 581, 638 (S.D.N.Y. 2011) (“[S]ince
equity acts in personam, the Court may issue an injunction barring all of the defendants from
filing enforcement proceedings in other jurisdictions. Hence, this Court’s judgment should
finally determine the controversy worldwide.”).
33. Something close to such a process takes place in American courts when a judge
asks the prevailing party to draft an order, often a complicated order in certain injunctive
cases, terminating the litigation. Unlike the apparent procedure followed in Ecuador, the
opposing party is given the opportunity to comment and object before an American court
ratifies the plaintiffs’ draft. Obviously, such a transparent process is preferable. But where
both sides have been given a fair shot at persuading an inquisitorial judge about their factual
assertions, it does not seem beyond the pale in an inquisitorial system for an Ecuadorian
judge to have chosen one side’s version of the facts, and to have asked ask the winning party
to put it into final form for his signature.
34. Chevron Corp. v. Naranjo, 667 F.3d 232, 234 (2d Cir. 2012).
35. The failure to permit intervention was doubly unfortunate because it removed the
opportunity for the innocent victims to defend the Ecuadorean judgment without the
sideshow of defending the appalling conduct of certain of the named-plaintiffs’ lawyers. I
believe that the innocent victims and the accused judges are Rule 19 necessary parties in any
Southern District RICO litigation that seeks to undermine the Ecuadorean judgment. See
generally Republic of Philippines v. Pimental, 553 U.S. 851 (2008) (discussing
indispensable parties in transnational litigation).
36. See supra note 31.
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Chevron massive one-way discovery, opening the questionable conduct of
plaintiffs’ chief lawyer to unrelenting (and deserved) scrutiny, but failing to
provide a meaningful opportunity to probe the allegedly questionable conduct
of Chevron and its agents in Ecuador.
Repeated institutional failure has been exacerbated—and in some sense
driven—by the dysfunctional behavior of the principal lawyers for both sides.
The behavior of plaintiffs’ counsel, as shown on the ‘outtakes’ of a 2009
propaganda film apparently commissioned by plaintiffs’ counsel, is both
juvenile and deplorable. Instead of recognizing the institutional weakness of
the underfunded and overwhelmed Ecuadorean judiciary and seeking ways to
reinforce it, plaintiffs’ counsel apparently confused himself with Humphrey
Bogart. The filmed evidence of his hard-boiled and cynical comments,
denigrating Ecuador’s judges and legal system and pretending that only extrajudicial political and economic pressure orchestrated by him could lead to
justice, is simply appalling. His assertions that the outcome of the Ecuadorean
case would turn not on the honest efforts of Ecuador’s judges to do justice in a
difficult case, but on his ability to orchestrate political and economic pressure
on them is a classic example of lawyer puffery and self-glorification. Too
often, I’ve heard American lawyers talk that way, denigrating the courts and
exaggerating the lawyer’s ability to manipulate the system, but the Ecuadorean
outtakes carry lawyer self-aggrandizement to a new level. The delusional sense
of self-importance that led plaintiffs’ counsel to brag on camera about
pressuring and corrupting Ecuadorean judges makes it all too easy to denigrate
the actual work of Ecuador’s judges, and to place a sinister cast on otherwise
innocent (if not ideal) procedures like an underfunded judge, lacking law clerks
and access to expertise, asking the plaintiffs and an ex-judge to draft complex
findings and a lengthy opinion that he then adopts as his own.
Confronted with the disturbing self-glorification of plaintiffs’ counsel,
defendant’s lead counsel also behaved dysfunctionally. Rather than focus on
the merits, he has sought to turn the case into a blistering assault on Ecuador’s
judges and plaintiffs’ lawyers. There is, of course, nothing wrong with resisting
an allegedly corrupt judgment. The adversary system both encourages and
condones vigorous efforts to avoid the enforcement of a judgment deemed
unjust by a defendant. But the extremely aggressive tactics of Chevron’s
counsel in seeking to place a deeply sinister cast on the activities of Ecuador’s
judges has turned the case into a bitter feud between the lawyers, while the
victims are ignored.
How important are the allegations underlying the feud? So what if
plaintiffs’ counsel drafted the Ecuadorean court’s factual findings? So what if
an ex-judge did a first draft of the court’s opinion? The real issue is whether, in
the end, the inquisitorial Ecuadorean judge sincerely believed that the draft
factual and legal findings prepared by plaintiffs and the ex-judge actually
expressed his honest view of how the case should be decided. In our wellfunded adversarial system, we would recoil at having one of the parties engage
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in ex parte drafting of the court’s complex factual and judicial finings. But in
an underfunded inquisitorial legal system lacking the resources for genuinely
independent factual and legal investigation in an overwhelmingly complex
case, it is not necessarily sinister for a judge to turn to one or another of the
parties to prepare a draft of the final decision, as long as the other party was
given a fair chance to persuade the court to accept its view of the facts and law,
and as long as the version ultimately adopted by the judge actually reflects his
sincerely held beliefs. Unfortunately, Chevron’s counsel has apparently
decided to ignore whether the findings and judgment actually reflect the
sincerely held views of the Ecuadorean courts, in favor of seeking to paint the
unorthodox decisional process as the corrupt fruition of plaintiffs’ counsel’s
unfortunate fixation on himself.
Finally, greed permeates the entire process, ranging from the greed of
plaintiffs’ entrepreneurial attorneys, who sometimes appear to act as though the
principal purpose of the case is to bestow great wealth on them, to the greed of
Chevron which, when confronted with evidence that Texaco’s rapacious
activities had saddled it with an unanticipated liability, has sought to avoid the
liability by claiming to be the innocent victim of judicial corruption in the very
court system to which Chevron had begged to be transferred, to the greed of
defendant’s counsel, who have turned the litigation into a never-ending stream
of legal fees. The sad fact is that although the land was despoiled four decades
ago, and although victims have been seeking legal relief for more than two
decades, no serious effort at remediation has taken place, and none is on the
horizon. Instead, the litigation has spiraled downwards to an ugly ad hominem
war (often a public relations war) between opposing teams of lawyers who seek
to wage total law on each other around the world with no end in sight.
I say ‘a plague on both their houses.’ At this point, the only thing that can
be said with certainty about the Ecuadorean rainforest litigation is that it is has
become an embarrassment to the rule of law. It is not too late to rescue the
process. Somewhat immodestly, I believe that the German foundation model
created under the Berlin Accords described above is capable of extricating the
Ecuadorean rainforest litigation from its current dead-end. The Stanford
Accords would: (1) remove the dispute from the judiciaries of both Ecuador
and the United States; (2) involve diplomats of the two (and other affected)
nations in seeking a just resolution of the dispute; (3) assure Chevron legal
peace in return for committing to the payment of a negotiated sum aimed at
remediating the land, a sum payable over the time needed for remediation; (4)
permit non-political experts to begin remediating the land free from political
influence; (5) assure the affected parties—the victims, Chevron, Ecuador, and
the United States—a voice in the remediation process; and (6) provide for
reasonable compensation for the plaintiffs’ lawyers without requiring Chevron
to sign the check.
Just do it.
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