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So much for Plan B: Kaplan denies Chevron attachment motion

1/6/2012 COMMENTS (0)

Looks like I wasn't the only person thinking Thursday about Chevron's motion to attach the assets of the Ecuadorean plaintiffs who won appellate affirmance of their $18 billion judgment against the oil company earlier this week.

In a post yesterday on what I called Chevron's "Plan B," I highlighted the unusual pre-trial attachment motion -- which Chevron filed in November in its Manhattan federal court racketeering suit against the Ecuadoreans and some of their lawyers and experts -- as a way for the oil company to effect, in essence, the same enforcement ban the U.S. Court of Appeals for the Second Circuit lifted in September. Faced with an Ecuadorean lawyer's threats that he plans to launch worldwide actions to enforce the now-affirmed $18 billion judgment, Chevron renewed its request that U.S. District Judge Lewis Kaplan of Manhattan federal district court issue a temporary restraining order barring the Ecuadorean plaintiffs "from assigning, alienating, transferring, encumbering or otherwise dispersing their interest in the fraudulent Ecuadorean judgment, or otherwise collecting proceeds."

On Friday Kaplan said no -- at least for now. In a six-page opinion the judge denied Chevron's attachment motion, concluding that the oil company hadn't sufficiently specified its alleged damages, aside from citing the $18 billion Ecuadorean judgment. "In these circumstances, Chevron has not demonstrated a likelihood of recovering any specific amount of damages," Kaplan wrote.

But lest anyone think the judge has changed his mind about the fraud evidence that prompted him to issue a worldwide injunction barring enforcement of the judgment last spring, Kaplan went on to suggest he hasn't -- despite the Second Circuit's skepticism about his power to interfere with the judgment of a foreign court. "This is not to say that Chevron is unlikely to prevail on its claim that the judgment was procured by fraud or is unenforceable for other reasons," wrote Kaplan, who has been notably quiet in Chevron's RICO case since the Second Circuit's September order. "It is not to say that Chevron's ability to enforce any damages judgment it may secure in this case would not be frustrated by transfers of the sort that it here seeks effectively to prevent. Nor is it to say that Chevron could not make out a sufficient case for some order of attachment, now or in the future."

Chevron counsel Randy Mastro of Gibson, Dunn & Crutcher painted the opinion as a mere temporary setback. "We appreciate Judge Kaplan's prompt ruling and the guidance he has given on how to proceed," he told me. "We look forward to litigating our case before him."

A spokesperson for the Ecuadoreans sent this comment on Kaplan's opinion: "It is clear that Chevron's motion had no legal basis and was designed yet again to distract attention from the company's fraudulent misconduct in Ecuador." The Ecuadoreans -- plaintiffs in the suit against Chevron and defendants in Chevron's RICO case -- have begun a campaign to counter Chevron's fraud allegations with their own filings accusing the oil company of fraudulently manipulating the evidence before the Ecuadorean appellate court.

Kaplan's opinion did not address Chevron's motion to lift his stay on discovery in the racketeering suit, which has been pretty quiet this fall, perhaps in anticipation of a full opinion from the Second Circuit panel that lifted Kaplan's injunction. When Kaplan does dig into the Chevron suit again, he'll have quite a tantalizing question before him. In a fascinating motion to dismiss filed way back in May, the defendants argued that the U.S. Supreme Court's 2010 ruling in Morrison v. National Australia Bank precludes Chevron's suit under the Second Circuit's interpretation of Norex Petroleum Limited. (I'm abashed that as a Morrison groupie, I didn't previously pick up the ruling's potential implications in the Chevron litigation; my thanks to the loyal reader who raised the question with me Thursday.)

"Chevron's RICO allegations leave no doubt that the RICO defendants' purported racketeering scheme is centered in and focused on Ecuador and overwhelmingly involves conduct occurring outside the United States," the brief said. The Chevron complaint's assertion of peripheral activity inside the United States, the RICO defendants argued, "are not alleged to be the direct cause of Chevron's injuries [and] 'are insufficient to support extraterritorial application of the RICO statute'" under Norex.

Chevron countered in its opposition to the motion to dismiss that its RICO suit is nothing like the Norex case the Second Circuit dismissed on Morrison grounds. "It isn't even a close question," Chevron counsel Mastro told me. "Our RICO complaint alleges a conspiracy organized, orchestrated, and largely operated New York to target a U.S. company. ... Norex involved activity almost entirely committed outside of the U.S."

I left a request for comment on the Morrison arguments with Craig Smyser of Smyser Kaplan & Veselka, defense counsel for the Ecuadoreans in the RICO case, but didn't hear back.

(Reporting by Alison Frankel)

Follow Alison on Twitter: @AlisonFrankel 

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