Environmental and Energy Law Blog

Thursday, July 28, 2016

The Billion Dollar Oil Lawsuit: An Example of Why Venue Matters

The location where a trial takes place matters. There is no better example of this in the gas and oil context than the ongoing legal battle over Chevron’s operations in the Ecuadorean jungle.

In February 2011, a court in Lago Agrio, Ecuador determined Chevron was liable for decades of pollution and social ills related to its oil business in the country. It awarded the villagers who had brought the case $18 billion in damages. Chevron appealed the decision, and the judgement was reduced to $9.5 billion.

Chevron has no assets in Ecuador, and it is refusing to pay up, so the villagers, through their New York based attorney/activist Steven Donziger, are filing lawsuits all over the world in places where Chevron does have assets, seeking to have to judgment enforced.

There are many reasons Chevron is refusing to pay, but the main reason is that they believe the Ecuadorian lawsuit to be a giant fraud. In 2014, this view was echoed by a federal judge in New York, who denounced the Ecuadorian judgment as a product of fraud and racketeering after Chevron countersued Donziger.

During the lawsuit in New York, it was revealed that Donziger had fabricated evidence, bribed officials, and generally behaved in a way that would not be acceptable in the United States courts. Subsequent research by journalists indicates and Donziger and his team may have even ghost-written the Ecuadorian judge’s decision in the case.

Hopefully, the smaller oil and gas producers in the Houston area that we typically work with aren’t going to be faced with continent-spanning, fraud-filled lawsuits. But that doesn’t mean they won’t have to make important decisions about where to litigate disputes, just like the lawyers in the Chevron case did, and are actually still doing.

For example, some disputes must be tried in state court while others can go to federal court. There are slightly different evidence and procedural rules in these different courts, and that could shift your opinion about which court will give you a fairer trial. This is a choice that producers face in quite a few environmental lawsuits.

Venue is something that comes up in a lot of oil and gas cases between producers. Operators often have business dealings in many counties, and any one of them could serve as the site of a trial.

The rules are the same in all of the Texas state courts, but the judges in some counties have much more experience presiding over oil and gas cases than the judges in other counties. Choosing to go to a court where there are more experienced judges can significantly reduce the length of time a case strings along since the judge can quickly get up to speed on the case, and may be better at pushing the parties to resolve their dispute before going to trial because they have handled something similar before.

Many people don’t realize that the contracts they enter into actually dictate the venue in any future disputes well before such disputes arise. That’s just another reason why having an experienced attorney check out all your business contracts is so critical in this business, even if you never expect to face a lawsuit from villagers living in a distant jungle.

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