Republic of Ecuador v. Chevron Corp..

• Decision Date: 17 March 2011
• Docket Number: Docket Nos. 10–1020–cv (L),10–1026 (Con).
• Citation: 638 F.3d 384
• Parties: REPUBLIC OF ECUADOR, Petitioner–Appellant,Daniel Carlos Lusitand Yaiguaje, Venancio Freddy Chimbo Chefa, Miguel Mario Payaguaje Payaguaje, Teodoro Gonzalo Piaguaje Payaguaje, Simon Lusitande Yaiguaje, Armando Wilmer Piaguaje Payaguaje, Javier Piaguaje Payaguaje, Fermin Piaguaje, Luis Agustin Payagua Piaguaje, Emilio Martin Lusitand Yaiguaje, Reinaldo Lusitande Yaiguaje, Maria Victoria Aguind Salazar, Carlos Grega Huatatoca, Catalina Antonia Aguinda Salazar, Lidia Alexandria Agui Aguinda, Clide Ramiro Aguinda Aguinda, Luis Armando Chimbo Yumbo, Beatriz Mercedes Grefa Tanguila, Lucio Enrique Grefa Tanguila, Patricio Wilson Aguinda Aguinda, Patricio Alberto Chimbo Yumbo, Segundo Angel Amanta Milan, Francisco Matias Alvarado Yumbo, Olga Gloria Grefa Cerda, Narcisa Tanguila Narvaez, Bertha Yumbo Tanguila, Lucrecia Tanguila Grefa, Francisco Victor Tanguila Grefa, Rosa Teresa Chimbo Tanguila, Maria Clelia Reascos Revelo, Heleodoro Pataron Guaraca, Celia Irene Viveros Cusangua, Lorenzo Jose Alvarado Yumbo, Francisco Alvarado Yumbo, Jose Gabriel Revelo Llore, Luiza Delia Tanguila Narvaez, Jose Miguel Ipiales Chicaiza, Hugo Gerardo Camacho Naranjo, Maria Magdalena Rodriguez, Elias Piyahuaje Piyahuaje, Lourdes Beatris Chimbo Tanguila, Octavio Cordova Huanca, Celia Irene Viveros Cusangua, Guillermo Payaguaje Lucitande, Alfredo Payaguaje, Delfin Payaguaje, Plaintiffs–Appellants,v.CHEVRON CORPORATION, Texaco Petroleum Company, Defendants–Appellees.
• Court: U.S. Court of Appeals — Second Circuit

638 F.3d 384

REPUBLIC OF ECUADOR, Petitioner–Appellant,Daniel Carlos Lusitand Yaiguaje, Venancio Freddy Chimbo Chefa, Miguel Mario Payaguaje Payaguaje, Teodoro Gonzalo Piaguaje Payaguaje, Simon Lusitande Yaiguaje, Armando Wilmer Piaguaje Payaguaje, Javier Piaguaje Payaguaje, Fermin Piaguaje, Luis Agustin Payagua Piaguaje, Emilio Martin Lusitand Yaiguaje, Reinaldo Lusitande Yaiguaje, Maria Victoria Aguind Salazar, Carlos Grega Huatatoca, Catalina Antonia Aguinda Salazar, Lidia Alexandria Agui Aguinda, Clide Ramiro Aguinda Aguinda, Luis Armando Chimbo Yumbo, Beatriz Mercedes Grefa Tanguila, Lucio Enrique Grefa Tanguila, Patricio Wilson Aguinda Aguinda, Patricio Alberto Chimbo Yumbo, Segundo Angel Amanta Milan, Francisco Matias Alvarado Yumbo, Olga Gloria Grefa Cerda, Narcisa Tanguila Narvaez, Bertha Yumbo Tanguila, Lucrecia Tanguila Grefa, Francisco Victor Tanguila Grefa, Rosa Teresa Chimbo Tanguila, Maria Clelia Reascos Revelo, Heleodoro Pataron Guaraca, Celia Irene Viveros Cusangua, Lorenzo Jose Alvarado Yumbo, Francisco Alvarado Yumbo, Jose Gabriel Revelo Llore, Luiza Delia Tanguila Narvaez, Jose Miguel Ipiales Chicaiza, Hugo Gerardo Camacho Naranjo, Maria Magdalena Rodriguez, Elias Piyahuaje Piyahuaje, Lourdes Beatris Chimbo Tanguila, Octavio Cordova Huanca, Celia Irene Viveros Cusangua, Guillermo Payaguaje Lucitande, Alfredo Payaguaje, Delfin Payaguaje, Plaintiffs–Appellants,

v.CHEVRON CORPORATION, Texaco Petroleum Company, Defendants–Appellees.

Docket Nos. 10–1020–cv (L)

10–1026 (Con).

United States Court of Appeals, Second Circuit.

Argued: Aug. 5, 2010.Decided: March 17, 2011.

Gene C. Schaerr (Eric W. Bloom, Lauren M. Butcher, Gregory L. Ewing, C. MacNeil Mitchell, on the brief), Winston & Strawn LLP, Washington, DC and New York, New York, for Petitioner–Appellant.Jonathan S. Abady (Ilann M. Maazel, O. Andrew F. Wilson, on the brief), Emery Celli Brinckerhoff & Abady LLP, New York, New York, for Plaintiffs–Appellants.Randy M. Mastro (Edward G. Kehoe, Daniel J. King, King & Spalding, New York, New York, Scott A. Edelman, Thomas G. Hungar, on the brief), Gibson, Dunn, & Crutcher LLP, New York, New York, Los Angeles, CA, and Washington, DC, for Defendants–Appellees.Daniel A. Cohen, Kornstein Veisz Wexler & Pollard, LLP, New York, New York, for Amici Curiae Emergency Committee for American Trade and National Association of Manufacturers in support of Defendants–Appellees.Carter G. Phillips, Kathleen M. Mueller, Sidley Austin LLP, Washington, DC, Robin S. Conrad, Amar D. Sarwal, National Chamber Litigation Center, Inc., Washington, DC, for Amicus Curiae Chamber of Commerce of the United States of America in support of Defendants–Appellees.Before: JACOBS,^* Chief Judge, POOLER and LYNCH, Circuit Judges.GERARD E. LYNCH, Circuit Judge:

For nearly seventeen years, in litigation spanning two continents and numerous courtrooms, a group of Ecuadorian citizens (“Plaintiffs”) have sought relief for environmental devastation allegedly caused by defendant-appellee Texaco Petroleum Company's (“TexPet”) oil exploration and drilling operations in the Ecuadorian rainforest. In 2001, the district court (Jed S. Rakoff, Judge) dismissed Plaintiffs' initial action on Chevron's forum non conveniens motion, and Plaintiffs refiled their claims in Lago Agrio, Ecuador, where they are currently being litigated.

Recently, Chevron Corporation ¹ and TexPet (collectively, “Chevron”) invoked the arbitration clause in Ecuador's Bilateral Investment Treaty (“BIT”) with the United States, and initiated arbitration against Ecuador. See Treaty Between The United States of America and The Republic of Ecuador Concerning the Encouragement and Reciprocal Protection of Investments, U.S.-Ecuador, Aug. 27, 1993, S. Treaty Doc. No. 103–15 [hereinafter Bilateral Investment Treaty]. Chevron's notice of arbitration asserted that Ecuador had improperly interfered in the Lago Agrio litigation and requested, among other things, a declaration that Chevron has no liability for environmental damage arising out of TexPet's drilling operations in Ecuador.

Plaintiffs, who are not parties to the arbitration, responded by commencing this proceeding in the district court for a stay of the BIT arbitration, arguing that Chevron's initiation of arbitration against Ecuador breached the promises that Texaco made to the district court in order to secure dismissal of Plaintiffs' original action. Shortly thereafter, Ecuador also moved for a stay. The district court (Leonard B. Sand, Judge ) assumed, without deciding, that it had the power to stay BIT arbitration, but declined to exercise that authority in this case. See Republic of Ecuador v. Chevron Corp., Nos. 09 Civ. 9958, 10 Civ. 316, 2010 WL 1028349 (S.D.N.Y. Mar. 16, 2010). Ecuador and Plaintiffs appealed. We conclude that the initiation of BIT arbitration did not breach Chevron's promises to the district court and that the BIT arbitration and the Lago Agrio litigation can coexist without undermining the district court's forum non conveniens dismissal. We therefore affirm the district court's refusal to stay the arbitration.

BACKGROUND

Prior decisions of both this Court and the district court have thoroughly detailed the factual background and procedural history of this case. See Aguinda v. Texaco, Inc., 303 F.3d 470 (2d Cir.2002); Jota v. Texaco, Inc., 157 F.3d 153 (2d Cir.1998); Republic of Ecuador v. ChevronTexaco Corp., 376 F.Supp.2d 334 (S.D.N.Y.2005); Aguinda v. Texaco, Inc., 142 F.Supp.2d 534 (S.D.N.Y.2001); Aguinda v. Texaco, Inc., 945 F.Supp. 625 (S.D.N.Y.1996). We repeat only those facts necessary to resolve the narrow issue raised in this appeal.²

In 1993, residents of Ecuador's Oriente region sued Texaco in the Southern District of New York “seeking extensive relief for vast devastation to that region caused by ... decades of oil exploration and extraction activities.” Aguinda, 945 F.Supp. at 626. Plaintiffs alleged that TexPet “improperly dumped ... toxic by-products of the drilling process into the local rivers” and constructed a pipeline that “leaked large quantities of petroleum into the environment,” causing both personal injuries and catastrophic environmental damage. Jota, 157 F.3d at 155. At the time, both Texaco and the Ecuadorian government vigorously opposed having Plaintiffs' claims litigated in the United States, and Texaco moved for dismissal on forum non conveniens and international comity grounds. Id. at 156. The district court (Jed S. Rakoff, Judge ) granted Texaco's motion and dismissed Plaintiffs' action. Aguinda, 945 F.Supp. at 627.

Shortly after that dismissal order, a new government came to power in Ecuador. Political change brought with it a shift in Ecuador's view of this litigation, and the Ecuadorian government attempted to intervene in the lawsuit on Plaintiffs' behalf. However, the district court denied Plaintiffs' then-pending motion for reconsideration and Ecuador's motion to intervene. Jota, 157 F.3d at 155, 158. On appeal, we held that the district court erred by dismissing Plaintiffs' complaint without first securing “a commitment by Texaco to submit to the jurisdiction of the Ecuadoran courts” and remanded for further proceedings. Id. at 159–61, 163.

On remand, Texaco provided that commitment by “unambiguously agree[ing] in writing to be[ ] sued ... in Ecuador, to accept service of process in Ecuador, and to waive ... any statute of limitations-based defenses that may have matured since the filing of the [complaint].” Aguinda, 142 F.Supp.2d at 539. Texaco also offered to satisfy any judgments in Plaintiffs' favor, reserving its right to contest their validity only in the limited circumstances permitted by New York's Recognition of Foreign Country Money Judgments Act. ³ See N.Y. C.P.L.R. 5301 et seq. With those concessions in mind, ⁴ the district court again dismissed Plaintiffs' complaint. Aguinda, 142 F.Supp.2d at 554. On August 16, 2002, we affirmed. Aguinda, 303 F.3d at 480. Plaintiffs responded by refiling their claims in Lago Agrio, Ecuador, and the resulting Ecuadorian litigation continues to this day.⁵

In September 2009, Chevron initiated BIT arbitration against Ecuador. Chevron's notice of arbitration asserted two claims related to the Lago Agrio litigation. First, Chevron argued that any judgment issued against it would violate the terms of TexPet's previous settlement agreement with Ecuador under which TexPet funded certain environmental remediation projects in exchange for what Chevron now characterizes as a release from liability for environmental impact falling outside the scope of that settlement. Second, Chevron argued that the Ecuadorian government improperly interfered with the Lago Agrio proceedings. In particular, Chevron claimed that “Ecuador's executive branch has publicly announced its support for the plaintiffs, and it has sought ... to interfere with Chevron's defense,” and that “Ecuador's judicial branch has conducted the Lago Agrio Litigation in total disregard of Ecuadorian law, international standards of fairness, and Chevron's basic due process and natural justice rights....”

In the BIT arbitration, Chevron Corporation and TexPet seek (1) a declaration that they “have no liability or responsibility for environmental impact ... or for performing further environmental remediation”; (2) a declaration that Ecuador has breached both the BIT and the terms of its release agreement with TexPet; (3) an order requiring Ecuador to inform the Lago Agrio court that Chevron has “been released from all environmental impact ... and that Ecuador and Petroecuador [Ecuador's state-owned oil company] are responsible for any remaining and future remediation work”; (4) a “declaration that Ecuador or Petroecuador is exclusively liable for any judgment that may be issued in the Lago Agrio Litigation”; (5) an order “requiring Ecuador to indemnify, protect and defend [Chevron] in connection with the Lago Agrio Litigation, including payment ......