Second Circuit stretches federal racketeering law to find that a pressure campaign against corporate misconduct constitutes a racketeering conspiracy.
The Issue: In 2013, after twenty years of litigation, Ecuador’s Supreme Court upheld a finding that Chevron was liable for over $9 billion for environmental and human rights violations by Texaco in a pristine area of the Ecuadorean Amazon. (Texaco had been acquired by Chevron.) Texaco was found to have deliberately dumped an estimated 18 billion gallons of toxic wastewater into rivers and streams and spilled an estimated 17 million gallons of oil, with severe health consequences for the indigenous inhabitants of the area. Chevron responded to the lawsuit against it with a scorched earth campaign of intimidation and harassment – including propounding discovery on innumerable organizations and individuals on a scale described by a federal Court of Appeals as “unique in the annals of American judicial history.” Drawing on deep pockets that its adversaries could not hope to match, Chevron hired a virtual army of more than 2000 legal professionals from more than 60 law firms at an estimated annual cost of a $250 million in an effort to discredit the Ecuadorean judgment. After unsuccessfully suing in U.S. court for a worldwide injunction against enforcement of the judgment, Chevron – which had previously persuaded a U.S. court to dismiss the case on the ground that Ecuador was the proper forum for the case – then sued the Ecuadorean victims and their lawyers in U.S. court, alleging that they were part of a racketeering conspiracy to extort money from Chevron through fraud and public pressure. A federal court ruled in favor of Chevron in a court proceeding in which the defendants and “non-party co-conspirators” were not allowed to bring evidence to challenge allegations of misconduct nor to bring evidence of Chevron’s own far more egregious litigation misconduct. The defendants appealed.
Why It Matters: A final decision for Chevron would be a disaster for the blighted communities it left behind in Ecuador, and would bode poorly for any future efforts to restrain the predations of powerful and wealthy corporations throughout the world. It would be a victory for Chevron’s view that, in the words of one of its lobbyists, “We can’t let little countries screw around with big companies like this.” The district court decision also poses a severe threat to First Amendment freedoms. It means that citizens wishing to exercise basic rights to attempt to persuade government officials or the public, to speak to the press, to participate in public protests, or to bring or support impact litigation will be threatened by the vaguely defined scope and heavy penalties of RICO, designed for law enforcement against organized crime syndicates. Activists could incur crushing liability if they act in coordination with someone later found to have engaged in illegal activities, or just to have issued false statements. Even where no liability is found, the cost of defending against non-meritorious RICO charges would deter advocacy against powerful interests.
Contribution of Public Good: Public Good collaborated with the San Francisco law firm of Gross Belsky Alonso LLP on a brief emphasizing the First Amendment implications of the case. The brief explained that most of the actions alleged to have been committed by the designated racketeering “enterprise” fell within the core protections of the First Amendment, and were entirely legal. And when illegal conduct is alleged within a context of concerted protected activities, the First Amendment demands heightened burdens of proof and greater precision than ordinary to establish liability, a standard the district court came nowhere near meeting. Moreover, the law is clear that litigation activities cannot be RICO predicate offenses, and that RICO is not an appropriate vehicle for relitigating judgments. After the Second Circuit upheld the decision, Public Good collaborated on a brief in support of Donziger’s petition for Supreme Court review.
Amici joining Public Good: The Second Circuit brief was filed on behalf of Amazon Watch, one of the public interest organizations characterized by Chevron as a “non-party co-conspirator” and subjected to discovery demands labeled “egregiously overbroad” by the federal judge reviewing them, but requiring diversion of Amazon Watch’s sparse organizational resources to defend against, and by a variety of other U.S.-based organizations dedicated to advancing environmental protection, human rights, corporate accountability, and economic justice: Amnesty International, 350 Bay Area, Center For Environmental Health, Connecticut Citizen Action Group, Food And Water Watch, Friends of the Earth, Global Exchange, Global Initiative For Economic Social And Cultural Rights, Greenaction for Health and Environmental Justice, International Accountability Project, Justice in Nigeria Now!, Marin Interfaith Task Force On The Americas, Media Alliance, Pachamama Alliance, Rainforest Action Network, Rights Action, and Sunflower Alliance. The Supreme Court brief was filed on behalf of most of the same organizations.
Outcome: The Court of Appeals for the Second Circuit upheld the judgment against Donziger. The Supreme Court denied certiorari.
974 F. Supp. 2d 362 (S.D. N.Y., March 4, 2014), judgment affirmed, 833 F.3d 74 (2nd Cir., Aug. 08, 2016), and cert. denied, 137 S.Ct. 2268 (June 19, 2017).