A U.S. appellate court has vacated a preliminary injunction that barred enforcement of an approximately $18 billion dollar foreign judgment against Chevron.  The multi‑billion dollar judgment was entered earlier this year by a court in Ecuador to compensate plaintiffs for contamination of rain forests by Texaco, whose assets and liabilities were acquired by Chevron.

The Ecuadoran plaintiffs had originally filed their claims in New York, but Chevron asked the court to dismiss the claims on grounds of forum non conveniens, arguing that Ecuador, not New York, was the appropriate forum for the litigation.  The New York court agreed and dismissed on that basis.  The Ecuadorans then pursued their contamination claims in Ecuador, ultimately obtaining a nearly $18 billion dollar judgment after several years of litigation.  Chevron is appealing that judgment.

In addition to appealing in Ecuador, Chevron filed suit in the United States District Court for the Southern District of New York, seeking an injunction to permanently prohibit the Ecuadorans from attempting to enforce their judgment anywhere in the world except Ecuador, where Chevron no longer has any assets.  Chevron argued that the New York court should grant the injunction because the Ecuadoran judicial system allegedly is corrupt, and because it allegedly denied Chevron due process. 

The Ecuadorans disputed Chevron's contentions that the Ecuadoran judicial system is corrupt and that Chevron was denied due process.  They also noted that Chevron had praised the Ecuadoran judicial system years before, when Chevron argued that the litigation should take place in Ecuador, not New York.  Chevron replied that the Ecuadoran court system allegedly changed for the worse between the time Chevron argued that the case should be litigated in Ecuador and the time that the judgment was entered against Chevron. 

United States District Judge Lewis A. Kaplan of the Southern District of New York granted a preliminary injunction that purported to bar the Ecuadorans from attempting to enforce their judgment anywhere in the world except Ecuador, and set a trial for later this year on Chevron's request for a permanent injunction.  The Ecuadorans filed a motion asking that Judge Kaplan recuse himself, asserting that some of his actions and statements had shown bias.  Judge Kaplan denied the motion for recusal. 

The Ecuadorans then sought relief from the United States Second Circuit Court of Appeals.  The Second Circuit panel declined to remove Judge Kaplan from the case, but the panel unanimously vacated the preliminary injunction and stayed the district court action, thereby cancelling the scheduled trial on Chevron's request for a permanent injunction. 

The Second Circuit has not yet issued an opinion expressing its reasons for judgment, but it indicated that an opinion will be forthcoming.  It is possible that the forthcoming opinion will indicate that the Second Circuit decided to vacate the preliminary injunction on some narrow grounds that will leave Chevron free to seek injunctive relief later.  During oral argument before the Second Circuit, the counsel who argued for the Ecuadoran appellants stated that his clients would not attempt to enforce the Ecuadoran court's judgment until Chevron's appeal of the Ecuadoran judgment is decided.  It is conceivable that the Second Circuit might state that the request for an injunction is not ripe until Chevron's appeal in Ecuador is decided.  But the Second Circuit might base its ruling on grounds that the U.S. District Court simply should not attempt to bar enforcement of an Ecuadoran judgment.

The case raises interesting legal issues relating to comity, the extent to which foreign judgments are enforceable in the U.S., and when it is appropriate to deny enforcement of a foreign judgment.  These issues also have foreign policy implications.

Chevron issued a statement regarding the Second Circuit decision.  The Second Circuit's decision can be found at Chevron Corp. v. Naranjo, 2011 WL 4375022 (2nd Cir.).  The district court decision that granted the preliminary injunction can be found at Chevron Corp. v. Donziger, 768 F. Supp. 2d 581 (S.D.N.Y. 2011).