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Chevron fails to block $18 billion Ecuador judgment

WASHINGTON (Reuters) - Chevron Corp on Tuesday lost a U.S. Supreme Court bid to block an $18.2 billion judgment against it in Ecuador in a case over pollution in the Amazon jungle.

The Supreme Court did not give any explanation for its decision, which rejected Chevron's appeal of a lower court ruling. The lower court in January had thrown out an injunction blocking enforcement of the Ecuadorean judgment.

The decision is the latest in a nearly two-decade conflict between the No. 2 U.S. oil company and residents of Ecuador's Lago Agrio region over claims that Texaco, bought by Chevron in 2001, contaminated the area from 1964 to 1992. The battle has spawned litigation in numerous courts both inside and outside the United States.

Oil companies are watching the case closely because it may affect other cases accusing companies of polluting the areas where they operate.

Chevron claims that the judgment, imposed by an Ecuadorean court in February 2011, was fraudulent and unenforceable under New York law.

In March 2011, a federal judge in New York issued a worldwide injunction blocking enforcement of the judgment. But on January 26, the 2nd U.S. Circuit Court of Appeals in New York overturned the ban, finding that Chevron had been premature to challenge the judgment.

The 2nd Circuit said the oil company, based in San Ramon, California, could challenge it "only defensively, in response to attempted enforcement," which the Lago Agrio residents had not attempted and might never attempt in New York.

The appeals court also said that the U.S. judge did not have the authority to stop courts in other countries from enforcing the judgment. The Ecuadorean plaintiffs are currently trying to enforce the judgment in Canada and Brazil.

In its appeal to the Supreme Court, Chevron said it was entitled to raise an anticipatory defense in U.S. courts to preempt any enforcement efforts.

It also said such defenses are necessary in light of the "disturbing trend" in which lawyers win big money judgments against U.S. companies in corrupt foreign courts, and then seek to enforce them in countries where the companies operate.

Chevron's shares were up 32 cents at $117.94 on Tuesday afternoon.

"While Chevron is disappointed that the Court denied our petition, we will continue to defend against the plaintiffs' lawyers' attempts to enforce the fraudulent Ecuadorean judgment, and to further expose their misconduct," Chevron said in an emailed statement.

The company is pursuing a racketeering suit against a New York attorney, Steven Donziger, a group of Ecuadoreans and environmental groups that helped win the judgment, accusing them of intimidation and extortion.

It has also challenged the judgment before an international arbitration panel under a trade agreement between the United States and Ecuador. The panel is scheduled to begin hearing the dispute in November.

The judgment included $8.6 billion of environmental damages, which an Ecuador court more than doubled because Chevron failed to make a public apology.

In July, damages in the case were increased to $19 billion.

Justice Samuel Alito, a conservative, did not participate in the Supreme Court's decision to deny the appeal. The court's order provided no reason.

The case is Chevron Corp v. Naranjo et al, U.S. Supreme Court, No. 11-1428.

(Reporting by Terry Baynes and Jonathan Stempel; editing by John Wallace and Marguerita Choy)

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