Chevron case heads to Court of Appeal again

Third parties are asking the courts to unseal documents in a long-running case about whether an Ecuadorian judgment against oil giant Chevron should be enforced against a Canadian subsidiary in Ontario.

Chevron case heads to Court of Appeal again
Ranjan Agarwal says there is a very high burden to obtain a sealing order, which requires the documents to be truly confidential.

Third parties are asking the courts to unseal documents in a long-running case about whether an Ecuadorian judgment against oil giant Chevron should be enforced against a Canadian subsidiary in Ontario.

The Canadian Broadcasting Corporation, as well as a group of NGOs, filed separate motions in early April seeking public access to “confidential information” that was sealed by the court in orders in 2012 and 2015. 

The Court of Appeal is set to hear an appeal in the case, Yaiguaje v. Chevron Corporation, on April 17 and 18. The matter concerns a US$9.5-billion judgment issued in Ecuador against Chevron Corp. after Ecuadorian villagers brought a lawsuit against the company claiming it was responsible for environmental damage to their region. As Chevron has no assets in Ecuador, the plaintiffs turned to Chevron Canada, a seven-level indirect subsidiary, to try to collect.

In its motion, the CBC argued that documents containing “confidential information” were sealed in the two orders without any notice to any media outlets and that these sealing orders have prevented public access to the entirety of the case’s evidence. 

“There is not evidence that any of the proceedings, documents, evidence or information covered by the sealing orders are in fact confidential,” said the motion. 

Philip Tunley, one of the lawyers representing CBC on the motion, declined to comment. Ryder Gilliland, one of the lawyers representing the NGOs on their motion, did not respond to a request for comment. 

In a press release, the NGOs said the documents “may show that the Canadian company takes direction from Chevron management in the U.S. and operates as little more than a holding company.” 

Ranjan Agarwal, a partner with Bennett Jones LLP, who was not involved in the Chevron matter, says there is a practice direction in Ontario that the media as interested party should get notice of sealing order motions.

He says the reason for this is that the court should have the benefit of an adverse view, which would be given by the media. 

“Part of this will have to turn on the content of the documents, which, unfortunately, only the court and right now the parties know what they say,” he says. 

Alan Lenczner, one of the lawyers representing the plaintiffs, says the motions have been adjourned until June because they were brought late but that he intends to reveal the confidential information orally in the Court of Appeal hearings. 

In a 2017 decision in the case, Ontario Superior Court Justice Glenn Hainey found the assets of Chevron Canada Limited could not be seized to pay out a foreign judgment against Chevron Corp., as the subsidiary is not an asset of the parent company. 

The Court of Appeal is set to hear an appeal of Hainey’s decision after it reversed a ruling that the plaintiffs would have to post more than $900,000 in security for costs for their appeal to proceed. In that decision, the Court of Appeal found that the order requiring they post security for costs was unjust because of the unique circumstances of the case. 

In a redacted version of their factum in the appeal, the plaintiffs argued that the case is about the collection of a debt and not establishing liability. They also contended that Chevron Canada is an asset of the Chevron parent company and that the lower court judge erred in his determination of piercing the corporate veil. 

The plaintiffs argued that the result of failing to pierce the corporate veil has allowed the parent company to benefit from receiving at least US$25 billion in dividends over the last six years from subsidiaries, including Chevron Canada, “while, at the same time, allowing the corporation to escape paying a judgment for widespread contamination and debilitating disease that it caused.”

Sean Comey, a spokesman for Chevron Corporation, said in an emailed statement that despite attempts by the plaintiffs’ lawyers and others to “shift the discussion to unrelated topics,” the question before the court remains whether the Canadian subsidiary can be held liable for a judgment that a U.S. Federal Court has found was the product of fraud. 

“That finding has been unanimously affirmed by a U.S. Federal Court of Appeals and is now final,” Comey said in the statement.

“Chevron does not believe that the fraudulent Ecuadoran judgment is enforceable in any court that observes the rule of law,” he added. 

The case has attracted the attention of corporate lawyers as its ultimate outcome could have significant implications for when it’s appropriate for the court to pierce the corporate veil — a bedrock principle of corporate law. 

“The decision may end up having implications as to when a party holding a foreign judgment against a defendant corporation can look to enforce that judgment against assets held in Ontario by a company that is somehow related to the defendant,” says Andrew Kalamut, a lawyer with McCarthy Tétrault LLP, who was not involved in the matter.

The case has already made its way all the way up to the Supreme Court of Canada on jurisdictional issues. However, lawyers expect it will likely make its way up to the country’s top court again, considering the importance of the issues being raised and the amount of money at stake.

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