Acting with surprising speed, a federal appeals court yesterday lifted an injunction that stopped Ecuadorean plaintiffs from enforcing an $18 billion judgment against Chevron Corp. just three days after hearing arguments in the case.

The New York-based 2nd U.S. Circuit Court of Appeals heard arguments Friday on whether a district judge was right to impose a preliminary injunction that prevents the Ecuadorean plaintiffs from seeking to recover any of the damages awarded by an Ecuadorean judge in February (Greenwire, May 17).

The Ecuadorean court found that Chevron was liable for up to $18 billion in environmental damages for oil pollution in the Lago Agrio area of eastern Ecuador caused by Texaco Petroleum Corp., which was acquired by Chevron in 2001.

U.S. District Judge Lewis Kaplan of the Southern District of New York ruled in March that Chevron had raised serious enough concerns about the legitimacy of the judgment to warrant a preliminary injunction.

The injunction was in response to a racketeering lawsuit filed by Chevron, which claims the entire case against it is an extortion scam.

But in the order issued yesterday, the three-judge panel of 2nd Circuit judges lifted the injunction and also put on hold a trial scheduled for November, also before Kaplan, over whether the Ecuadorean court ruling should be recognized by U.S. courts.

The appeals court did, however, reject the plaintiffs' request that Kaplan be removed from the case over what they allege is his bias toward Chevron.

In its two-page order, the court said that it would explain its decision in an opinion that "will follow in due course."

Karen Hinton, a spokeswoman for the Ecuadorean plaintiffs, said the order indicated that Kaplan had "rushed to judgment without considering the overwhelming evidence" against Chevron.

In a statement, Chevron said it was disappointed with the order but "remains confident that once the full facts are examined, the fraudulent judgment will be found unenforceable."

Just before the court issued the order, the plaintiffs' lead attorney, James Tyrrell of the Patton Boggs firm, sent the panel a letter in which he pledged that the plaintiffs would not seek to enforce the Ecuadorean ruling while an appeal in Ecuador is ongoing.

The plaintiffs had declined to make such a pledge in proceedings before Kaplan.

It is unclear what steps Chevron will now take. It could seek Supreme Court review or perhaps ask Kaplan to reimpose the injunction on different grounds.

James Rubin, a partner at the SNR Denton firm, said it is "always extraordinary" when an appeals court acts so quickly on a case, especially when it is an issue that has such a huge impact.

Such prompt action "usually shows that the court felt it could rule on the papers and was probably prepared to do so but wanted to see if oral arguments added anything of value," he added.

Robert Percival, an environmental law professor at the University of Maryland School of Law, said the appeals court's prompt action "probably reflects the panel's strong belief that Judge Kaplan did not have the authority to issue the global injunction."

Click here to read the order.

Click here to read the E&E special report on the case.