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CORPORATIONS - General principles - Distinct legal entity - Exceptions (piercing the corporate veil)

Tuesday, February 07, 2017 @ 9:56 AM  

Motions by the Chevron defendants and by the plaintiffs for summary judgment in an action commenced to enforce an Ecuadorian judgment. The 47 plaintiffs represented 30,000 indigenous Ecuadorian villagers affected by environmental pollution resulting from oil exploitation and extraction activities in the Oriente region of Ecuador. After their action against Texaco in New York was dismissed with Texaco’s agreement to submit to the jurisdiction of the Ecuadorian courts, the plaintiffs commenced an action in Ecuador. They obtained a $9.5 million USD judgment against Texaco, which merged with Chevron prior to the commencement of the action in Ecuador. Chevron refused to acknowledge or pay the Ecuadorian judgment, and had no assets in the country. The plaintiffs commenced the present action in Ontario in 2012. They alleged no wrongdoing on the part of Chevron Canada, but took the position that Chevron Canada was an asset of Chevron that was exigible and available for execution and seizure to satisfy the Ecuadorian judgment against Chevron. Alternatively, the plaintiffs submitted that the Court should pierce Chevron Canada’s corporate veil to makes its shares and assets available to satisfy the judgment. Chevron Canada was a seventh-level indirect subsidiary of Chevron, with assets across Canada. It had never carried on business in Ecuador. Chevron was incorporated in Delaware and had no Canadian assets. As was the case with its many other subsidiaries, Chevron owned all of the shares of Chevron Canada and received dividends from its operations.

HELD: Motion by Chevron and Chevron Canada allowed. Motion by the plaintiffs dismissed and action dismissed. The Execution Act did not make Chevron Canada’s shares and assets exigible and available for execution and seizure in satisfaction of the Ecuadorian judgment against Chevron. There was no basis to consider the assets or shares of Chevron Canada to be owned by Chevron. They did not share management or employees. A guarantee Chevron provided to Chevron Canada’s lenders underscored the separate corporate existence of the two entities. Chevron lacked an interest in the assets of Chevron Canada as an indirect shareholder seven times removed. A claim against Chevron Canada for its shares could not succeed because Chevron did not own its own shares. Chevron Canada was not a puppet for Chevron. It controlled its own operations without financial contributions from Chevron or any other Chevron entity. Certain defences pleaded by Chevron were struck as impermissible, including a
challenge to the jurisdiction of the Ecuadorian court over the original action and a claim that the Ecuadorian action was a violation of a settlement Chevron’s predecessor reached with respect to its activities in Ecuador in 1985.

Yaiguaje v. Chevron Corp., [2017] O.J. No. 311, Ontario Superior Court of Justice, G.A. Hainey J., January 20, 2017. Digest No. 3637-003