For nearly two decades, Texaco, which was acquired by Chevron in 2001, has been embroiled in legal battles with the residents of Ecuador. The central issue of these proceedings stems from a 1970s and ‘80s-era joint venture between Texaco and Petroecuador, a state-owned petroleum company. According to the Amazon Defense Coalition, in the course of its Ecuadorian operations, Texaco, among other things, dumped more than 18 billion gallons of toxic waste into Amazonian waterways, abandoned more than 900 waste pits, burned millions of cubic meters of gases with no controls, and, as a result of pipeline ruptures, spilled more than 17 million gallons of oil. Further, local citizens now claim that as a result of the massive environmental destruction caused by this pollution, cancer rates and other oil-related health problems have increased among those residents who live near the company’s former operations.

While in accordance with agreements with the government, the company has spent nearly $40 million for its share of remediation efforts after it ended its Ecuadorean operations, plaintiffs continue to seek civil claims. In early 2011, an Ecuadorian judge ordered Chevron to pay $8.6 billion for environmental damages. However, the judge increased this amount to $18 billion because the company refused to make a public apology. This legal battle continued in the United States, where in 2011, a federal judge in New York granted a preliminary injunction—barring the plaintiffs from seeking enforcement of the Ecuadorian ruling outside of the country. However, the preliminary injunction was overturned on appeal later that year. Further, on October 9, 2012, the Supreme Court announced that it was refusing to hear the case, effectively leaving the appellate court’s decision in place.

According to an emailed statement reported by the Globe and Mail, Chevron states that, although it is disappointed with the latest decision, it “will continue to defend against the plaintiff’s lawyers’ attempts to enforce the fraudulent Ecuadorean judgment and to further expose their misconduct…” Chevron has long maintained that the allegations made in these cases are illegitimate, fraudulent and a result of bribery on the part of the Ecuadorian courts. Further, in 2011, Chevron stated that it had filed a civil lawsuit under the Racketeer Influenced and Corrupt Organizations Act (“RICO Act”) as well as other state and federal laws against the lawyers and consultants leading the litigation and PR campaign against the company. Chevron stated that it was seeking “a court declaration that any judgment against Chevron in the Ecuador lawsuit is a result of fraud and therefore is unenforceable” and that it was also seeking damages associated with the cost of defending the Ecuadorean litigation.

Since Chevron does not currently have significant assets in Ecuador, the plaintiffs will have to go elsewhere to enforce the judgment issued by the Ecuadorian court. In May of this year, lawyers representing the Ecuadorian people began to pursue their more-than-$18 billion judgment by filing a claim in Ontario Superior Court in Toronto, demanding that the company surrender its Canadian assets. The plaintiffs’ lawyers have stated that this “is just the beginning,” and that they are “analyzing and…preparing a series of enforcement actions that are going to be presented around the world in the near future.”

Given the seriousness of these allegations and the amount of the judgment awarded to the plaintiffs (to compare, BP paid $20 billion to fund claims following the Deepwater Horizon spill in 2010), it is only natural that shareholders are expressing concern about how Chevron is managing these issues.

Recently, some investors have grown increasingly worried about the ongoing legal battles plaguing the company and the litigations’ potentially negative impact on shareholder value. In May 2012, shareholders representing $580 billion in assets under management sent a letter to Chevron urging the company to “revaluate whether endless litigation is the best strategy and discuss with shareholders whether the company could adopt a more productive approach, such as reaching an equitable settlement, to both provide for a proper remediation for past environmental damages and better protect future shareholder value.”

Shareholders are not the only ones expressing concern over how Chevron is managing this issue. In June 2012, Congresswoman Janice Schakowsky sent a letter to SEC chairman Mary Schapiro stating her concern regarding whether Chevron was in compliance with SEC regulations. Specifically, Schakowsky cited a report that “details multiple contexts in which Chevron may have failed, over a period of years, continuing through the present time, to disclose material information to investors concerning the likelihood, scope and impact of its potential liability for massive environmental damage to a large part of the Ecuadorian rainforest and the associated health and other negative effects of that damage upon tens of thousands of indigenous famers and individuals.” Schakowsky encouraged the SEC to promptly consider “whether Chevron has followed its legal obligations in informing current and potential investors about the risks to the company inherent in the Ecuador litigation and, in particular, about the impact of the $18.1 billion judgment rendered against Chevron early in 2011.”

Given the stunningly complicated nature of Chevron’s ongoing litigation, it is highly unlikely that these issues will be resolved in the near future. However, as these legal battles consume considerable company resources and leave the company exposed to significant risk, shareholders should continue to remain vigilant in ensuring that Chevron is managing and disclosing these issues properly and sufficiently.