There was an interesting article last week in the Wall Street Journal concerning recent developments in the Checvron Ecuador litigation, and substantial changes to the plaintiffs’ litigation strategy that new counsel Patton Boggs has been implementing in the wake of revelations of possible fraudulent conduct by another lawyer involved with representing the plaintiffs. I don’t know much about the merits of the case, aside form what I have read in a couple of news stories, and am not really much more than casually interested in that aspect of the story. Nor do I have a view as to the truth of Chevron’s claims that the plaintiffs’ case relies on grossly fraudulent condict by one of its lawyers. What caught my eye in the Journal story was this short passage:

For the plaintiffs, defending the legitimacy of the Ecuadorian process is critical. Chevron has no assets in Ecuador, and the plaintiffs will have to try and enforce any ruling in a country where the oil company operates, most likely the U.S. If Chevron can prove that the Ecuadorian ruling was based on fraud, it will be harder for the plaintiffs to recover any money. (Emphasis addedd).

What interests me is that it appears that supposedly seasoned business journalists writing for the Wall Street Journal seem to completely misunderstand the significance of Chevron’s fraud offensive. If a hypothetical Ecuadorian judgment were shown to be based on fraud, it wouldn’t be “harder for the plaintiffs to recover any money ….” as the Journal story suggests. It would, rather, likely be impossible. It is a very old and longstanding precept of law – in Pennsylvania, at least and, I suspect, in pretty much every jurisdiction in the United States – that obligations that are based on fraud, including judgments, are not only not enforceable, but legally void. As a plaintiff holding a judgment based on fraud can’t collect any money on the judgment. That’s why, it seems to me, Chevron is pushing the fraud argument so hard, and why the issue is so significant. And it also seems to me that the Wall Street Journal’s reporters and editors ought to have known that.

The United States Supreme Court took a substantial step toward doing just that yesterday when it vacated Skilling’s conviction under the federal “honest services” wire fraud statute, and remanded the case to the 5th Circuit Court of Appeals to determine whether Skilling’s conviction on other charges against him was so tainted by the government’s reliance on the “honest services” theory that they all must be dismissed. Tom Kirkendall, Larry Ribstein and Stephen Bainbridge, all of whom have blogged extensively on the Enron case and the over-criminalization of business over the years, have more details on their various sites.

Skilling’s case – which is perhaps the most egregious example of the criminalization of business conduct in the most recent generation of ani-business prosecutions – now heads back to the lower courts and further litigation. In addition to the honest services question now put into play by yesterday’s ruling, there remain issues relating to Skilling’s sentencing and his motion for a new trial based upon prosecutorial misconduct to resolve. It would certainly appear that the convictions that the government managed to claim are but a house of cards waiting to topple. Here’s hoping that yesterday’s ruling is a further step toward not only freeing Jeff Skilling, but to also reigning in the nonsensical criminalization of bad business decisions and poor judgment.