Invisible Borders

The Republic of Bolivia filed suit against US tobacco company and cigarette maker Philip Morris to recover health care costs incurred from treating citizens with smoking-related illnesses in 1999. Philip Morris managed to get the case transferred from the Texas state court, under the jurisdiction of Southern District of Texas judge Samuel Kent, to federal court. Judge Kent, feeling Brazoria was an inappropriate venue for a product liability case with a foreign plaintiff, transferred the case to the federal court in Washington DC, where Bolivia has an embassy. In a not-so-politically correct court report, Judge Kent cited his reasons for transferring the case.

“This is one of at least six similar actions brought by foreign government in various courts throughout the United States. Why none of these countries (Guatemala, Panama, Nicaragua, Thailand, Venezuela, and Bolivia) have a court system their own government has confidence in is a mystery to this court. The Court can hardly imagine why the Republic of Bolivia elected to file suit in the veritable hinterlands of Brazoria County, Texas.” This case is currently tied up in litigation procedures in the Washington courts.

Many Cases are Better than One
So why did Bolivia come to Brazoria? Consider this:  an 81-year old women receives severe burns from a cup of McDonald’s coffee and a US jury awards the plaintiff $2.7 million; the family of a woman paralyzed in a car accident involving Firestone tires settles for $7.5 million; a Florida jury awards $145 billion to a several hundred person class action law suit against cigarette companies for smoking related injuries and punitive damages. Now consider this: a US lawyer travels to Latin America and promises enormous product liability awards to the governments and citizens of Latin America if they bring their tire manufacturer and cigarette maker lawsuits to the US courts.  It’s no wonder with the promise of a $145 billion award why so many Latin America governments, citizens groups and health care organization are hurrying across the borders to try their legal luck.

It is the very nature of US product liability laws and procedures that bring Latin American plaintiffs and their suits to the US. Sara D Schotland, partner at Cleary Gottlieb Steen & Hamilton, Washington DC, explains that litigation remains far more burdensome in the US than other courts because of the unique features of the US system which include a jury system, contingent fee compensation to the plaintiff’s attorney, no penalty for frivolous suits, availability of large pain and suffering awards, and punitive damage awards. “There is a much greater financial incentive to litigate in the US than in other countries because the economic reward to the plaintiff and the plaintiff’s counsel is so much higher,” says Schotland.

However, Latin American plaintiffs prefer to bring suit in the US because many Latin America countries lack the class action suit structure, or anything remotely similar. “In Latin America, there is no class action similar to that in the US. While Brazil has regulated a similar process, it is not identical. Each suit is to be filed separately,” says Alejandro Hernandez, director of Banking and Finance for Uruguayan law firm Estudio Ferrere Lamaison.

Latin America is beginning to understand just how advantageous the class-action suit can be for a product liability claim. “It may be difficult for an individual who has suffered an alleged injury that may not be serious enough to warrant a recovery. But if several individuals find themselves in the same position, having a large number of prospective plaintiffs may interest a plaintiff’s class action attorney to invest in the case.  In the Americas, the US has the most advanced judicial system that can handle this kind of litigation

Finding an Appropriate Forum
A defense strategy, known as forum non conveniens (FNC), has been an effective deterrent against successful foreign plaintiff suits in the US. One of the most important cases to use FNC was the DBCP case in 1993 when more than 25,000 banana workers from 12 countries including Guatemala, El Salvador, Ecuador, Nicaragua, Costa Rica, Honduras, and Panama filed a class-action lawsuit against several multinational companies. The suit, filed against Dow Chemical, Shell Oil, Dole, Del Monte, Chiquita Brand, Occidental Chemical Corp, and Standard Fruit Company, demanded that multinationals pay the health care costs resulting from exposure to the banana plant pesticide Dibromochloropropane (DBCP).

Duly filing suit in the Southern District of Texas, the defendant’s counsel called for dismissal based on forum non conveniens. Forum non conveniens is a procedure allowing the court to dismiss the case if a more convenient and adequate venue for the case exists. In other words, can the local courts of the foreign plaintiffs reasonably serve as a forum for the case? A panel of legal and judicial experts from each of the plaintiff’s countries testified, resulting in the dismissal of the case under FNC, with the court concluding that the plaintiff’s local court systems were indeed adequate venues for the lawsuit.

“The DBCP litigation is one of the most significant cases involving Latin American plaintiffs who have sued in US courts. In this case, we were successful in persuading the court that these lawsuits needed to be brought in the plaintiffs’ home countries. These were foreign residents living abroad and strangers to the US. The courts of their home countries were adequate to address the claims,” says Schotland.

However, exercising FNC does not mean the liability case will go away. Countries such as Costa Rica, Ecuador, Honduras, Nicaragua, and Guatemala, feeling ill-equipped to handle the cross-border product liability cases dismissed in the US courts on the basis of FNC, passed legislation denying the plaintiff’s right to file suit in local court.

“I think it is a very interesting example of a conflict in protecting their sovereign interests. By attempting to discourage subject matter jurisdiction, it could be suggested that these countries may not be exercising a level of sovereignty that provides their citizens with a forum for redress of an act or injury occurring on their own soil, in accordance with their own laws and culture,” says Wood.

But this does not leave a dead-end for foreign plaintiffs whose cases have been dismissed in the US on the grounds of FNC and deemed unfit to be heard in their own local court systems. In the DBCP case, the FNC dismissal is contingent on whether or not the plaintiffs can file suit in their local courts. Therefore, if the highest court in the plaintiff’s home country rules the case unfit to be heard by the local court system, the plaintiff can return to the US, case in hand. The initiation of this legislation is a strategic move for these countries to let the US courts know that US companies have to handle their own cases on their own turf. If the plaintiff returns to the US, after refusal by their home courts to hear the case, the US court will have to honor the case, rendering the FNC defense strategy powerless.

Changing Trends
In addition, US courts are becoming less likely to dismiss a case on the grounds of FNC. “In recent years, the trend seems to be changing, and in the cases of claims by foreign plaintiffs against American companies, the US courts have assumed competence,” says Hernandez. This is a change from the infamous 1984 case of a pesticide plant, owned by US company Union Carbide Corporation, in Bhopal, India which released enough of the highly poisonous substance, methyl isocyanate, to kill 2,000 and injure 100,000 people. The case was brought before the New York State courts, and dismissed on the basis of forum non conveniens. The case was forced to go back to India and submit to the jurisdiction of the local courts, leaving the defendants free and clear of any damages that may have been appropriated from US jury trial.

But in August, a Latin American plaintiff celebrated a  victory against a US company in a US court. A Miami jury awarded Costa Rican ornamental plant growers, Productura de Semillas and Palmas y Bambu, an $88.5 million award against multinational defendant E.I. du Pont de Nemours & Company (Dupont). The plaintiffs claimed that the fungicide Benlate DF, manufactured by Dupont caused serious damage to their crops and filed suit alleging product liability, fraud and violation of Florida’s civil racketeering act. Dupont was found guilty, by jury, of fraud and violating the civil RICO statute, Florida’s state racketeering law.

However, Hernandez cautions that although more foreign plaintiff cases are finding even footing in the US, the process is still far from complete. “A definitive solution for these problems has yet to be found, but the future decisions made regarding these issues will have a big influence on product liability claims in the US and Latin America.”

Victor Diaz, associate at Podhurst Orseck Josefsberg in Miami, is currently handling 100 of the 450 personal injury lawsuits filed against US tire manufacturer Firestone. The Firestone drama began two years ago when the company began receiving official reports of high-speed car accidents, the result of tire treads separating, killing and injuring people worldwide. Eighty-seven of Diaz’s clients are Venezuelan. Diaz believes these cases can only be handled in the US courts.

“As of today, it is a complete fiction to say there is any viable alternative forum in Latin America for these cases. In many of these countries there is no independent judiciary and no functioning litigation system. The defendants are seeking to try in the US because if they go to their local courts, the cases will disappear or be settled for much less,” says Diaz.

The gradual removal of tradeborders has  created extraordinary business opportunities for foreign multinationals in Latin America. The benefits of globalization and free trade are tremendous. But Diaz cautions that multinationals don’t want the responsibility that comes with it. “It is very easy for US multinationals [such as Firestone to pursue] a global market and reap the economic benefits, but they do not want the responsibility of a global distribution system. When it comes to the consequences of selling a defective product, they want to put the boundaries back up,” says Diaz.

But it is not just the companies that are avoiding responsibility, according to Diaz, so are the US courts. Although the forum non conveniens is used as an effective defense strategy in many of these lawsuits, according to Diaz it violates the legal rights of the foreign plaintiff. If the product causing injury is produced and manufactured by a US company, then the US courts are responsible for hearing the case.

“The forum non conveniens doctrine is the opposite of free trade. We have no national boundaries when it comes to free trade, but we have national boundaries when it comes to the consequence of liability from the exposure of free trade.”

Diaz argues that Firestone, and other multinationals alike, are thrilled to distribute their products in Venezuela, but they consider the lives of Venezuelans and the other foreign plaintiffs to be worth a lot less. And given that there has yet to be a single product liability case successfully tried in Venezuela, there is little doubt in Diaz’s mind that the US courts is the only forum appropriate.

Unequal protection?
Philip Morris, currently in litigation with 35 foreign governments and health-care organizations, including 21 from Brazilian cities and states, believe US lawyers are misleading foreign plaintiffs on the prospect of easy money.

According to Timothy Lindon, associate general counsel for Philip Morris, “While there is some truth to the perception that US juries may be more generous in tort awards than Latin American courts, the Latin American governments suing in the US have been grossly misled about their chances of success in US tobacco litigation. The perception that litigation in the US will be relatively painless or will result in easy money is absolutely false.”

Several of these foreign plaintiff cases, including Guatemala, were dismissed on the motion of remoteness and are sitting idly in appellate court. Because the injury happened to the smoker and not the government, the government is considered too remote to have a direct claim against the company. “No tobacco cases filed by foreign governments against Philip Morris in the US or anywhere in the world have been settled or won by the plaintiffs,” says Lindon.

But on the contrary, the US states of Minnesota, Florida, Mississippi and Texas all successfully settled multi-billion dollar lawsuits against the tobacco industry. Charles Siegel, lead council on Rio de Janeiro’s lawsuit against the tobacco industry and partner at Waters & Kraus Dallas, says “There is no distinction between the US state cases and the foreign plaintiff cases on the issues of remoteness. They should be treated equally under the law. If anything, the foreign governmental claims are less remote, because of differences in local legal and societal treatment of the costs of injuries.”