Editor’s note: This article is the second in a series.
When American manufacturers are sued at home by foreign plaintiffs, the traditional litigation strategy has been to argue to judges that it’s inconvenient to have American courts hear those products liability cases and to get the cases removed to the plaintiffs’ home countries.
But risk-benefit calculus that once weighed heavily in favor of defendants seeking to dismiss claims from American courts on the grounds of forum non conveniens may be tipping the other way because many other countries are now developing their own forms of class and mass actions.
Keeping products liability cases in the United States runs the risk of what punitive damages domestic juries might award or that American judgments won’t be honored abroad, lawyers said.
But removing cases to foreign countries runs the risk that defendants will face attempts to execute significant, successful judgments in American courts, lawyers said. In the most notorious instance of this phenomenon, Chevron Corp. is fighting an Ecuadorian judgment of $18.6 billion over environmental damages allegedly caused by oil operations. The company is seeking certiorari in the U.S. Supreme Court on the question of whether a district court can issue an injunction in order to determine if the foreign judgment was procured fraudulently.
Until about 15 or 20 years ago, only a few other countries besides the United States had class action procedures, according to a law review article written by Mark A. Behrens, Gregory L. Fowler and Silvia Kim-Yang of Shook, Hardy & Bacon and published in the Michigan State Journal of International Law .
Only two class actions were filed in Canada in 1996, but at least 107 were filed in 2008, Legal affiliate The American Lawyer reported in 2009.
Mexico just had its first class action law go into effect earlier this year.
The traditional strategy when dealing with a large number of claims is “defend until you die,” said S.I. Strong, a professor at the University of Missouri School of Law whose research has included whether international arbitration could apply to mass torts. “It’s not always the best approach.”
A lot of people are trying to “make mass, class and collective actions go away, but the genie is out of the bottle,” and counsel and their clients now need to do a cost-benefit analysis of which jurisdictions would be better, Strong said.
Strong argued that global class products liability arbitrations might be possible as long as notice to class members could be accomplished.
Class arbitrations could cut down the costs of resolving class actions or mass-tort litigation, because the arbitrations would not involve punitive damages and because arbitration awards are more likely to be followed than court judgments from abroad, Strong said.
“There is a globalization phenomenon that has affected every industry, including the legal industry,” said Byron G. Stier, a professor of law at Southwestern Law School in Los Angeles who is teaching a course this semester on global tort litigation and worked on products liability cases for Jones Day and Skadden, Arps, Slate, Meagher & Flom.
To Stay or To Go?
Richard L. Berkman, a partner with Dechert in Philadelphia who practices in products liability and mass torts, said that now “going overseas” could be less advantageous than staying in the United States.
Michael T. Scott, a partner with Reed Smith in Philadelphia whose practice includes products liability, said there are two reasons that American courts are popular with foreign plaintiffs: plaintiffs lawyers amass cases on which they can win contingency fees and juries decide products liability cases.
“Juries, in my view, tend to decide cases on sympathy more than on the facts and for the most part plaintiffs always want juries and defendants don’t in any kind of product liability cases,” Scott said. Those are strong factors favoring sending cases out of the United States, he said.
“Companies sued in U.S. courts by foreign plaintiffs often move for forum non conveniens dismissal because much of the evidence is in the plaintiffs’ country of residence and thus lies beyond the subpoena power of a U.S. court,” J. Russell Jackson, a partner with Skadden Arps in New York who does mass torts and insurance litigation, said in an email. “This includes important documents — such as a plaintiff’s medical records — as well as important witnesses. For example, in pharmaceutical cases a key witness is the prescribing doctor.”
There also is the issue of whether American court judgments will be recognized by other nations’ courts, according to the law review article, “Rule 23 and the Exclusion of Foreign Citizens as Class Members in U.S. Class Actions,” published this summer in the Virginia Journal of International Law .
But there are countervailing reasons to favor keeping cases in the United States.
Charles M. Wolfson, a U.S.-trained plaintiffs lawyer who now is a naturalized Australian citizen and who is of counsel to Lewis Saul & Associates with offices in New York City and Portland, Maine, said he has seen an American manufacturer pat itself on the back for having gotten a case dismissed from the United States for forum non conveniens but “then got their backside kicked” by a seven-figure award in Australia.
Wolfson, who wrote briefs fighting against defendants who wanted foreign plaintiffs’ cases dismissed, said in an interview with The Legal over Skype that the issue is “pretty much a dead letter now. The tide sort of turned” and American lawyers aren’t seeking to bring the mass tort or class-action products liability claims of foreign plaintiffs nearly as much.
While Australia does not allow contingency fees and the losers must pay the winner’s fees, there are no rules that plaintiffs have common injuries and the numerosity requirement only requires seven or more plaintiffs, Wolfson said.
Discovery obligations in the United States are probably “the most onerous” of anywhere in the world, so it can be more economical to not keep cases in the United States, Scott said.
Jury trials also are more expensive than bench trials, Scott said.
Things that are said in a foreign proceeding can be used in the United States to the detriment of defendants even though they are taken out of context and were admitted into the foreign courts under different standards, Donald C. Le Gower, an associate with Dechert who works on products liability and mass tort cases, said.
When defending a mass tort, a scientific body of evidence develops, but when cases are sent to foreign countries, defendants have to re-educate foreign lawyers and foreign courts on that evidence, Berkman said. Further, some foreign courts do not allow the opportunity to take depositions and cross-examine experts, he said.
If there is a mature litigation in the United States, there are established parameters for the litigation because of judicial rulings on what the scientific experts can testify about, but that predictability will be lost “immediately if you send the case back overseas,” Le Gower said.
Mass torts globalizing
Lawyers and law professors have many ideas on why class actions and mass torts are growing in other countries just as the United States is pulling back from such multiclaim litigation, including expanding federal court jurisdiction over class actions and including court rulings requiring that plaintiffs have to prove individual causation.
“As class actions become more difficult to maintain here or pursue here, plaintiffs have started to look to other jurisdictions,” particularly Canada, said Will Sachse, a partner with Dechert who also practices in the area of products liability and mass torts.
Behrens said there is “an interest on the part of policymakers in these other countries to provide more rights for consumers, more restitution, more remedies for consumers.”
Countries are addressing injuries from products liability or consumer finance through their own forms of collective redress because “the kinds of injuries being experienced are different … than they used to be [from] the forces of globalization,” Strong said.
Stier said having redress for consumers injured by products helps the rule of law, and “in a global world, it helps countries to have the rule of law [in order] to have access to capital markets.”
In next week’s installment, The Legal is set to examine changes in products liability case settlements.