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July 9, 2009
Importing defective lawsuits
Ronald D. Rotunda
[Originally published in the Orange County Register, 6-30-09.]
A Los Angeles judge threw out several weeks ago a lawsuit that Nicaraguan farm workers brought against Dole Food Co. for actions that occurred on Dole banana plantations in Nicaragua nearly a third of a century ago. The judge found that the plaintiffs' lawyers recruited fraudulent plaintiffs and coaxed them to lie.
"What occurred here is not just fraud on the court but blatant extortion of defendants," Judge Victoria Chaney said in her ruling.
Why, you may ask, was this case in the California courts in the first place? Good question.
When we consider the U.S. trade imbalance, we normally do not consider importing lawsuits, but we should. Increasingly, foreign plaintiffs who have never set foot in America are suing in the United States for events, or "torts," in their own countries, where the U.S. company violated no law. Many U.S. courts are accepting these lawsuits and applying U.S. law to foreign countries.
Why foreigners choose U.S. courts is easy to understand. U.S. law is typically much more pro-plaintiff. U.S. courts impose "strict liability" for products; that is, liability without proof of negligence. They allow contingent fees, so well-financed law firms can assure plaintiffs that they owe nothing unless they win. Our juries may impose punitive damages, in amounts that are mind-boggling to foreigners.
U.S. courts also offer procedural advantages that do not exist abroad, such as class actions, where one individual can represent thousands of other people who may not even know they are plaintiffs. Our courts allow extensive evidence discovery, which imposes heavy costs on the defendant. The system encourages the defendant to settle early, to avoid a costly trial.
What is hard to understand is why U.S. courts let foreigners sue here.
Normally, U.S. courts apply a doctrine called forum non conveniens, or inconvenient forum. The court dismisses the lawsuit because it should be brought in another court - in the country where the alleged wrong occurred. However, some state courts are deciding that they will hear these lawsuits and apply U.S. law, even though the country where the dispute originated would apply its own law. It is like suing after an auto accident and asking the court to apply the speed limit posted outside the courthouse instead of the speed limit at the site of the accident.
In Stangvik v. Shiley Inc. (1991) the California Supreme Court declared that California should hear the foreign case, "no matter how inappropriate the forum may be," if the foreign statute of limitations would bar the plaintiff's suit, unless the defendant agrees that he will not raise this defense in the foreign jurisdiction.
Why should U.S. courts impose on U.S. companies a statute of limitations that is more generous to foreign plaintiffs than the statute of limitations the foreign country applies to its own citizens?
This double standard - U.S. courts applying stricter rules against U.S. companies than the foreign country would apply to any company within its jurisdiction - tilts the playing field against America. It makes it more costly to invest overseas. It allows the foreign country to enforce lower safety standards, knowing that its citizens can sue in U.S. courts for punitive damages while its own companies simply follow the local rules. Only U.S. companies must comply with local laws and the law of whatever U.S. state in which foreign plaintiff decides to sue, decades later.
U.S. courts should not accommodate countries, like Nicaragua, that have adopted laws targeted against U.S. companies. In such cases, our court system is importing two things: foreign judgments and foreign plaintiffs. As Judge Chaney said, referring to Nicaragua law, "There is a lack of respect for law down there."
Ronald Rotunda, a prominent Constitutional scholar, is professor of law at Chapman University School of Law.