Mass tort litigation against sovereigns remains an intriguing issue. In the Second Circuit, Motley Rice recently won reversal of the order dismissing Saudi Arabia as a defendant in the 9/11 litigation. The opinion is here, and some of the pleadings and briefs are here. The opinion is narrow but interesting for thinking about law suits or contribution claims against sovereigns.
Niche Litigation - The Small Picture and the Big Picture as Illustrated by International Arbitration Panel Awards Against Russia for Appropriating Yukos Investment Via Ginned Up Tax Bills
Today, niche litigation creates an amazing three-dimensional chess board for moves and counter-moves. For example, Russia has now lost two international arbitrations regarding its appropriation of Yukos through ginned up tax bills. Covington's cogent press release effectively tells the story of this single arbitration. The arbitration award is here.
End of story? No. The larger story is well-told by Michael Goldhaber in an American Lawyer post. In short, the outcomes to date are preliminary thrusts in a larger chess game against Russia. The ultimate claimants are persons with huge stakes in Yukos. These small claims have allowed the opportunity to compile and present a trial story in small test runs instead of staking everything on one trial.
The same principles apply in toxic tort litigation. A plaintiff's firm with many mesothelioma cases can afford to try and lose some cases to get the case presentation just right. Then, once the case presentation is honed, the same script can be used again and again.
"WASHINGTON, DC, July 26, 2012 — An international tribunal ordered the Russian government to compensate a group of Spanish investors for the losses they suffered when Russia seized the Yukos Oil Company, one of the largest oil and gas companies in the world.
The Spanish investors sought compensation under the bilateral investment treaty between Spain and the Russian Federation. The panel ruled that the Russian government issued illegitimate tax bills and, through a series of enforcement actions and eventual bankruptcy, placed Yukos’ assets under state control. State-owned Rosneft and Gazprom received the vast majority of Yukos’ assets. The tribunal valued Yukos at more than $60 billion at the time the company was nationalized.
“This case stands for an important principle: If Russia violates its treaty obligations and harms investors, there will be consequences,” said Marney Cheek, a partner at Covington & Burling LLP who represents the Spanish investors. “The panel’s decision holds Russia accountable and awards compensation to the former shareholders of Yukos.”
The tribunal concluded “that Yukos' tax delinquency was indeed a pretext for seizing Yukos assets and transferring them to Rosneft. . . . [T]his finding supports the Claimants' contention that the Russian Federation's real goal was to expropriate Yukos, and not to legitimately collect taxes.”
“This ruling vindicates the rights of Spanish investors, and, indeed, all investors in Yukos,” said Ms. Cheek.
Thousands of investors worldwide owned shares in Yukos. This is the second ruling by an international tribunal holding that these investors are entitled to compensation. An investor from the United Kingdom prevailed in a similar proceeding in September 2010.
The arbitration proceeding, Quasar de Valores SICAV S.A., et al. v. The Russian Federation, was filed in March 2007 under the jurisdiction of the Stockholm Chamber of Commerce. A tribunal of three distinguished jurists issued a unanimous award: Jan Paulsson (chair) of Freshfields Bruckhaus Deringer; Toby Landau QC, of Essex Chambers; and Judge Charles Brower of the Iran-United States Claims Tribunal.
Covington & Burling and Spanish firm Cuatrecasas, Gonçalves Pereira represented Claimants.
The Covington team included former partner O. Thomas Johnson, Jr., as well as Marney Cheek, Jonathan Gimblett, David Pinsky, Alexia DePottere-Smith, Alex Canizares, Fritz Scanlon, and Alex Berengaut. Mr. Johnson retired from Covington in April 2012." VICTORY FOR SPANISH FUNDS IN CLAIM AGAINST
Set out below is an ad I received for an interesting looking book on state liability claims. The topic to me is interesting because nations like China are so tied into many of its industrial businesses that are investing in Brazil and other nations, and no doubt have been or will be releasing toxins. Some of these businesses inevitably will end up being identified as causes of personal injury and property damage claims, and probably will be sued in mass tort claims of the future.
New Title from Hart Publishing
I am pleased to announce the publication of the title shown below. If you would like to order this title with your 10% discount you can do so through our website* (please mention ref: ‘E-MAIL LIST’ in the special instructions field) or you can complete and return the order form that is included at the bottom of this message.
*Please note the discount will not show up on your order confirmation but will be applied when the order is processed.
Now available in Paperback
State Liability in Investment Treaty Arbitration
Global Constitutional and Administrative Law in the BIT Generation
Reviews of the Hardback Edition
“... Montt has authored a thought-provoking and welcome contribution to the current literature on international investment law.”Valentina S. Vadi, Journal of International Economic Law
“State Liability in Investment Arbitration is a valuable and truly interdisciplinary contribution to the growing body of literature on international investment law. It offers novel analytical approaches to analyzing the emergence and evolution of the BIT generation, and sheds light on some of the hitherto less explored issues of state liability for interference with foreign investment.” Mavluda Sattorova, Transnational Dispute Management
“The book is widely supported with authorities and references. In every subject, Montt excels at combining the historical perspective, the conceptual analysis and a critical look at the future. His work has an unquestionable intellectual and academic value. Were I to recommend it, then I would surely do to scholars and researchers.” Albert Badia, Journal of World Energy Law and Business
Today there are more than 2,500 bilateral investment treaties (BITs) around the world. Most of these investment protection treaties offer foreign investors a direct cause of action to claim damages against host-states before international arbitral tribunals. This procedure, together with the requirement of compensation in indirect expropriations and the fair and equitable treatment standard, have transformed the way we think about state liability in international law.
We live in the BIT generation, a world where BITs define the scope and conditions according to which states are economically accountable for the consequences of regulatory change and administrative action. Investment arbitration in the BIT generation carries new functions which pose unprecedented normative challenges, such as the arbitral bodies established to resolve investor/state disputes defining the relationship between property rights and the public interest. They also review state action for arbitrariness, and define the proper tests under which that review should proceed.
State Liability in Investment Treaty Arbitration is an interdisciplinary work, aimed at academics and practitioners, which focuses on five key dimensions of BIT arbitration. First, it analyses the past practice of state responsibility for injuries to aliens, placing the BIT generation in historical perspective. Second, it develops a descriptive law-and-economics model that explains the proliferation of BITs, and why they are all worded so similarly. Third, it addresses the legitimacy deficits of this new form of dispute settlement, weighing its potential advantages and democratic shortfalls. Fourth, it gives a comparative overview of the universal tension between property rights and the public interest, and the problems and challenges associated with liability grounded in illegal and arbitrary state action. Finally, it presents a detailed legal study of the current state of BIT jurisprudence regarding indirect expropriations and the fair and equitable treatment clause.
Santiago Montt has a JSD and an LLM from Yale University, an MPP from Princeton University, and an LLB from Universidad de Chile, and has taught administrative law and international commercial arbitration at Universidad de Chile, and competition law at Universidad Diego Portales.
Dec 2011 460pp Pbk 9781849462136 US$ 50
DISCOUNT RATE TO E-MAIL LIST SUBSCRIBERS: US$45
Everything is relative in the world of injuries and torts. In the US, defendants and plaintiffs jockey back and forth, and lobby for state and federal changes in laws and/or members of the judiciary. But, we do not have outright government censorship or reporters being blocked from investigating. Not so, it appears, in China, when it comes to reporting on defective vaccines. Reports came out in China last year on perhaps 100 children dying from improper vaccines administered in one particular program. Now, reports say that the reporting journalists are facing government crackdowns and are being assigned to non-investigative work. The current story is set out below.
"One of China's leading newspapers has shut down its respected investigative unit, an editor said Tuesday, an apparent victim of a broad clampdown on political dissent and the media.
The sudden move has sparked concern about the future of watchdog journalism in China, which has gained strength in recent years despite a ruling Communist Party censorship system aimed at ensuring favourable media coverage for the government.
Xie Baokang, assistant to the editor-in-chief at the China Economic Times newspaper, told AFP the publication's investigative team -- led by veteran muckracker Wang Keqin -- had been "dismantled."
"The correspondents haven't left, they still work at the newspaper, but in different departments," he said, refusing to comment on the reasons behind the move.
The China Economic Times is published by an institution that comes under the central government but has still managed to push political boundaries, becoming one of the nation's leading watchdog publications.
Wang's report last year on children who fell seriously ill after being given allegedly faulty vaccines in the northern province of Shanxi made waves around the country.
Soon after that story, the paper's editor-in-chief Bao Yueyang -- a keen supporter of Wang -- was sacked.
The Chinese government strictly censors the country's newspapers, broadcast media and the Internet, blocking any information it deems a threat to its authority.
Controls have been further tightened by a heavy clampdown on dissent amid official fears that recent uprisings in the Middle East and North Africa could spark similar movements in China.
Scores of prominent rights lawyers and activists have been detained in the campaign.
David Bandurski, the Hong Kong-based co-author of a book on investigative journalism in China, said the newspaper's move was a worrying development.
"Wang is the pre-eminent investigative reporter in China, he's symbolic of the whole movement going back to the mid to late 1990s," he said.
"So what happens with this team will reflect on the overall environment for investigative reporting," he said.
Wang -- who just recently offered a positive assessment of the growth in watchdog journalism on his blog -- could not be reached by phone, and did not immediately respond to emails sent by AFP."
It seems inevitable that sovereign liability issues will continue to grow; several posts on this topic are indexed under the heading "sovereign." Two new items caught my eye on sovereign-owned or supported entities.
First, note this NLJ article on decisions holding that FCPA prosecutions are proper for bribes paid to business entities which are arguably owned or controlled by government entities. Second, consider the growing scale of global Chinese government investment in businesses around the world, and how many entities may soon be considered sovereign-owned or controlled. According to this recent NYT article about a new study on Chinese investment:
"Flush with capital from its enormous trade surpluses and armed with the world’s largest foreign exchange reserves, China has begun spreading its newfound riches to every corner of the world — whether copper mines in Africa, iron ore facilities in Australia or even a gas shale project in the heart of Texas.
The study, commissioned by the Asia Society in New York and the Woodrow Wilson Center for International Scholars in Washington, forecasts that over the next decade China could invest as much as $2 trillion in overseas companies, plants or property, money that could help reinvigorate growth in the United States and Europe."
Chinese Government Hit With Default Judgment for Stealing Sofware Code for Use in Supressing Internet Acess
A National Law Journal article reports that the Chinese government has been hit with a default judgment in a tort case. Through February 16 rulings in federal court in Los Angeles, District Judge Josephine Tucker held that Solid Oak Software Inc. was entitled to a default in a suit alleging governmental theft of software code for use in suppressing Internet access. According to the article by Amanda Bronstad, one of the lawyers for plaintiff is Gregory Fayer of Gipson, Hoffman & Pancione in Los Angeles. Ms. Bronstad also reports that the Chinese government was aware of the suit, but declined to defend, as explained below:
The U.S. Department of State filed proof of service with the Chinese government on Nov. 12. But the Embassy of the People's Republic of China in the United States filed a letter with the court on Nov. 29 claiming it did not have to respond to the lawsuit. "The purpose that the Chinese Government applies and installs the Green Dam Youth Escort software is to use web filter technology to block pornographic texts and images on the internet and to protect minors from internet pornography and other dangers," the embassy wrote. "For the US company to sue China as a State, it is nothing but an uncalled for and unwarranted lawsuit."
Sovereigns and Their Roles Related to Commercial Activities Involving Substances that Present Health Risks
Here's an invitation for readers to guest blog or comment on a question related to mass tort litigation, governments and substances that are extracted and exported despite known health risks and the absence of complete certainty regarding health effects. Feel free to reframe the question, but I see it as:
when, if ever, should government agencies and/or officials be held liable for statements or other actions taken in support of commercial mining, extracting, distributing or manufacturing of substances known to have some health risks. For example, mining , exporting and manufacturing involving chrysotile asbestos fibers.
Obviously various sovereign immnunity doctrines already exist and tend to draw lines between tradtional government activties, discretionary functions, and commercial activities. Those lines and these issues seem to me likely to face renewed scrutiny over the next few years due to increased globalization and explicit government outreach to and involvement in commercial activities with international impacts. For some context for the question, consider this prior post regarding "aiding and abetting" claims asserted against two goverments for assisting the Stanford ponzi scheme. Consider also a recent article regarding Canadian physicians accusing Canadian officials of issuing misleading statements about the absence or presence of health hazards from chrsyotile asbestos fibers. The text pasted below is from this February 12, 2010 article by Michelle Lalonde from the Canadian Gazette.
Australia and Asbestos - The James Hardie Saga, Its Asbestos Claim Payment Foundation - A Viable Alternative to Ch. 11 ?
Now it's west (from Chicago) to Australia, asbestos and the public company fiber cement business commonly known as James Hardie.
The short story is that James Hardie and its officers and directors have been through a wringer as several were convicted of securities violations in connection with information disseminated regarding "asbestos liabilities" and a foundation set up by various former Hardie entities to manage and pay asbestos claims. The convictions are on appeal. For more specifics on the past, look to the left for prior posts indexed under the topic "James Hardie."
Rapid Global Movement Makes Local Policy Hard to Enforce: Hardies actions are noteworthy for multiple reasons other than the securities convictions. For one, note that Hardie's recent global corporate "citizenship" translocations from Australia to The Netherlands and now Ireland, all in just 9 years. The point? Money and ownership will move to wherever financial engineering offers a material opportunity to avoid taxes, achieve tax benefits, or avoid or limit liabilities. This point needs to be understood by policy makers, tort claimants, tort case co-defendants and insurers because of its implications for tort claiming and risk spreading. Simply put, parochial local approaches to tort law may be politically attractive at times (e.g. take action to save local jobs) but one should expect the tort system will be gamed just as some financiers play games with states in the US for financial incentives to relocate - for a few years - the corporate headquarters or a manufacturing facility. The wills of state legislatures, the long term abstractions of tort law professors, and the opinions of slow moving appellate courts are all much less relevant when, as now, ownership, the corporate "home" and money, can all be moved in a matter of months. (One wonders when an enterprising tropical island will enact legislation favorable to companies facing long tail tort claims. One might look to the precedent set in the UK with FSA legislation that helped the "the names" and the Lloyds insurance market run away from their insurance obligations. Or, one might also consider states that set up rules considered unduly favorable to one side or another - some might say that West Virginia, Texas, New York, South Dakota, and Delaware all provide classic examples of this approach ... )
Private Tort Claim Foundation as an Alternative to Chapter 11 ? By any reasonable standard, current and former Hardie entities Hardie entities face claims for at least a billion or two of claims, and maybe much more, depending on how one defines claims (do overseas claims count; what about property damages claims). In the US, the now-defined answer would be to file one or two subsidiaries file a Chapter 11 case in Delaware or New York. Then, via the parent company chipping in some money and/or rights related to some "shared insurance," the parent and all subsidiaries likely would end up with an injunction purporting to protect them against a future claim anywhere in the world. Thanks to the rampant lack of due process and the resulting lack of objectors in chapter 11 cases (highlighted most recently by GM and Chrysler), most such plans succeed, at least in the sense that confirmation is obtained.
Hardie, however, did not pursue that path and instead set up a private foundation to manage and pay claims, backed by some conditional promises of future cash flow from Hardie entities. The foundation has now been in place for almost a decade. Future posts will explore some specific aspects of the Hardie foundation. For now, for 213 pages of Hardie facts and history as narrated by KPMG as advisors, go here and read/skim through a 2006 liability estimate.
While reading, note, among other things, that Hardie entities have been selling asbestos products since the early 1900s, owned a chryotile asbestos mine in Australia, sold products internationally, participated in various international joint ventures, and sold a wide range of asbestos-containing products. Sales included a asbestos-cement building materials, pipe insulation, and friction products, as well as sales of raw chrysotile asbestos fiber. Note also that some of Hardie's cement and insulation products included one or both of two types of the highly lethal amphibole fibers, which are crocidolite (apparently mined in Australia at Wittenoom) and amosite from Cape or others in South Africa (amosite being a sort of a contraction for "asbestos from the mines of South Africa").
Conflict of Interests and International Tort Claims for Persons from Many Countries - The Libyan Terrorism Example
Here is an unexpected but interesting non-asbestos example of conflict of interest issues arising from efforts to resolve "mass torts" for various persons around the world. The example arises from the airplane crash and airplane hijacking blamed on Libyan terrorists. The article describes a recently filed lawsuit in which two victims of the crash object to the terms of the settlement with Libya. In brief, the two plaintiffs argue that the lawyers who represented the crash victims, Crowell & Moring, operated under conflicts of interest and that the agreement improperly commingles the interests of the various different categories of claimants, including US and non US claimants. The article includes a link to the complaint itself. The complaint, however, does not attach a copy of a "joint prosecution" agreement apparently signed by the plaintiffs and many others.
Here are excerpts from the article by Roger Alford:
"The facts as alleged in the complaint of Davé v. Crowell & Moring are complex. In brief, Libya has been implicated in terrorist activities on numerous occasions, most notably the hijacking of Pan Am Flight 73 in Karachi, Pakistan on September 5, 1986 and the bombing of Pan Am Flight 103 over Lockerbie, Scotland on December 21, 1988. In 2005, victims of these terrorist attacks and their heirs--including American and non-American victims--retained the law firm of Crowell & Moring--known for representing victims of terrorism--to pursue litigation against Libya. The Davés were among those who signed the Crowell & Moring retainer agreement. As part of retaining Crowell & Moring, every client was also required to sign a joint prosecution agreement ("JPA"), a provision of which provided that the proceeds recovered by any signatory to the JPA shall be shared on a sliding scale based on type of injury with all signatories to the JPA, without distinction as to nationality. Only 23% of the victims who signed the JPA were American. A Liaison Group consisting of one American and four non-Americans was established as agents for the victims in their dealings with litigation counsel. The Liaison Group was represented by Latham & Watkins. In 2008, the United States government entered into a bilateral treaty with Libya for an award of compensation for all U.S. nationals harmed by Libyan terrorism, including the victims of the Pam Am Flight 73 hijacking, which included plaintiffs Gargi and Giatri Davé. The treaty provided for distribution of these funds through the Treasury Department's Foreign Claims Settlement Commission ("FCSC"). After the Davés successfully received notice of their entitlement to millions under the FCSC process, Crowell & Moring issued a demand letter to the Davés contending that under the retainer agreement and the JPA the funds secured by the United States government pursuant to the U.S.-Libya treaty on behalf of American victims are to be shared among all of the victims of Libyan terrorism, American and non-American alike. In other words, the vast majority of the funds secured by American nationals under the U.S.-Libya treaty are--approximately 90% according to Crowell & Moring--required to be paid to non-Americans pursuant to these private agreements."
Chapter 11 Cases Fail to Properly Deal with Future International Claims Against Multinationals Heavily Involved in Selling Asbestos Fibers or Products
The point of today's post is to focus attention on issues and topics that arise from relationships between insolvencies and multinationals heavily involved in selling asbestos fibers and/or asbestos-containing products, and their implications for present and future tort claiming and the ability to enforce bankruptcy court injunctions. To illustrate that the topic is well-grounded in fact, the text below provides a specific example, plus the names of books that describe some multinationals which, in addition to Eternit (see last Friday's post), were very heavily involved in global sales of raw asbestos fiber and/or other products containing large amounts of asbestos.
The topic of multinational relationships vis a vis asbestos claiming and insolvencies has been largely free of careful, public attention during chapter 11 cases. As a result, when chapter 11 trusts were created, little or no provision was made for future international claims, meaning claims to be asserted from overseas against an entity now subsumed by a chapter 11 trust. Such claims were at most handled in name only, with virtually no specific anticipation of the volume of or value of future claims from other nations. What's my basis for saying that no one has ever publicly and specifically estimated the volume and value of overseas claims against US trusts? One basis is general knowledge from involvement in asbestos litigation for 25 years. But, more specifically, that also was the conclusion during an asbestos seminar panel discussion last year. The discussion was part of a March 2009 panel consisting of Steve Kazan (a senior member of the asbestos plaintiff's bar and a lawyer who is very active in international asbestos claiming), Francine Rabinovitz (a wonderful economics and policy expert who advises many trusts, companies and others on future asbestos claiming), and me.
Despite the absence of formal, public estimates of overseas claims, some of the chapter 11 cases have included broad injunctive orders granting debtor entities (and non-debtor entities) the widest possible injunctive relief to protect them against any and all possible future claims, on a global basis. Such orders purport to channel all such claims to the trust created in chapter 11. Issuing global injunctions without meaningful notice and due process is a procedure that is deeply flawed for all concerned, and so will not bind all future claimants, thereby leading to endless claiming and wasted attorney's fees.
On a short-term view, the broad shotgun injunction no doubt appeals to debtors because they (usually) want to exit chapter 11 quickly, and also seek maximum future certainty by obtaining the broadest injunctive protection against any and all future claims. But, the short term approach should be tempered by the reality that the company will not be able to enforce an overbroad, unconstitutional injunction issued without meaningful notice and due process. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812, n.24 (1985)(class action cannot bind persons who were not accorded due process); Stevenson v. Dow Chemical Co., 273 F.3rd 249 (2d Cir. 2001)(class action cannot bind persons who were not adequately represented). Thus, in fact, there is in fact uncertainty if a company is basing its future on an unenforceable injunction.
Overbroad injunctions issued without meaningful notice and due process procedures certainly are adverse for (and illegal as to) a future claimant whose claim may be enjoined when there was no person adequately representing the interest of the overseas claimants whose claims were not actually anticipated in and properly provided for in the insolvency proceedings . As described above, the chapter 11 cases to date have done nothing or very, very little to provide meaningful notice or fair compensation for future overseas claims or claims that arise from corporate interactions, such as joint ventures.
Recognize also that the future claimants also include other corporate entities that will or should be co-defendants in future underlying cases. Like future personal injury claimants, these entities also have not been given meaningful and timely prior notice of proceedings, much less an opportunity to be heard at a meaningful time. Accordingly, to my knowledge, there have not been any hearings to formally and publicly estimate the amount or value of contribution or indemnification claims that current and future co-defendants could or should assert against an insolvent multinational due to both allegedly contributing to the asbestos "exposures" that lead to "asbestos disease."
What kind of corporate interrelationships exist that ought to be carefully, explicitly and publicly considered in the insolvency cases? Consider, for example, the following excerpt from this paper on Eternit (see also last Wednesday's post on Eternit entities.) Specifically, note the assertion that Eternit entities had tight ties to two major asbestos producers that have now been through insolvency - Johns-Manville and T& N/Turner & Newall. Thus, the Eternit paper asserts:
"1960 Eternit Belgium, Johns-Manville (US), T&N and Eternit France together form TEAM, under whose auspices many new [asbestos-cement] firms are established in Asia.
"70-90 Influenced by the debate around the dangers of asbestos, British and American firms are the first to begin to withdraw from the market. T&N and Johns-Manville transfer their interests in TEAM to Eternit Belgium. In addition, Eternit Switzerland withdraws, selling a growing proportion of its interests to Eternit Belgium. By 1989 almost everything which was originally divided between a number of other firms is in Belgian hands. This includes the US firm Eternit Inc."
Want more? Plenty of facts on inter-corporate relationships are out there through books that describe extensive ties between multinational "asbestos companies." In general, the ties consists of joint ventures, sharing knowledge on manufacturing techniques, and sharing information on asbestos health effects. Companies also interacted with each other through inter-company sales of raw asbestos fiber and other products containing asbestos. All of these actions are ones that may give rise to shared liabilities and/or aiding and abetting liability. Here are some examples of the available books; most of them include significant footnotes and bibliographies:
Asbestos House - The Secret History of James Hardie Industries, by Gideon Harris, is a comprehensive account of that company. Numerous mentions are made of relationships between James Hardie, Turner & Newall, Cape Industries, Johns-Manville, and CSR.
The Way From Dusty Death, by Peter Bartrip, is a comprehensive discussion of Turner & Newall and asbestos regulations in the UK from the 1890s through 1970. This book also discusses interactions between various industry titans, including Cape Industries.
Jock McCulloch has written two books on asbestos, focused primarily on mines in South Africa that were the sources for all of the world's amosite fiber, and much of the world's crocidolite fiber. The mines were owned by Cape Industries entities and various other entities. One book is: Asbestos: It's Human Cost, and was published in 1986. McCulloch's second book was published in 2002, and is titled Asbestos Blues, Labour, Capital, Physicians and the State in South Africa.
Messrs. McCulloch and Tweedale combined to write a 2008 book, Defending the Indefensible, the Global Asbestos Industry and It's Fight for Survival.
In addition, Mr. Tweedale also has written extensively regarding Cape Industries and Turner & Newall/T & N. One of his publications is the book titled Magic Mineral to Killer Dust, Turner & Newall and the Asbestos Hazard.
Global Asbestos Claiming - Report on Asbestos Litigation in Nine Nations - Munich Re's Major Compilation of Information
Here is the online image of Munich Re's recent, comprehensive report on asbestos litigation, Asbestos: Anatomy of a Mass Tort. The 112 page report is authored by Nicholas Roenneberg, and is Order number 302-06142. The report can be downloaded and printed from this page.
The same page, on the right hand side, allows you to order a printed copy at no charge.
The report is quite good. It begins with a review of asbestos litigation in North America. The report goes on to explain and explore various factors relevant to reinsurers such as Munich Re.
Beginning at page 58, the report addresses asbestos claiming in other nations in the context of employers' liability. The report covers the UK, Ireland, Italy, Spain, France, Czech Republic, Japan and Brazil. These country-specific reports are well worth reading to better understand the global asbestos claiming situation.
I owe a hat tip and thanks to Christian Lahnstein of Munich Re for bringing the report to my attention this past fall, and for provding value contributions to dialog regarding mass tort claiming. Christian is a very thoughtful thinker and speaker on the subject of asbestos claiming and its consequences. Indeed, he is thoughtful enough that at a dinner before an international asbestos conference this past fall in London, a smart plaintiff's lawyer listened to Christian for a while and then commented that he was surprised to learn that Christian works in the insurance industry.
Eternit, Etex and Asbestos Cement - Global Scale, Decades Ago - How to Deal with Current and Future Claims ?
Monday's post (12/26) pointed out a variety of product liability, corporate law and compensation issues in the context of one nation (India) and a small group of apparently independent asbestos-cement companies. The point of today's post is to illustrate macro level complexities that arise due to the cross-border issues that arise from multinationals, globalization and immigration, among other factors. A few country-specific points also are noted.
Today's post focuses on the large number of Eternit, Etex and other related entities that for decades have comprised a literally global network of manufacturers of asbestos-cement. Today, some of these companies are in the news because of the recent start of an Italian trial to resolve combined civil and criminal charges involving over 2,500 injuries and deaths suffered by persons injured by asbestos inhaled at manufacturing facilities operated in Italy by Eternit entities. In the trial, individual officers and managers face Italian law charges that are more or less akin to reckless homicide, with the charges related to Italian laws requiring a safe workplace. Additional media stories exist because one of the defendants is a billionaire, and he is busy with actions that rightly or wrongly seek to portray Mr. Schmidheiny as a person who is both "green" and concerned about other people.
Global Scale, Decades Ago: What are sources for facts discussed in this post ? As to the entities in general, this substantial paper provides an extensive and apparently reasonably credible hundred year history of various Eternit entities sprawled around the globe (but note the paper is prepared by partisans plainly interested in causing Eternit entities to make compensation payments.) The paper can be skimmed in just a few minutes to obtain a basic grasp of the global scale and inter-connected nature of the operations. A basic summary is that the entities operated across Europe, Africa, South America and Asia. The paper also describes extensive transfers of business operations between and among entities. For more background and specifics on the trial in Italy, please look to the left for prior posts indexed under Eternit and/or go to this partisan website operated by persons who support the injured persons. Articles here and here relate to Mr. Schmidheiny and his image/actions.
The bottom line ? Actions of Eternit and Etex entities, and their officers and managers, plainly caused many deaths and injuries among plant workers around the globe, and no doubt more deaths and injuries of plant workers will follow in future years. One also may reasonably assume that so-called "take home" exposures have produced some number of deaths or injuries among spouses of plant workers through fact patterns such as a wife contracting mesothelioma due to having shaken out and washed a husband's work clothes laden with asbestos fibers. It also seems fair to conclude that injuries and deaths also have occurred and will continue among persons who worked for contractors who performed services at the plants, such as persons who installed, removed, or serviced a factory boiler. In the US, the latter incidents would give rise to "premises liability" claims. In addition, some additional number of current and future product liability claims will arise among persons who sawed, drilled, broke or otherwise worked directly with asbestos-cement or other Eternit products. For all of these groups of current and future victims of disease, one assumes that some significant number of persons and/or their families will have migrated to other nations.
The injuries and deaths arising from decades of global operations and transfers of business operations will provide the factual grist needed for plaintiff's lawyers, defense lawyers and insurance company lawyers to write and argue a wide range of legal positions on a wide range of liability, compensation and insurance issues. The various positions will be further colored by the years in which relevant action or inaction did or did not occur. The issues for example logically would require parsing which entities and/or officers and directors are directly liable to pay which claims, whether as defendants facing civil claims or via mitigation payments to reduce criminal sanctions ? Also, are those entities or persons financially protected by insurance or other indemnities ? Which entities, persons, insurance policies, or insurers are known, still exist , and are financially viable ? Can funds be obtained from solvent reinsurers who lurk behind insolvent primary insurers?
Other issues may arise regarding which entities or persons are entitled to make claims or decisions regarding insurance or other assets. And, all of these issues will arise under the laws of myriad nations. Moreover, health care costs associated with the injuries will be incurred in myriad nations under myriad legal rules regarding the recoverability of such expenses. To the extents the costs are not recovered from Eternit entities, they will have imposed a burden on the "economic commons" of many nations, and those burdens will be suffered for several future decades due to the 20-50 year latency periods associated with cancers caused by asbestos inhalation.
Also consider the impacts of corporate papers written in myriad languages, and myriad rules on discovery. And bear in mind that most of the paper will not be in digital form. Also think about if and when relevant papers were destroyed or preserved.
County-Specific Topics: To highlight just a few of the legal issues, one may look at the Italian trial to see both differences and similarities when compared, tor example, to the US legal system. One difference between US and Italian law is that Italy allows joinder of both criminal charges and civil claims, an approach that would set off shock waves if used in the US. Second, note that the trial includes claims by Italian government agencies seeking to obtain repayment of expenses incurred for medical care for injured persons. Thus, another example of the reality that diminishing government resources lead to more claiming, and that the US is not unique in being a home for lawsuits seeking government cost recoveries. Note also that the Italian system moves more slowly and in different ways than does the US system. Thus the prosecutors gather and share information and evidence in conjunction with testimony taken at various times before one or more judges. Note finally that the trial coverage highlights yet again the risk related to corporate reputation.
Macro Issues: So, who pays, when and how given a history of inter-related entities spread across the globe, many transfers of entities and assets, and many nations with an apparent interest in asserting jurisdiction and trying to provide due process for both claimants and defendants ? And, how does society cope with the reality that some of the victims probably have moved to other parts of the distant from where they inhaled fibers, and that faux victims will emerge ?
Litigation of course is an option. Consider, however, the incredible amount of wasted resources we saw in US asbestos litigation that took place mainly under one language and with mainly state-based rules of law that vary, but are not so terribly different in their general framework. Now consider the inefficiencies plainly ahead when the Eternit/Etex issues described above will unfold globally in myriad languages under rules of law that in some cases are now fixed but in other cases have yet to be written or decided in developing countries.
For all the above issues, who can or should speak for which future personal injury claimants? Who can or should speak for governments or others who incur health care costs resulting from Eternit-caused injuries ? Who can or should speak for other corporate defendants that will be called on to pay for some or all of the injuries caused by work at Eternit plants or by Eternit products? Who speaks for US and non-US asbestos trusts and/or foundations that will be called on to pay for some or all of the injuries caused by work at Eternit plants or by Eternit products? Who speaks for solvent or insolvent insurers or solvent insurers that are trying to cut off their future payments and risks by participating in "schemes of arrangement" in the UK, the United States or other nations?
Focusing this Week on Global Issues and Future Claims, Starting with Articles on Growing Asbestos Cement Use in India
I keep falling off the "global" side of things. So, this week, I'll make a special effort to be more global. This week I'm also going to try to focus more on the wide range of issues regarding "future" claims. By future claims, I mean future tort or business to business claims that possibly, likely or probably will arise as a result of past and/or current and/or future sales of products that involve risks, whether known, knowable or evolving.
Issues to Ponder: The starting point is India and its booming production of asbestos cement products. As detailed in the articles described below, there are myriad entities involved in and expanding their businesses in India producing asbestos cement products. Plainly, the manufacturing process itself sales produces risks of future physical injuries, and so do sales of the products. So, given the asbestos injury debacles still ongoing in North America, Europe and Australia, what should one think about these processes and sales in other nations. Should asbestos fiber be sold at all since, without it, there is no industry ? Should asbestos-cement sales be allowed ? Should the manufacturers be required to issue warnings in languages geared at the likely readers ? How big should the warnings be? How permanent should the warnings be - after all, someone will dismantle or cut these sheets some day in the future ?
Should the manufacturers be required to buy minimum levels of insurance in case they are wrong in their hopeful assessment that risks are low ? Is insurance even available or is there an "asbestos exclusion" of the sort put into place in the US in the early to mid-1980s? Either way, should their be minimum capital requirements for conducting a business that plainly involves some level of risk? Should these companies be allowed to do business for 20 years and then fold up and exit before cancers arise after lengthy latency periods ? Should they exit through dissolution, insolvency, or chapter 11 like proceedings? Should we judge the actions of the companies, their insurers and their customers based on what we know and have been through in the US, Europe and Australia, or should a different standard apply?
If the risks prove to be greater than stated and/or expected, how much should be paid as compensation when future cancers arise? Should legislation be put in place now that will let insurers keep down premiums and that will warn asbestos-cement users that future damages for a potentially horrible death by mesothelioma will be capped at 1,000,000 rupees? But, what happens when exposed persons migrate to new nations, start families and then become sick (or at risk) in other nations? Will those caps apply ? Will the caps apply to risks of cancer or other disease, or just an actual, manifest disease itself?
If there is much future claiming, shall we (once again) blame the lawyers involved? Shall we blame the business persons who went ahead producing asbestos-cement, knowing they were exposing others to risks and failing to confront fully some very real issues with predictable possible future consequences? Or, shall we blame government officials who let the issues go ? Or, shall we just let the topic unfold on its own, trusting that there will be an economic market-based solution ? Will that solution involve litigation funders? Multinational plaintiff's firms?
Will science save the victims ? In 5, 10 or 20 years, will cancer be a manageable disease? Curable? Always? Sometimes ? For some genomes, but not others? For some cancers, but not others? Will it all depend on when the disease is first spotted as having started at the cellular level?
Simply put, we are now at a time where intelligent, sentient beings are not able to credibly deny the foreseeability of the future issues that may arise. Judge Weinstein and others have plainly said that we in the US have collectively done a lousy job dealing with tort law issues. "Conservatives" blame the trial lawyers. The trial lawyers blame "greed" and purportedly "heartless" business persons. Academics ponder and write, some are great but too many lack a real understanding of the real world of business, science and the litigation industries that thrive on insurance claims and tort claims. Those industries, however, do not have all the answers, and so there is the quagmire known as chapter 11
Myriad former manufacturers and sellers of risky products (not just asbestos) are now in chapter 11, some due to actual insolvency caused by product liabilities and some because chapter 11 is a great place to use legal and financial engineering to dump problems and move ahead without the burden of the past. To that end, our nation's bankruptcy judges have issued rulings creating $ 30 billion or more of asbestos trusts. In the process, the bankruptcy judges hear evidence (very loosely speaking) and make rulings about future tort "liabilities" even though they have little or no clue about the real rules of each of the 50 state court tort systems and/or the realities of insurance claiming or paying, and also have little or no clue why state court tort claim settlements and trials turn out as they do. Too often, they do not even allow objectors to appear and they just "bless" deals cut by interested people, all making money from the outcome. Meanwhile, state court trial judges continue to march asbestos cases to trial despite having little or no idea of or regard for what may or should happen with the $ 20 billion still left in the trusts, and the billions more that will be added. And, virtually no one does or says much for companies that stay in business and are stuck paying the financial tab for deaths and injuries that in fact were caused by companies now sheltered by purportedly world-wide chapter 11 injunctions.
All these abstract issues really do matter and need better answers than we have today. But, the answers are not arriving. Why ? In part because the issues quickly become moot for a person dying from (avoidable) cancer. All they may want to do is try to live, or to die gracefully, perhaps leaving some money behind to support a dependent spouse or children. So, they victims say very little, and their lawyers include some good people, but they are busy looking for the next case and in any event are not really the spokespersons for the future victims.
Who really speaks for these foreseeable future claimants? No one, because their interests are in fact not well-served by today's "future's representatives." Why is that so (in my opinion), when the ranks of the futures representatives include some genuinely good, smart and compassionate individuals? The realistic answer includes many factors. One is that futures representatives are hopelessly conflicted between really sick people and the not so sick. (On this topic, see the Amchem decision, the many law reviews after it, and this great article by Plevin, Epley (now Davis) and Elgarten on the specifics of futures representative conflicts in asbestos bankruptcies) The futures representatives also hit conflicts due to the desire to reach certainty, today or "soon," despite the changes science will bring tomorrow. They also are outnumbered and out muscled. And, finally, the bankruptcy code gives them far too little power, and pays far too little attention to current or future science.
Global Context for Why the Issues Matter: On the last two Sundays, The Toronto Star has published an extended pair of articles (here and here) that are well worth reading as they cover in some detail the topics of increasing use of asbestos in India as a "developing country," and plans to export more asbestos fiber from Canada's Jeffrey Mine. The first article focuses on the growing use of asbestos cement to provide less expensive and "better" housing for people living in massive slums in India. The author, Jennifer Wells, candidly confronts the disparities between the "talking points" offered by the manufacturers and government as compared to the reality of actual working conditions in factories and the reality that there are no safeguards on use in the slums. She also points out that all of the warnings on the products are in languages other than Hindi. Ms. Wells also identifies the manufacturers and fiber suppliers.
The second article focuses on the issues regarding Canada's continuing export of chrysotile fiber, and plans to expand the exports from the Jeffrey Mine. The mine was formerly owned by Johns-Manville and has been in use for decades. According to the article, the open pit phase of mining is drawing to a close, but an underground mining phase is perhaps approaching fruition. The article includes some of the needed dialogue regarding the distinctions between the different asbestos fibers. Unfortunately, the article does not report on whether the "new" fiber to be mined has or has not been tested for "contamination" with amphibole fibers.
These article are yet another example of the issues that evolve as "developing" countries face opportunities and choices. In part, they face choices between current and future health risks, and the demands/pressures of industry and a vast population. They also face choices between the financial and health costs and risks encountered by people aspiring to "better" living conditions.
For those interested in more on the topic of banning asbestos, consider Laurie Kazan-Allen's website that documents her many years spent campaigning with others to ban asbestos use around the world. Ms. Kazan-Allen works through an organization known as the International Ban Asbestos Secretariat (IBAS). Ms. Kazan-Allen is the sister of an American asbestos plaintiff's lawyer, Steve Kazan. She has accomplished a great deal to limit the harms that can arise from asbestos use. She also has organized many groups of victims seeking medical care. legislation and/or compensation. The website contains a vast amount of information and is well worth the time to browse for anyone interested in the issues. The website also highlights a paper on and an upcoming conference opposed to asbestos use in Asia. In addition, Steve Kazan provides a website known as the World Asbestos Report.
Others, of course, would say IBAS goes too far in seeking to ban all use of all forms of asbestos. That position is well laid out in the Toronto Star's second article.
Unfortunately, there is no website focused on those who will have the future risk or disease, or the interests of the companies that will in the future pay bills for other companies.
Milk intentionally altered with melamine sickened around 300,000 thousand children in China The aftermath includes civil suits in China and criminal convictions.
The NYT reported yesterday that civil trial is underway against one of the producers and the retailer. Earlier this year, about 20 involved persons were convicted of criminal charges. Two of them were executed, as reported here. The primary seller went into bankruptcy and was sold at auction, as reported here. Ultimately a compensation fund was set up by the government.
As pointed out by the NYT, more details and news stories are available from an English language paper, China Daily. Some recent stories are here, and here.
A China Daily reporter, Cui Xiaohuo provided the following account of the first hearing:
"A lawsuit filed by a family that was a victim of the melamine-tainted milk scandal saw its day in court on Friday - the first trial for the families suing the milk company since the incident broke out more than one year ago.
Several courts nationwide have previously accepted compensation cases from parents of sickened children who were not satisfied with the government-led compensation, but no court has ever held a public hearing against the company until Friday.
Ma Xuexin, father of a 20-month-old boy from Henan province, requested compensation totaling 55,184 yuan ($8,080) from collapsed dairy maker Sanlu Group in Hebei province and a Beijing-based supermarket, where he bought the Sanlu-brand infant formula milk powder before the scandal went public last year.
The 30-year-old also requested that the medical costs for his son, until he reaches adulthood, be covered by the 1.1 billion yuan State-run compensation fund, of which 900 million was paid by Sanlu Group last December.
"Since my son was born last March, he has suffered from a stone in his left kidney after consuming hundreds of packages of Sanlu-brand infant formula milk powder," Ma said in the hearing.
The two defendants, the bankrupted Sanlu Group and the Longhua supermarket in the Shunyi district, both said they should not be held responsible for the plaintiff's requests because the central government has already set up the fund for victim families.
"There is no official document from the hospitals showing the direct link between melamine-tainted milk powder and the child's kidney problem," said Zhou Xiaolong, a lawyer with the Jimin Law Firm from Hebei province, where Sanlu Group was formerly located.
The hearing came just three days after two criminals were executed by injection in Hebei for their roles in producing and selling toxic milk, which killed six children and made more than 300,000 sick nationwide.
There was not a flurry of media attention at the hearing on Friday. Only representatives from the plaintiff and the defendants were sitting in the small No 9 courtroom at the Shunyi district court, about 30 km northeast of downtown Beijing.
"Being the first case held by a Chinese court, more such cases may have a chance to be heard in the near future," said Xu Zhiyong, a Beijing-based law scholar.
The hearing lasted just two hours without a verdict. The judge, Zhang Nan, said that both sides need to bring more evidence when the trial continues on Dec 9.
Here is an interesting paper from the Lehman bankruptcy. It is a motion for discovery against the UK's Financial Services Authority and PwC. (Hat tip to Am Law Daily for publishing this article on the topic, with a link to the motion. ) The opening paragraph is pasted below:
"The Official Committee of Unsecured Creditors (the "Committee")
appointed in the above-captioned chapter 11 cases of Lehman Brothers Holdings Inc.
("LBHI") and its affiliated debtors and debtors in possession (collectively, the "Lehman
Debtors"), by and through its undersigned counsel, hereby files this Motion (the
"Motion"), pursuant to section 105(a) of title 11 of the United States Code, 11 U.S.C. §§
101-1532 (as amended, the "Bankruptcy Code"), and the Hague Convention of 18 March
1970 on the taking of Evidence Abroad in Civil or Commercial Matters, 28 U.S.C. §
1781 (the "Hague Convention"), for the issuance of two Letters of Request for
International Judicial Assistance in the form annexed hereto as Exhibit A (the "Letters of
Request") to the High Court of Justice of England and Wales (the "U.K. Court") to
compel the production of documents by the following entities located in the United
Kingdom: the Financial Services Authority ("FSA"), Barclays' regulator, and
PricewaterhouseCoopers LLP and PricewaterhouseCoopers International Limited
(collectively "PwC"), Barclays' auditors."
State Secrets Privilege - Should The Alleged Victim Be Compensated When the Government Chooses to Exercise the Privilege ?
Here is an interesting NLJ article on the state secrets privilege from a law professor and dean with an impressive background in both public interest litigation and academics. The law professor, Alan B. Morrison, currently is the Lerner Family Associate Dean for Public Interest and Public Service Law at the George Washington University School of Law. In short, he suggests that the price for exercising the privilege should be that the government pays for the harm caused. Here are two key paragraphs:
"The problem to date has been that the arguments have all been about whether the claims of secrecy are actually justified and who should decide that. The best way around that debate is for Congress to pass a law saying to the intelligence community, "You can keep your secrets, but you (the U.S. Treasury) must pay the claimant's damages if you won't allow the case to be tried in the ordinary fashion." That's what the law says will happen if the government wants to take my land to build a military base, and that same principle should apply in these cases as well.
Here's how such a law might work. Cases would be filed in the usual way, and if the government contended that state secrets might have to be divulged if the case were tried, it would make whatever efforts it could to dismiss the case on nonstate secrets grounds. But if that failed, the attorney general could formally invoke the state secrets privilege. At that point, the case would be transferred to the Court of Federal Claims, which hears claims against the government that it has taken someone's property without compensation. However, once the government invoked the state secrets defense, it would lose its right to contest its liability: The only issue remaining would be the proper amount of actual, but not punitive, damages."
Binding a Successor Corporation to a Forum Selection Clause in International Litigation Related to a Sovereign-Owned Entity
With a hat tip to Mondaq, this article from Proskauer summarizes a recent 2d Circuit ruling holding that forum selection clauses may be enforced against successor entities in the context of an entity 90% owned by the Argentine government. The case arises in the context of business to business litigation, but the same principles presumably will apply to consumer claims where a contract terms is interposed as a substantive defense or as controlling forum. That may be a mixed blessing for corporations as choosing one forum or law may actually foster class action claims because it will simplify otherwise extant issues regarding choice of law and/or forum.
The article's key excerpt explains the following:
"On October 23, 2009, the Second Circuit definitively ruled in Aguas Lenders Recovery Group LLC v. Suez, S.A (ALRG) that U.S. forum selection clauses are enforceable against successors in interest under ordinary principles of contract law - even when the successor is a non-U.S. entity. The opinion ( found here) clarifies this key legal issue, further strengthening predictability in international transactions. Applying ordinary successorship law to forum selection clauses prevents a defaulting successor from escaping liability on a jurisdictional theory when substance and jurisdiction were negotiated as one contractual package.
In ALRG, Proskauer represents the Plaintiff-Appellant in claims against an Argentine entity, AySA. ALRG sued AySA to recover on more than $125 million in loans made to Aguas Argentinas - a now-defunct Argentine entity that ran Buenos Aires' water and sewage system. ALRG alleges that AySA is Aguas' successor in interest. Among other things, ALRG alleges that AySA (owned 90% by the Argentine government) was specifically created to, and did, take over Aguas' contracts and operations after Aguas' shareholders opted to get out of their arrangement with Argentina and that, as part of that takeover, AySA received the physical assets that had been built, improved or acquired using money borrowed by Aguas, the accounts receivable, and assumed various of Aguas' employment and other contracts - yet shirked its obligations under Aguas' loan agreements (which were expressly binding on all successors). Proskauer filed claims against AySA (and others) in the Southern District of New York based, in part, on express forum selection clauses in the operative agreements."
Here is a link to an American Lawyer article detailing a defrauded investor's suit against the SEC for failing to uncover and stop Mr. Madoff's fraud. According to the article, plaintiff's counsel is a former SEC lawyer who acknowledges sovereign immunity rules but has tried to plead around them. The claims are asserted under the Federal Tort Claims Act.
This September 23 NYT article by Charlie Savage describes Obama administration plans to deploy rules that limit the use of the state secrets privilege to block civil litigation. The article also briefly discusses legislative efforts to limit invocation of the privilege.
The existing use of privilege has significantly limited past lawsuits. For an example, see this prior post from this blog regarding civil claims against Saudi entities regarding the September 11 attacks. Make sure to click through to the linked NYT article and its internal links.
Key excerpts follow from the recent article:
Under the new policy, if an agency like the National Security Agency or the Central Intelligence Agency wanted to block evidence or a lawsuit on state secrets grounds, it would present an evidentiary memorandum describing its reasons to the assistant attorney general for the division handling the lawsuit in question.
If that official recommended approving the request, it would be sent on to a review committee made up of high-level Justice Department officials, and then to Deputy Attorney General David W. Ogden and Mr. Holder. All those officials would be charged with deciding whether the disclosure of information would risk "significant harm" to national security, and they would be instructed to seek a way to avoid shutting down the entire lawsuit if possible.
If the Justice Department signed off on asserting the privilege, the head of the agency controlling the information would sign a classified memorandum to be filed with a court explaining in detail the government's reasoning. A judge could request access to particular pieces of underlying evidence.
The policy is silent on whether the government would comply, and officials said such requests would be evaluated on a case-by-case basis. One of the controversies surrounding the privilege is that sometimes judges accept executive assertions about classified evidence without independently examining it.
Tort Settlement Secrecy - Can Government Lawyers Ethically Use Settlement Agreement Terms That Purport to Limit Future Use of The Settlement ?
Is it ethical for government lawyers to demand, or a plaintiff's lawyer to sign, a tort claim settlement agreement that includes terms that purport to limit the use of the settlement agreement in future litigation? "No" is the answer provided in this article addressing the issue in the context of government and private lawyers involved in tort and civil rights claims against the City of Chicago. The article is:
SETTLEMENTS YOU CAN'T SIGN: ETHICAL
IMPLICATIONS OF CHICAGO'S MACHINERY OF DENIAL
By Craig B. Futterman, Jason E. Huber, and Pier Petersen
The article is interesting and valuable in multiple ways. One is its discussion of the settlement secrecy actics formerly used by the City of Chicago, but now apparently abandoned. More value lies in its footnote 32 citation to laws around the US that in one way or another require public access to most settlement agreements arising from tort claims against the government. Also valuable is its closing reminder/discussion of the many cases in which courts have enforced similar unethical settlement agreement terms despite the seeming perversity of that result.
Hat tip to Jerry Crimmins for reporting on the existence of the article and other related background facts in a July 17 , 2009 article in the Chicago Daily Law Bulletin.
Suits Against Sovereigns - Class Action Filed Against the Commonwealth of Antigua and Barbuda for Aiding and Abetting the Stanford Ponzi Scheme
Here is an excerpt fron this blog post by Kevin LaCroix at The D + O Diary:
"The Latest Stanford Financial Group Lawsuit: According to a July 13, 2009 Bloomberg article (here), Stanford Group investors have filed a class actoin lawsuit in the Southern District of Texas against The Commonwealth of Antigua and Barbuda, alleging that the Caribbean nation helped the financier engineer a massive fraud. The complaint (here) , purports to be filed on behalf of all individuals and investors who were customers of Stanford International Bank as of February 16, 2009, alleges violations of and seeks to recover damages under RICO.
I have added this latest lawsuit to my running register of all Stanford Group-related litigation, which can be accessed here."
Set out below are two paragraphs from the Complaint:
"3. Antigua is sovereign, but not above the law. It became a full partner in Stanford's fraud, and reaped enormous financial benefits from the scheme. Stanford stuffed Antigua's coffers - and its officials' pockets - with money stolen from unsuspecting customers throughout the United States, Canada, Central America, South America, and elsewhere. Antigua worked tirelessly to protect and nurture Stanford's criminal enterprise and, in return, eagerly accepted its share of criminally-procured funds.
4. As described more fully below, Stanford's massive fraud would not have been possible without the active, knowing, and essential assistance of Antigua. Antigua: (i) provided a safe haven for Stanford to operate; (ii) provided essential assistance in Stanford's efforts to portray itself to Plaintiffs and other members of the Class as a legitimate provider of financial services; (iii) participated with Stanford in a variety of commercial activities in Antigua that provided a pretext for the transfer of criminal proceeds from Stanford to Antigua; (iv) provided false and fraudulent information to the Securities and Exchange Commission ("SEC") and other regulators in order to thwart the SEC's investigations into Stanford; and (v) shared in the criminal proceeds of the conspiracy, all or substantially all of which were stolen from the Plaintiffs and other members of the Class. "
Jones Day lawyers wrote a detailed article on new Chinese Supreme Court rules regarding litigation over non-performing loans and state-owned banks. This is not quite tort litigation, but provides yet another example of the accelerating relationships between legal sytems, and the difficult issues that may arise when dealing with state-owned entities.
You can see the article here on Mondaq if registered or here on the Jones Day website.
Do not miss a fascinating June 24 article in the New York Times regarding the tort litigation seeking damages from the Saudi royal family for the 9/11 attacks, and make sure to click back through the prior articles and briefs linked to in the past articles. One issue of course is sovereign immunity. Another issue is secrecy - the article quotes from documents said to help prove the claim that some members of the royal family provided financial support to groups said to be linked to terrorists. So far, the immunity defense is prevailing. There also is an ongoing battle about whether the documents can be made public since they were apparently leaked to one of the plaintiff's firms, the Motley Rice firm of asbestos and tobacco fame.
Update - Upcoming US Trial for Claims by Nigerians Against Shell Under the Alien Tort Statute and the Torture Victim Protection Act
A May 29, 2009 law.com article by Mark Hamblett updates on this case. The update provides some additional legal commentary and indicates jury selection was delayed this week, perhaps for settlement talks.
A May 7, 2009 Law.com article by Mark Hamblett from the New York Law Joournal describes an upcoming trial for a fascinating "crimes against humanity" case against Shell by Nigerians. To whet your appetite, here are some exceprts from the article:
"A federal judge has cleared one of the last obstacles to a May trial for families of Nigerian environmental activists who are seeking to hold a Dutch oil company liable for violations of international law committed by the Nigerian military government.
In what will be one of the first times, if not the first time, that a corporation goes on trial for crimes against humanity, Southern District of New York Judge Kimba Wood rejected all but one motion to dismiss by Shell Petroleum, N.V. and other defendants in Wiwa v. Royal Dutch Petroleum, 96 Civ. 8386 and Wiwa v. Anderson, 01 Civ. 1909.
The claim alleges that executed Nigerian writer Ken Saro-Wiwa and other activists were the victims of a campaign of terror launched by the Nigerian government because they fought oil exploration in the Ogoni region of Nigeria. The company, the plaintiffs allege, was complicit in the 1995 hanging of Saro-Wiwa and other activists and the torture, jailing and ultimate exile of Saro-Wiwa's brother, Dr. Owens Wiwa.
Filed under the Alien Tort Statute (ATS) and the Torture Victim Protection Act, the complaints in the two cases contend that the defendants, Shell Petroleum, N.V., recruited Nigerian police and military to attack villages and crush opposition to the company's development in the region. While the plaintiffs are seeking to hold the company vicariously liable, they are attempting to hold directly liable Brian Anderson, the head of the company's Nigerian operation.
Jury selection in the case is expected to begin May 26."
More and more sovereign entities will face tort litigation in the foreseeable future because they are involved in businesses through direct or indirect owenership. A wrinkle on that general issue is whether and when the Holy See, a/k/a The Vatican , can be sued. The issues are complex because it is a nation state. Recent case law in the area is summarized in an interesting article by Russell Jackson of Skadden Arps. He also hosts a blog at www.consumerclassactionsmasstorts.com. The case law he discusses includes Doe v. Holy See, 557 F.3d 1066 (9th Cir. 2009), and O'Brien v. Holy See, 556 F.3d 361 (6th Cir. 2009). The article is here.
More and more tort litigation will involve suits against entities that operate outside the United States and through the Internet. Accordingly, I noted with interest an April 6, 2009 National Law Journal article by Pamela MacLean regarding payday lenders proving difficult to pursue in unfair and deceptive trade practice cases filed by state attorneys' general. Why are they hard to pursue? According to the article, many of them have moved to internet presences and have moved off shore. Some also are said to be claiming immunity from suits as purportedly controlled by Indian tribes. The article provides an interesting review of case law in the area and a basic description of some of the efforts of state attorneys general to prosecute the payday lenders. No doubt similar issues will arise in the future as there are additional suits against sovereigns, and as tort litigation becomes more global.
On the subject of payday lenders, note further that federal legislation was introduced to facilitate law suits byattorney's general, as described here on Pointoflaw.