Morrison, Big Tobacco and Limited Jurisdictional Thinking – An Early Example of the Need for C
Alison Frankel at AmLaw published today this significant story on the continuing impact of the limited thinking jurisdictional thinking embodied in the Morrison securities law decision. The article tees off from a new ruling in which a US federal judge invoked Morrison to hold that the US Justice Department cannot enforce previously won injunctive, RICO-based relief against global tort giant British American Tobacco. Ms. Frankel also notes other, similar post-Morrison rulings that defeat using US courts and laws to police global torts. Note further that the lower court judges issuing these rulings are not shy judges – Judge Kessler has coped for years with the government’s massive claims against big tobacco, and another of the judges is the well-known and outspoken Judge Rakoff. Moreover, as Ms. Frankel points out, one of the similar rulings involved a RICO suit by the EU – yes, really, the EU itself – against big tobacco.
It’s disturbing to watch the impacts of the limited jurisdictional thinking of Chief Justice Roberts’ Court. Limited jurisdictional thinking is outmoded in this age of virtually instant, global movement of corporations, people, and capital. And, global corporate movement and gaming of laws is not just economic theory – it is reality when corporate entities define their mission almost solely around the short-term creation of money (a/k/a shareholder value), regardless of the long-term consequences and harms. Need examples of such corporate behavior? Go here and read/watch the March 27, 2011 story by Leslie Stahl of 60 Minutes on corporations creating tax dodges by moving themselves, their people and, supposedly, moving the location of IP assets. Or, read David Kocieniewski’s great NYT story on GE’s massive, global gaming of tax laws by a massive tax department viewed as a profit center. (Note also this blog post by tax law professor Paul Caron highlighting GE’s tax strategies and its corporate service mark: Imagination at Work.) Or, read my prior post on Australian tort defendant James Hardie skipping around the world seeking shelter from tort storms it created.
Where does this all end? Hard to say. It does, however, seem plain that the world’s societies need to act to create faster and better global forums for enforcement of national and international laws and treaties, and courts need to revisit their "traditional thinking" about "traditional notions" of due process, territorial reach and justice for "foreign corporations." New legal forums and rules need to evolve – quickly – due to globalization, the Internet, jet planes and other factors that make modern life so global in so many ways. Since global regulators largely do not yet exist and may never exist, new processes need to evolve to cope with global torts. For now, decisions such as Morrison are creating jurisdictional black holes that bright lawyers and some companies can and will exploit until stopped.
Ultimately, these stories highlight the truth of a thesis repeatedly argued by a brilliant friend who worked for years in global finance: Capital and companies will run wild until regulators and/or courts become exponentially smarter, faster and global.
In the long term, regulatory and jurisdictional black holes are bad for humans and other creatues because the holes allow toxin sellers to escape paying for the consequences of their actions. And, jurisdictional black holes also can be bad for corporations, at least in some settings. Why? Because corporations can be attacked by global pirates, whether using the high seas, internet hacks, or other tactics to plunder and steal. Imagine, for example, BAT’s reaction if a US court refused to grant an injunction against a "foreign" entity that blatantly counterfeited cigarettes. Or, imagine GE’s reaction if a US court declined to enjoin an offshore, "foreign" entity from selling medical scanners built around stolen GE technology subject to US patents.