The Multinational Monitor


C O R P O R A T E   A C C O U N T A B I L I T Y

The South's Day In Court

by Ellen Hosmer

On March 28, 1990, the Texas Supreme Court handed down a landmark decision that shocked the business community and bucked the trend across the United States of restricting foreigners from suing U.S. corporations for injuries caused overseas.

In a 5-4 decision, the Court gave notice to U.S. companies that if they hawk their hazardous wares overseas, they may find themselves hauled into U.S. courts, at least in Texas anyway.

The decision in Dow Chemical Company and Shell Oil Company v. Domingo Castro Alfaro struck down a doctrine, known as forum non conveniens, which allowed judges to dismiss suits by foreign plaintiffs on the grounds that the forum or court that the plaintiff had chosen was not convenient or proper because the injury or death took place elsewhere.

Plaintiffs' lawyers, environmentalists and corporate accountability advocates applauded the decision. "The [Texas] Supreme Court decision knocked out an antiquated legal doctrine that should have disappeared with the first export of a hazardous American product," says Russell Mokhiber, editor of Corporate Crime Reporter, an investigative weekly based in Washington, D.C. and author of Corporate Crime and Violence. "The decision shook the corporate world, which has used this special protection against innocent victims injured by American products in faraway lands."

A new era of corporate accountability may not yet be on the horizon, but the Texas decision will almost assuredly bring change in corporate boardrooms. The decision will make corporations "more aware of the consequences of their trade in these very dangerous products," noted Monica Moore of the Pesticide Action Network in San Francisco.

Other cases are sure to follow in the wake of the decision. Lawyers for the victims of the 1984 explosion at the Union Carbide plant in Bhopal, India are already considering refiling their claims in Texas courts and Alfaro's lawyer is representing another 220 plaintiffs in similar suits against Dow, Shell and Standard Fruit Company. Standard Fruit was left out of the original case for fear that workers still employed by the company would face retaliation.

The Texas decision caused an outcry from the business community. The Texas Association of Business warned that the decision could spell disaster for the Lone Star State. "[A]llowing foreign workers to sue Texas companies could drive industry from the state or keep new companies from moving in," the association noted. It's a "significant blow not only to Texas business but to future economic development."

Dissenting justices made equally ominous predictions. Why "should Texas be the only state in the country, perhaps the only jurisdiction on earth, possibly the only one in history, to offer to try personal injury cases from around the world?" questioned Justice Nathan Hecht in his dissenting opinion.

The Alfaro case

The case that has sparked such controversy began in the 1970s on the Standard Fruit banana plantations of Costa Rica. The 1970s were a time of bumper crops on the plantations, in part because of a pesticide produced by Shell Oil and Dow Chemical. DBCP, or dibromochloropropane, was injected into the ground around the plants, obliterating the pesky nematode worm which ate the banana roots.

It was a miracle pesticide, allowing Standard Fruit to reap unparalleled harvests. For the farmworkers who trudged through the banana fields applying the chemical, it gave them a way to feed their families.

But the pesticide had another effect, one that Shell and Dow were less eager to have publicly linked to their efficient substance: it caused sterility in workers who handled it. As early as the 1950s, there were disturbing animal studies about the health effects of DBCP. Tests conducted by both Shell and Dow showed that when animals were exposed to the pesticide, their sperm counts fell and their testicles shrivelled and atrophied.

In the United States, workers who were exposed to the product found that they later became sterile. Although Shell, Dow and other companies acted quickly to limit the damage to U.S. workers and thereby forestall the multimillion dollar lawsuits that the allegations had spurred, they continued to ship the product overseas for use by unsuspecting Third World farmworkers. DBCP has been labelled one of the "Dirty Dozen" by the Pesticide Action Network due to its toxicity, but selling the pesticide overseas is not prohibited by the U.S. government despite the fact that the U.S. Environmental Protection Agency ordered a phase-out of the pesticide on food in 1977. Later, the EPA entirely removed pesticides that contained the toxic substance from the market.

In Costa Rica and many other Third World countries, it took much longer to ban the pesticide. By the time public concern had spurred action, a thousand workers allegedly had been sterilized in Costa Rica alone. Many also face elevated risks of stomach cancer from exposure to DBCP.

That would have been the end of the story, simply another tragic example of Third World workers or consumers being exposed to hazardous products or processes that are no longer acceptable in the United States. But Domingo Castro Alfaro and 81 other Costa Rican workers and their spouses decided to challenge the U.S. corporations and to sue in U.S. courts. Thrown out of courts in California and Florida on grounds of forum non conveniens, they persisted and brought their case to Texas, home of Shell's world headquarters and of the largest Dow-owned chemical plant in the Untied States.

Originally the farmworkers and their attorney, Charles Siegel of the Dallas law firm of Baron & Budd, found Texas less than receptive. Their suit against Shell and Dow was dismissed in the Houston State District Court on the grounds that it was not a convenient forum. The appeals court, however, overruled the district court, holding that the farmworkers' case should be heard in Texas. Dow and Shell quickly appealed to the Texas Supreme Court.

The Supreme Court affirmed the appellate court's decision, dealing a blow to both Dow and Shell and other corporations which apply different health and safety standards to products and processes they ship overseas. Lawyers from Shell were astounded. "We thought the law was well established that the doctrine of forum non conveniens was available in Texas," says James Evans, an attorney with Shell. "We were really disappointed at the decision."

Shell attorneys argue that bringing the case to the U.S. courts will be much more than inconvenient. "The problem that you have is that all the incidents took place elsewhere in the world; how can we get discovery, how can we get the medical records, how can we know what doctors examined the plaintiffs, how can we know what exposures the plaintiffs had, how can we even know what products the plaintiffs dealt with?" asks Evans.

The Texas courts can't force relevant witnesses to come forward from Costa Rica or doctors to release their records, he says. "We think we're put in an extreme disadvantage to defend our case."

Siegel responds that the defendants will have easy access to all the information they need. His clients have agreed to come to Houston both for medical examinations and for depositions. "It's really hard for the defendants to argue that our case is inconvenient," he says. "No one can really argue that with a straight face."

Siegel says the forum non conveniens argument was a ruse to force the case out of US. courts, a point duly noted by Texas Justice Lloyd Doggett in his concurring opinion. "Shell Oil Company is a multinational corporation with its world headquarters in Houston, Texas. Dow Chemical Company, though headquartered in Midland, Michigan, conducts extensive operations from its Dow Chemical USA building located in Houston," wrote Doggett. 'The chemical allegedly rendering the workers sterile was researched, formulated, tested, manufactured, labeled and shipped by an American company in the United States to another American company. The decision to manufacture DBCP for distribution and use in the Third World was made by these two American companies in their corporate office in the United States. Yet now Shell and Dow would argue that the one part of this equation that should not be American is the legal consequences of their actions."

Both the plaintiffs and the defendants understand the implications of moving the case to Costa Rican courts. A costly trial would be impossible to undertake since the total compensation that could be received in Costa Rica wouldn't cover even a fraction of the costs associated with suing a major multinational company.

Even Evans admits it would be difficult for the workers to bring a case to court in Costa Rica. "The laws in Costa Rica provide fora set scheme of recovery. It provides with great specificity the amount of money that the plaintiffs are able to recover.... [IIn Texas we have a far wider range of recovery."

After damaging evidence surfaced showing that the manufacturers of DBCP had had information on the health risks of the pesticide for many years, U.S. workers alleging sterility from exposure to the pesticide received settlements in the high six figures, according to Siegel. By contrast, he says, typical compensation for a worker sterilized on the job in Costa Rica is $1,500. Since Alfaro and the other farmworkers make only a little over a dollar an hour, they would be unable to pay for a lawyer in Costa Rica nor would a settlement of this size be sufficient to cover even legal costs. "We have been fighting Dow and Shell for six years now just on the issue of where the case is going to be tried," Siegel says. "Our firm has spent a good deal over $100,000 on the case so far. As a practical matter, the only place in the world where workers can manage to take on companies like this is the United States."

History of forum non conveniens

The forum non conveniens doctrine was originally in-tended to weed out cases that were clearly not appropriate for U.S. courts. Until the 1970s, the doctrine was rarely used. It only became popular with the Reagan federal court.

Reagan appointees had been looking for a new way to deal with the growing number of foreign personal injury and death cases, and forum non conveniens, which allowed for judicial discretion above all else, fit the bill perfectly. It allowed judges to dismiss cases when the traditional rules of jurisdiction would have allowed such cases to remain in U.S. courts. "The federal courts began dusting off and using that old doctrine more and more readily," said Professor David Robertson at University of Texas School of Law.

As applied by the Reagan judiciary, forum non conveniens allowed judges to bow out not on the merits of the case but because of the size of their dockets, the complexity of the case and the number of plaintiffs. "America, as far I know, is the only place in the world where it's legitimate for a court to say part of the reason we're declining to hear this case is our dockets are crowded," says Robertson.

As the federal courts invoked the forum non conveniens doctrine more often, foreign plaintiffs started looking to the state courts for a hearing. But many state courts had followed the feds' lead. Forty states and the District of Columbia have recognized forum non conveniens. Some states, however, held out. Texas, although allowing some cases to be dismissed on forum non conveniens grounds, left in force a state law giving foreigners access to its courts in certain instances. Now the Texas Supreme Court decision has taken away the judicial discretion that had allowed forum non conveniens to be applied on an ad hoc basis.

For many multinationals, the lack of forum non conveniens in Texas is particularly worrisome. Texas headquarters 39 of the Fortune 500 corporations. And as the third largest state in the country, many corporations do extensive business in Texas. More plaintiffs could conceivably charge that a corporation had significant enough ties with the state to mandate that the lawsuit be heard there.

This possibility has spurred the multinationals to action. There is talk that the Texas and U.S. business communities will attempt to close the doors of the state's courthouses to foreigners during the next regular legislative session by pushing through a forum non conveniens law. "Big business is back and wants to overturn the decision in the Texas legislature and reinstate the protection," Mokhiber says. "The eyes of multinationals are on Austin and the betting is that the state of Texas will once again live down to its reputation of being owned, con-trolled and refined by the petrochemical giants."

Business leaders are already predicting that apocalyptic repercussions will flow from the decision. They claim that, without the doctrine, Texas will be seen as inhospitable to multinational corporations and that companies will not locate there.

But critics of forum non conveniens charge that such claims are mere scare tactics. Safeguards are still in place to ensure that cases brought to Texas courts have both merit and standing in the state. Jurisdictional rules still apply and the statute itself only allows suits by plaintiffs from countries that maintain equal treaty rights with the United States. A majority of countries apparently do not have such treaties. And cases can still be removed to federal court, where forum non conveniens is alive and well, unless there is a local defendant in the case.

Corporate accountability

Without the risk of legal suits in US. courts, companies can evade responsibility for their business decisions overseas.

"It's a great tool for them to evade accountability," says Siegel. "They have this whole sphere of profit � sales to foreign countries � without any corresponding liability for the injury they cause."

In his concurring opinion, Doggett agreed. "The refusal of a Texas corporation to confront a Texas judge and jury is to be labelled 'inconvenient' when what is really involved is not convenience but connivance to avoid corporate accountability," wrote Doggett.

This is especially true in Third World countries, where worker and consumer health and safety laws are often nonexistent, and where small recoveries and the lack of contingency fees make court costs an impossible under-taking for much of the population. Such plaintiffs have the deck stacked against them from the beginning, de-spite the magnitude of their injuries or the strength of their cases.

"Unfortunately, the justice systems in most nations, particularly Third World countries, just aren't equipped to deal with modern day wrongs of the kind that companies like this perpetrate," Tommy Jacks, president of the Texas Trial Lawyers Association, says.

One of the reasons that forum non conveniens is so popular with corporations is that once such cases are thrown out of U.S. courts, the victims rarely find their way to any other forum. In a study at the federal level, Robertson found that fewer than 4 percent of cases dismissed on grounds of forum non conveniens make it to courts overseas. "If the cases don't get brought here they don't get brought," he says.

One of the most disturbing examples of how forum non conveniens denies foreigners a just hearing is the case of the Bhopal victims. Union Carbide used a highly dangerous process to create pesticides with untrained workers, non-functional and inadequate safety equipment and a poorly designed plant. It was a disaster waiting to hap-pen, according to lawyers representing the victims. But Union Carbide refused to respond to warnings. The gas leak which occurred the night of December 2-3 killed an estimated 10,000 people and injured hundreds of thousands more.

In the legal wrangling that followed, the case was first thrown out of a court in New York on the grounds of forum non conveniens. Once in the Indian courts, Union Carbide argued that the proceedings violated due process. Four years after the accident, the victims were still waiting for a settlement. Finally, the Indian government decided to settle for $470 million.

Union Carbide was fortunate. Had the case been heard in U.S. courts, it would almost assuredly have cost the company billions of dollars. Lawyers for the plaintiffs estimate that the figure could have been as high as $5 billion.

But Bhopal, while highly publicized, was only exceptional for the magnitude of the loss of life. The list of products and processes shipped overseas when they fail to meet U.S. health and safety standards is long. From children's nightgowns treated with cancer-causing TRIS, to pacifiers pulled from the US. market because they choked infants, to dangerous pesticides, to hazardous wastes that are difficult to isolate from water tables or neighborhoods, to contraceptives like the Dalkon Shield that caused women to bleed to death, the Third World has long been a dumping ground for first world products deemed too dangerous for citizens with full access to a legal system and strong regulatory bodies.

The export of hazardous pesticides alone is said to cause a million poisonings and 20,000 deaths each year in the Third World. Although Congress is currently considering legislation to regulate the export of hazardous pesticides, it will be a difficult battle. Twenty-five percent of all pesticides exported from the United States are banned or unregistered, says Moore of Pesticide Action Network. The country's largest producers of these products will not stand idly by while their profits from Third World sales are slashed.

Decisions like that of the Texas Supreme Court which require that corporations figure into their bottom lines the cost in lives and health of exporting hazardous goods are needed to end the double standard that corporations apply to the Third World. "Some United States multinational corporations will undoubtedly continue to endanger human life and the environment with such activities until the economic consequences of these actions are such that it becomes unprofitable to operate in this manner," wrote Doggett. "When a court dismisses a case against a United States multinational corporation, it often removes the most effective restraint on corporate misconduct."

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