October 23, 2009
In a detailed ruling with important implications for any company doing business abroad, Judge Paul C. Huck of the United States District Court in Miami this week denied enforcement of a $97 million judgment that a Nicaraguan court had rendered against Dole Food Company, Inc. and other defendants. Gibson, Dunn & Crutcher LLP represented Dole in the action, captioned Sanchez Osorio, et al., v. Dole Food Company, et al., Case No.: 07-22693-CIV-HUCK. This milestone decision is the first on the merits regarding the $2.1 billion in judgments that Nicaraguan courts have issued against Dole and other U.S. companies. These judgments arise from alleged personal injuries asserted by individuals who claim that, while working on Dole-contracted banana farms in the 1970s, they were exposed to the then-common pesticide DBCP. U.S. plaintiffs’ lawyers prompted and actively promoted these claims overseas, with the ultimate intention of seeking enforcement in the United States. The Sanchez Osorio decision provides crucial lessons for companies facing potential or actual adverse judgments from foreign courts that plaintiffs will attempt to enforce in the United States. The decision also follows Dole’s recent success in obtaining dismissals in related, though separate, cases pending in California state court, based on those plaintiffs’ fraud on a California court.
Case Background
In October 2000, the Nicaraguan legislature passed "Special Law 364" to specifically handle claims of injury supposedly resulting from exposure to DBCP, a pesticide that has not been used for decades. Under that law, a Nicaraguan trial court rendered a judgment in favor of 150 individuals for a total of approximately $97 million. Plaintiffs alleged that they worked on banana farms in Nicaragua between 1970 and 1982 and were exposed to DBCP, a chemical that under certain circumstances may affect male fertility. Plaintiffs’ U.S. lawyers filed an action seeking recognition and enforcement of the judgment in Florida state court, which the defendants removed to federal court.
Decision
After considering a voluminous record and conducting a 4-day evidentiary hearing, the U.S. District Court held that four separate and independent grounds precluded it from recognizing or enforcing the judgment.
First, the "Nicaraguan trial court lacked personal and/or subject matter jurisdiction under Special Law 364." Special Law 364 uniquely allowed DBCP defendants to elect jurisdiction by either making large monetary deposits at the outset of the case, or opt-out of Special Law 364 thereby agreeing to waive the forum non conveniens defense in a subsequent U.S. action. Dole expressly elected not to make the requisite deposits and "opt-out," yet the Nicaraguan trial court proceeded with the action. The Court found that Dole "effectively invoked [its] opt-out rights" which "divested the Nicaraguan trial court of jurisdiction."
Second, the Court ruled that the Nicaraguan legal system does not provide due process of law, and that the Nicaraguan "court applied a law that unfairly discriminates against a handful of foreign defendants with extraordinary procedures and presumptions found nowhere else in Nicaraguan law. Both the substantive law under which this case was tried, Special Law 364, and the Judgment itself, purport to establish facts that do not, and cannot, exist in reality. As a result, the law under which this case was tried stripped Defendants of their basic right in any adversarial proceeding to produce evidence in their favor and rebut the plaintiffs’ claims."
Specifically, the Court focused on Special Law 364’s provision establishing an irrefutable presumption of causation between any alleged exposure to DBCP and a plaintiff’s purported sterility. The Court found that the "presumption simply legislates into existence a set of facts based on little more than speculation" and "the credible and unrefuted medical testimony in this case is that it is factually impossible for what is represented in the Judgment to have occurred." It held that due process "do[es] not permit awarding damages in the face of clear scientific evidence of the absence of causation," or, as in this case, "with proof that [the defendants] are not at fault." For example, a majority of the plaintiffs were awarded damages even though "they suffered exclusively from conditions not scientifically linked to DBCP exposure," and over $21 million was awarded to plaintiffs who fathered children after their alleged exposure–which likewise is "completely incompatible with scientific reality" about the affects of DBCP exposure. The application of the causation presumption, therefore, "flies in the face of the unrefuted medical and scientific evidence before the Court."
Additionally, the Court found that "Special Law 364, by design and in operation, targets a handful of United States companies for burdensome and unfair treatment to which domestic Nicaraguan defendants are never subjected." The Court cited approvingly the testimony by Stephen Schwebel, former judge of the International Court of Justice (the "World Court"), that "the unfair, discriminatory nature of Special Law 364 exceeds that of any law of which he is aware." Examples of the discriminatory procedures included disproportionate minimum damages, over $15 million in required deposits just to permit a defendant to defend itself in court, limited appellate rights, summary evidentiary proceedings, and the imposition of retrospective liability. The Court ruled that "civilized nations simply do not subject foreign defendants to the type of discriminatory laws and procedures mandated by Special law 364."
Third, the Court found "the evidence is compelling that Nicaragua lacks impartial tribunals" such that the judgment could not be enforced. The judgment "was rendered under a system in which political strongmen exert their control over a weak and corrupt judiciary, such that Nicaragua does not posses a ‘system of jurisprudence likely to secure an impartial administration of justice.’" In fact, the Court concluded, "Special Law 364 and its application in the Osorio proceedings could well serve as Exhibit A evidencing the lack of independent tribunals in Nicaragua. The passage of Special Law 364 is itself further evidence of undue political meddling in Nicaragua’s judicial process."
Fourth, and finally, the Court held that the judgment could not be enforced because to do so would violate Florida’s public policy. Specifically, the "irrefutable presumption of causation applied in this case is a sufficiently consequential departure from Florida law to warrant non-recognition on public policy grounds." Indeed, the Court found that "enforcing this judgment would undermine public confidence in the tribunals in the state, in the rule of law, in the administration of justice, and in the security of individuals’ rights to a fair judicial process."
Ultimately, therefore, "the judgment in this case did not arise out of proceedings that comported with the international concept of due process."
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The Sanchez Osorio decision represents an important development in what is becoming an increasingly common litigation scenario: U.S. plaintiffs’ lawyers exporting their tactics to specifically targeted foreign countries in order to exploit the weaknesses and biases of overseas judicial and political systems and obtain gargantuan awards against U.S. corporations. These efforts may be undertaken with the active collusion of corrupt and hostile political actors. The ultimate end-game for this tactic generally is an action seeking recognition and enforcement of the foreign judgment in the United States. The searching and trenchant analysis set forth in the Sanchez Osorio decision represents a significant setback to the plaintiffs’ bar’s efforts to import into the United States the fruits of their tainted foreign labors.
"The Kill Step": State Court Dismissals of Two Cases Based on Plaintiffs’ Fraud on the Court
Gibson, Dunn & Crutcher also recently represented Dole in two high-profile toxic tort actions filed in Los Angeles Superior Court that were intended to be test cases for thousands of similar pending or potential claims. Plaintiffs alleged injuries from DBCP while working on banana farms in Nicaragua during the 1970s. After Dole presented stunning evidence of a widespread conspiracy to manufacture DBCP claims in order to defraud the defendants and the trial court, the Superior Court imposed terminating sanctions and a complete dismissal of the actions. The article entitled "The Kill Step" provides an analysis of the cases and their global and political implications and describes how Gibson Dunn partners Theodore Boutrous, Scott Edelman and Andrea Neuman gradually exposed the fraud. The article appeared in the October 2009 issues of The American Lawyer and Corporate Counsel.
Article printed in The American Lawyer and Corporate Counsel, © 2009, ALM Media Properties, LLC.
Gibson, Dunn & Crutcher’s lawyers are available to assist in addressing any questions you may have regarding the issues involved in the Dole cases. Please contact the Gibson Dunn attorney with whom you work, or any of the following:
Theodore J. Boutrous, Jr. – Los Angeles (213-229-7804, [email protected])
Scott A. Edelman – Century City (310-557-8061, [email protected])
Andrea E. Neuman – Orange County (949-451-3937, [email protected])
William E. Thomson – Los Angeles (213-229-7891, [email protected])
© 2009 Gibson, Dunn & Crutcher LLP
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