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The rise of “Tort Tourism”

July 15, 2012

by Sean Hackbarth
U.S. Chamber of Commerce,

Innovation runs amok when trial lawyers find new ways to attack businesses. In Investors Business Daily, U.S. Chamber President and CEO, Tom Donohue lets us know about “tort tourism,” lawyers traveling the globe in search of sympathetic courts where they can sue companies for big paydays and then try to convince American courts to uphold those rulings. He uses the example of Chevron under legal assault in Ecuador:

In 2003, Chevron Corporation was sued in Ecuador for environmental damage allegedly caused by Texaco’s oil operations a decade earlier, even though Texaco — which Chevron acquired in 2001 — had ceased operations in Ecuador in 1992 and had settled any outstanding claims for environmental cleanup with the Ecuadorian government in 1994.

Nevertheless, in February 2011, an Ecuadorian judge ordered Chevron to pay $8.6 billion in damages. Incredibly, the judge increased that amount to $18.6 billion because the company refused to publicly apologize within 15 days of the judgment. It is the largest award ever by a foreign court against an American company.

Chevron has no assets in Ecuador, so the plaintiffs’ lawyers engaged in some tort tourism. They devised a plan to collect the judgment wherever Chevron did business.

First stop — the United States. Chevron, with ample evidence that the Ecuadorian judgment had clearly been procured by fraud, won an injunction from a federal court in New York that would have, among other things, prevented collection of judgment in the United States. That injunction was overturned by a higher court. The case is now before the Supreme Court.

For an example of the fraud mentioned by Donohue, a 2011 op-ed from Carter Wood, who has covered the Chevron lawsuit for many years, shows how plaintiffs lawyers were in cahoots with Ecuadorian officials to intimidate judges.

Donohue suggests two steps that can be taken to rub out this nefarious legal tactic. First, a federal law should be passed that is “clear, uniform, and modern — one that recognizes foreign judgments only when arrived at in a fair, reasonable and legal manner.” Second, the Supreme Court should hear the Chevron case and rule “that when there is evidence that a foreign judgment has been procured by fraud or corruption, the victim of the ill-gotten reward should have the right to preemptively block recognition and enforcement of the award in U.S. courts.” The U.S. Chamber’s National Litigation Center filed an amicus brief making that case.

Tort tourism is another egregious example of out-of-control trial lawyers putting big-money shakedowns of businesses above the quest for justice and must be stopped.

  
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