01 Mar 1999 Latin American Nations Use U.S. Legal System for Profit

Greedy plaintiffs attorneys making back-room deals with elected officials, massive contingency fee deals, untested legal theories, multi-billion dollar claims – sounds like another day in the U.S. court system, doesn’t it?

But this time the perpetrators are five Latin American nations – Panama, Guatemala, Nicaragua, Bolivia and Venezuela1 – all intent on abusing the U.S. system at the expense of U.S. taxpayers.

Spurred on by the U.S. tobacco settlement, a handful of America’s wealthiest personal injury lawyers have persuaded these Latin American governments to sue the tobacco industry in the U.S., using the U.S. court system to do it.

Why use the U.S. court system and not that of their own country?

One reason is that these governments have decided they would rather sue the U.S.-based multi-nationals than the local tobacco companies that actually sell cigarettes in their countries.

Apparently they don’t want to upset their local economy, but upsetting ours is okay.

Another reason is that many Latin American countries have “loser pays” rules in their judiciaries. These rules, which work well in Britain and which some say the United States should adopt, make it possible for the winners of a lawsuit to get their expenses reimbursed by the losers. This procedure makes it less likely that someone will file a lawsuit if they are not sure that they have a good case.

Finally, the lawyers and the governments believe that U.S. juries are more likely to hand out fat awards. They aren’t wrong there. CSX Transportation (formerly Chesapeake and Ohio Railroad) was once found liable for $2.5 billion in punitive damages by a New Orleans jury for a train tank-car fire in which no one was hurt on a train that CSX did not own, repair, transport or load.2 Tobacco litigation is so lucrative for lawyers that attorneys representing just three U.S. states in tobacco litigation will be paid $8.2 billion – with a “b.”3

Will these Latin American governments succeed? Not necessarily. These governments probably believe U.S. tobacco companies would rather settle than fight. What they may not realize, however, is that the U.S. settlement was at least in part due to the fact that several U.S. states passed laws that removed legal defenses for the tobacco companies. But those laws won’t help foreign countries.

The other circumstance these countries may not realize is that these were U.S.-based companies dealing with a U.S. problem. The tobacco settlement dealt with not only money, but with a whole host of regulatory concerns applicable to the U.S. as a whole.

The holes in these cases are a mile wide. By neglecting to name their local tobacco companies as defendants, and instead seeking to harm U.S.-based corporations, their employees, stockholders and, ultimately, U.S.-based suppliers and farmers, the Latin American governments underscore the absurdity of their cases.

On top of that, there is no statutory authority for these suits. These are sovereign nations who made local decisions about how to tax and regulate tobacco consumption in their own nations. The U.S. legal system doesn’t cover them. But because the U.S. is rich, and our legal system not infrequently bestows incredibly high (some would say, abusively high) awards, these nations prefer try their luck in the U.S., hoping that the U.S. court system will deliver them an easy payday.

Most Americans are unlikely to be wild about the idea of U.S. companies, U.S. stockholders and U.S. employees paying the health care bills of foreign governments.

The hypocrisy of these suits is stunning. Most Latin American countries have rejected a U.S. style tort system with all of its attendant excesses, but now that they see the potential for a pot of gold they are all-too-willing to use the U.S. system to accomplish their ends.

Adding to the hypocrisy is that fact that for decades these governments have been the primary beneficiaries of tobacco sales in their own nations, collecting two dollars on average for every dollar collected in sales by the tobacco industry. Now they are saying that tobacco has cost them money, and they need to be reimbursed – but not from local tobacco merchants, but from the U.S.

Every Latin American country has the power to regulate and tax tobacco as it sees fit. Using the U.S. court system instead of their own costs U.S. taxpayers the expense of paying for their trials and the inevitable appeals.

American citizens are spending tax dollars right now to help Latin American nations clean up after Hurricane Mitch. Should they respond by hiring U.S. lawyers to help them clean up in American courts?

Amy Ridenour is president of The National Center for Public Policy Research. Comments may be sent to [email protected].

Footnotes:1 Saundra Torry, “New Attacks in the Tobacco Wars: Other Nations File Suit in U.S. Courts Seeking Damages from Industry,” Newsday, January 20, 1999; “Another Latin American Country Files Suit in the U.S. Against Tobacco Companies,” Business Wire, December 10, 1999; “Venezuela Latest to Sue U.S. Tobacco Firms,” Business Wire, January 28, 1999; “Venezuela Sues Big Tobacco,” UPI, January 27, 1999; “Venezuela Sues Tobacco Industry in Miami,” Reuters, January 27, 1999.

2 “Firm Penalized $2.5 Billion for Accident They Did Not Cause and in Which No One Was Hurt,” Legal Briefs newsletter, The National Center for Public Policy Research, Issue Eight, September 26, 1997.

3 Samuel Goldreich, “Lawyers in Tobacco Deal Win $8.2 Billion in Fees,” Washington Times, December 12, 1998. See also: Amy Ridenour, “Billion-Dollar Legal Paydays Hurt Ordinary Americans,” National Policy Analysis #230, The National Center for Public Policy Research, January 1999.