June 24 (Bloomberg) -- Dole Food Co. is using a California judge’s finding of a conspiracy hatched by plaintiff’s lawyers and Nicaraguan courts to fend off $2 billion in verdicts against the fruit producer and other U.S. firms for pesticide poisoning.

Superior Court Judge Victoria Chaney in Los Angeles ruled that three suits alleging ill effects from Dole’s use of a farm chemical were based on false testimony by coached Nicaraguan men. They alleged banana farming in the 1970s exposed them to a pesticide that left them sterile. The judge threw out two cases awaiting trial, and Dole appealed the one it lost. The company is using Chaney’s ruling to fight paying a $98.5 million Nicaraguan verdict in Miami federal court.

Chaney said she found a systematic effort to defraud Dole and companies including Dow Chemical Co. by U.S. and Nicaraguan attorneys, as well as judges in the Central American country.

“These lawyers used a corrupt judicial system and manufactured evidence to bring judgments to U.S. courts for the U.S. courts to enforce,” said Edwin Smith, a professor of international law at the University of Southern California. Chaney’s findings in a June 17 opinion reinforce U.S. State Department reports that depict Nicaragua’s judicial system as being compromised, he said.

The judge found evidence of an enterprise built on “fraudulent evidence for the creation of judgments that could be brought to U.S. courts” for enforcement against the companies, Smith said. The plaintiffs’ lawyers denied wrongdoing, and a Nicaraguan judge in an interview questioned Chaney’s reliance on secret testimony from Dole witnesses.

First U.S. Trial

The 2007 Los Angeles trial lost by Dole was the first in the U.S. over Nicaraguans’ claims of sterility caused by the pesticide dibromochloropropane, or DBCP. The U.S. Environmental Protection Agency banned the chemical in 1979 after it was linked to sterility of workers at manufacturing plants.

Dole says there’s no reliable evidence that farm use of the chemical causes sterility. It appealed the verdict along with its codefendant, Midland, Michigan-based Dow. The award against Dole after post-trial motions is $1.58 million.

“Contrary to their sworn testimony, most of the plaintiffs never worked on Dole-affiliated banana farms and none were involved in the DBCP application process,” Chaney said in her written opinion, explaining an initial April ruling. “The plaintiffs, and their counsel, were part of a broader conspiracy that permeates all DBCP litigation arising from Nicaragua.”

Nicaraguan and U.S. lawyers in at least four firms worked with operators of at least four laboratories and Nicaraguan judges, including the one whose ruling Dole is challenging in Miami, to manufacture evidence and fix cases, Chaney found.

32 Losses

The trial and the two that were canceled may have been used as guides for settlements. More than 40 DBCP cases with more than 5,000 plaintiffs from Costa Rica, Guatemala, Panama, Honduras and the Ivory Coast are pending in Chaney’s court.

Nicaraguan courts since 2002 have issued judgments in 32 lawsuits for a total of $2.05 billion against Dole and DBCP manufacturers, Dole said May 8 in a regulatory filing. If the plaintiffs win in Miami, their lawyers will try in other U.S. courts to collect judgments companies refused to pay, Dole said.

Closely held Dole, based in Westlake Village, California, is the world’s largest fresh-fruit and vegetables producer, with $7.62 billion in revenue last year. The company, operating as Standard Fruit Co. in Central America, lost its Nicaraguan banana farms when the Sandinista government expropriated them after taking power in a 1979 revolution. The new government destroyed labor records, opening the door to the fraudulent lawsuits, Dole said.

Nicaraguan Law

A Nicaraguan law enacted in 2001 guarantees minimum damages of $100,000 to each plaintiff claiming to have worked on a banana farm where DBCP was used and who provides medical evidence of sterility, Chaney said in her 60-page ruling.

The law presumes the plaintiff’s sterility is caused by DBCP and requires defendants to post a $15 million bond to participate in the suit, the judge said.

“The vast majority of these plaintiffs have never had to make an appearance in court or submit to medical testing by defendants,” she wrote in the decision. Chaney opened an investigation into possible fraud in February 2008 after Dole’s loss at trial.

The company said an unidentified Nicaraguan witness claimed to know about wrongdoing by the plaintiffs’ lawyers.

As the California judge weighed Dole’s request to interview more witnesses, the company alleged plaintiffs’ attorneys were interfering with its investigation in Nicaragua.

Intimidation Evidence

Dole later presented evidence, ruled to be credible by Chaney, that the plaintiffs’ lawyers used street demonstrations and radio broadcasts to intimidate the company’s investigators and warn locals not to cooperate with them.

The plaintiffs countered that Dole offered bribes to solicit witnesses, a claim Chaney rejected as unsupported.

The judge said the need to protect Dole’s witnesses required her to shield their identities. As a result, they didn’t appear in court during a three-day hearing in April. Instead, they testified on video, with faces obscured and voices distorted.

Chaney ruled “an entire industry has developed around DBCP litigation in Nicaragua for the purpose of bringing fraudulent claims.” It began with lawyers disappointed at finding few sterile workers to serve as plaintiffs, she said.

“Because more plaintiffs were desired to make the DBCP litigation a profitable enterprise, these law firms turned to fraud, first by finding men willing to lie about being exposed to DBCP while working on banana farms, and second by faking the sterility of these men,” according to Chaney’s ruling.

Recruiting, Coaching

At least three Nicaraguan law firms and one based in Texas used “captains” to recruit plaintiffs, often making them pay for training manuals and field trips, and coached them to testify they were made sterile on farm jobs, the judge said.

“The firms attempted to recruit people in the poorest areas of Nicaragua, thought most susceptible to exploitation, and after promising them an imminent windfall, proceeded to charge them for the right to be part of a plaintiff group,” she said.

Lawyers in Nicaragua provided unspecified “improper benefits” to judges “for influencing the outcome of DBCP cases in favor of plaintiffs and to obtain judgments that could be enforced in the U.S. or other jurisdictions,” Chaney said.

The Nicaraguan judgment Dole is challenging in Miami was entered by Judge Socorro Toruno, who Chaney alleged conspired with U.S. and Nicaraguan lawyers to manufacture evidence and “fix” DBCP cases.

Meeting in Nicaragua

Chaney accepted the testimony of Dole’s witnesses that Toruno hosted a meeting attended by lawyers from a Texas-based law firm, Provost & Umphrey LLP; Benton Musslewhite, a Houston lawyer; Juan Dominguez, a Los Angeles lawyer; and Nicaraguan lawyers, recruiters and laboratory personnel.

“It’s absolutely not true,” Musslewhite said in an interview. “I don’t know who Dole got to lie for them. We’ll get the evidence out there that that meeting never took place.”

Musslewhite said his passport shows he wasn’t in Nicaragua in March 2003, when the alleged meeting took place. He declined to comment on Chaney’s fraud findings, saying he is involved in DBCP cases before her that include non-Nicaraguan plaintiffs.

The attorney said he worked with local lawyers to bring cases in Nicaragua, including the one that resulted in the verdict before the Miami judge. He denied the corruption claims.

“Judge Toruno is one of the finest judges I know,” Musslewhite said of the Nicaraguan jurist. “I can’t believe she was ever paid by anybody, and certainly not by us.”

No Fabrications

Toruno, in a telephone interview from Chinandega, Nicaragua, said she “never met with anyone to fabricate evidence.”

The judge said she received lawyers from Provost Umphrey in her office as part of trial proceedings, just as she did lawyers for Dole. She never told attorneys how to falsify lab reports for use in trials, she said.

Toruno said allegations against her were discredited by Chaney’s decision to rely on secret testimony.

“It’s strange to me that she doesn’t want to say where those allegations came from,” Toruno said.

Chaney said she balanced the witnesses’ safety and potential damage to the reputations of people named as participants in fraud in deciding how to gather evidence.

“This court understands and respects the need for these individuals to defend themselves in an adversary proceeding” in another forum, the judge said.

Texas Law Firm

Mark Sparks, a Provost & Umphrey lawyer who Chaney said was at the meeting with Toruno, didn’t return a call for comment. Joe Fisher of the same firm declined to comment.

Rosario Murillo, a spokeswoman for the Nicaraguan government, didn’t respond to calls and e-mails seeking comment.

Chaney said she would refer the case to the California State Bar and federal prosecutors. She initiated contempt of court proceedings against Dominguez, the Los Angeles attorney.

In her written ruling, Chaney alleged Dominguez solicited perjury, offered a bribe, obstructed justice and falsely accused Dole’s lawyers of trying to bribe a witness with offers of $50,000, U.S. visas and a new home and job in the U.S.

Dominguez denied any wrongdoing, his law firm said May 19 in an e-mailed statement. The lawyer asked last week that Chaney be disqualified from the contempt accusation, saying he wasn’t allowed to defend himself and was excluded from some hearings.

Court’s Orders

Chaney claimed that Dominguez and other plaintiffs’ lawyers shunned repeated requests and orders to testify and provide evidence for the April hearing.

Dominguez is the subject of a new Swedish documentary “BANANAS!*” that champions his advocacy on behalf of workers.

The film was shown June 20 at the Los Angeles Film Festival, over Dole’s objections, after festival staff read a statement to the audience saying “the version of reality that the film portrays does not match the reality that emerged in the courtroom.” The company threatened to sue for defamation.

Michael Axline, a lawyer with Miller, Axline & Sawyer, the Sacramento firm that represented the Nicaraguans in the 2007 Los Angeles trial, declined to comment in April and didn’t return later calls. Chaney said she heard no evidence the firm participated in fraud. The firm has withdrawn from the case, according to Gibson Dunn & Crutcher LLP lawyer Scott Edelman, who represents Dole.

Chaney, 63, was appointed June 11 to California’s Court of Appeal by Republican Governor Arnold Schwarzenegger after serving as a Los Angeles trial judge since 1990, according to a statement from the governor’s office. She previously worked in the Los Angeles City Attorney’s office for about a decade.

Unocal, Merck

She presided over a case in which Unocal Corp. reached a 2004 confidential settlement of lawsuits claiming it was responsible for human rights violations committed during the construction of a Myanmar pipeline.

She handled cases against Merck & Co. over its painkiller Vioxx and ruled last year in the company’s favor denying consumers’ request to sue as a group over the drug’s costs.

In the Dole case in Miami, U.S. plaintiffs’ lawyers not part of the California pesticide litigation asked a federal court to enforce the $98.5 million Nicaraguan judgment against Dole and onetime DBCP manufacturer Dow.

U.S. District Judge Paul Huck put the Florida case on hold pending the outcome of the Los Angeles hearing.

“I’m not prepared to say federal courts will take Judge Chaney’s order as gospel,” said Smith, the law professor. “But no federal court in its right mind would refuse to consider the state court’s questions with regard to fraud.”

The cases thrown out are Mejia v. Dole Food Co., BC340049, and Rivera v. Dole Food Co., BC379820, and the case lost by Dole is Tellez v. Dole Food Co., BC312852, California Superior Court, Los Angeles County (Los Angeles). The Florida federal case is Sanchez Osorio v. Dole Food Co., 07-22693, U.S. District Court for the Southern District of Florida (Miami).

To contact the reporter on this story: Edvard Pettersson in Los Angeles at epettersson@bloomberg.net.

Last Updated: June 24, 2009 00:01 EDT