And Justice For All?

As more foreign plaintiffs seek U.S. trials, legal boundaries are blurring

Windridge Pig Farm is based in New South Wales, Australia. The headquarters of F. Hoffmann-La Roche Ltd. (RHHVF ) is in Basel, Switzerland. So when Windridge and 11 other foreign companies filed a class action against Hoffmann-La Roche and more than three dozen overseas manufacturers of livestock vitamins for price-fixing in 2000, where was the case filed? In Washington, D.C.

As globalism becomes a fact of life, U.S. courts fast are becoming the forum of choice for victims abroad. Product-liability suits, civil antitrust claims, and human rights cases filed by overseas plaintiffs and based on alleged misdeeds that occurred outside of the U.S. all appear to be on the rise. Mexicans and Venezuelans, for example, have filed hundreds of lawsuits in the U.S. against Bridgestone/Firestone involving tires made, sold, and used in those countries. Although precise numbers are hard to come by, there are fears that the wave of foreign litigation could overburden American courts and expose companies to wider liability. "If anybody can sue in the U.S., it's a step in the direction of the U.S. becoming a world court," says former Federal Trade Commission Chairman Robert Pitofsky, a member of Hoffmann-La Roche's legal team.

But consumer activists, human-rights groups, and some businesspeople praise the development. Compared with their foreign counterparts, U.S. courts are transparent, efficient, and effective. They are the only available venues for certain types of consumer protection and corporate malfeasance claims. "The real question is how do we make multinational companies accountable for their actions," says former World Bank chief economist Joseph E. Stiglitz, who has filed an animus brief against Hoffmann-La Roche.

CARTEL PROFITS. Now the U.S. Supreme Court is weighing in on the debate. On Apr. 27, the high court will hear arguments about whether the vitamin price-fixing lawsuit, F. Hoffmann-La Roche Ltd. v. Empagran, should proceed before an American judge. It is one of a trio of cases this term focusing on the issue of how far domestic courts should wade into international disputes. The U.S. Chamber of Commerce, which has filed briefs in all three, is asking the court to sharply curtail access to the American legal system.

In the livestock vitamin price-fixing case, Windridge and its supporters argue that the U.S. legal system is the only one in the world with sufficiently robust antitrust laws to deter global price-fixing. They note that Hoffmann-La Roche and other cartel members earned more than $10 billion in profits from their allegedly illegal activities but have paid out less than $5 billion in penalties worldwide -- hardly a disincentive to future misdeeds. The triple damages available in U.S. courts for price-fixing could right this imbalance, says Stiglitz.

Meanwhile, Britain and six other foreign governments have filed briefs favoring Hoffmann-La Roche. They accuse the U.S. of meddling in their domestic affairs. And the U.S. Justice Dept., which has also filed a brief against the plaintiffs, says the threat of civil litigation in the U.S. makes it harder to win cooperation from foreign companies in antitrust investigations. Why blow the whistle on a cartel if doing so exposes you to triple damages?

POLICING COMPANIES. Equally important to Corporate America is Sosa v. Alvarez-Machain, the Supreme Court's first attempt to define the scope of the 1789 Alien Tort Claims Act (ATCA). While Sosa involves a claim by a Mexican citizen who says that he was falsely arrested by the Drug Enforcement Administration, the ruling could have repercussions for business. In recent years, human rights activists have begun using the ATCA to police corporate conduct that violates international law. Unocal Corp. (UCL ), for instance, has been targeted for allegedly using slave labor in Burma in cahoots with that country's military rulers. Dozens of similar cases have been filed against other companies. Oral arguments in Sosa took place on Mar. 30.

The third key case this term, Intel Corp. v. Advanced Micro Devices Inc., involves a twist on the theme: It centers on a dispute between U.S. companies in a foreign legal proceeding. In 2000, AMD had complained to the European Commission that Intel was abusing its market position in microchips. Because European law didn't give AMD a way to obtain documents that the company claims would bolster its case, AMD took advantage of a 1964 law that allows U.S. courts to provide assistance in non-U.S. legal proceedings. Critics say AMD is abusing the statute; defenders argue that it exports high investigatory standards overseas.

Together, the three cases will go a long way toward deciding the limits of the U.S. courts in this age of globalization. As powerful forces such as outsourcing and e-commerce erode the importance of national borders, the high court will have to decide if it wants to build a legal wall around the U.S.

By Lorraine Woellert in Washington

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