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Posts Tagged ‘transnational class action’

The wait is finally over!  World Class Actions is finally out in print, and the book is available for order via the Oxford University Press website.  For those of you who have been holding your breath in anticipation of the book’s release… well, you’ve probably long since passed away from asphyxiation.  For those who have not heard about the book, however, here’s a short summary.

Class action and other group litigation procedures are increasingly being adopted in jurisdictions throughout the world, as more countries deal with the realities of increased globalization and access to information. As a result, attorneys and their clients face the ever-expanding prospect of a class or group action outside their home jurisdictions.

World Class Actions: A Guide to Group and Representative Actions around the Globe is a guide for attorneys and their clients on the procedures available for class, group, and representative actions throughout the world. It helps lawyers navigate and develop strategies for litigation and risk management in the course of doing business abroad, or even in doing business locally in a way that impacts interests abroad.

Part I of the book provides a jurisdiction-by-jurisdiction survey of the class action, group, collective, derivative, and other representative action procedures available across the globe. Each chapter is written from a local perspective, by an attorney familiar with the laws, best practices, legal climate, and culture of the jurisdiction.

Part II provides guidance from the perspective of international attorneys practicing in foreign jurisdictions and the art of counseling and representing clients in international litigation. It also covers a variety of topics related to transnational, multi-jurisdictional, and class or collective actions that involve international issues and interests.

Each chapter offers practice tips and cultural insights helpful to an attorney or litigant facing a dispute in a particular part of the world. Many of the chapters introduce key books, treatises, articles, or other reference materials to foster further research. Its focus on international class and group litigation law from a practitioner’s perspective makes World Class Actions an essential guide for the lawyer or client.

Many thanks to the more than 50 authors from all over the world who contributed to the book.

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For those of you interested in the forthcoming book, World Class Actions, here’s a quick update.  The page proofs should be ready by the end of next week, and barring unexpected delay, we are still on pace for an early summer publication date.  For those that haven’t yet heard about the book, it is a guide to class and collective action litigation around the world.  Here’s a link to the Oxford University Press web page for the book where you will find a more detailed synopsis.  I’ll continue to post updates as the publication date approaches.

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NOTE: The following is a copy of a post that I did for the recently-released Baker Hostetler Class Action Lawsuit Defense Blog. Be sure to check out the new blog for other fantastic class-action-related content!

Globalization has brought with it the growing problem of how to deal with mass disputes that transcend jurisdictional boundaries, as well as ever-increasing creativity among the members of the plaintiffs’ bar in bringing ever-larger class and mass actions. There is no single global court or other forum for bringing international or cross-border civil disputes, let alone disputes that involve allegations of mass harm. One of the key challenges for lawyers, policymakers, consumers, and businesses in the 21st century is how to efficiently resolve international mass disputes given the realities of globalization and the lack of any clear forum.

From the late 1990s through the first decade of this century, there were several trends favoring the U.S. courts as a global forum for litigating international disputes. However, recently, that trend has reversed, and the U.S. courts are becoming increasingly reluctant to entertain international class action litigation.

One of the hottest trends in securities litigation in the latter part of the last decade was what became known as foreign-cubed (or “f-cubed”) class actions, securities fraud class actions filed on behalf of foreign investors against foreign companies involving securities traded on a foreign exchange. The trend came to an abrupt halt, however, when the U.S. Supreme Court issued its decision in Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010), holding that section 10(b) of the Securities and Exchange Act does not have an extraterritorial reach and only applies to securities traded on a U.S. exchange or other transactions that occurs within a U.S. state or territory. Although lower court decisions following Morrison, including a recent Second Circuit Court of Appeals decision, may breathe some life back into the idea of litigating a small subset of primarily foreign securities disputes in the U.S. federal courts, Morrison has generally closed the U.S. courts to foreign-cubed class actions.

Another promising avenue for litigating global mass disputes was international arbitration. A developing strategy was for plaintiffs who had signed form arbitration agreements to seek to compel arbitration on behalf of both themselves and others who had signed the same form of agreement. (Several arbitration associations have implemented specific rules for how class arbitrations should be conducted. Here is a link to the AAA Supplemental Rules for Class Arbitration). The Supreme Court put an end to this strategy when it decided the international price-fixing case, Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010). In Stolt-Nielsen, the Court held that a party to an arbitration agreement could not compel class-wide arbitration unless the parties had expressly agreed to allow class, rather than individual, arbitration.

In the human rights area, the U.S. Alien Tort Claims Act has increasingly been used as a tool to litigate international disputes involving alleged violations of international law over the past two decades. Several circuit courts of Appeals have even allowed actions under the ATCA to be brought against private corporations, under the theory that those corporations aided and abetted a foreign government or foreign official in committing human rights abuses. However, the Circuits split on the issue, and the Supreme Court accepted certiorari to resolve the split in the case of Kiobel v. Royal Dutch Petroleum, No. 10-1491. Following an oral argument held last month, the Supreme Court issued an order directing the parties to submit supplemental briefing to address the extent to which the ATCA should permit the exercise of extraterritorial jurisdiction at all over acts that took place within a sovereign jurisdiction other than the United States. Questions posed during oral argument, especially by the conservative wing of the Court, suggest skepticism about the allowing U.S. Courts to adjudicate human rights disputes that have nothing to do with the United States.

At the same time that avenues for global mass redress in the U.S. Courts have been closing, doors have been opening in other parts of the world. Class action law continues to develop in Canada and Australia. Israel has a class action procedure that closely mirrors U.S. law. Dozens of other countries in all corners of the world now have procedures allowing at least some form of mass redress. A very recent example is a class action law enacted in Mexico that permits a form of collective litigation that, while quite different from class actions in the United States, provides express mechanisms for seeking collective redress. In 2006, the Netherlands passed a law that allows mass settlements of claims (although it does not provide a procedure for litigating contested class claims), and arguably allows residents of other EU countries to be included. In other countries, the lack of a specific class or collective action procedure has not kept courts from fashioning remedies for mass redress.

The continuing lack of a single global forum for litigating mass disputes and the proliferation of new procedures permitting collective litigation abroad, are likely to have at least one near term practical impact. That is, the development of areas of law dealing with the enforcement of foreign class or collective action judgments. This has already become a reality in a huge environmental contamination case involving the drilling operations of a formal Chevron subsidiary in Ecuador. In 2010, a court in Ecuador entered an $18 million judgment in the case, and proceedings are ongoing in both the U.S. courts and in international arbitration proceedings relating to the enforceability of the judgment.

In a related vein, U.S. courts increasingly find themselves adjudicating disputes under 28 U.S.C. § 1782, which allows litigants discovery in the United States for use in connection with foreign proceedings (see this recent Second Circuit Court of Appeals decision interpreting the statute).

What does this all mean for potential litigants in global disputes? For any company or even small business that does business internationally, these developments highlight the necessity of keeping up with the constant changes in local laws as well as international trends. The procedures that might have been applicable, and arguments that might have been persuasive a year before, may no longer be viable, but new avenues and theories will have almost certainly taken their place.

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In this era of globalization, one key issues in international class and collective actions is the recognition of foreign judgments by countries who lack the same collective or class action procedures.  I was recently introduced to a lawyer and scholar, Leandro Perucchi, who published his PhD thesis on this topic.  Dr. Perucchi’s book, with the German title Anerkennung und Vollstrechung von US Class action-Urteilen und -Vergleichen in der Schweiz, concludes that class action judgments and settlements can be recognized in Switzerland and be given res judicata effect.  

Foreign enforceability of class action judgments is an important question facing any litigant or court involved in international or transnational class action litigation.  Even when it is permitted (see this CAB entry discussing the Supreme Court’s Morrison v. Australia National Bank decision addressing foreign-cubed class actions), obtaining a class action judgment against a foreign defendant in the United States may be a hollow victory if the defendant lacks sufficient US assets and is located in a country that does not recognize US class action judgments as enforceable.

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This is the fifth in a multi-part post summarizing last week’s 5th Annual Conference on the Globalization of Class Actions and Mass Litigation.  Click these links to see the summaries for Session 1, Session 2, Session 3, and Session 4.

Who Has Jurisdiction in a Global Market?

This presentation was chaired by Professor Deborah Hensler, Stanford Law School/Tilburg University and co-founder of the annual conference on the globalization of class actions and the Stanford Global Class Actions Exchange.  The panelists were Mrs. Femke van ‘t Groenewout, Senior Advisor, Responsible Investment PGGM Investments, Mr. Daan Lunsingh Scheurleer, Mass Litigation Partner at NautaDutilh, and Professor Peter Cashman, University of Sydney Law School.

Professor Manual Gomez, Florida International University College of Law, presented the case study, which focused on the Lago Agrio (“sour lake”) litigation in Ecuador against oil company Texaco.  The toxic tort litigation arose out of allegations that Texaco’s dumping activities from the mid 1960s to the early 1990s caused severe degradation of a lake in the Amazon rain forest.  Ten separate proceedings were filed in Ecuador against the two companies.  A separate case was filed in the United States, but the United States District Court for the Southern District of New York, but that court dismissed the case on forum non conveniens grounds in 2002, a decision that was upheld by the Second Circuit Court of Appeals.  A court in Ecuador ultimately rendered an $18 billion judgment in favor of the plaintiffs.  This has led to additional litigation in the United States about whether the judgment was procured by fraud, whether the U.S. courts have the power to enjoin its enforcement globally, and whether agreements made by Texaco, before it was acquired by Chevron in 2001, bind the current corporate parent.  Most recently, the Second Circuit Court of Appeals vacated a lower court’s preliminary injunction against the enforcement of the judgment.  (For a recent update on the status of the Lago Agrio litigation in the United States, see this September 20, 2011 American Lawyer article by Michael Goldhaber).

The first panelist to comment was Femke van ‘t Groenewout, who provided an institutional investor’s perspective on the issue of global forum selection.  She started by making clear that institutional investors rarely look to litigation as a means to protect investments because it usually is not cost-effective.  Other strategies, such as regulatory engagement and excluding bad actors from the investor’s portfolio, are much more common.  In the few instances where litigation is necessary, institutional investors will look to joining existing class actions and will file opt out actions if necessary.  When asked during the Q&A portion of the presentation what factors dictate whether to take an active role in pursuing litigation, she pointed to multiple factors, including the amount of loss, the degree of misconduct, and the time an effort required to pursue reimbursement. 

To date, nearly all of the litigation that van ‘t Groenewout has been involved in has been brought in the United States.  However, she pointed to what she considers a negative trend in the U.S. courts to exclude foreign investors from the forum, a trend culminating in the Supreme Court’s decision in Morrison v. National Australia Bank, which barred so-called foreign-cubed securities class actions.  This, she observed, may lead other jurisdictions to open their courthouse doors to foreign investors.  As an example, she pointed to the Royal Dutch Shell settlement in the Netherlands.  In light of the decreased legal protection in the U.S. for foreign investors, she raised the question whether investors will consider whether they can continue to invest in the United States.  In addition to lobbying Congress, she discussed the alternative of pursuing litigation in other parts of the world.  However, there are two problems with this approach 1) there are signficant differences in the substantive securities law in other parts of the world, which makes litigation less efficient and therefore less appealing; and 2) institutional investors are unlikely to want to pay for counsel up front, as opposed to simply paying a percentage of recovery as is customary in the United States.  Van ‘t Groenewout summed up by stating that institutional investors have an obligation to protect their own investors in the case of severe fraud, and they cannot always count on regulators to remedy acts of investor fraud.  Therefore, in her view, institutional investors need more mechanisms for collective redress outside the United States.

Daan Lunsingh Scheurleer opened his remarks by challenging the notion that the Morrison case leaves foreign investors unprotected in the U.S. Courts, pointing out that foreign investors can still seek relief in the U.S. for securities purchased on U.S. exchanges, among other situations.  He then focused on barriers to the development of procedures for transnational litigation in Europe.  There is a prevailing reluctance to create procedures that would impose uncertainty about where a defendant may be sued.  For example, a general rule within European court systems is that a defendant should only be sued in the jurisdiction where it is situated.  There are some exclusions to this general rule, including where there are multiple defendants.  If so, there is a choice.  All of them may be sued in the country where one of them is situated provided that there is enough connectivity between the rest of the defendants and the forum.  In the case of tort law, a defendant may be sued where the tortious act occurred or where the damage is felt.  In a securities case, this means that you can only sue on behalf of investors that reside in a particular jurisdiction.  The challenge for Europeans, Lunsingh Scheurleer concluded, is to convince their lawmakers that they need a remedy in their home jurisdiction, but prevailing cultural norms will make it difficult to implement a system that allows all plaintiffs from multiple European jurisdictions to pursue relief in a single forum.

In his remarks, Professor Cashman pointed out some additional barriers to the development of transnational litigation procedures within any given country, including: 1) the problem of exercising personal jurisdiction over class members in other countries (he noted that this issue is still murky in both the United States and Canada); 2) uncertainty about whether the courts of another jurisdiction give preclusive effect to the judgment (as an example, he pointed to the Canadian courts, where even the judgment of a court in one Province is not enforceable in the courts of another Province); 3) forum non conveniens issues, such as those highlighted by the case study; and 4) other issues of comity, such as what one court does while the same issue is pending in a court within another jurisdiction.

Professor Hensler observed that there is a tension between finding a single forum versus taking into account the fact that there are differences in the substantive laws from one jurisdiction to another.  Cashman has a somewhat modest proposal to solve this quandary: create an international MDL process for the adjudication of transnational mass claims.  He suggested several existing mechanisms that could be used to establish an MDL process, including conventions, treaties, or simply a memorandum of understanding between courts.  He also pointed to protocols that are already being developed by the courts of the United States and Canada to assist with the cooperative management of cross-border litigation. 

When asked what he thought about the possibility of an international MDL process as a solution to the problem of transnational disputes, Lunsingh Scheurleer responded that it was hard to envision a framework that would apply to all sorts of claims in all situations.  He thought it might be possible to come up with different procedures for different claims that bore a “family resemblance” to one another, but that it would be hard to find a “one-size fits all” approach.  It might, however, be possible to come up with a set of simple rules that could help guide courts in some situations.  For example, a rule requiring that tort claims be moved to the corporate law umbrella might provide more predictability because it could permit a defendant to be sued in its home jurisdiction by all alleged victims, regardless of their country of residence.

Van ‘t Groenewout said that she favored the idea of an MDL process in principle, but noted that there are some cases where it is clearly more appropriate to litigate in a single jurisdiction. 

Hensler noted that one problem with the MDL concept is that discovery procedures differ so widely from jurisdiction to jurisdiction.

The panelists were asked whether international arbitration might be a solution.  Van ‘t Groenewout pointed out that fraud claims aren’t contract claims, so class actions often better fit than arbitration.  Lunsingh Scheurleer pointed out another practical problem to the idea, at least with respect to consumer claims: arbitration agreements with consumers are generally not enforceable in Europe.

There are a few interesting side notes in this presentation.  The first is that the Lago Agrio litigation has many interesting facets that overlap with all of the earlier presentations at the conference.  As Professor Gomez pointed out in presenting the case study, the litigation in Ecuador was the subject of mass public relations campaigns, a topic discussed in Session 1.  There were also significant case management concerns raised in the litigation both in Ecuador and the United States, a topic discussed in Session 3.  Finally, as discussed by Alison Frankel in this December 12, 2011 article, the litigation has been supported through investments from private litigation funders, a topic discussed in Session 2

Finally, someone (I believe it was Professor Tzankova) noted during this presentation that the conference had been the subject of a story that day in the local Amsterdam media in which the assertion was made that the conference was  contributing to a “claims” consciousness in the Netherlands.  I assumed that this was another way of saying that there was a fear that hosting a conference on the globalization of class actions was going to turn the Dutch sue-happy.  We shall see…

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I am just about set to head overseas to the Netherlands to attend the Fifth Annual Conference on the Globalization of Class Actions and Mass Litigation, which starts on Thursday, December 8.  At last count, there were more than 150 registrants for this year’s conference, including yours truly and Andrew Trask of the blog ClassActionCountermeasures.  The faculty includes the world’s top authorities among academics, policymakers, and practitioners on global class and collective litigation.  I’ll be sure to post a summary of my notes following the conference.  If you happen to be attending, please drop me a note so that I can look out for you there.

On a related note, I’m excited to announce that the manuscript of a book of collective works that I’ve been editing on the topic of global class action litigation is finally complete and set to go out to Oxford University Press tomorrow.  The book, currently titled World Class Actions, is a practitioner-focused guide to international class and collective action litigation.  The list of contributors includes many of the world’s top practitioners in global class action litigation, in addition to authorites on local class and collective action litigation in every corner of the globe.  I’ll be posting more about the book in the coming months.

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A recent CAB post entitled Mexico Joins the Class Action Club provided an update from Mexican attorney Jorge de Hoyos Walther on the passage of recent legislation in Mexico introducing class actions.  If that post piqued your interest, check out this new article authored by Catherine Dunn for Corporate Counsel magazine (available at Law.com) entitled Mexico’s New Class Action Law Opens a Litigation Frontier.  Dunn’s article highlights the key provisions of Mexico’s new class action law and compares and contrasts it both with U.S. class action procedure and the procedures available in other Latin American countries.

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