Litigation isolationism.

• Author: Bookman, Pamela K.
• Position: II. Foreign Developments B. The Resulting Legal Landscape through Conclusion, with footnotes, p. 1115-1144

2. The Resulting Legal Landscape

   As a result of the combination of developments in U.S. and foreign courts, more and more transnational disputes--particularly in certain categories of cases--are appearing in foreign fora. They may be refiled in foreign courts after they are dismissed from U.S. court, filed in foreign courts instead of in U.S. court, or filed in foreign courts in parallel with U.S. litigation. These cases usually have some connection to the forum in which they are brought, but this fact should not undermine the significance of the development. (232) As for transnational litigation with only remote connections to the forum, Canada and the Netherlands are currently the most likely countries to entertain such suits. (233)

   Although it is too early to see the full effects of the recent Supreme Court decisions and still-emerging foreign trends, (234) evidence of the transition toward foreign fora is beginning to appear. (235) I do not claim that avoidance trends are causing the foreign developments but rather that they are contributing to plain tiffs' choices to bring suits abroad. Some commentators contend that foreign-judgment enforcement actions are growing in U.S. courts. (236) This trend suggests plaintiffs are suing in foreign courts, which may then impose substantial judgments on companies with U.S. assets.

   This may be happening in two main ways. First, some plaintiffs are refiling lawsuits in foreign courts after U.S. courts dismiss them on avoidance grounds. (237) Although avoidance doctrines, especially forum non conveniens, have ostensibly contemplated this happening for decades, in practice such refiling rarely occurred. (238)

   Second, plaintiffs may bring certain types of cases in foreign fora in the first instance. (239) In these types of cases, the United States is no longer presumptively plaintiffs' favorite forum. Securities, environmental, and human rights litigation provide examples of types of litigation that are gradually migrating abroad. (240)

   Global securities litigation, for example, is beginning to move to the Netherlands and Canada, even in cases in which the only connection to the forum is that some of the plaintiff-investors were citizens of those countries--a rather low threshold. (241) Both fora have replicated some of the most attractive attributes of the U.S. litigation system. (242)

   The Dutch have created an innovative collective settlement procedure under which putative plaintiffs and defendants "can jointly petition the Amsterdam Court of Appeals to approve the settlement and make [it] binding on all class members who do not opt out." (243) Dutch civil procedure affords Dutch courts jurisdiction if at least one of the plaintiffs requesting the declaration or one of the defendants is a Dutch domiciliary. (244)

   Canada is also becoming an increasingly popular jurisdiction for bringing transnational securities litigation. (245) Securities actions in Ontario, (246) for example, are not limited to securities traded on Canadian exchanges (if the issuer has sufficient connections to Canada) (247) and can include plaintiffs from all over the world. (248) On the merits, Ontario also does not require plaintiffs to prove reliance to certify a class. (249) And while the Ontario Securities Act caps a defendant corporation's liability, this provision does not apply to knowing misrepresentations or other potential damages, which limits the cap's practical effect. (250)

   Some environmental tort litigation is also going overseas. For example, Nigerian plaintiffs sued Royal Dutch Shell and its Nigerian subsidiary in a Dutch court, alleging damages resulting from an oil spill in Nigeria. (251) The court held the wholly owned Nigerian subsidiary liable to compensate one farmer but dismissed claims against the Dutch parent company. (252) To the Dutch court, the suit against the Nigerian subsidiary was foreign-cubed, but that did not stay the court's hand. Had the Dutch court followed American avoidance doctrines, it would have determined that it had no personal jurisdiction over the Nigerian subsidiary. Instead, it applied the substantive law of Nigeria. (253) This expansive concept of jurisdiction may make the Netherlands a choice destination for environmental and other transnational tort litigation. (254)

   In the area of human rights litigation, Canada, several European nations, and the European Union are "loosening constraints on corporate liability." (255) Canada, the United Kingdom, and the Netherlands, for example, all appear to offer potential fora for such suits. (256) Canadian courts hold parent companies liable in negligence for failing to prevent foreign subsidiaries' human rights abuses in circumstances where, in the United States, the parent would likely be protected by the corporate veil. (257) This practice can circumvent restrictions on enforcing laws extraterritorially without addressing the extraterritoriality issue directly. In the United Kingdom, four out of five business human rights disputes litigated to conclusion (80%) have resulted in a payout, compared to 9.5% for U.S. corporate alien tort suits. (258) Similar cases in the United Kingdom have settled for tens of millions of dollars. (259) Dutch courts recognize corporate liability for human rights abuses under domestic tort law regardless of the location of the harms if the defendant has a domicile or headquarters in the Netherlands or if the defendant's place of residence is unknown, as was the case in the litigation brought by the Palestinian doctor against unidentified Libyan officials. (260)

   These developments have the potential to shape the landscape of litigation and liability worldwide. (261) Due in part to U.S. litigation isolationism, foreign courts may be increasingly attractive for foreign plaintiffs suing multinational corporations. Recognizing this eventuality, Donald Childress has called attention to the emergence of a law market for transnational litigation. (262) This market is a means of understanding how domestic and foreign courts compete through their legal regimes for transnational litigation. But scholarship has not yet evaluated the systemic impact of these trends or their interaction with U.S. transnational litigation avoidance doctrines in terms of those doctrines' ability to accomplish their stated goals or otherwise further U.S. interests. (264)

   3. JUDGING AVOIDANCE

   Until this point, this Article has shown the development of litigation isolationism, identified its stated goals, and demonstrated the forces embracing transnational litigation in foreign courts. It now turns to consider whether, in light of these foreign court developments, avoidance decisions have accomplished their stated goals of protecting separation of powers, international comity, and defendants' convenience.

   To some extent, the answer would seem to be yes, notwithstanding any foreign court trends. First, avoidance developments appear to reduce burdens on separation of powers and international comity simply by having courts not adjudicate contentious cases that could create such concerns. By hearing fewer transnational cases, U.S. courts seem to prevent themselves from interfering with political branch prerogatives or offending foreign nations.

   Second, by making it easier for defendants to win pretrial dispositive motions and by discouraging plaintiffs from suing in U.S. courts, avoidance alleviates many burdens on defendants. Defendants' belief that foreign litigation will be less onerous than U.S. litigation is not unfounded. Even accounting for recent developments, foreign nations still tend to have less costly litigation, (265) less expansive discovery rules, (266) lower damages awards, and a "loser pays" funding system that can provide winning defendants with attorneys' fees. (268) Limiting jurisdiction over foreign defendants also seems to lessen any perceived "litigation tax" of doing business in the United States, at least for foreign defendants, which seems to benefit the U.S. economy. (269)

   But these first impressions of avoidance's unmitigated success are deceptive. In fact, avoidance does little to address separation of powers and international comity concerns because federal courts are still the major decisionmakers in deciding whether to entertain transnational suits. And hearing too few transnational cases, like hearing too many, can also offend foreign sovereigns and therefore interfere with political branch prerogatives. Furthermore, while most assume that excluding transnational cases is negative for plaintiffs but positive for defendants, litigation isolationism has unappreciated negative effects for all U.S. parties--both plaintiffs and defendants--and more broadly for U.S. sovereign interests.

1. Separation of Powers and International Comity

   Avoidance doctrines strive to prevent federal courts from interfering with foreign relations policies that should be controlled by the political branches and from disrupting international comity in the process. But, as judicially driven developments mostly uninformed by international law or practice, they are simply ill equipped to do so. A signature feature of avoidance doctrines is the lack of political branch input and the domination of the area by courts. U.S. courts were long criticized for expanding transnational litigation. Today, courts have gone too far in the opposite direction.

   Entertaining "too little" transnational litigation can raise the same separation of powers concerns as entertaining too much. In articulating the costs to U.S. democracy of international human rights litigation, Curtis Bradley has noted that the separation of powers problems that come from courts "inventing]" procedures to facilitate that kind of litigation (such as holding that customary international law has the status of federal common law) are likewise apparent in judicially created doctrines designed to limit such litigation (such as the political question...