Trouble Abroad, Sue in the U.S.
By Richard Korman, a freelance writer whose work has appeared in major national publications
American lawyers in Los Angeles are scheduled to depose witnesses over claims from an airplane crash in the Indian Ocean in 2009. But no American was on board and no U.S. airline or airport was involved.
Still, the case will be tried in Los Angeles.
Yemenia Airways 626, killed 153 passengers and crew; a lone teenage girl survived. Federal Judge Margaret M. Morrow allowed claims to be tried in her court against the equipment lessor, International Lease Finance Corp., a Los Angeles-based company.
Families of the victims say ILFC knew or should have known that Yemenia Airways was operating the leased Airbus A310-300 jet unsafely. ILFC moved to have the case dismissed and tried in France.
Over the years, claims departments at aviation insurers knew the chances of foreign cases being tried in the U.S. was slim.
"And then this came along," said Alan Beacock, head of aviation reinsurance at Swiss Re.
For almost three decades, U.S. federal judges have refused to try lawsuits from the majority of claims over foreign disasters -- aviation or otherwise. Using the judicial doctrine, forum non conveniens (Latin for inconvenient forum) they've turned away claims from plenty of mishaps: such as a Boeing jet in a midair collision in 2006.
"Tactically, corporate defendants have an advantage" in their ability to win dismissals from U.S. courts, where payouts are higher, said Nicholas A. Fromherz, a visiting assistant professor at Lewis & Clark Law School.
Insurers and corporations worry about the exceptions, cases that aren't dismissed, driving up the costs of settlements or damage awards. Behind the worry is a bigger concern, that the U.S. could become the world's courthouse in the new age of global commerce. Writing last year in GR-NEAM Inc.'s CEO Risk Forum, Richard Ward, chief executive of Lloyds', pointed to last year's two separate class action lawsuits in federal court in Florida against the Miami-based owners of the cruise liner Costa Concordia.
"There is a growing risk," he wrote, "of litigants choosing the jurisdiction in which they launch their claim."
Despite the concern, federal judges have historically turned away cases (as did one in Fort Lauderdale, Fla. last February who dismissed one of the Costa Concordia lawsuits). A study of published forum non conveniens motions by Christopher Whytcock, acting professor of law and political science at the University of California at Irvine, found that foreign plaintiffs were twice as likely to have their cases dismissed by a federal judge as a domestic plaintiff. But Whytcock's study covered published case decisions from 1990 to 2005, and the tide may be changing.
Partly in response to the dismissals, several legal scholars have described the forum non conveniens doctrine not as the successful limit on cross-border ambulance chasing, but as a form of economic protectionism that stifles legitimate claims.
In a scholarly paper published last year in Washington University's Global Studies Law Review, Fromherz argued that the forum non conveniens doctrine has afforded U.S corporations an advantage during appeals, too. He had sifted through hundreds of appeals court decisions and found that appellate courts have upheld three out of four based on forum non conveniens, significantly higher than other types of cases, which are upheld about six out of 10 times.
And "when a case is dismissed for forum non conveniens, it usually goes away for good," wrote Fromherz.
Plaintiffs attorneys in air disasters, accustomed to being on the losing side of such dismissal motions, say the motions themselves are also a form of forum shopping.
"A lot of motions to dismiss are really reverse forum shopping, where the defense is not saying it's convenient to defend in Zimbabwe but that if it's dismissed, [the claims] will be made in Zimbabwe and settled on the cheap," said Justin Green, a partner in Kreidler & Kreidler.
On the Yemenia Airways case being tried in Los Angeles, Judge Morrow said that a French court's ability to enforce a judgment became a key element since many of the victims had departed from airports in France and traveled on a different aircraft to Yemen. They boarded that plane and crashed while en route to the Comoros Islands. ILFC had argued that France would be a better venue for victims' families and that enforcement of claims was a neutral factor in the weighing of venues because ILFC vowed to honor and pay any judgment award against it by a French court.
"This court cannot agree," answered Morrow in her written decision. She rejected ILFC's offer, because ILFC is a California company with no present ties to France and that as a result, "an American court is in a better position to enforce a judgment against the company."
A spokesman for IFLC declined to comment on the case or name the insurers involved.
The pushback against forum non conveniens isn't coming only from legal scholars. Several Latin American nations, Ecuador, the Dominican Republic, Costa Rica, Honduras and Guatemala, in the 1990s enacted "blocking statutes." They provide that a claimed filed in a foreign country ends that nation's jurisdiction until the plaintiff re-files in its home country.
In considering forum, U.S. courts must weigh competing public and private interests, the adequacy of alternative forums and the convenience of trying the claims in the U.S.
Manufacturers, just like lessors, are vulnerable to claims in their home territory based on theories that local residents have an interest in the outcome.
For example, an Illinois federal court decision last year involved product liability claims by the families of 32 victims of a 2007 crash in Turkey. Atlasjet Airlines Flight 4203, from Istanbul to Isparta, crashed into a mountain outside Isparta. The families sued Boeing, McDonnell Douglas Corp., and Honeywell International, designer of the plane's ground-proximity warning system. Two people who died were U.S. residents and one had dual Turkish-American citizenship. The defendants argued that Turkey would be more convenient.
Many factors favored keeping the case in the U.S. Chicago is home to both Boeing and its owned unit, McDonnell Douglas, and much of the evidence and many witnesses were in the U.S. As a product liability case, the crash site wasn't critical.
Also, there was a chance Turkish courts would refuse to take the case. If they took the case, Turkish law doesn't provide for pre-trial discovery and Turkish courts require claimants to pay a fee of 5.4 percent of the amount of the claim.
The federal court held that private and public interest factors lined up against dismissal and that the case should stay in Illinois. The defendants argued that Turkey has a greater interest in the case, but the appeals court ruled that product liability actions "are not localized cases" but are "cases with international implications." It upheld the dismissal.
"Americans, just as much as Turks, have an interest in the safety of Boeing airplanes," the appeals court ruled.
Still Far Off
Except for the Yemenia Airlines crash case, 2012 was a good year overall for the forum non conveniens doctrine.
One case involved the May 2007 crash of Kenya Airways Flight KQ 507 shortly after takeoff in Douala, Cameroon, killing 114. The destination had been Kenya. No Americans were on board and victims' families sued in federal court in northern Illinois, again, the home territory of Boeing, maker of the 737-800 plane. This time the judge dismissed the claims on forum non conveniens grounds.
A week after the Kenya Airways decision, a federal judge in San Francisco, also responding to a forum non conveniens motion, dismissed claims arising from the June 2009 crash of Air France Flight 447 into the Atlantic Ocean. The Rio-to-Paris flight had two Americans on board and lawyers for their families and families of the French and Brazilian passengers filed a lawsuit against Airbus, maker of the A330-202 jet, and component manufacturers in Texas, Illinois and California. Those actions were consolidated in the California lawsuit.
International treaties, such as the Montreal Convention of 1965, had in theory provided much flexibility to plaintiffs in the choice of venue in which to make claims against carriers (but not manufacturers or lessors). The convention allows a passenger to sue in the carrier's domicile, the carrier's principal place of business, location where the ticket was purchased, the destination country and the passenger's "principal and permanent residence," which is defined as "the one fixed permanent abode of the passenger at the time of the accident."
In his rulings in the Air France Flight 447 case, the judge said in essence that the Montreal convention doesn't trump forum non conveniens doctrine.
Said Mike Danko, a San Diego-based aviation attorney: "If you are an insurer, you are saying this is great. We now know forum non conveniens has grown into a defense-type of doctrine."
Based on the strength of the doctrine, insurers and risk managers could be reasonably confident that even flights with few U.S ties probably wouldn't create enough of a connection to provide all claims from an accident entrée to a U.S. court.
"It is a concern," said Beacock, "because we find it's an exceedingly difficult thing to make a judgment as an underwriter if you can't count on a structure that will keep organizations like Yemenia out of U.S. courts."
Since the Sept. 11 attacks, underwriters take special care in calculating potential loss exposures, said Bijan Vasigh, an aviation economist and author at Embry-Riddle Aeronautical University in Daytona Beach. In addition to the basics of routes and service, "insurers and lessors are very cognizant of the airline staff, where they come from, the load factors and occupancy," he said. Mike Danko, the aviation attorney, notes that other countries award comparatively small damages for economic loss, pain and suffering, and that some prohibit attorney contingency fees.
Equal to any damages in a particular forum is the standard for negligence in a particular country, said Tim McSwain, chief claims officer for Allianz's Aviation Americas unit. That standard will determine "whether there are any damages at all," he said.
Allianz's McSwain said his company has a database that allows it to figure out what cases will be worth in different countries. "We can have one accident set of victims, a, or another set, b, with the same damages and circumstances and damages will be different," he said.
Swiss Re's Beacock said he has the impression U.S. courts have a lot to do and "you have to wait a long time for adjudication." As a result, he raises the question, "Could it be that the greatest friend of forum non convenience doctrine is the U.S. taxpayer and whoever manages the load in courts?"
"Let's be fair, we want people compensated," said McSwain. "It's just a question of who's going to do it and how much."
April 4, 2013
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