Courting danger: The latest Latin American export to the United States: Product liability lawsuits - Special Report

Latin Trade, Feb, 2002 by Mary A. Dempsey

The U.S. Supreme Court recently had before it a tobacco lawsuit. But it was no ordinary product liability case. This legal action was filed by the Guatemalan and Nicaraguan governments for smoking-related illnesses that occurred in Latin America.

A decade ago, an international lawsuit like that would never have seen the inside of a U.S. courtroom. In swelling numbers, however, Latin American governments, companies and individuals are suing U.S. multinationals on their home turf, the United States, in a bid to win fat product liability awards.

"If you're going to reap the economic advantages of selling your product abroad, you'll have to face the lawsuits, too," says Victor Diaz, one of the best-known attorneys in liability cases involving Latin America. "This kind of litigation, especially with globalization, is going to increase."

American Airlines lost a U.S. lawsuit filed by the families of victims in a 1995 crash near Cali, Colombia. A federal court in Florida is hearing the case of allegedly defective Bridgestone/Firestone tires on Ford Explorers in Venezuela. In another Florida court last year, two Ecuadoran shrimp producers were awarded US$22 million for losses they suffered from contamination by a DuPont pesticide. In a separate case, a jury in Miami ordered DuPont to pay $78 million to a pair of Costa Rican plant nurseries that claimed fungicide produced by the chemical company had ruined their ornamental plants; the cases of four other nurseries are still pending.

"Latin American cases have appeared in the last few years with Florida becoming a hotbed. It's a center for Inter-American commerce and a center for Inter-American litigation," says Diaz, at the Miami law office of Podhurst Orseck Josefsberg Eaton Meadow Olin & Perwin. Attorneys say Florida courts saw at least 15 Latin American cases last year. Additional cases have surfaced in other U.S. states and the District of Columbia.

In the past, lawsuits generally were filed where the damage occurred. But globalization has blurred the borders. What happens if a U.S.-engineered product, made in Brazil causes damage in Uruguay? What if an Argentine part, used in a U.S. carmaker's vehicle assembled in Mexico, is cited in an injury in Guatemala? What about U.S. products that spark lawsuits because of something that happens while they're in transit from one Latin American country to another? Courts in the United States are suddenly being called to sort out such complaints.

There are two big reasons why the United States is the preferred locale for litigation: deep pocket awards and laws that favor plaintiffs. "The United States imposes liability on a manufacturer or company even if the company has shown care," says Sara Schotland, a product liability lawyer in Washington, D.C. She says the country is also notorious for exorbitant damages, both pain and suffering and punitive awards. "In most states, the sky is the limit on the amount of pain and suffering that is awarded," she adds.

Not just individuals and companies are flocking to U.S. courtrooms. In an ironic twist, several Latin American governments have even bypassed their home courts to seek retribution from the U.S. justice system, enticed by the multi-billion dollar tobacco awards. In addition to the Guatemalan and Nicaraguan lawsuit against Philip Morris and other cigarette makers, Ecuador, Honduras, Belize, three Brazilian states and four Brazilian cities have sued a dozen tobacco companies in the United States. The Ecuadoran case was dismissed; the others are pending.

Going for the gold. In South America, product liability suits are heard by judges--not juries--who are barred from imposing punitive awards. "Damage cannot be used as a mechanism to enrich the victim," says Alejandro Hernandez, a lawyer with Ferrere Lamaison in Montevideo. That's to say, a consumer can be compensated for losses or damage created by the product, but there cannot be additional punitive fines against the company.

As a result, average damage awards in Argentina run about $87,000, says Herndndez, who has tracked liability actions in the region. He says the size of the awards are directly linked to the age--and earning power--of the plaintiffs. The largest awards go to plaintiffs between 30 and 39 years of age; successful litigants over age 80 generally see less than $29,000. Hernandez says awards in Brazil and Uruguay are comparable to those in Argentina. In Peru, where product liability complaints are not common and courts are generally viewed with distrust, awards as high as $85,000 have been issued in cases involving wrongful death, but the average is only $1,300.

There's another reason why Latin American litigants prefer suing in the United States: Out-of-court settlements are possible as an alternative to lengthy and expensive trials. "In Brazil, it's rare to settle a case before you go to court:' says Luiz Guilherme Migliora, a partner at the law firm Veirano & Advogados Associados in Rio de Janeiro.

Lawyers for the companies being sued generally battle to keep the legal action in Latin America, where damages are lower and burden of proof favors the defendants. But for those filing the lawsuit, the goal is usually a U.S. courtroom (and better yet if it's a state court where jury awards tend to be higher than in federal courtrooms). To get a hearing, however, the plaintiffs must show a geographic reason why the court should handle the case. Often they point to the location of corporate headquarters or where the troublesome product was designed.