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Constitutional Opinions
Hiding Behind U.S. Law
All the world (of plaintiffs’ lawyers) is banging down our door.
The Supreme Court recently gave a significant victory to those seeking to prevent plaintiffs’ lawyers from taking advantage of our overly generous civil justice system. In Morrison v. National Australia Bank Ltd., the Court held that plaintiffs who purchased securities traded on foreign exchanges could not bring an action for securities fraud in U.S. courts. The case involved a lawsuit brought against an Australian company for alleged misstatements made to foreign investors in connection with securities traded on the Australian securities market. The Court held that Congress declined to provide a venue for foreign plaintiffs seeking to pursue such fraud claims in U.S. courts.
Prior to Morrison, some courts had interpreted the law much differently, holding that such cases may proceed where a sufficient portion of the alleged misconduct occurred in the United States or where the foreign activities had sufficient “effects” on U.S. investors and securities markets. As Justice Scalia noted in his majority opinion, this result was contrary to the plain language of the securities laws and the strong presumption that Congress intended laws to apply solely within the boundaries of the United States. Nonetheless, foreign plaintiffs were lining up to bring such suits, leading some to fear that the United States had “become the Shangri-Law of class-action litigation for lawyers representing those allegedly cheated in foreign securities markets.”
The Court’s decision in Morrison cut off this potential expansion of the securities laws to reach foreign disputes — a ruling that is likely to have a significantly positive effect. With the recent economic downturn and accompanying drop in stock prices, the plaintiffs’ bar is lining up to file new lawsuits accusing companies of fraud. The last thing the judicial system needs is a wave of additional litigation over foreign securities clogging the U.S. courts.
Moreover, as Justice Scalia noted, each country has its own standards for defining what constitutes securities fraud. Allowing disputes over foreign securities to be brought in U.S. courts would usurp other countries’ authority to determine their own laws and upset settled expectations of those selling securities in foreign markets. A “race to the bottom” would ensue, with foreign plaintiffs rushing to U.S. courts that they believed might employ comparatively lax standards and offer potentially greater awards.
While the result in Morrison is a welcome one, it raises a more fundamental question: Why are foreign plaintiffs increasingly attempting to resolve their disputes in U.S. courts? Even a cursory analysis provides several potential answers. Class action practice in the United States often makes it easier for plaintiffs to join claims in a single suit. By bundling claims together, plaintiffs can put additional pressure on defendants to settle regardless of the merits. The United States also stands out in allowing contingent fees under which plaintiffs’ lawyers may take a “piece of the action” in the form of a percentage of any judgment if the plaintiffs win. This provides a powerful incentive to bring new cases and an effective funding mechanism for litigation. Finally, the vagaries of U.S. juries often provide the potential for windfall verdicts. Given these risks, companies often find that it is safer to simply settle cases, rather than going to trial. In sum, U.S. law often facilities litigation — whether meritorious or not.
Cases such as Morrison should prompt a thorough review of our civil justice system and provide an impetus for reform. In the absence of such reform, the United States will increasingly become a magnet for foreign lawsuits — of all kinds. This is a result that our country can ill afford at this time.
Letter to the Editor View all comments (15) | Leave a comment
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owyheewine| 7.9.10 @ 9:36AM
The plague of ambulance chasing, sleazy lawyers has become one of the worst American influence on the world's culture.
Too bad we can't get a Supreme ruling to cut off the domestic branch.
Bently Dodd| 7.9.10 @ 10:53AM
Could these sleazy lawyers be SVR moles?
Petronius| 7.9.10 @ 10:55AM
Our self serving legal profession is really perversion.
We've almost reached the point where anyone without a law degree is a chattel of the courts. Lawyers and judges run our lives by and through litigation. And the people who get their way are those who can afford to hire them, not to mention
the high profile political activist lawyers who form foundations generating more lawsuits, costing us more money, reducing what's left of our prosperity, opportunity, and liberty. Plaintiff and defendant both get only what lawyers want them to receive. I wouldn't call it justice.
Bob| 7.9.10 @ 12:37PM
"our overly generous civil justice system"
what a laugh.
"Law" is the instrument of the rulers and enforces the rights of property owners. The notion that "law" benefits individuals or consumers is a vestige of the 1960's that has obviously gone to a dark and forgotten place. What is left of the civil law system is the notion that an occasional award to some victim is supposed to keep banks from committing the more blatant frauds and to persuade manufacturers to build cars that don't speed up and kill people. However, the banks and manufacturers have unlimited funds for lawyers so the awards are few and far between.
That the function of "law" to serve the ruling powers has been present since before the Roman Empire and continued through the entire history of the common law, beginning in the twelfth century with the Norman Conquest. English legal theorists call it "positive law" -- the law is what the King says. This theory continues up to the latest installments, like the case of MGM v. Grokster where Supreme Court invented a new common law doctrine so that the Entertainment Industry could maintain its oligarchic control over videos and music.
The reasons there are so many laws is because the rulers and owners need to prohibit the "citizens" from doing anything to curtail the empire of corruption and greed.
JMWinPR| 7.10.10 @ 2:37AM
This article is right on as usual. I just received notification that I was awarded $6.72 in a class action suit. In order to collect my prize, I must order a service through this company and I will receive a credit. The only people who will collect anything are the attorneys. We have an out of control tort system that is just as onerous and odorous as our various legislatures.
Tim| 7.10.10 @ 12:34PM
While I agree with the article, the problem isn't "Lawyers" the problem is "Corrupt lawyers"
Just like the problem isn't "Capitalism"
The problem is "Corrupt Capitalists"
Patrick| 7.10.10 @ 2:47PM
No, the problem is that lawyers legislate an endless number of laws, are enforced by lawyers, are represented by lawyers, judged by lawyers, and now lawyers can create more laws for lawyers through the very judiciary they work.
The government of the lawyers, for the lawyers, by the lawyers.
EricGB| 7.11.10 @ 6:57PM
From the first day of law school, lawyers are taught to think up-is-down, right-is-wrong and that everyone deserves his/her day in court. What's worse, is the notion that the prosecution or defense of virtually any position, no matter how immoral or illogical, is actually for the common good and the more strained the argument, the more seemingly noble. There is a dark little secret (larger to some than others) in the dark recesses of every lawyer's brain that haunts them knowing they are part of a rather sleazy bunch thanks to the perversion of the US legal system starting in the early 60's.
Marc Jeric| 7.12.10 @ 2:28AM
Here in the US we have about 1,100,000 lawyers. I would estimate that some 150,000 of them are trial lawyers, mostly specializing in tort cases against private companies; these private companies employ about 500,000 lawyers to defend them from class action suits by the trial lawyers. Total number of trial lawyers in Great Britain, Germany, and Japan is about 35,000. How come you will ask? Well, in all civilized countries except ours when you lose a case then automatically, with no countersuit necessary, you will be forced to pay all costs of the defendant and the courts, direct and indirect. Here if you lose you just walk away and look for the next victim. When shall we introduce the necessary legislation to bring us up the the international standards?