Don’t Discount Delaware: Can the First State be a Forum for Transnational Corporate Liability Cases?

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Nearly a million businesses have their legal home in Delaware, including more than 60 percent of the Fortune 500. The Delaware General Corporation Law and the state’s Court of Chancery are known worldwide for their pro-business approaches to corporate law. Delaware is unique in the United States because its Court of Chancery is modeled on England’s Court of Chancery, and handles matters of equity instead of legal issues, does not have juries, and focuses on commercial cases.

As many U.S. corporations enjoy the favorable legal climate in Delaware, civil society members and developing countries’ citizens have accused some of these corporations of human rights and environmental abuses abroad. From instances of oil pollution in Peru to child slave labor in the Ivory Coast, U.S. corporations have been accused of benefiting from weak environmental and social policies in developing states. For example, the United Nations (UN) has reported that in 2008, the top 3,000 global companies created $2.2 trillion in annual environmental damage.

Under federal law, foreign plaintiffs may sue U.S. corporations for harmful overseas activities in U.S. courts. Yet, transnational tort cases that do not necessarily involve allegations of genocide, slavery, or torture often face an early possibility of dismissal based upon forum non conveniens grounds, such as happened in the litigation over Chevron’s pollution in Ecuador. Forum non conveniens is an option available to the defense where it can argue that there is an alternative court that is adequate to hear the case. Often times, dismissal based on forum non conveniens is a death knell to foreign plaintiffs’ claims who face a plethora of jurisdictional, procedural, and practical challenges in their home courts.

Delaware has admittedly not been a popular forum for transnational claims against corporations, perhaps because of the forum’s reputation as pro-business. But Delaware may actually be an attractive forum for foreign plaintiffs because of its pro-plaintiff approach to choice-of-forum jurisprudence.

There is a trend in Delaware courts to maintain jurisdiction over corporate cases. When facing a forum non conveniens challenge, a plaintiff can argue that its choice of Delaware as a forum should be respected because the corporation is incorporated in Delaware and the state’s legal community is very well reputed for its knowledge of corporations.

Delaware common law shows that the courts prefer not to cast away claims against Delaware corporations. As Professor Faith Stevelman has observed, the Chancery Court’s concern over keeping corporate cases in Delaware has affected its forum non conveniens jurisprudence for claims originally filed in Delaware and has affected its interpretation of the “McWane” presumption. The McWane presumption would normally require the Chancery Court to stay proceedings originally filed somewhere else. Yet, the Chancery Court, according to Stevelman, has invented novel ways to keep corporate cases in Delaware. Obviously, a court’s ability to retain cases is important for their outcome, but this is especially so in Delaware. Retired Delaware Supreme Court Chief Justice E. Norman Veasey has estimated that nearly 90 percent of Chancery Court cases are not appealed. Cases from both the Chancery Court and the Delaware Superior Court would be appealed directly to the Delaware Supreme Court.

An action by an individual victimized by a corporation’s transnational tort could be filed in the Superior Court.

For example, in In re Asbestos Litig., 929 A.2d 373 (Del. Super. Ct. 2006), the Superior Court did not dismiss a class action law suit for alleged asbestos poisoning under the forum non conveniens doctrine even though none of the plaintiffs were Delaware citizens, the harm did not occur in the state, and not all of the defendants were incorporated there. In fact, the court followed Delaware common law in applying the “overwhelming hardship standard” to the forum non conveniens issue. According to this framework, a defendant must “demonstrate that litigating in Delaware would impose overwhelming hardship on defendant” and survive the court’s assessment of the following factors: “(1) relative ease of access to proof; (2) availability of compulsory process for witnesses; (3) possibility of view of premises; (4) whether controversy is dependent upon the application of Delaware law; (5) pendency of similar action in another jurisdiction; and (6) all other practical problems that would make trial of case easy, expeditious and inexpensive.”

The court also considered public interest factors, including: “(1) the administrative difficulties caused by court congestion which arise when cases are not litigated at their origins; (2) the unfairness of imposing jury duty on people of a community with no real relation to the litigation; (3) the local interest in having localized controversies decided at home; (4) difficulties associated with application of foreign law; and (5) any other burdens imposed on the forum.”

Similarly, the District Court of Delaware rejected a Delaware-incorporated business’s request for dismissal upon forum non conveniens and transferability. In Tradimpex Egypt Co. v. Biomune Co., C.A., No. 10-757-LPS, 2011 WL 1447553 (D. Del. Apr. 14, 2011), the court wrote that the burden for a forum non conveniens dismissal was on the defendant to show not only why Delaware was inappropriate, but in this case, why Egypt would be. While most of the activity at issue was committed in Egypt and the case’s only connection to Delaware was its legal identity, the court held that Delaware was an appropriate forum. Furthermore, the court refused to transfer the case to Kansas because in balancing the public and private interest factors, as well as considering the convenience of the parties, the defendant had not met its burden to have the case transferred. Thus, Tradimpex is further evidence of pro-plaintiff forum decisions in Delaware.

In conclusion, Delaware might be an appropriate forum for foreign plaintiffs seeking redress for transnational corporate harm. Since dismissal upon forum non conveniens grounds can be devastating to a case, the favorable forum non conveniens doctrine in Delaware might be the best way for some plaintiffs to get their foot in the U.S. courtroom door.


This guest post was contributed by Misty Seemans, a legal intern in our U.S. office. Misty is a second year law student at American University Washington College of Law.

 

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Photo courtesy of Amnesty International UK