The American Legal System

Sometimes I think lawyers view business as a big piggy bank, and the American legal system as their withrdrawal slip. It seems an old obscure law has been resurrected to punish companies who may have done nothing wrong.

AMBITIOUS, entrepreneurial businesses often search for fresh opportunities overseas. Usually, this means going to new places, but for America's ravenous plaintiff lawyers the opportunity seems to lie in bringing the world's troubles home and dragging American companies and other multinationals back with them. The strategy hinges on the use of a law, the Alien Tort Claims Act (ATCA)-or Alien Tort Statute-which had been largely ignored for 190 years before bursting forth in a flurry of suits that seek to make American firms, or firms with strong ties to America, pay damages for the wrongs committed by countries in which they have operated.

On Tuesday, oral arguments were heard by a rare "en banc" panel of the ninth circuit Court of Appeals in San Francisco-which is known for its expansive view of the law and a willingness to cause business apoplexy. The suit asks the court to review a decision by three of its judges to reverse a lower court ruling that dismissed charges against Unocal, a California-based oil company, of violating the ATCA. Unocal was sued in connection with human-rights abuses in Myanmar.

The facts of the case are muddy. But the main question raised is clear enough: why is Unocal before an American court for actions it did not take, and which were done neither in America nor to an American?

Sometimes I wish for an Atlas Shrugged type response by corporate America. They should pack up and go somewhere less litigous, where people don't hate them and sue them incessantly. Yeah I know there are a few bad apples who deserve it, but over all I think the lawsuits have gotten out of control.

UPDATE: Walter from IdolsOfTheMarketPlace has done some homework on this (more than I have, anyway) and provides links here, here, and here. They present a picture a bit different from the one in the Economist.