IN THE MATTER OF:
THE LOEWEN GROUP, INC. and
RAYMOND L. LOEWEN,
Claimants/Investors,
v.
THE UNITED STATES OF AMERICA,
Respondent/Party.
ICSID Case No. ARB(AF)/98/3
JOINT REPLY OF CLAIMANTS
THE LOEWEN GROUP, INC.
AND RAYMOND L. LOEWEN
TO THE COUNTER-MEMORIAL
OF THE UNITED STATES
John H. Lewis, Jr.
Leonard A. Busby
John M. Myers
Jean K. Sbarge
MONTGOMERY, McCRACKEN,
WALKER & RHOADS, LLP
123 South Broad Street
Philadelphia, PA 19109
Tel: (215) 772-1500
Fax: (215) 772-7620
Attorneys for Claimant Raymond L. Loewen / Christopher F. Dugan
James A. Wilderotter
Gregory A. Castanias
Melissa D. Stear
Tashena Middleton Moore
H. Brian Holland
Matthew S. Duchesne
JONES, DAY, REAVIS & POGUE
51 Louisiana Avenue, N.W.
Washington, D.C. 20001
Tel: (202) 879-3939
Fax: (202) 626-1700
Attorneys for Claimant The Loewen Group, Inc.
June 8, 2001
WA:1246485v2 ii
TABLE OF CONTENTS
Page
I. INTRODUCTION 1
A. The Competing Versions Of The Facts 2
B. The Claimants’ NAFTA Claims 3
C. The United States’ Affirmative Defenses 6
II. THE FACTS DEMONSTRATE NUMEROUS NAFTA VIOLATIONS 8
A. The Plaintiffs’ Strategy of Anti-Canadian, Pro-Mississippi Animus Incited the Jury’s Excessive Verdict 9
1. The Jury Foreman “Hated” Canadians 9
2. The Numerous References to “Ray Loewen and His Group from Canada,” the Bombing of Pearl Harbor, “The American Way” of Resolving Disputes, and the Like, Cannot Be Legitimized 10
3. O’Keefe Relentlessly Distinguished Between “Locals” and “Foreigners” 17
4. Loewen Never “Chose” to Introduce Anti-Canadian Testimony 19
5. The Trial Court Allowed Nationality to Be a Problem in the Case and Refused to Correct It 26
B. The Plaintiffs’ Strategy of Racial Politics Served Further to Incite the Jury’s Excessive Verdict 29
1. The Trial Was Racially Charged 29
2. O’Keefe Exploited Racial Divisiveness 31
3. The “Race Card” Was Played First by Gary 33
4. Gary’s Religious Appeals Also Invoked Racial Issues 35
C. O’Keefe Used Class-Based Animus To Further Incite the Jury 37
1. O’Keefe’s Populist Appeals Were Not Merited By The Claims 37
2. “Me, I’m trying the case on the yacht theory!” 42
D. The Evidence Does Not Support Any Portion of The Excessive $500 Million Verdict 46
1. Punitive Damages 48
2. Emotional Damages 52
3. Economic Damages 55
E. O’Keefe Was, at Bottom, a Straightforward Contract Case 61
1. The Trial Record 62
2. The Jurors Recognized That O’Keefe Was, At Heart, a Breach of Contract Case 68
3. O’Keefe’s Antitrust and Oppression Claims Were Legally Unsupported 69
4. The Antitrust Claim Did Not Justify O’Keefe’s Repeated References to Race 74
III. THE UNITED STATES IS LIABLE FOR ITS NAFTA BREACHES 76
A. The Mississippi Litigation Discriminated Against Loewen And Violated Article 1102 78
1. The United States Concedes a Violation of Article 1102 79
2. The United States’ Defenses to Article 1102 Liability Lack Merit 83
3. Loewen Has Not “Abandoned” Any Part of Its Discrimination Claim 91
B. The O’Keefe Litigation Resulted In Multiple Denials Of Justice In Violation Of NAFTA Article 1105 92
1. The “Denial of Justice” Standard 93
2. Claimants Were Repeatedly Denied Justice 97
3. The Existence Of A “Highly Developed Procedural System” Does Not Immunize The United States From Liability For Denials Of Justice 126
4. Claimants Have Proven a Denial of Justice Even Under The United States’ Narrow And Incorrect Formulations Of The Standard 127
5. “Finality” Is Not a Substantive Element of Denial of Justice 130
C. The Mississippi Litigation Violated Claimants’ Right To “Fair and Equitable Treatment” Under Article 1105 133
1. The Ordinary Meaning of Article 1105 Forecloses the United States’ Interpretation 134
2. NAFTA Tribunals Have Uniformly Rejected The United States’ Argument 138
3. Commentators Reject The United States’ Interpretation 143
4. Article 1105 Guarantees Non-Discrimination 144
5. Loewen Was Denied Fair And Equitable Treatment 144
D. The Mississippi Litigation Violated Claimants’ Right To “Full Protection and Security” Under Article 1105 145
1. This Tribunal’s Earlier Decision Forecloses The United States’ Interpretation of Article 1105 147
2. The Ordinary Meaning Of Article 1105 Forecloses The United States’ Interpretation 147
3. The United States Has Long Insisted On Full Protection For Its Own Citizens’ Investments 149
4. The Mississippi Courts Failed to Employ Reasonable Efforts To Protect Claimants’ Investments 152
5. The United States Is Not Permitted to Impose an Ex Post Facto Reservation or Ad Hoc Amendment 152
E. Mississippi Expropriated Loewen’s Assets and Violated Article 1110 153
1. Claimants’ Expropriation Claim Properly Implicates Their Article 1102 And 1105 Claims 153
2. Civil Judgments In Private Litigation May Be Expropriations 154
3. The O’Keefe Judgment Resulted In A Transfer That Was “Tantamount To . . . Expropriation” 155
IV. THE UNITED STATES’ AFFIRMATIVE DEFENSES ARE MERITLESS 160
A. Article 1121 Waives Any Obligation To Exhaust Local Remedies 160
1. The United States Fails To Address The Text Of Article 1121 161
2. Other NAFTA Parties And Tribunals Have Rejected The United States’ Position 163
3. Commentators Reject The United States’ Position 164
4. The Historical Context Of NAFTA Refutes The United States’ Position 164
5. Headquarters Agreement And Other International Authorities Refute The United States’ Position 165
6. In Any Event, The Local Remedies Rule Does Not Apply To Claimants’ Denial Of Justice Claims 169
B. The Settlement With O’Keefe Did Not Waive Claimants’ Rights To Pursue This Claim 172
1. The United States’ “Causation” Argument Is Legally Unsupportable 172
2. The United States Is Not A Beneficiary Of The O’Keefe Settlement 176
3. In Any Event, The Settlement Agreement Was Entered Into Under Duress 179
C. Despite Loewen’s Requests, The Mississippi Trial Court Failed in Its Duty to Provide Loewen a Fair Trial 201
V. CONCLUSION 212
Table of Abbreviations
R. Loewen Mem. / Memorial of Raymond L. Loewen, filed on Oct. 18, 1999
U.S. Mem. on Comp. & Juris. / Memorial of the United States on Matters of Competence and Jurisdiction, filed on Feb. 18, 2000
TLGI Juris. Subm. / Submission on Jurisdiction of The Loewen Group, Inc. Concerning the Jurisdictional Objections of the United States, filed on May 26, 2000
R. Loewen Juris. Subm. / Submission of Raymond L. Loewen Regarding Competence and Jurisdiction, filed on May 25, 2000
U.S. Juris. Resp. / The United States’ Response to the Submissions of the Claimants Concerning Matters of Jurisdiction and Competence, filed on July 7, 2000
TLGI Final Juris. Subm. / Final Submission of The Loewen Group, Inc. Concerning the Jurisdictional Objections of the United States, filed on July 28, 2000
U.S. Counter-Mem. / Counter-Memorial of the United States of America, filed on March 30, 2001
Joint Reply / Joint Reply of Claimants The Loewen Group, Inc. and Raymond Loewen to the Counter-Memorial of the United States, filed on June 8, 2001
Tr. __ / O’Keefe Trial Transcript at page number __
App. at A__ / Claimants’ Appendix at page number __
U.S. App. at __ / United States’ Appendix at page number __
Hearing Tr. __ / Transcript of the September 20-22, 2000 Hearing on Jurisdiction at page number __
Juror Report / Report on Post-Trial Juror Interviews (submitted with the United States’ Counter-Memorial)
Bilder Op. / Opinion of Richard Bilder, dated March 16, 2001 and attached to U.S. Counter-Mem at TabB
Clark Stmt. / Statement of Judge Charles Clark, dated June 6, 2001 and attached to Joint Reply at Tab C
Corlew Stmt. / Statement of John Corlew, Esq., dated June 6, 2001 and attached to Joint Reply at Tab E
Days Op. / Statement of Drew S. Days III, dated Feb. 15, 2000 and attached to U.S. Mem. at Tab A
Dunbar Stmt. / Statement of Jack F. Dunbar, Esq., submitted Mar. 30, 2001 and attached to U.S. Counter-Mem. at Tab F
Fried Op. / Opinion of Charles Fried, attached to TLGI Mem. at Tab E
Gotanda Stmt. / Statement of John Gotanda, dated March 19, 2001 and attached to U.S. Counter-Mem at Tab G
Greenwood Op. / Opinion of Christopher Greenwood, QC, dated March 26, 2001 and attached to U.S. Counter-Mem. at Tab A
Hawkins Stmt. / Statement of Justice Armis E. Hawkins, dated
June 6, 2001 and attached to Joint Reply at TabE
First Jennings Op. / First Opinion of Sir Robert Jennings, dated Oct. 26, 1998 and attached to TLGI Mem. at Tab A
Second Jennings Op. / Second Opinion of Sir Robert Jennings, dated May 24, 2000 and attached to TLGI Subm. at Tab A
Third Jennings Op. / Third Opinion of Sir Robert Jennings, dated May 29, 2001 and attached to Joint Reply at Tab A
Klee Decl. / Declaration of Kenneth Klee, dated May 26, 2000 and attached to TLGI Subm. at Tab C
Klee Supp. Decl. / Supplemental Declaration of Kenneth Klee, dated June 2, 2001 and attached to Joint Reply at Tab F
Landsman Stmt. / Statement of Stephan Landsman, dated March 9, 2001 and attached to U.S. Counter-Mem. at Tab C
Neely Aff. / Affidavit of Justice Richard Neely, dated Oct. 28, 1998 and attached to TLGI Mem. at Tab B
Neely Decl. / Declaration of Justice Richard Neely, dated July 27, 2000 and attached to TLGI Final Subm. at Tab A
Sinclair Op. / Opinion of Sir Ian Sinclair, QC, dated May 9, 2001 and attached to Joint Reply at Tab B
Sinclair Supp. Op. / Supplemental Opinion of Sir Ian Sinclair, QC, dated May 23, 2001 and attached to Joint Reply at Tab B
First Tribe Stmt. / Statement of Laurence H. Tribe dated October 18, 1999 and attached to TLGI Mem. at Tab D
Turner Decl. / Declaration of Rt. Hon. John N. Turner, P.C., C.C., QC, dated May 25, 2000 and attached to TLGI Juris. Subm. at Tab D
Vidmar Stmt. / Statement of Neil Vidmar, dated March 22, 2001 and attached to U.S. Counter-Mem. at Tab D
iii
I. INTRODUCTION
- Along with the Memorials filed earlier in this case, this Joint Reply establishes the liability of the United States of America to Claimants The Loewen Group, Inc. and Raymond L. Loewen for several breaches of the North American Free Trade Agreement (“NAFTA”) that occurred during the O’Keefe litigation. The United States’ Counter-Memorial cannot withstand even the mildest scrutiny: It grossly distorts the O’Keefe factual record; it improperly narrows the governing NAFTA standards to exclude even the egregious facts of this case; and it urges a series of patently meritless affirmative defenses. The Tribunal should therefore establish the United States’ liability and proceed to the damages phase of this arbitration.
- Attached to this Joint Reply are opinion statements from the following experts:
· The Third Opinion of Sir Robert Jennings (Tab A), which responds to the United States’ “exhaustion” and “finality” arguments;
· The Opinion and Supplemental Opinion of Sir Ian Sinclair, QC, the former Legal Adviser to the Foreign and Commonwealth Office of the United Kingdom (TabB), which covers broadly many of the international law and NAFTA issues in this case;
· The Statement of Charles Clark, former Chief Judge of the United States Court of Appeals for the Fifth Circuit (Tab C), which addresses the Mississippi supersedeas bond requirements and the nature of the judicial duty;
· The Statement of Armis E. Hawkins, former Chief Justice of the Supreme Court of Mississippi (Tab D), which evaluates the O’Keefe case from the perspective of a Justice who retired from the Mississippi Supreme Court just hours before the O’Keefe case reached that court;
· The Statement of John Corlew, Esq., a distinguished trial practitioner in Jackson, Mississippi (Tab E), which provides the perspective of a leading trial lawyer in Jackson on the O’Keefe case and the United States’ impugning of the trial strategy of Loewen’s lawyers; and
· The Supplemental Declaration of Professor Kenneth Klee (Tab F), which confirms that bankruptcy would have been risky and injurious to Loewen in 1995 and 1996.
- Claimants have endeavored to assist the Tribunal by filing a single Joint Reply; we nonetheless express our regret at its length. But we feel it essential to file such a reply in order to respond properly to the United States’ own extensive submission and its eight new expert statements; we must set straight, at some length, the factual record, clarify the governing legal standards for Claimants’ NAFTA claims, and respond to the United States’ affirmative defenses.
A. The Competing Versions Of The Facts
- In its extended factual recitation, the United States describes an O’Keefe trial that never happened. In the words of Claimants’ expert witness, former Mississippi Chief Justice Hawkins, “the trial described by the United States in the Counter-Memorial it filed in the NAFTA case bears little resemblance to the trial record I reviewed. I am confident this Tribunal will read this record cover to cover, and make its own assessment of the accuracy of my view.” (Hawkins Stmt. at 12.)
- The United States virtually ignores the “main character” of the O’Keefe litigation — Willie Gary, the uniquely flamboyant lead counsel for Jeremiah (“Jerry”) O’Keefe.