A group of Burmese refugees won a landmark victory Tuesday when a Los Angeles judge ruled that Unocal Corp. could be tried for human rights violations, including forced labor, that allegedly occurred during construction of a $1.2-billion natural gas pipeline in Myanmar.
Superior Court Judge Victoria Gerrard Chaney's ruling means that if the case goes to trial in September as scheduled, Unocal would become the first U.S. corporation held to answer in an American courtroom foreigners' allegations of such abuse abroad.
"In many ways this is a historic decision," said Dan Stormer, a Los Angeles lawyer representing the plaintiffs.
The case is being closely watched in business and legal circles because of its implications for other multinational corporations.
"This is going to open up a whole new way of looking at what the responsibility of U.S. corporations is when they are dealing abroad," said Carole Basri, director of the New York chapter of the American Corporate Counsel Assn. and a University of Pennsylvania corporate law instructor. "It's going to have a tremendous impact."
Unocal contends the suit is baseless--part of a politically motivated campaign to embarrass the El Segundo-based company into divesting its holdings in the nation formerly known as Burma. It is the last major U.S. firm with dealings in Myanmar since its military leaders seized power after free elections in 1990.
Unocal is not being tried for direct liability for the alleged human rights abuses but for so-called vicarious liability.
"Unocal's actions are not at issue in this case," said spokesman Barry Lane. "The case centers around the actions of the Myanmar military, and that's where you come up with the vicarious liability. We're party to a contract with the government of Myanmar, and the military is part of the government of Myanmar; therefore, we are responsible for it. That's the rationale for this lawsuit."
The plaintiffs are 14 former residents of Burmese villages in the path of the pipeline, which was completed in 1998 to transport natural gas from an offshore field through Myanmar to Thailand. The villagers, who now are living in Thai refugee camps, allege that Myanmar soldiers forced them to work on the pipeline project, in some cases kidnapping and raping them.
Unocal, which describes itself as a pipeline investor, has acknowledged the history of human rights abuses in Myanmar but denies any corporate connection.
"It's very well documented," Lane said. "But there is no evidence showing our participation or our solicitation to get this to occur, or that we benefited from it."
The villagers initially filed suit in federal court but lost their bid for a trial when the judge determined there was insufficient evidence that Unocal participated in the alleged abuses.
"None of the facts have really changed," Lane said. "We're confident that when this case does come to trial, once again it will be proven that Unocal had no role in any of these activities, as came out in the federal case."
With an appeal of the dismissal of the federal case pending, the villagers filed a second suit in state court.
If they prove their case, they could ask for damages and demand that Unocal give up profit from the pipeline, which, based on Unocal documents obtained in the course of litigation, could be $60 million, Stormer said.
"That's before we address damages and before punitive damages," he said. "The judge's ruling allows us to look at damages in the hundreds of millions of dollars."
Terry Collingsworth, director of the Center for International Labor Rights Fund, filed the first lawsuit in 1996 as part of a legal campaign to force multinational corporations to improve their conduct abroad. He has a few cases pending, but none has come so near to a trial.
As the Unocal case progressed over the last two years, Collingsworth said investment fund managers called for updates to determine how great a risk it posed for shareholders.
"When we filed the Unocal suit six years ago, all these companies said, 'Oh, this is crazy--there's no way you can hold us liable,' " Collingsworth said. "The fund managers didn't feel there was enough to take account of. Now they can't say we're nuts anymore. With the right set of facts, we can take a company to trial."
The case has the potential to force change in corporate conduct, said Christine Rosen, an associate professor at UC Berkeley's Haas School of Business.
"It's very significant in the sense that if they are held liable, it means that companies are going to be held by the courts to the same standards that they are held to in this country," she said. "And companies will not be able to go abroad and take advantage of the much looser regulatory environment or the corruption of the government to treat their workers in an inhumane way."