JACKSON - It turns out there's a side of NAFTA (the North American Free Trade Agreement) that few, if any, of us down here ever knew existed, or imagined would involve the state of Mississippi in a $725 million lawsuit.
But that is what is happening. And guess who's suing?
Canada, our maple leaf neighbors to the North.
Or to be more precise, a huge Canadian funeral home conglomerate is using a relatively obscure provision in NAFTA, to which Canada is a party, to sue a fellow NAFTA member, the United States.
The firm, Loewen Group, is seeking to make the U.S pay a $725 million claim as a consequence of a 1996 breech-of-contract civil lawsuit Loewen lost in Mississippi courts to a comparatively smaller Biloxi-based insurance/funeral business owned by noted Biloxian Jerry O'Keefe.
If that isn't bizarre enough, get this: A secret three-member court made up of two non-Americans will decide the case against the U.S. (and, tangentially, Mississippi) behind closed doors in a trial where no cross-examination or public access is allowed.
In NAFTA jargon, it's called a tribunal. (You remember, that's a word we've heard bandied about of late in connection with how suspected al-Qaida terrorists will be tried.)
The NAFTA tribunal, under aegis of the World Bank, will decide the $725 million lawsuit without any press coverage and in some undisclosed location, but not in Mississippi.
Significantly, the Mississippi-connected lawsuit, filed three years ago by the Canadian group under NAFTA's Chapter 11 that relates to property expropriation by another NAFTA country, was the first instance of the United States being sued under the celebrated trade agreement. (Several have been filed since, however.)
In effect, Canada's Loewen is using the umbrella of NAFTA to be compensated for what it claims were its business losses in the late 1990s as a result of alleged "abuse" by Mississippi's court system. Actually, Loewen is seeking a heck of a lot more money than was ever involved in the Mississippi litigation.
All of this goes back to a $500 million jury award (later reduced to $150 million) O'Keefe's Gulf National Life Insurance and Bradford-O'Keefe funeral homes won against the Loewen Group in Hinds County Circuit Court in 1996. O'Keefe's suit arose from Loewen's acquisition of Wright & Ferguson Funeral Home in Jackson in 1992.
For nearly 10 years before Wright & Ferguson sold its funeral business to Loewen, O'Keefe had had a contract with the Jackson funeral home granting him exclusive rights to conduct the company's burial insurance business. After several years unsuccessfully attempting to get Loewen to recognize his insurance contract with Wright & Ferguson, O'Keefe sued in Hinds Circuit Court for unspecified damages.
When Loewen refused to engage in pre-trial settlement discussions sought by then-Circuit Court Judge James Graves, a trial jury brought back an award of $500 million in compensatory and punitive damages. Graves later reduced it to $150 million.
Now in its lawsuit under NAFTA, Loewen is contending that because the Mississippi Supreme Court refused to waive its rule requiring posting bond of 125 percent of the jury award during appeals, it was "forced" to settle the case for $150 million. The jury award and the state Supreme Court's action amounted to expropriating the company's property, Loewen now contends.
While Chapter 11 of NAFTA regulating investor-state disputes was intended to prevent outright confiscation of a foreign company's property within a fellow trade agreement nation, some U.S. critics such as Public Citizen, the national non-profit watchdog organization, are outraged by Loewen's lawsuit. In effect, says Public Citizen, the Loewen Group is using NAFTA's investor protections "in effect to 'reverse' a Mississippi jury's ruling."
The citizen organization charges that the Loewen lawsuit is seeking payment of U.S. taxpayer funds to compensate for alleged business losses in an action that "goes significantly beyond the rights available to U.S. citizens or businesses under domestic law."
Michael Allred, the Jackson attorney who represented O'Keefe, is even more vehement in his criticism of the entire NAFTA tribunal process, calling it "a star chamber of elitists … something that we in this democracy find repugnant."
Allred, formerly attorney for the Mississippi Republican Party, lashed out at "would-be conservatives in Congress who gave us this (NAFTA) and called it the greatest thing since sliced bread." The defense in the Loewen lawsuit is being handled by the U.S. Justice Department. Allred has no part in the tribunal litigation
There is some concern down here that if the U.S. government is hit with a multimillion-dollar judgment by the NAFTA tribunal, the feds may turn their attention to the state of Mississippi to pick up all or part of its payment.
In any case, observers here say, just the huge amount of compensation sought by the Loewen lawsuit, highly questionable or not, based on a Mississippi jury award, will provide further ammunition to such groups as the U.S. Chamber of Commerce, which are using this state as a poster child for tort reform.
O'Keefe, who tackled the huge Canadian funeral home conglomerate in court, is the patriarch of a family-owned Gulf Coast insurance and funeral home chain founded in 1865. He has had a colorful career ranging from being a World War II naval fighter pilot who won the Navy Cross for shooting five Japanese planes, to serving in the state Legislature and twice as mayor of Biloxi.
He is noted for not only becoming one of the most successful businessmen in the Gulf Coast area, but as well for his philanthropies, and as a force in state politics.
While the Loewen/NAFTA lawsuit has drawn no attention thus far in Mississippi, it was a key topic probed in Bill Moyer's "NOW" program on Public Broadcasting three month's ago.
Among Moyer's findings was the fact that several former congressional staffers who helped draft the language of NAFTA's Chapter 11 provision, are now representing companies seeking to collect compensation for alleged expropriation of their property in a fellow NAFTA member country.
The old revolving door seems to be still working.
