Fraud by trial Lawyers Taints Wave of Pesticide Lawsuits

Wall Street Journal , August 19, 2009
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Fraud by trial Lawyers Taints Wave of Pesticide Lawsuits

By Steve Stecklow

CHINANDEGA, Nicaragua -- After responding to a radio commercial seeking former banana-plantation workers for a lawsuit against Dole Food Co., Marcos Sergio Medrano thought he might be entitled to some money. He says an American law firm convinced him that a pesticide used on the Dole-operated banana plantation where he had worked years ago had made him sterile. 

 

Lawyers for the 49-year-old peasant produced tests that purported to prove it. But DNA testing by Dole revealed that he had fathered three children -- something Mr. Medrano says was news to him. "I don't feel good about this," he says now. "I feel I was involved in foul play."

  

Mr. Medrano is part of the sorry fallout from a group of U.S. personal-injury and other lawyers who descended on this small, impoverished city, seeking to recruit thousands of clients and earn up to 40% of any awards. Emboldened by a developing-world legal system that heavily favored plaintiffs, they filed an avalanche of lawsuits here against California-based Dole and eventually won $2.1 billion in local judgments.

 

Plaintiffs and Plantations
 

Bayardo J. Barrios stands in front of his testing lab in Chinandega, Nicaragua. He says about half of the nearly 1,000 ex-banana workers he tested were sterile, but a California judge ruled the results were faked. 

 

Now a California judge has ruled that plaintiffs and their lawyers deployed fraudulent tactics, which included faking sterility tests and using plaintiffs who never worked on banana plantations. As a result, actual workers who may have been hurt may receive nothing, even though Dole continued using a dangerous pesticide called DBCP after it had been linked definitively to male sterility.

 

Citing "clear and convincing evidence" of fraud, California Superior Court Judge Victoria Chaney in June dismissed two DBCP cases brought by Nicaraguan plaintiffs, one of which involved Mr. Medrano, and raised questions about related cases. There are about 30 such cases in state and federal courts in the U.S. Dole has refused to pay the $2.1 billion awarded plaintiffs by courts in Nicaragua, where it no longer does business. Some lawyers have been trying to collect on those judgments through courts in the U.S. and elsewhere. 

 

"Because of the interrelationships of the law firms and plaintiff groups in all DBCP cases in and emanating from Nicaragua, the taint of the fraud proven in this case permeates and discredits all such cases," Judge Chaney, who recently became an appellate judge, wrote in her decision. "Sadly, this means that if there are people who have been injured in Nicaragua due to DBCP exposure, it is extremely difficult if not impossible for them credibly to litigate their claims."

 

Fraud allegations against lawyers have surfaced in other liability cases involving exposure to toxic substances, including asbestos. The banana-pesticide litigation is unusual in that few of the parties involved, including plaintiffs, defense and plaintiffs' lawyers, and lab workers, dispute that many claims were faked. Judge Chaney noted that more Nicaraguans have filed claims against Dole than ever worked on the plantations when DBCP was in use. 

 

Many plaintiffs "had never even seen a banana plant," says 67-year-old Celsa Ermelinda Franco, a plaintiff who says she spent eight years cutting banana bunches at a local plantation.

 

·        See the 1978 agreement between Dow Chemical Co. and a unit of Dole Fruit Co. for the purchase of "Fumazone" brand dibromochloropropane (DBCP). Dow agreed to sell Dole some of its remaining stocks only after the fruit company agreed to hold Dow harmless from any injury claims.
·        See a 1998 lawsuit filed by Dow against Dole unit Standard Fruit Co. in Michigan circuit court, requesting reimbursement for DBCP claims paid by Dow. The lawsuit was settled out of court.
·        See the June 2009 ruling by California Superior Court Judge Victoria Chaney, citing "clear and convincing evidence" of fraud in dismissing two DBCP cases brought by Nicaraguan plaintiffs.
DBCP, short for dibromochloropropane, was widely used around the world in the 1960s and 1970s to control microscopic worms called nematodes that attack roots and destroy crops. "The first year after we used" the pesticide, "the bananas were huge," says Isaias Paz, who worked for years as a foreman on a Dole-operated banana plantation outside Chinandega.

 

In 1977, California health officials discovered that workers at a DBCP manufacturing plant there had become sterile. Another manufacturer, Dow Chemical Co., one of Dole's suppliers for Central America, stopped production and announced a recall.

 

Dole, which began using the pesticide in Nicaragua in 1973, had a contract to purchase DBCP for another two years. It threatened Dow with breach of contract for stopping deliveries, stating there was no evidence that plantation workers who apply DBCP had been rendered sterile, according to records in a lawsuit later filed by Dow against a Dole unit in Michigan circuit court. In 1978, Dow agreed to sell Dole some of its remaining stocks only after the fruit company agreed to hold Dow harmless from any injury claims.

 

In 1979, the U.S. Environmental Protection Agency banned DBCP in the U.S. for nearly all uses, including bananas, stating that "farm workers, pesticide applicators and the public at large...run varying degrees of risk of cancer, gene and chromosomal damage" and male infertility. Dole stopped using the pesticide in Nicaragua in 1980, according to Scott A. Edelman, a Dole attorney. The company's "use of the remaining stocks" of DBCP from 1978 to 1980 "was legal," he says.

 

Mr. Edelman says there's no evidence that banana-plantation workers received enough exposure to DBCP to become sterile. Mr. Paz, however, says at his plantation, some of the same pipes that carried DBCP to sprayers also carried water to the kitchens, and that sometimes during power outages the pesticide backed up into wells. He also says "there were no masks, no boots, no gloves" for workers involved in the spraying operation. Mr. Edelman disputes that, saying plantation workers told Dole that protective gear was provided but "workers often chose not to wear the equipment because they complained that it was too hot."

 

In 1979, the leftist Sandinistas overthrew Nicaragua's dictator, Anastasio Somoza. Many multinational companies, including Dole, left. The employment records of the banana plantations were destroyed, making it difficult to determine who had worked there.

 

By 1983, lawyers had begun filing lawsuits in the U.S. against Dole and DBCP manufacturers on behalf of thousands of Central American banana workers. Dole eventually settled a series of cases in Texas and Florida involving Costa Rican workers, for $6.8 million, and paid several thousand Hondurans up to $6,000 each to avoid litigation, says Fernando Medina, Dole's Nicaraguan attorney.

 

In Nicaragua, the DBCP controversy swelled into a political movement, with peasant marches on Managua, the capital city. In 2000, the government passed a law establishing rules for DBCP trials. Among other things, it required companies to put up $100,000 per claim merely to defend themselves. It also set minimum damages at $100,000 for claimants who were exposed to the pesticide and later became sterile.

 

U.S. lawyers soon began setting up shop in the northwestern city of Chinandega, once the heart of the banana-growing region. Many former banana workers live there in shacks of wood and corrugated metal.

 

One of the first to arrive was Rick Dovalina, a personal-injury lawyer from Pasadena, Texas. Mr. Dovalina says he and another lawyer spent several months in Chinandega trying to recruit former banana workers and test them for sterility. But he says local laboratories secretly referred his best cases to other law firms who stole his clients. "The system down there was so corrupt," he says.

 

Mario Pastora, a local doctor, says he worked for Mr. Dovalina, examining hundreds of prospective plaintiffs and determining which ones should undergo sterility tests. Mr. Pastora says of the first 400 tested, only about 4% were sterile -- about the rate that would be expected of the overall male population. But later lab test results began showing rates of 30% to 40%. He says he believes prospective plaintiffs were tampering with sperm samples by heating them up with matches or lighters, or adding substances to kill the sperm.

 

Mr. Dovalina says he left Nicaragua, disgusted. Dr. Pastora says representatives of Houston-based law firm, Provost Umphrey LLP, known for representing workers in asbestos cases, then approached him. Provost Umphrey had begun soliciting former banana workers in Chinandega in 2000.

 

Dr. Pastora says the law firm recommended a local lab owned and operated by Bayardo J. Barrios, and he sent about 80 prospective plaintiffs there. "The lab results, in all of the tests, they were 100%" sterile, the physician says. "I was astounded."

 

The next day, he says, he sent 55 more men to the lab and showed up himself, unannounced. While sitting at a desk, he says, he discovered a pile of sperm-test results already completed, stating that each man was sterile. The men hadn't yet been tested, he says.

 

Dr. Pastora says he reported this to Provost's office administrator and the firm's two local lawyers, and suggested they use another lab to retest the men. They refused, he says, so he resigned, asking not to be paid.

 

In an interview, Mr. Barrios, the lab owner, called Dr. Pastora's account "totally false," and denied the physician had ever visited the lab. In a prior interview, Mr. Barrios said he had conducted between 800 and 1,000 sterility tests between 2000 and 2002, and that about half the former plantation workers were shown to be sterile.

 

Barnard Zavala, one of Provost's local attorneys, also denied Dr. Pastora's account. The Texas law firm issued a statement saying, "Every Provost Umphrey Nicaraguan client who was tested by Dr. Barrios who could physically give another sample was tested again at a different lab." The statement didn't discuss the results of the retests.

 

Mr. Zavala says he and his legal partner recruited 1,244 plaintiffs for Provost and have won $900 million in judgments in Nicaragua. He says they stopped recruiting new clients for Provost in Nicaragua in 2002. "We started to see there were too many people not telling the truth," he says.

 

Another U.S. attorney who showed up in Nicaragua was Walter J. Lack, a well-known Los Angeles lawyer who had represented plaintiffs in the pollution case that became the subject of a movie named for a file clerk instrumental in the litigation, Erin Brockovich. Mr. Lack says he arranged with a Nicaraguan law firm to find clients and try cases there. Mr. Lack's firm would attempt to collect judgments in U.S. courts, he says.

 

The Nicaraguan law firm's administrator, Walter A. Gutiérrez, says his firm eventually signed up about 4,200 plaintiffs and has won about $600 million in judgments. "There were many, many, many impostors," he says. "I had the real banana workers."

 

Mr. Gutiérrez was charged in California Superior Court in Los Angeles in 1995 with conspiracy to commit insurance fraud in an alleged scheme involving payments to police officers to refer accident victims, court records show. He fled, but was rearrested in 2006. Then he fled to Nicaragua, says a spokeswoman for the Los Angeles County District Attorney. A judge has issued a bench warrant for his arrest.

 

Asked about the matter, Mr. Gutiérrez replied, "What does it have to do with the case?" He declined to discuss the matter further, saying only, "I'm a fugitive from ignorance." Mr. Lack says he didn't know about the insurance-fraud allegations against Mr. Gutiérrez.

 

In 2002, Juan J. Dominguez, a Los Angeles personal-injury lawyer who advertises on buses and billboards for accident victims, also came to Chinandega. He teamed up with a local lawyer, Antonio Hernández. They advertised on the radio seeking former banana workers, used paid "captains" to find plaintiffs, and set up their own sterility-testing lab inside the law office. Some plaintiffs say they were told they could win tens of thousands of dollars.

 

Mr. Hernández says they wound up with 4,500 clients. One-third of the names came from a Nicaraguan trade unionist named Victorino Espinales, who had initially provided clients to Mr. Gutiérrez before the two had a falling out. (Mr. Gutiérrez says he had been paying Mr. Espinales $600 a month, and that the union activist also had been charging clients to attend organizational meetings about the cases. Mr. Espinales denies ever receiving money from Mr. Gutiérrez or collecting anything but minimal expenses from plaintiffs.)

Mr. Espinales brought his client list to Mr. Hernández. But in 2005, the two had their own falling out, trading accusations of ethical lapses. Soon after, Mr. Espinales began talking directly with Dole on behalf of 4,200 Nicaraguans. Mr. Medina, Dole's attorney in Managua, says the company is talking to Mr. Espinales because "he represents a bunch of people" and is "interested in settling."

 

Two years ago, Dole suffered a legal setback when a Los Angeles jury awarded $5 million in damages to six Nicaraguan plaintiffs represented by Mr. Dominguez, who had brought suit in the U.S. Shortly after the verdict, a person contacted Dole claiming that at least two of the plaintiffs hadn't ever worked on banana plantations.

Attorneys for Dole from the law firm of Gibson Dunn & Crutcher LLP persuaded Judge Chaney, who presided over the trial, to allow depositions in two other cases from witnesses in Nicaragua. The witnesses testified about other incidents of alleged fraud by lawyers and laboratories.

 

When presented with the evidence, Judge Chaney dismissed the two cases brought by Mr. Dominguez and accused him and his Nicaraguan associate, Mr. Hernández, of "massive fraud," including faking sterility tests. Meanwhile, an appellate court has sent the Los Angeles case back to the trial court to determine whether the judgment should be thrown out because of fraud.

Mr. Dominguez now is under federal criminal investigation for his actions in the cases, according to a person familiar with the matter. Michael McCarthy, an attorney for Mr. Dominguez, says, "If anything's going on, it's unknown to us." Mr. Hernández says he's done nothing wrong.

 

Dole still faces nearly 250 DBCP lawsuits, mostly in Nicaragua. Even Mr. Lack says he's "not optimistic" plaintiffs will prevail. If fraud did occur, he says, "that would cause any reasonable person to question all of the cases."

 

Meanwhile, along the back streets of Chinandega, many plaintiffs say they have lost all hope of ever collecting the giant settlements the lawyers said were possible. "We heard $200,000," says 69-year-old Maria Theresa Cornejo. "I was going to make a beautiful house and not live in these shacks."

 

Write to Steve Stecklow at steve.stecklow@wsj.com

 
 

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