THE LOEWEN GROUP, INC. and RAYMOND L. LOEWEN, v. THE ...

IN THE MATTER OF: 

THE LOEWEN GROUP, INC. and 

RAYMOND L. LOEWEN, 

v. 

THE UNITED STATES OF AMERICA, 

ICSID Case No. ARB(AF)/98/3 

__________________________ 

REJOINDER OF THE 

UNITED STATES OF AMERICA 

__________________________ 

Claimants/Investors, 

Respondent/Party. 

David J. Anderson 

Vincent M. Garvey 

Mark A. Clodfelter Kenneth L. Doroshow 

Barton Legum Craig M. Blackwell 

Laura A. Svat David O. Buchholz 

Alan J. Birnbaum Jonathan B. New 

U.S. DEPARTMENT OF STATE U.S. DEPARTMENT OF JUSTICE 

Office of the Legal Adviser Civil Division 

Suite 5519 901 E Street, N.W., P.O. Box 883 

2430 E Street, N.W. Washington, D.C. 20530 

Suite 203, South Building Tel: (202) 514-4263 

Washington, D.C. 20037 Fax: (202) 616-8202 

Steven F. Fabry Attorneys for Respondent 

J. Carol Williams United States of America 

OFFICE OF THE U.S. TRADE 

REPRESENTATIVE 

600 17th Street, N.W. 

Washington, D.C. 20508 Dated: August 27, 2001

TABLE OF CONTENTS 

Page 

I. INTRODUCTION ..................................................................................................... 1 

II. CLAIMANTS CONTINUE TO GROSSLY MISSTATE THE 

TRIAL RECORD ...................................................................................................... 4 

A. Claimants Entirely Ignore The Seven Weeks Of Evidence And 

Testimony At Trial, As Well As The Many Errors Committed 

By Loewen And Its Counsel .......................................................................... 5 

B. Alleged Improper References To Geography And Nationality ..................... 8 

1. The Record Conclusively Demonstrates That Loewen, 

Not O'Keefe, Introduced Matters Of Nationality And 

Prejudice As A Central Component Of Its Case ................................ 8 

2. The Jury Foreman Did Not "Hate" Canadians And, By 

Loewen's Own Account, Had A "Good Grasp Of The 

Entirety Of The Trial" ........................................................................ 10 

3. References To Geography And Nationality Were Relevant 

To Several Issues In The Case ........................................................... 12 

C. Alleged Improper References To Race .......................................................... 14 

D. Alleged Improper References To Class ......................................................... 18 

E. Loewen Raised The Character Issues Of Which Claimants Now 

Complain ....................................................................................................... 20 

F. The O'Keefe Case Was Far More Than A Mere Contract Dispute, 

And Involved Valid (And Proven) Antitrust Claims ..................................... 23 

1. O'Keefe's Antitrust Claims Were Legally Sound And 

Properly Submitted To The Jury ........................................................ 24 

2. The Antitrust Claims Were An Essential Part Of O'Keefe's 

Presentation At Trial .......................................................................... 28 

G. Claimants Misrepresent Loewen's Report On Post-Trial Juror 

Interviews ....................................................................................................... 29

III. CLAIMANTS CANNOT OVERCOME LOEWEN'S FAILURE TO 

COMPLAIN TO THE MISSISSIPPI COURTS ON THE GROUNDS 

RAISED IN THIS PROCEEDING ........................................................................... 36 

A. Claimants Still Fail To Identify A Single Instance Where Loewen 

Raised These Complaints To The Mississippi Courts ................................... 37 

1. Failure To Object At Trial On The Grounds Of Alienage, 

Race Or Class ..................................................................................... 38 

2. Failure To Argue For A Departure From The Bond 

Requirement On The Ground That Reorganization Protection 

Was Inadequate .................................................................................. 42 

B. International Law Does Not Excuse Loewen's Failures To Object ............... 46 

1. Claimants' Statement Of The "Plain Error" Doctrine Is 

Inaccurate And, In Any Event, Is Not International Law .................. 47 

a. "Plain Error" Is Generally Not Recognized In 

Civil Cases ............................................................................. 50 

b. The "Plain Error" Rule Is Foreclosed Where The 

Failure To Object Was A Tactical Choice ............................. 53 

c. The "Plain Error" Doctrine Is Discretionary, 

Not Mandatory ....................................................................... 54 

2. The Obligation To Provide "Full Protection and Security" 

Did Not Impose A Duty On The Mississippi Courts To Act 

In The Absence Of An Objection ...................................................... 56 

IV. LOEWEN'S AGREEMENT TO SETTLE THE MISSISSIPPI LITIGATION 

OUT OF COURT DEFEATS THIS CLAIM IN ITS ENTIRETY ............................ 60 

A. Loewen's Waiver of Claims Through The Settlement Agreement 

Eliminates State Responsibility ..................................................................... 60 

1. The Settlement, By Its Terms, Waived Claims Against The 

United States ...................................................................................... 61 

2. Loewen's Decision To Settle Was An Independent Cause Of 

The Alleged Damages For Which Claimants Seek Recovery ........... 66 

-ii-

B. Claimants Cannot Be Excused From Loewen's Settlement On The 

Ground Of "Economic Duress" ...................................................................... 74 

1. The Excuse Of "Economic Duress," Even If Recognized 

Under Customary International Law, Cannot Be Extended 

To Loewen's Circumstances ............................................................... 74 

2. The Availability of Federal Court Review Defeats Any 

Claim of Duress .................................................................................. 76 

3. The Availability Of Corporate Reorganization Protection 

Defeats Any Claim Of Economic Duress .......................................... 78 

4. An Unbonded Appeal Was A Reasonable Alternative For 

Loewen, As Execution Was Neither Imminent Nor Likely ............... 82 

V. FURTHER COMMENT ON THE EFFECT OF NAFTA ARTICLE 1121 .............. 86 

A. NAFTA Article 1121 Is Irrelevant To The Outcome Of This Case ............... 87 

B. Even If The Local Remedies Rule Were Relevant To The 

Substantive Merits Of NAFTA Chapter Eleven Claims, The Rule 

Is Presumed To Apply Absent Unequivocal Waiver ..................................... 91 

VI. THE MISSISSIPPI COURT JUDGMENTS DID NOT VIOLATE ANY OF 

THE SUBSTANTIVE PROVISIONS OF NAFTA CHAPTER ELEVEN ............... 96 

A. The United States Is Not Responsible For The Alleged Acts Of Mr. 

O'Keefe, His Counsel, or His Witnesses ........................................................ 96 

B. Claimants Fail To Establish A Violation Of NAFTA Article 1102 ............... 97 

1. The United States Does Not "Concede" A Violation Of 

Article 1102 ........................................................................................ 98 

2. Loewen and O'Keefe Were Not "In Like Circumstances" ................. 100 

3. Loewen Did Not Receive Treatment "Less Favorable" ..................... 102 

-iii-

C. Claimants Fail To Establish A Violation Of NAFTA Article 1105 ............... 106 

1. The Availability Of Further Appeals Defeats Claimants' 

Article 1105 Claim As A Matter Of Law ........................................... 106 

2. Claimants Misstate The Liability Standard Under Article 1105 ........ 111 

3. The Trial Proceedings ......................................................................... 116 

4. The Form Of The Verdict ................................................................... 118 

5. The Amount Of The Judgment ........................................................... 121 

a. The Proper Benchmark ........................................................... 122 

b. The Elements Of Damages ..................................................... 124 

6. The Decisions Regarding The Supersedeas Bond .............................. 130 

a. Imposition Of A Neutral Supersedeas Bond 

Requirement, Despite An Appellant's Claimed 

Inability To Pay, Is Not A Denial Of Justice .......................... 130 

b. The Refusal To Depart From The Full Bond 

Requirement Was Not, On The Basis Of The Record 

Before The Mississippi Courts, A Denial Of Justice .............. 133 

(i). The Mississippi Courts Did Not Fail To 

Consider Loewen’s Grounds for Departure ................ 134 

(ii). The Mississippi Courts Did Not Abuse 

Their Discretion .......................................................... 135 

7. Claimants’ “Fair And Equitable Treatment” And “Full 

Protection And Security” Arguments Are Without Merit .................. 143 

a. Claimants Fail To Establish A Denial Of “Fair And 

Equitable Treatment” As That Obligation Is Defined 

Under Customary International Law ...................................... 147 

b. Claimants Fail To Establish A Denial Of “Full Protection 

And Security” Under Customary International Law .............. 148 

-iv-

D. Claimants Fail To Establish A Violation Of NAFTA Article.1110 ............... 152 

CONCLUSION ...................................................................................................................... 154 

-v-

I. INTRODUCTION 

This arbitration concerns litigation in a Mississippi state court that went very badly for 

The Loewen Group. Why it went badly, and the international law consequences of that result, 

are the subjects of very different characterizations presented by the parties before this Tribunal. 

A close review of the record of the Mississippi proceedings, however, shows that claimants have 

largely invented a story of the O'Keefe litigation bearing little resemblance to the events as they 

actually occurred and, indeed, have done it so forcefully that they have persuaded several of their 

experts to mistakenly assume that the story is true. The resolution of this claim, however, should 

not turn on claimants' characterizations, but instead must turn on the actual record of the O'Keefe 

litigation, including the contemporaneous documentary evidence that claimants and their experts 

ignore. 

Neither should resolution of this case turn on the alleged conduct of Willie Gary, despite 

claimants' effort to make Mr. Gary – rather than the gross business misconduct that Loewen was 

found to have committed, the company's tactical decisions, and its lawyers' mishandling of the 

O'Keefe litigation – the central focus of this case. Contrary to claimants' suggestion, the United 

States is not responsible, under either the NAFTA or international law more generally, for the 

actions of Mr. Gary, Mr. O'Keefe, or any other private individual. Rather, the United States can 

be held responsible in this matter, if at all, only for the actions of the Mississippi courts. As to 

the latter, claimants ask this Tribunal to assume, on the basis of nothing more than the very sort 

of stereotyping and innuendo that claimants contend marred the O'Keefe trial proceedings, that 

the Mississippi courts decided as they did not because the evidence presented in the case 

supported such rulings, but because the judges and jury were biased by alleged improper appeals

to certain alleged prejudices. The presumption under international law, however, runs in 

precisely the opposite direction, as does all of the contemporaneous evidence in this case. 

As is manifest from the record before the Tribunal, Loewen made a series of carefully 

considered strategic choices at each step in its litigation with O'Keefe in the Mississippi courts. 

It consciously chose to present certain evidence and testimony before the Mississippi jury, and 

(consequently) not to object to the introduction of certain material by its adversaries. Loewen 

decided to make certain representations before the Mississippi Supreme Court, yet, to gain 

advantage in the wider court of public (investor) opinion, made other representations that ran 

contrary to its claimed inability to post a bond. Loewen knew it had appellate or alternative 

remedies available to it to challenge the jury verdict, yet it chose to settle and compromise the 

case. In short, Loewen had access to highly developed and fundamentally fair judicial 

mechanisms in both state and federal courts, but often acted to undermine its position, and, 

ultimately, to fully compromise it. No provision of the NAFTA, nor any principle of 

international law, could render the United States liable for any alleged injury to claimants under 

these circumstances. 

Given the alarming number of inaccuracies that form the basis of this claim, it is perhaps 

fitting that one of the more fundamental of these appears on the very first page of the very first 

Memorial in the case. There, The Loewen Group assured this Tribunal that "[t]his claim does not 

seek direct or collateral review of the municipal-law issues addressed by the Mississippi courts in 

the O'Keefe litigation." TLGI Mem. at 1. As claimants' Joint Reply starkly reveals, however, 

this international claim is little more than a substitute for the appeal from the trial court's 

judgment that Loewen elected to forgo in the Mississippi courts. This Tribunal should decline 

2

claimants' invitation to serve as a surrogate court of appeals, a role that neither the NAFTA nor 

international law permits. 

Claimants' Joint Reply, despite its length, fails to overcome the central points established 

in the United States' Counter-Memorial, each of which requires the dismissal of this claim: 

! Loewen never complained to the Mississippi court at any point during the O'Keefe 

trial – as claimants do extensively in this arbitration – on the grounds that 

O'Keefe's counsel had appealed to any alleged nationalistic, racial or class biases 

of the jury. In fact, much of the testimony of which claimants complain was 

introduced by Loewen itself during the trial. 

! Loewen never argued to the trial or appellate courts at any point during the 

O'Keefe bond proceedings – as claimants do extensively in this arbitration – that 

corporate reorganization was an unreasonable means by which the company could 

have stayed execution of the trial court judgment pending appeal, without the need 

to post any supersedeas bond at all. 

! Loewen elected to forgo several alternative means of appeal that, at the very least, 

were not "manifestly ineffective" or "obviously futile." Loewen's agreement to 

settle the litigation, whether by its terms or its consequences, thus defeats this 

NAFTA claim. 

! The court judgments of which claimants complain were undeniably subject to 

further appeals within the domestic judicial system. Because Loewen had 

effective means of appeal open to it, those court judgments cannot be 

internationally wrongful under established customary international law principles 

of state responsibility. 

! The actions or alleged inactions of the Mississippi courts did not, in any event, 

violate any of the substantive provisions of NAFTA Chapter Eleven. 

As the United States explains below, claimants' contentions to the contrary rest on allegations 

and arguments that cannot be sustained by either the record of the Mississippi proceedings, the 

text of the NAFTA, or settled principles of customary international law. 

3

II. CLAIMANTS CONTINUE TO GROSSLY MISSTATE THE TRIAL RECORD 

The United States and claimants are in agreement on at least one point: that the parties 

have described two vastly different O'Keefe trials, one real and one imagined, and that the 

Tribunal must read the entire record of the O'Keefe litigation if it is to make a proper 

determination of the merits of these competing claims. Although the Tribunal must of course 

read the record for itself, the United States nevertheless commends to the Tribunal's particular 

attention the Statement of Stephan Landsman, appended at Tab C to the United States' Counter- 

Memorial. Professor Landsman (in an apparent contrast to claimants' experts) has read the entire 

record of both the pre-trial and trial proceedings in the O'Keefe litigation put before this 

Tribunal. His opinion offers a detailed and thorough summary of the proceedings that is amply 

supported with citations to the entire record – not just those sections of the voir dire, opening and 

closing statements selectively referred to by claimants and their experts 1 – and places the O'Keefe 

litigation in a proper legal context. In the interest of brevity, and in lieu of a point-by-point 

rebuttal to each of claimants' many misstatements, we respectfully encourage the Tribunal to 

review Professor Landsman's statement and limit ourselves to the following, more general 

responses to claimants' most recent mischaracterizations of the record. 

1 Claimants' expert Armis Hawkins, for example, does not offer a single citation to the 

record to support his often hyperbolic and inaccurate assertions. See Statement of Armis E. 

Hawkins ("Hawkins Statement"). Likewise, Sir Ian Sinclair consistently bases his observations 

on various "paras. of the Loewen Memorial" rather than the actual record itself. See Opinion of 

Sir Ian Sinclair ("Sinclair Op.") at 6-11. For his part, Sir Robert Jennings (who never claims to 

have read more than a few isolated fragments of the trial record) now appears to view his role as 

that of an advocate for the claimants (e.g., writing as "we"), rather than as a dispassionate expert. 

See Jennings Third Opinion 23-24; id. at 21 (expressing view as "[t]he claimants, with respect"). 

4

A. Claimants Entirely Ignore The Seven Weeks Of Evidence And Testimony At 

Trial, As Well As The Many Errors Committed By Loewen And Its Counsel 

One of the most striking aspects of claimants' Joint Reply is its utter silence with respect 

to the vast amounts of highly damaging evidence and testimony given over seven weeks of the 

O'Keefe trial, as well as the numerous – and grave – miscalculations of Loewen's trial counsel. 

Indeed, if claimants' account of the O'Keefe litigation were to be believed, the entire trial 

proceedings would have lasted for just a few days, consisting only of voir dire, O'Keefe's opening 

statements, Mike Espy's few minutes of testimony, and Willie Gary's closing argument. Of 

course, as the United States has shown and as the record makes clear, the trial lasted for nearly 

two months and involved far more than these isolated events – which, in any event, claimants 

distort beyond recognition. See Counter-Mem. at 17-56. 

For example, as the United States has shown, Loewen's counsel failed throughout the trial 

to convey a credible or coherent explanation of the company's defense. See Counter-Mem. at 35- 

36. As Loewen's recent (albeit paltry) production of additional discovery confirms, 2 this view 

was shared even by members of Loewen's own trial team at the time. After the first week of the 

trial, David Clark, one of Loewen's trial counsel, privately complained to Loewen that Richard 

2 Loewen claims to have produced "all documents, generated by or in the possession of 

Loewen or others acting on its behalf," which arguably respond to the United States' request for 

documents reflecting contemporaneous assessments of the progress of the trial. See Letter from 

G. Castanias to K. Doroshow, June 20, 2001. Loewen's entire production in this respect, 

however (excluding a small handful of documents previously produced for other reasons and 

which happened to respond to this request as well), consists of only thirteen pages and contains 

only two letters written during the entire course of the litigation. See U.S. App. at 1234-46. 

While we take Loewen's current counsel at their word that they know of no additional responsive 

documents, it stretches credulity to accept that, during the entire two months of trial and three 

more months of post-trial proceedings, Loewen and its many experienced trial counsel generated 

only two documents that reflect any assessment of Loewen's own handling of the trial. 

5

Sinkfield's performance was inadequate and that his role as lead trial counsel should be 

diminished (advice the company apparently chose to ignore). U.S. App. at 1234-35. Mr. Clark 

complained that Loewen's trial team was "still struggling to recover" from Mr. Sinkfield's 

unfocused opening statement and his "missed opportunities" with respect to the examination of 

John Turner, one of O'Keefe's first and most significant witnesses. Id. According to Mr. Clark, 

"[t]he jury did not hear a good summarization of our case until Jimmy's [James Robertson's] 

cross-examination of [Walter] Blessey," which did not occur until well into the trial. Id. Mr. 

Clark further lamented that, although "[w]e can try to 'replace'" Mr. Sinkfield's failures "with 

testimony from other witnesses, . . . much cannot be replaced at all and some of the rest 

inadequately." Id. 3 

Similarly, claimants and their declarants ignore the extensive evidence and testimony at 

trial establishing that Loewen intentionally breached the contracts with O'Keefe with the intent to 

destroy him as a competitor, all as part of the company's overall scheme to secure and abuse 

monopoly power. See Counter-Mem. at 18, 34-48. Indeed, neither claimants nor their witnesses 

even mention the letters from the Riemanns (Loewen's co-defendants) that suspiciously emerged 

halfway through the trial, despite Loewen's own recognition at the time that the letters were "very 

damaging to defendants" and, as reported by Loewen in its post-trial juror interviews, were an 

3 The interviewed jurors reportedly shared Mr. Clark's assessment. See, e.g., U.S. App. at 

1133 ("The jury heard no message to shake Willie Gary's storyline."); U.S. App. at 1148 ("The 

trial was way too long. It probably hurt the defense."); U.S. App. at 1156 ("as for the Loewen 

Group's defense, there was 'nothing there'"); U.S. App. at 1165 ("The defense danced around the 

issues and were not hitting the real issues and the jury knew it."). 

6

important basis for the jury's ultimate verdict. U.S. App. at 1132. See Counter-Mem. at 36. 4 

Even claimants' own media source reported that the first of the "[t]hree key pieces of evidence 

[that] decided the size of the award" was "Loewen's treatment of the Riemann family . . . ." 

A3101. 5 

But of all the many telling omissions in claimants' Joint Reply, perhaps none is more 

striking than the absence of any mention of the woefully inadequate performance of Loewen's 

counsel with regard to the issue of punitive damages. See Counter-Mem. at 53-56. Indeed, no 

fair-minded reader of the transcript could fail to conclude that Loewen, and only Loewen, bears 

responsibility for the conversion of the jury's initial punitive damages award of $160 million into 

one for $400 million. 6 Both claimants and their experts concede as much by their silence. 7 

4 See also, e.g., U.S. App. at 1147 ("The Riemann letter was very damaging."); id. at 1151 

("The David Riemann letter described The Loewen Group to a tee, although Riemann tried to 

backpedal on that in the courtroom."); id. at 1158 ("[T]he 'Tammy cried' letter by one of the 

Riemanns was an impressive piece of evidence showing the way the Loewens treated their own 

people."); id. at 1165 (the Riemanns "wrote two letters to Loewen that were really damaging, and 

this didn't come out until the defense took over the case . . . ."); id. at 1187 ("Ms. Chapman told 

me that the single most significant piece of evidence was the August 1991 letter from David 

Riemann to Ray Loewen."). 

5 According to claimants' source (a February 17, 1996 newspaper article from the Toronto 

Star), the other two significant pieces of evidence were: (1) "the revelation that . . . the cost of 

dying [in markets where Loewen did business] increased in direct correlation to the decrease in 

competition," and (2) Loewen's contract with the National Baptist Convention. A3101. 

6 This is confirmed by Loewen's own summaries of juror interviews. See, e.g., U.S. App. 

at 1159 ("the punitive damages evidence put on by the defense was pitiful . . . ."); id. ("the 

defendants just had no case on punitives and . . . they did not clearly provide the jury with any 

numbers other than the numbers the plaintiff was putting forth. . . . [T]he defense did not have 

nearly as clear a message [as O'Keefe] on damages."); id. ("the defense message on damages was 

muddled."); id. at 1165 ("The defense should have really hit [O'Keefe's punitive damages 

showing] on closing. They [the defense] really just cried a little bit on the punitive argument."); 

id. at 1182 ("Richard Sinkfield continually lied to the jury," including his claim that Loewen's net 

(continued...) 

7

B. Alleged Improper References To Geography And Nationality 

The United States has shown that claimants' allegations of improper appeals to 

"nationalistic" biases have no basis in the record and that, in fact, much of what claimants 

bemoan as improper was actually introduced by Loewen itself at the trial. See Counter-Mem. at 

19-25. Claimants offer essentially three responses. First, they contend that Loewen introduced 

matters of nationality only as a "defense" to Willie Gary's alleged improper references. Second, 

claimants contend that the jury foreman, despite having served in the Royal Canadian Air Force, 

actually "hated" Canadians. Third, claimants contend that no issues in the trial could have 

justified the comments that claimants contend impermissibly appealed to nationalistic biases. 

Each of these responses is meritless. 

1. The Record Conclusively Demonstrates That Loewen, Not O'Keefe, 

Introduced Matters Of Nationality And Prejudice As A Central 

Component Of Its Case 

As the United States has shown, the O'Keefe jury heard evidence relating to "anti- 

Canadian" bias only because Loewen itself chose to introduce such evidence as part of its 

deliberate litigation strategy, the purpose of which was to paint Jerry O'Keefe as a bigoted and 

6 (...continued) 

worth was $411 million, followed by testimony from Loewen's own witness "that the Loewen 

Group net worth was $700 million. Usually an attorney will coordinate their lies with their 

witnesses."). 

7 Neither, for example, do claimants or their declarants mention Loewen's counsel's 

notorious violation of the court's sequestration rule, which resulted in the complete striking of the 

testimony of one of Loewen's witnesses. See Counter-Mem. at 37. While claimants and their 

declarants may choose to ignore this event, it certainly did not go unnoticed in the courtroom. 

See U.S. App. at 1158. ("the jury was very impressed by" Loewen's violation of the 

sequestration rule and "believed that all of this indicated some kind of improper maneuver by the 

defense") (reported comment of Juror Number 6). 

8

unfair competitor, and to garner sympathy from the jury. See Counter-Mem. at 22-25. Claimants 

effectively concede that Loewen did so, but only (they contend) "to protect itself" from "[Mr.] 

Gary's numerous early appeals to local favoritism and national prejudice . . . ." Joint Reply at 21. 

This is absolutely false. 

Well before it had even heard of Mr. Gary, Loewen made clear that a central part of its 

litigation strategy was to emphasize O'Keefe's negative advertisements as evidence of Jerry 

O'Keefe's alleged bigotry, as well as to call Mr. O'Keefe's integrity into question. For example, 

in its motion for summary judgment filed on July 28, 1995, weeks before Mr. Gary ever appeared 

in the Mississippi courtroom, Loewen alleged the following facts as material to its defense: 

[Around August 1990], O'Keefe initiated a scathing attack on Loewen and 

Riemann, emphasizing Riemann's "foreign ownership" (The Loewen 

Group, Inc., the parent of Loewen Group International, Inc., is a Canadian 

corporation), questioning the Riemanns' patriotism ("Remember Pearl 

Harbor") and trying to make much of the fact that one of its sources of 

financing, a branch bank in Seattle, Washington, was the Hong Kong- 

Shanghai Bank. These attacks continued in the summer and fall of 1990 

and into 1991. 

A63. Plainly, it was Loewen, not Mr. Gary, that deemed the company's nationality to be relevant 

(and useful), and it was Loewen, not Mr. Gary, that first introduced such matters as "anti- 

foreigner" bias, "Pearl Harbor" and the "Hong Kong-Shanghai Bank" into the case. See also, 

e.g., U.S. App. at 1189 (Loewen's attorney, James Robertson, acknowledging that "[w]e . . . 

offered evidence of the rather scurrilous slander campaign O'Keefe mounted just after Loewen's 

acquisition" of Riemann and "[w]e had introduced . . . the poster reflecting the Japanese and 

Canadian flags. . . . [W]e thought it was . . . significant.") (emphasis added). 

9

Indeed, it was Loewen who had its witness (Peter Hyndman) explain to the jury, with 

regard to O'Keefe's advertisements, that "many Canadian lives were lost in the bloody and heroic 

defense of the British Crown Colony of Hong Kong by the Canadians against the Japanese." Tr. 

4486. It is thus nothing short of astonishing that claimants should now complain, for example, 

that Mr. O'Keefe, on cross-examination by Loewen about the advertising campaign, made 

references to Loewen's nationality. See Joint Reply at 13. 8 

2. The Jury Foreman Did Not "Hate" Canadians And, By Loewen's Own 

Account, Had A "Good Grasp Of The Entirety Of The Trial" 

One of the more alarming aspects of the Joint Reply is claimants' treatment of the fact 

that the foreman of the O'Keefe jury was himself Canadian by birth and a veteran of the Royal 

Canadian Air Force. Rather than accept the unavoidable conclusion that the jury's verdict could 

not have been motivated by an "anti-Canadian" bias, claimants now allege that the foreman 

actually "hated" Canadians and reached his verdict out of "contempt . . . for his ex-homeland." 

See Joint Reply at 9-10. 

Appended hereto at Tab D is a declaration from the jury foreman, Glenn Millen, which 

conclusively demonstrates that claimants' allegation is as wrong as it is, in Mr. Millen's words, 

8 Many of the other references of which claimants complain are likewise no different from 

Loewen's own statements to the jury. For example, Loewen complains that Mr. Gary mentioned 

Loewen's nationality during voir dire, but Loewen's own questionnaire (which was submitted to 

the jury pool long before Mr. Gary uttered his first words to the jury) asked such questions as 

"Do you believe that a foreign corporation with its corporation headquarters being located in 

Canada and Kentucky is entitled to a fair trial the same as an individual in our courts of law?" 

U.S. App. at 1015 (emphasis added). See also, e.g., U.S. App. at 1020. Similarly, claimants 

criticize Mr. Gary's description of lawsuits as "the American way" of resolving disputes, but 

Loewen's counsel (Edward Blackmon) also felt it important to tell the jury that "we [Americans] 

have one of the best systems in the world to settle disputes" and that, "under our way of justice 

and settling disputes in this country, . . . [w]e don't go fighting each other or start wars. [People] 

file lawsuits if there's a dispute." A404. 

10

"completely ridiculous." Millen Declaration at 1. As his declaration makes clear, Mr. Millen 

was always proud of his Canadian origins, including his Canadian military service. Id. at 1-4. 9 

Although he became a United States citizen at the age of thirty-three for professional reasons, 

Mr. Millen continued to be extensively involved with Canada and Canadians both personally and 

professionally, and his Canadian origins remained very much a part of his identity throughout his 

life. Id. Indeed, Mr. Millen's wife of fifty years is a Canadian national, as are many of his 

relatives and personal friends, and Mr. Millen for decades traveled regularly to Canada (including 

to Vancouver, where Loewen was headquartered) for both professional and personal reasons. Id. 

at 2-3. Not only was there thus never a basis for inferring any "anti-Canadian" sentiments on Mr. 

Millen's part, but, as Mr. Millen explained, "in my many years of living and working in the 

United States, I have never experienced or witnessed such a thing as 'anti-Canadian' hostility." 

Id. at 3. 

In fact, Loewen itself offered a very different assessment of Mr. Millen at the time of the 

Mississippi litigation. Reporting on his interview with Mr. Millen after the verdict, Loewen's 

counsel (John F. Corlew, a witness for claimants in this proceeding) described Mr. Millen as 

"gregarious, articulate" and "forthright," possessing "a good grasp of the entirety of the trial." 

U.S. App. at 1163. Claimants' remarkably revised portrait of Mr. Millen simply does not square 

with the facts, even as developed by Loewen itself at the time. 10 

9 We note, sadly, that Mr. Millen passed away suddenly and unexpectedly on July 30, 

2001, just two weeks after providing the United States with his declaration. 

10 Mr. Millen's declaration addresses only claimants' allegation that he harbored an "anti- 

Canadian" bias, and does not address claimants' ascription of statements to Mr. Millen on the 

basis of Loewen's post-trial interview of him. The United States did not ask Mr. Millen to 


11

3. References To Geography And Nationality Were Relevant To Several 

Issues In The Case 

Claimants complain at length that many of the alleged references to geography and 

nationality at trial cannot be justified "on grounds of mere locational reference . . . ." Joint Reply 

at 10-16. This is a classic straw-man argument, for the United States never suggested that 

"locational disputes" were the sole reason for these references. See, e.g., Counter-Mem. at 24 

n.15. As both the record and the context of the litigation make clear, the challenged references 

were relevant to several issues at the heart of the dispute, not limited to issues of geography. 

For example, by showing that Riemann was not truly "locally owned" as Riemann had 

represented itself to the community, O'Keefe sought to explain the very advertising campaign 

that Loewen had made a central issue in the case. Loewen argued that O'Keefe's advertisements 

were not only bigoted but false because Riemann, by virtue of the alleged "partnership" between 

LGII and David Riemann, was not "foreign owned." See, e.g., Counter-Mem. at 11-12; Tr. 85, 

4476-77. O'Keefe was thus fully justified in showing that Loewen was the true owner of the 

Riemann companies and that David Riemann's purported ownership through his "partnership" 

interest was insignificant. See Counter-Mem. at 36, 43, 45-46; Tr. 1986-87. Thus, for example, 


discuss this latter subject, given our concern that it would possibly have been improper to do so. 

See, e.g., Martinez v. Food City, Inc., 658 F.2d 369, 373 n.2 (5th Cir. 1981) (questioning the 

propriety of inquiry into jury deliberations, noting that "such 'fishing expeditions' . . . are looked 

upon with severe disfavor in this Circuit as violating, inter alia, the substantial policy interests in 

protecting the confidentiality of the jury function."); Gregory v. United Kingdom, 25 E.H.R.R. 

577 (Eur. Ct. H.R. 1998) ("the rule governing secrecy of jury deliberations is a crucial and 

legitimate feature of English trial law which reinforces the jury's role as arbiter of fact and 

guarantees open and frank deliberations among jurors on the evidence"). The Tribunal should 

thus not construe Mr. Millen's silence with respect to his or any other juror's deliberations as any 

sort of endorsement or acceptance of claimants' allegations in this regard. 

12

O'Keefe's explanation that Riemann's "payroll checks come out of Canada," was not at all the 

"gratuitous" appeal to nationalism that claimants allege (see Joint Reply at 13), but was instead a 

rebuttal to Riemann's specious claim of local ownership, autonomy, and independence from 

Loewen. Indeed, as was ultimately disclosed at trial, even the co-defendant Riemanns 

themselves privately complained to Loewen that "[t]here is too much direct orders [sic] coming 

from Canada." U.S. App. at 0965. 

Relatedly, a key aspect of Loewen's deceptive business practices involved its wilful 

concealment of the company's ownership of local funeral homes from the general public. See, 

e.g., U.S. App. at 0024, 0179; Tr. 1255, 1863-66. As the O'Keefe plaintiffs made clear in their 

pleadings and at trial, Loewen's mistreatment of O'Keefe was part of an overall plan to raise 

prices through a general practice of deception, both as to competitors and to consumers. See, 

e.g., A146, A151, A157, A159. O'Keefe's proof that the Riemann homes were, in fact, owned by 

Loewen rather than any "local" concern was thus entirely relevant, both to show the falsehood of 

Loewen's persistent claims to the contrary, and to demonstrate that Loewen had misled 

consumers to trust that they were dealing with a community-based funeral home that would not 

exploit them for excessive profit in their time of bereavement. E.g., id.; U.S. Jurisdictional 

Mem. at 9-10; A3272-74. 11 As their context makes clear, many of the references to Loewen's 

11 O'Keefe also argued that Loewen's concealment of its ownership from the general public 

was an "unfair method of competition" in violation of Mississippi law. A3272-74 (citing Miss. 

Code Ann. § 75-24-5). As O'Keefe explained, Loewen's clustering of funeral homes that it held 

out to be independently owned deceived consumers to believe the funeral homes were in 

competition with one another, thereby preventing true price competition in the relevant market. 

Id. Since the O'Keefe litigation, several jurisdictions – including several U.S. states and the 

United Kingdom – have implemented rules mandating the disclosure of funeral home ownership 

to prevent this very problem. See, e.g., B. Hills, Foreign Bodies, Sydney Morning Herald at 1 


13

nationality of which claimants complain were directed to these points, and not to any alleged 

nationalistic bias. 

C. Alleged Improper References To Race 

Claimants are wide of the mark when they assert that "[t]he United States cannot dispute 

that Willie Gary played the race card first . . . ." Joint Reply at 34. As the United States has 

shown, it was Loewen, not O'Keefe, that began the practice of racial pandering by adding to its 

already-large legal team a number of prominent African-American attorneys, and it was Loewen 

that attempted to ingratiate itself with the African-American jurors throughout the trial. See 

Counter-Mem. at 26-30. Although this fact is already evident from the record, Loewen's recent 

production of documents (meager as it is) makes it even clearer. 

For Loewen, it was not enough that Richard Sinkfield, the company's lead trial counsel, 

was African-American and that two of the other four lawyers on the team were prominent 

African-American members of the Mississippi state legislature. As David Clark, one of 

Loewen's two white trial lawyers, privately explained to the company at the time, 

Richard is a bright and able lawyer, but the person we have on our side 

who is well known to the black (and to a more limited extent, white) 

community here is Ed Blackmon. In addition, several members of the jury 

know him, and one knows his wife even better. 

U.S. App. at 1234 (emphasis added). Given Mr. Blackmon's perceived influence with the 

African-American jurors, Loewen's counsel urged that "we need to get Ed Blackmon on his feet 

and in front of this jury more, and soon." Id. (emphasis added). 


(Aug. 2, 1997) (U.S. App. at 1334-37) (noting that the UK Monopolies and Mergers Commission 

ruled that SCI, Loewen's principal competitor, had to "disclose publicly its ownership of funeral 

businesses it took over."); U.S. App. at 0065, 0072. 

14

Mr. Blackmon, who was on Loewen's trial team well before Loewen had even heard of 

Willie Gary, fully understood Loewen's strategy in this regard. Indeed, Mr. Blackmon's first 

words to the jury pool during voir dire (before Mr. Gary uttered any of the statements that 

claimants allege were racially-charged) were a thinly-veiled reference to the success of the 

African-American civil rights movement in Mississippi. See A398. Mr. Blackmon observed that 

"the composition of the jury was quite different" in the Hinds County courthouse when he began 

practicing law in 1974 than it was by the time of the O'Keefe trial "because of the laws that says 

[sic] that everybody has to be treated fairly, everybody has to be included in the system." Id. 

Mr. Sinkfield followed Mr. Blackmon and, at the urging of Loewen's other counsel, took 

pains to point out to the prospective jurors that two African-American Mississippi state senators 

(Robert Johnson and Mr. Blackmon) were representing Loewen in the case. See A414. 12 Mr. 

Sinkfield asked those lawyers to stand so the jurors could see them, noting that "these two 

gentlemen are honorable members of the Mississippi State Legislature," thereby seeking to give 

Loewen an endorsement from these prominent members of the local African-American 

community. Id. 13 

Mr. Sinkfield continued this tactic in his opening statement, which he devoted largely to 

criticizing O'Keefe for having engaged in a bigoted advertising campaign against Riemann. 

Sinkfield questioned O'Keefe's "character," charging that O'Keefe had sought to appeal to "an 

12 Mr. Sinkfield was prepared to sit without making this point, but, as he made clear, did 

so only because he was asked by his colleagues to do it. A414. 

13 Claimants themselves complain that, among the sixteen witnesses called by O'Keefe at 

trial, two were "prominent black members of the local community," including Earl Banks, who 

(as claimants are quick to point out) was a "black state legislator," just like two of Loewen's own 

trial counsel. Joint Reply at 32. 

15

audience . . . who doesn't like you because you're sensitive to people of a different country or 

because you're associated with people of a different race . . . ." Tr. 105 (emphasis added). In 

contrast to this portrait of O'Keefe as a racist, Mr. Sinkfield described Ray Loewen as "a 

courteous and hospitable man" who sought only "to help bring peace down there" to the Gulf 

Coast in response to O'Keefe's "rabble rousing about the Japanese and other foreigners." Id. 

This strategy pervaded Loewen's presentation during the case-in-chief. See Counter- 

Mem. at 22-25. For example, in cross-examination of Walter Blessey (a white man and 

O'Keefe's third witness), Loewen's counsel again criticized the O'Keefe advertisements as racist, 

charging that the advertisements "could have said that [O'Keefe's funeral homes are locally- 

owned] without making any reference or appeal to racial prejudice . . . ." Tr. 731. See also Tr. 

2173 (Loewen's counsel suggesting that O'Keefe did not "distinguish . . . between the concept of 

pro-American buying and Japanese bashing"); 2677 (Loewen's counsel asking witness whether 

he had "problems with doing business with Japanese? . . . People who are of the Japanese 

race?"). 

Mr. Blackmon, as Loewen had expected, executed the company's strategy all the way 

through to closing argument. Mr. Blackmon devoted the bulk of his closing argument to 

O'Keefe's advertising campaign, charging that Mr. O'Keefe "played on . . . race" by mentioning 

the Japanese in his advertisements. Tr. 5673. To ensure that the African-American jurors 

sympathized with Loewen (and the allegedly-maligned Japanese), Mr. Blackmon added his 

observation that "[i]t could have easily been any other race" and that, "in this day and age," one 

should not have to apologize for employing someone of another "race or nationality . . . ." Tr. 

16

5677 (emphasis added). This was especially so, Blackmon argued, "after all we've been 

through," once again referring to the civil rights movement. Tr. 5674. 14 

Mr. Blackmon underscored these themes by complaining that O'Keefe had "assaulted" the 

"reputation and . . . integrity" of the "largest religious African-American religious [sic] 

organization in this country [the National Baptist Convention]" and – in a direct appeal to the 

African-American members of the jury – arguing that "our people who belong to that association 

are going to be doing mighty good" as a result of the Convention's affiliation with Loewen. Tr. 

5668-70 (emphasis added). According to Mr. Blackmon, O'Keefe's alleged "assault" on the 

National Baptist Convention was particularly inappropriate, given what the organization has 

"tried to do for this community . . . ." Tr. 5669 (emphasis added). Indeed, it appears that Mr. 

Blackmon even went so far as to imply that O'Keefe's alleged insensitivity to minorities extended 

to anti-Semitism, charging – with absolutely no predicate in the record – that O'Keefe had 

brought the "emotional edge . . . to an extreme" by saying "that he [Loewen] tried to 'Jew them 

down.'" Tr. 5668. 

Thus, not only did Loewen lodge no objection to any of the alleged racial appeals by 

O'Keefe, but, as the record makes clear, Loewen itself injected race and racial division into the 

litigation from the very start. Loewen's obvious strategy was to paint Mr. O'Keefe as a racist, 

insensitive to minorities, and an exploiter of racial tensions. In contrast, Loewen sought to 

portray itself as another victimized minority (i.e., a "foreigner") that the African-American 

community – as represented by Loewen's prominent African-American counsel and the National 

14 Blackmon added his speculation that O'Keefe intended the advertisements to exploit 

racial tensions that allegedly existed in the fishing community on the Mississippi Gulf Coast as a 

result of an influx of Vietnamese immigrants after the U.S. war in Vietnam. Tr. 5674. 

17

Baptist Convention – had taken under its wing. 15 In short, claimants' protestations of innocence 

with respect to the playing of the "race card," as well as the irrelevant foray into which side 

"started" the playing of that card, are thoroughly disingenuous. 16 

D. Alleged Improper References To Class 

Despite the United States' showing that neither the jury verdict nor any of the Mississippi 

court judgments was motivated by an improper "class-based" animus, see, e.g., Counter-Mem. at 

30-32, claimants still contend otherwise. According to claimants, O'Keefe's counsel made 

several improper references to "class-based" or "populist" sentiments that were irrelevant to any 

issues in the case, and which influenced the jury's and the court's ultimate decisions. Not so. 

Claimants' principal error in this respect is the mistaken assertion that the challenged 

references were directed only to O'Keefe's "oppression" claim, which Judge Graves prevented (at 

Loewen's request) from going to the jury. See Joint Reply at 37. As the record makes clear, the 

O'Keefe plaintiffs generally alleged, with reference to all of their claims, that "Defendants have 

taken advantage of their wealth and unequal bargaining position with that of the Plaintiffs." 

A125. 

15 Mr. Gary's characterization of Loewen's defense as "Excuse me. I'm from Canada," 

which claimants misrepresent as an appeal to local bias without predicate (see Joint Reply at 14- 

15), was plainly a response to Loewen's strategy of seeking sympathy from the jurors on the basis 

of its status as an allegedly victimized foreigner. 

16 Judge Graves' casual remark of "Oh, I know y'all didn't start it" was hardly the finding 

of fact that claimants contend. (Tr. 5289). Viewed in the context of the litigation as a whole (as 

well as Judge Graves' justifiably waning patience with the lawyers), Judge Graves' remark was 

plainly intended merely to chide the squabbling parties and to urge them to move the case along. 

Id. 

18

For example, the O'Keefe plaintiffs alleged, in support of their claims of fraud, wilful and 

malicious breach of contract, bad faith, and violations of state anti-monopoly laws, that "[t]he 

Defendants knew, and acted upon the knowledge, that the Plaintiffs had an unequal bargaining 

position and could not afford to continue to leave this transaction [the August 1991 settlement 

agreement] in an incomplete posture for an indefinite time,"A128, and that "[t]he Defendants['] 

acts, course of business, or usage in trade is typical conduct of these Defendants which they have 

used on a wide basis to the detriment of small businesses such as Plaintiffs in similar transfers." 

A125; see also, e.g., A147-49. 17 Claimants' emphasis on the "oppression" claim is thus a 

distraction. 

Similarly, several of the excerpts from the record that claimants offer to support their 

theory are from the punitive damages phase of the litigation. See Joint Reply at 40-41; id. at 37 

(citing TLGI Mem. at 16-17, 43-47). Because one of the principal purposes of the punitive 

damages phase was to establish Loewen's net worth, it is difficult to see how Loewen could 

complain of O'Keefe's references to Loewen's worth – which claimants now characterize as a 

"wealth-based incitement strategy" – in that portion of the litigation. 

Finally, claimants once again rely principally on the exchange that occurred at trial 

concerning Ray Loewen's yacht to support their claim of impermissible "class-based" bias. See 

Joint Reply at 37, 39, 42-46, 68. Claimants, however, misconstrue the import of this alleged 

17 As Mr. O'Keefe related elsewhere, Loewen used its unfair bargaining power to 

intimidate even John Wright, Loewen's co-defendant in the case. According to Mr. O'Keefe, 

during his meeting with Mr. Loewen aboard Loewen's yacht, "Loewen boasted how he 

maneuvered John Wright to sell the Wright & Ferguson Funeral Home by threatening to build a 

brand-new home in his territory. Loewen demonstrated how Wright's hand shook so much the 

coffee sloshed from his cup." U.S. App. at 0025. 

19

"yacht theory" of the case, an invention attributed to Willie Gary in a newspaper article five years 

after the O'Keefe trial. As the article makes plain, Mr. Gary "jumped on the matter" of Loewen's 

yacht only after Mr. Loewen testified, in response to questions from Loewen's own lawyer, that 

he did not know the difference between a boat and a yacht. A3122. The issue then was simply 

one of Mr. Loewen's credibility, which Mr. Gary challenged with effectiveness by pointing out to 

the jury that Loewen and its witnesses "lied to Jerry, and they lied to you. They even lied for no 

reason. . . . What about the boat? Nothing wrong with the man having a yacht, but if you've got 

a yacht, say it." Id.; Tr. 5557. Mr. Gary's boast of his supposed "yacht theory" five years after 

the fact was simply a reference to Loewen's dishonesty – the actual theme of the O'Keefe case – 

having nothing to do with class or populism. 

E. Loewen Raised The Character Issues Of Which Claimants Now Complain 

Throughout their discussion of the alleged appeals to bias, claimants complain that 

certain witnesses testified favorably to Mr. O'Keefe's character which, according to claimants, 

was irrelevant to the case and impermissibly appealed to nationalistic or racial biases. See Joint 

Reply at 11-12, 14, 24, 31-33. Although they concede that Loewen itself spent much of the trial 

assaulting Mr. O'Keefe's character – including sustained efforts to portray Mr. O'Keefe as a 

racist, a xenophobe, a slanderer or defamer, and a dishonest businessman who associated with 

criminals – claimants contend that Loewen was "forced" to do so by the earlier testimony of 

O'Keefe's witnesses. See, e.g., Joint Reply at 24. This is demonstrably not so. 

As already noted, Loewen made clear from the outset of the case, well before any witness 

took the stand, that an essential part of its strategy was to characterize O'Keefe as a bigot who 

exploited racial divisions in his advertisements. See supra at 8-10, 14-18. O'Keefe was thus well 

20

within his rights to elicit testimony showing, for example, that he was "a man without bias." 

Joint Reply at 32 (quoting testimony of Mike Espy). 

Beyond this, however, one of Loewen's most basic defenses to its breach of the August 

1991 settlement agreement was that Loewen allegedly had reason to question O'Keefe's honesty, 

good faith and reputation and, therefore, had reason to prevent the transaction from closing. See, 

e.g., U.S. App. at 1255; Tr. 3270, 5660. As Loewen argued to the court in its pretrial briefs, 

Loewen was allegedly concerned about "possible impropriety" by O'Keefe that caused Loewen to 

reconsider its agreement to enter into a relationship with the O'Keefe companies, even though the 

agreement had already been executed. See A85. Loewen thus sought to excuse its breach 

because, "[a]s Plaintiffs' own attacks on Loewen's 'foreign ownership' and the like suggest, the 

reputation of a funeral home company in the community it serves is one of its most valuable 

assets." Id. 18 

Loewen signaled this defense to the jury as early as the voir dire proceedings. For 

example, Mr. Blackmon suggested to the prospective jurors that O'Keefe had been dishonest with 

Loewen, telling "one truth at one time" to Loewen and telling "another story" in another setting 

"outside of the state or in Florida," and that O'Keefe's "word was not what they purported it to 

be." A401-02. 19 See also A402-03 (Mr. Blackmon referring to "an investigation of the O'Keefe" 

18 Several witnesses at trial, including former Loewen executive John Turner, established 

that this purported excuse was utter pretext for Loewen's intentional, bad faith breach of the 

agreement. See, e.g., Tr. 247, 349-53, 2089-93, 2623. 

19 Mr. Blackmon's reference to "Florida" was a foreshadowing of Loewen's allegation, 

explored at great length during Loewen's presentation at trial, that O'Keefe had been involved in 

an improper – and, Loewen would assert, fraudulent – series of loans involving a real estate 

investment in Florida. See, e.g., Tr. 2338-49, 2623, 3445-46, 3473-3510, 5602-08; see also 


21

usiness by the Mississippi Department of Insurance). This strategy persisted – and magnified – 

over the course of the trial, including Loewen's presentation of certain witnesses whose sole 

purpose (as Loewen's counsel would later acknowledge) was to "suggest[] misconduct on the part 

of O'Keefe." U.S. App. at 1190; see also, e.g., Tr. 732 (questions by Loewen's counsel alleging 

that the O'Keefes did not "always tell the truth to the public about what they're doing with their 

money."). 20 

Having thus placed O'Keefe's honesty and reputation squarely at issue from the very start, 

Loewen could not be heard to complain about testimony establishing that Mr. O'Keefe was, for 

example, "'an honorable man,' 'a decent guy,' 'a very respectable person,' 'a friend,' and 'a man 

without bias and without prejudice.'" Joint Reply at 24 (quoting testimony of Mike Espy). 21 Even 


TLGI Mem. at 30. 

20 One notable instance was Loewen's presentation of Mr. Kenny Ross, a former business 

associate of O'Keefe's, whom claimants themselves describe as a "significant witness." See 

TLGI Mem. at 30 (TLGI incorrectly describes Mr. Ross as a former "owner" of an O'Keefe 

entity). Loewen called Mr. Ross to testify with full knowledge that Mr. Ross would do nothing 

other than invoke his constitutional protections against self-incrimination (the Fifth 

Amendment), thereby tarring Mr. O'Keefe – solely by association – with whatever undefined 

misconduct of Mr. Ross the jury might infer from his refusal to testify. See Tr. 3523-35. Judge 

Graves, despite noting O'Keefe's "concern[] about the inference that may be drawn from Kenny 

Ross taking the fifth," permitted Loewen to call Mr. Ross as a witness, over O'Keefe's vigorous 

objection. Id. The only "significance" of Mr. Ross's testimony, therefore, is as an example of 

Loewen's strategy of besmirching Mr. O'Keefe's character and reputation throughout the trial. 

See, e.g., Tr. 3446, 5604-07 (Mr. Sinkfield, in closing argument, asserting that O'Keefe's 

involvement with Mr. Ross showed O'Keefe to be "a crook" who was "cooking the books"). 

21 Even if Loewen had not presented these issues to the jury from the outset, O'Keefe 

would still have been within his rights to elicit this testimony. The well-established rule of 

"anticipatory rehabilitation" allows a calling party to explore on direct examination facts or 

points that rehabilitate an anticipated area of impeachment. See, e.g., Christopher B. Mueller & 

Laird C. Kirkpatrick, Federal Evidence § 269, at 193 n.6 (2d ed. 1994). 

22

in the present proceeding, claimants acknowledge that issues of Mr. O'Keefe's credibility were 

"crucial" in the Mississippi trial. Joint Reply at 22. 

One can, of course, reasonably question the wisdom of Loewen's strategy in this respect. 

See, e.g., Declaration of the Honorable Raymond E. Mabus, Jr. at 4 (former Governor of 

Mississippi opining that, "[t]o the extent that The Loewen Group's legal strategy in the trial was 

to suggest that Mr. O'Keefe was anything but honorable in his dealings with Loewen, I would 

expect that such a strategy would have been doomed to fail.") (Tab E to Counter-Mem.). 

Nevertheless, it is the strategy that Loewen chose. Claimants therefore cannot be heard to 

complain now of the consequences of that choice. 

F. The O'Keefe Case Was Far More Than A Mere Contract Dispute, And Involved 

Valid (And Proven) Antitrust Claims 

Claimants persist in their erroneous contention that the O'Keefe litigation was nothing 

more than a "garden-variety contract dispute" and that O'Keefe's antitrust claims (to say nothing 

of the fraud and intentional tort claims proven at trial) were without legal or factual basis. See 

Joint Reply at 61-75. According to claimants, O'Keefe's antitrust claim was legally unsupported 

and, in any event, was not the "real" focus of O'Keefe's overall claims against Loewen. Id. Apart 

from the fact that this is precisely the sort of question of municipal law that is well beyond the 

role of this Tribunal to assess, 22 claimants' contention is wrong as a matter of both law and fact. 

22 See, e.g., Alwyn A. Freeman, International Responsibility of States for Denial of Justice 

319 (1938) ("[N]o domestic judgment may be attacked merely because it is unsound in the light 

of applicable principles of local law and justice. . . . [T]he question whether a given decision is 

correct or not is not of itself relevant to or determinative of the issue whether it constitutes a 

denial of justice."); id. at 325 ("It must always be remembered that the function of an 

international tribunal is not . . . to sit in review as a municipal court of appeals, but solely to 

determine whether the judgment rendered was so obviously wrong and unjustified as to amount 


23


to an international delinquency.") (emphasis in original). 

23 See Joint Reply at 70-71; Hawkins Statement at 21; Statement of John G. Corlew 

("Corlew Statement") at 8. 

1. O'Keefe's Antitrust Claims Were Legally Sound And Properly 

Submitted To The Jury 

With characteristic bravado, claimants assert that O'Keefe's antitrust claim "was so legally 

deficient that any fair-minded judge would have dismissed it prior to trial." Joint Reply at 70. 

Once again, however, precisely the opposite is true: O'Keefe's antitrust claim was so plainly 

valid as a matter of law that Loewen's mishandling of the issue is yet another example of the 

grievous errors committed by Loewen's trial counsel. 

Claimants and at least two of their experts contend that O'Keefe "grounded his 

'monopolization/antitrust' claim" solely on a theory of predatory pricing, whereby a defendant 

sells products below cost in order to drive out competition. 23 This is simply untrue. As O'Keefe 

argued to the court, "[p]redatory trade practices may consist of any per se or statutory violation of 

law, or any practice which is intended to destroy competition . . . ." A3232 (citing Miss. Code 

Ann. § 75-21-3) (emphasis added). Although O'Keefe did argue that "price discrimination by 

locality" would have been a per se violation of Mississippi's anti-monopoly law, O'Keefe also 

argued that Loewen's other "malicious acts . . . which [were] intended and calculated to destroy 

competition and exclude weak competition from the market . . . are predatory trade practices" in 

violation of the statute. Id. (citing Poller v. Columbia Broadcasting Sys., Inc., 368 U.S. 464 

(1962)). 

24

O'Keefe, of course, was absolutely right. Mississippi's anti-monopoly law is not limited 

only to prohibitions against predatory pricing, but instead broadly proscribes predatory or 

exclusionary conduct in any form. See Miss. Code Ann. § 75-21-3; see also Standard Oil Co. v. 

State, 61 So. 981, 982 (Miss. 1913) (predecessor statute "denounces all restraints of the freedom 

of trade, and is broad enough to cover every and all kinds of business dealings inimical to the 

general welfare of the people of the state."). While, "[i]n its classic form, predation occurs as 

pricing below cost to drive a rival from the market," Philip E. Areeda & Herbert Hovenkamp, 

Antitrust Law § 396g (1995), predatory pricing is by no means the only way to violate anti- 

monopoly law. Rather, "[t]he offense of monopolization" is defined more generally as "the 

possession of monopoly power coupled with the attainment or maintenance of that power by 

unfair means . . . ." E. Kintner, Federal Antitrust Law § 14.5 at 437 (1980); see also Areeda & 

Hovenkamp, Antitrust Law § 650c (antitrust law generally proscribes "monopolies shown to be 

achieved with the aid of reprehensible conduct"). 24 

O'Keefe's pleadings clearly alleged (and O'Keefe ultimately proved at trial) the "unfair 

means" by which Loewen attempted to attain its monopoly power, having nothing to do with 

"pricing below cost." See, e.g., A175. 25 As O'Keefe explained to the court during a pre-trial 

24 See also NAACP v. Claiborne Hardware Co., 393 So.2d 1290, 1301 (Miss. 1980) 

(federal case law construing federal antitrust law is persuasive authority in application and 

interpretation of Mississippi's antitrust statutes), rev'd on other grounds, 458 U.S. 886 (1982). 

25 To the extent that O'Keefe also asserted an "impermissible pricing" claim, Judge Graves 

gave Loewen precisely what it wanted in the court's instructions to the jury. See Tr. 5525-26 

(instructing jury that "any claim for impermissible pricing must show that the plaintiffs were 

injured because defendant charged a price for a product or service . . . that was lower than that 

defendant's cost for that product or service."). The court's instruction on the law of 

"monopolization," however, was entirely distinct from the "impermissible pricing" instruction. 


25

hearing on this very issue, Loewen violated the anti-monopoly laws by (among other things) 

manipulating the August 1991 settlement agreement in bad faith with the intent to drive O'Keefe 

out of relevant funeral home markets, thereby enabling Loewen to continue to raise its prices 

without fear of competition. See A3344-47. O'Keefe also argued that Loewen's treatment of 

O'Keefe was part of a broader practice of destroying or excluding smaller competitors through 

similar unfair methods. See, e.g., A158-59. As Mississippi trial lawyer Jack Dunbar explains in 

his attached declaration, such allegations were more than sufficient to state a claim for a violation 

of Mississippi's anti-monopoly laws. See Supplemental Statement of Jack F. Dunbar, Esq. 

("Supplemental Dunbar Statement") at 2-8 (Tab C hereto). 

Claimants, who merely parrot the misguided arguments of Loewen's trial counsel, are 

similarly incorrect when they assert that O'Keefe, as a competitor of Loewen, lacked the requisite 

legal standing to bring a monopolization claim against Loewen. See Joint Reply at 72. As a 

leading antitrust treatise observes, "[s]tanding is clear and seldom challenged when the plaintiff 

alleges that its rival engaged in an exclusionary practice designed to rid the market of the 

plaintiff, or to preclude his entry, so that the defendant could maintain or create a monopoly." 

Areeda & Hovenkamp, Antitrust Law § 373d. See also, e.g., Oltz v. St. Peter's Cmty. Hosp., 19 


See id. at 5527-28 (instructing jury that, "[t]o prevail on a claim of monopolization and to 

recover damages, the plaintiffs must prove . . . that the defendants had monopoly power in the 

relevant market . . . [,] that the defendants willfully acquired or maintained such monopoly power 

through restrictive or exclusionary conduct[,] [a]nd . . . that the plaintiffs were injured in their 

business or property as a result of such . . . conduct."). Claimants and their expert, Mr. Corlew, 

are thus wrong in asserting that "[t]he only antitrust jury instruction which plaintiffs were granted 

involved 'predatory pricing' . . . ." Corlew Statement at 8. 

26

F.3d 1312, 1314 (9th Cir. 1994) (competitor "is entitled to seek recovery for all damages 

resulting from the destruction of his business" by antitrust conspirators). 26 

Claimants, like Loewen's trial counsel, thus fundamentally misconstrue the antitrust 

claims at issue in the O'Keefe case. O'Keefe's "antitrust injury" did not purport to flow from 

Loewen's exorbitant increases of the prices of funeral services, as claimants contend. See Joint 

Reply at 72. Rather, O'Keefe's antitrust injury resulted from Loewen's bad faith exclusionary 

conduct, which Loewen had undertaken with the ultimate goal of raising prices, in violation of 

Mississippi's anti-monopoly statutes. O'Keefe's right to recover on that claim, and not the claim 

as erroneously described by claimants, is clear as a matter of (in claimants' words) "black letter 

antitrust law." As events have proven, the failure of Loewen's counsel to appreciate this 

important distinction was yet another unfortunate mistake for the company. 27 

26 Claimants are correct that antitrust laws "were enacted for the protection of competition, 

not competitors," Joint Reply at 72 (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 

U.S. 477, 488 (1977)), but that principle only serves to illustrate that O'Keefe's monopolization 

claim was entirely valid. By showing that Loewen's exclusionary acts resulted in reduced 

competition and higher prices to the consumer, O'Keefe proved that Loewen's acts were 

"injurious to the public welfare" and, therefore, had violated the antitrust laws. See, e.g., Young 

Refining Corp. v. Pennzoil Co., 46 S.W.3d 380, 390-91 (Tex. App. 2001) (competitor may bring 

antitrust claim for its injuries caused by rival's exclusionary acts, but only if such acts also injure 

competition in general) (applying Mississippi law); Andrx Pharmaceuticals, Inc. v. Biovail Corp. 

Int'l, 256 F.3d 799, 816-17 (D.C. Cir. 2001) ("[A] rival has clear standing to challenge the 

conduct of rival(s) that is illegal precisely because it tends to exclude competitors from the 

market.") (quoting 2 Areeda & Hovenkamp, Antitrust Law § 348 at 387). 

27 Claimants' discussion of the "tort" of "oppression" is another distraction. See Joint 

Reply at 73-74. As claimants themselves acknowledge, Judge Graves did not submit any 

independent claim of "oppression" to the jury, nor did the jury render any verdict on such a 

claim. Id. at 74. That O'Keefe's pleadings contained a separate count of "oppression" in addition 

to O'Keefe's valid causes of action is thus irrelevant. 

27

2. The Antitrust Claims Were An Essential Part Of O'Keefe's 

Presentation At Trial 

According to claimants, the record of the O'Keefe litigation shows that the case was "at 

bottom" one of a "straightforward" breach of contract. See Joint Reply at 61-69. This contention 

not only reinvents the record, but, once again, misapprehends the nature of the antitrust claims 

that were at the heart of the litigation. 

Contrary to claimants' contention, the record amply demonstrates the centrality of 

O'Keefe's monopolization claim. In fact, the vast bulk of Michael Allred's opening statement on 

behalf of O'Keefe focused on the monopolization claim, including detailed references to how 

Loewen would "control the market" and "deny the people a choice so that they can raise prices" 

on a broad scale, and how the company routinely did "whatever it takes to . . . injure the business 

of their competitors" in order to maintain their monopoly power. See Tr. 17-18. Mr. Allred 

made clear that monopolization was Loewen's motive for the bad faith and tortious breaches of 

contract with O'Keefe: "to [achieve] 28 monopoly power in not one but all three of the largest 

areas in the state, he needed to remove the O'Keefe family as an obstacle in his way." Tr. 38-39; 

see generally Tr. 19-44. 

O'Keefe also presented extensive evidence and testimony at trial to substantiate the 

monopolization claims, evidence and testimony that claimants entirely ignore. Indeed, as the 

United States has already shown, Loewen ignored – at its ultimate peril – one such witness 

during the trial, Mr. Dale Espich, a highly-credible expert who testified in detail with regard to 

28 The transcript misquotes "achieve" as "a chief." 

28

Loewen's monopolistic practices, and whom Loewen chose not to cross-examine. See Counter- 

Mem. at 44-45. 

In the end, claimants contend that the antitrust issues were not at the "bottom" of the case 

simply because O'Keefe's counsel, as a thematic device, often described the case in relation to the 

breaches of contract. See Joint Reply at 63-68. But, in so doing, claimants once again 

misapprehend the nature of the monopolization claim at issue. As O'Keefe argued, and as the 

jury found, Loewen intentionally broke the contracts as a means of excluding O'Keefe from the 

market and thereby securing its monopoly power; the breaches of contract and the predatory 

conduct that gave rise to the antitrust violation were thus one and the same thing. It is entirely 

appropriate, therefore, that O'Keefe's counsel, as a matter of effective advocacy, reduced the 

claim to a theme involving Loewen's bad faith breaches of contract. Cf., e.g., T. Mauet, Trial 

Techniques at 44 (4th ed. 1996) ("Every case can, and should, be distilled into one, two, or no 

more than three themes that summarize your positions on the case in an engaging, easily 

remembered way."). 29 

G. Claimants Misrepresent Loewen's Report On Post-Trial Juror Interviews 

As part of discovery in this arbitration, Loewen produced the self-titled "Report on Post- 

Trial Juror Interviews," dated December 11, 1995. See U.S. App. at 1125-1191. This 

document, prepared on Loewen's behalf by John G. Corlew (a witness for claimants in this 

29 Claimants' reliance on news accounts of the trial that allegedly describe the contract 

claims as the focus of the case is similarly misplaced. Even claimants' own news source 

observed that one of the "[m]ore damaging" aspects of the case for Loewen was the proof at trial 

that "the cost of dying increased in direct correlation to the decrease in competition." A3101. 

See also id. (noting that the case offered "a rare insight into the secretive and rapidly 

consolidating funeral-home industry. That can mean higher prices and local monopolies with 

communities unaware that control of these services has even changed hands."). 

29

proceeding) and another lawyer at his firm, contains (i) the lawyers' summaries of their 

interviews with five of the rendering jurors (id. at 1146-91); and (ii) Mr. Corlew's analysis of 

those interviews and the jury selection process. Id. at 1126-38 ("Corlew Report") (collectively 

"Corlew documents"). 

The United States has shown, through the statement of Professor Neil Vidmar ("Vidmar 

Statement"), that the jury interview memoranda, taken as a whole, "provide no credible evidence 

to support claimants' allegations of improper jury bias, jury incompetence, or that the trial 

improperly 'inflamed the passion' of the jury." See Vidmar Statement at 1. In fact, as Professor 

Vidmar explained, "the interviews support an opposing view: that is, the data indicate that the 

jury followed the judge's instructions on the law and reached a verdict based on the evidence 

presented at trial." See id. 

While claimants' take issue with Professor Vidmar's conclusions, they offer no expert 

testimony in rebuttal. 30 Nor do claimants make any coherent attempt to grapple either with 

Professor Vidmar's analysis, or the vast majority of the interviewed jurors' reported comments 

demonstrating that the jury, rather than being swayed by improper prejudice, simply assessed 

Loewen's evidence and witnesses as not credible. See Vidmar Statement at 27-39. 

30 Professor Vidmar is an internationally-recognized expert in civil juries (including juror 

prejudice) who, through 25 years of research, has gained unprecedented insights into the behavior 

and performance of civil juries. See Vidmar Statement at 3-5; see also U.S. App. at 1348. While 

Sir Ian Sinclair, one of claimants' international law witnesses, discusses the juror interviews in 

his opinion (see Sinclair Op. at 15-26), he does not purport to be a civil jury expert, or, indeed, to 

have any experience interviewing, surveying, or observing civil jurors, or otherwise researching 

their behavior. See also Second Opinion of Christopher Greenwood QC ("Second Greenwood 

Op.") (attached hereto at Tab A) at 96. 

30

More fundamentally, claimants' discussion of the Corlew Report and juror interview 

memoranda is misleading (if not outright inaccurate) in a number of critical respects. For 

example, in their Joint Reply, claimants: 

! fail to attribute statements from the jury interviews to particular jurors, 

obscuring that most, if not all, of the derogatory statements on which they 

rely are the purported comments of a single juror – the lone dissenter from 

the verdict – discussing other members of the jury panel with whom she 

disagreed and from whom she was estranged; 31 

! inaccurately describe statements and observations of the lone dissenting 

juror as "admissions" of other jurors; 32 

! repeatedly attribute statements or observations of one juror to "the jurors" 

or "the jury" generally; 33 

31 See, e.g., Joint Reply at 25 (block quote in 48 attributable to interview of dissenting 

juror); id. at 42 (all quotations in 85 attributable to same); id. at 90 (all but the last two 

quotations in 190 attributable to same); id. at 105 (all quotations in the first sentence of 225 

attributable to same). The lack of juror identification is particularly confusing when claimants, in 

the same sentence, combine quotations from interviews of different jurors, such as the dissenting 

juror and another member of the panel. See, e.g., Joint Reply at 68 (third sentence of 142). 

32 For example, claimants assert "[t]he jurors themselves admitted that Gary's nationalistic 

appeals affected their verdict." Joint Reply at 25. But the document claimants cite reflects only 

the dissenting juror's reported impressions of the other jurors. Similarly, claimants assert the 

foreman (Mr. Millen) "admitted" he disliked Canadians. Joint Reply at 10. But again, the cited 

document reflects only the dissenting juror's (erroneous) impression of the foreman. See U.S. 

App. at 1148. 

33 See, e.g., Joint Reply at 25, 42, 47-48, 51, 61, 90, 99-100, 105, 128, 129. To take one 

example, claimants repeatedly assert that "the jurors freely admitted" they were seeking to 

"destroy" Loewen (or some variation of that charge). See Joint Reply at 47, 50, 129. The actual 

statement – which Mr. Corlew did not even include in his Report – allegedly was made by the 

dissenting juror, in reference to a single other juror. See U.S. App. at 1147. 

31

! repeatedly fail to distinguish between the interview memoranda and the 

Corlew Report, portraying Mr. Corlew's analysis and conclusions as actual 

statements of the interviewed jurors; 34 and 

! repeatedly refer to a memorandum of Mr. Robertson's interview of the 

dissenting juror as "the Juror Report" (see Joint Reply at 42, 90, 129). 

Perhaps most egregiously, though, claimants, throughout their Joint Reply, represent 

Loewen's lawyers' paraphrases and summaries of the jurors' purported remarks in the interview 

memoranda as actual quotations of the jurors themselves. See Joint Reply at 25, 41, 42, 48, 51, 

61, 68, 69, 99-100, 105, 128, 129. 35 In fact, claimants go so far as to italicize certain phrases in 

the lawyer summaries to "emphasize" what claimants portray – without any qualification to the 

Tribunal – as the individual jurors' own words. See Joint Reply at 41, 51, 68, 69. 

Although it is tempting to correct, or provide context to, each of claimants' (mis)citations 

to the Corlew documents, Professor Vidmar's unrebutted statement provides a clear, thorough 

accounting of the jurors' reported comments. Thus, beyond urging the Tribunal to read, for itself, 

the underlying documents, we add only the following brief comments to put the Corlew Report 

and interview memoranda into an appropriate context. 

Claimants repeatedly characterize the Corlew Report and juror interview memoranda as a 

"government source," suggesting, it seems, that the government played some role in their 

creation. These documents, in reality, were the fruit of a Loewen-sponsored investigation, 

34 See Joint Reply at 35, 41-42. Again, this is particularly confusing when claimants, in 

the same sentence or paragraph, combine quotations from the Corlew Report with quotations 

from the interview memoranda. See Joint Reply at 41, 68-69, 90, 128-29. 

35 There is no indication the interviews were taped or transcribed verbatim (nor have 

claimants produced any such tape recording or transcription), and the interview memoranda 

consist largely of paraphrases and summaries of statements the jurors purportedly made during 

the interviews. The few juror statements reported directly appear in quotation marks. 

32

conducted by Loewen-retained lawyers, designed to "ferret out" any basis for complaint about the 

jury on appeal. See Landsman Statement at 29. The relevance of the Corlew documents thus is 

not, as claimants seem to believe, that Mr. Corlew or the dissenting juror made statements or 

reached conclusions supportive of Loewen's arguments here. Rather, the relevance of the Corlew 

documents is that, notwithstanding their quite obvious bias, they demonstrate the jury rendered 

its decisions in good faith, and not as a result of some latent prejudice. 

The Corlew Report. The Corlew Report plainly is a work of advocacy. Authored by 

Loewen-retained lawyers, the Report analyzes, and ultimately recommends, potential arguments 

for appeal, see U.S. App. at 1137-38, generally avoiding (or downplaying) the vast majority of 

statements in the interview summaries indicating the jurors decided O’Keefe's claims based on 

the evidence presented at trial. Compare Vidmar Statement at 19-39 with Corlew Report at 7-11 

(U.S. App. at 1132-36). 

Given its bias, the Report's most striking feature is what it does not say. For example, in 

the "Conclusion and Recommendations" section, Mr. Corlew does not say (or even suggest) that 

he found the interviewed jurors prejudiced against Loewen for nationality- or class-based 

reasons. See U.S. App. at 1137-38. Elsewhere, Mr. Corlew affirmatively states he found no 

evidence of "juror misconduct," see id. at 1126, and that "it is not probable that reversible error 

can be found in the [jury] selection process" (i.e., voir dire). See id. at 1129. These 

contemporaneous admissions (and omissions) by Loewen's lawyers run directly contrary to 

arguments that claimants advance in this proceeding. 36 

36 The Corlew Report undermines claimants' arguments before the Tribunal in other ways 

as well. For example, claimants and their witnesses have suggested throughout this proceeding 


33

The Interview Summaries. The interview summaries, too, must be seen for what they are: 

the work of advocates marshaling arguments, not social scientists conducting a study. See 

Vidmar Statement at 16-17. While Mr. Corlew surely cannot be faulted for failing to observe 

methodological rules that would govern a social scientist, the interview summaries, as a result, 

are neither balanced nor even-handed. 

For example, Mr. Corlew has acknowledged that, in conducting the interviews, he 

informed the jurors he was "inquiring on Loewen’s behalf." See Corlew Statement at 2 

(footnote) ("I would be stunned if any of the jurors did not understand, based on our disclosures, 

who 'the true sponsor of the inquiries' was"). As Professor Vidmar has explained, revealing 

Loewen as the interview sponsor "would tend to result in answers tilted more favorably to 

Loewen." See Vidmar Statement at 17; see also Reference Manual on Scientific Evidence 238 


that the jury was swayed by the outcome of the O.J. Simpson trial (see, e.g., Joint Reply at 30), 

but the Corlew Report notes that "[t]he O.J. Simpson verdict was never mentioned in post-trial 

interviews . . . ." See U.S. App. at 1134. Claimants also have argued that the jury was 

dominated by its "predominantly black" members (see, e.g., Joint Reply at 34, 108), but the 

Corlew Report notes that three of the four "strong personalities" on the jury were white (and that 

two of these white jurors joined the verdict). See U.S. App. at 1127, 1134. Indeed, claimants 

fail to mention that the jury – as originally picked and impaneled – included an equal number of 

white and black members. See U.S. App. at 1135. Two white jurors were excused for illness 

early in the trial and replaced by African-American alternates. See id. 

34

(Federal Judicial Center 1995). 37 Loewen's international-law expert, Sir Ian Sinclair, concedes 

this point as well. See Sinclair Op. at 15. 

Moreover, the juror's answers were paraphrased, not reported verbatim; the interview 

questions focused primarily on the jurors' reactions to the lawyers (rather than the trial evidence); 

and, to the extent the questions raised issues relating to the evidence, they focused on plaintiffs' 

breach of contract claim (largely ignoring the other issues the jury was asked to decide). See 

Vidmar Statement at 17. For all of these reasons, Professor Vidmar has concluded (id.): 

there is a reasonable probability that the psychological influences in the interviews 

tilted some jurors' answers away from a neutral disclosure of attitudes and events 

at trial toward answers consistent with the defense perception of how jurors 

responded at trial. 

But again, the summaries are most notable because, notwithstanding the "methodological 

problems," the "jurors' answers still produce a picture of the jury that is vastly different than – 

and inconsistent with – the claims put forth by [claimants]." See Vidmar Statement at 17. While 

we have referred the Tribunal to the interview memoranda themselves, we note that even the 

dissenting juror reportedly made a number of statements inconsistent with claimants' allegations 

here. For example, according to Mr. Corlew, this juror reportedly said: 

that the Loewen defendants breached the 1974 contract (U.S. App. at 1146); that 

Judge Graves was not "a great influence on the way that the jury reacted" (id. at 

37 James Robertson's interview of the dissenting juror, upon which claimants rely so 

heavily in their Joint Reply, is particularly unreliable. See Joint Reply at 42, 90, 129. Not only 

was Mr. Robertson on the team of lawyers representing Loewen at trial, see Reference Manual on 

Scientific Evidence 237 (Federal Judicial Center 2000) ("the attorney should have no part in 

carrying out [a survey to be offered as scientific evidence]"), but it is apparent that, based on 

discovery produced by claimants, he had a very personal stake in the dissenting juror's views. In 

a post-settlement letter to the Loewen team, Mr. Robertson went so far as to state: "[t]here are 

moments when [the dissenting juror] is all that stands between me and despair." See U.S. App. 

at 1240,1242, 1244, 1246. 

35

1147); that he was "very hard" on [O'Keefe attorney] Michael Allred (id.); that the 

Riemann letter was "very damaging" (id.); and that the defense witnesses "really 

didn't help [Loewen], because of cross-examination." (id. at 1148). 

And according to Mr. Robertson, this juror reportedly said: 

that O'Keefe had suffered "severe losses" (id. at 1185); that the Riemann letter 

was "the single most significant piece of evidence" (id. at 1187); that the jurors 

"regarded [John Turner] as a very credible witness" (id. at 1188); that they 

"reacted very favorably to all of the lawyers in the case" (id.); and that Loewen's 

"presentation of the contract with the National Baptist Convention backfired." (id. 

at 1189). 

In fact, Mr. Robertson reported that the dissenter was "complimentary of Judge Graves" (id. at 

1191), and, in a fitting rejoinder to claimants' allegations here, was "reluctant to question the 

motives of her fellow jurors." Id. 

In the end, we do not dispute that claimants can find isolated statements in the interview 

memoranda to support some of their allegations. But that is to be expected. The interviews, after 

all, were conducted by Loewen's attorneys, in an obvious effort to "ferret out any basis for 

complaint about the jury," no matter how "fanciful or legitimate." See Landsman Statement at 

29. Professor Vidmar's analysis makes clear, however, that any fair reading of the jury 

interviews, in their totality and in view of the trial record as a whole, provides compelling proof 

that the jury, rather than being swayed by prejudice, "followed the judge's instructions to decide 

the case based on the trial evidence." See Vidmar Statement at 20. 

III. CLAIMANTS CANNOT OVERCOME LOEWEN'S FAILURE TO COMPLAIN TO 

THE MISSISSIPPI COURTS ON THE GROUNDS RAISED IN THIS PROCEEDING 

The United States has thrice shown that Loewen never complained during the relevant 

portions of the O'Keefe litigation on the grounds that claimants raise in this proceeding. (See 

U.S. Jurisdictional Mem at 86-88; U.S. Jurisdictional Resp. at 84-92; Counter-Mem. at 65-72). 

36

In response, claimants contend that the government's "real position is plainly that Loewen did not 

object enough to the[] tactics" of which claimants complain in this proceeding. Joint Reply at 

202 (emphasis in original). The record of the O'Keefe litigation is clear on this point, so let us be 

clear as well: Loewen never objected at any time during the trial on the grounds that the alleged 

"tactics" of O'Keefe's counsel appealed to any nationalistic, racial or class animus. Likewise, in 

the post-trial proceedings, Loewen never argued to the Mississippi courts that Chapter 11 

reorganization was an insufficient means by which the company could have stayed execution 

pending appeal without a supersedeas bond, despite having been challenged repeatedly to do so. 

As the United States has fully demonstrated, and as we confirm below, these failures deprive 

claimants of their asserted grounds for complaint in this proceeding as a matter of international 

law. 

A. Claimants Still Fail To Identify A Single Instance Where Loewen Raised 

These Complaints To The Mississippi Courts 

Claimants and their witnesses contend that Loewen objected repeatedly throughout the 

O'Keefe trial. This contention is entirely unremarkable, for the United States agrees that Loewen 

objected repeatedly throughout the trial. Indeed, any litigant would assume that its counsel 

would object repeatedly over the course of a two-month trial in any American courtroom. What 

claimants fail to address is the fact that Loewen never objected on the grounds of which it 

complains here – i.e., that O'Keefe's counsel appealed to alleged prejudices of nationality, race 

and class during the trial, and that (in the post-trial proceedings) a full supersedeas bond deprived 

Loewen of a meaningful opportunity to appeal because Chapter 11 reorganization was an 

unreasonable form of protection for Loewen under the circumstances. It is Loewen's failure to 

37

make these complaints to the Mississippi courts that deprives claimants of any grounds for 

raising these same complaints now. 

1. Failure To Object At Trial On The Grounds Of Alienage, Race Or Class 

Claimants' contention that Loewen objected at trial on the grounds of nationality, race or 

class bias, like much of this NAFTA claim generally, finds no support in the record. As 

Professor Landsman observed, "[t]here were a large number of objections made on the record 

during the trial but none appeared to be addressed to racial or class bias, no argument was made 

by Loewen's counsel on these points and no curative instructions were sought." Landsman 

Statement at 32 (emphasis added). Similarly, Loewen made "[n]o objections regarding prejudice 

arising from references to Canadian citizenship, foreign corporations or any related subject . . . 

during the course of the seven week trial." Id. at 22 (emphasis added). 

Claimants offer nothing but rhetoric to the contrary, relying instead on their newest 

witnesses' assertions that Loewen objected on the relevant grounds during the trial. See Corlew 

Statement at 6; Hawkins Statement at 3. 38 Like claimants, however, Mr. Hawkins does not offer 

38 Evidently, claimants have added the declarations of Armis Hawkins and John Corlew to 

bolster the opinions of Richard Neely, which cover essentially the same ground. This is not 

surprising, given that Mr. Neely, since submitting his initial opinion in this case (an opinion on 

which it appears many of claimants' experts have relied), has been criticized for a shortage of 

truthfulness by a federal court. See Henley v. FMC Corp., 189 F.R.D. 340, 343 n.6 (S.D.W.Va. 

1999) (noting that in a "crucial exchange [with the Court], Plaintiff's counsel [Mr. Neely and 

others] fell short of the duty to be candid and truthful . . . ."). Shortly before submitting that 

opinion, Mr. Neely was rebuked by his former colleagues on the West Virginia Supreme Court 

for his litigation conduct. See Lawyer Disciplinary Bd. v. Neely, 528 S.E.2d 468, 471 n.8 

(W.Va. 1998) (while declining to find Mr. Neely guilty of ethics violations, the majority noted 

that "we are troubled by the threatening content of the letters Mr. Neely sent to the insurance 

company," and "[s]imply put, what the lawyer did in this case was unfair and inappropriate."); 

see also id. at 475 (noting that Mr. Neely "g[ot] off by the skin of [his] teeth for filing a spurious 

lawsuit," and that his conduct "does not bring respect to the profession") (Workman, J., 


38

a single citation to the record to support his assertions. Although Mr. Corlew offers a string of 

citations to the record, not one of these citations actually supports claimants' position. 

concurring). 

For example, Mr. Corlew highlights Loewen's objection at page 62 of the trial transcript, 

but that objection (which, in any event, the court sustained) did not complain of any appeal to 

bias; it instead complained only on the unremarkable ground that one of opposing counsel's 

opening statements was premature "argument." Tr. 62. 39 Likewise, the apparent basis for 

Loewen's objection at page 484 (also sustained) was that opposing counsel's question to the 

witness sought inadmissible hearsay. In a similar vein, Loewen's objection at page 1110 (again, 

sustained) was not on any grounds of improper bias, but merely that opposing counsel's questions 

were "lead[ing] the witness . . . ." And the list goes on. 40 


39 Such objections are routine in American litigation, as "[a]rguments are reserved for 

closing arguments." T. Mauet, Trial Techniques §3.3(1). 

40 See, e.g., Tr. 1132 ("Object to leading, Your Honor."); id. ("Object to hearsay, Your 

Honor."); Tr. 1139-40 (objection to testimony about black and white funeral markets not based 

on bias, but merely that testimony "hadn't been narrowed to a particular area he's talking about."; 

objection sustained); Tr. 1212 (objections on apparent ground of hearsay; sustained); Tr. 1831 

(objection to expert testimony regarding lack of competition between black and white funeral 

markets not based on bias, but merely that testimony was allegedly outside scope of expert's 

testimony as identified by O'Keefe pre-trial); Tr. 2039-41 (objections on grounds of "no 

foundation," "hearsay," "argumentative and leading"); Tr. 2269 (objection to witness's 

unresponsive "comment on depositions"; objection sustained); Tr. 2518 ("I object. This is not 

responsive to the question."); Tr. 3535 (objection to lack of foundation; sustained); Tr. 4317 

(objection to compound question; sustained); Tr. 5169 (objection to question as "argumentative"; 

sustained); Tr. 5334 (objections on grounds of "leading" and "foundation"); see also Swington v. 

State, 742 So.2d 1106, 1110 (Miss. 1999) ("An objection on one specific ground waives all other 

grounds."). 

39

As the United States has shown, it was not until Loewen submitted its numerous post-trial 

motions on a variety of matters – fully two weeks after the jury rendered its verdicts and the trial 

proceedings were closed – that Loewen first claimed that "plaintiffs repeatedly and 

impermissibly interjected issues and matters of race, national origins, class and economic status 

into the case . . . ." A729. Even then, this cursory allegation was buried in an 87-page motion 

following 70 pages of often tedious and impenetrable arguments about other aspects of the trial, 

and was made without the support of even a single example from the record. Under any 

standard, this claim was both far too late and far too unspecific to constitute a proper objection. 

See, e.g., Barnett v. State, 725 So.2d 797, 801 (Miss. 1998) (objection raised "after the jury has 

returned a verdict and been discharged is simply too late."); Oates v. State, 421 So.2d 1025, 1029 

(Miss. 1982) ("We have said many times that general objections will not suffice."); Counter- 

Mem. at 69 n.41. 41 

41 Although the United States has already addressed claimants' contention that Loewen's 

proposed jury instruction on "bias" qualifies as an objection (see, e.g., Counter-Mem. at 49-51; 

U.S. Jurisdictional Resp. at 86), Mississippi trial lawyer Jack Dunbar discusses this issue in 

further detail in his attached supplemental statement (see Tab C hereto). As Mr. Dunbar 

explains, Judge Graves did not err in refusing to give the proposed instruction in favor of the 

court's more neutral instruction on "bias," to which Loewen did not object. See Supplemental 

Dunbar Statement at 8-13. The contrary opinion of claimants' witness, Armis Hawkins, finds no 

basis in the actual circumstances of the trial and, indeed, is best seen as an example of the 

"typical Hawkinsian Fury" and "hyperbole" for which Mr. Hawkins is well-known among his 

colleagues. See Statement of W. Joel Blass ("Blass Statement") at 5-6 (attached at Tab B 

hereto). As the actual record makes clear, Loewen never lodged any objection during the casein-chief 

alleging any improper appeals to bias – and, in fact, devoted much of its own case to 

making such appeals itself. Loewen's proposed instruction, therefore, was either a further effort 

to curry sympathy from the jury or, at the very most, a substitute for an objection that came far 

too late. See Supplemental Dunbar Statement at 11-12. Even in its post-trial motions, Loewen 

offered no argument that the refusal to give the instruction was error (as it did with several other 

instructions that were refused), and instead buried the instruction ("D-3") in a final "laundry list" 

general assignment of error. See A718-23. Claimants' much-belated effort to give the point 


40

In short, since the United States first challenged them to do so, neither claimants nor their 

witnesses have been able to identify a single instance during the trial where Loewen raised an 

objection that O'Keefe's counsel had improperly appealed to the jury on the grounds of 

nationalism, race or class. 42 The opinion of the court in Curtis Publishing Co. v. Butts, 351 F.2d 

702 (5th Cir. 1965), aff'd, 388 U.S. 130 (1967), is thus a fitting description of claimants' 

allegations here: 

Id. at 714. 

If, as . . . counsel now claim, the arguments were, among other things, 

'grossly improper and inflammatory', 'intemperate and inexcusable', 

'appeals to passion and prejudice', 'corruptions of the evidence', 

'completely unsupported by the evidence', and 'unsworn testimony of 

counsel', it is inconceivable to us that they would have delayed so long 

without raising the slightest hint of an objection. Leeway must often be 

allowed counsel in objecting to argument lest the objection itself magnify 

the harm. But to say nothing during argument, the extended week end 

recess, and for nine days thereafter, leaves us with the conviction that they 

did not consider the arguments objectionable at the time they were 

delivered, but made their claim as an afterthought. 


prominence now confirms that the allegation is a mere afterthought. 

42 At the hearing on jurisdiction, Mr. Loewen's counsel suggested that Loewen’s four-word 

motion for a mistrial during O'Keefe's closing argument might qualify as an objection on these 

grounds (see 9/20/01 Transcript of Hearing at 206-07), but counsel has simply misconstrued the 

record. Loewen did object to Mr. Gary's statement in closing argument that Loewen's "actions 

have hurt this family and the people of Mississippi" (an objection Judge Graves sustained) and 

moved for a mistrial. Tr. 5543. Viewing the record in its entirety, however, the basis for this 

objection and motion was not that Mr. Gary had appealed to any improper "bias," but that, by 

referring to the entire State of Mississippi, Mr. Gary had exceeded the court's pre-trial ruling on a 

motion in limine that limited O'Keefe's presentation regarding monopolistic practices only to 

seven Mississippi counties. See, e.g., A295 (limiting O'Keefe to proof of monopoly in seven 

counties); Tr. 18-19 (sustaining objection to Mr. Allred's reference to Loewen's monopolies in 

areas beyond scope of ruling on motion in limine); 44-46 (Judge Graves' sua sponte 

admonishment of Mr. Allred for same). 

41

2. Failure To Argue For A Departure From The Bond Requirement 

On The Ground That Reorganization Protection Was Inadequate 

The United States has shown that Loewen, during the proceedings on the supersedeas 

bond question, never argued for a reduction of the bond requirement on the ground that corporate 

reorganization was an unreasonable means of protection for the company, despite having been 

challenged in both the Mississippi trial and Supreme courts to do so. See U.S. Jurisdictional 

Resp. at 88-92; Counter-Mem. at 58-63. In response, claimants contend that Loewen did so 

argue to the courts and that, in any event, the company had no obligation to make such a 

showing. See Joint Reply at 203-04. Claimants are wrong in both respects. 

As the record makes clear, Loewen left entirely unrebutted O'Keefe's repeated assertions 

to the Mississippi courts that Chapter 11 reorganization provided adequate protection to Loewen 

even in the face of a full supersedeas bond. See, e.g., A1058, A1062. Claimants offer only three 

citations to the record where, it is alleged, Loewen sufficiently informed the Mississippi courts of 

the inadequacy of reorganization protection. See Joint Reply at 120, 203 (citing to footnote in 

prior submission). One need not tarry long to see that the cited portions of the record have 

nothing whatsoever to do with reorganization protection, which is not even mentioned. 

Claimants thus offer no serious factual rebuttal in this respect. 

Instead, claimants contend that Loewen had no obligation to argue to the courts that 

reorganization protection was inadequate because, they contend, the United States' argument to 

the contrary is supported only by "a minority view of only two of the nine [J]ustices [of the U.S. 

Supreme Court] and thus had no legal force." Joint Reply at 203-04. This, too, is wrong. 

As the United States has already demonstrated, business reorganization is a well-known 

mechanism in the United States' legal system for staying the execution of large judgments where, 

42

as is alleged here, the cost of a supersedeas bond would be prohibitive. See U.S. Jurisdictional 

Mem. at 72-81; U.S. Jurisdictional Resp. at 59-61. 43 The authority for the reasonableness of this 

often-used practice is by no means limited only to Justices Brennan and Marshall of the U.S. 

Supreme Court (the two Justices to whom claimants refer). Consider, for example, the following 

additional authorities in existence at the time of the Mississippi proceedings: 

! Justice Stevens of the United States Supreme Court, a current Justice who 

was on the Court at the time Loewen's petition for relief would have been 

heard, independently concluded in the Pennzoil v. Texaco case that 

corporate reorganization obviated the need for a departure from a full 

bond. Indeed, Justice Stevens found the point to be obvious: "Of course, 

if Texaco were forced to file for bankruptcy under Chapter 11, the claims 

of judgment creditors would be automatically stayed. See 11 U.S.C. § 

362. If Texaco were then to prevail on its appeal from the Texas 

judgment, the bankruptcy court could dismiss the reorganization 

proceeding. 11 U.S.C. § 1112." Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 

32 n.6 (1987) (Stevens, J., concurring) (emphasis added). 

! Judge Easterbrook of the United States Court of Appeals for the Seventh Circuit, 

an acknowledged expert regarding the economic aspects of law, amply explained 

why corporate reorganization is generally adequate protection for a judgment 

debtor faced with an allegedly unaffordable supersedeas bond: 

[T]here is no reason to treat bankruptcy as a bogeyman, as a fate 

worse than death . . . . No evidence of which I am aware 

demonstrates that the bankruptcy process is particularly costly. 

True, there are high costs, including the costs of trustees and 

lawyers and the costs of judicial error. But the costs of 

reorganization come from the financial distress of the firm, not 

from the judicial process though which that distress is worked out. 

. . . 

43 Loewen has already admitted as much in this proceeding. See TLGI Counter-Mem. at 

39 ("Loewen readily agrees that a bankruptcy filing was a theoretical local remedy available to 

the Company following the O'Keefe verdict . . . . .") (emphasis in original). According to 

Loewen's own counsel and witness, Wynne Carvill, "[t]he 'bankruptcy card' was the only credible 

threat we had in the final negotiations." Declaration of Wynne S. Carvill at 9-10. 

43

The alarums in . . . Texaco, Inc. v. Pennzoil Co., 784 F.2d 1133, 

1152 (2d Cir. 1986), which equated a Chapter 11 filing with the 

imminent dismissal of 55,000 employees and the destruction of the 

valuable assets of a firm[,] are unjustified. Firms in reorganization 

go on as before; all operations with positive values are 

maintained; operations that are not continued in bankruptcy 

should not be continued outside it, either. The principal effect of 

the judicial process is to stave off asset-grabbing and to ensure that 

creditors of the same level of priority are treated alike. This is, of 

course, just what the plaintiffs want – to receive the same treatment 

as [the judgment debtor's] other general creditors, who may get 

paid off while plaintiffs cool their heels in the appellate process. 

Olympia Equip. Leasing Co. v. Western Union Tel. Co., 786 F.2d 794, 

802-03 (7th Cir. 1986) (Easterbrook, J., concurring) (emphasis added). 

! Loewen's own witness, Laurence Tribe, in his brief to the U.S. Supreme 

Court in the Pennzoil v. Texaco case, argued that the very sort of harms 

that Loewen alleges here "do[] not comport with the reality of 

contemporary bankruptcy." U.S. App. at 0326. As Professor Tribe 

explained, a full supersedeas bond requirement that results in a filing for 

corporate reorganization protection is consistent with due process, as "[a] 

number of corporations, both large and small, have . . . found that 

Congress has created [with the 1978 revisions to the bankruptcy code] a 

rather pleasant and profitable harbor of refuge in the bankruptcy court." 

Id. (quotation omitted). 44 

! Countless corporations in the United States, both before and since the 

O'Keefe litigation, have successfully – and notoriously – invoked the 

protections of Chapter 11 reorganization to stave off the execution of 

44 Drew S. Days, III, who was the Solicitor General of the United States at the time 

Loewen's petition for relief from the U.S. Supreme Court would have been heard, is in agreement 

with Professor Tribe on this point: "I doubt that the financial hardship that allegedly would 

follow O'Keefe's execution of the judgment against Loewen would suffice to establish irreparable 

harm, since it seems likely that such 'harms' can be avoided, without any due process problems, 

by filing a petition for reorganization protection under Title 11 of the U.S. Code." Days 

Statement at 31-32 n.19. The United States has also offered the expert testimony of some of the 

nation's most respected bankruptcy practitioners and scholars, whose unanimous conclusion is 

that Chapter 11 reorganization was a reasonable alternative for Loewen at the time. 

44

Trost at 4. 

potentially ruinous judgments. 45 Similarly, numerous federal courts have 

held that the availability of corporate reorganization protection "is a valid 

legal option sufficient to defeat an economic duress claim." Capizzi v. 

Federal Deposit Ins. Corp., 1993 WL 723477 at * 9 (D. Mass. 1993) 

(citing cases). See also Teachers Ins. and Annuity Ass’n v. Wometco 

Enterprises, Inc., 833 F. Supp. 344, 349 n.7 (S.D.N.Y. 1993). 46 

Former Mississippi Supreme Court Justice Joel Blass confirms that the authority for this 

practice was well known to the participants in the O'Keefe bond proceedings: 

Blass Statement at 12. 

Loewen could also have, of course, obtained a stay under Chapter 11 in the 

bankruptcy court without any bond for protection. Many major companies 

have done so and now prosper. Neither Judge Hawkins nor Judge Clark 

disputes this plain and common practice in litigation in the United States. 

Judge Graves knew it and the Mississippi Supreme Court knew it. It is an 

indisputable fact. Every litigating lawyer in the United States knows it. 

Given how well-recognized the protections of the Bankruptcy Code are for corporate 

debtors confronted with large supersedeas bond requirements, it is no surprise that Professor 

Tribe and his colleague, Charles Fried, were specifically instructed by Loewen's counsel to 

ignore the alternative of corporate reorganization as adequate protection for Loewen in the face 

of a full bond requirement. See Tribe Statement at 4 ("I am informed that [bankruptcy or an 

unbonded appeal] would have been catastrophic alternatives . . . .") (emphasis added); Fried 

Statement at 2 ("I am informed" that "the protection of a federal bankruptcy court" would have 

45 See Statement of Elizabeth Warren at 7, 12-16; Supplemental Declaration of J. Ronald 

46 Of course, Loewen also had the contemporaneous advice of the nation's leading 

bankruptcy practitioners that Chapter 11 reorganization was a reasonable alternative, and had 

fully prepared, over the course of three months, all of the documents necessary to invoke those 

protections. See U.S. Jurisdictional Mem. at 72-83 and Tabs C & D thereto; see also, e.g., U.S 

App. at 0447-0594. 

45

imposed large and unrecoverable costs on Loewen) (emphasis added). Loewen offered no such 

instruction, however, either to Judge Graves or to the members of the Mississippi Supreme 

Court, choosing instead to leave the courts with an eminently reasonable basis to conclude that 

O'Keefe's unrebutted argument on the subject was correct. Surely, the Mississippi courts cannot 

be said to have breached any "duty to act" under these circumstances. 

B. International Law Does Not Excuse Loewen's Failures To Object 

Claimants offer no international authority – and the United States is aware of none – for 

the extraordinary proposition that a State may be held in breach of an international obligation if 

its courts failed to act on the basis of a point that an alien litigant could have raised, but did not. 

To the contrary, as the United States has demonstrated, there has long been "a translation into 

international law of the rule common to municipal systems that a litigant cannot have a second 

try if, because of ill-preparation, he fails in his action." 2 Daniel P. O'Connell, International Law 

1059 (2d ed. 1970). See U.S. Jurisdictional Resp. at 81-84; Counter-Mem. at 70-72. 47 As the 

Appeals Chamber of the International Criminal Tribunal for the Former Yugoslavia held earlier 

this year, "a party should not be permitted to refrain from making an objection to a matter which 

was apparent during the course of the trial and to raise it only in the event of an adverse finding 

against that party." Prosecutor v. Delalic, IT-96-21-A (ICTY 20 Feb. 2001) at 640. 48 

47 See also Eduardo Jiménez de Aréchaga, International Law in the Past Third of a 

Century, 159 Académie de Droit International, Recueil des Cours 282 (1978) ("[A] State cannot 

base the charges made before an international tribunal or organ on objections or grounds which 

were not previously raised before the municipal courts."). 

48 The claimed error in Delalic, a war-crimes prosecution, was that one of the judges in the 

trial court was sleeping through portions of the trial. The Appeals Chamber found that the 

defendant's counsel had waived the objection by not raising the point below, even though a 


46

Claimants ignore the international law authorities entirely and, instead, argue that the 

domestic doctrine of "plain error" creates an exception that would allow this Tribunal to find a 

NAFTA violation on the basis of points not raised before the Mississippi courts. International 

law, however, recognizes no such exception based on any alleged duty of the domestic courts to 

act of their own accord: a claimant “should not identify in the duty of domestic courts to 

investigate matters ex officio a factor relieving him of the obligation to raise the issues of his case 

(the substance of his complaint) before the domestic courts.” A.A. Cançado Trindade, The 

Application of the Rule of Exhaustion of Local Remedies in International Law 83-85 (1983) 

(surveying decisions of the European Commission). Moreover, as we discuss below, claimants' 

version of the "plain error" doctrine is unsupported even by the domestic sources cited and 

cannot form the basis of the new rule of international law that claimants ask this Tribunal to 

create here. 

1. Claimants' Statement Of The "Plain Error" Doctrine Is 

Inaccurate And, In Any Event, Is Not International Law 

Claimants and their experts proclaim at great length that the O'Keefe judgment would 

"certainly" have been reversed by the Mississippi Supreme Court had Loewen followed through 

with its appeal. See, e.g., Joint Reply at 202-03; Hawkins Statement at 29-30. Whether or not 

that is so, however, is entirely beside the point. The question here is not whether "reversible 

error" occurred in the case as a matter of Mississippi or United States law, but instead whether 


videotape demonstrated that the judge was, indeed, asleep at various points in the trial, including 

one stretch of thirty minutes. See id. at 628, 640-49. The Chamber noted that "defence 

counsel, who alone truly knows the interests of his or her client, is necessarily obliged to 

safeguard those interests at every moment during the trial, in order to avoid prejudice which 

cannot be remedied." Id. at 635. 

47

the Mississippi courts breached an international obligation to act, even in the absence of an 

objection from Loewen. 49 

49 See, e.g., NAFTA art. 1131(1) (a tribunal shall decide issues in accordance with the 

NAFTA and "applicable rules of international law") (emphasis added); Freeman, International 

Responsibility of States for Denial of Justice, at 330 ("there is unquestionably no [international] 

responsibility for simple or ordinary 'reversible' errors (i.e., errors which might allow a domestic 

court of appeals to reverse the judgment below)"). 

50 See Gordon A. Christenson, Attributing Acts of Omission to the State, 12 Mich. J. Int'l 

L. 312, 360 (1991) ("National and international decision-makers alike resist finding an 

affirmative duty on governments to act from customary international law or treaty without the 

clearest normative expression of such duty."). 

51 Statute of the International Court of Justice, Art. 38(1)(c) (identifying "general 

principles of law as recognized by civilized nations" as a source of international law). See also 

Restatement (Third) of the Foreign Relations Law of the United States § 102 & note 7 (1986) ("It 

has become clear that this phrase [in the ICJ Statute] refers to general principles of law common 

to the major legal systems of the world."). 

(1976). 

Although they do not dispute that the standard for proving the existence of such a duty is 

extraordinarily high, 50 claimants suggest that the municipal law of a handful of jurisdictions – 

almost all within the United States – supports their contention that the "plain error" exception 

amounts to a principle of international law that would excuse, for purposes of this claim, 

Loewen's failure to object during the O'Keefe proceedings. See Joint Reply at 204-07. 

Municipal law, however, is relevant as a source of international law only to the extent that it 

reflects a "general principle of law" that is common to the major legal systems of the world. 51 

Moreover, "[t]he existence of a general principle of law cannot be assumed; it must be proved." 52 

Claimants have failed to meet their burden to do so here. 

52 Michael Akehurst, Equity and General Principles of Law, 25 Int'l Comp. L. Q. 801, 818 

48

To rise to the level of a general principle of law, the principle must exist in most, if not 

all, of the major legal systems of the world, including those of non-Western jurisdictions: 

[I]t is not permissible to give a preference to one group of legal systems over 

another group, e.g. to allow principles derived from civil law countries to override 

principles derived from common law countries, or to allow principles derived 

from Western systems of law to override principles derived from non-western 

systems of law. A principle which is accepted in only a minority of States of the 

world cannot be said to be a general principle of law. 53 

Consequently, "rules peculiar to common law countries" – and especially rules particular to only 

some common law countries – "are, therefore, not general principles of law." 54 If variations in 

the substantive elements of the particular rule exist among or within the major legal systems, a 

tribunal cannot simply choose one approach over another, but may instead apply only those 

elements that the systems share in common. 55 

53 Id. at 818-19 (emphasis in original) (citation omitted); see also id. at 814 (“If a rule does 

not exist in the generality of municipal legal systems, there is very good reason to believe that 

municipal legislators are of the opinion either that the rule is not required by justice and equity, 

or else that the rule, although desirable from an ideal point of view, would probably prove 

unworkable in practice - in which case it is not likely to prove workable as a rule of international 

law.”); David J. Bederman, International Law Frameworks 13-14 (2001) ("In order for an 

international lawyer to argue that a general principle of law is a binding rule of international law, 

it would be necessary to canvass all of the world's great legal systems for evidence of that 

principle, and also to reference manifestations of that principle in the actual domestic law of as 

many nations as possible. This is no easy task. Simply citing a few U.S. Supreme Court 

decisions, or to quote a Latin legal maxim, will not do the trick."); Amco Asia Corp. v. 

Indonesia, 24 I.L.M. 1022 248 (1985) (Nov. 21, 1984 Award) (tribunal examined common law, 

civil law and Islamic law traditions and found pacta sunt servanda to be a "general principle of 

law" because "it is common to all legal systems in which the institution of contract is known"). 

54 Akehurst, Equity and General Principles of Law, at 817 n.85. 

55 H.C. Gutteridge, Comparative Law 65 (2d ed. 1949) ("If any real meaning is to be given 

to the words 'general' or 'universal' and the like, the correct test would seem to be that an 

international judge before taking over a principle from private law must satisfy himself that it is 

recognised in substance by all the main systems of law, and that in applying it he will not be 


49

Claimants have cited no authority that in any way suggests that municipal recognition of 

their proposed "plain error" exception is sufficiently universal to be considered a principle of 

international law. Indeed, as we demonstrate below, even the United States' law of "plain error" 

– which claimants suggest is most generous to their cause – does not support the proposed 

international law principle that claimants ask this Tribunal to create. 

a. "Plain Error" Is Generally Not Recognized In Civil Cases 

To support their claim of entitlement to an unprecedented "plain error" review in this 

international forum, claimants rely on several municipal cases in which the "plain error" doctrine 

was applied in the context of criminal prosecutions. See TLGI Final Jurisd. Sub. at 60-61 & 

n.33; Joint Reply at 205 & n.52. This reliance is misplaced, however, as "[m]any of the reasons 

given for the use of the 'plain error' doctrine are simply not applicable in civil cases." 21 Wright 

& Graham, Federal Practice & Procedure § 5043 at 236 (1977). In contrast to criminal cases, 

"liberty and life are not involved" in civil cases and therefore do not justify an exception to the 

strict requirement of a contemporaneous objection. 1 McCormick on Evidence § 52 at 212 (4th 

ed. 1992). As a result, many jurisdictions refuse to recognize the doctrine at all in civil cases, 

regardless of how egregious the alleged error or its effect on the outcome of the proceedings. 

See, e.g., Dilliplaine v. Lehigh Valley Trust Co., 322 A.2d 114, 117 (Pa. 1974) (the doctrine of 

"fundamental error has no place in our modern system of jurisprudence."); Hammer v. Gross, 932 

F.2d 842, 847 (9th Cir. 1991) ("there is no 'plain error' exception in civil cases in this circuit."). 56 


doing violence to the fundamental concepts of any of those systems."). 

56 Accord, e.g., Williamson v. Handy Button Mach. Co., 817 F.2d 1290, 1295 (7th Cir. 


50

Claimants ignore this distinction entirely and, in so doing, fundamentally mischaracterize 

the law of "plain error." For example, claimants rely on no fewer than four decisions of 

intermediate courts in the State of Florida for their view that a civil litigant may complain on 

appeal of improper argument by opposing counsel, even in the absence of an objection in the trial 

court. See Joint Reply at 109 n.13, 205-06 n.52, 211. Claimants fail to note, however, that the 

positions expressed in each of those cases to this effect were specifically overruled by the 

Supreme Court of Florida just last year. See Murphy v. International Robotic Sys., Inc., 766 

So.2d 1010, 1027 (Fla. 2000) ("We . . . disapprove decisions issued by Florida's District Courts 

of Appeal to the extent that they stand for [the] proposition" that "improper, but unobjected-to 

closing argument in a civil case may be challenged for the first time on appeal."). 

Even in those jurisdictions that allow for "plain error" review in civil cases, the law is 

clear that "the plain error standard, high in any event, . . . is near its zenith" in the context of civil 

litigation. Clausen v. Sea-3, Inc., 21 F.3d 1181, 1196 (1st Cir. 1994) (internal quotations 


1987) ("No doctrine of 'plain error' protects parties from the consequences of their decisions in 

civil litigation"); Durham v. Quincy Mut. Fire Ins. Co., 317 S.E.2d 372, 377 (N.C. 1984) 

("Heretofore, this Court has limited the application of the plain error doctrine to appeals in 

criminal cases, and we decline to apply it in appeals in civil cases."); Mayrose v. Fendrich, 347 

N.W.2d 585, 586 (S.D. 1984) ("the plain error doctrine is a rule of criminal procedure and is 

inapplicable to this civil case."); Murphy v. International Robotic Sys., Inc., 766 So.2d 1010, 

1027 (Fla. 2000) (appellate relief from opponent's improper closing argument is absolutely 

barred in civil cases where such argument was not objected to in trial court); Gitten v. Haught- 

Bingham, 716 A.2d 1063, 1066 (Md. Ct. Spec. App. 1998) ("no Maryland court" has adopted "a 

'plain-error'-type doctrine in civil cases . . . ."); cf. Imported Car Center, Inc. v. Billings, 653 A.2d 

765, 770 (Vt. 1994) ("It is not clear whether plain error is ground for reversal in civil cases."); 

Hobson v. Wilson, 737 F.2d 1, 32 n.96 (D.C. Cir. 1984) (questioning whether "plain error" 

doctrine applies in civil cases); Vakauta v. Kelly, [1989] 63 HCA 610, 614 (Austl.) ("There is 

abundant authority which establishes, at all events in civil cases, that a party may waive his right 

to object on the ground of bias.") (Dawson, J.). 

51

omitted). Because litigants are bound by the actions of their counsel, "[t]he plain error exception 

in civil cases" is "an extraordinary, nearly insurmountable burden." Phillips v. Hillcrest Med. 

Ctr., 244 F.3d 790, 802 (10th Cir. 2001). As one state's highest court has explained, 

the idea that parties must bear the cost of their own mistakes at trial is a 

central presupposition of our adversarial system of justice. . . . Parties in 

civil litigation choose their own counsel who, in turn, choose their theories 

of prosecuting and defending. The parties, through their attorneys, bear 

responsibility for framing the issues and for putting both the trial court and 

their opponents on notice of the issues they deem appropriate for jury 

resolution. 

Goldfuss v. Davidson, 679 N.E.2d 1099, 1103-04 (Ohio 1997) (quotation omitted). As a result, 

"in appeals of civil cases, the plain error doctrine is not favored . . . ." Id. at 1104. 57 

The O'Keefe litigation was, of course, a civil proceeding and not a criminal prosecution; 

neither Loewen nor any of its co-defendants were imprisoned or otherwise deprived of life or 

liberty. Accordingly, even if the "plain error" doctrine were ever to have some application on the 

international plane, it could have no application here. 

57 Accord, e.g., Smith v. Kmart Corp., 177 F.3d 19, 26 (1st Cir. 1999) ("Plain error is a 

rare species in civil litigation, encompassing only those errors that reach the pinnacle of fault . . . 

.") (quotation omitted); Johnson v. Ashby, 808 F.2d 676, 679 n.3 (8th Cir. 1987) (in civil 

litigation, plain error exception is limited to only "the most compelling cases"); State v. Berg, 

927 P.2d 975, 982 (Mont. 1996) ("only on rare occasion is the [plain error] doctrine invoked in 

civil cases.") (quotation omitted); Palanti v. Dillon Enters., Ltd., 707 N.E.2d 695, 701 (Ill. App. 

1999) ("As civil trials do not implicate sixth amendment concerns, the application of the plain 

error doctrine to civil cases should be exceedingly rare . . . .") (quotation omitted); Cavuoti v. 

New Jersey Transit Corp., 735 A.2d 548, 561 (N.J. 1999) ("Relief under the plain error rule [], at 

least in civil cases, is discretionary and should be sparingly employed.") (quotation omitted); 

Reese v. Brooks, 43 S.W.3d 415, 419 (Mo. App. 2001) ("the plain-error doctrine is rarely 

resorted to in civil cases."). 

52

. The "Plain Error" Rule Is Foreclosed Where The Failure To 

Object Was A Tactical Choice 

Nowhere in any of their submissions do claimants suggest that the absence of objection 

was anything but a deliberate strategy of Loewen's counsel at trial. To the contrary, claimants' 

own declarant, John G. Corlew, confidently asserts that "the Loewen counsel made sound tactical 

decisions with respect to trial objections," Corlew Statement at 6, and claimants elsewhere 

contend that Loewen's trial counsel "[c]ertainly . . . understood what was necessary in this regard 

. . . ." TLGI Final Jurisdictional Sub. at 59. This concession is fatal to claimants' position, 

because the "plain error" rule is absolutely foreclosed where, as here, "failure or refusal to raise 

an issue in trial court is conscious and intentional on the part of trial counsel." Martinez v. 

Montana Power Co., 779 P.2d 917, 920 (Mont. 1989). See also, e.g., Johnson v. United States, 

318 U.S. 189, 201 (1943) ("We cannot permit an accused to elect to pursue one course at the trial 

and then, when that has proved to be unprofitable, to insist on appeal that the course which he 

rejected at the trial be reopened to him"; plain error review foreclosed). 58 This is equally so in 

Mississippi. See, e.g., Ward v. State, 461 So.2d 724, 726 (Miss. 1984) (Robertson, J.). 59 As one 

58 Accord, e.g., United States v. Yu-Leung, 51 F.3d 1116, 1122 (2d Cir. 1995) ("If . . . the 

party consciously refrains from objecting as a tactical matter, then that action constitutes a true 

'waiver,' which will negate even plain error review"); United States v. Handly, 591 F.2d 1125, 

1128 (5th Cir. 1979) ("Where . . . the record indicates that defense counsel's failure to object to 

an improper comment was part of his defense strategy, then the defendant will not be heard to 

claim he was prejudiced by the prosecutor's indiscretions"); County of Cook v. Colonial Oil 

Corp., 153 N.E.2d 844, 848 (Ill. 1958) ("We have consistently held that experienced counsel 

cannot take a chance of failing to make objections and then, upon receiving what they consider 

an adverse jury verdict, claim error."). 

59 Loewen asserts that its "lead trial lawyer understood what was necessary in this regard 

[to preserve objections for appeal] – he was himself a former justice of the Mississippi Supreme 

Court," referring to James Robertson. TLGI Final Jurisdictional Sub. at 59. As the United States 


53

court has explained in analogous circumstances, "it is hardly a miscarriage of justice when a 

party fails to object to improper argument by its opponent and chooses to retaliate with improper 

argument of its own, only to have this strategic decision backfire when the jury returns a 

substantial award against it." Smith, 177 F.3d at 28. 

c. The "Plain Error" Doctrine Is Discretionary, Not Mandatory 

Claimants persist in their assertion that the "plain error" rule reflects a duty that required 

the Mississippi courts to act on Loewen's behalf, even in the absence of objection from Loewen 

at the time. See Joint Reply at 204-11. The United States Supreme Court has made clear, 

however, that the plain error doctrine, even in criminal cases, "is permissive, not mandatory. If 

the forfeited error is 'plain' and 'affects substantial rights,' the court of appeals has authority to 

order correction, but is not required to do so." United States v. Olano, 507 U.S. 725, 735 (1993). 

Although claimants dismiss Olano as a "non-Mississippi case" (Joint Reply at 208), Mississippi's 

"plain error" rule is identical in every respect to the federal rule. Compare Miss. R. Evid. 103(d) 

("Nothing in this rule precludes taking notice of plain errors affecting substantial rights although 

they were not brought to the attention of the court.") (emphasis added) with Fed. R. Evid. 103(d) 


has shown, the reference to Mr. Robertson as Loewen's "lead trial lawyer" is contrary to fact, as 

Loewen's lead trial lawyer was Richard Sinkfield, not Mr. Robertson. See Counter-Mem. at 29. 

We agree with Loewen, however, that Mr. Robertson "certainly . . . understood what was 

necessary" with regard to the plain error rule, as he authored the unanimous opinion of the 

Mississippi Supreme Court in Ward v. State, which held that the "plain error rule . . . has no 

force" when it appears that the failure to object is "part of the overall defense strategy of defense 

counsel, albeit ultimately unsuccessful." 461 So.2d at 726 (Robertson, J.). 

54

(same). 60 See also Miss. R. App. P. 28(a)(3) ("[T]he court may, at its option, notice a plain error 

not identified or distinctly specified.") (emphasis added). 61 

In fact, the Mississippi Supreme Court has indicated that, because the "extreme cases" in 

which a trial court's exercise of its "sound judicial discretion" to notice plain error may be 

justified are "rare," it can be error for a trial court to grant a new trial on the basis of matter that 

was not objected to at trial. Berryhill v. Byrd, 384 So.2d 1026, 1029 (Miss. 1980) (disapproving 

and reversing trial court's decision to invoke plain error rule to grant new trial). Thus, even if the 

plain error rule could be deemed to have applied to this civil dispute in which Loewen was 

represented by numerous experienced counsel, in no event could this authority reflect a "duty" on 

Judge Graves to have acted on the basis of the alleged "plain errors" to which Loewen never 

objected. 62 

60 The official comment to Mississippi's plain error rule notes expressly that the 

Mississippi and federal rules are "identical." Miss. R. Evid. 103 (comment). 

61 Even claimants' own source describes the plain error rule as an "option of the 

[Mississippi] Supreme Court." Robbins v. Berry, 47 So.2d 846, 848 (Miss. 1950) (emphasis 

added). For his part, claimants' declarant John Corlew misstates three Mississippi cases as 

examples of "reversals" of lower court decisions premised on "the court's 'duty' or 'obligation' to 

prevent or correct . . . fundamental injustices." Corlew Statement at 11. In fact, one of these 

cases, Dunaway v. State, 551 So.2d 162 (Miss. 1989), was an affirmance of a criminal conviction 

in which the Mississippi Supreme Court made clear that its power to notice "plain error" was 

discretionary. 551 So.2d at 164. Similarly, the court in McCullom v. Franklin, 608 So.2d 692 

(Miss. 1992) – the only civil case cited – did not speak of a "duty" of the courts, but rather the 

duty of counsel both to refrain from impermissible statements and to object to such statements 

when they are made. 608 So.2d at 694. In the third case, Brooks v. State, 46 So.2d 94 (Miss. 

1950), the Mississippi Supreme Court exercised its discretion to notice plain error where 

prejudicial evidence touches on "[c]onstitutional rights in serious criminal cases," noting only 

that the "dispensing of justice is the object of courts." 46 So.2d at 97. 

62 Claimants also speculate that Mississippi's plain error rule "may well be discretionary in 

cases involving ordinary, technical, or non-prejudicial errors" but not in cases involving 


55

2. The Obligation To Provide "Full Protection and Security" Did Not 

Impose A Duty On The Mississippi Courts To Act In The Absence 

Of An Objection 

Claimants continue to press their claim that, apart from the plain error rule, NAFTA 

Article 1105's obligation of "full protection and security" imposed an independent duty on the 

Mississippi courts to act, even in the absence of an objection by Loewen. See Joint Reply at 204. 

However, as stated in the NAFTA Free Trade Commission's binding interpretation of Article 

1105, dated July 31, 2001, the obligation to provide "full protection and security" does not 

impose duties on the government beyond the minimum standard of treatment required by 

customary international law to be afforded alien investments. See infra at 143-52. Tribunals 

applying this obligation under customary international law have recognized the obligation only to 

require reasonable police protection against criminal conduct that physically invaded the person 

or property of an alien, a requirement that has absolutely no application to the circumstances of 

this case. Id. at 148-51; Counter-Mem. at 176-77. 63 


"egregious appeals to local prejudices." Joint Reply at 205. But the plain error rule applies, if at 

all, only in "extreme cases in order to prevent manifest injustice . . . ." Berryhill, 384 So.2d at 

1029 (quotation omitted). By definition, therefore, an "ordinary, technical, or non-prejudicial 

error" could never be regarded as "plain error," let alone error as to which review could be said to 

be "discretionary." Claimants' effort to manufacture a distinction suggesting any mandatory 

application of the plain error rule in this case is thus entirely baseless. 

63 Claimants seize upon this Tribunal's passing remark, made in the context of a wholly 

separate jurisdictional question, that "Article 1105, in requiring a Party to provide 'full protection 

and security' to investments of investors, must extend to the protection of foreign investors from 

private parties when they act through the judicial organs of the state." Joint Reply at 147 

(quoting Loewen, Decision on Competence at 58). Unlike claimants, the United States does 

not interpret the Tribunal's remark as a "conclusion" on this question, as the meaning of "full 

protection and security" was not at issue (and therefore was not briefed) in connection with any 

matter decided in the Tribunal's decision. Moreover, the decision predates the Free Trade 


56

Moreover, even if the obligation of "full protection and security" were given claimants' 

unprecedented construction to apply in the context of litigation, it could not impose so broad a 

duty as claimants seek to create here. To the contrary, even in the most analogous context 

involving the judicial function at all, tribunals and commentators applying the customary 

international law obligation of protection recognize liability only "if the authorities were 

manifestly and inexcusably negligent in the prosecution, trial and punishment of the persons 

guilty of the injurious act." Revised Draft on International Responsibility of the State for Injuries 

Caused in its Territory to the Person or Property of Aliens, Article 8(2), reprinted in F.V. García- 

Amador et al., Recent Codification of the Law of State Responsibility for Injuries to Aliens 129, 

130 (1974) (emphasis added). Surely, even if this Tribunal were to take the broad and 

unprecedented leap urged by claimants and were to extend the "full protection and security" 

obligation to the courtroom setting, the Mississippi courts' alleged failures to act in the civil 

O'Keefe litigation on the basis of points that Loewen failed to raise cannot be said to have been 

so "manifestly or inexcusably negligent" as to fall short of the minimum expectations of 

international law. 64 


Commission's interpretation of Article 1105. To the extent that the Tribunal intended its remark 

to give content to the "full protection and security" obligation, the United States submits, with 

respect, that the statement is inconsistent with the Free Trade Commission's interpretation and 

the obligation as it is understood in customary international law. See infra at 143-52. 

64 In the seminal case of Neer v. United Mexican States, 4 R.I.A.A. 60 (1927), an 

international tribunal refused to find a state liable for its failure to apprehend or punish the 

murderer of an alien, concluding that the failure of the state to act, "in order to constitute an 

international delinquency, should amount to an outrage, to bad faith, to wilful neglect of duty, or 

to an insufficiency of governmental action so far short of international standards that every 

reasonable and impartial man would readily recognize its insufficiency." Id. at 61-62. 

57

Indeed, under any standard of reasonableness (and even those academics who, according 

to claimants, advocate a "full protection and security" obligation broader than the international 

minimum standard accept that the obligation is bounded by reasonableness under the 

circumstances), 65 the Mississippi courts' alleged failure to act could not be said, given the 

circumstances of this case, to have breached any duty to provide "full protection and security" to 

Loewen. While claimants may allege that the Mississippi courts were under a duty to act here, 

the truth of the matter is that, in courtrooms in the United States, "[t]he initiative is placed on the 

party, not on the judge." 1 McCormick on Evidence § 52 at 200 (4th ed. 1992). As the United 

States Supreme Court has explained, "[u]nder our adversary system, once a defendant has the 

assistance of counsel the vast array of trial decisions, strategic and tactical, which must be made 

before and during trial rests with the accused and his attorney. Any other approach would 

rewrite the duties of trial judges and counsel in our legal system." Estelle v. Williams, 425 U.S. 

501, 512 (1976) (emphasis added). It would be utterly unreasonable to accept that, by agreeing 

to include in Article 1105 an obligation to provide "full protection and security" – an obligation 

that has never been found to apply in the courtroom setting – the NAFTA Parties intended to 

reconfigure the very foundations of the United States' adversary legal system. 66 

65 See, e.g., Kenneth J. Vandevelde, United States Investment Treaties 77 (1992) ([T]he 

"full protection and security" clause "is not one of strict liability. Rather, the government must 

provide protection reasonable under the circumstances."). 

66 See, e.g., W. Michael Reisman, The Regime for Lacunae in the ICSID Choice of Law 

Provision and the Question of Its Threshold, 15 ICSID Rev. - Foreign Inv. L. J. 362, 366 (2000) 

("A basic postulate of public international law is that every territorial community may organize 

itself as a State and, within certain basic limits prescribed by international law, organize its social 

and economic affairs in ways consistent with its own national values."). 

58

In any event, as the record makes clear, the United States clearly provided Loewen with 

"full protection and security," under any reasonable formulation of that obligation. As Professor 

Landsman explains, Loewen was afforded a vast array of mechanisms to protect itself against the 

possibility of improper bias, and was represented in the proceedings by numerous experienced 

counsel who were fully familiar with the use of such mechanisms. See Landsman Statement at 

16-17. Moreover, although claimants' Joint Reply is silent on the point, the record shows that 

Judge Graves took great pains to manage the trial, intervening frequently (often without 

prompting) to chastise counsel for improper comments, including the strong (and sua sponte) 

admonition that "I'm not going to allow any courtroom where any witness, any litigant, any 

lawyer is insulted based on race, ethnicity or national origin." Tr. 4325-26; see also, e.g., Tr. 44- 

46; Counter-Mem. at 17-18; 35-36. 

With respect to the bond question, Judge Graves afforded Loewen a full hearing on the 

subject and a full opportunity to explain, in response to specific challenges by O'Keefe's counsel, 

why Chapter 11 reorganization was inadequate protection for the company in the event that the 

court did not depart from the full bond requirement. Similarly, the Mississippi Supreme Court 

continued the stay of execution on the judgment (which had already been stayed for nearly a 

month by operation of law) for an additional two months to give careful consideration to 

Loewen's request for an unprecedented reduction in the required bond amount. During that time, 

the Court afforded Loewen numerous opportunities to explain why Chapter 11 reorganization 

was inadequate protection for the company, but Loewen chose instead to remain silent on the 

point. 

59

In short, the United States unquestionably afforded "full protection and security" to 

Loewen. As a matter of the NAFTA, customary international law, and common sense, claimants' 

contentions based on an alleged failure of the Mississippi courts are without legal and factual 

merit. 

IV. LOEWEN'S AGREEMENT TO SETTLE THE MISSISSIPPI LITIGATION OUT OF 

COURT DEFEATS THIS CLAIM IN ITS ENTIRETY 

The United States has previously shown that Loewen's decision to obligate itself to pay 

the O'Keefe plaintiffs in settlement of the O'Keefe litigation extinguished any possible NAFTA 

claim. See Counter-Mem. at 73-106. Claimants disagree, for essentially two reasons. First, 

claimants contend that Loewen's settlement of the litigation was between Loewen and O'Keefe 

only and, therefore, the United States cannot claim rights as a beneficiary of that agreement. See 

Joint Reply at 176-79. Second, claimants contend that, even if the settlement would otherwise 

extinguish this claim, this Tribunal should be the first ever to excuse a settlement of civil 

litigation on the grounds of "economic duress" as a matter of international law. Id. at 179-201. 

As we have shown, and as we confirm below, neither contention has merit. 

A. Loewen's Waiver Of Claims Through The Settlement Agreement 

Eliminates State Responsibility 

Loewen's agreement to settle the O'Keefe litigation defeats claimants' claims in at least 

two ways. First, the agreement, by its terms, waived all claims arising out of the O'Keefe 

litigation, including any claims against the United States. See Counter-Mem. at 105-06. Second, 

regardless of whether the United States is a beneficiary of the agreement, Loewen's decision to 

forgo its appeal in favor of the settlement was an independent cause of the company's alleged 

60

injuries, thus eliminating any possible responsibility of the United States. Id. at 104-05. 

Claimants offer no effective response to either point. 

1. The Settlement, By Its Terms, Waived Claims Against The United States 

Claimants concede, as they must, that the instrument by which Loewen settled the 

O'Keefe litigation contained broad and unambiguous language that waived all claims arising 

from that litigation. See Joint Reply at 178. Claimants also concede that a non-signatory may be 

treated as a third-party beneficiary of a settlement agreement where the settlement reflects "the 

express or implied intention of the parties to benefit the third party." Joint Reply at 178 (citing 

Frank & Breslow, LLP v. United States, 43 Fed. Cl. 65, 67 (Fed. Cl. 1999)). In Mississippi in 

particular, "[a] third person may in his own right and name, enforce a promise made for his 

benefit even though he is a stranger both to the contract and the consideration." Burns v. 

Washington Savings, 171 So.2d 322, 324 (Miss. 1965) (quoting 17 Am. Jur.2d Contracts 297 

(1964)); see also The Country Club of Jackson Miss., Inc. v. Saucier, 498 So.2d 337 (Miss. 

1986) (general release can discharge third parties who are intended beneficiaries of the 

settlement). 67 Given the broad terms of the agreement's waivers, as well as the circumstances of 

their implementation, there can be no question that the United States is entitled to the benefits of 

the settlement here. 

67 The settlement agreement provides that it is to be governed by and construed in 

accordance with Mississippi law. See A1578, A1610. Claimants' discussion of the "settled 

principles of international law" regarding the effect of settlement agreements, see Joint Reply at 

176-77, is thus misplaced, for international tribunals refer to municipal law to determine the 

effect of private instruments such as these. See, e.g., Payment of Various Serbian Loans Issued 

in France (Fr. v. Serb.), 1929 P.C.I.J. (ser. A) Nos. 20-21, at 41 (July 12) ("Any contract which is 

not a contract between States in their capacity as subjects of international law is based on the 

municipal law of some country"; engaging in choice-of-law analysis to determine municipal law 

governing bonds issued by Serbian government to French investors). 

61

Despite claimants' assertions to the contrary, (Joint Reply at 179), the government gave 

consideration to Loewen for the release and thus was no mere "stranger" to the agreement. 68 In 

particular, the Mississippi courts gave consideration to Loewen in the form of the dismissal of 

the appeal, the vacatur of the Mississippi Supreme Court's decision and order on the supersedeas 

bond, and the entry of judgment by the trial judge in accordance with the settlement terms. See 

A1585-91, 1618-23. Indeed, the Absolute Release granted by Loewen provides expressly that it 

was given "for and in consideration of the dismissal with prejudice" of the O'Keefe case in 

addition to the corresponding release granted by the O'Keefe parties. A1605. 69 Only the 

Mississippi courts could have provided such consideration. See Miss. R. App. P. 42 (b); Wolf v. 

Mississippi Valley Trust Co., 93 So. 581, 581 (Miss. 1922) ("The right of an appellant to dismiss 

his appeal is not absolute but can be exercised only by leave of court."). 

68 Although the consideration was given by the Mississippi courts, the United States is 

entitled to the benefit of any waiver of claims against the Mississippi courts, as the alleged 

liability of the United States in this matter is entirely derivative of that of the Mississippi courts. 

Because the United States stands in the shoes of the Mississippi courts for purposes of this claim, 

the claim against the United States can be no greater than any claim that would lie against the 

Mississippi courts. A waiver against the Mississippi courts (the instrument of the United States' 

alleged wrongdoing under the NAFTA, according to claimants), therefore, is a waiver against the 

United States for purposes of this claim. See, e.g., Nguyen Quoc Dinh, Patrick Daillier & Allain 

Pellet, Droit international public 413 (6th ed. 1999) ("[A State's] 'government,' from the 

perspective of public international law, includes not only the executive authorities of the State, 

but the ensemble of its 'public powers.' It is the entirety of the internal political judicial and 

administrative order that is envisaged (cf. article 5 of the draft articles of the I.L.C. on State 

responsibility).") (translation by counsel). 

69 This language stands in contrast to other provisions of the Settlement Agreement meant 

to define O'Keefe's obligations as opposed to those of the courts – i.e., "the O'Keefe Parties shall 

sign and cause to be delivered to the Loewen Parties"; "executed Orders . . . shall be obtained 

from the said Courts"; "executing and filing such documents as may be necessary . . . to vacate or 

otherwise nullify the effect of any such recording or lien." A1569, A1577. 

62

In fact, the Mississippi courts were not only a beneficiary of the settlement but also a 

necessary party to its execution. Regardless of whether Loewen fulfilled the financial terms of 

the settlement agreement, the agreement could not close unless the Supreme Court of Mississippi 

dismissed the appeal and vacated its decision on the bond, and the trial court dismissed the action 

with prejudice (and O'Keefe's pending motion for attorney's fees) by a specified date. A1567, 

A1570-1572. Although parties to a litigation are free to settle on whatever (lawful) terms they 

wish, they cannot dictate the actions a court must take through a bilateral contract. 70 As one 

court has explained, "by conditioning the waiver of appeal upon the vacatur of the decision in 

this matter, the parties have placed in issue the integrity of the judicial process." Aetna Casualty 

and Surety Co. v. Home Ins. Co., 882 F. Supp. 1355, 1357 (S.D.N.Y. 1995). 71 

The Mississippi courts not only granted the orders prescribed by the Settlement 

Agreement, but expressly conditioned the entry of their orders on the fulfillment of the 

agreement's terms. See A1590-91, A1618-19, A1620-21. Thus, the courts ensured that Loewen 

70 See Clarendon Ltd. v. Nu-West Indus., Inc., 936 F.2d 127, 128 (3d Cir. 1991) ("[A]ction 

by the court can neither be purchased nor parleyed by the parties . . . A provision for such action 

in a settlement agreement cannot bind the court."); In re Memorial Hosp. of Iowa Cty, Inc., 862 

F.2d 1299, 1302 (7th Cir. 1988) ("When the parties' bargain calls for judicial action . . . , the 

benefits to the parties are not the only desiderata. . . . [T]he judge does not automatically approve 

but must ensure that the agreement is an appropriate commitment of judicial time and complies 

with legal norms."). 

71 Vacatur upon settlement is an extraordinary form of relief. See U.S. Bancorp Mortgage 

Co. v. Bonner Mall P'ship, 513 U.S. 18, 29 (1994) (appellate court should not vacate district 

court judgment because of a settlement absent "exceptional circumstances"); id. at 26-27 

("Judicial precedents are not merely the property of private litigants and should stand unless a 

court concludes that the public interest would be served by a vacatur"); Manufacturers Hanover 

Trust Co. v. Yanakas, 11 F.3d 381, 385 (2d Cir. 1993) (refusing to vacate court of appeals 

judgment as a condition to settlement, stating that "once such a decision has been rendered we 

decline to allow [the parties] to dictate, by purchase and sale, whether the precedent it sets will 

remain in existence."). 

63

would not be denied the opportunity to present its claims on appeal if the settlement were to 

unravel. At the same time, by taking these steps, the courts adhered to Mississippi's "strong and 

abiding policy favoring settlement." Preferred Risk Mutual Ins. Co. v. Collier, 712 F. Supp. 96, 

98 (S.D. Miss. 1989). 72 Had the Mississippi courts believed that Loewen reserved the right to 

claim under the NAFTA for the alleged failings of those courts, they surely would have denied 

the joint motion for dismissal and addressed the merits of Loewen's claims on appeal. That they 

did not do so and instead dismissed the appeal (in addition to the extraordinary additional step of 

vacating the bond decision) only serves to confirm that Loewen's waiver and release was 

presented to the courts as, and was fully intended to be, inclusive of any claims against the state. 

In any event, even if the courts were not themselves party to the agreement by virtue of 

the consideration given to Loewen, claimants concede that Loewen's settlement agreement 

contained broad and all-encompassing releases of claims, including a provision making clear that 

the agreement was intended to be "a full accord and satisfaction of all claims and causes of action 

in the premises as against the Releasees and any and all other persons, firms and/or corporations 

having any liability in the premises." A1609 (emphasis added). Claimants offer only a single, 

unsupported response to this self-evident waiver of all claims: that the United States is not 

entitled to the benefits of this broad waiver because the United States "is not a person, firm 

and/or corporation." Joint Reply at 178. The law, however, is otherwise. 

Indeed, the court in Taggart v. United States, 880 F.2d 867 (6th Cir. 1989), interpreted a 

virtually identical waiver of claims as barring subsequent claims against the United States, even 

72 See also Chertkof v. Harry C. Weiskittel Co., 248 A.2d 373, 377 (Md. 1968) ("Courts 

look with favor upon the compromise or settlement of law suits in the interest of efficient and 

economical administration of justice and the lessening of friction and acrimony."). 

64

though the United States was not a party to the agreement or in any way connected to its 

formation or implementation. As the court explained, 

Id. at 870 (emphasis added). 

[w]e find the language of the release to be clear and unambiguous. The 

agreement releases and discharges not only the Church, "his successors 

and assigns" but further releases "any and all other persons, associations 

and corporations, whether herein named or referred to or not, and who, 

together with the above named, may be jointly or severally liable to the 

Undersigned." This language is not ambiguous. The release does not 

exclude from its broad terms, either explicitly or implicitly, the United 

States or any other potentially liable party. 

Moreover, even if the United States were not a "person, firm and/or corporation" for 

purposes of the waiver, the settlement is not limited only to those categories. Instead, the parties 

expressly agreed "to effectuate a full, final and complete release of all parties/releasees and all 

others having any liability in the premises." A1610 (emphasis added). At the very least, the 

United States falls within the class of the "all others" intended to be released from liability. As 

one court has explained, 

[i]n general, releases extending to 'all other persons' are frequently used and are 

commonly given effect by way of summary judgment to third parties not 

specifically named in the release. This applies even if the cause of action against 

the third party is unrelated to that against defendant in the first action. 

Hughes Aircraft Co. v. United States, 15 Cl. Ct. 550, 554 (Cl. Ct. 1988) (suit against United 

States barred by settlement between plaintiff and third party). In light of this broad release, as 

well as the other terms of the settlement and the circumstances of their implementation, the 

United States is clearly entitled to the benefits of Loewen's waiver of all claims. 73 

73 It is of no consequence that the release did not refer expressly to Loewen's potential 

NAFTA claim against the United States. See Joint Reply at 178-79. Under Mississippi law, a 


65

2. Loewen's Decision To Settle Was An Independent Cause Of The 

Alleged Damages For Which Claimants Seek Recovery 

As noted, O'Keefe was never, at any point, able to enforce the trial court's judgment, the 

execution of which was at all times stayed. See Counter-Mem. at 104. Because Loewen was 

thus never under any obligation to pay O'Keefe until it bound itself to do so under the terms of 

the settlement agreement, Loewen's decision to settle was the proximate cause of the alleged 

injuries for which claimants now seek recovery, regardless of whether the settlement, by its 

terms, waived this NAFTA claim against the United States. Id. 

Claimants' response is remarkable. According to claimants, the NAFTA Parties, by 

including the phrase "by reason of, or arising out of" in NAFTA Articles 1116 and 1117, adopted 

a more "relaxed" and undefined standard of causation, unprecedented in international law, that 

would permit a claimant to recover damages alleged to flow even from the claimant's own 

decision to settle litigation. Claimants contend that Loewen's settlement, even if voluntary, was 

"a foreseeable, consequential link in the causal chain between" the O'Keefe court judgments and 

claimants' alleged injuries and that, as a result, the United States is responsible for the 

consequences of that voluntary settlement. Joint Reply at 174. Claimants' new theory of 

causation, however, is without basis in law, fact, or common sense. 


general release bars all subsequent claims by the releasor arising out of the settled controversy, 

absent an express reservation of rights. See, e.g., Mississippi Power & Light Co. v. United Gas 

Pipe Line Co., 729 F. Supp. 504, 508-09 (S.D. Miss. 1989) ("The broad language of the release 

indicates clearly and unambiguously that the parties intended that United release all claims 

arising prior to the settlement date, not just those involved in the two lawsuits."); Houser v. Brent 

Towing Co., 610 So.2d 363, 365-66 (Miss. 1992). The settlement agreement plainly does not 

contain any such reservation, with respect to this claim or any other. 

66

To support its novel causation theory, claimants invoke several municipal court decisions 

construing insurance contracts. See Joint Reply at 172-73. NAFTA Articles 1116 and 1117, 

however, are to be interpreted in accordance with "applicable rules of international law." 

NAFTA arts. 102(2), 1131(1) (emphasis added). There can be no question that proximate cause 

is firmly established as a rule of international law. 74 In fact, a review of the international 

authorities establishes that States have, over the past two centuries, used a wide variety of clauses 

in international agreements submitting claims to arbitration – some quite similar to Articles 1116 

and 1117, some broader in their language and scope – which uniformly have been interpreted to 

require proximate cause. 

The most recent and closest example is that of the Algiers Accords, which granted the 

Iran-United States Claims Tribunal jurisdiction over claims that "arise out of . . . measures 

affecting property rights." 75 The Iran-United States Claims Tribunal has interpreted this 

provision to provide jurisdiction only over claims that meet the customary international law 

standard of proximate causation and, therefore, to reject the "lesser degree of causation" standard 

74 See, e.g., Louis B. Sohn & R.R. Baxter, Harvard Draft Convention on the International 

Responsibility of States for Injuries to Aliens (Draft No. 12), art. 14(3), at 141, 145 (Harv. L. 

Sch. 1961) (recognizing proximate cause as a requirement for an international claim); Bin Cheng, 

General Principles of Law 244-45 (Grotius 1987) (1953) ("[T]he relation of cause and effect 

operative in the field of reparation is that of proximate causality in legal contemplation. . . . 

Hence the maxim: In jure causa proxima non remota inspicitur. . . . [D]erogation from this 

principle is not to be presumed."); Administrative Decision No. II, 7 R.IA.A. 23, 29 (Germ.-U.S. 

Mixed Cl. Comm'n 1923) (Proximate cause is a "rule of general application both in private and 

public law – which clearly the parties to the Treaty had no intention of abrogating."). 

75 Declaration of Algeria Concerning the Settlement of Claims (Claims Settlement 

Declaration), Jan. 19, 1981, U.S.-Iran, art. II(1), 20 I.L.M. 230, 231 (1981) (emphasis added). 

67

that claimants urge here. 76 That tribunal's interpretation of a substantially similar clause in a 

claims agreement governed by international law provides persuasive evidence of the content of 

the phrase "arising out of" in Articles 1116(1) and 1117(1). 

Other international tribunals applying international law have similarly construed a wide 

variety of different treaty language – some plainly broader than the language in NAFTA Articles 

1116 and 1117 77 – to be consistent with the customary international law principle that proximate 

76 See Mohsen Asgari Nazari v. Iran, 1994 WL 109558, at 54 (Aug. 24, 1994) (Award No. 

559-221-1) (noting lack of "evidence that the Respondent is culpable for proximate causation of 

the Claimant's loss . . . ."); Behring Int'l, Inc. v. Iran, 8 Iran-U.S. Cl. Trib. Rep. 238, 271 (1985) 

("[T]he Tribunal has jurisdiction to adjudicate a counterclaim for all reasonably foreseeable 

damages . . . proximately caused by such breach . . . ."); Hoffland Honey Co. v. Nat'l Iranian Oil 

Co., 2 Iran-U.S. Cl. Trib. Rep. 41 (1983); see also Leach v. Iran, 23 Iran-U.S. Cl. Trib. Rep. 233, 

239 (1989) (separate opinion of Judge Noori) (claim did not arise out of Iranian measures as 

claimant's employer's "decision was the actual, proximate and direct cause of the termination of 

contracts."); Iran v. United States, Award No. 597-A11-FT (April 7, 2000), 268, 275, 280, 291 

(tribunal would "determine in a subsequent proceeding whether Iran has established that it has 

suffered a loss as a proximate result of that failure by the United States") (emphasis added); 

Charles N. Brower & Jason D. Brueschke, The Iran-United States Claims Tribunal 459 (1998) 

("Even where the claimant can prove that actions attributable to the Government of Iran were a 

cause of damages, recovery still will be denied unless its actions were the proximate cause. . . . 

The Tribunal correctly drew a distinction . . . between 'cause' and 'proximate cause' . . . . "); The 

American Society of International Law, Iran-United States Claims Tribunal: Its Contribution to 

the Law of State Responsibility 318 (Richard B. Lillich & Daniel Barstow Magraw eds., 1997) 

("It is further a basic premise that one is not liable for every harm that is caused. As discussed 

above, the tribunal in Hoffland Honey endorsed the general limiting principle of 'proximate 

cause,' which requires that the link between action and compensable harm be reasonably direct 

and obvious."). 

77 Compare, e.g., Treaty of Peace, Aug. 25, 1921, U.S.-Germ., art. I, 42 Stat. 1939 

(incorporating section 5 of the July 2, 1921 Joint Resolution of Congress, which (as quoted in 

Administrative Decision No. II, 7 R.I.A.A. 23, 29 (Germ.-U.S. Mixed Cl. Comm'n 1923)) 

granted the German-U.S. Mixed Claims Commission jurisdiction over claims by U.S. nationals 

who "'suffered . . . loss, damage, or injury . . . directly or indirectly . . . or in consequence of 

hostilities or of any operations of war or otherwise'.") (emphasis in original), with Provident 

Mutual Life Ins. v. Germ., 7 R.I.A.A. 91, 116 (Germ.-U.S. Mixed Cl. Comm'n 1924) ("[T]he act 

of Germany in striking down an individual did not in legal contemplation proximately result in 


68

cause is a necessary prerequisite of any international claim. 78 These international tribunals 

reached the same result in construing differing language for a reason: unless a different intent 

unmistakably appears from the text, the ordinary relationship – that of proximate cause – 

between an alleged breach and an alleged loss must be proven for any international claim to 

proceed. As Umpire Ralston stated in the Sambiaggio case, if the governments intended to 

depart from the general principles of international law, then the "agreement would naturally have 

found direct expression in the protocol itself and would not have been left to doubtful 


damage to all of those who had contract relations, direct or remote, with that individual, which 

may have been affected by his death.") (emphasis added) and United States Steel Products v. 

Germ., 7 R.I.A.A. 44, 54-55, 58-59, 62-63 (Germ.-U.S. Mixed Cl. Comm'n 1923) (rejecting on 

proximate cause grounds claims seeking reimbursement of war-risk insurance premiums); 

compare also, e.g., Protocol for Arbitration of Claims, Feb. 17, 1903, U.S.-Venez., art. I, T.S. 

No. 420 ("All claims owned by citizens of the United States of America against the Republic of 

Venezuela . . . shall be examined and decided by a mixed commission . . . .") (emphasis added), 

with Dix v. Venezuela, 9 R.I.A.A. 119, 121 (U.S.-Venez. Comm'n 1903) ("International as well 

as municipal law denies compensation for remote consequences, in the absence of evidence of 

deliberate intention to injure."). 

78 Compare Elettronica Sicula, S.p.A. (ELSI) (U.S. v. Italy), 1989 I.C.J. 15, 41 48 

(quoting compromissory clause as encompassing "'[a]ny dispute between the High Contracting 

Parties as to the interpretation or the application of this Treaty . . . .'") with id. at 62 101 

(rejecting claim on ground that U.S. failed to establish that acts attributable to Italy rather than 

"ELSI's headlong course towards insolvency" were proximate cause of losses); compare also 

Northern Cameroons (Cameroon v. U.K.), 1963 I.C.J. 15, 25 (Dec. 2) (quoting compromissory 

clause as encompassing "'any dispute whatever [that] should arise . . . relating to the 

interpretation or application of the provisions of this Agreement . . . .'") (emphasis added) with 

id. at 99 (separate opinion of Judge Fitzmaurice) (noting that had the applicant sought reparation, 

it would have been required to establish "that these breaches were the actual and proximate cause 

of the damage alleged to have been suffered[.]"); compare Convention with Canada Relative to 

Certain Damages Arising From Smelter Operations at Trail, British Columbia, Apr. 15, 1935, 

U.S.-Can., art. III(1), 49 Stat. 3245, 3246 (tribunal shall decide "[w]hether damage caused by the 

Trail Smelter in the State of Washington has occurred . . . .") with Trail Smelter (U.S. v. Can.), 3 

R.I.A.A. 1906, 1931 (first decision 1938) (rejecting claim for indirect damages arising from 

unintended and incidental interference with contractual relations with third parties). 

69

interpretation." 79 Like the provisions of each of the international claims agreements reviewed 

above, Articles 1116(1) and 1117(1) contain no indication that the NAFTA Parties intended to 

vary from centuries of claims practice and dramatically expand the number and range of claims 

for which they would be liable. 

Claimants ignore international law entirely (and thus the requirements of NAFTA 

Articles 102(2), 1131(1)) and rely instead exclusively on municipal cases, nearly all of which 

involved contracts of insurance and indemnity. See Joint Reply at 172-73 & n.38-40. 80 But 

insurance contracts have a fundamentally different object, purpose and context than that of 

NAFTA Chapter Eleven. On policy grounds, national courts construe provisions in insurance 

contracts broadly in favor of insureds. 81 Insurance contracts are the product of commercial 

79 10 R.I.A.A. 499, 521 (Italy-Venez. Mixed Cl. Comm’n of 1903); see also Asian 

Agricultural Products Ltd. v. Sri Lanka (“AAPL”), 30 I.L.M. 577, 601 51(1991) (“[I]n the 

absence of travaux preparatoires in the proper sense, it would be almost impossible to ascertain 

whether Sri Lanka and the United Kingdom had contemplated during their negotiations the 

necessity of disregarding the common habitual pattern adopted by previous treaties . . . .”). 

80 Of the fourteen municipal cases cited by claimants, twelve involved insurance or 

indemnity contracts; the remaining two cases had nothing to do with causation at all, but instead 

concerned only whether certain proceedings arose out of other proceedings for procedural 

purposes. See Re Hamilton-Irvine and the Companies Act 1985, 94 A.L.R. 428, 433 (S. Ct. 

Norfolk Island May 1, 1990) (pending proceedings did not arise out of other proceedings given 

that the latter were "in no sense dependent upon, or linked or associated with," the former); 

United States v. Friedland, 1998 A.C.W.S.J. 140040, at *53-*60 (Ont. Ct.) (counterclaim arose 

out of subject matter of proceedings initiated by plaintiff)). 

81 See, e.g., Amos v. Insurance Corp. of Brit. Colum., 3 S.C.R. 405, 1995 S.C.R. LEXIS 

663, at *16 (1995) ("Traditionally, the provisions providing coverage in private policies of 

insurance have been interpreted broadly in favour of the insured, and exclusions interpreted 

strictly and narrowly against the insurer."); Dodson v. Peter H. Dodson Ins. Servs., [2001] 1 

Lloyd's Rep. 520, 2000 WL 1791537, 41 (Engl. C.A. 2000) ("In case of any ambiguity (and 

this is in our view, at lowest, such a case), an insurance wording such as the present falls to be 

construed against the insurers whose standard wording it is and who put it forward contractually 


70

transactions where insurers assume the risk of certain losses in exchange for payments. Chapter 

Eleven, in contrast, is not an insurance policy or any other form of liability-shifting mechanism. 

Instead, it imposes on a State legal obligations with respect to certain foreign investors and 

foreign-owned investments and creates a private right of action for monetary damages for 

violations of those obligations. A NAFTA Party's liability under Chapter Eleven is thus more 

analogous to that of a tortfeasor or violator of a statute: areas where, under municipal law, 

liability has been limited to the principle of proximate cause. 82 Thus, neither international law 

nor the policy rationale underlying the municipal-law decisions claimants invoke supports 

application of the substantially broader standard applied in the insurance law context to Chapter 

Eleven arbitration. 

Moreover, claimants' suggestion that the use of the word "or" to separate "by reason of" 

and "arising out of" in NAFTA Articles 1116 and 1117 indicates that the two phrases "have 

distinct legal meanings" is wrong as a matter of simple grammar: "or" can be and often is used to 


in apparently general terms and then seek to read into it an unexpressed restriction on their 

liability."); Merchants Ins. Co. v. US Fid. & Guar. Co., 143 F.3d 5, 8 (1st Cir. 1998) ("Where 

policy provisions are ambiguous – that is, where the language permits more than one rational 

interpretation – the reading most favorable to the insured must prevail. That contra proferentem 

principle applies with added rigor in determining the meaning of exclusionary provisions.") 

(internal quotations, citations and footnote omitted); 2 George J. Couch, Cyclopedia of Insurance 

Law § 15:74 (2d ed., rev. vol. 1984) ("The words, 'the contract is to be construed against the 

insurer' comprise the most familiar expression in the reports of insurance cases."). 

82 See, e.g., Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 287 (1992) 

(Scalia, J. concurring) ("One of the usual elements of statutory standing is proximate causality 

. . . . [I]t has always been the practice of common-law courts (and probably of all courts, under all 

legal systems) to require as a condition of recovery, unless the legislature specifically prescribes 

otherwise, that the injury have been proximately caused by the offending conduct."). 

71

introduce synonymous terms. 83 For example, in Articles 1116(1) and 1117(1), just as "loss" and 

"damage" are interchangeable, "by reason of" and "arising out of" are interchangeable. If, as 

claimants urge, "arising out of" embodied a significantly more expansive standard of causation 

than "by reason of" – which claimants concede "has generally been held to connote the traditional 

tort concept of proximate causation," Joint Reply at 173 – the narrower standard would be read 

out of Chapter Eleven: the substantially more expansive causation standard would in all cases 

swallow the more restrictive one. Such an interpretation would thus be "contrary to one of the 

fundamental principles of interpretation of treaties, consistently upheld by international 

jurisprudence, namely that of effectiveness." 84 

There can be no question, therefore, that NAFTA Articles 1116 and 1117 require 

claimants to prove, as a necessary element of their claim, that their alleged damages were 

proximately caused by the alleged breach rather than the intervening act of Loewen's decision to 

83 This is so in the languages of all three NAFTA Parties. See, e.g., Webster’s II New 

Riverside University Dictionary 826 (1988) (defining "or" as "a synonymous or equivalent 

expression" and providing the example "claustrophobia, or fear of enclosed places"); American 

Heritage Dictionary of the English Language 873 (2d ed. 1985) (defining "or" as "used to 

indicate a synonymous or equivalent expression" and providing the example "acrophobia, or fear 

of great heights"); Concise Oxford Dictionary 716 (1982) ("or" may be used as a "mere synonym 

(common or garden heliotrope)") (emphasis in original); Oxford American Dictionary of Current 

English (1980) (defining "or" as "also known as" and providing the example "hydrophobia or 

rabies"); El Pequeño Larousse Ilustrado 722 (2000) (defining "o" as "[i]ndica equivalencia o 

identidad: el protagonista o personaje principal."); 1 Le Micro-Robert Poche 883 (1992) 

(defining "ou" as "1. (Équivalence de formes désignant une même chose) Autrement dit. La 

caccinelle, ou bête à bon Dieu."). 

84 Territorial Dispute (Libya v. Chad), 1994 I.C.J. 6 51 (collecting authorities); accord 

Corfu Channel (U.K. v. Alb.), 1949 I.C.J. 4, 24 ("It would indeed be incompatible with the 

generally accepted rules of interpretation to admit that a provision of this sort occurring in a 

special agreement should be devoid of purport or effect."). 

72

settle the litigation. 85 As the German-United States Mixed Claims Commission explained, 

proximate cause exists only where "there is no break in the [causal] chain and the loss can be 

clearly, unmistakably, and definitively traced, link by link, to [the State's] act." Administrative 

Decision No. II, 7 R.I.A.A. at 29-30 (emphasis added); see also Bin Cheng, General Principles of 

Law 246-47 (noting that the original wrongdoer is not liable if another was the natural cause of 

the injury). As the United States has already demonstrated, Loewen was under no obligation to 

pay O'Keefe at any point until it bound itself to do so under the settlement agreement. See 

Counter-Mem. at 57-63, 104. Because Loewen chose to forgo its appeal – a decision which was 

not the product of "economic duress" – it was that decision, and not the Mississippi court 

judgments, that proximately caused claimants' alleged injuries. 86 

85 Claimants assert incorrectly that the United States bears the burden of disproving 

proximate cause. See Joint Reply at 175. The absence of proximate cause is not an affirmative 

defense; rather, the existence of proximate cause is an indispensable element of a legally 

cognizable claim that any claimant must prove. Claimants' own authorities do not represent a 

contrary view. See, e.g., Bin Cheng, General Principles of Law as Applied by International 

Courts and Tribunals at 334 (1987) ("the general principle [is] that the burden of proof falls upon 

the claimant . . . ."); Dan B. Dobbs, The Law of Torts § 150, at 359-60 (2000) (although the 

"defendant . . . has the burden of proving facts to support affirmative defenses such as 

contributory negligence," the "plaintiff must provide evidence of . . . facts from which a jury 

could reasonably find . . . proximate cause by a greater weight of the evidence."). In any event, 

even if the United States bore the burden of proving that claimants' settlement was the proximate 

cause of claimants' alleged injuries (which should not be confused with claimants' heavy burden 

of proving that the decision to settle was the product of "economic duress"), the United States has 

more than met that burden here. 

86 See, e.g., Yukon Lumber (G.B. v. U.S.), 6 R.I.A.A. 17, 20-21 ("[T]he Canadian 

Government does not seem justified in complaining now of a grievance which easily could have 

been avoided. . . . [T]he Canadian Government had every opportunity and facility" to prevent the 

harm alleged and, "having been able to avoid the grievance . . . , does not seem to be entitled now 

to hold the United States . . . in any way responsible for it."); Davis Case, 9 R.I.A.A. 460, 462-63 

(U.S.-Venez. Comm'n of 1903) (where claimant's goods were improperly given by a third party 

to Venezualan customs officials for sale at public auction, claimant's failure "to forward the bill 


73

B. Claimants Cannot Be Excused From Loewen's Settlement On The 

Ground Of "Economic Duress" 

Claimants effectively concede that this claim must be dismissed if Loewen's settlement, 

either by its terms or by its consequences, extinguished claims against the United States arising 

from the O'Keefe litigation. See Joint Reply at 180. The heart of claimants' defense to such a 

result, then, is the contention that this Tribunal must disregard Loewen's settlement on the ground 

of "economic duress." Id. As the United States has shown, and as we confirm below, no defense 

of "economic duress" exists in international law (even assuming that such a defense exists at all) 

that would excuse Loewen's settlement under the circumstances of this case. 

1. The Excuse Of "Economic Duress," Even If Recognized 

Under Customary International Law, Cannot Be Extended To 

Loewen's Circumstances 

Claimants urge this Tribunal to excuse Loewen's settlement agreement through a claim of 

"economic duress" of unprecedented breadth, without even acknowledging the first hurdle to 

their assertion of any such claim here: whether "economic duress" is even recognized at all as an 

excuse under international law. As the United States has noted, "there is no very solid or wide 

consensus on coercion outside of the cases dealing with physical force" and, therefore, no firm 

basis from which to derive a rule of customary international law. Counter-Mem. at 74 n.45 


of lading with the goods to a responsible Venezualan resident agent . . . was the real and primary 

cause of the conditions which followed, and the least that can be said is that this negligence was 

directly and proximately contributory to the injuries complained of."); Dix Case, 9 R.I.A.A. 119, 

121 (U.S.-Venez. Comm'n of 1903) (after revolutionary army confiscated over half of claimant's 

cattle, claimant sold remaining cattle at a loss in response to perceived threat of further 

confiscation; tribunal disallowed recovery of losses from sale of cattle at depressed price on 

proximate cause grounds because "there is in the record no evidence of any duress or constraint 

on the part of the military authorities to compel [claimant] to sell his remaining cattle to third 

parties at an inadequate price."). 

74

(quoting Detlev F. Vagts, Coercion and Foreign Investment Rearrangements, 72 Am. J. Int'l L. 

17, 33 (1978)). Without such an international rule, claimants have no basis under the NAFTA to 

avoid the dispositive effect of Loewen's settlement. 87 

Despite the United States' challenge, claimants still offer no support for their assertion 

that economic pressure, by itself, can transform a settlement of disputed claims in litigation into 

an international claim. That is because there is no such support. See Counter-Mem. at 74-75. 

For this reason alone, Loewen's settlement of the O'Keefe litigation defeats this claim in its 

entirety. 

Moreover, even with respect to municipal law, claimants fail to identify any analogous 

authority and entirely ignore the United States' showing that, in the specific context of 

settlements of litigation and commercial matters involving sophisticated parties, the duress 

jurisprudence of all of the leading common-law jurisdictions is particularly restrictive and 

conservative. See id. at 76-79. Instead, claimants summarily dismiss all duress law that is 

contrary to their preferred result – including that of states such as Virginia, Massachusetts, 

Illinois and New York, as well as the entirety of English law – as somehow "outside the 

mainstream" of the law of economic duress. See Joint Reply at 181, 194. 

But, even if the excuse of "economic duress" were available under international law, 

claimants' convenient dismissal of numerous municipal jurisdictions leaves one to wonder what 

the "mainstream" of duress law is, given the apparent lack of uniformity in the application (or 

even recognition) of "economic duress" in the various leading legal systems of the world. 

87 See NAFTA art. 102(2) (the NAFTA is to be interpreted "in accordance with applicable 

rules of international law")(emphasis added); see also id. art. 1131(1) (tribunal shall decide 

issues "in accordance with this Agreement and applicable rules of international law"). 

75

Whether the courts of Australia (which themselves do not appear to reflect a uniformity of view 

on the subject), Canada or New Zealand would, as claimants seem to suggest, consider that 

Loewen entered the settlement under "economic duress" (and claimants cite no authority 

indicating that those courts would do so) is not determinative of the question before this 

Tribunal. Rather, the question before this Tribunal is whether international law would regard 

Loewen's settlement as the product of "economic duress." In view of the acknowledged 

divergence in state practice on this point, as well as the absence of international precedent for the 

recognition of "economic duress" as an available excuse under international law, it would be 

inappropriate to apply anything but the most restrictive version of "economic duress" to this 

international dispute, if at all. 88 

2. The Availability Of Federal Court Review Defeats Any Claim Of Duress 

Claimants' suggestion that the United States is no longer pressing its argument that 

Loewen had a reasonable opportunity to obtain a stay, and review, of the Mississippi Supreme 

Court's bonding decision in the U.S. Supreme Court, see Joint Reply at 182-83, is odd. While 

the United States chose to incorporate by reference, rather than repeat verbatim, the federal court 

arguments advanced in the jurisdictional phase, see Counter-Mem. at 79-80, these points are at 

the very core of the United States' rebuttal to claimants' allegation that Loewen settled under 

"duress." In fact, the United States Supreme Court's most recent punitive damages decision, 

Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 121 S.Ct. 1678 (May 14, 2001), decided 

88 See, e.g., Akehurst, Equity and General Principles of Law at 821 ("Certainly, if a State 

is not bound by a rule of customary law which it has consistently opposed ab initio, it would be 

illogical to regard a State as bound by a general principle of law which has always been rejected 

by its own law."). 

76

after the United States filed its Counter-Memorial (but before claimants submitted their Joint 

Reply), provides yet more support for Professor Days' conclusion that Loewen would have had a 

reasonable opportunity to obtain U.S. Supreme Court review. 89 

Cooper Industries is the latest in a series of Supreme Court cases relating to the 

importance of judicial review of punitive damages verdicts under the Due Process Clause. See 

Statement of Drew S. Days, III, at 24-28 (reviewing prior cases). The Supreme Court, with only 

one Justice dissenting, held that, on appeal, courts should apply a de novo standard of review 

when passing on the constitutionality of punitive damages awards. See 120 S.Ct. at 1682-83. 

The Court rejected, as inconsistent with due process, the lower court's holding that a more 

relaxed "abuse of discretion" standard should apply. See id. 

Decided by the same Justices before whom Loewen would have filed its application for a 

stay and petition for certiorari, Cooper Industries provides further evidence of the Supreme 

Court's keen interest in issues surrounding the role of the courts in reviewing punitive damages 

verdicts. As we previously have explained (and as Loewen's own lawyers recognized at the 

time), Loewen's petition would squarely have presented fundamental, far-reaching, and (still) 

unresolved questions implicating the reviewability of large punitive damages verdicts, questions 

89 The United States has not, as claimants say in a footnote, "abandoned" its further 

argument that Loewen, as an alternative to seeking relief in the U.S. Supreme Court, could also 

have mounted a collateral attack on the Mississippi Supreme Court's bond decision in a U.S. 

federal district court. See Joint Reply at 183 n.42. While claimants deride the collateral attack 

option as "fantastic," id., they have yet to explain why, at the time of the underlying events, the 

company's own lawyer – James Robertson, a former Justice of the Mississippi Supreme Court – 

advised Loewen in writing that it could seek relief from an adverse bonding decision in a 

Mississippi federal district court. See U.S. App. at 0399. In his letter, Mr. Robertson stated with 

apparent confidence that a district court "would grant [the company] an immediate hearing on an 

application for a temporary restraining order and/or a preliminary injunction if the Plaintiffs were 

threatening immediate attachment or other process of Loewen assets in Mississippi." See id. 

77

that remain certworthy today. 90 See, e.g., Counter-Mem. at 153 n.109; Statement of Drew S. 

Days, III, at 24-28; Reply Statement of Drew S. Days, III, at 13-14; U.S. App. at 0882 (draft stay 

petition). Contrary to claimants' continued assertions, and as we have shown, relief from the 

United States Supreme Court was, at the very least, "reasonably available" to Loewen to a degree 

sufficient to defeat any claim of economic duress. 

3. The Availability Of Corporate Reorganization Protection Defeats 

Any Claim Of Economic Duress 

In the face of four-square authority (and the advice of Loewen's own counsel) to the 

contrary, claimants continue to argue that reorganization protection under Chapter 11 of the U.S. 

Bankruptcy Code would not have avoided their alleged "economic duress" because it would not 

have been the effective option for Loewen that it has been for countless other U.S. companies in 

identical circumstances. Much has already been said in this case on this subject, so the United 

States will limit its response to the following two brief points. 

First, to the extent that claimants offer any duress authorities that post-date the 1978 

overhaul of the Chapter 11 reorganization provisions (and they offer very few), none of those 

authorities addresses the type of circumstances that claimants allege were present for Loewen in 

January 1996. See Joint Reply at 194-98. Indeed, many of claimants' authorities do not purport 

to assess the effectiveness of Chapter 11 reorganization at all, but deal instead with general, 

abstract notions of bankruptcy, such as personal bankruptcies or liquidation. 91 In particular, by 

90 Moreover, as we also have explained, Loewen's petition would have raised other 

important issues, such as the potential liability of the United States under the NAFTA, see U.S. 

App. at 0882 (draft stay petition), increasing its "certworthiness" even further. 

91 See, e.g., Tri-State Generation & Transmission Ass'n v. Shoshone River Power, Inc., 


78

elying largely on authorities involving distressed companies with serious operational problems, 

"Loewen has confused two radically distinct situations." Supplemental Declaration of J. Ronald 

Trost at 5 (Counter-Mem. Tab H). Professor Elizabeth Warren explains this distinction, which 

claimants continue to obscure: 

If a company has no explanation for its filing other than a shrinking market, a 

tangled business operation, and a string of bad business decisions that it has no 

coherent plan to correct, the company may not survive a Chapter 11 filing. In 

such a case, Chapter 11 will give the company a last chance to straighten out 

before it is liquidated or sold. But if the company can identify an isolated 

problem that it can credibly expect to cure, the Chapter 11 filing is understood as 

a reasonable business strategy that has a high likelihood of success. 

Warren Statement at 7 (U.S. Jurisdictional Mem. Tab E). 

Claimants have insisted throughout this case that Loewen, at the time of the O'Keefe 

litigation, was not a deteriorating business suffering serious operational difficulties, but was 

instead an otherwise thriving company faced with a single, non-operational crisis: the threat of 

execution on a substantial judgment that was "virtually certain" to be reversed on appeal. See, 

e.g., TLGI Jurisdictional Sub. addendum B; Joint Reply at 200. If so, then claimants' authorities, 

which generally address the dangers, costs and complexities of Chapter 11 reorganization for 

troubled companies facing operational crises (which are the majority of companies that file for 


805 F.2d 351, 356 (10th Cir. 1986) (assuming that company facing bankruptcy "would likely 

collapse"). Sir Robert Jennings makes the same mistake when he misconstrues Loewen's 

decision to settle the litigation as a choice "between accepting the terms of the settlement or 

going into liquidation." First Jennings Op. at 16 (emphasis added). Significantly, claimants' 

"last word" on the subject comes from a note written by a law student having no experience (let 

alone expertise) with the realities of reorganization filings, and which predates the U.S. Supreme 

Court's decision in the Pennzoil v. Texaco case. See Joint Reply at 198 (quoting Gary Stein, 

Expanding the Due Process Rights of Indigent Litigants: Will Texaco Trickle Down?, 61 N.Y.U. 

L. Rev. 463 (1986) (law student note addressing Second Circuit's decision in Texaco v. Pennzoil 

before reversal by the U.S. Supreme Court)). 

79

Chapter 11 protection) are irrelevant to the circumstances that claimants contend existed as of 

January 1996. 92 For Loewen, at the time, a Chapter 11 filing "would have been a highly 

organized, planned and strategic filing executed for the sole purpose of prosecuting what Loewen 

believed to be a successful appeal . . . without the necessity of posting a supersedeas bond . . . ." 

Supplemental Trost Declaration at 5. 93 

Second, the parties' disagreement over the extent to which Loewen could have continued 

its acquisitions program while under reorganization protection is largely academic, as claimants' 

lone bankruptcy expert concedes a more fundamental point: that Loewen's core business of 

owning and operating funeral homes "would have continued virtually uninterrupted during 

Loewen's Chapter 11 cases." Sworn Declaration of Kenneth N. Klee at 8-9. At the very worst, 

therefore, Loewen could have continued to operate its core business – which, according to 

claimants, was profitable at the time – without interruption while Loewen's appeal proceeded in 

the Mississippi Supreme Court. According to Joel Blass, a former Justice of the Mississippi 

92 For example, claimants rely on an empirical observation of Professors Bradley and 

Rosenzweig that "stockholders and bondholders of bankrupt firms suffer dramatically greater 

losses under the 1978 Act than previously," an observation that was directed toward the far more 

common Chapter 11 filings of deteriorating or operationally-challenged companies rather than a 

strategic filing of the sort contemplated by Loewen in 1995-96. Joint Reply at 197 (quoting 

Bradley & Rosenzweig, 101 Yale L. J. at 1049). In any event, this empirical observation, even 

with regard to Chapter 11 filings by failing firms, has since been discredited. See J. Bhandari & 

L. Weiss, The Untenable Case for Chapter 11: A Review of the Evidence, 67 Am. Bankr. L. J. 

131 (1993) (criticizing Bradley & Rosenzweig's empirical observation as based on "vacuous" 

evidence). 

93 Claimants' assertion that a reorganization filing "would have been hurried" or 

"desperate," Joint Reply at 198 n.51, is fully belied by the record, which demonstrates that all of 

the documents necessary for Loewen's reorganization filing were completed by mid-December 

1995 (more than a month before the Mississippi Supreme Court's final decision), and needed 

only to be walked over to the courthouse and filed. See U.S. App. at 0447-0594. 

80

Supreme Court, the Court would have expedited the appeal and the whole matter "would have 

been over within a few months." Blass Statement at 14. Such a temporary cooling of the 

company's overly-aggressive acquisitions would hardly have been "devastating" to the company, 

as claimants now contend. 94 

The United States need not prove, nor need this Tribunal decide, whether Loewen's 

decision to forgo an appeal under the protections of corporate reorganization in favor of the 

settlement was a reasonable path for the company to take under the circumstances. 95 The 

94 As the United States has already shown, Loewen was already in an extremely precarious 

financial condition of its own making before the O'Keefe jury rendered its verdict. See Counter- 

Mem. at 97-99. The unrebutted expert testimony on this subject, that of Steven Saltzman, 

confirms that this was so. See Declaration of Steven Saltzman, C.F.A. (Tab D to U.S. 

Jurisdictional Resp.). To the extent that Loewen would not have been able to continue with its 

overly-aggressive acquisition practices while under reorganization protection, that would only be 

so if those practices were (contrary to claimants' assertions) unsound to begin with. As one 

leading American jurist has explained, "[f]irms in reorganization go on as before; all operations 

with positive values are maintained; operations that are not continued in bankruptcy should not 

be continued outside it, either." Olympia Equip. Leasing Co. v. Western Union Telegraph Co., 

786 F.2d 794, 802-03 (7th Cir. 1986) (Easterbrook, J., concurring). Claimants cannot have it 

both ways. 

95 The United States demonstrated during the jurisdictional phase of this arbitration that 

there are compelling reasons to conclude that Loewen's decision to forgo this alternative was not 

reasonable under the circumstances. See, e.g., U.S. Jurisdictional Resp. at 61-74. Claimants 

have offered a post-hoc theory that the reorganization option was made unreasonable by a 

supposed threat that O'Keefe might somehow take control of Loewen in bankruptcy, a theory 

which, as the United States has already shown, is frivolous. See Supplemental Trost Declaration 

at 12-18. In their Joint Reply, claimants, through their expert Mr. Klee, identify two new cases 

as support for this absurd "takeover" theory. See Joint Reply at 197-98; Sworn Supplemental 

Declaration of Kenneth N. Klee at 3-4) (citing the Texaco and Marvel Entertainment Group 

bankruptcies). Both cases are inapposite to the Chapter 11 reorganization filing that Loewen 

would have made in January 1996. For example, Mr. Klee fails to mention that Texaco's 

settlement with Pennzoil came after Texaco had already largely failed in the appellate courts and 

thus faced significantly worse prospects than Loewen for success on appeal. See Texaco, Inc. v. 

Pennzoil Co., 729 S.W.2d 768 (Tex. App. 1987) (remitting judgment only from $10.53 billion to 

$8.53 billion); Declaration of Harvey R. Miller at 10. In the Marvel Entertainment case, a trustee 


81

question presented is not whether the course actually chosen by Loewen was reasonable, but 

whether claimants have met their heavy burden to prove that the alternatives Loewen did not 

pursue were manifestly ineffective or obviously futile. See U.S. Jurisdictional Resp. at 32-37; 

Counter-Mem. at 77-78. Even assuming that Loewen's choice to settle in lieu of continuing with 

the appeal under reorganization protection was reasonable, the decision to forgo one reasonable 

alternative in favor of another perceived to be less costly is nothing more than a business 

decision, and not one made under "economic duress." 

4. An Unbonded Appeal Was A Reasonable Alternative For Loewen, As 

Execution Was Neither Imminent Nor Likely 

The United States has demonstrated that, at the time of settlement, any "threat" of 

attachment of Loewen's assets was, at best, remote and theoretical, both as a matter of fact and as 

a matter of law. Claimants have not rebutted this showing. 

The relevant facts are undisputed. That is, claimants do not dispute that, at the time of 

settlement, O'Keefe had taken no steps towards executing the judgment in any state outside 

Mississippi. They also do not dispute that, within Mississippi (where Loewen had a relatively 

insignificant portion of its assets), O'Keefe had enrolled the judgment in only fourteen of eighty- 

two Mississippi counties. Nor, apparently, do claimants dispute that, even within those 


was appointed only after the debtor's management had already been replaced post-filing at the 

behest of large and sophisticated institutional bondholders, and only after irreconcilable acrimony 

developed between the new management and the company's bank lenders. See In re Marvel 

Entertainment Group, Inc., 140 F.3d 463, 471 (3d Cir. 1998) (new, post-filing management's lack 

of "extensive familiarity with the company's operations" militated against the usual "strong 

presumption against appointing an outside trustee"). In contrast, Loewen's then-existing 

management would have been firmly in place as debtor-in-possession and, as the record makes 

clear, would have enjoyed the full support of the company's lenders in opposing O'Keefe's claim. 

See, e.g., Supplemental Trost Decl. at 8-9, 17-18. 

82

Mississippi counties where the judgment was enrolled, no evidence suggests O'Keefe (or his 

contingent-fee counsel) would have been willing or able to pay any "sheriff’s bond" required to 

secure attachment of assets. See generally Counter-Mem. at 89, 91. 

Even more fundamentally, claimants offer no evidence to dispute the United States' 

showing that the threat of a "wrongful execution" claim would have prevented O'Keefe from 

executing on the judgment during the pendency of Loewen's appeal (which had already been filed 

at the time of settlement). 96 Nor could they. The record is clear that all counsel – Loewen's and 

O'Keefe's– viewed the damages verdict as potentially subject to reversal on appeal (Loewen's 

lawyers thought reversal was a "certainty"). As Joel Blass, O'Keefe's counsel during the bond 

proceedings and a former Mississippi Supreme Court Justice, has stated: 

I was of the opinion, and so informed Mr. O'Keefe, that while the case on the 

issue of liability was so strongly made that I felt very confident that it would 

stand, a remand on the damages issue was a definite possibility. In such 

circumstances, the chances of Mr. O'Keefe or anyone else risking their own 

personal liability to execute on unbonded assets during the appeal are simply 

negligible. I know that Jimmy Robertson [Loewen's lawyer] understood this. 

Blass Statement at 11-12 (emphasis added); see also U.S. App. at 0601 (Loewen's lawyers stating 

they were "convinced" O'Keefe's counsel "kn[e]w" the verdict could not "be sustained on the 

basis of the record at trial"). 

To support their contrary argument – i.e., that the threat of execution was imminent – 

claimants cite Mr. Gary's hyperbolic statement to the press that he would "take over . . . the 

96 Claimants' only argument on this point is their statement that a "retrospective remed[y] 

for 'wrongful execution' . . . would have little practical significance to a publicly traded company 

like Loewen." See Joint Reply at 191-92. But the relevance of a "wrongful execution" claim is 

not that Loewen, in the event of reversal, might recover damages for wrongfully-seized assets, 

but that the specter of such a claim would prevent O'Keefe from even attempting to seize 

company assets in the first place. 

83

usiness" and "start embalming" if Loewen failed to obtain supersedeas. See Joint Reply at 188. 

But Loewen knew any such "threats" were idle. 97 Again, as Justice Blass has stated: 

[E]ven if [O'Keefe] had wanted to start execution immediately, the process to 

obtain execution on assets is not easy, and takes a good bit of time. We were not 

ready to execute on Loewen's assets at the time, and I am aware of no specific 

plans to go forward. Based on my conversations with Loewen's counsel, Loewen 

either knew or should have known that. 

Blass Statement at 12. The record is thus clear that, at the time of settlement, there was no real 

"threat" that O'Keefe would execute on the judgment pending Loewen's appeal (and Loewen 

knew as much). There is no credible evidence to suggest otherwise. This alone defeats 

claimants' allegation of duress. 

But even assuming – contrary to the record evidence, as well as common sense – that 

O’Keefe would have attempted to execute on the judgment pending appeal, the United States' 

expert Jack Dunbar's (unrebutted) testimony makes clear that Loewen "could still have had an 

effective strategy (excluding settlement) to seek an expedited appeal before the Mississippi 

Supreme Court while making execution upon the judgment more difficult and costly for the 

O'Keefe Plaintiffs pending appeal." See Statement of Jack Dunbar, Esq. ("First Dunbar 

Statement") at 15 (attached at Tab F to Counter-Mem.). 

Claimants' only response to Mr. Dunbar is their contention that, under the Uniform 

Enforcement of Foreign Judgments Act ("UEFJA"), execution would have been "speedy" outside 

the State of Mississippi. See Joint Reply at 188-90. But claimants never really address the heart 

of Mr. Dunbar's point, i.e., that, under § 4(b) of the UEFJA, Loewen (i) could have sought a stay 

97 It is quite clear that Loewen's lawyers took Mr. Gary's posturing during settlement 

negotiations with the proverbial grain of salt. See, e.g., U.S. App. at 0601 (advising that Mr. 

Gary's settlement posturing be treated "as nothing more than what it is – a negotiating strategy"). 

84

in any foreign state where O'Keefe sought to execute under the foreign state's laws, and, (ii) 

could have argued that any statutorily-prescribed bond be reduced for cause (including as a 

matter of federal due process), or be limited to the amount of its assets within the foreign state. 

See Counter-Mem. at 92 & n.60; First Dunbar Statement at 12-13. 98 

At the time of the underlying events, Loewen's lawyers knew they would have an obvious 

"tactical advantage" if O'Keefe's "'contingent fee counsel'" were forced to "'litigate in far reaching 

and unfriendly forums on multiple fronts.'" See Counter-Mem. at 94 (quoting U.S. App. at 

0652). That is precisely what Loewen would have achieved by seeking stays in every jurisdiction 

outside Mississippi where O'Keefe might have sought to execute. See First Dunbar Statement at 

14 (seeking stays "would have given Loewen a formidable tool and a reasonable basis to 

continue its appeal without supersedeas in the post-verdict phase of the litigation."). 

Thus, while claimants say the notion of appeal without supersedeas lacks "real-world 

perspective," see Joint Reply at 191, it is claimants who blink at reality. At the time of the 

settlement, Loewen's lawyers knew (or should have known) that any risk of execution pending 

appeal, in any degree, was exceedingly remote. They also knew (or should have known) that, 

under the UEFJA, they had avenues for staying or otherwise delaying any attempted execution 

98 Claimants plainly misunderstand the UEFJA stay provision, asserting that Loewen 

could only have obtained a stay by showing the Mississippi courts lacked jurisdiction, that the 

O'Keefe judgment was procured by fraud, or that the judgment was void. See Joint Reply at 191. 

This, of course, is the standard for denying "full faith and credit" to a sister-state judgment, not 

the standard for obtaining a UEFJA stay. See Statement of Drew S. Days, III, at 44-45 

(explaining full faith and credit standard and noting that, assuming the truth of claimants' factual 

allegations, Loewen would have had a viable argument that the O'Keefe judgment was void as a 

matter of Mississippi law). 

85

during the company's appeal. 99 In the words of Mr. Dunbar, Loewen's failure to pursue an 

unbonded appeal or avail itself of other reasonable options "makes one wonder if its decision to 

settle was based on reasons not otherwise apparent from the record." See First Dunbar Statement 

at 15. 

V. FURTHER COMMENT ON THE EFFECT OF NAFTA ARTICLE 1121 

From their continued argument that NAFTA Article 1121 waives the local remedies rule, 

claimants make a further and unsupported leap that an erroneous lower court decision is not only 

attributable to the state, but may also be internationally wrongful, regardless of whether a 

domestic appeal was available from the decision in the first instance. In so arguing, however, 

claimants fundamentally misconstrue established principles of state responsibility, as well as 

Article 1121 itself, a jurisdictional provision that can have no application to the merits of this (or 

any other) denial of justice case. Moreover, even if Article 1121 could be construed as relevant 

because of its impact on the local remedies rule, the Article still would have no effect on the 

outcome of this proceeding. Article 1121 does not waive the local remedies rule with respect to 

denial of justice claims. 

99 Even putting aside the UEFJA stay provision, the process to obtain execution on assets 

"is not easy, and takes a good bit of time." Blass Statement at 12. To execute the judgment 

outside Mississippi, O'Keefe, at a minimum, would have had to determine the location of 

Loewen's out-of-state assets; enroll the Mississippi judgment in the appropriate out-of-state 

counties; serve notice of enrollment on Loewen; pay any applicable "sheriff's bonds"; and, in the 

states where Loewen was most worried about execution, wait a proscribed period of time 

(usually 20-30 days) before commencing execution. See Counter-Mem. at 91-92 & n.59; see 

also Ga. Code Ann. 9-11-62(a); Tex. R. Civ. P. 627. These seemingly minor delays would have 

been critical in an appeal that "would have been over within a few months." See Blass Statement 

at 14. 

86

A. NAFTA Article 1121 Is Irrelevant To The Outcome Of This Case 

Claimants devote a substantial portion of their Joint Reply to a discussion of NAFTA 

Article 1121 and its alleged effect on the local remedies rule. See Joint Reply at 160-72. 

Claimants' discussion, however, is beside the point. For at least two reasons, the question of 

whether or to what extent NAFTA Article 1121 waives the local remedies rule is irrelevant to the 

outcome of this case. 

First, Loewen's waiver of this claim through the settlement agreement renders NAFTA 

Article 1121 irrelevant here. This point does not appear to be in dispute, as claimants concede 

that, if Loewen's settlement waived this claim, claimants must prove that they are entitled as a 

matter of international law to avoid the effect of the settlement on the ground of "economic 

duress." See Joint Reply at 179-80. The United States agrees with claimants that, if such a 

defense is even recognized under international law at all, the relevant analysis is the same as it 

would be under the principles of "finality" or "exhaustion," as "[t]he standard [of economic 

duress] is manifestly no different from that prescribed by the . . . 'local remedies rule' . . . ." Joint 

Reply at 182. As the United States has shown (without contradiction), that standard is a strict 

one and imposes a heavy burden on claimants to prove the unavailability of an appeal "so 

abundantly clear as to rule out, as a matter of reasonable possibility, any effective remedy before 

[the] courts." Certain Norwegian Loans (Fr. v. Nor.) 1957 I.C.J. 9, 39 (separate opinion of Judge 

Lauterpacht) (emphasis added). 100 

100 See U.S. Jurisdictional Resp. at 32-37; Counter-Mem. at 77-79 see also, e.g., C.F. 

Amerasinghe, Local Remedies in International Law 195 (1990) ("[T]he test is obvious futility or 

manifest ineffectiveness, not the absence of reasonable prospect of success or the improbability 

of success, which are both less strict tests."); Dubai-Sharjah Border Arbitration (1981), 91 I.L.M. 


87

Second, as the United States has explained, NAFTA Article 1121 is a jurisdictional 

provision that has nothing to do with the substantive law applicable to the merits of this (or any 

other) case under NAFTA Chapter Eleven. See Counter-Mem. at 108-111. In support of their 

contrary view, claimants rely largely on the opinion of Sir Robert Jennings, who professes to 

know of no authority for the view that the local remedies rule is distinct from the substantive law 

governing the merits of denial of justice claims. See Third Jennings Opinion at 21-22. But Sir 

Robert need look no further than the prominent treatise of which he is an editor, which states 

emphatically that "[t]he local remedies rule has to be distinguished from a requirement . . . that, 

as a matter of substantive obligation, a state must provide for recourse to an independent 

tribunal to adjudicate upon civil rights and obligations." Sir Robert Jennings & Sir Arthur 

Watts, Oppenheim’s International Law 525 n.8 (9th ed. 1992) (emphasis added). 

In fact, as Sir Robert acknowledged in his treatise but fails to acknowledge here, the 

distinction between the local remedies rule and the substantive rules of state responsibility for 

denial of justice is well established. In addition to the supporting sources that the United States 

has already identified in this proceeding, Professor James Crawford, Special Rapporteur to the 

International Law Commission ("ILC") on state responsibility, recently observed that "[t]here are 

. . . cases where the obligation is to have a system of a certain kind, e.g. the obligation to provide 

a fair and efficient system of justice. There, systematic considerations enter into the question of 

breach, and an aberrant decision by an official lower in the heirarchy, which is capable of being 


543, 569 (1993) ("[I]t is manifestly clear that any allegation of duress, of whatever kind, which is 

alleged to vitiate consent must be the subject of very precise proof."). 

88

econsidered, does not of itself amount to an unlawful act." 101 Professor Crawford's discussion 

makes clear that this principle – which reflects essentially the same substantive law principle on 

which United States relies in this case – is independent of the local remedies rule. Id. 

Professor Greenwood explains this point – and Sir Robert's error – in greater detail in his 

attached Second Opinion. As Professor Greenwood makes clear, much of the confusion over the 

relationship between the local remedies rule and the substantive rules of state responsibility for 

denial of justice stems from statements in earlier ILC drafts of the 1970s that have since been 

discredited. See Second Greenwood Op. at 50-62. This earlier view, which equated the local 

remedies rule with substantive law, "was heavily criticised both by governments and by 

commentators" and no longer reflects the accepted doctrine, which recognizes that the local 

remedies rule is a purely procedural rule that is independent of the substantive merits of any 

international claim. Id. 102 

The United Kingdom, which was a leading critic of the now-discredited view, explained 

in its 1996 comments to the ILC draft articles why it is important to maintain the distinction 

between the local remedies rule (as a matter of procedure) and the substantive rules in certain 

types of cases "in which unsuccessful recourse to the local courts is indeed necessary in order to 

101 James Crawford, Special Rapporteur, Second Report on State Responsibility, 

International Law Commission, 51st Sess., U.N. Doc. A/CN.4/498 (1999) at 75 (emphasis in 

first sentence in original; emphasis added in second sentence). 

102 Professor Greenwood respectfully points out that this Tribunal, in paragraph 67 of its 

January 5, 2000 Decision on Competence in this case, relied on ILC materials reflecting the 

earlier, discredited view. See Second Greenwood Op. at 52. Professor Greenwood thus 

concludes (and the United States agrees) that the Tribunal must not have intended its decision on 

competence to have decided that the substantive merits of this claim are subsumed within the 

local remedies rule because, among other things, "the decision which Loewen asserts the 

Tribunal took would clearly have been wrong in international law." Id. at 57. 

89

'complete' the violation of international law." 103 Because there are certain international 

obligations "where the breach arises only after a definitive position is taken by the courts or other 

organs of the State. . . , [t]he recourse to 'local remedies' is in this context not at all of the same 

nature as recourse to local remedies as a procedural precondition" for presentation of a claim on 

the international plane. 104 Whether or not an international agreement waives the local remedies 

rule, therefore, is irrelevant to the merits of such claims, for which the exhaustion of local 

remedies is a substantive requirement independent of the local remedies rule. See Second 

Greenwood Op. at 54. 

As the United States has shown, and as we confirm below, the breaches alleged by 

claimants in this case are precisely of the sort described by the United Kingdom in its 1996 

comments: instances "where the breach arises only after a definitive position is taken by the 

courts . . . of the State." See Counter-Mem. at 124-30; infra at 106-111. As such, the question of 

whether "a definitive position" was in fact taken by the courts of the United States in the O'Keefe 

litigation remains at the heart of this case, regardless of whether or to what extent NAFTA 

Article 1121 waives the local remedies rule. 

103 UK Materials on International Law, 69 B.Y.I.L. (1998) 558-59 (quoted in Second 

Greenwood Op. at 53). 

104 Id. 

90

B. Even If The Local Remedies Rule Were Relevant To The Substantive Merits Of 

NAFTA Chapter Eleven Claims, The Rule Is Presumed To Apply Absent 

Unequivocal Waiver 

There is no support for claimants' startling suggestion that States, by the mere fact of 

permitting investors to assert claims under international law against them directly in arbitration, 

granted investors greater rights than States themselves have under international claims law. 

Claimants' assertion is that, although States remain limited by the local remedies rule in asserting 

claims based on injuries to their nationals against other States, investors are not limited by that 

rule or, for that matter, any other principle of international claims law. See Joint Reply at 166- 

69. 

Claimants claim to find support for their theory in legal history: international claims law 

developed in an "'earlier and very different period of international law'" in which diplomatic 

protection was the most common method of presenting international claims, and such "relic[s] of 

a bygone era," claimants assert, have no application in the modern era of investor-State 

arbitration. See Joint Reply at 166, 168. Therefore, claimants conclude, even if the United 

States is correct that Article 1121 does not unequivocally waive the local remedies rule with 

respect to denial of justice claims, the rule has no application here in any event because of the 

mere fact that the NAFTA permits individuals to assert claims directly against states. See id. at 

166 (quoting Third Jennings Op. at 8); id. at 168. 

Modern State practice, however, does not bear out claimants' theory that the local 

remedies rule is irrelevant when individuals assert international claims directly against States. 

As Professor Greenwood observes: 

all of the major human rights conventions, which between them have created 

much the largest scope for individuals to bring claims before international 

91

tribunals (dwarfing ICSID in this regard), have made exhaustion of domestic 

remedies a requirement for bringing such a claim. 

. . . . 

Indeed, what the human rights treaties demonstrate is that the expansion of 

the jurisdiction of international tribunals so as to permit individuals to bring cases 

in their own right rather than having to rely upon the diplomatic protection of their 

State of nationality makes the local remedies rule more, not less, important. 

Second Greenwood Op. 29-31 (citing European Convention on Human Rights (1950), 

International Covenant on Civil and Political Rights (1966), American Convention on Human 

Rights (1969) and Convention against Torture (1984)); see generally id. 20-44. 

Neither is there a basis for concluding that principles of international claims law such as 

the local remedies rule are somehow inappropriate in the specific context of investor-State 

arbitration. To the contrary, the preparatory work of the ICSID Convention indicates that 

investor-State arbitration merely allows investors to assert the same international claim that 

States could have asserted in exercising diplomatic protection, subject to the same requirements 

of international claims law governing claims by States. For example, Aron Broches, the ICSID 

Convention's principal drafter, explained that, "by giving the investor the right to go before a 

tribunal, and by providing for the surrender of the right of diplomatic protection [in Article 27 of 

the ICSID Convention], the Convention implied that the investor would have the same right as 

his Government would have had if it had come before the tribunal on his behalf." 2 ICSID, 

Documents Concerning the Origin and the Formulation of the Convention 259 (1968) (emphasis 

added). 105 

105 See also id. at 241 (principal aspect of Convention was "firstly, recognition of the 

principle that a non-State party, an investor, might have direct access, in his own name and 

without requiring the espousal of his cause by his national government, to a State party before an 


92

In particular, Mr. Broches expressly disavowed the notion that the local remedies rule 

was inappropriate in investor-State arbitration: 

while the Convention implied a recognition that local courts were not necessarily 

the final forum for the settlement of disputes between a State and a foreign 

investor, it did not imply that local remedies could not play a major role. When 

parties consented to arbitration, they would be free to stipulate either that local 

remedies might be pursued in lieu of arbitration, or that local remedies must first 

be exhausted before the dispute could be submitted to arbitration under the 

Convention. 

Id. at 241. 106 As the Report of the World Bank's Executive Directors notes in the sentence 

immediately following that quoted in the Joint Reply (at 168), the ICSID Convention was drafted 

"to make clear that it was not intended thereby to modify the rules of international law regarding 

the exhaustion of local remedies." Report of the Executive Directors on the Convention on the 

Settlement of Investment Disputes between States and Nationals of Other States, ICSID Doc. No. 

2, at 11 (1965). Thus, the history of the ICSID Convention – the instrument at the origin of 

investor-State arbitration as such – does not support claimants' hypothesis as to the irrelevance of 

international claims law in general or the local remedies rule in particular. 

Finally, the cases cited in the Joint Reply (at 167-68) do not support the contrary 

proposition. The decision of the Chilean Claims Commission, established under the Convention 


international forum. States, in signing the Convention would admit that principle, but only the 

principle.") (statement of Mr. Broches) (emphasis added); id. at 420 (defending choice-of-law 

provision of ICSID Convention as appropriate for investor-State arbitration because "experience 

had shown that international arbitral tribunals had not in the past encountered insuperable 

difficulties and had in fact applied international law as if the national government of the 

individual concerned had espoused his case") (statement of Mr. Broches). 

106 See also id. at 431 ("[I]f it were felt that the present draft implied that the prior 

exhaustion of local remedies was undesirable per se the wording would call for reconsideration.") 

(statement of Mr. Broches). 

93

of August 7, 1892, in the Trumbull case does not provide an example of "an arbitration 

agreement [that] guarantees claimants access to international panels," as the Joint Reply 

erroneously contends (at 167). To the contrary, that commission expressly barred any direct 

access by private claimants to proceedings before it. See 2 Moore’s International Arbitrations 

1473-74 (commission directed brief filed by private counsel "to be withdrawn, and ordered that 

in the future the briefs of private counsel be considered by the board only when it appeared that 

they were presented with the approval and upon the responsibility of the agent of the government 

in behalf of whose citizens the claim was filed."). The Trumbull case, like the others cited by 

claimants, simply represent instances early in the formation of the local remedies rule when 

tribunals construed the claims agreements in question to explicitly or implicitly waive recourse to 

local remedies. As the Tribunal has already found, cases where "the relevant treaty waived 

exhaustion" provide no guidance for the issue before this Tribunal as to whether Article 1121 of 

the NAFTA waives the local remedies rule with respect to denial of justice claims. Loewen, 

Decision on Competence, at 65; see also id. at 73 (noting general rule that exhaustion is 

required unless waived by "words making clear an intention to do so" or "express provisions 

which are at variance" with exhaustion requirement). 

A final word is warranted regarding claimants' discussion of the Headquarters Agreement 

case, which the Tribunal asked the parties to discuss. According to claimants, "the Headquarters 

Agreement decision did not rest in any way on the presence, or absence, of an individual alien 

claimant." Joint Reply at 166. As the United States has already shown, however, that is 

precisely what the decision rested on, and that is precisely why the case is irrelevant to these 

proceedings. See Counter-Mem. at 114-17. 

94

If there were any doubt on this point (and international law is so clear that there could not 

be), that doubt was fully resolved earlier this year, when Professor John Dugard, a Special 

Rapporteur to the International Law Commission, wrote specifically that the Headquarters 

Agreement case was an illustration of the principle that the local remedies rule applies to cases 

involving injury to aliens but "does not apply where the claimant State is directly injured by the 

wrongful act of another State." 107 As Professor Dugard observed, the Headquarters Agreement 

case was an example of the latter circumstance in which, because there was no injury to an alien, 

the local remedies rule was inapplicable. 108 The present claim, in contrast, falls squarely in the 

former category in which the injury is to the alien, not to the state directly. As Professor 

Dugard's discussion makes clear, the local remedies rule is presumed to apply in such 

circumstances unless unequivocally waived. 109 And, as Professor Greenwood confirms, "Article 

1121 [of the NAFTA] does not manifest such a clear intention in respect of claims derived from 

107 John Dugard, Second Report on Diplomatic Protection, International Law Commission, 

53d Sess., U.N. Doc.A/CN.4/514 (2001) at 18. 

108 Id. at 27. 

109 Sir Robert Jennings' discussion of investor-state agreements in which the local 

remedies rule is presumed to be waived is similarly inapposite. See Third Jennings Report at 16- 

17. Contrary to Sir Robert's assertion, the ICSID Convention is not applicable here, as this case 

is proceeding under the ICSID's Additional Facility. See ICSID Additional Facility Rules, art. 3 

("[s]ince the proceedings [under the Additional Facility] are outside the jurisdiction of the 

Centre, none of the provisions of the Convention shall be applicable to them or to 

recommendations, awards, or reports which may be rendered therein."). Unlike the 

circumstances envisioned by Sir Robert's comments, the State has not directly agreed with the 

investor to arbitration, as there is no privity between the United States and Loewen. Rather, the 

only agreement (as such) is that among the NAFTA Parties themselves, by which each Party 

agreed with the others to consent to submission of claims to international arbitration under 

specified circumstances and conditions. There is thus no basis for presuming an intent that 

arbitration was to the exclusion of any other remedy, as there is when a State and an investor 

agree directly to arbitration as the exclusive means of resolving disputes between them. 

95

a judicial decision which is open to appeal or other challenge." Second Greenwood Op. at 42; 

see also Counter-Mem. at 111-14. 

VI. THE MISSISSIPPI COURT JUDGMENTS DID NOT VIOLATE ANY OF THE 

SUBSTANTIVE PROVISIONS OF NAFTA CHAPTER ELEVEN 

As the United States fully demonstrated in its Counter-Memorial, claimants have failed to 

sustain their burden of proving that the Mississippi courts breached any of NAFTA Chapter 

Eleven's substantive obligations. See Counter-Mem. at 117-186. Despite the length of their 

Joint Reply, claimants have offered nothing to change this result. Instead, claimants have only 

confirmed that this claim is, in reality, little more than an attempt to obtain the appellate review 

that Loewen elected to forgo in the Mississippi courts, and to seek to hold the United States 

liable for a host of private actions, including Loewen's own. As we have shown, and as we 

confirm below, claimants' efforts find no support in the NAFTA or customary international law 

generally. 

A. The United States Is Not Responsible For The Alleged Acts Of Mr. O'Keefe, 

His Counsel, Or His Witnesses 

It is beyond dispute that, under established rules of international law, states are 

responsible only for official action or inaction, and not for the acts of private individuals. 110 

Despite this settled principle, claimants and their experts devote the vast majority of their 

complaints to the alleged acts of O'Keefe, O'Keefe's counsel, or certain witnesses during the trial 

– including O'Keefe's advertising campaign, the testimony of Mike Espy and Jerry O'Keefe, and 

110 See, e.g., Restatement (Third) of Foreign Relations Law § 207, comment c ("the state is 

not responsible for injuries caused by private persons that result despite [reasonable] police 

protection"); id. at § 711; David J. Bederman, Contributory Fault and State Responsibility, 30 

Va. J. Int'l L. 335, 346 (1990) ("State responsibility is only engaged when an act or omission is 

attributed to a state."). 

96

countless remarks of O'Keefe's counsel – all private individuals for whom the United States is 

not responsible as a matter of law. Indeed, claimants take this effort to new heights in their Joint 

Reply, where they seek to attribute to the United States a lecture given by Willie Gary long after 

the O'Keefe litigation had been settled, in which Mr. Gary delivered a mock closing argument 

different from the one he gave during the trial. See Joint Reply at 35, 66. As Professor 

Greenwood explains, 

[t]he counsel for a private party appearing in civil litigation in a court are not organs of 

the forum State and that State is not responsible for their conduct. I accept that the 

conduct of Judge Graves is imputable to the United States, so that Loewen is entitled to 

argue that responsibility arises for what Loewen characterises (wrongly, in my view) as 

his failure to control the counsel in his court but that is an entirely different matter from 

holding the United States responsible for the behaviour of counsel themselves. It is 

important that the two should not be confused. . . . Unfortunately, they are so confused 

in the Loewen Reply, which at times treats them as interchangeable. 

Second Greenwood Op. at 12-13. 111 Notwithstanding claimants' efforts to blur this important 

distinction, it should go without saying that any responsibility of the United States in this case is 

limited only to those acts or omissions for which it can be held responsible under international 

law. 

B. Claimants Fail To Establish A Violation Of NAFTA Article 1102 

In the face of overwhelming record evidence to the contrary, claimants continue to assert 

that "the O'Keefe litigation was precisely the sort of discriminatory and biased judicial 

proceeding that is condemned by NAFTA Article 1102 . . . ." Joint Reply at 78. Claimants' 

assertion is premised on a fundamental distortion not only of the underlying record of the 

111 See also Jennings & Watts, Oppenheim's International Law at 501 n.13 ("The state is in 

international law not legally responsible for the act [of a private person] itself, but for its own 

failure to comply with obligations incumbent upon it in relation to the acts of the private person: 

those acts are the occasion for the state's responsibility for its own wrongful acts, not the basis of 

its responsibility."). 

97

proceedings, but of Article 1102 itself and the few decisions of NAFTA tribunals that have 

construed the provision. As confirmed below, claimants cannot possibly establish, on the record 

of this case, anything even approaching a violation of NAFTA Article 1102. 

1. The United States Does Not "Concede" A Violation Of Article 1102 

Claimants contend that the United States, through one of its experts, Professor Richard 

Bilder, "concedes" that the Mississippi courts' treatment of Loewen violated NAFTA Article 

1102's requirement of national treatment to investors in like circumstances. See Joint Reply at 

79. According to claimants, the United States has accepted that the Mississippi courts acted as 

they did simply because Loewen was "non-local." Id. at 80. In so arguing, claimants 

fundamentally misconstrue both Professor Bilder's statement and the United States' position, as 

well as the claims at issue in the O'Keefe litigation. 

As Professor Bilder explained, it is true that Loewen's "non-localness" played some role 

in the ultimate verdict, but not, as claimants contend, for its own sake nor in any way prohibited 

by NAFTA Article 1102. Rather, a key issue in the O'Keefe litigation concerned Loewen's 

deliberate misrepresentation of the Riemann funeral homes as "locally owned," a 

misrepresentation intended to mislead consumers of death-care services to believe that they were 

dealing with a trusted member of their local community. The significance of this issue was thus 

not simply that Loewen was "non-local," but that Loewen, which traded in a business for which 

local community connections are of paramount importance, misrepresented itself as "local." As 

Professor Bilder suggests, any death-care company that engaged in such wilful misrepresentation 

would have received the same treatment. See Bilder Opinion at 9-11. 

98

In fact, jurisdictions other than Mississippi – and indeed other than the United States – 

have expressed disapproval of the very practice at issue here. In the United Kingdom, for 

example, a recent report of the U.K. Office of Fair Trading on the "sharp practices in the funerals 

industry" found that "customers can be misled by the continued use of established local trading 

names by funeral parlours that have been bought by large chains." K. Brown, Watchdog 

Undertakes to Clarify Cost of Dying, Financial Times (July 27, 2001) (citing SCI and Loewen as 

examples) (U.S. App. at 1346). Similarly, after SCI (Loewen's principal competitor) launched an 

aggressive acquisitions campaign in England in 1995, the U.K. Monopolies and Mergers 

Commission ordered the company "to disclose publicly its ownership of funeral businesses it 

took over." B. Hills, Foreign Bodies, Sydney Morning Herald at 1 (Aug. 2, 1997) (U.S. App. at 

1334-37) (noting the mounting criticism of similar practices in Australia). 112 

One particularly helpful illustration of this point is an investigation into the practices of 

the death-care consolidators that aired on February 1, 1998, on the CBS television news program 

"60 Minutes," a highly-respected television news program in the United States. That 

investigation, entitled "The High Cost of Dying," exposed the consolidators' broad practice of 

misrepresenting the ownership of their funeral homes as "local" in order to deceive consumers, as 

well as their practice of dramatically raising prices on death-care services. See U.S. App. at 

1265-74. Significantly, although the investigation is very critical of these practices, no mention 

of nationality is made at any point in the program; indeed, the primary focus of the investigation 

is SCI, an American company. The United States has supplied the Tribunal with copies of a 

112 See also, e.g., U.S. App. at 0065, 0072 (New York commission recommending 

requirements of disclosure of ownership of funeral homes to prevent consumer deception); id. 

(noting that Massachusetts law requires disclosure of funeral home ownership). 

99

videotape of the "60 Minutes" investigation, along with a transcript of the program. See U.S. 

App. at 1265-73, 1274. We encourage the Tribunal to view this videotape, as it illuminates some 

of the same practices at issue in the O'Keefe litigation and, of at least equal importance, makes 

clear that nationality had nothing to do with the O'Keefe jury's understandable disapproval of 

Loewen's conduct. 

2. Loewen and O'Keefe Were Not "In Like Circumstances" 

Claimants do not dispute that the national treatment obligation under NAFTA Article 

1102 is only a relative one, and that it is their burden to establish that they and/or their 

investments, when compared to U.S. investors or investments in like circumstances, received 

treatment that was less favorable. Claimants also acknowledge that this determination "must 

depend on all the circumstances of each case." Id. (quoting S.D. Myers, Inc. (U.S.) v. Canada, 

(Partial Award) (Nov. 13, 2000) at 244); see also Pope & Talbot, Inc. v. Canada, (Award on the 

Merits, Phase 2) (Apr. 10, 2001) at 75 ("By their very nature, 'circumstances' are context 

dependent and have no unalterable meaning across the spectrum of fact situations."). Claimants 

then proceed to ignore this very limitation and purport to derive a general rule, from the findings 

of other tribunals involving entirely different circumstances, that "all investors or investments 

that compete in the same business or economic sector" are necessarily in "like circumstances" in 

all cases and that, therefore, Loewen and O'Keefe were in "like circumstances" for purposes of 

NAFTA Article 1102. See Joint Reply at 84-85. Claimants' position is absurd on its face. 

According to claimants' view, any civil lawsuit between competitors in the same business 

would involve investors in "like circumstances" with respect to their treatment by the court in 

which their case was being tried. If this were correct, then any civil lawsuit where the parties are 

100

of different nationalities – "litigation competitors," as claimants call them; see Joint Reply at 85- 

86 – would necessarily result in a violation of NAFTA Article 1102 whenever the foreign party 

loses. The losing foreign party in every such lawsuit would thus claim that it was accorded less 

favorable treatment than its domestic rival, as the prevailing party, by definition, would have 

received more favorable treatment by the court. Claimants' positing of O'Keefe as the relevant 

investor for purposes of comparison – which ignores the "circumstances" (i.e., civil litigation) in 

which the investors must be "like" – is readily seen as frivolous. 113 

As the United States has suggested, the only meaningful comparison under the 

circumstances of this case is to inquire how any company in Loewen's situation (e.g., a death-care 

company accused of bad faith and monopolistic practices on a broad scale) would have fared in 

the same litigation, regardless of its nationality. In other words, what would have been the result 

of the litigation if Loewen, all other things being equal, had been a Mississippi corporation? 

Former Justice Blass puts the point succinctly: "Any Mississippi corporation in Loewen's shoes, 

owning what [Loewen] owned, trying to dominate the market, to control the business of death, 

would have faced the same or a similar outcome." Blass Statement at 5. 114 

113 Both Pope & Talbot and the S.D. Myers tribunal – the purported sources for claimants' 

proposed "general rule" – involved measures of general application and thus were both very 

different from the dispute before this Tribunal. As far as the United States is aware, no 

international tribunal has ever examined a claim of a violation of a national treatment obligation 

in the context of a civil jury award. 

114 According to claimants, it is not enough that Loewen received exactly the same 

treatment that any investor from any other state of the United States, or even from another 

location in Mississippi, would have received. See Joint Reply at 80 (quoting Bilder Op. at 8). 

Rather, claimants contend that Loewen was entitled to the same treatment that a similarly 

situated "local" investor would have received. But claimants once again misconstrue the claims 

at issue in the case. As already noted, one important aspect of the case involved Loewen's 

misrepresentation of its funeral homes as "locally owned." A "local investor," by definition, 


101

3. Loewen Did Not Receive Treatment "Less Favorable" 

As the United States has already shown, the record of the O'Keefe litigation, contrary to 

claimants' grossly distorted presentation of it, provides no basis for the allegation that the jury or 

the Mississippi courts were motivated in any way by an "anti-Canadian" bias. See Counter-Mem. 

at 21-25; supra at 8-14. Claimants make no claim (nor could they) that Loewen was denied the 

same broad array of procedural rights and protective mechanisms afforded to all litigants, 

regardless of nationality, to present their cases as they see fit. Cf. Landsman Statement at 16-33. 

And, as the international disapproval of certain practices in the death-care industry suggests (see 

supra at 99; Counter-Mem. at 141), the outcome of the litigation would have been no different 

had Loewen been a Mississippi corporation. In short, Mr. Blass is entirely correct to conclude 

that, "if Loewen had been a Jackson, Mississippi, company, the result would have been the 

same." Blass Statement at 15. 

At bottom, the claim of "unfavorable treatment" in this case is not based on the actions of 

the Mississippi courts – indeed, claimants' expert, Sir Ian Sinclair, concedes that there are no 

"demonstrable and significant indications of judicial bias on the basis of nationality in this 

particular case . . . ." Sinclair Op. at 13. Rather, claimants allege only that O'Keefe's counsel 


could not be accused of such a misrepresentation, as the representation would be accurate in such 

a case. Thus, with respect to the treatment of the issue of Loewen's misrepresentation in this 

respect, there can be no "local" investor in "like circumstances." See, e.g., Joseph de Pencier, 

17 th Annual Symposium Investment, Sovereignty, and Justice: Arbitration Under NAFTA 

Chapter Eleven, 23 Hastings Int’l & Comp. L. Rev. 409, 413 (2000) ("If there are no domestic 

investors with which to compare a foreign investor, how can the foreign investor receive 'less 

favorable treatment' than, let alone be 'in like circumstances' with, domestic investors?"). In any 

event, under claimants' strict definition of what constitutes a "local" investor, see Joint Reply at 

82, O'Keefe was no more "local" to the Hinds County jury than was Loewen, as O'Keefe is from 

the Gulf Coast region of Mississippi, not from Jackson. 

102

appealed to nationalistic biases by supposedly "favoring" Loewen's local co-defendants, John 

Wright and David Riemann. See Joint Reply at 17-19. Whether O'Keefe's counsel did so or not 

is, of course, irrelevant because, as already noted (supra at 96-97), the United States is not 

responsible under the NAFTA or international law for the actions of O'Keefe's counsel, but 

instead only for the actions or inactions of the Mississippi courts. 115 As the record makes clear, 

the courts treated all of the defendants equally and made no distinction – whether in the 

proceedings or in the ultimate judgments – among the "local" Mississippi defendants, LGII or 

their Canadian parent. In fact, as Loewen itself acknowledged in its post-trial investigation, 

"John Wright, despite plaintiff counsel's repeated references to his being a 'fine man[,]' did not 

appear to be so highly regarded by the jury." U.S. App. at 1132. 116 

In any event, claimants' suggestion that O'Keefe's counsel somehow favored the local co- 

defendants (John Wright and the Riemanns), even if relevant, once again misconstrues the 

O'Keefe record and the claims at issue in the case. To the extent that O'Keefe attempted to put 

John Wright or the Riemanns in a sympathetic light, the record makes clear that O'Keefe did so 

not for the purpose of inflaming any alleged "nationalistic" or "local" bias on the part of the jury, 

but rather to address several points in dispute in the trial. 

115 The practical goals of litigation further illustrate why claimants' effort to derive an 

"unfavorable treatment" claim from the actions of O'Keefe's counsel is baseless. In any civil 

litigation, it is the role of counsel to advocate zealously on behalf of his client, and specifically 

not to do the same for the opposing party. 

116 The reported comments of the interviewed jurors confirm this point. See e.g., U.S. 

App. at 1132 ("The Riemanns were generally regarded as participating in the trial to the extent 

necessary for preservation of their relationship with the Loewen Group."); id. at 1164 ("The 

Wright sale of pre-need insurance was wrong . . . ."); id. at 1165 ("David Riemann was a 

dunderhead."). 

103

For example, one of the central issues in the case was Loewen's broad practice of 

misconduct in connection with its acquisition of smaller death-care companies. As O'Keefe 

showed at trial, Loewen's mistreatment of both John Wright and the Riemanns was an illustration 

of this very practice. Most notable in this respect were the "Riemann letters," which revealed 

that Loewen, after it had acquired the Riemann companies, badly mistreated the Riemann family 

and divested them of meaningful control of their businesses, leading the Riemanns to (privately) 

reconsider their affiliation with Loewen. See U.S. App. at 0962-69. As claimants' own source 

observes, "the jury reasoned that if Loewen treated its own partners that way, why would O'Keefe 

have fared any better?" A3101. 

Claimants similarly misconstrue the significance of O'Keefe's counsel's description of 

John Wright as "an honorable man" who "told you the truth." Joint Reply at 18. Among the 

"truths" to which O'Keefe's counsel was referring was Mr. Wright's testimony that Loewen raised 

prices on the services of his funeral home immediately after Mr. Wright had sold it to Loewen, 

without Wright's knowledge or consultation, and that Loewen did so with every other acquisition 

of which Mr. Wright was aware. See Tr. 3072-73; 5548; see also Counter-Mem. at 46-47. 

O'Keefe's counsel was thus not attempting to appeal to any alleged "local" bias through his 

positive descriptions of Mr. Wright, but was instead reinforcing the point that Loewen 

consistently mistreated smaller companies – including Loewen's own so-called "regional 

partners" – in its aggressive pursuit of greater profits. Again, we can look to claimants' own 

source to explain the point, which had nothing to do with an appeal to any improper bias: 

104

"[w]hile preaching homespun values and local control, Loewen's actions showed something 

else." A3101. 117 

John Wright also served to rebut Loewen's allegation that O'Keefe had not been 

forthcoming in his dealings with Loewen, an allegation that Loewen had made a centerpiece of 

its defense. See supra at 20-23. On cross-examination, Mr. Wright testified that he had known 

Jerry O'Keefe for many years and believed O'Keefe was an honorable man who always kept his 

word. See Tr. 3065-67. One of O'Keefe's counsel's obvious goals in its favorable treatment of 

Mr. Wright, therefore, was to reinforce this helpful testimony, and not to appeal to any "local" 

bias. 118 

In short, there is no basis for claimants' theory that the O'Keefe litigation, whether in 

whole or in part, "force[d] Loewen to incur a $175 million liability because it was Canadian." 

117 To support their theory of O'Keefe's "favoring" the local defendants, claimants allege 

that witness Walter Blessey "was clearly coached to say that 'the O'Keefe companies and Gulf 

National have no quarrel with John Wright and have no quarrel with David Riemann. . . . The 

actions were taken by Mr. Ray Loewen.'" Joint Reply at 18 (quotations and ellipses in original). 

This allegation is yet another blatant distortion of the record, for the quoted language preceding 

claimants' ellipses, which claimants attribute to a "coached" Mr. Blessey, was in fact uttered by 

Loewen's counsel, not by Mr. Blessey. See Tr. at 721. 

118 O'Keefe's positive treatment of Mr. Wright also served other legitimate, strategic goals. 

For example, at trial, Loewen made much of the fact that O'Keefe, before Loewen's acquisition of 

the Wright & Ferguson funeral home in 1990, had not challenged Mr. Wright's selling of 

insurance policies from another insurance company, despite the existence of an exclusive 

contract between O'Keefe and Wright & Ferguson. Indeed, claimants' expert Armis Hawkins 

seems to believe that Loewen's point was significant. See Hawkins Statement at 18. Among 

O'Keefe's responses to the point was to show that Jerry O'Keefe had granted Wright a concession 

from the contract as part of the warm and cordial business relationship that had existed between 

the two men for decades. See, e.g., Tr. 713-15. The positive portrayal of Mr. Wright thus served 

to explain away one of Loewen's principal defenses to its own subsequent breach of the Wright & 

Ferguson contract, as well as to illustrate the deleterious effects that Loewen's business practices 

introduced into an otherwise peaceful business climate. Neither strategic purpose had anything 

to do with an alleged "anti-Canadian" or "pro-local" bias. 

105

Joint Reply at 78. As former Justice Blass observes, "[i]t is simply not true to say Loewen was 

treated differently as a result of its Canadian ownership, or the class or race of its owners." Blass 

Statement at 5. 

C. Claimants Fail To Establish A Violation Of NAFTA Article 1105 

As they did in their Memorials, claimants devote the bulk of their most recent submission 

to their claim that the Mississippi courts violated NAFTA Article 1105. See Joint Reply at 92- 

152. As before, however, claimants' entire argument proceeds on the basis of several 

fundamental errors of both fact and law. As the United States has demonstrated (see Counter- 

Mem. at 124-180), and as we show further below, claimants cannot show on the facts of this case 

that the Mississippi courts breached any obligation imposed by Article 1105. 

1. The Availability Of Further Appeals Defeats Claimants' 

Article 1105 Claim As A Matter Of Law 

The United States has shown that the substantive obligations of customary international 

law, as incorporated in NAFTA Article 1105, cannot be breached by decisions of domestic courts 

from which effective appeals were available. See Counter-Mem. at 124-30. The United States 

also has shown that this is so regardless of whether the local remedies rule has been waived. See 

id; supra at 88-90. Claimants and at least one of their experts continue to disagree, charging that 

the United States is "simply making . . . up" this substantive principle of state responsibility. 

Joint Reply at 132 & n.27. 

In fact, however, despite some earlier academic confusion (from which claimants appear 

to suffer still) regarding the relationship between the local remedies rule and substantive rules of 

state responsibility (see supra at 88-90), it is now a well-established part of State practice that a 

lower court decision from which an effective appeal is available cannot constitute a denial of 

106

justice, irrespective of the local remedies rule. As the United States explained in its comments 

on the most recent ILC Draft Articles on State Responsibility, 

[t]he lower court decision, in and of itself, may be attributable to the State 

pursuant to article 4 [of the ILC Draft]; whether it constitutes, in and of itself, an 

internationally wrongful act is a separate question, as recognized in article 2. 

Except in extraordinary circumstances, there is no question of breach of an 

international obligation until the lower court decision becomes the final 

expression of the court system as a whole, i.e. until there has been a decision of 

the court of last resort available in the case. 119 

The United States is hardly alone in this view. For example, in its 1998 comments to the 

ILC Draft Articles on State Responsibility, the United Kingdom observed that "the duty to 

provide a fair and efficient system of justice" is not breached by a lower court from which an 

effective appeal was available: "Corruption in an inferior court would not violate that obligation 

if redress were speedily available in a higher court." 120 The United Kingdom emphasized that 

this substantive principle of state responsibility, which requires exhaustion of all "speedily 

available" appeals before a denial of justice could be found, "should be clearly distinguished" 

from the local remedies rule, which is strictly procedural in character. 121 

As Professor Greenwood notes, this comment of the United Kingdom, which is fully 

consistent with the view of the United States, 

is directly in point in the present case. It constitutes State practice, only three 

years old, which clearly indicates that the substantive obligation imposed on the 

119 Draft Articles on State Responsibility, Comments and Observations Received from 

Governments, International Law Commission, 53d Sess., U.N. Doc. A/CN.4/515 (2001) at 26 

(comments of the United States on Draft Article 15). 

120 Draft Articles on State Responsibility, Comments and Observations Received from 

Governments, International Law Commission, 50th Sess., U.N. Doc. A/CN.4/488 (1998) at 68- 

69 (comments of the United Kingdom on Draft Article 21) (emphasis added). 

121 Id. 

107

State is to provide a fair and efficient system of justice and that the decision of a 

lower court (even if it is not merely wrong but "corrupt") does not put the State in 

breach of that obligation if the State has provided the means within that system 

whereby that decision can be corrected. 

Second Greenwood Op. at 83. The comment also confirms that the requirement of exhaustion 

of appeals in this context is not in any way an aspect of the local remedies rule, but is instead a 

substantive element of any claim for a breach of the obligation. 122 

In view of these and other authorities to the same effect (see Second Greenwood Op. at 

82-88), 123 claimants' charge that the United States is "simply making it up" is ironic, for it is 

122 Claimants' reference to the Pirocaco case, which claimants accuse the United States of 

"eliding," illustrates the United Kingdom's point as well as claimants' confusion with respect to 

it. See Joint Reply at 131 n.26. The Pirocaco tribunal's recognition that "[a] litigant must 

exhaust his remedies before it can be said that he has had that final judicial determination of his 

case which the law affords" was not – and could not have been – an expression of the local 

remedies rule, as that rule was not applicable to the claims agreement at issue. See U.S. 

Jurisdictional Resp. at 24 & n.8. Rather, the Pirocaco tribunal recognized, as a substantive 

matter, that, "[a]s a general rule, a denial of justice can be predicated only on a decision of a court 

of last resort." Id. (quoting Pirocaco at 599). As the United Kingdom explained in its 1996 

comments on the ILC draft articles, "[t]he recourse to 'local remedies' is in this context not at all 

of the same nature as recourse to local remedies as a procedural precondition" for presentation of 

a claim on the international plane. See UK Materials on International Law, 69 B.Y.I.L. (1998) 

558-59 (quoted in Second Greenwood Op. at 53). 

123 See also, e.g., Crawford, Special Rapporteur, Second Report on State Responsibility, 

International Law Commission, 51st Sess., U.N. Doc. A/CN.4/498 (1999) at 75 ("systematic 

considerations enter into the question of breach [of the obligation to provide a fair and efficient 

system of justice], and an aberrant decision by an official lower in the heirarchy, which is 

capable of being reconsidered, does not itself amount to an unlawful act.") (emphasis added); 

Second Greenwood Op. at 62 (discussing 1986 Oil Field of Texas decision of the Iran-U.S. 

Claims Tribunal). The late Judge Jiménez de Aréchaga, a former President of the International 

Court of Justice, agreed that a manifestly unjust decision of a domestic court had to be "a 

decision of a court of last resort, all remedies having been exhausted," before it could be said to 

be in breach of an international obligation. E. Jiménez de Aréchaga, International Law in the 

Past Third of a Century at 282 (quoted in Second Greenwood Op. at 86). Judge Jiménez de 

Aréchaga made clear that this requirement is wholly independent of the local remedies rule, and 

is instead a recognition that "States provide in their judicial organization remedies designed to 

correct the natural fallibility of its judges." Id. 

108

claimants, not the United States, who are without legal basis for their position. As Professor 

Greenwood observes, "neither Sir Robert nor Sir Ian has produced a single instance of an arbitral 

decision given by any international tribunal in which a State has been held responsible for the 

decision of a lower court when there was available within the legal system of that State a means 

by which that decision could effectively be challenged." Second Greenwood Op. at 89. 124 

In fact, despite the professed agreement of claimants' experts, it appears that even Sir Ian 

does not support the view expressed by claimants and Sir Robert in this regard. Notwithstanding 

the tenor of his opinion, Sir Ian does not dispute the general point that, "[s]o long as the system 

itself provides a sufficient guarantee of such treatment [in accordance with the customary 

international minimum standard], the State will not be in violation of its international obligation 

merely because a trial court gives a defective decision which can be corrected on appeal." 

Sinclair Op. at 33 (quoting Professor Greenwood). Sir Ian's response is not that the point is 

incorrect, but only that there has been a "failure of the system" where, in a given case, the 

claimant has no reasonable means of challenging the defective decision – in other words, where 

an appeal would be futile. Id. This, of course, is precisely the United States' point: because 

Loewen's means of appeal were not manifestly ineffective or obviously futile, the Mississippi 

judgments cannot be said to have constituted a denial of justice. 125 

124 Although claimants purport to have found authority for their contrary view, claimants 

have simply misunderstood their own citations. As Professor Greenwood explains, "[n]either 

Oppenheim, nor Brownlie, nor Amerasinghe's detailed study of the [local remedies] rule, contain 

a statement in such sweeping terms and the older statements quoted by Loewen are either 

misrepresented or relate to cases in which the decisions of the lower courts were taken as proof 

that there would be no effective remedies in the higher courts, which is a different point 

altogether." Second Greenwood Op. at 32 (footnotes omitted). 

125 As Professor Greenwood explains, Sir Robert's and Sir Ian's differences of opinion are 


109


fundamental in this respect. Unlike Sir Robert, Sir Ian views the actions of the Mississippi 

courts (correctly) as "a single complex act" rather than as a series of discrete acts, each giving 

rise to state responsibility. See Second Greenwood Op. at 17-19 (quoting Sinclair Op. at 22). 

But, as Professor Greenwood points out, 

Id. at 19. 

Although claimants contend that this Tribunal has already "foreclosed" consideration of 

this issue in its interim decision on competence, the United States does not believe that this is so, 

as the Tribunal has thus far addressed only the admissibility of the claims, not their merits (and, 

even then, did not decide the issue of admissibility but joined it to the merits). See Counter- 

Mem. at 108. 126 As Professor Greenwood notes, "the decision which Loewen asserts the 

Tribunal took would clearly have been wrong in international law." Second Greenwood Op. at 

57. The Tribunal should thus reject claimants' invitation to err on the merits of this claim by 

"hold[ing] – for the first time – that a State is in breach of its treaty obligations as the result of a 

court decision which is open to challenge," for there is "nothing in th[e] terms [of NAFTA 

[i]f what is in issue, as Sir Ian suggests, is a single complex act, involving a 

number of actions by different parts of the judicial system, then there is no reason 

why that act should be treated as complete when other steps can still be taken 

within the judicial system the effect of which might be dramatically to alter the 

nature of that complex act. 

126 The Tribunal's reliance on the ILC Draft Articles on State Responsibility for its 

discussion of "judicial finality" and the local remedies rule further indicates that the Tribunal 

must not have decided, as a substantive matter of state responsibility, that a lower court decision 

from which effective appeal was available could constitute a denial of justice. See Loewen, 

Decision on Competence at 67, 70. The ILC has long made clear that its Draft Articles have 

addressed only "secondary" rules of state responsibility (e.g., rules of attribution, admissibility, 

and remedies) and not the "primary" substantive rules of responsibility (e.g., the specific content 

of an internationally wrongful act). See, e.g., Report of the International Law Commission on the 

Work of Its Fifty-Second Session, U.N. GAOR, 55th Sess., Supp. No. 10, at 60, U.N. Doc. 

A/55/10 (2000) ("the distinction between primary and secondary rules" has "long been the plinth 

on which the entire drafting exercise rested."); Dugard, Second Report on Diplomatic Protection, 

International Law Commission, 53d Sess., U.N. Doc.A/CN.4/514 (2001) at 7-10 & n.15. 

110

Article 1105] to suggest a departure from a practice which was already firmly grounded both in 

authority and common sense." Id. at 91 (emphasis added). 

2. Claimants Misstate The Liability Standard Under Article 1105 

One of claimants' more fundamental errors in this case is their incorrect assumption, 

wholeheartedly embraced by claimants' international law experts, that the obligations imposed by 

NAFTA Article 1105 extend "'far beyond' the minimum protections accorded to foreign 

investments under customary international law." Joint Reply at 133 (quotation omitted); see 

also, e.g., Third Jennings Opinion at 26 ("the gravamen of the present case cannot be denial of 

justice according to customary international law"). As the United States submitted to the 

Tribunal on July 31, 2001, the Free Trade Commission, established under NAFTA Article 2001, 

has now issued a binding interpretation of NAFTA Article 1105 that conclusively rejects the 

fundamental premise of claimants' analysis and that of their experts concerning the extent of the 

United States' obligations under Article 1105. 

The Free Trade Commission's interpretation confirms that "Article 1105(1) prescribes the 

customary international law minimum standard of treatment of aliens as the minimum standard 

of treatment to be afforded to investments of investors of another Party." FTC Interpretation of 

July 31, 2001 at B(1) (emphasis added). Contrary to claimants' interpretation, "[t]he concepts 

of 'fair and equitable treatment' and 'full protection and security' do not require treatment in 

addition to or beyond that which is required by the customary international law minimum 

standard of treatment of aliens." Id. at B(2). The Free Trade Commission's interpretation, 

which is binding on this and other NAFTA Chapter Eleven tribunals (see NAFTA art. 1131(2)), 

thus confirms that, contrary to claimants' contention, treatment in accordance with the customary 

111

international law minimum standard is not merely "one of the protections afforded to investments 

under NAFTA Article 1105" (Joint Reply at 92 (emphasis added)), but it is the only protection 

afforded by Article 1105(1). 

Claimants appear to concede that the customary international minimum standard, as 

applicable to the circumstances of this case, is the "denial of justice" standard. See Joint Reply at 

77. They argue, however, that the standard for a "denial of justice" is not so "extreme" as the 

United States contends, suggesting that denials of justice arising out of domestic judicial 

proceedings are even "frequent" or "common" occurrences. See id. at 96-97 (quoting Freeman, 

International Responsibility of States for Denial of Justice 71-72 (1938), and Charles C. Hyde, 

International Law Chiefly as Interpreted and Applied by the United States 731-32 (2d ed. 

1945)). 127 If this were so, however, then one might expect that claimants would be able to find 

127 Claimants misconstrue even their own authorities, which accepted a high threshold for 

denial of justice, and advocated the following standard: "clear proof of serious error plus 

additional factors in the nature of malice toward the alien . . . or, stated negatively, the absence of 

good faith . . . ." Freeman, International Responsibility of States for Denial of Justice, at 330 

(emphasis added). "Where it is not possible to establish the influence of corruption, bias or 

malice upon the outcome of the proceedings . . . the State's responsibility may still be engaged 

where the decision is so erroneous that no court which was composed of competent jurists could 

honestly have arrived at such a decision; or, as De Visscher has put it, 'where the judge's 

défaillance attains such a degree that one can no longer explain the sentence rendered by any 

factual consideration or by any valid legal reason.'" Id. at 330-31 (emphasis in original). 

Similarly, Hyde's treatise characterized the standard in similar terms, citing as examples of 

"palpable injustice" by the judicial system the "application to an alien of local laws sharply at 

variance with treaty stipulations," instances of "perversion of the judicial system," and trials 

"conducted with gross injustice." Hyde, International Law, at 731-32. We also note that 

claimants' citation to Freeman as published in 1970, rather than 1938, appears to be a 

typographical error. See Joint Reply at 96. 

112

more than the handful of "denial of justice" cases that they have identified in this proceeding, the 

most recent of which dates from the first half of the last century. 128 

In fact, even claimants' own international law experts do not support claimants in this 

contention. To the contrary, Sir Robert Jennings acknowledges that "the cases show that 

generally speaking it has been applied when the treatment of an alien has been outrageous and so 

without any doubt a breach of a minimum standard." First Jennings Op. at 17. See also Third 

Jennings Opinion at 27 (assuming that "the traditional minimum standard" requires a showing of 

"outrageous treatment"); id. (even if Article 1105 were not limited to the customary international 

law minimum, "[i]t may . . . readily be agreed that no court or tribunal will lightly or readily find 

the judicial acts of a respondent State in breach of the requirements of international law."). 129 

128 Claimants' only modern case is Azinian et al. v. Mexico, 14 ICSID Rev. - Foreign Inv. 

L. J. at 568, a NAFTA Chapter Eleven award that, as this Tribunal has already recognized, was 

not a denial of justice case as "it involved no challenge to the decisions of the Mexican courts." 

Loewen, Decision on Competence at 49. In any event, although the Azinian tribunal 

considered denial of justice principles in dictum, it recognized that the denial of justice standard 

is very demanding. See Azinian at 105 (claimants bear the burden of proving "that the 

evidence for [the challenged court judgments] was so insubstantial, or so bereft of a basis in law, 

that the judgments were in effect arbitrary or malicious . . . ."). 

129 Claimants suggest that Sir Robert Jennings and Sir Ian Sinclair endorse their view that 

"[t]he United States' 'extreme' formulations of the denial-of-justice standard are vestiges of a past 

in which only States could protect the rights of aliens through the extreme process of diplomatic 

espousal." Joint Reply at 95. Their experts' actual statements, however, which claimants quote 

out of context, say nothing of the sort. See Second Greenwood Op. at 99 ("the testimony of 

Loewen's international law experts does not support the conclusions for which it is quoted at this 

part of the Reply."). Rather, Sir Robert and Sir Ian assert (wrongly, as Professor Greenwood 

explains) only that international law has changed with respect to the local remedies rule in denial 

of justice cases; they do not dispute any other aspect of the traditional denial of justice standard. 

See supra at 91-96; Second Greenwood Op. at 99 ("What constitutes a denial of justice to an 

alien is exactly the same irrespective of whether that alien complains of that denial itself or has a 

claim brought on its behalf[,] and none of the authorities cited by Loewen even hints 

otherwise."). 

113

Claimants' other sources confirm that a charge of denial of justice is an extreme one that is met 

only in the rarest of circumstances. 130 

As Professor Greenwood explains, "[c]ontrary to what is said by Loewen, international 

law sets a high threshold in this respect, recognizing a considerable 'margin of appreciation' on 

the part of national courts. Thus, the awards and texts make clear that error on the part of the 

national court is not enough, what is required is 'manifest injustice' or 'gross unfairness' . . . 

'flagrant and inexcusable violation' . . . or 'palpable violation' in which 'bad faith not judicial error 

seems to be the heart of the matter.'" Second Greenwood Op. at 94 (citations omitted). 131 

130 See, e.g., Edwin M. Borchard, The Diplomatic Protection of Citizens Abroad at 339-40 

(Kraus Reprint Co. 1970) (1915) (describing as denials of justice "irregularities in the course of 

judicial proceedings" that are "sufficiently gross so as to become a denial of justice" as well as 

"grossly unfair or notoriously unjust" decisions); Clyde Eagleton, The Responsibility of States in 

International Law 114 (1928) (citing "manifest injustice" as the international standard of 

responsibility of the domestic judicial system); A.O. Adede, "A Fresh Look at the Meaning of the 

Doctrine of Denial of Justice under International Law," 14 Can. Y.B. Int ’l Law 73, 93 (1976) 

("The alien sustains a heavy burden of proving that there was undoubted mistake of substantive 

or procedural law leading to an adverse decision operating to his prejudice."); J.W. Garner, 

"International Responsibility of States for Judgments of Courts and Verdicts of Juries Amounting 

to Denial of Justice," 1929 Brit.Y.B. Int’l L. 181, 188 ("manifestly or notoriously unjust" 

decisions); Article 9, Responsibility of States for Damage Done in Their Territory to the Person 

or Property of Foreigners, 23 Am. J. Int’l L.133 (Supp. 1929) at 134 & 189, comment to art. 9 

("1929 Harvard Research Draft") ("It may be said that before an international claim ought to be 

considered well-founded it should be shown that the decision was so palpably unjust that the 

good faith of the court is open to suspicion."); Sohn & Baxter, 1961 Harvard Draft Convention, 

at 98, comment to art. 8(a) ("The alien must sustain a heavy burden of proving that there was an 

undoubted mistake of substantive or procedural law operating to his prejudice."). 

131 The cases cited by claimants are no different. See Joint Reply at 93-97 citing 

Garrison’s Case (U.S. v. Mex.) (1871), 3 Moore’s Int’l Arbitrations 3129, 3129 (1898) (an 

"extreme" case where court "act[ing] with great irregularity" refused Garrison’s appeal "by 

intrigues or unlawful transactions"); see also TLGI Mem. at 75-80 citing Joseph F. Rihani, 

American Mexican Claims Commission (1942), 1948 Am. Mex. Cl. Rep. 254, 257-58 (finding 

decision of the Supreme Court of Justice of Mexico "such a gross and wrongful error as to 

constitute a denial of justice"); The Texas Company, American Mexican Claims Commission 

(1942), 1948 Am. Mex. Cl. Rep. 142, 144 (rejecting claim for failure to show error by Supreme 


114

Where the judicial action in question was mere error, it is not enough that the error had extreme 

consequences for the claimant, because "judicial error, whatever the result of the decision, does 

not give rise to international responsibility on the part of the State." Revised Draft on 

International Responsibility of the State for Injuries Caused in its Territory to the Person or 

Property of Aliens, Article 3(3), reprinted in García-Amador, Recent Codification of the Law of 

State Responsibility for Injuries to Aliens 129, 130 (emphasis added). 132 


Court of Justice of Mexico "resulting in a manifest injustice"); Bronner (U.S.) v. Mexico (1874), 

3 Moore’s Int’l Arbitration 3134, 3134 (1898) (finding court decision was "so unfair as to 

amount to a denial of justice"); Chattin (U.S.) v. Mexico (1927), 4 R.I.A.A. 282, 286-87 

(requiring that injustice committed by judiciary rise to the level of "an outrage, to bad faith, to 

wilful neglect of duty, or to an insufficiency of governmental action recognizable by every 

unbiased man"). Other international cases cited by claimants found denials of justice by courts in 

equally extreme contexts, though very different from the facts of the instant case, e.g., instances 

of detention of foreigners, or failure to prosecute violent crimes against foreigners, not in 

conformity with municipal law. See, e.g., Solomon (U.S.) v. Panama (1933), 6 R.I.A.A. 370, 

372-72 (alien’s arrest that did not comply with Mexican law found to be a "palpable injustice"); 

Dyches (U.S.) v. Mexico (1929), 4 R.I.A.A. 458, 461 ("long and unjustified delay" in obtaining 

justice for the accused alien constituted a denial of justice where delay was contrary to Mexican 

law); Morton (U.S.) v. Mexico (1929), 4 R.I.A.A. 428, 434 (improper prosecution and 

inadequate punishment of alien’s murderer under Mexican law gave rise to international 

liability); Kennedy (U.S.) v. Mexico (1927), 4 R.I.A.A. 194, 198 (misapplication of Mexican law 

in prosecuting crime against alien revealed "negligence in a serious degree" constituting a "denial 

of justice"); Roberts (U.S.) v. Mexico (1926), 4 R.I.A.A. 77, 80 ("unreasonably long detention" 

of alien without a trial found to be contrary to Mexican law and, thus, denial of justice). 

132 Claimants also fail to refute the point that no denial of justice claim can be based on an 

excessive verdict in the absence of bad faith or discrimination on the part of the courts or the 

jury. See Counter-Mem. at 133. Indeed, each of the authorities cited by claimants by way of 

response confirms that discrimination or other bad faith is a prerequisite, even if proof of such 

can be circumstantial in certain cases. See Joint Reply at 127-28. As the United States has 

shown, the proof in this case demonstrates that the O'Keefe jury and the Mississippi courts were 

not motivated by any nationalistic or other improper bias, but instead reached their decisions 

based on their good faith view of the evidence and argument submitted by the parties. See 

Counter-Mem. at 18-19, 133. This fact alone is sufficient to defeat claimants' denial of justice 

claim. 

115

In short, contrary to claimants' unsupported assertions, the customary international 

minimum standard applicable to this case is every bit as "extreme" as the United States has 

indicated. As Judge Tanaka of the International Court of Justice explained in the Barcelona 

Traction case, 

[i]t is an extremely serious matter to make a charge of a denial of justice vis-a-vis a State. 

It involves not only the imputation of a lower international standard to the judiciary of the 

State concerned but a moral condemnation of that judiciary. As a result, the allegation of 

a denial of justice is considered to be a grave charge which States are not inclined to 

make if some other formulation is possible. 

1970 I.C.J. at 160 (separate opinion of Judge Tanaka). 133 

3. The Trial Proceedings 

As the United States has already shown, the record of the O'Keefe trial proceedings fully 

belies claimants' charge that those proceedings were so marred by improper appeals to 

nationality, racial, and class biases as to amount to a "denial of justice" under customary 

international law. See Counter-Mem. at 132-33. In support of their continued allegations to the 

contrary, claimants offer nothing but the same fictional account of the O'Keefe trial that formed 

the basis of their Memorials in the first instance. 

For example, claimants still purport to have identified several points in the voir dire (jury 

selection) proceedings where, it is alleged, the court improperly permitted O'Keefe's counsel to 

appeal to the prospective jurors' alleged improper biases. See Joint Reply at 11, 17, 18, 20, 26, 

27, 35, 38. Although claimants offer the opinion of Mr. John Corlew as support for this 

allegation (see Corlew Statement at 3-4), Mr. Corlew offered a different assessment when he 

133 See also, e.g., Chattin, 4 R.I.A.A. at 295 ("Since this is a case of alleged responsibility 

of Mexico for injustice committed by its judiciary, it is necessary to inquire whether the 

treatment . . . amounts even to an outrage, to bad faith, to wilful neglect of duty, or to an 

insufficiency of governmental action recognizable by every unbiased man."). 

116

privately reported to Loewen (his client) shortly after the trial that "it is not probable that 

reversible error can be found in the jury selection process . . . ." (U.S. App. at 1137). As the 

record makes clear, Mr. Corlew's earlier assessment – made under a somewhat different set of 

incentives than the present case – was the more accurate one. See Counter-Mem. at 33-34, 132; 

U.S. Jurisdictional Resp. at 85. 

Similarly, as summarized in the United States' Counter-Memorial (see Counter-Mem. at 

17-56), and confirmed above (supra at 5-46, 103-06), there can be no serious dispute that Loewen 

was afforded a trial that, at the very least, comported with the minimum standard of justice 

required under customary international law. 134 Although claimants concede that the rules of 

procedure that governed the trial were highly developed and afforded Loewen innumerable 

means of protecting itself and advancing its own interests (see Joint Reply at 126-27), they 

nevertheless contend that the alleged failure of the Mississippi courts to invoke those procedures 

sua sponte for Loewen's benefit constituted a denial of justice. (Id.). But claimants once again 

have it precisely backwards: it was Loewen, not the courts, that was "charged with responsibility 

to initiate the use of these protective mechanisms." Landsman Statement at 18. As the Appeals 

Chamber of the International Criminal Tribunal for the Former Yugoslavia has observed, 

"defence counsel, who alone truly knows the interests of his or her client, is necessarily obliged 

to safeguard those interests at every moment during the trial, in order to avoid prejudice which 

cannot be remedied." Delalic at 635. As the record makes clear, the O'Keefe trial proceedings 

134 See, e.g., Landsman Statement at 16-18; Freeman, International Responsibility of 

States for Denial of Justice, at 267 ("[I]f the alien is granted what an ordinary, reasonable 

international judge would designate as a decent trial, then the duty of judicial protection will 

have been fulfilled despite whatever inconsequential irregularities may have been committed in 

administering the local adjective law.") (emphasis in original). 

117

unquestionably, and at the very least, accorded with the minimum standard of treatment required 

under customary international law. 

4. The Form Of The Verdict 

Although they acknowledge that the court reformed the jury's initial verdict of $260 

million and thus rendered the initial form of the verdict irrelevant, claimants nevertheless 

contend that the initial verdict (rather than the reformed verdict) worked a denial of justice both 

in form and in substance. See Joint Reply at 57-60. The United States readily agrees that the 

jury's response to the initial verdict form – which Loewen itself drafted – was confused, insofar 

as the award included punitive damages and assigned separate amounts to each of several counts 

relating to the same breaches of contract (which the form, as written, apparently led the jurors to 

believe was required). 135 But claimants' complaints about this confusion are irrelevant, as Judge 

Graves rejected that verdict form in favor of a far clearer expression of the jury's intent, which 

did not suffer from these flaws. See Tr. 5739-53. 

As the record makes clear, the jury foreman's note, which unambiguously indicated the 

jury's intention to award $100 million in compensatory damages separate from an award of $160 

million in punitive damages, bore no relation to the confused breakdown of damages in Loewen's 

verdict form. Instead, it clearly expressed a general verdict of $100 million compensatory 

damages without any breakdown at all, whether as to individual claims or types of compensatory 

135 The party that proposed the verdict form may generally not be heard to complain of 

flaws in the form. See, e.g., Grove Holding Corp. v. First Wis. Nat'l Bank, 12 F. Supp.2d 885, 

899 (E.D. Wis. 1998) ("If the party presently complaining participated in drafting the form that 

was ultimately submitted to the jury and requested the portion of the verdict of which it now 

complains, waiver [of the right to object after submission] likely will be found."). O'Keefe 

objected on several occasions to Loewen's proposed form of verdict, including on grounds that 

the form was unnecessarily complex, and offered instead a more general form of verdict. See, 

e.g., Tr. 5472-74, 5503-05. 

118

damages. 136 Because the initial verdict form was never accepted by the court, any confusion 

reflected in that form was of no consequence to the case and, thus, could not have denied justice 

to Loewen. 137 

Although claimants complain that Judge Graves had no authority to reject the initial 

verdict form in favor of the general verdict as expressed in the foreman's note, the United States 

has shown that Judge Graves' authority to do so is well-established under Mississippi law. See 

Counter-Mem. at 52-53. It is of no consequence that the jury's actual intent was clarified in the 

note rather than on the verdict form itself because no special verdict form was required. See 

Miss. Code Ann. § 11-7-157. 138 Indeed, claimants' expert Armis Hawkins, who now 

characterizes Judge Graves' decision to reform the verdict as "bizarre" (see Hawkins Statement at 

19), has himself recognized the court's authority in this respect. See, e.g., Singleton v. State, 495 

So.2d 14, 16 (Miss. 1986) (Hawkins, J.) ("Courts do have the power to correct a verdict 

obviously irregular and to make it conform to a clear and unequivocal jury intent."). 

136 Mississippi law provides for three types of verdicts: (a) general verdicts, (b) special 

verdicts, and (c) general verdicts accompanied by answers to interrogatories. See Miss. R. Civ. 

P. 49. The determination of which verdict to submit to the jury is within the court's discretion. 

Id. & cmt. A general verdict, which does not break down the award by claims, is presumptively 

to be applied, subject to the court's exercise of discretion to employ a different verdict form. Id. 

137 The jury foreman's note made clear that the jury did not intend to double-count various 

types of damages, as claimants allege was evident from the initial verdict form. Instead, the jury 

intended simply to award $100 million in compensatory damages generally and, as they believed 

was required by the initial verdict form, to give "weighted values" of that amount to each of the 

nine items specified in the form. See A659. Claimants' expert Armis Hawkins seems to agree 

that this is how the jury approached the initial verdict form. See Hawkins Statement at 19. 

138 The form that Loewen drafted for submission to the jury was not a "special verdict" 

form, as claimants assert, but a set of interrogatories to accompany a general verdict. See A650; 

Miss. R. Civ. P. 49(c). 

119

In fact, Judge Graves was obligated to find a way to give effect to the jury's intent and to 

avoid a mistrial, as "[t]he trial court [is] under the duty to see that loss of time and the expense of 

the trial should not be nullified by failure [of the jury] to put their verdict in proper form." 

Adams v. Green, 474 So.2d 577, 580 (Miss. 1985) (quoting Universal C.I.T. Credit Corp. v. 

Turner, 56 So.2d 800, 803 (Miss. 1952)). Mississippi law, and United States law generally, 

expects that a defective verdict will be reformed so as to give effect to the jury's intent. See, e.g., 

Miss. Code Ann. §§ 11-7-157, 11-7-159; ACandS, Inc. v. Godwin, 667 A.2d 116, 151 (Md. 

1995) ("'[I]n a proper case [a verdict] can be molded or reformed to reflect what the jury 

manifestly and beyond doubt intended.'") (citation omitted). 139 As Mississippi trial lawyer Jack 

Dunbar explains, "the jury is returned to deliberation only where their expressed intent with 

regard to the issues submitted to them is unclear. Where the intent of the jury is clear, the Court 

is duty-bound to give it effect." Supplemental Dunbar Statement at 16. 

In this case, the foreman's note provided a clear and unequivocal expression of the jury's 

intent. As Judge Graves explained, "this note clarifies what the jury's intent was with regard to 

an award of compensatory damages which they indicate very clearly in this note was 100 million 

dollars." Tr. 5739. See also Tr. 5749 ("The Court is of the opinion that the note is abundantly 

clear and that there is absolutely no question about whether the jurors intended what they . . . 

139 Claimants protest that the verdict in the O'Keefe case should not have been reformed 

because it was not "intelligent," see Joint Reply at 60-61, but this is just a recasting of their 

argument that the verdict was excessive. In any event, the relevant question for Judge Graves 

was whether the verdict was understandable to the court. See, e.g., Wilson v. State, 19 So.2d 475 

(Miss. 1944) ("test of the validity of a verdict is whether or not it is an intelligible answer to the 

issues submitted to the jury") (emphasis added). The jury foreman's note in the O'Keefe case, 

combined with the written verdict, more than meets that standard. Indeed, even the sole 

dissenting juror reportedly stated that the foreman's note accurately expressed the jury's intent. 

See, e.g., U.S. App. at 1146 (summary of interview with dissenting juror reporting her statement 

that the jury intended to award "$100 million compensatory and $160 million punitive"). 

120

said, what they did or why they did it."). Addressing the jury directly, Judge Graves reiterated 

that "you have, by way of your verdict and then by way of clarification through this note, 

indicated that it was your intention to award the plaintiff 100 million dollars in compensatory 

damages, and so the Court accepts that as the verdict of the jury with regard to compensatory 

damages." Tr. 5753. 140 Judge Graves therefore properly gave effect to that intent, consistent 

with his obligation under domestic law to construe the jury's verdict "by exegesis if necessary, 

. . . before [he was] free to disregard the jury's [] verdict and remand the case for a new trial." 

Gallick v. B. & O. R.R. Co., 372 U.S. 108, 119 (1963). 141 Thus, as Mr. Dunbar concludes, Judge 

Graves "did not commit error in reforming the verdict in this fashion." Supplemental Dunbar 

Statement at 18. 

5. The Amount Of The Judgment 

Claimants continue to assert that the O'Keefe judgment was so "grossly excessive" as to 

violate even the minimum standard of protection of aliens required under customary international 

law. See Joint Reply at 97. Although claimants purport to offer new reasons for this exaggerated 

assertion, their position suffers from the same fundamental flaws as in their opening Memorials. 

140 Claimants' complaint that the jury included an "illegal" award of $160 million in 

punitive damages (Joint Reply at 60) is similarly irrelevant, as the court rejected that award and 

accepted only the $100 million compensatory award. See Tr. 5739-43. Moreover, the contention 

that the jury's inclusion of punitive damages was "in obvious violation of Mississippi procedural 

law" (Joint Reply at 60) is belied by Loewen's own counsel, who candidly admitted to his 

colleagues at the time that, "[t]echnically, this statute [requiring bifurcation in punitive damages 

cases] is not effective for actions filed before July 1, 1994," as the O'Keefe case was. U.S. App. 

at 1045. 

141 See also Wilks v. Reyes, 5 F.3d 412, 415 (9th Cir. 1993) ("when there is tension 

between a general verdict and written interrogatories the [] court must attempt to sustain the 

judgment by harmonizing the answers and the verdict"); Harvey v. General Motors Corp., 873 

F.2d 1343, 1347 (10th Cir. 1989) ("trial court has a duty to try to reconcile the answers to the 

case to avoid retrial.") (emphasis added). 

121

a. The Proper Benchmark 

As before, claimants continue to seize on the $500 million awarded by the O'Keefe jury, 

dismissing as immaterial the fact that Loewen never paid anywhere near that amount in the end. 

Although they acknowledge that the Mississippi courts' ultimate entry of judgment in the 

O'Keefe litigation was not based on the never-executed-upon verdict of $500 million, but was 

instead based on Loewen's $85 million consideration under the settlement agreement, claimants 

contend that the $85 million consideration is properly viewed only as Loewen's mitigation of 

damages, not as the benchmark of the wrongfulness of the challenged measures. This is so, 

claimants argue, because "'the measure of the wrong done' is a question of damages, not of 

international liability vel non." Joint Reply at 107 (quoting Sohn & Baxter, 1961 Harvard Draft 

Convention at 97). Claimants, however, have confused two entirely separate concepts. 

The violation of NAFTA Article 1105 that claimants have alleged here is that the O'Keefe 

judgment was "grossly excessive." As claimants' own authority suggests, for an excessive 

judgment to be wrongful as a matter of substantive international law, it must be determined 

whether that judgment was grossly excessive in the first place. See Sohn & Baxter, 1961 

Harvard Draft Convention at 97. While the degree to which the judgment was grossly excessive 

may be a question of damages, it is very much a question of liability (i.e., wrongfulness) in the 

first instance whether the judgment was so grossly excessive as to breach an international 

obligation at all. Id. 

This distinction between the degree of excessiveness and the fact of excessiveness, which 

claimants have confused, is also readily seen in analogous municipal practice. For example, as 

claimants are quick to point out, "U.S. courts have struck down excessive punitive damages 

122

awards in a wide range of circumstances" where those awards exceeded the constitutional limits 

of due process. TLGI Mem. at 84. In such cases, the court need not determine how 

unconstitutionally excessive was the judgment to find a due process violation, but only that the 

judgment was unconstitutionally excessive at all. See, e.g., BMW of N. Am. v. Gore, 517 U.S. 

559, 585-86 (1996) (finding that judgment was excessive so as to violate due process guarantee, 

but remanding the case to state court for further proceedings for appropriate remedy). 

Loewen's ultimate payment of $85 million to end the litigation is thus not properly 

viewed as the mere "mitigation" of damages for purposes of claimant's denial of justice claim to 

be decided in the damages phase of this case, but is instead the benchmark by which claimants' 

claim of "excessiveness" must be measured in the first place. As claimants' own authority 

suggests, the wrongfulness of a judgment must be determined by reference to "what it [the 

judgment] actually was." Sohn & Baxter, 1961 Harvard Draft Convention, at 97. 142 Because the 

last judgment in the case was based not on the jury's verdict but on the parties' agreement to settle 

for $85 million, claimants' arguments of excessiveness based on the $500 million verdict that 

Loewen did not pay are immaterial to the determination of whether Loewen suffered a denial of 

justice in the O'Keefe litigation. 143 

142 For example, had Judge Graves granted Loewen's post-trial request for a remittitur and 

reduced the judgment to $85 million, or had Loewen succeeded in obtaining such a remittitur 

after continuing with its appeal in the Mississippi Supreme Court, claimants would surely have 

had no claim of excessiveness based on the jury's $500 million verdict. That Loewen ultimately 

achieved the same result through settlement rather than through the appellate process is 

immaterial. 

143 Indeed, this Tribunal has no authority under NAFTA Chapter Eleven to issue a 

declaration whether the $500 million award, if paid, would have amounted to a denial of justice, 

as the NAFTA explicitly limits the authority of the Tribunal to award only monetary damages 

and restitution of property, and does not permit the issuance of declaratory relief or advisory 


123


opinions. See NAFTA Article 1135. 

b. The Elements Of Damages 

In addition to their specious claim that the jury's verdict was the product of improper 

biases, claimants contend that the judgment was "grossly excessive in its compensatory and 

punitive components" and was "unsupported by the evidence . . . ." Joint Reply at 97. This 

contention is meritless as well, for several reasons. 

First, with respect to the economic damages awarded by the jury, claimants effectively 

concede that O'Keefe proved, and that Mr. Gary identified in his closing argument, more than 

$35 million in purely economic damages flowing from Loewen's misconduct. See Joint Reply at 

58. 144 Rhetoric aside, claimants' only complaints about the economic damages component of the 

award are: (1) that the initial verdict form did not reflect this assessment of economic damages 

but instead appeared to double-count damages for certain claims, and (2) that the $35 million in 

economic damages "consisted primarily of legally impermissible damages." Joint Reply at 57- 

58. 

As the United States has already shown, claimants' complaints based on the initial verdict 

form (submitted by Loewen) are irrelevant, because the court did not accept that form as the 

appropriate expression of the jury's actual intent and instead accepted the general verdict, as 

reflected in the foreman's note, to award $100 million in compensatory damages. See supra at 

118-121; Supplemental Dunbar Statement at 16-18. 

144 Although claimants weakly suggest that these damages "bore no natural relationship to 

. . . the record evidence" (Joint Reply at 98), nowhere do they identify any such "record evidence" 

to support this suggestion. 

124

The contention that the $35 million in economic damages were "legally impermissible" is 

similarly without merit. Although claimants contend that "virtually all" of those damages "were 

not foreseeable and therefore as a matter of law not recoverable," the record demonstrates (as the 

United States has already shown) that the damages were, in fact, foreseen by Loewen. See 

Counter-Mem. at 136. In any event, both municipal and international law recognize that 

foreseeability need not limit the recovery of consequential damages where, as here, the tortious 

acts were intentional and directly inflicted on the person claiming injury. 145 

Claimants also challenge the $35 million on the ground that it included $20 million in 

lost future revenue, whereas, according to claimants, Mississippi law allows recovery of only 

"lost future profits (i.e., lost revenue minus saved expenses)" and not "future revenue." Joint 

Reply at 58 (emphasis in original). To the extent that claimants' legal argument in this regard is 

sound under Mississippi law, one must then ask why Loewen never advanced it before the 

Mississippi court – whether during the trial or in any of Loewen's post-trial motions – and never 

made any effort to establish O'Keefe's alleged "saved expenses" so as to offset the conceded loss 

of $20 million in future revenue. See, e.g., A660-747. At the very most, this newly-minted 

argument, made more than five years after the fact, only confirms that Loewen should have 

continued with its appeal and raised this point of domestic law to the Mississippi Supreme 

Court. 146 

145 See, e.g., Cheng, General Principles of Law at 251 ("If intended by the author, such 

consequences are regarded as consequences of the act for which reparation has to be made, 

irrespective or whether such consequences are normal, or reasonably foreseeable."); Counter- 

Mem. at 136. 

146 See J. Arechaga, International Law in the Past Third of a Century, 159 Recueil des 

Cours (1978) at 282 ("a State cannot base the charges made before an international tribunal or 


125

Second, claimants challenge the jury's award of approximately $65 million in damages for 

Loewen's intentional infliction of emotional distress as "monstrously excessive." Joint Reply at 

98. As the United States has shown, Mississippi law clearly permits recovery of damages for 

emotional distress, even absent proof of physical injury, where, as here, the tortious conduct was 

intentional. See Counter-Mem. at 135 n.100 (quoting Adams v. U.S. Homecrafters, Inc., 744 So. 

2d 736, 743 (Miss. 1999)). 147 Nevertheless, the United States agrees that Loewen would have 

had compelling arguments on appeal for a substantial reduction of the jury's award of emotional 

distress damages. 148 

More fundamentally, however, claimants' complaint about this component of the award 

once again ignores the fact that Loewen never paid anywhere near the full amount awarded by 

the jury. Indeed, if the entire emotional distress component were subtracted from the $500 

million award (even assuming that the jury awarded $74.5 million in emotional distress damages, 

as claimants contend), Loewen's consideration of $85 million to settle the case would still 


organ on objections or grounds which were not previously raised before the municipal courts."); 

supra at 46-47. 

147 Claimants' suggestion that Adams forecloses recovery of emotional distress damages 

on the basis of testimony concerning "loss of sleep and worry" is misleading. See Joint Reply at 

99. The Adams court made clear that such proof was insufficient when the emotional distress 

was the result of "simple negligence." See 744 So. 2d at 743-44. The court expressly stated that, 

"where the defendant's conduct was 'malicious, intentional or outrageous,' the plaintiff need 

present no further proof of physical injury." Id. at 743. 

148 That is not to say, however, that the emotional distress damages would have been 

rejected entirely on appeal. O’Keefe presented evidence at trial demonstrating that Loewen’s 

conduct, which nearly resulted in the complete loss of the business that had been in the O’Keefe 

family for nearly 130 years, caused the O’Keefes to suffer emotional distress, lasting through the 

entirety of the administrative supervision and all the way through the trial. See, e.g., Tr. 176-77; 

2107-16. 

126

epresent only a fraction of even the reduced award. 149 Loewen thus cannot be heard to argue that 

Loewen was denied justice on the basis that the jury had awarded such damages in the first place. 

Finally, claimants continue to assert that the jury's award of $400 million in punitive 

damages was so excessive as to violate even the minimum standard of protection under 

customary international law. See Joint Reply at 48-52, 100-105. As before, claimants ignore the 

evidence and conduct on which that award was based, preferring instead to treat the underlying 

litigation as if it were a simple contract dispute between ordinary commercial parties concerning 

an innocuous trade. As the United States has shown, however, the record and context of the 

O’Keefe litigation cannot be so easily dismissed. See, e.g., Counter-Mem. at 139-43. 

For example, as discussed above (supra at 23-29), claimants fundamentally misapprehend 

the broader monopolization claims that were at the heart of the case, dismissing those claims as 

merely "peripheral" to "ordinary contract" claims. Joint Reply at 62. 150 In this respect, claimants' 

revisionist complaints about the jury's award suffer from the same failings that observers 

attributed to Loewen's handling of the trial at the time: "Loewen's main failure was to 

149 Claimants dispute the amount of emotional distress damages awarded by the jury, 

arguing that the "actual" emotional distress award was "$74.5 million" rather than the $65 

million difference between the $35 million in economic damages and the overall compensatory 

award of $100 million. See Joint Reply at 54-55. The United States is curious as to how 

claimants can know the "actual" amount of this award, as the jury's general verdict makes no 

distinction among the categories of compensatory damages. It appears from the record that 

O'Keefe's counsel sought $70.45 million in emotional distress damages out of a total of $105.832 

million in compensatory damages. See Tr. at 5566. The jury awarded only $100 million of 

O'Keefe's requested amount, and gave no indication that it did not intend to include in that award 

the entire $35 million in proven economic damages, leaving only $65 million for emotional 

distress damages. 

150 Even claimants' own media source noted that "[a]t the heart of the dispute with Loewen 

was the contention by the O'Keefes that the treatment they received was part of a wider ploy to 

eliminate competition as the chain moved into new markets." A3098. 

127

underestimate the seriousness of the case." A3100 (Toronto newspaper account of the O'Keefe 

litigation two weeks after settlement). Monopolization is indeed regarded as a serious offense in 

the United States, which provides for an automatic trebling of damages under federal law. 151 

Thus, had the O'Keefe plaintiffs proven their monopolization claim in a U.S. federal court under 

the federal antitrust laws – which, as noted above, are substantially similar to the Mississippi 

laws at issue in the O'Keefe case (see supra at 25 n.24) – Loewen would automatically have been 

assessed a statutory penalty of a trebled amount of O'Keefe's actual damages, plus attorneys' fees, 

irrespective of any alleged "bias, passion or prejudice" on the part of the jury. Even excluding 

the entirety of the emotional distress damages award, a trebling of the more than $35 million in 

purely economic damages that O'Keefe proved at trial would have resulted in an award of over 

$105 million, well more than Loewen ever paid to end the O'Keefe litigation. 

Similarly, claimants ignore the uniquely sensitive character of the death-care industry at 

issue in the O'Keefe case, which, as Professor Landsman points out, gave the tort remedies in the 

case a "heightened salience." See Landsman Statement at 10. Given the widespread public 

outcry in recent years over some of the very business practices at issue in the O'Keefe case – 

including complaints about the "sharp practices" of the major death-care consolidators in the 

United Kingdom and Australia as well as in other jurisdictions in the United States (see supra at 

99) – there is no reason to assume that the O'Keefe jury's assessment of punitive damages was 

151 Section 4 of the "Clayton Act," a federal statute that authorizes private antitrust actions, 

provides (in relevant part) that "any person who shall be injured in his business or property by 

reason of anything forbidden in the antitrust laws . . . shall recover threefold the damages by him 

sustained, and the cost of suit, including a reasonable attorney's fee." 15 U.S.C. § 15(a). "The 

availability of a private antitrust action, and its accompanying treble damages remedy, serves 

both to compensate private persons for their injuries and to punish wrongdoers." Andrx 

Pharmaceuticals, 256 F.3d at 805. 

128

anything other than a genuine (and understandable) expression of disapproval of the conduct 

proven at trial. Indeed, as a recent review of a new book about the O'Keefe case observed, the 

case "was the first sign that the junk-mail, telemarketed, hard-sell, pre-need peddling, 

conglomerate model of funeral service brought to us by Ray Loewen and Robert Waltrip (of SCI) 

was going to be hugely repudiated by the marketplace, the media, and consumers." T. Lynch, 

Grave Matters, Both, Times of London (Aug. 15, 2001) (U.S. App. at 1354). 

Claimants also have little to say about the evidence that O'Keefe submitted to the jury 

showing Loewen's net worth to be in excess of $3.1 billion. See Joint Reply at 49. Claimants' 

silence in this regard is not surprising, given the performance of Loewen's trial team during the 

punitive damages phase of the trial and its confused and remarkably ineffective response to that 

evidence at the time. See Tr. at 5756-5807; Counter-Mem. at 54-56. As the United States has 

already shown, the jury's award of punitive damages under those circumstances could in no way 

be said to have been "so obviously wrong and unjust that no court could honestly have arrived at 

such a conclusion." Freeman, International Responsibility of States for Denial of Justice, at 319 

(quoting with approval Answer of British Government in claim of R.E. Brown (U.S. v. Gr. Brit.) 

(1923)) (citation omitted); see also Counter-Mem. at 136-143. That Loewen paid no more than 

$85 million (and, ultimately, less than even that amount) to end the litigation only confirms that 

the award of damages in the O'Keefe case did not constitute a denial of justice in violation of 

NAFTA Article 1105. 152 

152 Of course, claimants' complaints about both the form and the amount of the verdict do 

not address the more fundamental fact that the O'Keefe jury found Loewen to be liable for 

violations of each of the counts presented to it. 

129

6. The Decisions Regarding The Supersedeas Bond 

Claimants are still unable to point to a single case in which the existence or application of 

a bond requirement has been found to be a denial of justice. Moreover, the application of such 

requirements, even to parties without the financial resources to meet them, has been consistently 

found, both internationally and domestically (in the United States and elsewhere), to be proper. 

In support of their claim that the bond requirement in the O'Keefe litigation denied them justice, 

claimants assert that: (1) the unanimous case authority that bonds may be required even of those 

who cannot afford them is inapplicable to very wealthy corporations faced with obtaining a bond 

in a high numerical amount; and (2) the Mississippi courts, on the record before them, were 

required to grant Loewen an exception to the bond requirement. Neither of these suggestions is 

supported by fact or law. 

a. Imposition Of A Neutral Supersedeas Bond Requirement, Despite 

An Appellant's Claimed Inability To Pay, Is Not A Denial Of 

Justice 

The United States has cited numerous international and municipal cases in which parties 

challenged the application of bond requirements they claimed to be financially unable to meet. 

See, e.g., Counter-Mem. at 147-48, 159-60 (citing cases). In each case in which the issue was 

raised, the court or tribunal found that application of the bond requirement did not constitute a 

denial of justice. Claimants have cited no relevant contrary authority. 153 Instead, they attempt to 

dismiss the United States' authorities as a series of "unexceptional" cases in which "a 'poor' or 

'impoverished' claimant could not afford to pursue an appeal or obtain a standard security 

153 Claimants refer to only two cases. See Joint Reply at 112 n.14. In one, the Jones 

Claim, a person was held in jail for 31 days on excessive bail, a deprivation of liberty wholly 

different from a neutral requirement to post security in a civil action. The other, the Burt Case, 

does not at all discuss (or even mention) security requirements. 

130

instrument." Joint Reply at 112-13 (quotation marks in original). But this case is no less 

"unexceptional." Like the parties in each of the cited cases, Loewen professed to be financially 

unable to obtain a security instrument in conformance with the requirements of a neutral local 

law (i.e., a law applying equally to foreign and local parties). While claimants suggest the bond 

necessary to stay execution of the O'Keefe verdict was "excessive," the bond was no more 

"excessive" (to Loewen) than a multi-thousand dollar bond is to an individual facing the loss of 

her home. See Counter-Mem. at 159. The rules of international law cannot, and do not, apply to 

States any differently when the claimant is a large, wealthy corporation than when the claimant is 

a poor individual. 

In the face of this authority, and relying essentially on one draft convention, claimants 

assert that international law "universally" treats bond requirements that cannot be met as a denial 

of justice. Joint Reply at 111-12 (quoting Sohn & Baxter, 1961 Harvard Draft Convention at 

186). As the United States has previously explained, however, the Sohn & Baxter Draft 

Convention never suggests, let alone states, that an allegedly prohibitively expensive supersedeas 

bond constitutes a denial of justice, regardless of whether the bond amount is set by statute or by 

judicial order. See Counter-Mem. at 143 n.106. Instead, the Draft Convention advocated that 

resort to local remedies should be considered futile if the price of pursuing such remedies is an 

excessive or prohibitive cost (not supersedeas) bond. See Sohn & Baxter, 1961 Harvard Draft 

Convention at 161, 168. 154 Even with respect to cost bonds, Professors Sohn and Baxter 

154 The language from Sohn & Baxter on which claimants rely does not address 

supersedeas bonds (the type of bond Loewen was trying to obtain). This is an important 

distinction. While a party unable to provide a cost bond may be denied a right to continue 

litigation or appeals (thus explaining why Sohn and Baxter viewed this as rendering further 

exhaustion of local remedies futile), a party confronting a supersedeas bond that it cannot afford 


131

specifically rejected claimants' interpretation of their draft convention: "this view [of when the 

failure to exhaust local remedies may be excused] entails the rejection of the theory that State 

responsibility arises out of a 'denial of justice' in the course of an alien's attempting to gain 

redress within the courts of the respondent State." Id. at 161 (emphasis added). In any event, 

the unanimous legal authorities upholding bond requirements against denial of justice challenges 

– which would all have been wrongly decided if claimants' position were correct – provide full 

and sufficient rebuttal to claimants' assertion of a "universal" practice to the contrary. 

Claimants' other sources are similarly unhelpful to their cause. Freeman, for example, 

opines that "prohibitive" security requirements can give rise to an international complaint when 

such requirements are "arbitrary obstacles . . . placed in the path of an alien claimant" or 

"restrictions designed to render the alien's access to local tribunals impossible." Freeman, 

International Responsibility of States for Denial of Justice at 224 (emphasis added). But 

Freeman says nothing about requirements (like Mississippi's) applied neutrally to alien and 

domestic parties alike. While the Harvard Draft Convention does cite one case for the 

proposition that states are responsible internationally when they have "unlawfully prevented an 

appeal by an alien," (1929 Harvard Research Draft, in 23 Am. J. Int'l L. at 185, comment to art. 

9), in that case, the "appeal from the Acapulco judge to a Mexican court of appeal was prevented 

by intrigues or unlawful transactions," hardly analogous to the application of a non- 


remains free to continue with its appeal, subject only to the risk or cost (which may or may not be 

present in a given case) that its opponent may attempt to execute on the judgment during the 

pendency of that appeal. Of course, as explained above, Loewen could have continued its appeal 

without supersedeas. See supra at 82-86; Blass Statement at 11-12. 

132

discriminatory bond requirement. Garrison's Case (U.S. v. Mex. 1871), No. 8, cited in 3 Moore 

International Arbitrations 3129 (1898). 

This is why, contrary to claimants' assertions, the accepted application (worldwide) of 

supersedeas bonds to "poor or impoverished" parties is both relevant and important. If a claimed 

inability to meet a neutral supersedeas bond requirement is not a manifest injustice for purposes 

of customary international law, then, to prevail on their denial of justice claim, claimants must 

show that Loewen's nationality was the motivating factor behind the bond decisions (i.e., that a 

Mississippi party in Loewen's shoes seeking a departure from the ordinary bond requirement 

would have received it). Not only have claimants failed to prove such an allegation, but they 

concede that no evidence exists to support it. See Joint Reply at 91; Sinclair Op. at 35. 

b. The Refusal To Depart From The Full Bond Requirement 

Was Not, On The Basis Of The Record Before The 

Mississippi Courts, A Denial Of Justice 

The United States has demonstrated that the Mississippi courts' bond decisions were 

entirely rational in light of Loewen’s failure to justify, through a "detailed and credible" record, 

an exception to the ordinary 125 percent bond requirement. See Counter-Mem. at 155. 

Claimants offer two arguments in response. First, they contend that the courts failed to exercise 

judicial discretion in determining whether the bond amount should be reduced. See Joint Reply 

at 118-20; Clark Statement at 12-13. Second, they contend that, even if the courts exercised 

discretion, they abused that discretion. See Joint Reply at 118; Hawkins Statement at 25. Both 

contentions are meritless. 

133

(i). The Mississippi Courts Did Not Fail To Consider 

Loewen’s Grounds For Departure 

Claimants appear to equate the Mississippi courts' denial of Loewen's request for a 

reduction of the bond with a failure of the courts even to consider whether a reduction was in fact 

appropriate. Claimants are wrong to do so. At several points during the bond hearing, Judge 

Graves acknowledged his authority under Mississippi Rule of Appellate Procedure 8(b) to depart 

from the ordinary bond requirement. 155 At Loewen's urging, Judge Graves explicitly rejected 

O'Keefe's argument that he had no authority to vary from a 125 percent bond because of Rule 

8(a). See A1065 (Judge Graves telling Loewen's counsel "[the supersedeas rule] seems to be 

saying exactly what you said."); A1066 (Loewen’s counsel telling Judge Graves "[your 

understanding of the rules makes] perfect sense and I think you're right on."). And, as part of his 

oral decision denying Loewen's motion, Judge Graves stated: "[I am] persuaded that it is 

appropriate to reduce [a bond] for good cause shown." A1074. As former Justice Blass (who, as 

O'Keefe's counsel, was on the losing side of that part of the argument) confirms, Judge Graves 

"had a very clear understanding" of the difference between Rules 8(a) and 8(b). Blass Statement 

at 8. 

Thus, the record shows that Judge Graves did exactly what claimants' expert says he 

should have done – "carefully examine the good cause shown by Loewen" and determine how to 

"assure that the rights of both parties are protected." Clark Statement at 12-13. Judge Graves 

considered the risks to Loewen from pursuing appeal without a bond (A1057-59); considered the 

company's affidavits suggesting it could not obtain a full bond; and considered the case authority 

155 This Rule allows, but does not require, courts to depart from the ordinary full bond: 

"The court . . . for good cause shown may set a supersedeas bond in an amount less than the 125 

percent. . . ." Miss. R. App. P. 8(b) (emphasis added). 

134

Loewen cited. A1075-78. While Judge Graves ultimately was persuaded that granting Loewen's 

motion would unfairly risk O'Keefe's interests in the judgment, this does not mean he "did not in 

fact exercise discretion." Joint Reply at 118. It means only that, in exercising discretion, Judge 

Graves chose to reject the alternative proposed by Loewen. As claimants' own witness has 

written elsewhere: 

when we say a court has discretionary authority to say yes or no to a particular 

question, we must acknowledge it is a question as to which there can be honest 

disagreement between equally intelligent individuals. If the answer to the 

question is never uncertain, or never subject to any doubt, there would be no need 

to vest a court with discretionary authority in its answer. 

Hooten v. State, 492 So.2d 948, 950 (Miss. 1986) (Hawkins, J., dissenting) (emphasis in 

original); see also Blass Statement at 10 ("Discretion means that the court has within its lawful 

scope the ability to balance both sides, to weigh all interests, and to make a decision within a 

range of appropriate and just options. That is what the Court did."). 

(ii). The Mississippi Courts Did Not Abuse 

Their Discretion 

Claimants alternatively argue that, even if the Mississippi courts exercised their 

discretion, they abused that discretion in denying Loewen's request for a departure. See Joint 

Reply at 118; Hawkins Statement at 25. But while it was (and is) an open question of United 

States constitutional law whether a reduced bond in Loewen's situation would have been required 

on due process grounds, see U.S. Counter-Mem. at 152-53 & n.109, there is nothing in the 

Mississippi rules of procedure or case law that would have required the courts to grant a 

departure on the equitable grounds Loewen asserted. 

While claimants ignore the point in their submission, Loewen bore the burden to 

demonstrate that the requested departure – an extraordinary eighty-percent reduction from the 

135

ordinary bond amount – was justified. See Counter-Mem. at 154. At a minimum, therefore, 

Loewen was required to prove not only that a $125 million bond was all it could afford, but that 

it had "a clearly demonstrated ability to satisfy the judgment" in the event its appeal was 

unsuccessful, and that there was "no other concern that [O'Keefe's] rights [would] be 

compromised by a failure adequately to secure the judgment." In the Matter of Carlson, 224 F.3d 

716, 719 (7th Cir. 2000). Moreover, as even claimants' own expert has acknowledged elsewhere, 

in balancing the parties' relative interests, the courts were required to give more weight to 

O'Keefe's interest in satisfying the judgment than Loewen's interest in a stay. See, e.g., Poplar 

Grove Planting & Refining Co. v. Bache Halsey Stuart, Inc., 600 F.2d 1189, 1190-91 (5th Cir. 

1979) (Clark, J.). In at least three respects, it is far from obvious that Loewen met its burden. 

First, Loewen's extensive effort to prove that its financial situation caused difficulty in 

obtaining a bond – in particular, its dangerously high debt load – also had the effect of raising 

questions about the company's eventual ability to satisfy the judgment if a reduced bond were 

allowed. As Judge Graves noted during the bond hearing, there was a legitimate question 

whether "the same assets which are subject to levy right now would still be there and subject to 

levy a year from now or eighteen months from now." A1077. 156 Courts routinely insist on a full 

supersedeas bond in such circumstances. 157 

156 During the bond proceeding, O'Keefe pointed out the risk that another pending case in 

Pennsylvania would result in an adverse judgment against Loewen and that the plaintiffs in that 

case would gain priority over O'Keefe if his entire judgment were not secured. See A1056-57; 

see also Blass Statement at 9-10. That concern was proven justified when the Pennsylvania 

litigation settled only weeks later for $30 million. 

157 See, e.g., Avirgan v. Hull, 125 F.R.D. 185, 187 (S.D. Fla. 1989), aff'd, 932 F.2d 1572 

(11th Cir. 1991) (debtor's "admitted precarious financial condition . . . defeats their contention 

that this case is a rare instance where a bond is unnecessary or alternative collateral properly 


136

A full bond was especially important given Loewen's uncontroverted assertion that, at the 

time of the judgment, Loewen had assets sufficient to satisfy the judgment. See A825; see also 

A1387-88. Many of the cases in which a departure has been found appropriate – and, indeed, 

almost all of the cases claimants cite – involve circumstances where the reduced bond secures the 

judgment debtor's entire present ability to pay, even if that does not amount to the full judgment. 

See, e.g., C. Albert Sauter Co. v. Richard S. Sauter Co., 368 F. Supp. 501, 520 (E.D. Pa. 1973) 

(defendants "without sufficient assets to satisfy the judgment"). 158 Claimants' expert makes this 

same point. See Clark Statement at 12 ($100,000 bond should be approved to secure a $150,000 

judgment against a debtor worth $100,000). These statements and cases, however, are irrelevant 

to a judgment debtor like Loewen with assets sufficient to satisfy the entire judgment. In a case 

like Loewen's, the court must determine how best to ensure that the entire judgment will be 

collectible after appeal. See, e.g., Olympia, 786 F.2d at 800 ("the district judge has a very 

difficult task – to make the judgment creditor as well off during the appeal as it would be if it 

could execute at once, but no better off") (Easterbrook, J., concurring). It is simply not true, 


could be posted"); see also id. at 188 ("this case appears to be just the type for which the 

supersedeas is designed – 'the financial distress of the debtor puts the judgment creditor in peril if 

it waits for the appeal to take its course.'") (quoting Olympia Equip. Leasing Co. v. Western 

Union Tel. Co., 786 F.2d 794, 800 (7th Cir. 1986)); Bank of Nova Scotia v. Pemberton, 964 F. 

Supp. 189, 192 (D.V.I. 1997) (existence of other creditors seeking same property is reason to 

insist on full supersedeas); United States v. Panhandle Eastern Corp., 696 F. Supp. 983, 985-86 

(D. Del. 1988) (pending litigation raising uncertainty as to whether judgment can be satisfied 

after appeal is basis to deny reduction in bond); Counter-Memorial at 145-46 (citing British and 

French cases for same proposition). 

158 See also Miami Int'l Realty Co. v. Paynter, 807 F.2d 871, 874 (10th Cir. 1986) 

(deposition revealed debtor had no assets beyond bond amount); Hurley v. Atlantic City Police 

Dept., 944 F. Supp. 371, 378 (D.N.J. 1996) ("nothing in the record suggests that" debtor could 

satisfy judgment); Isern v. Ninth Court of Appeals, 925 S.W.2d 604, 606 (Tex. 1996) (security 

approved was equal to entire amount of debtor's assets). 

137

then, to say that a $125 million bond would have provided "more" security to O'Keefe than 

collecting the entire $500 million judgment. Cf. Joint Reply at 117. 

Second, contrary to claimants' current view, nothing in the record showed that a $125 

million bond was the most Loewen could provide. As the United States has previously 

demonstrated, Loewen's affidavits were carefully worded to avoid making such a claim. See, 

e.g., A881-82 (Loewen could not provide bond "anywhere near" $625 million because of 

excessive debt); A902-03 (bond above $125 million meeting creditors' terms impossible "[a]t this 

moment"). 159 The company's affiants acknowledged that $625 million in bonding was available 

and could have been arranged but for Loewen's exceedingly high pre-existing debt. See A877- 

79, A882. That debt did not limit the company to a $125 million bond, however, but rather to 

some figure between $125 and $625 million. See A2297-98 (showing $125 million bond would 

have left Loewen well under maximum debt/equity ratio); see also A898 (explaining effect of 

bond on debt/equity ratio). Loewen also submitted evidence to the court that market analysts 

expected the company to continue reporting record earnings even after the verdict, and that the 

decline in share price reflected an "overblown" reaction. A779; see also A1216. Loewen cannot 

now dismiss as "innuendo" the very evidence it presented to the courts. See Joint Reply at 114, 

122. 

Claimants also conveniently dismiss the evidence that O'Keefe presented to the 

Mississippi Supreme Court which suggested that Loewen, despite its protestations, could have 

afforded a larger bond. See Counter-Mem. at 59-63. Claimants contend that this evidence was 

159 In their Joint Reply, claimants suggest that this point is equivalent to a series of perjury 

accusations against Loewen's affiants. Joint Reply at 122. To the contrary, in order to be 

truthful, Loewen's affiants very carefully worded their statements to avoid direct representations 

that a bond in any amount higher than $125 million would be impossible for Loewen to afford. 

138

inaccurate, as it allegedly misquoted Loewen officials as having told investors that the company 

"will be able to pay for this thing and win in the final . . . judgment" and that Loewen had "the 

contingency funds for every possible contingency." Joint Reply at 122-23 (quoting O'Keefe's 

transcript of Loewen investor conference call) (emphasis in original). According to claimants, 

the "official" transcript (i.e., the one prepared by Loewen in response to O'Keefe's filing) 

reflected that Loewen said only that the company "will be able to fight this thing and win in the 

final judgment" and that the company had "the contingency plan for every possible contingency." 

Joint Reply at 123 (quoting Loewen's transcript of the conference call) (emphasis in original). 

But, even assuming that O'Keefe's transcription (which, like Loewen's, was sworn and 

notarized; see U.S. App. at 806-07) was inaccurate, Loewen still did not effectively answer the 

charge that Loewen was telling two different stories – one to the court and another to investors – 

concerning the company's prospects in the event of a full bond requirement. For example, 

Loewen's own transcription quotes Ray Loewen as assuring investors that, even in "the worst 

case scenario," the company would still "be able to fight this thing and win in the final 

judgment." A2977. Similarly, even Loewen's allegedly corrected statement to investors of a 

"contingency plan for every possible contingency" ran contrary to Loewen's representation to the 

court that a full bond would result in "disastrous" consequences for the company. Compare 

A2981-82 with A1026. 160 

Moreover, even if Loewen had not represented that it had the contingency "funds" to pay 

for a full supersedeas bond, the assurance of a contingency "plan" was fully consistent with the 

160 Indeed, accorded to Loewen's own transcription, company officials assured investors 

that, even if the entire $500 million award were upheld on appeal, the company would not suffer 

"any major long-term harm on [its] liquidity . . . ." A2982. 

139

possibility of an alternative security arrangement, which the company was, in fact, developing at 

the time. As the record makes clear, Loewen was planning a pledge of LGII stock, in lieu of 

cash, to satisfy even a full bonding requirement. See U.S. App. at 0603-05. Upon learning that 

the Supreme Court had privately voted in Loewen's favor on the bond issue, however, Loewen's 

counsel immediately recommended that the company "go into a holding pattern on alternative 

security ideas, e.g., the pledge of the stock of Loewen Group International, Inc." U.S. App. at 

1213. 

While the Mississippi Supreme Court did not mention the evidence submitted by O'Keefe 

in its order affirming Judge Graves, 161 claimants do not dispute that, by Loewen's own lawyer's 

report, the Court had voted to rule in Loewen's favor just before learning the full extent of 

Loewen's ongoing financial activities. See Counter-Mem. at 60-63. To be sure, there is no 

possible measurement of the impact of this evidence on the court. But "if[,] as . . . Judge 

Hawkins says, the Court is not 'removed from human affairs,' this evidence would have had a 

profound impact on the views of the justices, especially in a case where large-scale fraud and 

misrepresentation by the defendants were the major jury findings." Blass Statement at 9 (citing 

Hawkins Statement at 24). 

161 Claimants err in suggesting (Joint Reply at 123) that the Mississippi Supreme Court 

was limited to considering evidence presented at the trial-court level. The Mississippi rules give 

the Supreme Court authority to accept additional evidence on the question of the propriety of a 

stay and the appropriate amount of security. See Miss. R. App. P. 8(c) ("the motion shall be 

supported by affidavits or other sworn statements"). Indeed, Loewen itself submitted "new" 

evidence to the Mississippi Supreme Court, see A1128 n.1, A2713-16, A2800-43, A2851-54, 

and specifically argued that the Court had authority to receive it. A1138-39. In any event, as 

noted above, Loewen itself had presented evidence to the trial court suggesting that the 

predictions of dire consequences from the judgment were overstated. See supra. 

140

Given that Loewen's own evidence suggested that $125 million was not the most it could 

afford, the $125 million figure – which matched exactly 125 percent of the compensatory 

damages award (and zero percent of the punitive damages award) – was, at a minimum, 

convenient. See A889 ($125 million figure was first suggested to bankers by Loewen). It 

allowed Loewen to argue, as it does today (see, e.g., Hawkins Statement at 22-23), that O'Keefe 

had no legitimate interest in the punitive damages award and that no bond should be required to 

secure it. See A1032-33, A1067. As Loewen's counsel recognized at the time, however, that 

argument was a novel one, and rejection of it can hardly be deemed an abuse of discretion. See 

U.S. App. 0894-95; see also Trans World Airlines v. Hughes, 314 F. Supp. 94, 96, 98 (S.D.N.Y. 

1970) (rejecting offer to post bond for only compensatory damages portion of judgment). 162 

Third, while claimants now cite a series of cases where companies argued successfully 

that the prospect of a Chapter 11 reorganization cut in favor of a reduced bond, see Joint Reply at 

121, they cannot dispute that Loewen did not make that argument at the time. Rather, O'Keefe's 

suggestion to the Mississippi courts that Loewen could easily use reorganization to obtain an 

automatic, unbonded stay went entirely unrebutted. See supra at 42. Moreover, not one of the 

cases claimants cite holds that a court abused its discretion by denying a request for a departure 

from a statutorily-required bond. To the contrary, Mr. Clark's seminal opinion in Poplar Grove 

found it can be an abuse of discretion for a trial court to approve a reduced bond. See 600 F.2d 

at 1191 (ordering district court to "establish some type of positive protection of the judgment 

162 The TWA case, on which claimants have relied, is notable as well because the court 

both rejected the notion that alternate security could be obtained through regular reporting of a 

company's net worth (cf. Joint Reply at 116-17) and suggested that it was inappropriate for a 

judgment debtor to commit financial resources to other acquisitions – "business as usual" – while 

refusing to post a full bond. 314 F. Supp. at 97-98. 

141

creditor's rights as outlined herein, or, in the alternative, to vacate its order approving a reduced 

supersedeas bond and require full bonded protection during the pendency of this appeal."); see 

also Missouri Pac. Ry. Co. v. McGrew Coal Co., 40 S. Ct. 503 (1920) (reversing lower court's 

allowance of reduced bond, and ordering appellant to provide bond in excess of judgment). 163 

It is by no means obvious, therefore, that the Mississippi courts abused their discretion in 

denying a departure on equitable grounds. Indeed, not even claimants' own witnesses seem to 

say that Loewen's request for a $125 million bond should have been granted. 164 But even if the 

bonding decisions were abuses of discretion under municipal law, that does not mean they were 

also denials of justice. "Rather than implying bad faith or an intentional wrong on the part of the 

trial judge, an abuse of discretion is viewed as a strict legal term that is 'clearly against logic and 

effect of such facts as are presented. . . .'" White v. State, 742 So.2d 1126, 1136 (Miss. 1999) 

(quoting Black's Law Dictionary). A court that has abused its discretion has of course committed 

an error under local law, but, as claimants' sources agree, "mere error in the application of local 

163 There is a multitude of cases, too many to cite here, in which parties with claims 

similar to Loewen's, including claims that the cost of a bond would trigger bankruptcy, had 

requests for a departure denied, and in none of these cases was the denial found an abuse of 

discretion. See, e.g., Brabson v. The Friendship House, 2000 WL 1335745, *2 (W.D.N.Y. 2000) 

(defendant in bankruptcy); N.J. Collins, Inc. v. Pacific Leasing, Inc., 1999 WL 1102605, *2 (E.D. 

La. 1999) (defendant would be "thrown into bankruptcy absent a stay"); Endress & Hauser, Inc. 

v. Hawk Measurement Sys. Pty., 932 F. Supp. 1147, 1150-52 (S.D. Ind. 1996) (defendant 

claimed bond would drive it to bankruptcy); Triton Containter Int'l v. Baltic Shipping Co., 1996 

WL 28511, *2 (E.D. La. 1996) (defendant's "financial condition is bleak"); Avirgan, 125 F.R.D. 

at 187 (bond would render party "insolvent and force [it] to discontinue its operations"). 

164 See Clark Statement at 13-14 (arguing only that Loewen’s evidence of "good cause" 

should have been carefully examined); Hawkins Statement at 24 ("the Court should have sought 

some way, some possible way, to accommodate both sides") (emphasis added). This, of course, 

is exactly what the Mississippi courts did. See, e.g., A1072 (Judge Graves seeking compromise 

between $125 million and $625 million). 

142

law does not constitute an unjust judgment." Adede at 90. Nor, erroneous or not, do the 

Mississippi courts' bond decisions. 

7. Claimants' "Fair And Equitable Treatment" And "Full Protection And 

Security" Arguments Are Without Merit 

In its Counter-Memorial, the United States showed that the "fair and equitable treatment" 

and "full protection and security" obligations are defined by the minimum standard of treatment 

of aliens under customary international law. See Counter-Mem. at 170-80. The United States 

noted, in particular, that State practice consistently supported the view that "fair and equitable 

treatment," as used in bilateral investment treaties, referred to the customary international law 

minimum standard of treatment of aliens. It further observed that each of the other NAFTA 

Parties concurred in this understanding of Article 1105(1) – an agreement as to the interpretation 

of the provision that, under the principles stated in Article 31(3) of the Vienna Convention on the 

Law of Treaties, was authoritative. See id. at 175 & n.96. 

In their Joint Reply (at 133, 143-44), claimants reiterated their assertion that the "fair and 

equitable treatment" standard "goes 'far beyond' the minimum protections accorded to foreign 

investments under customary international law." Claimants offered no support in State practice 

for their reading of the standard, but instead discussed the writings of certain academics and the 

interpretations of Article 1105(1) in three arbitral awards that have been issued during the course 

of this arbitration. Joint Reply at 138-42, 143-45. Claimants urged the Tribunal to disregard the 

agreement of the three NAFTA Parties as to the proper interpretation of the provision in the 

treaty among them, contending that agreement informally stated in "litigating positions" did not 

meet the requirements of Article 31(3) of the Vienna Convention. Id. at 139-43. 

143

On July 31, 2001, the Free Trade Commission, established under NAFTA Article 2001, 

issued the following interpretation of Article 1105: 

Having reviewed the operation of proceedings conducted under Chapter Eleven of 

the North American Free Trade Agreement, the Free Trade Commission hereby 

adopts the following interpretation of Chapter Eleven in order to clarify and 

reaffirm certain of its provisions: 

. . . . 

1. Article 1105(1) prescribes the customary international law 

minimum standard of treatment of aliens as the minimum standard 

of treatment to be afforded to investments of investors of another 

Party. 

2. The concepts of 'fair and equitable treatment' and 'full protection 

and security' do not require treatment in addition to or beyond that 

which is required by the customary international law minimum 

standard of treatment of aliens. 165 

Under NAFTA Article 1131(2), this Free Trade Commission interpretation is binding on this 

Tribunal. 166 

In a startling about-face, in a letter to the Tribunal of August 9, 2001, claimants assert that 

the Commission's interpretation "confirms" that customary international law now incorporates 

"fair and equitable treatment." By this, claimants appear to contend that customary international 

law now encompasses the view of this term espoused in the Joint Reply – that the standard 

requires an assessment of a State's conduct against what an arbitrator considers to be "fair" or 

"equitable" in a subjective and intuitive sense, rather than assessment of that conduct against 

165 NAFTA Free Trade Commission, Interpretation of July 31, 2001 (available at 

); see also id. ("A determination 

that there has been a breach of another provision of the NAFTA, or of a separate international 

agreement, does not establish that there has been a breach of Article 1105(1)."). 

166 Article 1131(2) provides that "[a]n interpretation by the [Free Trade] Commission of a 

provision of this Agreement shall be binding on a Tribunal established under this Section." 

144

established rules of law. Claimants do not identify the basis for the dramatic change in the 

supposed content of customary international law in the few short weeks since the submission of 

the Joint Reply, in which claimants' position was that "fair and equitable treatment" standard 

"goes 'far beyond' . . . customary international law." Joint Reply at 138-42, 143-45. Claimants 

also assert that, if the Commission's interpretation indeed means what it says, the Tribunal should 

disregard it as an "impermissible amendment" and an "intrusion" into an ongoing arbitration 

proceeding. 

Claimants' new contentions are without merit. First, there is no basis for claimants' 

assertion that their subjective and intuitive version of "fair and equitable treatment" has entered 

into customary international law. A new norm of customary international law can be established 

by widespread State practice that evidences an understanding that the practice is required by law. 

See, e.g., Restatement (Third) of Foreign Relations Law § 102(2) (1987). Claimants are correct 

that the terms "fair and equitable treatment" appear in a large number of bilateral investment 

treaties. See Joint Reply at 136-37 & n.28. That fact alone, however, says nothing about the 

content of the "fair and equitable treatment" standard. All of the State practice of record before 

this Tribunal, however, views that standard as a reference to the long-standing customary 

international law minimum standard of treatment of aliens. 167 Claimants' newfound belief that 

167 See Counter-Mem. at 171-72 (quoting commentary to OECD 1967 Draft Convention 

on the Protection of Foreign Property: "fair and equitable treatment" standard "conforms in 

effect to the 'minimum standard' which forms part of customary international law"); id. (quoting 

1984 report surveying OECD membership on meaning of standard, to similar effect); id. at 173 

n.92 (quoting 1980 statement by Swiss Department of External Affairs that "fair and equitable 

treatment" "references the classic principle of international law according to which States must 

provide foreigners in their territory the benefit of the international 'minimum standard.'"); id. at 

174 (quoting Canada's 1994 Statement of Implementation of the NAFTA, noting that Article 

1105(1) "provides for a minimum absolute standard of treatment, based on long-standing 


145

their version of "fair and equitable treatment" is a customary international law norm lacks 

support. 

Second, claimants' characterization of the NAFTA Parties' view of "fair and equitable 

treatment" as an "amendment" rather than an interpretation is wrong. As just noted, State 

practice over the past 30 years establishes that "fair and equitable treatment" has always referred 

to the customary international law minimum standard of treatment. Indeed, even those 

academics suggesting a contrary view have consistently acknowledged that viewing the standard 

as a reference to customary international law is a legitimate, alternative way to read the 

provision. See Counter-Mem. at 172-73 & nn. 91, 93. The Free Trade Commission's 

clarification that one interpretation was right and the other wrong does not make either any less 

an interpretation. 

Finally, there is no merit to claimants' assertion that the Commission's interpretation 

represents an impermissible "intrusion" into an ongoing arbitration. In submitting their claims to 

arbitration, claimants expressly consented to arbitration "in accordance with the procedures set 


principles of customary international law"); id. at 172 n.90 (quoting 2000 letter of submittal for 

U.S.-Bahrain bilateral investment treaty: paragraph setting forth "fair and equitable treatment" 

standard "sets out a minimum standard of treatment based on standards found in customary 

international law"). The reading of "fair and equitable treatment" in the U.S.-Bahrain letter of 

submittal is consistent with statements by the United States as to the content of the standard 

made contemporaneously with the NAFTA's negotiation and entry into force. Dep't of State, 

Letter of Submittal for U.S.-Armenia Treaty Concerning the Reciprocal Encouragement and 

Protection of Investment, reprinted in S. Treaty Doc. 103-11 at viii (Aug. 27, 1993); ("Paragraph 

3 guarantees that investment shall be granted 'fair and equitable' treatment in accordance with 

international law. . . . This paragraph sets out a minimum standard of treatment based on 

customary international law."); accord Dep't of State, Letter of Submittal for U.S.-Moldova 

Treaty Concerning the Encouragement and Reciprocal Protection of Investment, reprinted in S. 

Treaty Doc. 103-14 at ix (Aug. 25, 1993) (same); Dep't of State, Letter of Submittal for 

U.S.-Ukraine Treaty Concerning the Encouragement and Reciprocal Protection of Investment, 

reprinted in S. Treaty Doc. 103-37 at ix (Sept. 7, 1994) (same). 

146

out in this Agreement." NAFTA art. 1121(1)(a). Those procedures have always included Article 

1131(2)'s provision for the Commission to issue interpretations binding on Chapter Eleven 

tribunals. Nor is it any surprise that neither Article 1131(2) nor the July 31 interpretation 

suggests that ongoing arbitrations should be unaffected by a Commission interpretation; the 

general rule in international law is that agreements as to the interpretation of a treaty provision 

are retroactive in effect, since an interpretation does not change the content of a provision, it 

merely clarifies what the provision always meant. 168 

a. Claimants Fail To Establish A Denial Of "Fair And Equitable Treatment" 

As That Obligation Is Defined Under Customary International Law 

Claimants assert in error that the treatment provided them by the Mississippi courts did 

not accord with the "fair and equitable treatment" prescribed by customary international law. For 

all of the reasons demonstrated above, the treatment accorded claimants fully satisfied, at the 

very least, customary international law's minimum requirements of justice. Moreover, claimants' 

assertion that customary international law prohibits discrimination based on nationality, race or 

class does not advance their cause. Joint Reply at 144. Claimants do not suggest that a different 

standard applies to this allegation of alleged discrimination than to their allegations of 

discrimination under Article 1102 or under the principles of denial of justice already addressed. 

168 See Mustafa Yasseen, L'interprétation des traités d'après la Convention de Vienne, 151 

R.C.A.D.I. 1, 47 (1976) (Mr. Yasseen was the chair of the drafting committee at the conference 

that adopted the Vienna Convention on the Law of Treaties) ("The rule is that the interpretation 

is embodied in the text interpreted; the effect of a subsequent agreement thus goes back to the 

day of the entry into force of the original treaty.") ("Il est de règle que l'interprétation fasse corps 

avec le texte interprété ; l'effet d'un accord interprétatif remonte donc au jour de l'entrée en vigeur 

du traité initial.") (translation by counsel); see also, e.g., LaGrand (Germ. v. U.S.), 2001 I.C.J. 

104 99, 109-116 (June 27) (resolving question of interpretation of article of ICJ and PCIJ 

Statutes that had been subject of decades of controversy in literature and applying interpretation 

adopted to acts at issue before Court). 

147

Thus, for the same reasons, claimants' assertion of a violation of international law based on 

supposed discrimination under Article 1105(1) must fail. 

b. Claimants Fail To Establish A Denial Of "Full Protection And 

Security" Under Customary International Law 

In its Counter-Memorial, the United States showed that the cases in which the customary 

international law obligation of "full protection and security" was found to have been breached are 

limited to those cases in which a State failed to provide reasonable police protection against acts 

of a criminal nature. See Counter-Mem. at 176. In response, claimants do not dispute that this 

case does not remotely resemble those international cases because they have not proven that the 

United States failed to provide reasonable police protection against acts of a criminal nature that 

physically invaded claimants' property. See Joint Reply at 145-53. Rather, relying on their 

incorrect interpretation that Article 1105 "does not incorporate any reference or restriction to 

'customary' international law," id. at 147 (emphasis in original), Claimants assert that the "full 

protection and security" requirement extends to contexts entirely different from those where it 

148

has been recognized. 169 See id. at 145-52. Claimants fail, however, to identify a single 

international decision (and the United States is aware of none) supporting this assertion. 170 

Claimants wrongly assert that Maffezini v. Kingdom of Spain, Case No. ARB/97/7 (Nov. 

13, 2000), supports their position. See Joint Reply at 148. Maffezini involved a state entity's 

transfer of the claimant's funds in the absence of a legally binding contract formalizing the 

transaction. See Maffezini at 25 74-75. In that context, the tribunal found that "these acts 

amounted to a breach by Spain of its obligation to protect the investment as provided for in 

Article 3(1) of the Argentine-Spain Bilateral Investment Treaty." Id. at 27 83. Under that 

article, however, Spain was not required to provide "full protection and security" in accordance 

with the customary international law minimum standard of treatment, but to protect Argentinean- 

169 We note that claimants' suggestion (Joint Reply at 147-48) that the definition of 

"investments" in Article 1139 evidences the NAFTA Parties' intention that the "full protection 

and security" obligation would extend to non-physical intrusions not only is not persuasive as a 

matter of logic (i.e., because there is no reason to infer that every obligation embodied in Chapter 

Eleven necessarily could give rise to a breach with respect to every type of investment), but also 

is erroneous in the face of the Free Trade Commission interpretation of Article 1105. Likewise 

unavailing – especially in the face of the Free Trade Commission interpretation – is claimants' 

reference (id. at 148-49) to Professor Kenneth J. Vandevelde's statement that the full protection 

and security language in most bilateral investment treaties "certainly is broad enough to permit" – 

not, as claimants assert (Joint Reply at 148) "to require" – "an interpretation that it requires 

protection of investments (which includes intellectual property rights in most BITs) against 

injury by private parties . . . ." Kenneth J. Vandevelde, Investment Liberalization and Economic 

Development: The Role of Bilateral Investment Treaties, 36 Colum. J. Transnat'l L., 501, 510 

n.28 (1998) (emphasis added). Also, unavailing in the face of the Free Trade Commission 

interpretation – showing that the NAFTA Parties did not intend "to require within their treaty 

relationship a standard of due diligence higher than the minimum standard of general 

international law" – and for the reasons (ignored by claimants) explained in the Counter- 

Memorial (at 177-78), is claimants' continued reliance on AAPL, 30 I.L.M. 577 (1991). Joint 

Reply at 145 (quoting AAPL, 30 I.L.M. at 601 (internal quotation marks omitted)). 

170 For the reasons explained above, this Tribunal should reject claimants' assertion (Joint 

Reply at 147) that the Tribunal's Decision on Competence forecloses the United States from 

arguing that the "full protection and security" requirement is not even implicated in the context of 

this case. See supra at 56 n.63. 

149

owned investors and investments in conformity with Spain's own laws. See Acuerdo para la 

Promoción y la Protección Reciproca de Inversiones entre el Reino de España y la República 

Argentina, Oct. 3, 1991, art. 3(1) ("Each Party shall protect the investments effected in its 

territory, in conformity with its legislation, or investors of the other Party . . . .") ("Cada Parte 

protegerá en su territorio las inversiones efectuadas, conforme a su legislación, o inversores de la 

otra Parte . . . .") (translation by counsel). This is, obviously, quite a different legal regime than 

that of Article 1105(1), which prescribes international law, not domestic law, as the standard of 

protection. Thus, Maffezini is inapposite. 

Claimants also assert in error that the United States' position in this case is inconsistent 

"with the United States' own longstanding stance toward protection of its own citizens." Joint 

Reply at 146. Nothing in "the positions [the United States] has urged before other international 

tribunals," 171 "its official diplomatic positions," 172 or "its other treaty obligations" 173 suggests that 

171 None of the authorities claimants cite supports their contention that the United States' 

position here is inconsistent with the positions it has taken before other international tribunals. 

See American Mfg. & Trading, Inc. v. Republic of Zaire, 36 I.L.M. 1534 (1997) (involving 

destruction and looting of property); United States Diplomatic and Consular Staff in Tehran 

(U.S. v. Iran), 1980 I.C.J. 3 (involving hostage-taking); Home Insurance Co. v. Mexico (U.S.- 

Mex. Cl. Comm'n 1926), reprinted in Opinions of the Commissioners 51 (1927) (involving 

seizure of coffee); Case of the "Montijo" (U.S. v. Colombia) (1874), reprinted in 2 Moore's 

International Arbitration 1421 (1898) (involving seizure of steamship by rebels). Moreover, 

claimants wrongly assert that "the United States has successfully urged ICSID tribunals that 

foreign countries had failed to 'take all measures necessary' to 'ensure' the protection and security 

of an American company's investments." Joint Reply at 152 (quoting Zaire, 36 I.L.M. at 1548) 

(emphasis supplied by claimants). The United States did not so "urge" the Zaire tribunal: the 

United States was not a party to, and made no appearance in, that case. 


position here is inconsistent with its diplomatic positions. See Instructions of Sec'y Dulles to the 

American Embassy, Tripoli, No. A-101, May 21, 1957, MS. Dept. of State, reprinted in 8 

Whiteman’s 8 Digest of International Law 831 (1967) (liability for loss or injury to aliens arising 

from "mob demonstrations" exists only where claimant shows that authorities "failed to employ 


150

under customary international law the "full protection and security" requirement could apply 

here, a context not even remotely similar to those in which a breach of the obligation has ever 

been found; i.e., where a State failed to provide reasonable police protection against acts of a 

criminal nature that invaded the person or property of an alien. Joint Reply at 149. 


all reasonable means at their disposal to prevent the unlawful acts" or "failed to take proper steps 

to apprehend and punish the wrongdoers"); Dec. 8, 1923 treaty between the United States and 

Germany (at art. I), 44 Stat. 2133, 4 Treaties 4192 (Trenwith 1983), reprinted in 3 Hackworth 

Digest of International Law 630 (granting to aliens "that degree of protection that is required by 

international law"); Two French Citizens, 3 Op. 253, Butler (1837), in Digest of the Published 

Opinions of the Attorneys-General and Leading Cases on International Law 3 (1877) (noting that 

"where aliens have suffered violence from citizens of the United States, they can be protected 

only by the redress to be afforded in the courts and the special interposition of the legislature"); 

Letter of Mr. Adams, Sec'y of State, to Mr. de Onis, Spanish Minister (1818), reprinted in 4 

Moore's Digest of International Law § 535 (1906) (stating that Spain had a duty under 

international law to prevent French cruisers from seizing U.S. ships and cargo in Spanish waters). 


position here is inconsistent with any of its treaty obligations. See Treaty of Friendship, 

Commerce and Navigation (Argentina-U.S.) Art. II (1853), available at 

http://www.yale.edu/lawweb/avalon/diplomacy/argen02.htm (offering general protection to those 

engaged in business, "subject always to the general laws and usages of the two countries 

respectively."); Convention to Regulate the Commerce Between the Territories of the United 

States and of His Britannick Majesty, Art. I (1815) (reprinted in Charles I. Bevans, 12 Treaties 

and Other International Agreements of the United States of America 49, 50 (1974)) (offering 

merchants and traders general protection for commerce, "subject always to the Laws and Statutes 

of the two countries respectively"); Treaty of Friendship, Limits, and Navigation (Spain-U.S.) 

Art. VI (1795) available at http://www.yale.edu/lawweb/avalon/diplomacy/sp1795.htm#art6 

(requiring parties to "protect and defend all Vessels and other effects" of the other party's 

nationals and to make efforts to "recover and cause to be restored to the right owners" those 

vessels and effects; the preceding and subsequent articles concern violent attacks and physical 

seizures); Treaty of Amity, Commerce and Navigation Between His Britannick Majesty and the 

United States of America ("The Jay Treaty"), available at 

http://www.yale.edu/lawweb/avalon/diplomacy/jay.htm (granting rights of entry and protection 

for merchants in time of European war and threats of piracy); Kenneth J. Vandevelde, United 

States Investment Treaties at 77 (noting simply that the phrase "full protection and security" in 

bilateral investment treaties corresponds to similar language in friendship, commerce and 

navigation treaties). 

151

Thus, because, for the reasons explained in the Counter-Memorial and here, the full 

protection and security obligation does not extend beyond the customary international law 

minimum standard of treatment of aliens and that standard – contrary to claimants' assertion (see 

TLGI Mem. at 94) – does not require states "to prevent economic injury inflicted by private 

parties," claimants fail to meet their burden of proving that the challenged measures violate the 

"full protection and security" requirement. 

D. Claimants Fail To Establish A Violation Of NAFTA Article 1110 

Claimants continue to argue that the result of the O'Keefe proceedings – a 

court-approved settlement – violated Article 1110 of the NAFTA. See Joint Reply at 159. Yet 

claimants still have not provided the Tribunal with any authority that supports their allegation 

that such an action by a court could effect a taking in violation of Article 1110. 

NAFTA Article 1110 – and the cases interpreting it – require that claimants establish an 

"expropriation" of an "investment of an investor." Here, claimants have made repeated (though 

unsubstantiated) allegations of discrimination and denial of justice, but have ignored the 

fundamental protection afforded by Article 1110(1): "[n]o Party may directly or indirectly 

nationalize or expropriate an investment of an investor of another Party . . . ." 174 

For example, claimants dismiss too swiftly the fact that no international tribunal has 

found – or even heard an allegation of – an expropriation on facts such as these. This is not a 

case of an investor prevented from operating its investment by denial of a permit (see, e.g., 

174 Proof of failure of one of the four requisite characteristics of a lawful expropriation – 

i.e., "(a) for a public purpose; (b) on a non-discriminatory basis; (c) in accordance with due 

process of law and Article 1105(1); and (d) on payment of compensation" – is a secondary step 

in the analysis. NAFTA art. 1110 ("No Party may directly or indirectly nationalize or expropriate 

an investment of an investor of another Party . . . ('expropriation'), except . . . ."). 

152

Metalclad Corp. (U.S.) v. United Mexican States (Award) (Aug. 30, 2000), ICSID Case No. 

ARB(AF)/97/1, at 106), or of an investor/lessor deprived permanently of the value of its 

property by order of a court directed to the lessee without any notice to the lessor (see, e.g., Oil 

Field of Texas, Inc. v. Iran, 12 Iran-U.S. Cl. Trib. Rep. 308 (1986) at 41-43), or even of 

alleged substantial interference with an investment's ability to carry on its business (see, e.g., 

Pope & Talbot, Inc. (U.S.) v. Canada, (Interim Award) (June 26, 2000) at 102). Rather, this is 

a case where claimants allege that settlement of a lawsuit for civil damages constitutes an 

"expropriation." Just as international "precedent usually does not treat regulatory action as 

amounting to expropriation" (S.D. Myers, supra, at 281), the United States is aware of no case 

that has imposed liability under the theory of expropriation for a case such as this one (i.e., 

involving "the carrying out of a judgment of a court in a civil case"). See Sohn & Baxter, 1961 

Harvard Draft Convention, comment to art. 10(5), at 115. 

Finally, claimants have not satisfied their burden (noted by their own source) even to 

identify "some form of economic interest that can be identified as its 'investment' under NAFTA 

Article 1139[.]" Joint Reply at 158 (citing an unpublished commentary on Article 1110 written 

by an advocate for claimants in other Chapter Eleven cases). Claimants offer neither argument 

nor evidence to show that any of the multiple forms of consideration provided for by the O'Keefe 

settlement constitute an "investment of an investor of another Party in its territory," as required 

by Article 1110(1). If the amount of money paid in settlement of a civil suit could constitute an 

investment, then, as the United States has already noted (Counter-Mem. at 182), every settlement 

of civil litigation resulting in payment by a foreign investor (from a NAFTA country) would give 

rise to liability under Article 1110. 

153

In sum, claimants put the cart before the horse. By resting their argument on sub- 

paragraphs (a) through (d) of Article 1110(1), claimants leave unanswered the fundamental 

inquiry posed by that expropriation provision: has the government taken any property and does 

that property constitute an investment of an investor in the territory of the NAFTA Party? 

Claimants here have failed to establish a claim of expropriation of an investment of an investor. 

CONCLUSION 

For the foregoing reasons, and for the reasons set forth in the United States' Counter- 

Memorial and the submissions of the United States on matters of jurisdiction and competence, 

the claim for arbitration in this matter should be dismissed in its entirety. 

154 

Respectfully submitted, 

____________________________ 

David J. Anderson 

Vincent M. Garvey 

Mark A. Clodfelter Kenneth L. Doroshow 

Barton Legum Craig M. Blackwell 

Laura A. Svat David O. Buchholz 

Alan J. Birnbaum Jonathan B. New 

U.S. DEPARTMENT OF STATE U.S. DEPARTMENT OF JUSTICE 

Office of the Legal Adviser Civil Division 

Suite 5519 901 E Street, N.W., P.O. Box 883 

2430 E Street, N.W. Washington, D.C. 20530 

Suite 203, South Building Tel: (202) 514-4263 

Washington, D.C. 20037 Fax: (202) 616-8202 

Steven F. Fabry Attorneys for Respondent 

J. Carol Williams United States of America 

OFFICE OF THE U.S. TRADE 

REPRESENTATIVE 

600 17th Street, N.W. 

Washington, D.C. 20508 

Dated: August 27, 2001

THE LOEWEN GROUP, INC. and RAYMOND L. LOEWEN, v. THE ...

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