Develop a Global Mindset

So the decision tree is a tool that can apply regardless of the legal issue involved. And I’d like to here discuss another issue that applies across the board. We live in a global economy, and as a result, it’s very important to think globally about the three pillars. This applies, regardless of what stakeholder you’re thinking about, and regardless about what legal risk you’re facing.

Let me ask you this question rather than me just stating the fundamental principle involved here. My question is, let’s say that I sue you fo $100,000. And my lawsuit is based on the color of the shirt that you’re wearing or blouse that you’re wearing. I claim that this blouse is in a color that is used by one of the football rivals of the University of Michigan, and it’s caused me great mental distress. And therefore you owe me $100,000, but I also say to you I’m going to give you an out. You can pick one country in the world where this lawsuit cannot be filed. Which country would you pick?

In other words, where’s probably the worst place in the world to be sued? Now, I ask this question sometimes when I’m working with senior executives and it’s amazing how consistent they are in their answers. Can you guess what country they select? Well, it’s the good old United States of America. They say this is probably the worst place to be sued in the world. Then I ask them a second question. And that is let’s say I am going to sue you in the United States, but you can pick one state in the country, where you you can not be sued. When is the worst state to be sued in within the United States?

Now this is a tuff question for those of you are outside the United States, but here again at least from participants and executives who are from the United States, they’re fairly consistent in selecting California. So I’m going to call this global mindset the California effect. And actually I’ve borrowed this term from a friend who teaches at Berkeley. But when I use the term California effect it’s the equivalent of saying think globally about the law. Now why worry about the law globally? If you’re operating a business in Brazil, why worry about the law in the United States? If you’re operating a business in the United States, why worry about the law in India?

If you’re operating a business in China, why worry about German law? What’s going on here? Why think globally about the law under this California effect? Well, there are a couple of reasons. First of all, thinking globally about the law is important because laws change. There was an article in The Economist awhile ago that described a new law. And the article began, quote, California today The United States tomorrow, and the rest of the world the day after, sort of describing the way the laws are changed around the world, so it’s very important to think globally in order to try to predict changes in the law.

One of my students was the HR Vice-President for a very large international corporation, and she said whenever their company develop a new HR policy they would always match it against California law to see if it, if they should adopt it or not. So, think globally about the law. Here is a quick example, something we’ll be touching on later in the course.

Is it legal in the United States for a manager to bully and harass employees?

Hit pause and write down your answer. What do you think? Is it legal for a manager to bully and harass employees?

The answer is, it depends but generally it is legal for a manager to harass employees as long as the harassment is not based on what we call a protected category. So as long as it’s not based on race or sex, etc, as long as the manager Is an equal opportunity harasser. It’s legal in the United States, but in many countries of the world, it’s illegal. And so a wise company leader would look at what’s happening around the world, and see that this is going to to come to the United States eventually, and adopt corporate policies to match that. So very important to think Globally about the law, because law changes.

This is the legal version of think globally even though you are acting locally. Where as I saw on a student’s sweatshirt recently, think globally, drink locally, but this is the legal version of think globally even though you’re acting locally. There’s another reason why developing a global mindset is important. Why the California effect is important, and that is because, when you do business in other countries in a global economy. Then you are going to be subject to their regulations, and you’re going to be subject to potential lawsuits. So let’s take a look at a case example. We’ve got a couple that lives in the state of West Virginia, Marv and Bessie.

And Marv and Bessie go out one evening, and when they return to their house they discovered something interesting, and that is, their house is missing, and so Marv and Bessy are a little bit curious. What happened to our house? They did a little investigation, and they discovered that down the road from their houses they knew was a so called 7-Eleven store. I don’t know if you have 7-Elevens in your country. They were started many years ago in a town called Southland Texas. They opened at seven in the morning, closed at 11 in the evening, and a huge number of 711s in the United States are owned by a company called Southland, and, among other things, 711s sell gasoline.

Now, in this particular case, there was a leak in the pipes connecting a gas storage tank, with the gas pumps. And so, thousands of gallons of gasoline seeped underground, and some of it ended up in Marv and Bessie’s basement. There was a sump pump in the basement, a pump that pumps out water if there’s flooding, and a spark from this sump pump ignited the gas and blew up their house. So that’s why their house was missing, and Marvin Gussy got to thinking, this just doesn’t seem right. And so they hired a lawyer and decided to file suit, now the lawyer did some research.

He looked around the world, he wanted to find a large, rich defendant, and he finally found one in Japan, a company called Ito-Yokado. Now, what’s the connection between this large company in Japan? And Marvin Bessie’s missing house. How can they connect their loss with his large company? Please hit pause and write down your answer.

Well, when I ask this question in class, people come up with some very creative answers. They say well maybe Ito-Yokado manufactured the pipe that leaked the gas. And no they didn’t.

Or they said, maybe manufactured the sump pump, and the spark from the sump pump caused the gas to ignite and caused the damage. Well they didn’t manufacture the sump pump either. To make a long story short Ito-Yokado owns Southland Corporation. This large US corporation that owns the 7-Eleven, and so as a company owner they are brought into this law suit. So here you have a situation where now you’re a Japanese executive, and you have to defend a law suit in a small town in West Virginia. And on a global scale, this small town might not be friendly to foreign corporations, just as when a US corporation is sued overseas.

For example, there was a judge in the West Virginia Supreme Court who put it this way once. As long as I am allowed to redistribute wealth from out-of-state companies to injured in-state plaintiffs, I shall continue to do so. Not only is my sleep enhanced when I give someone else’s money away, but so is my job security.

So what What’s behind, what’s going on here? Why is it that when you make a business decision to operate in another country, you might have to go to that country to defend your business decision, to defend your business operations? Well the underlying law was illustrated by another case this case involved a couple of young men who were sitting around one afternoon listening to some old time music by a band called Judas Priest. And after listening to the music for awhile they loaded a shotgun, they drove to a lonely churchyard, and the first man propped the gun under his chin, pulled the trigger and killed himself. The second young man did the same thing only somehow he survived.

And now we have a lawsuit filed by the young man against the band Judas Priest. All of whom are British citizens and against their corporations in the state of Nevada where this incident occurred, and a Nevada judge basically said, well look. Before I can decide this case, I first of all have to decide what right do I have to hear this case. These are British citizens in British corporations. How can I force them to defend a case in Nevada? Well, he decided that he did have that right, and this was his reasoning, and let me read a paragraph from the decision. The State of Nevada, in protecting its citizens from personal injury, Has a strong interest.

Furthermore, the only alternative forum, the only alternative courts available would be the courts of England. An overseas lawsuit is expensive and burdensome. While it is true that members of Judas Priest will now be forced to defend a lawsuit in a country distant from their own, it is more fair to put the burden on them and not on the plaintiffs because and here’s the key, language from the courts decision. The band members consciously and deliberately chose to develop a world-wide market. So in our global economy it’s not uncommon for your business to choose a worldwide market, to operate in other countries. But one of the consequences of that is that you might then have to defend lawsuits in those countries.

So that concludes our general look at the California effect, and what I want to do in our final piece is to look at how litigation differs between the United States and the rest of the world.