Document Type

Article

Disciplines

International Law

Abstract

On November 2, 1995, a civil jury constituted in the First Circuit Court of Hinds County, Mississippi returned an award of punitive damages in the amount of $400 million in favor of Jeremiah O'Keefe, Sr., his son and their related business entities (O'Keefe) and against The Loewen Group, Inc. and its related entities (Loewen) in the case of O'Keefe v. The Loewen Group, Inc. (O'Keefe Litigation).3 This punitive damages award followed an award of $100 million in compensatory damages entered by the jury on November 1, 1995.' The compensatory damages award covered losses allegedly sustained by O'Keefe as a result of breaches of three contracts, entered into in 1974, 1979 and 1987, between Gulf National Life Insurance Company, a Mississippi funeral insurance company owned by O'Keefe, and Wright & Ferguson Funeral Home, Inc., a funeral home owned by Loewen.5 The compensatory award also covered losses allegedly sustained by O'Keefe as a result of the purported breach of a contract by Loewen in April 1992,6 fraud and violations of Mississippi's antitrust laws.

Confronted with this massive verdict as well as a state appellate bond requirement of 125% of the total judgment in order to obtain a stay of execution pending appeal,8 and without the financial ability to satisfy either, Loewen filed motions for a new trial, remittitur, reduction of the punitive damages award and reduction of the appeal bond requirement to $125 million.' The trial court denied all relief requested by Loewen, including its request for stay of enforcement of the judgment pending appeal.'" This denial was affirmed by the Mississippi Supreme Court on January 24, 1996." The Mississippi Supreme Court ordered Loewen to post the full $625 million bond within seven days in order to obtain a stay of execution pending an appeal. 2 Faced with imminent financial ruin, Loewen resolved the O'Keefe Litigation on January 29, 1996 through a structured settlement agreement valued at $175 million. 3 Despite the substantial discounting of the verdict in the settlement agreement, its amount was thirty to fifty times greater than the total value of the companies at issue in the underlying commercial disputes.

In the era of the pre-global economy, the O'Keefe Litigation would have ended with the execution of the settlement agreement and its subsequent performance. However, on October 30, 1998, Loewen initiated an arbitration proceeding against the United States through the filing of a claim with the International Centre for the Settlement of Investment Disputes (ICSID)." In its claim, Loewen contended that the ultimate result in the O'Keefe Litigation constituted a violation by the United States of its obligations with respect to the protection of international investments pursuant to the North American Free Trade Agreement (NAFTA).

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