March 11, 2002
Michael Rubin
On January 13-14, 1999, three separate lawsuits were filed challenging the unlawful sweatshop conditions in the Saipan, CNMI garment industry.
The first case, filed in San Francisco state court, was brought by Global Exchange, UNITE, Sweatshop Watch, and the Asian Law Caucus against 18 U.S. garment retailers -- including such companies as The Gap, Inc., Target Corp., J.C. Penney, Lane Bryant, and The Limited. Plaintiffs charged that all of the defendant companies engaged in unfair business practices (a violation of California Business and Professions Code ¤17200) by falsely advertising their garments as being sweatshop-free, by violating the federal law prohibiting the shipment of "hot goods" in interstate commerce, by aiding and abetting their Saipan garment factories' violations of the laws against involuntary servitude, and by other misleading labeling and advertising practices.
On November 12, 1999, the S.F. judge upheld the allegations of the complaint against the retailer defendants' motion to have these claims dismissed, and rejected the retailers' efforts to divide the case into separate proceedings against each retailer defendant. The judge concluded that plaintiffs' legal and factual allegations were legally sufficient under California law, and that plaintiffs would prevail and be entitled to relief if they could prove the facts alleged in the San Francisco complaint.
Discovery has been proceeding under the direction of a referee, and plaintiffs have been gathering the evidence needed to prove their case. In early 2002, several of the retailer defendants filed motions for summary adjudication, contending among other things that there is no proof that anyone has been harmed by the retailers' alleged misrepresentations about working conditions in the Saipan factories and that the First Amendment protects those allegedly misleading statements about working conditions. Plaintiffs filed extensive briefs opposing those motions. The parties' arguments will be heard later in 2002. No trial date for the San Francisco action has yet been set.
The second case, filed on behalf of a class of approximately 30,000 foreign garment workers who currently or formerly worked in Saipan, was originally brought in federal court against 18 retailers and 11 Saipan-based garment contractors -- the factories that manufacture the retailers' garments. Plaintiffs alleged that the retailers and their Saipan-based contractors engaged in a series of unlawful conspiracies in violation of RICO (the Racketeer Influenced and Corrupt Organizations Act). Plaintiffs also charged that the system of garment production on Saipan violates the Anti-Peonage Act -- which prohibits the use of forced labor, among other things -- and the Alien Tort Claims Act -- which permits foreign nationals to sue in America for violations of generally-accepted human rights.
This second case has been litigated in Los Angeles, Honolulu, and now Saipan against the original defendants plus new retailer defendants (including Levi Strauss, Talbots, and Abercrombie & Fitch), and several more Saipan-based garment factories. Plaintiffs contend that the retailer and factory defendants all conspired, among themselves and with foreign "recruitment agencies," to create an indentured work force in Saipan that was highly vulnerable to legal and economic exploitation, and that the factories and others routinely violated the workers' rights in a series of similar schemes.
In November 2001, the CNMI judge upheld the principal allegations of plaintiffs' complaint, ruling that most of plaintiffs' claims were validly stated on their face and that other claims could be amended to conform to the law. See Ruling re Motions to Dismiss (PDF 3.4 mb). Plaintiffs then amended the complaint, and defendants responded by filing another series of motions to dismiss, which will be heard and decided later this spring.
In February 2002, plaintiffs argued their motion for class certification in the Saipan case. By that motion, the workers are urging that the Saipan case be allowed to proceed as a single action on behalf of the entire class of foreign garment workers who toiled in the Saipan garment factories at any time from January 1989 to the present. Plaintiffs contend that all of the harms suffered by the workers are the result of a large, overarching conspiracy by the retailer and factory defendants, and that trying the case on a collective basis, rather than in a series of individual actions, makes practical and legal sense. A decision is expected on that class certification motion shortly.
The third case, filed by a smaller group of Saipan garment workers, was brought in federal court in Saipan against 22 Saipan-based garment contractors, charging violations of federal overtime law (the Fair Labor Standards Act, or "FLSA"). The FLSA case is smaller in scope than the RICO/Anti-Peonage Act/Alien Tort Claims Act case because the federal overtime law does not extend as far back in time (three years rather than ten) and because each plaintiff in an FLSA case must individually file a Consent to Sue, instead of being represented on a class basis.
More than 1,200 individual plaintiffs have now joined the FLSA case. Those individuals filed the FLSA case (and the RICO etc. case) under "Doe" pseudonyms, because they feared retaliation by the contractors and foreign government officials if their identities became known. The Ninth Circuit Court of Appeals in early 2000 issued a strong ruling upholding the individual plaintiffs' right to proceed anonymously, at least until notice could be sent to all potential FLSA plaintiffs, informing them of their rights and inviting them to join the litigation. See Does I et al. v. Advanced Textile Corp. et al.,
Although the factories opposed the sending of any notice, the CNMI judge recently authorized the distribution and publication of notice to approximately 15,000 similarly-situated current and former garment workers, and gave them several months in which to respond. Those notices will be distributed in early April 2002.
Beginning in the late Spring of 1999, plaintiffs' counsel started having extensive settlement talks with a broad range of defendants. The plaintiffs have now reached settlements totaling approximately $8.75 million with 19 U.S. mainland retailers: Brooks Brothers, Inc., Brylane, L.P., Calvin Klein, Inc. Cutter & Buck, Inc., Donna Karan International Inc., The Dress Barn, Inc., The Gymboree Corp., J. Crew Group Inc., Jones Apparel Group, Inc., Liz Claiborne, Inc., The May Department Stores Company, Nordstrom Inc., Oshkosh B'Gosh, Inc., Phillips-Van Heusen Corp., Polo Ralph Lauren Corp., Sears Roebuck and Company, Tommy Hilfiger U.S.A., Inc., Warnaco Group, Inc., and Woolrich, Inc. None of these settlements can take effect until after they receive court approval. However, plaintiffs' counsel are hopeful that the settlements will be approved, and that even more defendants -- contractors as well as retailers -- will join in those settlements. The CNMI judge is expected to decide shortly whether to preliminarily approve those settlements and to send notice to all 30,000 potential plaintiffs, advising them of the settlement terms and conditions. A final settlement Fairness Hearing would be scheduled after the sending of notice, if the settlement is preliminarily approved.
Those 19 settlements include both prospective relief (prohibiting Saipan-based contractors from violating the law in the future, and including strict and effective monitoring provisions to ensure compliance) and retroactive relief (payments to garment worker class members whose rights were violated in the past).
At the heart of the prospective relief provisions is a comprehensive new Saipan Code of Conduct. Every settling retailer has agreed, as a condition of settlement, to include in all future contracts with Saipan-based contractors a new series of provisions requiring the contractors' strict adherence to a set of detailed standards governing working and living conditions in the Saipan factories and barracks. These standards build on existing legal standards and previously-negotiated codes of conduct in other contexts, and result in a tough and clearly-stated list of conditions that each contractor must satisfy in the future.
To put teeth into the Code of Conduct, the settlement agreement also provides for extensive, on-site monitoring. The monitor's staff will be required to conduct initial pre-contract audits with all contractors who want to work for the settling retailers, to make sure their factories and living quarters comply with the Saipan Code of Conduct. Once the contracts are in effect, the monitor will send in regular monitoring teams to ensure that the contractors continue to live up to their obligations under the Code. The monitoring will be conducted by teams of specially-trained individuals who are familiar with the law and the Code and are experienced in human rights and labor law monitoring. Not only will the monitors conduct physical inspections and periodically review the contractors' documents, but monitors who speak the garment workers' language and have similar cultural backgrounds will also conduct worker interviews, both on-site and off-site, to ensure that the contractors are complying with all of their responsibilities.
The settlement agreement also prohibits enforcement of the notorious "Shadow Contracts -- draconian provisions in the agreements the workers are required to sign in their home countries, especially China, which require the workers to give up their right to date, to go to church, to become pregnant, or to exercise other rights that are clearly protected in the United States. Finally, the agreements address the troubling problem of excessive "recruitment fees," which are charges that can range from $2,000 to $8,000 which the workers must pay in their home countries as a condition of obtaining work in the Saipan garment factories. These exorbitant fees are one of the principal causes of the workers' involuntary servitude and peonage, because they effectively force the worker to continue working for their Saipan contractor, and to accept whatever overtime is offered, in the struggle to re-pay the enormous debt that they were forced to incur in order to get the job.