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US: Sweatshop Case Settles for $20M

by Alexei OreskovicThe Recorder
September 27th, 2002

Three overseas sweatshop lawsuits involving dozens of the United States' largest retailers and a 30,000-member class of garment workers have settled for $20 million.

Abercrombie & Fitch, Target, Gap Inc. and J.C. Penney Co. Inc. are among the retailers and manufacturers that agreed Wednesday to settle suits alleging that factory workers on the U.S. commonwealth island of Saipan were subject to exploitative conditions.

The multifaceted litigation, which included suits in federal and state courts in San Francisco and Saipan, has been going on for three years and involved hundreds of lawyers from all over the country representing nearly 60 defendants.

Lawyers from New York-based Milberg Weiss Bershad Hynes & Lerach, one of the lead firms representing the workers, decided to waive attorney fees. San Francisco-based Altshuler, Berzon, Nussbaum, Rubin & Demain, the other main plaintiffs' counsel, waived 40 percent of its fees. Altshuler Berzon Francisco's Bushnell, Caplan & Fielding will share about $3 million in attorney fees.

The settlement, which requires approval from a federal court in the Mariana Islands, does not include an admission of wrongdoing by the defendants.

Workers' rights advocates said the settlement was a major victory, not only because of the monetary sum, but also because of a monitoring program that the settlement puts in place.

"We think it's a precedent-setting settlement in that there's never been this kind of a monitoring system set up in which the companies actually collaborate with each other and that it's legally mandated," said Medea Benjamin, the founding director of Global Exchange, a San Francisco-based nonprofit human rights organization that was involved in one of the cases.

Attorneys on the defense side said they were pleased with the settlement as well. "We believe that going forward the settlement will confirm that we were fair to our workers," said Edward Patrick Swan Jr., a partner at San Diego-based Luce, Forward, Hamilton & Scripps that represented several of the factories in the case. "I think it's a victory for everyone concerned."

The three suits were Unite v. The Gap, 300474, a California Business & Professions Code ? 17200 violation claim filed in San Francisco Superior Court; Does v. Gap, CV-01-0031, a class action involving the Racketeer Influenced and Corrupt Organizations Act and the Alien Tort Claims Act filed in Saipan federal court; and Does v. Advanced Textile Corp., CV 99-002, a Fair Labor Standards Act claim also filed in Saipan.

All the suits revolved around working conditions at garment factories in Saipan, an island near Guam which is a U.S. commonwealth. Because the island is exempt from U.S. immigration and minimum wage laws, it has become a popular location for garment manufacturers to set up shop.

According to the complaints, numerous garment factories on the island hired impoverished Chinese wome contracts. These contracts included special recruitment fees intended to put the signer into debt and then require the person to work two to three years to pay off the debt. Factory rules prohibited workers from engaging in basic activities such as dating, getting pregnant, going to church, or criticizing their employers. Workers who broke the rules or tried to quit were threatened with fines, deportation and imprisonment.

Two years ago, 19 of the retailers agreed to settle the suit by paying $8.75 million in damages and agreeing to a code of conduct and monitoring concept. Wednesday's settlement, for another $11.25 million, covers the seven other retailers and all 23 manufacturers on the defendants' list.

A number of legal developments in the past few months strengthened the garment workers' cases.

In June, a federal judge in Saipan gave preliminary approval to a 30,000-member class, and the 9th U.S. Circuit Court of Appeals upheld the ruling two months later.

And in May, the California Supreme Court's decision in Kasky v. Nike, 02 C.D.O.S. 3790, accepted a false advertising argument similar to the one made by the plaintiffs in the Saipan ? 17200 case.

"Each legal development in this case, and externally, broke in our favor," said Michael Rubin, a partner at Altshuler Berzon.

The only defendant that opted not to join the settlement is Levis Strauss & Co., which began severing its ties to contractors in Saipan in 1998 and fully withdrew in 2000. According to Linda Butler, a spokeswoman for Levi, the company ensured that the independent contractors it worked with on the island in the 1990s were in compliance with its guidelines.

"We understand that from an economic point of view the short term solution is to settle, but in the long term it represents a compromise of our values," said Butler. "The allegations against Levis Strauss & Co. in the lawsuit are simply not true."

While the various parties in the cases sparred in court for three craft the code of conduct and the monitoring system. Attorneys went through hundreds of drafts before finalizing a code of conduct that guarantees extra pay for overtime work, safe food and drinking water, and other basic rights for the Saipan workers.

"It was an extraordinary effort by lawyers all over the world, meeting in Saipan, in L.A., in San Francisco," said Michael Rubin. "At the same time we were negotiating, we were engaged in some of the most hard fought, most difficult litigation I've ever confronted."

Under the terms of the settlement, the workers at the Saipan factories will get roughly $6 million. Another $4 million is dedicated to fund the monitoring program, and $400,000 will go to a repatriation fund for the workers.

Attorney fees will total about $3 million, while about $5.5 million to $6 million is dedicated to the costs and expenses involved in litigating the case.





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