Once again, a lawsuit accuses the Chinese government of mistreating its citizens, and once again, the victims are suing ... an American corporation.
In U.S. federal court last week, the Human Rights Foundation teamed up with members of Falun Gong, or FG, to name Cisco (Nasdaq: CSCO) as an accessory to China's FG crackdown. According to the plaintiffs, Cisco is providing China with the Internet infrastructure necessary to track and harass members of FG.
So why not sue China? U.S. courts are much more amenable to this kind of lawsuit, and thanks to the United States' Alien Tort Claims Act, it's easier to sue a corporation when the real villain is beyond the reach of the law (and sovereignly immune).
Maybe too easy. Even as Cisco got served court papers, Chinese search engine Baidu (Nasdaq: BIDU) also became defendant in another U.S. lawsuit, this time alleging censorship of Internet search results behind China's "Great Firewall." Both lawsuits echo the one filed in 2007 against Yahoo! (Nasdaq: YHOO), alleging similar human rights violations. Yahoo! chose to settle that case ... which sets a worrisome precedent for Cisco investors.
Like the Yahoo! lawsuit, the Cisco complaint aims to attack Chinese policies from the flank. Maybe China can't be sued directly, but if the lawyers can embarrass Cisco with a high-profile case, they might force the company to "self-censor" -- refusing to sell even equipment that China might possibly use to oppress its citizens.
Foolish takeaway
Here's hoping Cisco shows more backbone. According to the courts, in order to prove "accessorial liability under the Alien Tort Statute ... a claimant must show that the defendant provided substantial assistance with the purpose of facilitating the alleged offenses." [Emphasis added.] I doubt that was Yahoo's aim. I'm pretty sure it wasn't Cisco's, either.
Does the Falun Gong sound a death knell for Cisco? Add the stock to your Fool Watchlist and see how this plays out.
