Faulty Chinese Goods Have Lawsuit Included
Vesna Jaksic has an interesting story on U.S. lawsuits arising from harmful Chinese products in the most recent issue of the National Law Journal. The article is entitled, "Faulty Chinese Goods May Import Lawsuits: Attorneys eye potential litigation; others work to limit clients' liability," and it consists of interviews with lawyers on both sides of the issue, including yours truly.
The focus of the article is on the increasing work for lawyers who sue companies for defective products, on the one side, and for lawyers who counsel companies on how to avoid such lawsuits or defend against such lawsuits, on the other side.
Full disclosure: Both I and my firm do a huge amount of work counseling companies on how to protect against defective Chinese products, which position probably puts me in the middle of the debate. I consider Chinese defective Chinese products to be a very serious issue, but I also see American companies as anything but defenseless in preventing such problems.
The article starts with the sage admonition that companies cannot just sit back and do nothing:
"I'm sure everyone involved -- consumers, importers, retailers, plaintiffs lawyers -- is on alert now," said Lianne Pinchuk, an associate in New York's Weil, Gotshal & Manges [a leading New York based defense firm] who is a member of the firm's products liability and mass torts group. "I do think this is forcing all companies to get prepared."
It then talks of how American class action lawyers are gearing up:
Michael D. Hausfeld, a partner at Washington's Cohen, Milstein, Hausfeld & Toll [a leading plaintiffs class action firm] who has handled class action litigation, noted that news regarding the allegedly defective tires has prompted several calls from clients."We're in the process right now -- because we have a large Chinese presence -- of evaluating the extent of the issue," he said. "We've got requests on tires, on glycerin, on numerous products that clearly now emanate in one form or another at least in part from China."
The article notes that Seattle-based plaintiffs class action firm, Hagens Berman Sobol Shapiro, recently filed a proposed class action against the manufacturer of various Thomas & Friends wooden toys. Hagens Berman attorney, Beth Fegan rightfully calls it "a wake-up call for American companies, regardless of where their products are coming from."
I am then quoted as bluntly calling for American companies to do more to prevent product problems:
Dan Harris of Seattle's Harris & Moure, who writes for the "China Law Blog," noted that "[a]nyone who's doing business with China without a fairly comprehensive quality check is basically off their rocker."But Harris said a surprising number of these companies do not have detailed contracts with their manufacturers and distributors or don't have contracts in place at all. He noted that many businesses do not invest in quality control.
"Even if there is no enforcement in China -- which is absolutely not true -- you still want it [a good contract with your manufacturer] for many other reasons," he said.
John Leary, who heads up White & Case's Shanghai office, sees the suing of Chinese companies by American companies as a potentially growing practice area for Chinese law firms:
"Nearly every American company that's doing business in China has a law firm they use already," he said. "Are they going to find a different one in order to enforce their indemnities if they need to? I don't know, but you can certainly see it as a growing potential practice area, particularly given the fact that foreign firms are prohibited from practicing local law."
Todd L. Platek, of the Law Office of Todd L. Platek in Berkeley Heights, N.J., and a frequent commenter on this blog, says "that issues regarding problematic Chinese imports will most likely continue to surface, as they are a typical challenge for any developing nation:"
Lawyers, get ready.
Comments
Mr. Harris,
First, let me thank you for stopping by my site earlier today.
Two questions:
1. Do you see a huge proliferation of law suits coming with regard to products made in China?
2. How successful would such law suits be in promoting quality control? After all, the suits would involve a foreign company?
Posted by: Always On Watch | July 14, 2007 5:26 PM
Always On Watch --
Thank you for stopping by here. You ask two (really three) very good questions. Here goes:
1. Yes and no. I see plaintiffs' lawyers seizing on the publicity and filing more lawsuits involving Chinese products. But, at the same time, both Chinese manufacturing and American companies' Chinese know-how are improving so the number of defective products should decline.
2. Nine out of ten times, suing the Chinese company in the United States will not make sense, so plaintiffs are going to sue the American company or companies involved with the product. American companies do not like getting sued and so they will be more careful. For this reason, I think these lawsuits and the threats of such lawsuits will serve to force American companies to improve their quality control when it comes to sourcing product in China. I am already seeing this in our own clients.
Posted by: China Law Blog | July 14, 2007 5:56 PM
The Chinese manufacturers are under numerous stresses, and whether or not they can improve product quality depends on various financial and marketing issues they face. Materials costs are rising. Labor costs are rising. Taxes (or repeal of export rebates) are rising. Foreign buyers, however, continue to press strongly for continuing low prices in the face of competition and their own desire for protection or expansion of market share, profit, improved shareholder value, etc. The Chinese manufacturers are in a squeeze play. I am not an apologist, and there is no moral defense for putting defective merchandise into the stream of commerce. What needs to be understood is the dynamics of the situation and the competing demands of so many players in the entire picture. Is there room for improving product quality? Of course. How to do it, in the face of all the competing demands on the Chinese manufacturers and on the foreign buyers, is no easy task, and it may ultimately come at increased cost to consumers.
Posted by: Law Office of Todd L. Platek | July 14, 2007 10:51 PM
Mr. Harris,
Thank you for your responses.
I certainly hope that the threat of tort liability will result in better quality-control. If the Chinese won't implement such standards on their own, then American companies importing Chinese goods should do so. I do wonder, however, if there might be contractual clauses releasing the American companies from accountablity.
Also, I know from my own personal experience as a plaintiff in law suit regarding an auto accident reulting in some permanent disability for me, that pursuing legal recourse is expensive. I suppose that class-action suits would reduce and/or eliminate costs on the part of the plaintiffs here in America.
I also wonder if better quality-control will result in increasing the price of goods. As you know, one of China's advantages is the cheap production of goods.
Maybe I'm too cynical.
Posted by: Always On Watch | July 15, 2007 3:46 AM
Increased quality control *will* result in an increase in costs, but I don't think that the consumer will mind. People will pay for quality. People will pay *a lot* for quality.
The problem with class action suits is that while they may be a good way of dealing with individual cases, they are generally a horrible way of dealing with the general problem of consumer product safety. One big problem is that for there to be a lawsuit, someone has to have been injured, when the ideal situation would have been to have some mechanism in place to keep someone from getting hurt in the first place.
Part of the reason I'm so passionate about the law is that I was in personal situation that involved large numbers of lawyers. The experience made me both more cynical and more idealistic.
Posted by: Twofish | July 15, 2007 8:42 AM
precisolutely~!
we must sue our own u.s. companies who use chinese products - oh great~!
more frivolous lawsuits.
you, mr. harris, are in a very lucrative business defending(?) chinese businesses - our hands are tied and you get a tidy retainer, i'll bet.
i thank G-d everyday he gave me a conscience. more reason to shop at the local amish and anabaptist coops.
Posted by: nanc | July 15, 2007 6:23 PM
Would it be legal in China for a few people to get together and do private testing on products such as food?
Posted by: WorriedConsumer | July 15, 2007 7:45 PM
WorriedConsumer:
Not illegal, but their lab wouldn't last long and they would risk physical harassment, fines and possible imprisonment for revealing "state secrets".
There are no independent labs in China.
Posted by: nanheyangrouchuan | July 17, 2007 9:15 AM
The way that I've seen it working in China as far as food safety is that there is basically a chain of custody. You buy your food from people who you personally know and trust, who buys their food from people they personally know and trust, and this creates a chain all the way back to the farmer. There are also "markers" (i.e buy fresh food instead of processed food).
This system works more or less well enough if you are a local trying to eat. The trouble is that when you put in industrial processes or have to deal with people that aren't in the trust networks, these systems break down.
Posted by: Twofish | July 19, 2007 3:04 PM
It always takes a disater to bring attention to anything. Well, I will tell you a disaster before it happens. Counterfeit electronics being sold in China. Most appear to be in the SCHENZEN area. What will it take before this problem is taken seriously. An airplane falling from the sky? Perhaps a missle hanging a u-turn in flight. I'm telling you, something must be done as these parts are being bought and sold all over the world. Not just commercial parts but Military spec parts. Then and only then will you all jump on the bandwagon. Show some initiative,someone and bring this problem to the attention of the governments and to the consumers. Don't say that you were not warned.
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Posted by: Watainsus | August 27, 2007 1:29 PM
The Peoples Republic of China (PRC) is a communist regime and an enemy of the United States. They know they cannot beat us militarily, so they are destroying us from within. There are some very smart people people in the PRC who have figured out how to take advantage of the greed and shortsightedness in the West.
The PRC subsidizes cheap labor and manufacturing for the sole purpose of acquiring technology and destroying the industrial complex and and economy of the United States. They are also contaminating our food supply and consumer products to damage our health.
The short term prospects of making a fast buck by firing your workers, shutting your factories down in the United States, and moving everything over to China are very attractive, but think about the long term ramifications for your company, family, neighbors, and country.
Posted by: Rob | December 13, 2007 7:55 AM