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Chinese Drywall Plaintiffs Get US Court Judgment Against Chinese Company. Yawn.

Posted in Legal News

New Orleans federal judge Eldon Fallon recently awarded seven families $2.6 million against a Chinese drywall manufacturer for damages arising from their homes having been “ruined by sulfur-emitting drywall made in China.” This ruling dealt only with property damage; the first cases with medical claims have yet to be considered.
It remains to be seen how the plaintiffs can collect from Chinese companies that do not have to respond to U.S courts, although some have talked about getting orders to seize U.S.-bound ships and cargoes from the drywall companies.
Now for the Chinese part:

In this case, the plaintiffs sued Chinese drywall manufacturer Taishan Gypsum Co., which hasn’t responded to lawsuits and did not have a lawyer representing it at the February trial.
Plaintiffs lawyers have said they would try to seize the company’s U.S.-bound vessels and shipments if the company continues to ignore the litigation.
* * * *
The Taishan drywall was not tested under American engineering standards and Venture Supply Inc., the Norfolk, Va.-based buyer, “relied on a representation that Chinese testing was equivalent to the U.S. testing standards,” the ruling said.
The ruling noted that Chinese tests were done by a Chinese government agency and not by an independent testing laboratory. The Chinese government agency issued “certificates of quality” based on a protocol that “predates the production of the drywall shipped to the United States by at least two years,” the ruling said.
Taishan and the owners of Venture Supply Inc. could not be reached for comment. A telephone number listed on Venture’s Web site was disconnected.

Some thoughts:
1. Chinese courts do not enforce US court awards against Chinese companies. They just don’t. Period. Therefore, this judgment is almost certainly worthless.
2. I cannot imagine a court anywhere arresting a ship hauling goods for a third party (Taishan) because that third party owes money.
3. I cannot imagine a court anywhere arresting a ship because it formerly hauled goods for a third party (Taishan) because that third party owes money.
4. I would bet virtually anything that Taishon NO longer (even if it ever did) has any assets in the United States. I would bet virtually anything that Taishon is either no longer selling any of its product to the United States or, in the unlikely event that it is, that it is requiring full payment before it ships, such that any “Taishon product” already belongs to someone else before it ever hits the United States. As such, it is not subject to seizure.
At this point, the plaintiffs best option for pursuing collection against Taishon would be to find a country in which both US judgments are enforced AND in which Taishon has assets. Since very few, if any countries are likely to fit both descriptions, there is a good chance the plaintiffs are going to be out of luck. The most likely country for this, and my absolute favorite country anywhere in the world for seizing assets: South Korea.
For more on the Chinese drywall cases, check out the following:
Chinese Drywall Cases Make U.S. Lawyers Angry. I Want My Lex Americana!
Will Your US Judgment Be Enforced Abroad? Not China, But Maybe.
Chinese Drywall Cases. Show Me The Money!
Suing Chinese Drywall Manufacturers. Why All The Bother?
Chinese Drywall Litigation And Why Seizing Assets Is Very Different From Seizing Ships.

  • http://twofish.wordpress.com/ Twofish

    One other point is that non-US countries in general do not enforce large damage awards or default judgements by US courts.
    Also, one reason that it’s going to be difficult/impossible to seize US shipments of Chinese goods is that in pretty much all international trade, the title to the goods passes to the buyer before it reaches the destination port. You can’t seize assets on-board a ship to pay for judgements by the manufacturer because by the time the goods get to the destination port, the manufacturer no longer owns them.
    And it’s that way so precisely so that the buyer doesn’t end up in trouble for any judgements against the seller. The payment terms for international trade are also interesting. There are standard (and a little complicated) systems for payment in international trade, and those systems are set up so that if you buy something from someone else, that you don’t get sucked into third party issues that you don’t know about.
    The other thing is that if Taishan were doing business in the US, there are a lot of legal structures it could use to prevent the judgement from attaching.

  • http://twofish.wordpress.com/ Twofish

    This also points out the limits of using private litigation to enforce health and safety standards. Despite having a multi-million judgement against it, Taishan can still manufacture and ship the drywall that caused the problems, since there is basically nothing that the plantiffs can do to stop the drywall from being sold.
    If you really want to stop that, you’ll need some administrative agency to step in and seize the drywall. Someone like the EPA or CPSC. They can seize imported drywall, if they think that it is harmful.
    The problem is that there isn’t that much money to be made by filing a case before the EPA or CPSC.

  • http://www.chinalawblog.com/2010/04/china_litigation_and_arbitrati.html China Law Blog

    China Litigation And Arbitration. Maybe.

    I started my career doing massive case litigation. I remember being the 25th most senior lawyer on the litigation side of a matter, which side was actually secondary to the bankruptcy/workout side. In other words, I was No. 50 on the totem pole. About …

  • phyllis cattano

    So what our government is saying is that no body in our country can help us with this suit, we have no one person to help us get our homes fixed, and money for our damaged belongings. Guess we would all have a win the lottery (;like thats going to happen)