Product Liability

Federal court holds Chinese drywall companies in contempt for ignoring U.S. litigation

china flag1 Federal court holds Chinese drywall companies in contempt for ignoring U.S. litigationChina’s state-owned drywall manufacturers have abandoned litigation in the U.S. involving thousands of American homeowners who sued the companies over allegedly toxic and corrosive drywall they claim has damaged their homes and their health.

In addition to not responding to the multidistrict litigation (MDL) in a Louisiana federal court, Taishan Gypsum Co. Ltd. and other gypsum manufacturers owned by the Chinese government’s Assets Supervision and Administration Commission ignored a $2.7 million default judgment against them in 2010.

U.S. District Judge Eldon Fallon held Taishan in civil and criminal contempt on July 17 for its refusal to appear in court to answer questions about its failure to pay the fine. The judge also barred the company from doing any further business in the U.S. until it responds to the complaint or makes an appearance.

The U.S. District Court in New Orleans imposed the fine on Taishan and affiliated companies to cover the cost of removing the drywall. A new lawsuit filed on July 29 on behalf of 3,700 homeowners accuses the Chinese companies of manufacturing defective drywall that emits strong sulfuric odors and corrodes metal in homes with the noxious gases it releases. The plaintiffs seek more than $1.5 billion to cover the cost of property damages. Many families have been forced to abandon their homes, putting many in financial distress.

The refusal of China’s state-owned companies to engage in the U.S. litigation has also spurred a group of U.S. Senators to take action.

Senators Mary Landrieu, D-La., And Bill Nelson, R-Fla., questioned China’s integrity in its handling of the U.S. litigation.

“Will the Chinese government and its companies honor their moral and legal obligations under this or any other commercial contract?” they queried.

“Will the Chinese government and its companies, which have profited from the sale of defective products to consumers here in the United States, continue to flee court jurisdiction when sued or will they honor moral and legal obligations to appear in court, defend themselves, and satisfy an adverse judgment?” Nelson said in a statement included in the Congressional Record, adding that the behavior calls into question the Chinese government’s reliability on “any other commercial contract.”

Judge Fallon also hit Taishan and China’s Assets Supervision and Administration Commission with $55,000 in attorney’s fees, which will accrue an additional penalty of 25 percent of company profits should they continue to defy the injunction.


Law 360