Product Liability

China Rejects Drywall Litigation, Says Its Companies are Immune From U.S. Law

china 435x275 China Rejects Drywall Litigation, Says Its Companies are Immune From U.S. LawPlaintiffs suing Chinese companies that made allegedly defective drywall likely face an uphill battle as the Chinese government, which owns the manufacturing companies, shields them from litigation in the U.S.

As many as 4,000 U.S. homeowners claim that sulfuric drywall made by Taishan Gypsum Co. Ltd. emitted fumes that corroded metal wiring and appliances, destroyed their belongings, and made them sick. Many of the homeowners, who live in Alabama, Florida, Mississippi, Louisiana, Texas, and Virginia, say the defective drywall has forced them to abandon their homes, leaving them bankrupt. Damages could exceed $1 billion.

Lawyers representing the plaintiffs have been unable to even serve their lawsuit to the Chinese State-owned Asset Supervision and Administration Commission, the Cabinet agency that oversees China’s largest government-owned companies. The lawsuit also names five other government-run companies, all of which say they are immune from U.S. laws and should be dropped from the suit.

U.S. District Judge Eldon Fallon ruled that the plaintiffs’’ attorneys may try to serve the lawsuit through diplomatic channels, their last option. An attempt to serve the lawsuit under the rules of the Hague Convention was rejected by Chinese authorities, who returned it with a note from the Commission that said it “is the Chinese central government agency which shall enjoy sovereign immunity and not be subject to foreign jurisdiction.”

China and the U.S. are bound to the Hague conventions, which establish the international protocols for litigation. But “China interprets its obligations under these treaties in a manner that effectively protects Chinese firms from U.S. litigation,” the Associated Press reported, quoting policy analyst Kevin Rosier.

Attorneys for the other companies named as defendants in the suit issued a snarky response, saying “In blunderbuss fashion, Plaintiffs have sued everyone under the sun. All but explicitly invoking the bogeyman of ‘China, Inc.,’ they have sued not just the companies alleged to have engaged in wrongdoing — specifically, manufacturing and importing defective drywall — but also companies that merely invested in those principal defendants; companies that invested in the companies that invested in the principal defendants; and completely unrelated companies in which those investors hold some stake.”

Earlier this year, Taishan paid seven Virginia homeowners $2.7 million in damages and $500,000 in interest – a figure that may serve as the basis for awards in a larger class-action suit.

Source: Associated Press