I will be speaking at a Chinese drywall seminar in New Orleans next month and that means I am on an email list that I think consists of others who will also be speaking at this seminar. Seeing as how this email list consists of around 100 people, I do not believe I am violating any expectations of confidentiality by publishing what transpired on it today.
I get an email from Gary Rosen, who has a PhD in biochemistry, proclaiming the "Chinese manufacturers are NOT the ones to blame for problem drywall." According to Rosen, there is"good quality drywall manufactured in China at International Organization for Standardization (ISO) qualified factories that have US recognized quality control approvals such as UL and ASTM" and this stuff is, "by definition, NOT problematic." But China also makes drywall for local consumption that is not made at ISO qualified factories and is does not have UL and ASTM approval. According to Rosen, it was this drywall that was imported in the US and it is this drywall that is causing the problems.
Rosen goes on to lay blame right at the feet of the US companies that brought the bad drywall into the United States:
The problem is that US distributors purchased and then imported the domestic quality Chinese drywall rather than much better quality drywall made for the export market. If US distributors would have all purchased the good export stuff there would not be any problems at all.So why blame the Chinese? They certainly have the right to made lower quality less expensive product for their local consumption. Investigative reporters should be focusing on why US drywall distributors chose to purchase the lower quality Chinese domestic product rather than purchase export quality product. The answer will certainly turn out to be – they saved money by buying junk Chinese domestic board. Investigative reporters should be focusing on why builders actually used this nasty smelly stuff rather than rejecting it.
Rosen then attacks US builders' quality control systems:
What about the US builder’s quality control systems? Surely products used in the construction of homes have to be evaluated prior to use when not purchased from a well known US manufacturer and not approved/ certified by well known quality control bodies like UL, ISO, and ASTM? Again, where were our quality control systems?
Rosen was actually responding to a Miami Herald, quoting a number of US lawyers on the difficulties in suing Chinese companies for drywall problems. Seems these American lawyers are getting pretty testy.
The article talks about the 300 drywall lawsuits currently pending in New Orleans Federal Court and asks "who's going to be on the hook for any damages courts might award?" The article then outlines some of the tactics the plaintiffs' lawyers are considering for trying to collect and guess what? None make any sense.
The lawyers are "considering" suing "U.S. investment bankers who financed the Chinese companies, and seizing ships that brought the drywall to the United States." With all due respect, the odds of either of these tactics generating any cash are pretty much zero. First off, it would surprise me if any of the Chinese drywall manufacturers were financed by "US investment bankers." Does anyone disagree with me on this? Second, I also doubt very much that any US court is going to set aside 200 years of US (and a couple more hundred years of British) jurisprudence and find the investors liable. I certainly hope not as I own shares in drug and tobacco companies and by this logic, I could be held liable for injuries caused by those companies.
The arresting ships idea is probably even more ludicrous. What these lawyers are proposing is to do something that has, as far as I know, never been done anywhere in the world or at any time in the long history of shipping, and that is to find the shipper liable for having shipped a perfectly legal product. Not only has this never been done, but if it were done, it would probably destroy the shipping industry as we know it and, at minimum, raise the price of pretty much every single product worldwide. Can you even imagine a system where shipping companies are forced to guarantee the quality of every single item they ship? I can't and if any of my law firm's shipping companies get their vessels arrested over this, you can bet we will be counterclaiming for wrongful arrest.
And it is not just plaintiffs' lawyers who are getting mad. U.S. District Judge Eldon Fallon found one Chinese company, Taishan Gypsum Co., in contempt of court for ignoring the suits. And though I am on record in this post ("China Tooling/China Consulting -- I Told You So") for stressing the importance of abiding by Federal Court orders, I do not for a minute believe the Taishan Gypsum is going to care one whit about what some U.S. judge has to say. If Taishan Gypsum conducts no business in the United States or in any of the very few countries that typically enforce U.S. money judgments (I very much doubt any country enforces U.S. contempt orders) U.S. court orders almost certainly mean little to nothing to it. Most US judgments against Chinese companies have no value beyond the Chinese company owner's belief that it will preclude his/her son or daughter from attending UCLA.
The article then states how US lawyers "said Chinese companies are virtually insulated against liability in U.S. suits because suing them through international court is costly and time-consuming and civil judgments in U.S. courts are not enforced in China." I agree with the part about US court judgments not being enforced in China, but I do not know what they mean by an "international court." International courts are not going to take a drywall case so I am going to assume that Chinese courts was meant here. Again, these lawyers are wrong. Suing in Chinese courts is way cheaper and way faster than suing in US courts. The problem with suing in a Chinese court in a case like this is not the time or the cost, it is the damages. Chinese courts are incredibly stingy (by US standards) with damages for pain and suffering and lost profits. A win in a Chinese court might mean no more than a full refund for the cost of the drywall.
But at least one lawyer believes the future for plaintiffs' lawyers in these drywall cases looks bright because....well....because he really really wants it to:
Herman said plaintiffs' lawyers were up to the challenge. "I think we can bust the dam in this case," he said. "You're talking about billions of dollars" at stake, Herman said. "We're going to find some ways to make them responsive."
The next email came from Ervin Gonzalez, a plaintiff's lawyer out of Miami, who has this to say:
The Chinese are to blame because they sold defective dry wall, damaged thousands of homes, hurt consumers and caused billions of dollars in damages to be sustained by American homeowners and businesses. The Chinese Companies do business in the United States and should be responsible for the damage they have caused to American home owners and businesses. If the Chinese Companies are not willing to be accountable and responsible for their acts and omissions they should not do business in the United States. If any American Company provides a defective product, that Company would be responsible and accountable in a court of law in the United States as well as in the Country where the defective product was sold. Your comments blaming only the American companies, who certainly are legally responsible for this dry wall debacle, ignore the basic principles of justice, equity, accountability and responsibility that our civil justice system is built on. While I have enjoyed reading your scientific reports, I must say that your editorial supporting the Chinese makers of defective dry wall lacks any basis in law, equity, fairness and common sense.
I was interviewed yesterday by the Center on the Global Legal Profession and was asked what has surprised me in my practice of international law. Among my answers was how how so many American lawyers still refuse to recognize that foreign country's laws tend to be very different from ours and that U.S. law does not cover the entire world. As much as we U.S. lawyers (myself included) wish it would, it just doesn't and it never will.
So what of the Chinese drywall? Who is responsible and who should be liable and who will be found liable and who will need to pay? I have no idea who is responsible and I said that in my email to the group:
As someone who devotes the bulk of his law practice to China (representing mostly Western companies, but a few Chinese companies as well), I find this whole discussion bizarre and a little bit scary. There are good Chinese manufacturers and there are bad Chinese manufacturers. There are Chinese manufacturers that manufacture to spec and there are Chinese manufacturers that do not manufacture to spec. And there are American companies that get bad product from China because they do not know how to get good product from China or because they simply do not care whether they get good products or not. And there are American companies that get bad product from China even though they did pretty much everything one can do to prevent getting bad product.Unless one has had really close involvement with what transpired between the Western companies and the Chinese companies involved in the drywall mess, I do not see how one can confidently assess blame either way between the Chinese and the Western companies. I am not speaking to legal responsibility here, I am talking about blame. My experience in these situations is that most of the time, there is plenty of blame to go around.
Who should be liable? Whomever is responsible.
Who will be found liable in the US courts? Whomever is responsible.
Who will need to pay? See above.
For more on these issues, check out the following:
-- Who Needs International/Foreign Law? Not Us, We're Americans
-- Suing Chinese Drywall Manufacturers. Why All The Bother?
-- Will Your US Judgment Be Enforced Abroad? Not China, But Maybe.
-- Enforcing Foreign Judgments in China -- Let's Sue Twice
-- Taking Judgments To China (And Korea), Let's Not Sue Twice
-- Chinese Drywall. If You Think That Is Bad.....Just Wait