Judge Fallon,
the presiding federal judge over the Chinese drywall cases consolidated in an
MDL, has refused to dismiss claims from homeowners against one of the major
manufacturers of the toxic and corrosive product. Taishan Gypsum Co. Ltd.
argued that U.S. courts do not have jurisdiction over claims against the
Chinese company, but the Court rejected that argument.
Judge Fallon
also refused to vacate a $2.6 million default judgment he entered against the
company after it initially refused to respond to the suits. Taishan Gypsum
manufactured and sold more than 1.8 million sheets of drywall that were shipped
to Virginia, Florida, Louisiana and other parts of the U.S. from 2005 to 2009.
The company
claims it did not know the ultimate buyer or user of its drywall in Virginia,
but the 5th U.S. Circuit Court of Appeals has concluded that "such lack of
knowledge does not insulate a foreign defendant from personal jurisdiction in
the forum," Fallon wrote.
The judge said
Taishan "possessed more than mere awareness or expectation that its
drywall would be delivered, sold, and installed in Virginia." Fallon
presides over more than 10,000 claims involving Chinese drywall. His ruling
also could benefit homebuilders, brokers, sellers and installers who have been
sued for using Chinese drywall and are seeking to recoup millions of dollars
they have spent to repair damaged homes.
A different
Chinese company, Knauf Plasterboard Tianjin Co., agreed in December to pay
hundreds of millions of dollars to resolve related drywall claims. That company
is in reality a German corporation who owns manufacturing plants in mainland
China.
Chinese
drywall was used in the construction of thousands of homes, mainly in the
South, after a series of hurricanes in 2005 and before the housing bubble
burst. The drywall contains unusually high levels of sulfur that emits
foul-smelling gases, corrodes HVAC coils, copper pipes and electrical wiring,
and tarnishes other metal items in the home. Homeowners also complain of
aggravation of allergies, asthma, nosebleeds and other maladies.
The litigation
against Taishan "has not followed the same trajectory or enjoyed the same
measure of success" as the Knauf cases, Fallon wrote in his Order. Judge Fallon
had to travel to Hong Kong earlier this year to supervise a series of
depositions of Taishan executives after an initial round of depositions,
hamstrung by a language barrier and other problems, dissolved into
"chaos."
What does this
all mean to the thousands of homeowners who have Taishan board in their homes?
That answer is not at all clear. It is not yet known if Taishan will appeal the
ruling. Taishan could ultimately ignore the Court’s ruling by not satisfying
any monetary judgments against it, as many other Chinese manufacturers do in
our country.
The problems
created by Taishan’s legal tactics lead Senators Sheldon Whitehouse (D-RI) and
Jeff Sessions (R-AL) and Representatives Betty Sutton (D-OH) and Mike Turner
(R-OH) to introduce the “Foreign Manufacturers Legal Accountability Act
of 2011” (S.1946/H.R.3646). The bill would force foreign manufacturers to
play by the same rules as American manufacturers by requiring foreign
manufacturers to have a registered U.S. agent that would accept service of
process for civil and regulatory claims.
