Can U.S. consumers collect against a foreign manufacturer for a defective or dangerous products?

Chinese drywall has been linked to the corrosion of wiring, air conditioning units, computers, doorknobs and jewelry, as well as deleterious health effects. The culprit is hydrogen sulfide gas, a toxic and highly corrosive gas. Investigators have tested samples that emit one hundred times as much hydrogen sulfide as drywall from other sources. In higher concentrations, this gas causes extensive property damage and poses health risks to those breathing the fumes. Currently, the only way to completely eliminate exposure to the hydrogen sulfide gas in Chinese drywall is to remove all of the affected drywall. According to the Consumer Product Safety Commission (“CPSC”), thousands of U.S. homes with Chinese drywall will need to be gutted. The April 2010 guidelines also recommend the removal of all electrical wiring, outlets, circuit breakers, fire alarm systems, carbon monoxide alarms, fire sprinklers, and gas pipes in addition to the drywall.

While thousands of homeowners have filed suit in federal court against Chinese drywall manufacturers, the awards are worthless if there is no way to enforce these judgments. In an article posted on The Am Law Daily website, Gordon Gao, a litigation partner in Beijing with the Chinese law firm Fangda partners, believes as a practical matter, Chinese companies need not worry about these lawsuits. “In general, collecting on a U.S. judgment [in China] is difficult if not impossible.” Under Chinese law, enforcement of foreign judgments only occurs under bilateral treaties. Unfortunately for U.S. plaintiffs, China recognizes no bilateral treaty that would enforce a U.S. judgment against a Chinese manufacturer. With this knowledge, some companies like the Taishan Gypsum Co. have chosen not to defend themselves in court, realizing that a default judgment essentially has no effect. While pursuing claims against Chinese drywall manufacturers may be fruitless, plaintiffs may file choose to suit against a host of U.S. defendants like American builders, developers, and distributors. However, there is no guarantee that plaintiffs can recover the amount needed to fully replace all drywall in their homes and repair other damages resulting from the hydrogen sulfide gas.

In response, Senators Sheldon Whitehouse (D-RI), Majority Whip Richard Durbin (D-IL), and Jeff Sessions (R-AL) have sponsored S. 1606, the Foreign Manufacturers Legal Accountability Act. The bill has several practical improvements for injured consumers to sue foreign manufacturers. First, the bill makes it easier for injured consumers to serve foreign manufacturers with notice of pending claims. This is achieved by requiring foreign manufacturers or producers of covered products to register an agent, located in a state where the company conducts business, who can accept service of process for civil and regulatory claims. Covered products include drugs, devices, cosmetics, biological products, consumer products, chemical substances, and pesticides produced outside of and imported into the United States. The foreign manufacturer or producer must consent to state and federal jurisdiction for civil and regulatory claims upon registration of the agent. The bill also directs the Food and Drug Administration (“FDA”) and Department of Agriculture to consider the requirement of registered U.S. agents for foreign food producers.

After registering an agent and submitting to state and federal law, foreign manufacturers will need to be more careful about introducing dangerous and defective products into the U.S. market. While inspections are important, they are insufficient to ensure safety even in domestically produced products like ground beef. Assuming that enforcement is possible, legislation like S. 1606 would help injured consumers pursue compensation from foreign manufacturers. In the meantime, U.S. consumers, builders, and suppliers are the ones stuck footing the bill.