It has been said that while products move seamlessly over national boarders, legal judgments do not. That may be changing. Although few countries, except members of the European Union, recognize court judgments from other countries, the confluence of U.S. legislation and state and federal court decisions regarding defective Chinese drywall may forecast a sea change for liability and litigation costs for foreign makers and distributors of defective products in the United States
In the final days of 2012, the U.S. Congress passed H.R. 4212, the Drywall Safety Act of 2012 (the “Act”) and President Obama signed it into law on January 14, 2013. While the Act is largely symbolic and does not prescribe penalties against foreign manufacturers who ship defective goods into the U.S., it states that the U.S. Secretary of Commerce should “insist” that the Government of the People’s Republic of China “direct the companies that manufactured and exported the problematic drywall” to submit to the jurisdiction of the U.S. federal courts.
Earlier failed efforts to pass legislation addressing the liability of foreign manufacturers that make or distribute defective products have attempted to address the key issue in pursuing relief, specifically the lack of a registered agent for service of process in the United States.
The Act does, however, require mandatory labeling of drywall within 180 days of enactment to track the identity of the manufacturer, date and location of production and any other identification, such as the batch or lot. The identification requirements stem from a unanimous Consumer Product Safety Commission (“CPSC”) decision in 2009.
The Act requires the CPSC to regulate the sulfur content of drywall, limiting it to “a level not associated with elevated rates of corrosion in the home” although there exists no scientific standard. The Act’s language is enough to presage difficulties in interpretation and enforcement, especially in the area of product testing and certification. An important exception in the Act allows the CPSC to defer to a voluntary standard on gypsum content if an acceptable standard is developed by ASTM Internationali in the next two years.
Lastly, the Act requires the CPSC to revise its “Remediation Guidance for Homes with Corrosion from Problem Drywall” to avoid having removed Chinese drywall recycled into new boards made in the United States. Although the guidance document is not compulsory, state unfair competition statutes and state common law claims may offer avenues for redress to future plaintiffs.
The Act, toothless as it may appear, should be viewed in correlation with decisions in state and federal courts. In the Federal District Court of Eastern Louisiana, the
Hon. Eldon E. Fallon presiding, the court ruled that Taishan Gypsum was responsible for its drywall sold in Florida, Virginia and Louisianaii. This decision followed the Florida Circuit Court decision that the plasterboard company that exported the drywall to Florida was wholly owned and controlled by Taishan Gypsum, and as a result, is subject to its jurisdiction.
All of this appears to suggest a strong trend towards holding foreign manufacturers responsible for defective products sold in the U.S.