Update on Foreign Manufacturers Liability Act

We have posted before about legislative efforts to make it easier for U.S. consumers to sue foreign product manufacturers.

Last week the the House Subcommittee on Commerce, Trade, and Consumer Protection held a legislative hearing on H.R. 4678, the “Foreign Manufacturers Legal Accountability Act.”  The House bill  was introduced last February. The Senate's version, S. 1606, was introduced in August, 2009.

Witnesses included a representative of the Consumer Product Safety Commission, the Consumers Union,  American Association of Exporters and Importers, and a Professor from American University College of Law.

The Act would require foreign manufacturers and producers of several kinds of products to establish registered agents for service of process and to consent to jurisdiction here.  It appears to have bipartisan support, but raises a number of constitutional issues, and may not address the key issue of the enforceability of judgments handed down by U.S. courts.

Supporters of the bill note that the Hague Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters – of which the United States and many of its major trading partners, including China, are parties – provides a means of serving process on foreign manufacturers in their home countries.  However, this method can be time consuming and costly, because all the legal documents must be translated into the foreign manufacturer’s native language and then provided to a governmental central authority, which in turn attempts to serve the documents on the manufacturer. It can take many months for the central authority to serve the documents on the manufacturer.   In addition, even if a plaintiff successfully serves process on a foreign manufacturer, argue the supporters, the manufacturer will likely challenge the exercise of personal jurisdiction over it by a U.S. court. Before a U.S. court can exercise personal jurisdiction over a defendant it must consider: 1) the defendant’s purposeful minimum contacts with the state in which the court sits, and 2) fairness to the defendant of being subjected to jurisdiction in that state’s courts.  Foreign manufacturers have increasingly turned to litigating this issue to avoid being hauled into U.S. courts.

The Act would require foreign manufacturers and producers that import products into the United States to designate a registered agent who is authorized to accept service of process here in the United States. The agent would have to be registered in a state with a substantial connection to the importation, distribution, or sale of products of the foreign manufacturer or producer. CPSC, the Food and Drug Administration, and the Environmental Protection Agency would each be required to determine, based on the value or quantity of goods manufactured or produced, which foreign manufacturers and producers under their respective authority would be required to designate a registered agent. Registering an agent consistent with the Act constitutes acceptance by the manufacturer of personal jurisdiction of the state and federal courts of the state in which the agent is located.

AAEI, on the other hand, is particularly concerned about the impact H.R. 4678 would have on U.S. exporters if this bill is enacted by Congress. If the United States enacts H.R. 4678 requiring foreign manufacturers to appoint a registered agent to receive service of process, they anticipate that our trading partners will enact similar measures. It will be difficult and expensive for American exporters to maintain registered agents in all the foreign markets to which it exports. Moreover, having a registered agent in foreign markets increase the likelihood that these companies will be
subject to litigation before foreign courts in countries with legal proceedings which are less
transparent than the United States, argued AAEI.

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