Federal Court Sends Melamine Contamination Claims To China

A federal court recently sent back to China various Chinese families' product liability cases stemming from alleged melamine contamination of infant formula. See Tang v. Synutra International Inc., 2010 WL 1375373 (D. Md.).

Plaintiffs, one hundred Chinese citizens residing in China, brought suit on their own behalf as parents and on behalf of fifty-three minor children who allegedly suffered adverse health
conditions, predominantly the development of kidney stones, as a result of ingesting contaminated milk products produced by Defendants’ Chinese subsidiaries.  The principal place of business of both defendants, Synutra International, Inc., and Synutra, Inc., is in Maryland. Plaintiffs sought compensatory damages of at least $5.5 million for each child and $1.5 million for each parent, as well as a collective punitive damages award of $500 million. Defendants filed their motion to
dismiss on, inter alia,  the grounds of forum non conveniens.

In September 2008, the Chinese Administration of Quality Supervision, Inspection and
Quarantine (“AQSIQ”) initiated an emergency testing program of the country’s dairy supplies. Later that month, AQSIQ announced that certain lots of infant formula were found to have contained melamine, a chemical commonly used as an industrial component in plastics, adhesives, countertops, etc.  Melamine is not a food additive. It is not approved for human consumption.

By December 2008, approximately 300,000 Chinese infants were found to have ingested dairy products contaminated with melamine. Allegedly as a result, at least six infants have died and scores of others have required medical treatment for maladies associated with kidney damage. AQSIQ found varying amounts of melamine in sixty-nine batches of infant milk powder produced by several companies, including defendants' subs. In response to this crisis, the Chinese government, in conjunction with the China Dairy Industry Association, established a compensation program, funded by the dairy companies, that produced the contaminated milk products and totals approximately $160 million. It offered a lump-sum payment to the families of affected children, according to the extent of injury. To date, the families of approximately ninety-five percent of the injured children have reportedly accepted the remedies provided by the plan. Of those who have not, some have opted instead to bring suits in Chinese or U.S. courts.

The adequacy of the Chinese courts to adjudicate these suits was a significant point of contention between the parties; indeed, it was the critical factor of the forum non conveniens analysis in this case.

At the outset of any forum non conveniens inquiry, the court must determine whether there exists an alternative forum. The defendant bears the burden of establishing that the alternative forum is
available to all parties and that an adequate remedy is available to the plaintiff.  Although some courts conflate these issues, the availability and adequacy of the supposed forum are better seen as raising independent issues that warrant separate consideration by the court.

Ordinarily, a defendant can satisfy the availability element by showing that it is “amenable to process” in the alternative forum. Where the remedy offered by the alternative forum is so clearly inadequate or unsatisfactory that it is no remedy at all, however, the court may conclude that dismissal would not be in the interests of justice. Many courts have presumed the adequacy of the alternative forum and placed at least the burden of production on the plaintiff to establish otherwise.

Although plaintiffs here challenged both the availability and adequacy of the alternative forum to adjudicate their claims, there was no question in the court's mind that the Chinese forum was
available, since the defendant showed that it is “amenable to process” in the alternative forum.

Whether China constitutes an adequate forum was the primary issue in dispute. The dispute as to the adequacy of the Chinese forum boiled down to the competing declarations of the parties' China law experts. Defendants’ declarant opined that Chinese courts are adequate to resolve plaintiffs’ dispute and described that Chinese law provides causes of action for personal injury and products liability, a right to present evidence and argument in court, the power to compel witness testimony, and a right to appeal. Plaintiffs would be entitled to recover compensatory damages for expenses such as loss of income, related travel expenses, food subsidies, living expenses for dependents, as well as compensation for emotional damages, but not punitive damages.

Plaintiffs' experts claimed that “several volunteer milk attorneys” were summoned to a meeting held at the Beijing Bureau of Justice, a government entity, where an official demanded all attorneys to withdraw from representation on tainted-milk cases. The experts also asserted that the Chinese courts have denied litigants access to the courts, as well as the right to appeal an adverse ruling, because none of the complaints filed by contaminated-milk victims has been “either accepted or formally denied,”  resulting in the cases remaining perpetually in limbo. They also asserted that families of “seriously sickened children” receive $4,400, and “those suffering from other kidney problems” receive $292 under the government compensation scheme, and this is not “a legal remedy,” but rather “a settlement offer" made by the dairy companies,  In essence, plaintiffs asserted that the Chinese courts were deviating from normal process with respect to melamine claims and pressuring lawyers to withdraw representation of these claimants, thereby forcing the
unfortunate victims into a Hobson’s choice between pursuing futile litigation or accepting the "meager remedy" provided by the compensation program.

The court granted the motion, finding China an adequate forum.  The guiding principles included that the prospect of delay presented by the alternative forum does not typically render the alternative forum inadequate. The complaints had not yet been rejected in China. The court was not wiling to make the value judgment, on the basis of what it called limited evidence presented, that corruption in the Chinese judiciary would systematically deny access to a legal remedy there.  Courts have traditionally been reluctant to cast such aspersions on foreign judicial systems absent a substantial showing of a lack of procedural safeguards.

Second, even if the Chinese courts were not open to plaintiffs, another remedy was indisputably available to them, namely, the compensation program. While the plaintiffs characterized the
program as a “government-sanctioned settlement plan” from the companies that produced the contaminated milk products, as opposed to a legal remedy , they cited no authority for the proposition that the available remedy need be purely “legal” in nature. Regardless of whether it was enacted by the Chinese legislature or sanctioned by the judiciary, it is undisputed that the compensation program developed in China in the wake of the melamine contamination crisis was organized and sanctioned by government entities working in conjunction with the dairy industry and administered through an insurance provider.

Third, although the remedy offered by the compensation program was far less lucrative than what plaintiffs sought in the U.S., the courts have made clear, that the test is not to compare the rights, remedies, and procedures available under the law that would be applied in each forum to determine whether the law applied by the alternative forum is as favorable. 

China Melamine Update

Readers of MassTortDefense have been following the issues surrounding the dairy product contamination scandal in China, which we have posted on before.

Two recent developments: The families of 213 children who were sickened by tainted infant formula and milk have now filed a class-action lawsuit with China's highest court, seeking damages from 22 dairy producers. Class actions are rare in China; this one seeks damages mainly for parents whose children were made ill by melamine-laden dairy products, but who were offered what they saw as inadequate compensation by dairy companies. Under that plan, most received $292, while wrongful death cases were offered $29,200. Plaintiffs assert that the lower amounts were not enough to cover what they paid for doctors, medicines and other expenses.


According to the Chinese Health Ministry, nearly 300,000 children were made ill by tainted milk and at least six died. Melamine was reportedly added to milk products to fool protein-content tests.
In order for the class suit to proceed, the China Supreme Court must first agree to hear the case. Court filings in China must be accepted by the courts before they are considered on the merits.

On the criminal side, media reports are that 12 dairy officials were found guilty of charges related to the melamine issue; 2 were sentenced to death, and the highest ranking official was sentenced to life in prison as part of a plea bargain deal. Prosecutors showed that officials at the companies involved learned of the problem in 2007 but did not recall any products until September, 2008. 

In its latest update, FDA notes that there is no known threat of contamination in infant formula manufactured by companies that have met the requirements to sell such products in the United States.  In addition, the FDA -– in conjunction with state and local officials – continues to check Asian markets for food items that are imported from China and that could contain a significant amount of milk or milk proteins.

The FDA has broadened its domestic and import sampling and testing of milk-derived ingredients and finished food products containing milk or milk-derived ingredients from Chinese sources. FDA has recommended that consumers not consume certain products because of possible contamination with melamine.


 

FDA Issues Import Alert For China Dairy Products

The FDA continues to take action to attempt to limit the impact of the China milk scandal on U.S. consumers. As part of its ongoing strategy to address the present problem with melamine contamination of consumer products exported from the People’s Republic of China, FDA has expanded its import controls on Chinese dairy products, and food and feed products manufactured in China that contain dairy ingredients. Candy, snacks, bakery products, pet food and other Chinese products that contain milk will now be detained at the border until tests prove that they are not contaminated. This action was taken to help ensure that only those Chinese dairy products (and food and feed products manufactured in China that contain dairy ingredients) which are not contaminated with melamine and melamine-related compounds reach U.S. consumers.

No adverse health effects have been reported in the United States from contamination with melamine of dairy products or dairy containing products. But melamine is not approved for direct addition to human or animal foods and no manufacturer is allowed to deliberately add it to any food for U.S. consumers.  Since melamine was discovered in infant formula in September it apparently has sickened more than 50,000 infants in China and killed at least four. Since that time, melamine has been found in a wide range of other products, including milk, eggs and fish feed. Testing by the FDA has detected melamine and cyanuric acid, a related contaminant, in a number of products that contain milk or milk-derived ingredients, including candy and beverages, according to the FDA alert. China is also one of the world’s biggest makers of supplements, and some protein powders and shakes are made largely with powdered milk.


The agency has at times blocked imports of individual food products, but it is rare for it to block an entire category of one country’s foods. The widely spread assessment is that food and feed dealers in China added melamine to their products because it increases nitrogen content to give the appearance in testing that protein levels meet specifications.

Concern has been expressed about delays spilling over to other food imports, but the FDA said the percentage of food subject to the import alert is small. Another possible issue is that private laboratories which perform product tests for FDA compliance already reportedly have long waiting lists. The agency said it won't release the imported food unless an independent laboratory verifies that representative samples contain no melamine or cyanuric acid, a melamine derivative.
At a broader level, one wonders what the alert may do to the recently negotiated opening of FDA offices in China. The timing of the FDA alert coincides with an upcoming  meeting between Health and Human Services Secretary Michael Leavitt and top Chinese health officials in Beijing.