Bill Introduced To Ease Suits Against Foreign Manufacturers

We have posted at MassTortDefense about a number of significant product liability issues arising from products made outside the US and imported into this country.  Senators Sheldon Whitehouse, D-R.I.,  Jeff Sessions, R-Ala., and Richard Durbin, D-Ill., have introduced a bill that would make it easier for foreign manufacturers to be sued when their products allegedly injure U.S. consumers.

The Foreign Manufacturers Legal Accountability Act of 2009 was introduced in the U.S. Senate last week.  The bill, S. 1606,  follows up on hearings last Spring during which witnesses testified about the perceived delays and difficulties with serving foreign manufacturers with process and establishing jurisdiction.

In comments on the Senate floor, sponsors cited recent examples in which Americans had been injured by allegedly defective foreign products. They claimed that the current rules put American manufacturers at a competitive disadvantage because they supposedly allow foreign companies to offer cheaper products that do not comply with U.S. safety requirements. The bill would apply to drugs, medical devices, and cosmetics, biological products, consumer products, as such term is used in the Consumer Product Safety Act, chemicals under the Toxic Substances Control Act, and pesticides.

The bill attacks the issues of service of process and jurisdiction. Service abroad involves the Hague Convention on the Service Abroad of Judicial and Extra Judicial Documents in Civil and Commercial Matters, to which the U.S. is a signatory. A complaint must be translated into the foreign language, transmitted to the central authority in the foreign country, and then delivered according to the rules of service in the home country of the defendant. This can be a lengthy and expensive process. The proposed legislation would require foreign manufacturers and producers of covered products distributed in commerce (or component parts that will be used in the United States to manufacture such products) to establish a registered agent in the United States who is authorized to accept service of process.  It similarly states that a person may not import into the United States a covered product (or component part that will be used in the United States to manufacture a covered product) if such product (or component part) or any part of such product (or component part) was manufactured or produced outside the United States by a manufacturer or producer who does not have a registered agent.

 The second major hurdle is the inability to establish personal jurisdiction over foreign
manufacturers. Under the new bill, a foreign manufacturer or producer of covered products that registers an agent as above thereby consents to the personal jurisdiction of the State or Federal courts of the State in which the registered agent is located for the purpose of any civil or regulatory proceeding.

Not surprisingly the bill is supported by the "American Association for Justice"  plaintiffs lawyers.



Legislation Might Increase Litigation Against Foreign Product Manufacturers

Sen. Sheldon Whitehouse (D-R.I.) announced last week his plan to introduce legislation that would increase the ability of U.S. plaintiffs to sue foreign manufacturers of allegedly defective products. This development should be monitored by all foreign manufacturers selling into the United States.

Whitehouse announced the proposed legislation at a hearing by the Senate Judiciary Committee's Subcommittee on Administrative Oversight and the Courts. The hearing was entitled, “Leveling the Playing Field and Protecting Americans: Holding Foreign Manufacturers Accountable.” A variety of witnesses testified about the impact of the issue on both American consumers and American business, and whether there was a need for Congress to put foreign companies on a more equal footing with domestic companies in terms of litigation risks, and to reduce a possible “competitive disadvantage” suffered by U.S. manufacturers.

There are three main procedural hurdles faced by plaintiffs seeking to sue foreign parties: (1) obtaining personal jurisdiction; (2) serving process; and (3) enforcing U.S. judgments abroad. That is, a party suing must first be able to find a court that has Constitutional power/authority over the defendant, personal jurisdiction. Asahi Metal Industry Co. v. Superior Court of California, Solano County, 480 U.S. 102 (1987). Then after filing, the party must inform the defendant of the lawsuit and its contents.  And at the end of the lawsuit, the party must be able to collect any money awarded, especially when the defendant's assets are outside of the U.S.  If the defendant is judgment proof, the suit is a waste of time for plaintiffs.

One speaker, Prof. Teitz of the Roger Williams University School of Law, described that as a result of different approaches in other legal systems, U.S. consumers face difficulties recovering in U.S. courts and enforcing U.S. judgments abroad, in fact more difficulty than many foreign consumers face in the reverse situation. In addition, there is an obvious competitive impact on U.S.  manufacturers who are sued more easily and cheaply here for obvious reasons and against whom judgments can be enforced throughout the country under the Full Faith and Credit Clause. Service of process may be governed by international conventions and treaties, or may involve the use of diplomatic channels, the Professor said. Legislation to require domestic agents for service of process would reduce the cost and difficulty of service.

A plaintiff attorney testified that the transition of the U.S. economy away from manufacturing has resulted in a dramatic increase in foreign-made goods entering the country. The volume of imports has tripled over the last decade and is expected to triple again by 2015. He recommended legislation allowing jurisdiction based on aggregate national contacts and import licenses that require liability insurance as well as agents for service of process and consent to jurisdiction.

Another attorney noted a competitive disadvantage for U.S. companies that are subject to what he called the “tort tax.” But he cautioned that legislation should not burden U.S. business by expanding federal jurisdiction and changing choice-of-law rules. He also warned of possible problems with the constitutionality of the discussed legislation. For example, legislation might authorize jurisdiction over foreign entities by virtue of their national contacts in both federal and state courts. That may run afoul of the rule that state courts may only assert personal jurisdiction over defendants who purposefully establish minimum contacts with that forum state. See, e.g., International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).