China Drywall Firm Fights Order to Pay U.S. Homeowners

Taishan Gypsum Co. appealed a September court ruling that ordered the Chinese drywall manufacturer to pay U.S. homeowners for damages caused by harmful chemicals in the wallboard.

Taishan Gypsum, which claims on its English-language website to be the largest manufacturer of gypsum board in China, argued in its appeal that a ruling by U.S. District Judge Eldon Fallon should be set aside because the New Orleans-based court has no jurisdiction over a foreign company.

Taishan Gypsum asked Fallon to halt any court proceedings against it while the U.S. Court of Appeals in New Orleans considers the manufacturer’s request to dismiss a $2.6 million default judgment the judge awarded against Taishan Gypsum on behalf of seven Virginia homeowners in 2010. Fallon entered the judgment after the Chinese firm failed to appear to defend itself in his court where thousands of U.S. damages claims are consolidated for pretrial processing.

In a 142-page decision handed down last month, Fallon ruled he does have jurisdiction over the Chinese company. Fallon said that in addition to Taishan Gypsum’s sales agreement with a Virginia firm, the company also places English-language labels on its products and gives American nicknames to its salesmen to encourage U.S. sales.

“TG had more than reasonable knowledge that its products might end up in Virginia; it knew its products would end up in Virginia,” Fallon said in the ruling.

Hong Kong

Fallon made that decision after traveling to Hong Kong in January to witness depositions of Taishan Gypsum executives. They were asked whether the company intentionally placed its products into commerce in the U.S. and was thus subject to U.S. laws, Fallon said in his September ruling.

“We believe Judge Fallon’s order was well-reasoned and very thorough,” Leonard Davis, with Herman, Herman & Katz and one of the lead plaintiffs’ lawyers, said in an e-mail. “The court determined that Taishan is subject to the jurisdiction of the United States, and as such, Taishan should be held accountable for the tainted drywall that was placed into innocent homeowners’ properties. We expect that many more homeowners will seek full relief from Taishan, as thousands of suits have been filed.”

Tom Owen, a New Orleans attorney representing Taishan Gypsum, didn’t immediately respond to a phone message yesterday seeking comment on the Chinese company’s appeal.

In 2010, U.S. regulators recommended that homeowners remove all defective drywall and replace gas-service piping, smoke alarms and other electrical components and wiring that may have been corroded by chemicals in the wall board. Lawyers claim as many as 40,000 customers might have been harmed by the defective Chinese product, which was installed widely in the U.S. Gulf Coast and southern Eastern seaboard from 2005 through 2009.

The case is In Re: Chinese Manufactured Drywall Products Liability Litigation, 12-31017, U.S. Court of Appeals for the Fifth Circuit (New Orleans).

To contact the reporter on this story: Laurel Brubaker Calkins at laurel@calkins.us.com

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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