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Second verse, same as the first: Chinese drywall co. in contempt

Fri Jul 25th, 2014 on     Insurance Law,    

In February, the 5th U.S. Circuit Court of Appeals ruled that the U.S. has jurisdiction over the lawsuits against Chinese drywall manufacturer Taishan Gypsum Co. Ltd. The court also ordered the company to pay $2.7 million to the named plaintiffs in the class action.

The decision came as a relief to many watching the case. The class action against the other company involved in the scandal settled a year ago. TG’s challenge to jurisdiction and TG’s conduct had prolonged the proceedings. The company repeatedly missed court hearings and claimed that it had misunderstood court documents.

The failure to attend to the matter initially resulted in a default judgment against the company in the initial lawsuit, back in 2009. TG raised the jurisdiction issue in its appeal of that decision — an appeal that was filed one day before the deadline.

For a moment, it looked as if the way were clear for the plaintiffs — homeowners in Florida, Louisiana and Virginia — to collect damages and move on with their lives. Unfortunately, TG continued to ignore court notices.

The federal judge handling the case raised the stakes this week. “This refusal to appear is a direct contemptuous act occurring in open court after actual practice notice of the proceedings,” he said in his ruling. He first found TG in contempt of court. For the trouble the company caused in this round of the lawsuit, the judge added an order to pay $55,000 in penalties and attorney fees. And, the judge barred the company from doing business in the U.S. until it participates in the proceedings.

According to a professor at Fordham University School of Law, TG is not the first Chinese company to refuse to participate in litigation. Closing the U.S. market to uncooperative companies has worked in the past, he said.

A violation of the court order will result in a sizeable penalty: 25 percent of the company’s profits for the year the violation occurs. That penalty will presumably go to the court, not the plaintiffs.

Sources: 

Insurance Journal, “Chinese Drywall Maker Ordered to Pay $55,000, Stop Doing Business in U.S.,” Kevin McGill, July 22, 2014

China Daily US, “US judge holds Chinese drywall company in contempt,” Amy He, July 22, 2014

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