News: April 2, 2015: “Question Remains: Why Did Chinese Drywall Maker Pay?”

Question remains: Why did Chinese drywall maker pay?

 

It's a $3.2 million question without an answer - at least not yet.

What changed Taishan Gypsum Co. Ltd.'s mind?

The Chinese manufacturer of toxic drywall ignored lawsuits over its products for years. Then, it briefly fought back, claiming U.S. courts couldn't hold it liable for damages its wallboard caused. When that didn't work, the company walked away.

Then, late last week, Taishan paid a judgment it has owed to seven Hampton Roads families since 2010.

Legal experts said this week that cultural differences may have played a part in Taishan's initial hesitance, but economics may have persuaded it to pay.

Regardless, it was a shock to thousands of homeowners who have been hoping to recoup some of the hundreds of thousands of dollars each lost through foreclosures, short sales and bankruptcies.

To be clear, all but seven of the roughly 4,000 members of the class-action suit will still have to wait to find out if Taishan will pay them. The $3.2 million will be split between the suit's original seven plaintiffs, their attorneys and the courts handling the case.

Several members of Taishan's relatively new legal team did not respond to requests for comment. Bernard Taylor Sr., lead defense attorney and an Atlanta-based partner in Alston & Bird LLP., said through a spokesman that he was not at liberty to discuss the case.

The company's side of the story has rarely - if ever - been told in American media. Its previous attorney, whom the company fired months ago, did not discuss the case with The Pilot, other than to say in a statement that the 5th U.S. Circuit Court of Appeals had erred when it ruled the company could be held liable in American courts.

Arnold Levin, the lead attorney representing 4,000 homeowners in the class-action suit against Taishan, said pressure likely led to its decision.

"We've been pressing them all over the country, and some may say all over the world," Levin said Tuesday from his Philadelphia office of Levin, Fishbein, Sedran & Berman. "We are finding their assets in the U.S. We are finding they are doing business in the U.S. The judge held them in contempt of court in the U.S. They have a lot of problems."

When Judge Eldon Fallon, who presides over U.S. District Court for the Eastern District of Louisiana, found Taishan in civil and criminal contempt in July, he ordered the company not to conduct business in the United States.

If it did, the court said it would seize 25 percent of its earnings.

Levin said attorneys believe Taishan has been doing business in Oregon and New Jersey. Formal depositions have not been held to ascertain whether, where and how much business Taishan has done in the U.S.

Richard Silberberg, partner and co-chairman of the class-action litigation group at the Dorsey law firm in New York, said he has learned through 30 years of representing Asian companies that they aren't prone to settling cases, and tend to wait for consensus before reacting to judgments.

"Foreign companies generally will resist litigation very aggressively if they don't believe there was any basis for the claims that were asserted against them," Silberberg said. "Where they believe they are right, they would rather fight than settle."

American companies can opt to settle cases if they believe it will cost less in the long run, he said. It's also easier to point to a particular decision-maker in American businesses.

"Asian companies... require an agreement among all of the relevant decision-makers," Silberberg said. "It can slow the process down."

Stephen Radin, a partner at Weil, Gotshal & Manges LLP in New York, said it's not unprecedented for foreign companies to ignore American courts. A $69 million judgment was recently handed down in Delaware against a Chinese company that didn't defend itself.

Whether foreign companies pay judgments against them depends in part on whether they have assets in the United States that can be seized and whether they plan to continue doing business here, Radin and Silberberg said.

Sarah Kleiner Varble, 757-446-2318, [email protected]

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