Suing Chinese Companies for Product Liability

In the last few years, my law firm’s international dispute resolution team (of which I am a part) has seen a tremendous increase in cases involving individuals and companies and lawyers wanting to sue Chinese companies for a Chinese manufactured product that injured someone. The cases coming to our law firm typically involve one of the following scenarios:

A U.S. retailer or importer is being sued by someone injured by a product sold or distributed by the American company. The injured party has sued the U.S. retailer/importer/distributor because suing and collecting from the Chinese manufacturer will be difficult or impossible. The U.S. retailer/importer/distributor (or its subrogated insurance company) seeks our assistance in figuring out who to sue in China and how to go about doing so.
A U.S. lawyer representing an injured consumer wants our assistance in figuring out who to sue in China and how to do so in a way that will actually lead to the injured consumer receiving real money.
A U.S. company or U.S. lawyer just secured a U.S. court judgment against a Chinese manufacturer and wants our assistance in figuring out how to collect on that judgment.
A U.S. consumer writes us to ask about our one of our international dispute resolution attorneys representing them in a product liability lawsuit against the Chinese product manufacturer either in the United States and/or in China.

Suing Chinese companies on a product liability claim in either the United States or China is difficult.

If you sue the Chinese company in the United States, it will likely claim the United States lacks personal jurisdiction over it. This can be effective for the Chinese company that does business only in China and that has been smart enough to set up an intermediary company in Hong Kong (usually) that ships the product to the United States. Here’s a common scenario: China company manufactures widgets and sells its widgets to a Hong Kong company. The Hong Kong company then sells the widgets to an American company and the Chinese company then claims it never did any business with the United States and thus cannot be subject to personal jurisdiction there. This claim can be defeated by showing the Hong Kong company is essentially the China company. This is not necessarily going to be easy, especially because it is also quite common for the Chinese company to add another intermediary company into the mix by setting up a one person U.S. company to act as the importer and to in turn sell the products to various different American companies. A thorough, diligent investigation is required by attorneys who understand how Chinese companies seek to do this and how to collect evidence that these other companies are in fact shells for the Chinese manufacturer.

Assuming you can convince a US court to assert jurisdiction over the Chinese company, the Chinese company may not even bother fighting a U.S. lawsuit because it knows Chinese courts do not enforce U.S. judgments. If all of the Chinese company’s assets are in China and your U.S. judgment will not be enforced in China, the judgment has little value. And if you are thinking you may be able to seize the Chinese company’s future shipments of widgets to the United States, that too will be tough for various reasons. First off, the Chinese company will know about the U.S. judgment against it so it likely will create a new company in Hong Kong to buy its products and ship the products to the United States. And it probably will set up a new company in the United States as well to import those products. This will make it extremely difficult even to find the products. And what if that new U.S. company really is unaffiliated with the Chinese company that made the offending product? What right do you have to seize its already bought and paid for products?

Options beyond suing in the U.S. or China.

You can usually sue the Chinese manufacturer in China, but this approach has its own set of difficulties, ranging from the difficulty in securing evidence to enforcing any judgment. Equally importantly, your damages in a Chinese court will be a sliver of what they would have been in the United States.

There are though options beyond suing in the U.S. or China. Many countries enforce U.S. judgments and so it is important to “think globally” in deciding what actions to pursue against Chinese manufacturers and where. The United Kingdom, Taiwan, South Korea, Singapore, Canada, and even Hong Kong all have a pretty good record of enforcing U.S. judgments.

The first thing our international dispute resolution lawyers do when we are brought on to assist in seeking compensation from Chinese manufacturers is to seek to locate where the Chinese company has assets. We then research whether the country (or countries) where the Chinese company has assets will enforce a US judgment.

For example, assume the Chinese company has assets in Korea, Canada or England. If you can get a money judgment against the Chinese company in the United States, you likely will be able to “convert” that US judgment to a Korean or a Canadian or an English judgment and then use that judgment to collect on the Chinese company’s assets in the particular country.

Much of the time though, the way to collect in these cases is to take a holistic approach and seek to make life so difficult for the Chinese manufacturer in so many places that it will eventually decide it is easier and or cheaper for it to settle with you. We have succeeded with this sort of approach multiple times but usually after a lot of work and a lot of time and so this sort of approach only makes sense when considerable money is at stake.

For more on what it takes to sue a Chinese company in the United States, check out the following: