In re Chinese-Manufactured Drywall Prods. Liab. Litig.

• Decision Date: 21 April 2017
• Docket Number: CIVIL ACTION NO. 09-02047 SECTION "L" (5)
• Parties: IN RE: CHINESE-MANUFACTURED DRYWALL PRODUCTS LIABILITY LITIGATION THIS DOCUMENT RELATES TO: ALL CASES
• Court: U.S. District Court — Eastern District of Louisiana

IN RE: CHINESE-MANUFACTURED DRYWALL PRODUCTS LIABILITY LITIGATION

THIS DOCUMENT RELATES TO: ALL CASES

CIVIL ACTION NO. 09-02047 SECTION "L" (5)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA

April 21, 2017

ORDER & REASONS

Before this Court are four motions pursuant to Rule 12(b) of the Federal Rules of Civil Procedure seeking an order dismissing complaints against the Defendants for lack of personal jurisdiction and for insufficient process and service of process. Specifically, these motions are as follows: (1) Motion to Dismiss by China New Building Materials Group ("CNBM Group"), China New Building Materials Co. ("CNBM"), CNBMIT Co. Ltd. ("CNBMIT"), CNBM USA Corp. ("CNBM USA"), and United Suntech Craft, Inc. ("United Suntech") (collectively, the "CNBM Entities") (R. Doc. 19527); (2) Motion to Dismiss by Beijing New Building Materials Public Limited Company ("BNBM") (R. Doc. 19646); (3) Motion to Dismiss by Beijing New Building Material Group ("BNBMG") (R. Doc. 19664); and (4) Motion to Dismiss the State of Louisiana's Second Amended and Restated Petition by BNBM and BNBM Group (collectively, the "BNBM Entities") (R. Doc. 19663). Having read the parties' briefs, evaluated the relevant jurisdictional discovery, reviewed the applicable law, and heard the parties on oral argument, the Court now issues this Order and Reasons.

Table of Contents

I. BACKGROUND .......................................................................................................... 3

II. PROCEDURAL BACKGROUND .............................................................................. 4

III. FACTUAL BACKGROUND ..................................................................................... 12

A. The Corporate Structure of the CNBM Business Group .................................... 12

1. CNBM Group's Role as Parent of the CNBM Business Group ...................... 12

2. BNBM Group is a Minority Shareholder in CNBM ....................................... 13

3. CNBM Group is a Shareholder in CNBM ....................................................... 15

4. CNBMIT, CNBM USA, and United Suntech are companies within the CNBM Corporate Family ............................................................................................. 16

5. CNBM is a Majority Shareholder in BNBM ................................................... 17

6. BNBM's Relationship with its Subsidiary Taishan ......................................... 19

B. BNBM PLC's Contacts with Florida .................................................................. 27

C. Defendant Entities' Response to the Instant Litigation ....................................... 32

IV. IMPUTING TAISHAN'S FORUM CONTACTS TO PARENT CORPORATIONS FOR PURPOSES OF PERSONAL JURISDICTION ................................................ 36

A. Standard of Review ............................................................................................. 37

B. Legal Standards Governing Alter Ego Relationships ......................................... 38

1. Choice of Law ................................................................................................. 40

2. Chinese Company Law .................................................................................... 41

3. Forum State Law ............................................................................................. 42

C. Legal Standard Governing Agency Relationships .............................................. 46

D. Imputation Analysis ............................................................................................ 49

1. Chinese Cultural and Economic Context ......................................................... 50

2. Analysis Under Florida Law ............................................................................ 54

3. Analysis Under Virginia Law .......................................................................... 64

4. Analysis Under Louisiana Law ....................................................................... 69

V. PERSONAL JURISDICTION OVER BNBM BY VIRTUE OF ITS CONTACTS IN FLORIDA ................................................................................................................... 80

A. Personal Jurisdiction Over a Foreign Defendant ................................................. 80

B. Florida's Long-Arm Statute ................................................................................ 80

1. BNBM's Business in the state ......................................................................... 812. Tortious Acts within the State ......................................................................... 84

3. Causing Injury in the State .............................................................................. 86

C. Due Process Clause ............................................................................................. 86

D. Minimum Contacts .............................................................................................. 87

1. Specific Jurisdiction ........................................................................................ 88

E. Cause of Action Arises from Minimum Contacts ............................................... 91

F. Fair Play and Substantial Justice ......................................................................... 92

VI. SERVICE OF PROCESS .......................................................................................... 95

VII. CONCLUSION ......................................................................................................... 98

I. BACKGROUND

The present MDL litigation arises from alleged property damage and personal injuries sustained as a result of the presence of Chinese-manufactured drywall in homes and other buildings in a number of states. In the instant motions, Defendants are contesting personal jurisdiction and service of process. Defendants move to dismiss on the grounds that they do not have sufficient minimum contacts with the forum states to meet the long arm statutes or satisfy due process. Defendants contend they are not alter egos of Taishan and, thus, imputing jurisdiction is not justified. Against these contentions, Plaintiffs assert that there is substantial evidence that these foreign corporate entities acted as alter egos, agents, or within a single business enterprise, in unison with Taishan to sell defective drywall to American customers. It is the law of the case that personal jurisdiction has been established over Taishan. Chinese Drywall, 742 F.3d 576 & 753 F.3d 521. Therefore, the critical issue before this Court is whether the CNBM and BNBM Entities are alter egos or agents of Taishan or in a single business enterprise such that Taishan's contacts with the forum states, which were sufficient to establish personal jurisdiction, may be imputed to the CNBM and BNBM Entities.

Given the substantially similar nature of the arguments in the four pending motions, this Order & Reasons will analyze the four pending motions in the following manner. First, it will briefly summarize the procedural background of this litigation. Second, it will describe the factual background relevant to the personal jurisdiction arguments. Third, it will address the critical issue of whether Taishan's contacts with the forum states should be imputed to the CNBM and BNBM Entities. Fourth, it will address whether the BNBM Entities' contacts in Florida are sufficient to establish this Court's personal jurisdiction over the BNBM Entities. Finally, it will address the Defendants' insufficient service and service of process arguments.

II. PROCEDURAL BACKGROUND

From 2004 through 2006, the housing boom in Florida and rebuilding efforts necessitated by Hurricanes Rita and Katrina led to a shortage of construction materials, including drywall. As a result, drywall manufactured in China was brought into the United States and used to construct and refurbish homes in coastal areas of the country, notably the Gulf Coast and East Coast. Sometime after the installation of the Chinese drywall, homeowners began to complain of emissions of smelly gasses, the corrosion and blackening of metal wiring, surfaces, and objects, and the breaking down of appliances and electrical devices in their homes. In re Chinese-Manufactured Drywall Prod. Liab. Litig., 894 F. Supp. 2d 819, 829 (E.D. La. 2012), aff'd, 742 F. 3d 576 (5th Cir. 2014). Many of these homeowners also began to complain of various physical afflictions believed to be caused by the Chinese drywall. Accordingly, these homeowners began to file suit in various state and federal courts against homebuilders, developers, installers, realtors, brokers, suppliers, importers, exporters, distributors, and manufacturers who were involved with the Chinese drywall. Because of the commonality of facts in the various cases, this litigation was designated as multidistrict litigation. Pursuant to aTransfer Order from the United States Judicial Panel on Multidistrict Litigation on June 15, 2009, all federal cases involving Chinese drywall were consolidated for pretrial proceedings in MDL 2047 in the U.S. District Court, Eastern District of Louisiana.

The Chinese drywall at issue was largely manufactured by two groups of defendants: (1) the Knauf Entities, and (2) the Taishan Entities. The litigation has focused upon these two entities and their downstream associates, and has proceeded on strikingly different tracks for the claims against each group as described below:

The Knauf Entities are German-based, international manufacturers of building products, including drywall, whose Chinese subsidiary, Knauf Plasterboard (Tianjin) Co., Ltd. ("KPT"), advertised and sold its Chinese drywall in the United States. The Knauf Entities are named defendants in numerous cases consolidated with the MDL litigation and litigation in state courts. The Knauf Entities first entered their appearance in the MDL litigation on July 2, 2009. See (R. Doc. 18). Thereafter, the Court presided over a...