Taishan Gypsum Co. v. Gross (In re Chinese-Manufactured Drywall Prods. Liab. Litig.)

Decision Date20 May 2014
Docket NumberNo. 12–31213.,12–31213.
Citation753 F.3d 521
PartiesIn re CHINESE–MANUFACTURED DRYWALL PRODUCTS LIABILITY LITIGATION. Taishan Gypsum Company, Limited; Tai‘An Taishan Plasterboard, Company, Limited, Defendants–Appellants v. David Gross; Cheryl Gross; Lois Velez, individually and on behalf of others similarly situated, Plaintiffs–Appellees. In re Chinese–Manufactured Drywall Products Liability Litigation. Taishan Gypsum Company, Limited, Defendant–Appellant v. Mitchell Company Incorporated, individually and on behalf of others similarly situated, Plaintiff–Appellee. In re Chinese–Manufactured Drywall Products Liability Litigation. Taishan Gypsum Company, Limited; Tai‘An Taishan Plasterboard, Company, Limited, Defendants–Appellants v. Kenneth Wiltz, individually and on behalf of all others similarly situated, Barbara Wiltz, individually and on behalf of all others similarly situated, Plaintiffs–Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

OPINION TEXT STARTS HERE

Frederick S. Longer, Arnold Levin, Levin, Fishbein, Sedran & Berman, Philadelphia, PA, Leonard Arthur Davis, Russ M. Herman, Esq., Senior Attorney, Herman Herman & Katz, L.L.C., Brooke C. Tigchelaar, Stone Pigman Walther Wittmann, L.L.C., New Orleans, LA, Steven L. Nicholas, Esq., George M. Dent, III, David George Wirtes, Jr., Esq., Cunningham Bounds, L.L.C., Mobile, AL, Elizabeth Joan Cabraser, Lieff, Cabraser, Heimann & Bernstein, L.L.P., San Francisco, CA, Jonathan David Selbin, Lieff, Cabraser, Heimann, & Bernstein, L.L.P., New York, NY, for PlaintiffAppellee.

Frank T. Spano, Courtney Lynne Colligan, Joe Cyr, Hogan Lovells US, L.L.P., New York, NY, Thomas Patrick Owen, Jr., Esq., Richard C. Stanley, Esq., Stanley, Reuter, Ross, Thornton & Alford, L.L.C., New Orleans, LA, for DefendantsAppellants.

Ervin Amado Gonzalez, Colson Hicks Eidson, Coral Gables, FL, Elliot H. Scherker, General Attorney, Greenberg Traurig, L.L.P., Miami, FL, for Amicus Curiae.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before SMITH, DeMOSS, and HIGGINSON, Circuit Judges.

HIGGINSON, Circuit Judge:

This appeal encompasses three cases in the Chinese Drywall multidistrict litigation— Mitchell, Gross, and Wiltz. Picking up where we left off in Germano v. Taishan Gypsum Company, Ltd., 742 F.3d 576 (5th Cir.2014) (affirming as to a fourth), we hold that personal jurisdiction lies over Taishan Gypsum Company, Limited and Tai‘an Taishan Plasterboard Company, Limited, in their respective cases. We further hold that the district court did not abuse its discretion when it refused to vacate the preliminary default entered in Mitchell. We therefore AFFIRM.

I.

From 2005 to 2008, a housing boom coincided with the destruction of Hurricanes Katrina and Rita to sharply increase the demand for construction materials in the Gulf South and East Coast. In response, Chinese companies manufactured considerable quantities of gypsum wallboard (“Chinese drywall”) and sold it to United States companies. Homeowners experienced problems with the drywall, 1 and affected parties sued entities involved in manufacturing, importing, and installing the Chinese drywall. The cases multiplied, and the Judicial Panel on Multidistrict Litigation transferred the cases to a single court in the Eastern District of Louisiana (the “MDL” court). The Honorable Eldon E. Fallon presides over the MDL.

Four cases in the MDL have reached our court: Germano, Mitchell, Gross, and Wiltz. Germano is a class action originally filed by Virginia homeowners in the United States District Court for the Eastern District of Virginia. Mitchell is a class action originally filed by homebuilders in the United States District Court for the Northern District of Florida. Gross and Wiltz are class actions on behalf of property owners and were directly filed in the MDL in the Eastern District of Louisiana.

PlaintiffsAppellees are the class-action plaintiffs in each of the four cases. DefendantsAppellants are two Chinese companies that manufacture and sell drywall: Taishan Gypsum Company, Limited (TG) and Tai‘an Taishan Plasterboard Company, Limited (TTP) (collectively “Taishan”). Both entities are defendants in Gross and Wiltz, but only TG is a defendant in Germano and Mitchell. TG and TTP appeal in their respective cases from the MDL court's omnibus September 4, 2012 order. In Germano v. Taishan Gypsum Company, Ltd., 742 F.3d 576 (5th Cir.2014), our court affirmed the district court's decision finding personal jurisdiction over TG. We are tasked with the three remaining appeals: Mitchell, Gross, and Wiltz.

A. Mitchell, Gross, and Wiltz1. Mitchell

The Mitchell Company (Mitchell) is an Alabama construction company that has built homes and apartments in Alabama, Mississippi, Louisiana, Georgia, and Florida. On March 6, 2009, Mitchell sued TG, among others, in the United States District Court for the Northern District of Florida. Mitchell sued on behalf of itself and a class “composed of all persons and entities” in Alabama, Mississippi, Louisiana, Georgia, Texas, and Florida who “constructed an improvement to real estate using drywall manufactured or distributed by Defendants and incurred expenses associated with repairing the drywall itself, repairing property damage that the drywall caused, and liability to property owners as a result of the damage.

Mitchell properly served TG on May 8, 2009. On June 15, 2009, the MDL panel transferred Mitchell to the Eastern District of Louisiana. TG failed to appear, and Mitchell moved for a default judgment. The Clerk entered a preliminary default against TG on September 22, 2009, and on June 10, 2010, TG made its first appearance. TG moved to vacate the preliminary default under Rule 55(c) and also moved to dismiss the case for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2). The MDL court denied TG's motions in its omnibus September 4, 2012 order.

2. Gross

The Gross plaintiffs filed directly in the MDL court on October 7, 2009. The plaintiffs sued, among others, TG and TTP, on behalf of themselves and all United States homeowners who have defective drywall in their homes. They allege that defendants' drywall has caused them economic harm from the costs of inspection, costs of repairs, and devaluation of their homes, and physical harm such as an increased risk of disease. Because plaintiffs concede that they have failed to “identify the manufacturer of the product that caused the harm,” they urge liability for the defendants “in ratio to their proportionate share of the relevant market.” 2 After jurisdictional discovery, TG and TTP moved to dismiss for lack of personal jurisdiction under Rule 12(b)(2). The district court denied the motion in its omnibus September 4, 2012 order.

3. Wiltz

The Wiltz plaintiffs also filed directly in the MDL court. They are suing, among others, TG and TTP, on behalf of themselves and all owners and residents of property containing defective Chinese drywall. After completing jurisdictional discovery, TG and TTP moved to dismiss Wiltz for lack of personal jurisdiction under Rule 12(b)(2). The district court denied the motion in its omnibus September 4, 2012 order.3

B. The Taishan Entities (TG and TTP)

TG is a Chinese corporation with its principal place of business in Ta‘in City, Shandong Province, China. It began manufacturing drywall in 1992 and has grown to be one of the largest drywall manufacturers in China. In 2006, TG formed a wholly owned subsidiary, TTP. TTP stopped operating in 2008. TG and TTP are referred to collectively as “Taishan.”

C. The District Court's Order

On September 4, 2012, the district court ruled on Taishan's motions in Germano, Mitchell, Gross, and Wiltz in a 142–page order. In Germano the district court determined that personal jurisdiction was proper over TG in Virginia. The district court also denied TG's motion to vacate the default judgment.4 In Mitchell, the district court determined that personal jurisdiction was proper over TG in Florida. In so holding, the district court determined that TTP's contacts with Florida could be imputed to TG for the purposes of personal jurisdiction. The district court also denied TG's motion to vacate the preliminary default. In Gross and Wiltz,5 the district court determined that personal jurisdiction was proper over TG and TTP in Louisiana. The district court again held that TTP's contacts could be imputed to TG for the purposes personal jurisdiction. The district court subsequently certified an interlocutory appeal under 28 U.S.C. § 1292(b), and this court granted permission to appeal.

II.

Whether personal jurisdiction can be exercised over a defendant is a question of law subject to de novo review. Patin v. Thoroughbred Power Boats Inc., 294 F.3d 640, 652 (5th Cir.2002) (citing Dickson Marine, Inc. v. Panalpina, Inc., 179 F.3d 331, 335 (5th Cir.1999)). A district court's jurisdictional findings of fact, however, are reviewed for clear error. Lonatro v. United States, 714 F.3d 866, 869 (5th Cir.2013). “The burden of establishing personal jurisdiction over a non-resident defendant lies with the plaintiff.” Ainsworth v. Moffett Eng'g, Ltd., 716 F.3d 174, 176 (5th Cir.), cert. denied,––– U.S. ––––, 134 S.Ct. 644, 187 L.Ed.2d 420 (2013). Because the district court held an evidentiary hearing on personal jurisdiction, the plaintiffs must establish personal jurisdiction by a preponderance of the evidence. Germano, 742 F.3d at 585;see also Walk Haydel & Assocs., Inc. v. Coastal Power Prod. Co., 517 F.3d 235, 241–42 (5th Cir.2008).

Under Federal Rules of Civil Procedure 55(c) and 60(b), a district court may set aside an entry of default for “good cause.” Lacy v. Sitel Corp., 227 F.3d 290, 291–92 (5th Cir.2000). The denial of such relief is reviewed for abuse of discretion and any factual determinations underlying the district court's decision are reviewed for clear error. Id.

III.

We begin with the Mitchell appeal, in which TG argues that the district court erred in...

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