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In re Chinese Manufactured Drywall Products Liability Litigation

United States District Court, E.D. Louisiana

July 22, 2015

IN RE: CHINESE MANUFACTURED DRYWALL PRODUCTS LIABILITY LITIGATION, SECTION L

ORDER & REASONS

ELDON E. FALLON, District Judge.

I. INTRODUCTION

On June 22, 2015, the CNBM entities filed a motion to dismiss (R. Doc. 19179), which included, inter alia, CNBM Group's Motion to Dismiss for Lack of Subject Matter Jurisdiction. Pursuant to this Court's order, the parties met and conferred on July 6, 2015 to try and determine an appropriate submission date for CNBM Group's Motion to Dismiss for Lack of Subject Matter Jurisdiction. Notwithstanding their efforts, the Parties were not able to agree upon a satisfactory schedule. The Court received and reviewed letters from the parties and heard arguments from counsel at the July Monthly Status Conference regarding scheduling. The Court has considered these arguments in light of the applicable law and now issues this Order and Reasons to set the hearing date for CNBM Group's Motion to Dismiss for Lack of Subject Matter Jurisdiction.

II. 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 in the construction and refurbishing of 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). 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 and 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 as follows.

A. Knauf Entities

The Knauf Entities are German-based, international manufacturers of building products, including drywall, whose Chinese subsidiary, Knauf Plasterboard (Tianjin) Co., Ltd. ("KPT"), manufactured and sold its Chinese drywall in the United States. The Knauf Entities first entered their appearance in the MDL litigation on July 2, 2009. See (R. Doc. 18). Following a bellwether trial ( Hernandez v. Knauf Gips KG, Case No. 09-6050) involving a homeowner's claims against KPT for defective drywall where the Court found in favor of the Plaintiffs, the Knauf Entities entered into a pilot remediation program with the Plaintiffs' Steering Committee ("PSC") in the MDL. The Knauf pilot remediation program is ongoing and is in the process of remediating 2, 000 homes containing KPT Chinese drywall. Further, on December 20, 2011, the Knauf Entities and the PSC entered into a global, class Settlement Agreement ("Knauf Settlement Agreement"), which is designed to resolve all Knauf-related, Chinese drywall claims. See (R. Doc. 12061-5). Although the Court occasionally must deal with settlement administration and enforcement issues, the Knauf portion of this litigation is largely resolved.

B. Chinese Defendants

In stark contrast to the traditional approach with which the MDL litigation proceeded against the Knauf Defendants, the litigation against the Chinese entities has taken a different tack. The Chinese Defendants in the litigation, include the principal Chinese-based Defendant Taishan, namely, Taishan Gypsum Co. Ltd. ("TG") and its wholly-owned subsidiary, Taian Taishan Plasterboard Co., Ltd. ("TTP") (collectively "Taishan" or "Taishan Entities"). Other Chinese-based Defendants ("Taishan Affiliates") include the CNBM Defendants ("CNBM Entities"), comprised of the China National Building Materials Group Corporation, China National Building Materials Company Limited, China National Building Materials & Equipment Import & Export Corporation, and CNMB Forest Products (Canada) Ltd; and the BNBM Defendants ("BNMB entities"), comprised of Beijing New Building Materials Public Limited Company, and Beijing New Building Material (Group) Co. Ltd. As discussed below, the course of the litigation involving the Taishan Entities has not followed the same trajectory or enjoyed the same measure of resolution as that involving the Knauf Entities.

As an alleged manufacturer of Chinese drywall which has been installed in plaintiffs' properties, Taishan is a named defendant in numerous cases in both the MDL litigation and litigation filed in state courts. The Court's initial inquiry regarding Taishan involved four cases in the MDL in which Taishan was served, entered an appearance, and in two of these cases, subjected to default judgment proceedings. These four cases are: Germano v. Taishan Gypsum Co., Ltd., Case No. 09-6687; The Mitchell Co., Inc. v. Knauf Gips KG, Case No. 09-4115; Gross v. Knauf Gips KG, Case No. 09-6690; and Wiltz v. Beijing New Building Materials Public Ltd., Co., Case No. 10-361.

The first issues in the MDL litigation involving Taishan arose when TG failed to timely answer or otherwise enter an appearance in Mitchell and Germano, despite the fact that TG had been properly served in each case. See (R. Doc. 52); (R. Doc. 1-7) (Case No. 09-6687). As a result, after an extended period of time, the Court entered preliminary defaults against TG in both of these cases. See (R. Docs. 277, 487). The Taishan Affiliates have also been held in default with respect to proceedings in Wiltz, Gross, and Amorin . On February 1, 2011, BNBM, BNBM Group, CNBM, and CNBM Group were held in default in the Gross proceedings. See (R. Doc. 7302). These same entities were again held in default as to the omnibus intervention complaint that was filed in Gross on August 7, 2012. Also, on July 1, 2014, Taishan, TTP, BNBM, CNBM, and CNBM Group were held in default with respect to the Amorin complaint.

Taishan eventually entered this litigation on June 10, 2010, the last day to timely do so, by filing an appeal with the Fifth Circuit Court of Appeals. After Taishan entered its appearance in the MDL, it quickly sought to have the Default Judgment in Germano and the Preliminary Default in Mitchell vacated for lack of personal jurisdiction. See (R. Docs. 5436, 5583). The Fifth Circuit returned the case to this Court so that it could allow discovery and, in due course, rule on the jurisdictional issue. Formal personal jurisdiction discovery of Taishan began in October 2010, see e.g. (R. Docs. 5839, 5840), and continued over the year-and-a-half leading up to the filing of Taishan's motions to dismiss for lack of jurisdiction. This discovery has often been contentious, requiring close supervision by the Court. On June 29, 2012, over three years since the creation of MDL 2047, and after a year-and-a-half of personal jurisdiction discovery on Taishan, the Court presided over a hearing on Taishan's motions.

On September 4, 2012, this Court issued an order that was subsequently affirmed by two different panels of the Fifth Circuit, regarding Taishan's motions in Germano, Mitchell, Gross, and Wiltz, in which the Court denied the motions to vacate, denied the motions to dismiss, and held that it maintained personal jurisdiction over Taishan. This Court set a judgment debtor examination for July 17, 2014 ordering Taishan to appear; instead of appearing, however, Taishan fired its attorneys and indicated that it was again "withdrawing" from the litigation. The Court held Taishan in contempt of court, enjoining Taishan ...


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