United States District Court, E.D. Louisiana
IN RE CHINESE-MANUFACTURED DRYWALL PRODUCTS LIABILITY LITIGATION THIS DOCUMENT RELATES TO: ALL BROOKE CASES
ORDER & REASONS
E. FALLON U.S. DISTRICT COURT JUDGE.
the Court is the BNBM Defendants' Motion to Dismiss the
Brooke omnibus complaint, filed January 15, 2016. R.
Doc. 19984. On September 12, 2018, the Plaintiffs'
Steering Committee (“PSC”) filed its opposition.
R. Doc. 21779. The BNBM Defendants filed a reply on October
3, 2018. R. Doc. 21818. On November 13, 2018, after reviewing
the parties' submissions, the Court ordered additional
briefing on the issue of tolling. R. Doc. 21914. On December
14, 2018, the PSC filed its supplemental brief. R. Doc.
21963. On January 18, 2019, Taishan and the BNBM entities
filed their memoranda in further support of BNBM's motion
to dismiss, R. Docs. 22071, 22072, to which the PSC filed a
supplemental reply, R. Doc. 22083. The Court heard oral
argument on the motion on February 21, 2019. R. Doc. 22114.
Having considered the parties' arguments, briefing, and
the applicable law, the Court is ready to rule.
2004 through 2006, a housing boom in parts of the United
States and rebuilding efforts necessitated by Hurricanes Rita
and Katrina in the Gulf South 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 and East Coasts.
Sometime after the Chinese drywall was installed, homeowners
began to complain of foul-smelling odors, the corrosion and
blackening of metal wiring, surfaces, and objects, and the
breaking down of appliances and electrical devices in their
homes. See In re Chinese-Manufactured Drywall Prods.
Liab. Litig., 894 F.Supp.2d 819, 829-30 (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 have been caused by the Chinese
homeowners then 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 a
multidistrict litigation. Pursuant to a Transfer Order from
the United States Judicial Panel on Multidistrict Litigation
(“JPML”) on June 15, 2009, all federal cases
involving Chinese drywall were consolidated for pretrial
proceedings in MDL 09-2047 before this Court.
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 on these two
entities and their downstream associates and has proceeded on
strikingly different tracks for the claims against each
group. Relevant to this Order are the Chinese
Defendants. These Defendants 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 include
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”), as well as the Beijing New
Building Materials Public Limited Company
(“BNBM”) and Beijing New Building Material Group
(“BNBMG”) (collectively the “BNBM
Court's initial inquiry regarding Taishan involved four
cases in this MDL: (1) Germano v. Taishan Gypsum Co.
(No. 09-6687); (2) The Mitchell Co. v. Knauf Gips KG
(No. 09-4115); (3) Gross v. Knauf Gips KG (No.
09-6690); and (4) Wiltz v. Beijing New Building Materials
Public Ltd. (No. 10-361).
first issues involving Taishan arose when Taishan failed to
timely answer or otherwise enter an appearance in
Mitchell and Germano, despite the fact that
it had been properly served in each case. Thus, after an
extended period of time, the Court entered preliminary
defaults against Taishan in both cases. Thereafter, the Court
moved forward with an evidentiary hearing in furtherance of
the preliminary default in Germano on
Plaintiffs' claimed damages. At the hearing, the PSC
presented evidence specific to seven individual properties,
which served as bellwether cases. Thereafter, on February 19
and 20, 2010, the Court issued detailed Findings of Fact and
Conclusions of Law. On May 11, 2010, the Court issued a
Default Judgment against Taishan in Germano and in
favor of Plaintiffs.
10, 2010, the last day to timely appeal the Default Judgment
against them, Taishan filed a Notice of Appeal in
Germano and entered its appearance in
Germano and Mitchell. 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. Because this was the first time Defendants
raised jurisdictional issues, the Fifth Circuit remanded the
case to this Court to determine whether this Court indeed has
jurisdiction over Taishan.
fall of 2010, the Court directed the parties to commence the
personal jurisdiction discovery necessary to resolve
Taishan's motions to vacate. Sometime after the initial
discovery, the parties agreed to expand the discovery beyond
the Germano and Mitchell cases to other
cases in which Taishan had been served, including
Gross and Wiltz.
personal jurisdiction discovery of Taishan began in October
2010. Discovery included the production of both written and
electronic documents as well as depositions of Taishan's
corporate representatives, with each type of discovery
proceeding in a parallel fashion. This discovery was highly
contentious, requiring close supervision by the Court. The
Court presided over regularly-scheduled status conferences,
conducted hearings, and issued rulings to resolve numerous
2011, the PSC filed identical complaints in Federal district
courts in Florida, Virginia, and Louisiana (the
“Amorin complaints”). The
Amorin complaints include all Plaintiffs named in
the Wiltz, Gross, Abel, and
Haya actions. The Florida and Virginia actions were
transferred by the JPML to the MDL; the PSC filed the
Louisiana omnibus complaint directly into the MDL. It is
undisputed that the allegations and Plaintiffs named in the
Amoin complaints are identical. According to the
PSC, these identical complaints were filed “out of an
abundance of caution, ” because “there existed a
colorable question regarding the application of the
jurisdictional tests known as the ‘stream-of
commerce' test and the
‘stream-of-commerce-plus' test reflected in the
plurality opinions in McIntyre and Asahi,
as well as Justice Brennan's concurring opinion in
April 2012, Taishan filed various motions, including motions
to dismiss for lack of personal jurisdiction. On June 29,
2012, over three years since the creation of this MDL and
after a year-and-a-half of personal jurisdiction discovery on
Taishan, the Court presided over a hearing on Taishan's
motions. The Court coordinated its hearing with the Honorable
Joseph Farina of the Florida state court, who had a similar
motion involving Taishan's challenge to personal
September 4, 2012, this Court issued a 142-page Order
regarding Taishan's motions in Germano,
Mitchell, Gross, and Wiltz, in
which the Court denied the motions to dismiss and held that
it maintained personal jurisdiction over Taishan. In re
Chinese-Manufactured Drywall Prods. Liab. Litig., 894
F.Supp.2d 819 (E.D. La. 2012). The Court also ruled that
Taishan was operating as the alter ego of TG and TTP. The
Court certified an interlocutory appeal, and the Fifth
Circuit granted permission to appeal. In January and May of
2014, two different panels of the Fifth Circuit affirmed this
Court's ruling and held that this Court maintained
personal jurisdiction over Taishan, TG, and TTP. In re
Chinese-Manufactured Drywall Prods. Liab. Litig., 753
F.3d 521 (5th Cir. 2014); In re Chinese-Manufactured
Drywall Prods. Liab. Litig., 742 F.3d 576 (5th Cir.
2014). The time for writ of certiorari passed, and the issue
of personal jurisdiction over Taishan became firmly and
finally settled. Nevertheless, Taishan refused to voluntarily
participate in this suit.
20, 2014, the Court ordered Taishan to appear in open court
on July 17, 2014 to be examined as a judgment debtor. Taishan
failed to appear for the July 17, 2014 Judgment Debtor
Examination, and the Court held Taishan in contempt, ordering
that Taishan pay $15, 000.00 in attorneys' fees to
Plaintiffs' counsel and $40, 000.00 as a penalty for
contempt; Taishan and any of its affiliates or subsidiaries
be enjoined from conducting any business in the United States
until or unless it participates in this judicial process; and
if Taishan violates the injunction, it must pay a further
penalty of twenty-five percent of the profits earned by the
Company or its affiliate who violate the Order for the year
of the violation.
23, 2014, the PSC filed their Omnibus Motion for Class
Certification pursuant to Rule 23(b)(3). Taishan did not
appear and, on September 26, 2014, this Court certified a
class of all owners of real properties in the United States,
who are named Plaintiffs on the complaints in
Amorin, Germano, Gross, and/or
Wiltz (i.e., not an absent class member),
asserting claims for remediated damages arising from, or
otherwise related to Chinese Drywall manufactured, sold,
distributed, supplied, marketed, inspected, imported or
delivered by the Taishan Defendants. R. Doc. 18028.
finally entered an appearance with the Court in February
2015, and, to satisfy the contempt, Taishan paid both the sum
of $15, 000.00 in attorneys' fees to Plaintiffs'
counsel and the contempt penalty of $40, 000.00 in March
2015. On March 17, 2015, the Court ordered Taishan and the
BNBM and CNBM Entities to participate in expedited discovery
related to “the relationship between Taishan and
BNBM/CNBM, including whether affiliate and/or alter ego
March 10, 2016, this Court granted CNBM Group's motion to
dismiss, finding it was an “agent or instrumentality of
a foreign state” within the meaning of the Foreign
Sovereign Immunities Act (“FSIA”), and therefore
outside the jurisdiction of this Court under 28 U.S.C. §
1603(b). R. Doc. 20150. The Court determined the tortious
activity exception did not apply because the alleged tortious
conduct did not occur within the United States under 28
U.S.C. § 1605(a)(5). Further, the Court found the
commercial activity exception did not apply, as CNBM Group
did not directly manufacture, inspect, sell, or market
drywall in the United States. Because the PSC failed to
present evidence sufficient to overcome the presumption that
CNBM Group was entitled to independent status for purposes of
the FSIA, the Court granted the motion and dismissed CNBM
Group from the present litigation.
concluding it lacked personal jurisdiction over CNBM Group,
on April 21, 2017, the Court issued a 100-page opinion
related to jurisdictional challenges being raised with
respect to CNBM, BNBM Group, and BNBM. The Court found
Taishan was an agent of BNBM under Florida and Virginia law,
such that Taishan's contacts in Florida and Virginia are
imputed to BNBM. This Court further found that CNBM, BNBM
Group, and BNBM were part of a single business enterprise
with Taishan under Louisiana law, such that Taishan's
contacts in Louisiana may be imputed to them, and that the
Court has jurisdiction over CNBM, BNBM Group, and BNBM in
relation to Plaintiffs' claims based on Louisiana law.
Also on April 21, 2017, the Court issued its Findings of Fact
and Conclusions of Law related to the June 9, 2015 damages
hearing and adopted the PSC's damage calculations
methodology related to remediation of properties.
22, 2017, Defendants filed a motion pursuant to 28 U.S.C.
§ 1292(b) to certify an interlocutory appeal from this
Court's April 21, 2017 jurisdiction order. Because the
Court found the April 21, 2017 Order & Reasons involved a
controlling question of law as to which there was substantial
ground for difference of opinion, and because the Court
further found that an interlocutory appeal might materially
advance the ultimate termination of this MDL, on August 4,
2017, the Court certified an interlocutory appeal to the
Fifth Circuit pursuant to 28 U.S.C. § 1292(b).
August 1, 2017, Defendants filed a motion to dismiss for lack
of personal jurisdiction following the recent U.S. Supreme
Court case of Bristol-Myers Squibb v. Superior Court of
California (“Bristol-Myers”), 137
S.Ct. 1773 (2017). Based on Bristol-Myers,
Defendants contested this Court's findings of personal
jurisdiction, class certification, and agency relationship.
On August 14, 2017, Defendants filed a petition for
permission to appeal pursuant to 28 U.S.C. § 1292(b) in
the Fifth Circuit, in which they argued
Bristol-Myers impacted questions raised on appeal.
On August 24, 2017, this Court vacated its 28 U.S.C. §
1292(b) certification order to avoid piecemeal litigations,
noting its duty to address the effect of
Bristol-Myers on the jurisdictional issue before
certifying the matter to the Fifth Circuit. Subsequently, on
November 30, 2017, the Court denied Defendants' motion to
dismiss, holding Bristol-Myers did not change this
Court's jurisdictional findings and class certification.
January 2, 2018, the Court denied Defendants CNBM, BNBM
Group, and BNBM's motion to vacate the default judgments
against them. On March 5, 2018, the Court reinstated its
order certifying the interlocutory appeal of its April 21,
2017 order. This issue remains with the Fifth Circuit.
motion presently before the Court involves the
Brooke omnibus complaint filed by the PSC on
September 4, 2015. No. 15-4127, R. Doc. 1. On January 15,
2016, the BNBM Defendants moved to dismiss the
Brooke complaint. R. Doc. 19984. On September 12,
2018, the PSC filed its opposition. R. Doc. 21779. The BNBM
Defendants filed a reply on October 3, 2018. R. Doc. 21818.
On November 13, 2018, after reviewing the parties'
submissions, the Court ordered additional briefing on the
issue of tolling. R. Doc. 21914. On December 14, 2018, the
PSC filed its supplemental brief. R. Doc. 21963. On January
18, 2019, Taishan and the BNBM entities filed their memoranda
in further support of BNBM's motion to dismiss, R. Docs.
22071, 22072, to which the PSC filed a supplemental reply, R.
Doc. 22083. The Court heard oral argument on the motion on
February 21, 2019. R. Doc. 22114.
LAW & ANALYSIS
motion, the BNBM Defendants seek dismissal of the
Brooke omnibus complaint, arguing that: (1) they
were not properly served; (2) they are not subject to
jurisdiction in Louisiana, as Taishan's contacts with the
forum cannot be imputed to them; (3) the Brooke
complaint is barred by the applicable statutes of limitation;
and (4) the Brooke complaint should be dismissed for
failure to state a claim. This memorandum considers each
argument in turn.
Whether the BNBM Defendants were properly served
first argues it was not properly served, requiring dismissal
of the Brooke action.
motion to dismiss was filed in January 2016. Since that time,
the Court has made several jurisdictional rulings, including
orders regarding the sufficiency of service. On April 21,
2017, the Court rejected the BNBM Defendants' argument
that they had not been properly served. It held:
Based on the extensive procedural history of this case, the
Court is convinced service on these entities has satisfied
due process. Even without considering the agency and
alter-ego relationships that exist between many of these
related corporations, the evidence demonstrates the entities
received adequate notice of this action and sufficient time
to present their defenses.
R. Doc. 20739 at 55.
in their motion currently before the Court, Defendants
“incorporate by reference and adopt in full the
arguments they raised in their previously filed Opposition to
the Plaintiffs' Steering Committee's Motion to
Approve Alternative Service of Process.” R. Doc.
19984-1 at 29 n.32. Notably, the Court granted the PSC's
motion to approve alternative service on November 9, 2015,
stating “In this case, the Court is confident that
service upon domestic counsel of the Entities satisfies the
requirements of due process and is reasonably calculated to
apprise the Chinese Defendants of the pendency of the action
and afford them an opportunity to present their
objections.” R. Doc. 19713 at 14.
these prior orders, in their recent reply in support of their
motion to dismiss, filed October 3, 2018, the BNBM Defendants
maintain their argument that service was improper. R. Doc.
21818 at 14-15. They contend the Court's prior orders
addressing service are “not controlling as to the facts
and circumstances at hand, ” id. at 14, and
again point to their opposition to the PSC's motion to
approve alternative service of process, an argument the Court
has previously rejected. Given the Court's prior orders
addressing these issues, and notwithstanding Defendants'
assertion to the contrary, this issue is foreclosed by the
Court's prior orders, and the Court will not grant
Defendants' motion to dismiss on this basis.
Whether the BNBM Defendants are subject to this Court's
Defendants argue they are not subject to personal
jurisdiction in Louisiana. They argue “neither BNBM PLC
nor BNBM Group has purposefully directed activities toward
residents of the forum, and further that exercise of
jurisdiction over these Defendants would violate
constitutional due process.” R. Doc. 21818 at 13. In
opposition, the PSC points to this Court's jurisdictional
order and reasons, in which the Court concluded the Chinese
Defendants operate as a single business enterprise, such that
Taishan's contacts with Louisiana may be imputed to BNBM
PLC and BNBM Group for purposes of establishing personal
jurisdiction. R. Doc. 21779 at 10-11. In reply, Defendants
take issue with the PSC's reliance on the Court's
April 21, 2016 jurisdictional order, stating it
“respectfully disagrees with the Court's conclusion
that BNBM was a part of a SBE with Taishan or its alter ego,
such that Taishan's contacts should be imputed to BNBM
under Louisiana law.” R. Doc. 21818 at 14.
April 21, 2016 jurisdictional order, following a lengthy
analysis, this Court concluded that, “viewing
‘[a]ll the relevant facts and circumstances surrounding
the operations of the[se] parent[s] and subsidiary[ies]'
in the light more favorable to Plaintiffs, . . . Taishan is
an alter ego of BNBM under Louisiana law.” R. Doc.
20739 at 75. The Court further held the Chinese Defendants
must be considered a single business enterprise, as
the entities within the CNBM Group corporate umbrella have
integrated their resources to ensure their success as an
international building materials company. Thus, each business
within the larger corporate family-including BNBM, BNBM
Group, and CNBM-may be held liable for the wrongful acts done
in pursuit of that purpose.
Id. at 79. Ultimately, the Court found that,
“Under the Louisiana single-enterprise doctrine, . . .
Taishan, BNBM, BNBM Group, and CNBM constitute a single
business enterprise, ” and “therefore [must be]
considered one entity for the purposes of ...