Monday, September 13, 2010

Guest Blogger Andy Popper: "Leaping Forward--or Not--With the 2010 Foreign Manufacturer Legal Accountability Act"

    IMHO

    Earlier this summer I testified in favor of H.R. 4678, The Foreign Manufacturers Legal Accountability Act.  While at first the bill looked like it would sail through, recent highly vocal and stunningly well-funded opposition from foreign automobile manufacturers and others (can you guess which absolutely huge auto manufacturer – from Japan – has been at the forefront?) has placed its future in doubt. 

    Gross sales of foreign manufactured goods in the U.S. exceed two trillion dollars annually.  Conservatively, there are tens of millions of defective, dangerous, and in some instances deadly goods produced abroad for sale in U.S. markets (think Chinese dry-wall, toxic levels of lead paint on toys, contaminated pet food, allegedly lurching cars, infant cribs that to give rise to the prospect of strangulation, etc.).  Because of the complex post-Asahi minimum contacts puzzle, many of those producers are not subject to tort liability in state courts regardless of the fact that their products are dangerous and likely to be sold in the U.S.  

    H.R. 4678 would require foreign manufacturers of certain products and component parts to designate a registered U.S. agent to accept service of process in a state where the manufacturer has a substantial connection either through importation, distribution, or sale of its products.  Three federal agencies (FDA, CPSC, and EPA) would determine the products and component parts subject to the terms of the bill.  Each agency would also establish the minimum quantity or value required to trigger the terms of the bill.  Central to the bill is the declaration that designation of a registered agent constitutes consent to jurisdiction by the foreign manufacturer in the courts of that state and in federal courts. 

    This strikes me as a simple, elegant, and appropriate step forward.  It levels the civil liability landscape, stripping foreign manufacturers of an unfair advantage over domestic manufacturers and addresses a powerful but understandable anomaly in our legal system. 

    By making possible litigation against those who place into the stream of commerce defective goods, the bill triggers the corrective justice incentive mechanisms of the tort system.  When you create the realistic possibility for liability, you activate incentives to make safer and more efficient products. 

    It is both the current state of the law – and problematic – that a foreign producer cannot readily be held accountable in state courts even if (a) the product was unquestionably dangerous and defective, (b) the harm to the victim was foreseeable, and (c) the foreign producer has sold large numbers of these products in the U.S. in the past.  Every U.S. manufacturer of any product is subject to the U.S. rule of law, the U.S. tort/civil justice system, and U.S. regulatory mandates.  That foreign entities and individuals profit from the sale of defective goods and are outside this system is wrong.  

    We all recognize the legal issue: assertion of jurisdiction over an individual or entity presents a challenge when the entity’s contacts with state are limited.  Not surprisingly, many foreign manufacturers do not have an officer, agent, representative, employee, office, or property in a particular state where their products cause harm.  At present, such manufacturers cannot readily be “haled” into state court if their contacts fail to meet the constitutionally compelled “minimum contacts” requirement.  In addition, the assertion of judicial power must be consistent with notions of fair play and substantial justice, fundamental fairness, and reasonability – for the defendant.  In the absence of the ingenious solution presented in H.R. 4678, these norms prevail and access to justice is limited or denied. 

    Opponents have argued that the terms of the bill violate WTO constructs.  They claim this system would discriminate unfairly against foreign manufacturers.  Frankly, it is hard to see how H.R. 4678 would create any undue barrier or obstacle to trade.  It imposes on foreign manufacturers the same responsibilities and obligations of domestic sellers and producers.  This is a straightforward and essential change, giving injured persons access to the civil justice system. 

    Check out the full text of the legislation as well as the testimony and statements filed regarding H.R. 4678 at: http://energycommerce.house.gov/documents/20100616/Popper.Testimony.06.16.2010.pdf

 

--Andy Popper

American University

 

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