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54–556 PDF 2010

S. HRG. 111–236 

LEVELING THE PLAYING FIELD AND PROTECTING 

AMERICANS: HOLDING FOREIGN MANUFACTURERS ACCOUNTABLE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHT 

AND THE COURTS 

OF THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

MAY 19, 2009 

Serial No. J–111–23 

Printed for the use of the Committee on the Judiciary 

( 

(II) 

COMMITTEE ON THE JUDICIARY 

PATRICK J. LEAHY, Vermont, Chairman 

HERB KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

BENJAMIN L. CARDIN, Maryland 

SHELDON WHITEHOUSE, Rhode Island 

RON WYDEN, Oregon 

AMY KLOBUCHAR, Minnesota 

EDWARD E. KAUFMAN, Delaware 

ARLEN SPECTER, Pennsylvania 

JEFF SESSIONS, Alabama 

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

LINDSEY O. GRAHAM, South Carolina 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

BRUCE A. COHEN, Chief Counsel and Staff Director 

MATT MINER, Republican Chief Counsel 

SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHT AND THE COURTS

SHELDON WHITEHOUSE, Rhode Island, Chairman 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

BENJAMIN L. CARDIN, Maryland 

EDWARD E. KAUFMAN, Delaware 

JEFF SESSIONS, Alabama 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

LINDSEY O. GRAHAM, South Carolina 

SAM GOODSTEIN, Democratic Chief Counsel 

MATT MINER, Republican Chief Counsel 

(III) 

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont, prepared 

statement .............................................................................................................. 33 

Sessions, Hon. Jeff, a U.S. Senator from the State of Alabama .......................... 10 

Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode Island ...... 1 

prepared statement .......................................................................................... 57 

WITNESSES 

Gowen, Thomas L., Partner, Locks Law Firm, Philadelphia, Pennsylvania ...... 6 

Schwartz, Victor E., Chair, Shook, Hardy & Bacon, LLP, Public Policy Group 

on behalf of the Institute for Legal Reform, U.S. Chamer of Commerce, 

Washington, DC ................................................................................................... 8 

Stefan, Chuck, Vice President, The Mitchell Company, Mobile, Alabama; accompanied by Steven Nicholas, Esq. .................................................................. 10 

Teitz, Louise Ellen, Professor of Law, Roger Williams University School of 

Law, Bristol, Rhode Island .................................................................................. 4 

SUBMISSIONS FOR THE RECORD 

Gowen, Thomas L., Partner, Locks Law Firm, Philadelphia, Pennsylvania, 

statement .............................................................................................................. 22 

Schwartz, Victor E., Chair, Shook, Hardy & Bacon, LLP, Public Policy Group 

on behalf of the Institute for Legal Reform, U.S. Chamber of Commerce, 

Washington, DC, statement ................................................................................ 34 

Stefan, Chuck, Vice President, The Mitchell Company, Mobile, Alabama; accompanied by Steven Nicholas, Esq., statement ............................................... 42 

Teitz, Louise Ellen, Professor of Law, Roger Williams University School of 

Law, Bristol, Rhode Island, statement ............................................................... 45 

(1) 

LEVELING THE PLAYING FIELD AND PROTECTING AMERICANS: HOLDING FOREIGN 

MANUFACTURERS ACCOUNTABLE 

TUESDAY, MAY 19, 2009 

U.S. SENATE, 

SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHT AND THE

COURTS, 

COMMITTEE ON THE JUDICIARY, 

Washington, D.C. 

The Subcommittee met, pursuant to notice, at 10:22 a.m., in 

room SD–226, Dirksen Senate Office Building, Hon. Sheldon 

Whitehouse, Chairman of the Subcommittee, presiding. 

Present: Senators Whitehouse and Sessions. 

OPENING STATEMENT OF HON. SHELDON WHITEHOUSE, A U.S. 

SENATOR FROM THE STATE OF RHODE ISLAND 

Chairman WHITEHOUSE. The hearing will come to order, with my 

apologies for a delayed start. I had very much hoped that the votes 

that are about to get underway on the Senate floor would be done 

by now, but the usual last-minute wrinkles emerged, so it looks 

like it would be prudent to get started. We may have to interrupt 

in 20 minutes or so once the votes get close. I will go over and try 

to be the last Senator to vote on the first vote and the first Senator 

to vote on the second one and come back without too much interruption. But I very much appreciate everyone being here. 

Every day, Americans in all walks of life are injured by defective 

products that are manufactured outside the United States. These 

products hurt consumers—they lead to serious injuries, and even 

death—and they hurt the American businesses that sell these products, and that must deal with angry customers, product recalls, 

and unusable inventory. 

The list of recent examples of Americans injured by products 

made in China and other countries is shocking. Last year, a contaminated blood thinner caused severe medical reactions and contributed to numerous deaths. In 2006, a lead-tainted charm bracelet—and by ‘‘tainted,’’ I mean 99 percent lead—claimed the life of 

a 4-year-old. 

Food products from seafood to honey have been contaminated 

with unthinkable chemicals, including veterinary drugs banned in 

domestic production, potentially harmful antibiotics, and unapproved food additives. Sixty million packages of pet food contaminated with tainted wheat gluten have been recalled in the last 2 

2 

years. Substandard tires have failed, leading to fatalities. It is a 

long litany. 

Most recently, defective imported drywall, imported from China, 

has been found to contain excessively high levels of sulfur, causing 

houses to smell like rotten eggs, corroding copper wiring, and making expensive appliances fail. Thousands of homes may be affected. 

A subcommittee of the Commerce Committee is holding a hearing 

on Thursday to consider the consequences of those defective products, and I commend that Committee for their leadership on what 

rapidly is emerging as a major problem for homeowners and businesses. 

We all know that American manufacturers must comply with 

regulations that ensure the safety of American consumers. When 

they fail to do so, they must answer to regulators and are held accountable through the American system of justice. Unfortunately, 

however, foreign manufacturers are not being held to the same 

standards. This puts at risk American consumers and businesses 

and puts American manufacturers at a competitive disadvantage. 

A major cause of this disparity is that Americans injured by foreign products face unnecessary and inappropriate procedural hurdles if they seek to hold foreign manufacturers accountable. First, 

they must identify the manufacturer of the product that injured 

them—often not as easy as it would sound—since many foreign 

products do no more than indicate their country of origin. 

Second, an injured American must serve process on the foreign 

manufacturer. This means the injured American has to deliver 

legal papers to the company directly or through a registered agent 

explaining that he or she is bringing a legal action against it. But 

this simple step often requires enormous time and expense—lawsuits even can fail over it—as the injured American attempts to 

comply with various complicated international treaties. 

Third, an injured American must overcome the technical defense 

that, even though a foreign manufacturer’s product was used by an 

American consumer, sold to that consumer, nevertheless the courts 

of that consumer’s home State do not have jurisdiction over that 

company. 

Finally, even after an injured American has overcome these hurdles and prevailed in court, a foreign manufacturer can avoid collection on the judgment—often simply cutting off communications 

or shutting up the business and reopening under different name. 

Americans harmed by defective foreign products need justice, and 

they do not get it when foreign manufacturers use technical legal 

defenses to avoid paying damages to the people they have injured. 

Today’s hearing will help us learn more about these failures of 

justice and what we can do to fix them. If we do nothing, Americans will continue to be injured by foreign products and denied a 

meaningful remedy. American businesses will continue to be left on 

the hook for foreign defective products they import, use, or resell, 

and foreign manufacturers will maintain a competitive advantage 

over American manufacturers who must follow the rules and are 

subject to the American tort system. 

This hearing will consider the range of legal impediments standing between an injured American and an enforceable, collectible 

judgment against the foreign manufacturer. It also will demVerDate Nov 24 2008 10:31 Jan 28, 2010 Jkt 054556 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\54556.TXT SJUD1 PsN: CMORC
3 

onstrate that these impediments result in enormous harm to American consumers, as well as damage to American businesses that 

transact business with the foreign entity. The assembled panel of 

experts will explain the legal hurdles facing Americans injured by 

foreign products and also put those injuries into real-world context 

by describing the harm they can cause to families and businesses. 

I am very grateful to all the witnesses for taking the time to 

come before the Committee today. I am especially delighted to have 

my fellow Rhode Islander Louise Ellen Teitz here to testify. She is 

a distinguished professor at Roger Williams University Law School 

in Rhode Island. Her brother is a dear friend of mine of many, 

many, many years’ duration. Her expertise will make a great contribution to this hearing as it has to that wonderful law school of 

which she was one of the very first professors. 

I look forward to continuing to work with Professor Teitz and the 

other witnesses as I will soon introduce legislation that addresses 

the difficulty in serving process on foreign manufacturers. My legislation will require that a manufacturer who imports goods into the 

United States must designate an agent for service of process who 

will accept the legal papers required to initiate a lawsuit. It will 

require the development of a register of these agents so that an injured American can inform the manufacturer defendant of a lawsuit quickly and cheaply. I look forward to working with Ranking 

Member Sessions and other Senators on this legislation. Similarly, 

I look forward to hearing the witnesses’ perspectives on the approach I have proposed. 

Protecting Americans and holding foreign manufacturers accountable for the injuries they cause is not a partisan issue. Everyone agrees that we should do what we can to keep Americans safe 

from defective products, wherever they may come from. So too, I 

think, we all agree that American companies should not be at a 

competitive disadvantage to their foreign counterparts, particularly 

not for a wrong reason. With these fundamental agreements, I look 

forward to finding legislative solutions that will level the competitive playing field and protect Americans. 

I will ask for our first witness, Professor Louise Ellen Teitz, as 

I said, a professor of law at Roger Williams University School of 

Law in Bristol, Rhode Island. Ellen has been teaching and writing 

about transnational litigation, civil procedure, conflicts of law, private international law, and comparative procedure for over 20 

years, both here and abroad. She is the author of a treatise on 

transnational litigation and has participated as a member of the 

U.S. State Department delegation to The Hague Conference in connection with the Jurisdiction and Judgments Convention, the 

Choice of Court Convention, and the Conventions on Service of 

Process, Evidence, and Apostille. 

Professor Teitz is a member of numerous professional associations, including the American Law Institute and the International 

Association of Procedural Law. She has practiced law in Washington, D.C., and Dallas, Texas, in the fields of antitrust, competition, and trade regulation practice, and Federal and State litigation. She received her B.A. from Yale University and her J.D. from 

Southern Methodist University School of Law. 

Professor Teitz. 

4 

STATEMENT OF LOUISE ELLEN TEITZ, PROFESSOR OF LAW, 

ROGER WILLIAMS UNIVERSITY SCHOOL OF LAW, BRISTOL, 

RHODE ISLAND 

Ms. TEITZ. Thank you, Chairman Whitehouse, Ranking Member 

Sessions, and members of the Subcommittee. I am honored to be 

here today to address the Committee on the difficulties of suing foreign parties, specifically foreign manufacturers in U.S. courts. I 

will speak briefly to three major procedural hurdles: obtaining personal jurisdiction; serving process or notice to the defendant; and 

enforcing U.S. judgments abroad, the first two of these being more 

easily remedied by some form of legislation. 

A party suing in the U.S. must first be able to find a court that 

has constitutional authority over the defendant, or what is called 

‘‘personal jurisdiction.’’ Then after filing, the party must inform the 

defendant of the lawsuit and its contents—that is, serve process (of 

the summons and complaint.) At the end of the lawsuit, the party 

must be able to collect any money awarded, especially when the defendant’s assets are outside of the U.S.—that is, be able to enforce 

the judgment abroad. 

As a result of different approaches in other legal systems, U.S. 

consumers face difficulties recovering in U.S. courts—or enforcing 

U.S. judgments abroad—in fact, more difficulty than many foreign 

consumers face in the reverse situation. In addition, there is a competitive impact, obviously, on U.S. manufacturers who are sued 

more easily and cheaply here in the U.S. and against whom judgments can be enforced throughout the U.S. under the Full Faith 

and Credit Clause. 

First, personal jurisdiction. It is important not only for the initial 

litigation, but for subsequent enforcement of the judgment, here or 

abroad. When the defendant is an alien, there is the additional concern with potential enforcement in foreign locations where the defendant has assets. Personal jurisdiction in the U.S., as you are all 

well aware, is governed by the Due Process Clause, generally under 

the 14th Amendment, both in State and Federal court, which requires that the defendant have certain minimum contacts, such as 

not to offend traditional notions of fair play and substantial justice. 

Even when the defendant is a foreign individual or entity, State 

boundaries are generally, unfortunately, the measuring unit. 

The Supreme Court’s most recent case concerning a foreign defendant and a product in the stream of commerce is the Asahi case 

from 1987. It broke the requirements into two parts: the defendant’s purposeful minimum contacts with the forum, and the fairness to the defendant in having to be subject to jurisdiction in the 

forum. The finding of no jurisdiction over the alien inadvertently 

encouraged foreign manufacturers to challenge the assertion of personal jurisdiction in many cases by providing a basis for them to 

argue that there was unfairness to the alien defendant. 

While lower courts, both State and Federal, have, in fact, upheld 

jurisdiction over foreign manufacturers since Asahi, the determination is ultimately very fact-specific, both as to whether the contacts 

were purposefully directed at the forum and whether it is fair. This 

fact-specific nature encourages litigation—litigation that is very expensive and time-consuming for a plaintiff and costly in terms of 

judicial resources. 

5 

A Federal statute that required consent to jurisdiction—as well 

as designation of a domestic agent for service—for foreign manufacturers importing certain types of products into the U.S. could reduce the uncertainty that plaintiffs face about if and where they 

can sue and maintain jurisdiction in the U.S. 

Service of process, the second procedural problem that a U.S. 

party faces once a party has filed is notifying the defendant of the 

lawsuit, as constitutionally mandated. Suing foreign defendants 

raises several additional issues that add delay and expense for the 

consumer. First, if the defendant is located in a country with which 

the United States has a relevant treaty or agreement, that treaty 

controls, both in Federal and State court. The Hague Convention 

on Service of Process, which currently 59 countries are party to, includes many of our major trading partners—Japan, Canada, and 

China—and is the exclusive means of serving a defendant in a 

member country. If no treaty controls, there are several options 

but, nonetheless, these are time-consuming and, in fact, in some 

cases take 6 months to a year to execute, if at all. 

Since The Hague Convention is generally applicable to service of 

defendants from our major trading partners, I want to highlight 

briefly the implications of service under the treaty. There is a process with a central authority which is set up. It is time-consuming. 

All documents normally must be translated. At a Special Commission meeting in The Hague in February, many countries indicated 

that they have been trying to do this in 3 months, but countries 

such as China indicated they would have trouble meeting a 6- 

month deadline. 

What is crucial for triggering The Hague Service Convention, in 

Federal or State court, is that service is effected abroad—that is, 

that the document is served abroad. However, that determination 

of whether service is made abroad is made by reference to national 

law, and in the U.S., that is mostly state law. Thus, if service is 

complete under the law of a specific State without transmittal 

abroad, then the Convention, with its added expenses and delay, is 

not triggered. 

Thus, this is one area that, in fact, legislation that required a 

foreign manufacturer to appoint a domestic agent for service might 

reduce the cost of service abroad, especially if the agent would be 

appointed for all lawsuits throughout the U.S., and it would be 

even more effective, obviously, if in addition the legislation were 

expanded to require explicit consent to jurisdiction in the U.S. Consent is a traditional basis for personal jurisdiction, and one that 

thereby could avoid the need for lengthy litigation over the nature 

and extent of minimum contacts necessary for the court to have authority over the defendant. 

I see my time is up, and I will just close by saying that it is difficult to enforce U.S. judgments abroad. It is a trade imbalance. We 

enforce incoming judgments quite readily, but we are faced with 

difficulty in enforcing our judgments abroad. And so many of the 

manufacturers have no assets in the U.S. They structure their 

business to avoid personal jurisdiction, and, unfortunately, in the 

end a U.S. plaintiff who is choosing among potential defendants is 

obviously well advised to choose a domestic defendant. 

6 

I look forward to your questions and having the opportunity to 

work with the Committee as it develops its legislation. Thank you. 

[The prepared statement of Ms. Teitz appears as a submission 

for the record.] 

Chairman WHITEHOUSE. Thank you very much, Professor Teitz. 

Once again, American manufacturers on the losing end of American trade policy. 

The next witness we will hear from—and we will go to general 

questions—is Thomas Gowen. He is a partner at the Locks Law 

Firm in Philadelphia, Pennsylvania. He has practiced law for 30 

years with his primary concentration in the areas of complex personal injury and civil litigation. He has represented numerous clients in product liability, head injury, construction litigation, medical malpractice, and automobile litigation. Mr. Gowen is a member 

of the faculty of the National College of Advocacy and a past chairman of the Montgomery Bar Association Continuing Legal Education Committee. He has published legal articles in Am. Jur. 

Trials, ‘‘A Guide for Legal Assistants’’ by the Practicing Law Institute, the Barristers, the Pennsylvania Law Journal Reporter, and 

other journals. Mr. Gowen is a graduate of Haverford College and 

Villanova University School of Law. We are delighted to have him 

with us. 

Please proceed, Mr. Gowen. 

STATEMENT OF THOMAS L. GOWEN, PARTNER, LOCKS LAW 

FIRM, PHILADELPHIA, PENNSYLVANIA 

Mr. GOWEN. Thank you, Senator. The problem has grown in an 

exponential fashion. President Bush appointed an Interagency 

Working Group on Import Safety, chaired by Secretary Leavitt, 

which reported to the President in November of 2007 and largely 

recognized the problems and recommended numerous solutions. We 

now import $2 trillion worth of imported goods, over $200 billion 

of which come from China, and that number is expected to triple 

by 2015, according to the Commission. The Commission recommended a structured response by the United States of prevention, intervention, and response, and recognizing that it would not 

be able to inspect nearly all of the products coming into the country. 

The response portion of the American reaction to the product liability issues raised by imports is a critical part that has roles to 

play for the Consumer Product Safety Commission and others, but 

the civil justice system has long been a potent and effective method 

for bringing about safety. The Interagency Working Group recommended using the principles of hazard and risk recognition or 

simply the practice of safety engineering, which are used to prove 

a products liability case in the United States. 

The problem today with bringing these cases against foreign 

manufacturers, as Professor Teitz has indicated, is that you have 

numerous civil procedural hurdles which subsume much of the litigation in this case. And the issues are identification, service of 

process, jurisdiction of the court, and collectability. 

Professor Teitz addressed the issue of service of process. It is no 

joke that identification is a major problem because many of the 

products that come into this country bear nothing more than a 

7 

label saying made in a particular country, with no link the particular manufacturer. And we have seen in some cases that I have 

handled that the importer has not even been able to identify the 

manufacturer. 

I think it is important to recognize that the Supreme Court in 

the Asahi decision, in a footnote in Justice O’Connor’s opinion, did 

recognize that it was not addressing the issue of whether Congress 

could legislate to allow the system of justice to be based upon an 

aggregate of national contacts. That would be bringing our system 

of justice into sync with the system of commerce. These companies 

sell into the market of the United States and then claim that they 

do not sell into a particular State, but you cannot sell to the American market without the product going to one of the 50 States. It 

simply is an impossibility. So we need to bring our system of commerce into sync with the system of justice, or the other way 

around. 

I recommend that the Congress consider legislating an import license which would require that there first be identification of a 

product with the manufacturer and its address that is posted on a 

U.S. Government website that is searchable and available to the 

public. 

Second, that we require the designation of an agent for the service of process, as your bill is recommending, and service of process 

anywhere in the United States. 

Third, that the license require consent to jurisdiction in the 

States where the product is sold or causes injury. 

And, fourth, that there be product liability insurance in the 

United States. 

The collectability issue I think raises another somewhat more 

subtle issue. It is obvious when the company cannot collect a judgment, but it also greatly impairs the process of settlement when 

the foreign defendant is not concerned that its assets may be at 

risk and, therefore, it fails to negotiate reasonable and sensible settlements, as occur in most of our domestic litigation. 

I think that the use of an import license and the interagency 

task force recommend a system of verification and essentially licensing could be done and could go a long way toward leveling the 

playing field so that foreign manufacturers had to come to the 

courts in the United States and be amenable to process and justice 

in the same way that American companies are. 

Thank you, Senator. 

[The prepared statement of Mr. Gowen appears as a submission 

for the record.] 

Chairman WHITEHOUSE. Thank you very much, Mr. Gowen. 

I understand that the Ranking Member, Senator Sessions, is on 

his way, and I know that he will be very keen to hear from Mr. 

Stefan, who hails from his home State. So what I think I will do 

is step out of order, if Professor Schwartz would not mind, and go 

directly to Victor Schwartz, and then we will go to Mr. Stefan 

afterwards so that Senator Sessions can be here. 

Victor Schwartz chairs the Public Policy Group at Shook, Hardy 

& Bacon. For over two decades, he has co-authored the Nation’s 

leading torts casebook, ‘‘Prosser, Wade & Schwartz’s Torts,’’ and 

also authors ‘‘Comparative Negligence,’’ the principal text on the 

8 

subject. Mr Schwartz serves as general counsel to the American 

Tort Reform Association and co-chairs the American Legislative 

Exchange Council’s Civil Justice Task Force. Mr. Schwartz is 

former dean of the University of Cincinnati College of Law and currently serves on its Board of Visitors. During his academic career, 

he litigated cases on behalf of plaintiffs and secured the first punitive damages award of the Midwest against the manufacturer of a 

defective product. 

Mr. Schwartz has been inducted as a life member of the American Law Institute and served on the Advisory Committee to the 

restatement (third) of torts, products liability, and apportionment 

of liability projects. Mr. Schwartz holds a J.D. from Columbia University and a B.A. from Boston University. He is extremely distinguished as a witness, and we are delighted to have him here. 

Would that be Dean Schwartz, Professor Schwartz, Counselor 

Schwartz? 

Mr. SCHWARTZ. Just Victor. 

STATEMENT OF VICTOR E. SCHWARTZ, CHAIR, SHOOK, HARDY 

& BACON, LLP, PUBLIC POLICY GROUP, ON BEHALF OF THE 

INSTITUTE FOR LEGAL REFORM, U.S. CHAMBER OF COMMERCE, WASHINGTON, D.C. 

Mr. SCHWARTZ. Thank you, Mr. Chairman, and I appreciate the 

invitation. One thing you did not include in my biography is that 

I taught at UVA Law School in 1971. My whole life has been this 

way. I know that you graduated after I left, and every place I have 

been, something good has happened after I left. 

Chairman WHITEHOUSE. Maybe something good will happen in 

this hearing today. 

Mr. SCHWARTZ. It may, because you are leading the way, I am 

testifying today on behalf of the Institute for Legal Reform of the 

United States Chamber. I am privileged to do that. The views I set 

forth are my own. I have thought about this problem for a long 

time and see it as very serious to American manufacturers and 

large manufacturers of foreign goods overwhom there is jurisdiction 

in this country. Every manufacturer on its products pays what I 

call a ‘‘tort tax.’’ With something like a stepladder, many of which 

are imported, it is as much as 16 percent. So having American 

manufacturers and foreign manufacturers who can be sued here 

pay the tort tax and having foreign manufacturers not pay, as you 

hinted in your opening remarks, Senator, is simply unfair competition and it is wrong. And this is an area where you can get agreement between a distinguished member of the plaintiffs bar and 

some of us on the other side to do something. 

As I said to Mr. Gowen earlier, the main problem is getting this 

issue highlighted enough so that it really can be addressed. The 

House looked at the issue last year. They had some legislation that 

overreached a bit, but I think consensus can be reached. 

One of the things that I have noted is that many people have 

viewed this Asahi case, which Professor Teitz referred to, as a barrier. If you read the case, it is not a product liability case. It was 

two foreign manufacturers who were trying—one of whom was trying to seek jurisdiction in the United States. And Justice O’Connor, 

who wrote the plurality opinion, was clear that she might have had 

9 

a different point of view if it were a personal injury case, that jurisdiction might have been appropriate in that case if it had been 

somebody who was injured by a product, a Californian, where the 

State would have a greater interest than in refereeing a dispute between two foreign manufacturers who were not present there. 

And I mentioned this in my House testimony, and behold, two 

courts—and I will submit the opinions to you—have held that 

Asahi’s rules do not apply when there is a personal injury case and 

that there is broader jurisdiction when there is a personal injury 

case and someone is hurt here in the United States by a foreign 

product. In other words, this body has more latitude to develop legislation on jurisdiction than some might think. 

Senator Sessions, good to see you, sir. 

I note that your focus has been on service of process, and we 

would work with you on that. But I would urge you to also consider 

legislation that addresses the jurisdictional issue. It is very rare in 

a Supreme Court opinion that a Justice provides a road map to 

Congress as to what to do. But that is exactly what Justice O’Connor did in the Asahi case. In a very pregnant footnote, she outlined 

how legislation could be formed, and that is, to have jurisdiction in 

Federal courts only, assembling contacts throughout the United 

States. A company can sell a few products in California. Under the 

rules, you cannot get jurisdiction over that company. But if it sells 

products throughout the United States and you assemble those contacts, you can have jurisdiction in a Federal court. And I think the 

legislation, as my testimony indicates, has to be very carefully 

drawn not to go overboard and be directed to the specific problem. 

And that was the problem with some of the House legislation. It 

got into issues such as choice of law and other irrelevant things. 

It also affected domestic distributors. You do not want to do that. 

But I think apart from service of process, addressing the jurisdictional issue is very important, and only this body can do it. 

And I have a final suggestion that should be included is any legislation, one that might be of interest to you. I have dealt and 

talked with many foreign manufacturers who are sophisticated, but 

a lot of them do not really fully understand what our tort system 

does. And I think if this body passes legislation that information 

should be provided that reaches these foreign companies about our 

tort system. Tell them that they are subject to punitive damages 

with no limit. Tell them that they can be subject to strict liability. 

Let them know about the power of folks like Mr. Gowen who can 

see that they never will exist on the face of the Earth again if they 

sell defective products in this country. And I think that will be a 

deterrent as well as any legislation you may pass. 

Thank you both. 

[The prepared statement of Mr. Schwartz appears as a submission for the record.] 

Chairman WHITEHOUSE. I very much appreciate your testimony, 

Dean Schwartz, Professor Schwartz, whatever it will be. 

I would like to recognize the Ranking Member, the distinguished 

Senator from Alabama, Jeff Sessions, who has appeared. I do not 

if the Senator would care to make an opening statement at this 

point. We are through the testimony of Professor Teitz, Mr. Gowen, 

10 

and Professor Schwartz, awaiting only the testimony of your fellow 

Alabaman, Mr. Chuck Stefan. 

STATEMENT OF HON. JEFF SESSIONS, A U.S. SENATOR FROM 

THE STATE OF ALABAMA 

Senator SESSIONS. It is great to have Chuck here. Mr. Stefan, we 

are delighted to have you here and look forward to your testimony. 

I know because of the votes we have gotten behind. I will not issue 

any long statement. 

I was on the way up here, and the Armed Services staff, which 

is meeting down the hall, grabbed me. They needed one more for 

a quorum, so we got 2,400 military promotions done just 2 minutes 

ago because I was another 5 minutes late. 

But let me just say this, Mr. Chairman. This is a good hearing 

on an important subject. I think we ought to do the right thing for 

good public policy. It should be a bipartisan effort. There may be 

some disagreements, but I do not know what they will be. But I 

believe that this is not working adequately. I believe clarity and rationality can be improved in this system. And so I am glad you are 

having a hearing. I think it is the kind of thing we ought to do 

more of, get into the nitty-gritty of a problem that makes life miserable for judges, lawyers, and parties when we can probably fix 

it. 

I look forward to hearing Chuck’s testimony. 

Chairman WHITEHOUSE. I am delighted to have you here, and I 

would like to thank you and compliment you for your and your 

staff’s cooperation in putting this hearing together on a thoroughly 

cordial and highly bipartisan basis. It is really almost a joint hearing at this point. These are joint witnesses, and I could not be more 

delighted by the way this has gone. 

Now we get to hear from Chuck Stefan, who currently serves as 

the Senior Executive President for Apartment Development at the 

Mitchell Company, a home builder in Alabama, Florida, and Mississippi, that has been ranked among the top 100 single-family 

builders in the country. Mr. Stefan has been associated with the 

Mitchell Company, Incorporated, and its predecessors in interest 

since 1973, following his tenure with the Multi-Family Finance 

Section of the U.S. Department of Housing and Urban Development. 

Since joining the company, Mr. Stefan has been responsible for 

the site selection, acquisition, and long-term financing of the division’s various apartment programs. Mr. Stefan was appointed to 

the Office of Senior Vice President in 1988 and is also a principal 

in the firm. Mr. Stefan received a B.A. from DePauw University in 

1967 and an MBA from Florida State University in 1971, and we 

welcome him to the hearing. We believe he has the award for farthest traveled. 

STATEMENT OF CHUCK STEFAN, VICE PRESIDENT, THE 

MITCHELL COMPANY, MOBILE, ALABAMA; ACCOMPANIED BY 

STEVEN NICHOLAS, ESQ. 

Mr. STEFAN. Good morning, Chairman Whitehouse and Senator 

Sessions. Thank you for allowing me the opportunity to share my 

experience with you this morning. And, Senator Sessions, thank 

11 

you for stopping at the Armed Services Committee because my 

middle son is up for lieutenant colonel in the Air Force, and we 

really needed that vote. 

[Laughter.] 

Mr. STEFAN. The Mitchell Company builds homes in Alabama, 

Florida, and Mississippi. Prior to the current housing crisis, we 

were one of the top 100 builders in the country. 

My story today does not originate in Alabama, Florida, or Mississippi. It originates in China and Germany. You see, we currently 

have 45 houses, including homes located in Alabama and Florida, 

that have been positively identified as containing ‘‘Chinese Sheetrock’’—the same Chinese sheetrock that has been so much in the 

news lately. This drywall emits corrosive gases that smell like rotten eggs and quickly damage copper both in the piping and wiring 

systems. 

We received our first complaints on this problem in late 2008, 

when our homeowners complained of a ‘‘rotten egg’’ smell in their 

Mitchell homes. We also discovered that we were replacing the air 

conditioning coils in air conditioning units in these houses as often 

as once every year. Further investigation and a Wall Street Journal report confirmed that the smell and corrosion stemmed from 

the Chinese drywall. 

This calamity greatly impacted our business and the homes of 

our customers. Little did we realize the unnecessary and unfair 

procedural battles we faced, simply because the defective product 

had been manufactured abroad. 

First, it was difficult trying to figure out where the sheetrock 

came from. Some pieces from our Alabama homes had the word 

‘‘Knauf’’ stamped on the back of the product, while others were 

simply stamped ‘‘Made in China’’ without any further identification. 

In order to identify the manufacturer of the sheetrock from our 

Florida homes, we had to pay $2,300 simply to access shipping data 

from the Customs Department. We had to navigate through many 

different search terms and descriptions of the possible product, 

ranging from sheetrock, to drywall, to plasterboard, to gypsum 

board. These searches, along with other information we are obtaining, will allow us to identify the manufacturer, but only after substantial time and expense. If the product had been properly 

marked to begin with, identification would have been as easy as 

reading the manufacturer’s name on the product itself. 

We have had a great deal of difficulty holding Knauf accountable 

through the U.S. court system because the Hague Convention requires us to serve this company as an overseas defendant, even 

though Knauf has extensive operations in the U.S., is familiar with 

the U.S. language and customs, and sends and receives Federal Express packages daily from its Chicago headquarters. 

The rules vary by country, but under the Hague Convention, we 

had to translate all of the complaints into both Mandarin Chinese 

and German. The translators then have to send the complaints to 

the country involved and get an official there to serve them. We estimate that it will cost $2,300 for the German service and delay our 

case for an additional 12 to 16 weeks. Serving the two Chinese 

12 

manufacturers will cost us $3,000 and could add as long as 6 to 8 

months. 

Unfortunately, all of these delays and expenses are especially 

harmful to our clients. One home had such a severe drywall problem that we had to replace the refrigerator, the washer, and the 

dryer because the wiring had corroded and ruined these appliances. 

We have also relocated one homeowner over her concerns about 

living in an affected house. We have offered to move another homeowner to a different house in the same subdivision, but are still 

awaiting her answer. 

As you can see, the lack of registration and identification of these 

imported products and the difficulties involved in serving a foreign 

manufacturer have made a challenging task even more daunting. 

Foreign manufacturers should not be let off the hook for harming 

U.S. consumers and businesses like ours, especially if they are conducting substantial operations here in the U.S. If American businesses cannot hold foreign manufacturers accountable, it hurts our 

bottom line in addition to harming U.S. consumers and homeowners. 

I look forward to answering any questions you may have about 

my experience, and thank you again for allowing me the opportunity to testify today. 

[The prepared statement of Mr. Stefan appears as a submission 

for the record.] 

Chairman WHITEHOUSE. Thank you, Mr. Stefan. Your testimony 

I think is particularly important because it provides such a concrete example of the situation and the consequences of the situation that I think Mr. Gowen in his testimony described so well. Mr. 

Gowen said, ‘‘. . .foreign manufacturers enthusiastically seek access to the American market but assiduously seek to avoid responsibility and accountability in American courts for injuries caused by 

their products.’’ And that seems to be the case. They have no hesitation marketing the sheetrock. They have no hesitation shipping 

it to you. They have no hesitation taking the check. But when it 

came to cleaning up the damage that they caused, suddenly you 

have to translate things into Mandarin and German and chase people to foreign countries. 

An interesting element of your story that I would like you to expand on a little bit is that there seems to be a double whammy 

here for American business in the sense that from the very get-go 

an American gyp board manufacturer lost the sale of sheetrock to 

whoever manufactured the defective sheetrock, so there was harm 

to the manufacturer that lost the sale. And then here you are, the 

innocent intermediary, and now you evidently have to—they are 

your customers, and they are upset, and they cannot find the 

sheetrock manufacturer, so it sounds like that is all on you right 

now to try to keep your customers happy, and you are getting no 

support from the foreign sheetrock manufacturer. Is that correct? 

Mr. STEFAN. That is correct, Senator, and I would also like to 

point out that the American manufacturer of the air conditioning 

equipment, Goodman, sent their representatives to the site, replaced their product, and continue to replace their product even 

after they know that it is not a defect in their manufacturing. And 

even though Knauf sent its attorney and a Ph.D. in toxicology and 

13 

a lab assistant to the site, they have offered no assistance with 

finding a solution or paying any bills or even calling us back now 

that we have pestered them a little. 

Chairman WHITEHOUSE. And the harm to the air conditioners is 

because the release of sulfur from the sheetrock causes an environment in which copper corrodes very rapidly? 

Mr. STEFAN. Yes. We are not exactly sure that it is the sulfur 

or some compound that is in the sheetrock, but about once a year 

you have to change the coils. It is a very thin copper, and it eats 

right through, and the coils just have to be thrown away. They are 

not of any use. 

Chairman WHITEHOUSE. Ordinarily, how often would you have to 

change the coils in a regular home? 

Mr. STEFAN. We have plenty of apartments after 20 years with 

the same coils still operating in the air handler. 

Chairman WHITEHOUSE. And these ones do not last a year. 

Mr. STEFAN. That is correct. That problem is not solved, but it 

has been obviated by every time we replace a copper coil today, we 

change out the entire unit and use an aluminum coil from a different manufacturer. 

Chairman WHITEHOUSE. Professor Teitz, would requiring foreign 

manufacturers who sell defective products in this country to abide 

by a service of process requirement and appoint a registered agent 

and perhaps even consent to jurisdiction, is that a trade issue that 

would interfere with our treaty obligations with respect to the 

WTO? Is it addressed in NAFTA or CAFTA or any of the trade 

treaties we are under? 

Ms. TEITZ. I do not think those are, but service, at least under 

the Hague Convention, the question is whether the service is actually effected and made in the U.S. And it is left to the national interpretation, which, as I mentioned, in this country is state law, 

and the argument is that service is complete in the U.S.; therefore, 

it is sufficient and the Hague Convention is not triggered. 

Similarly, consent is generally viewed as an acceptable basis for 

jurisdiction, and I think in terms of—— 

Chairman WHITEHOUSE. And that would not be seen as a trade 

barrier being erected? 

Ms. TEITZ. I do not think either one would be a trade barrier because consent is also available as a basis for jurisdiction against 

domestic manufacturers. And more specifically, certainly with the 

service issue, most U.S. corporations to get incorporated they have 

to designate an agent for service or under most State law, if you 

do business and you have not designated an agent, you are deemed 

to have designated the Secretary of State. 

So it seems to me—I am not an expert in trade law, but I do not 

see anything that would suggest a favoring of nationals, of one’s 

own national. 

Chairman WHITEHOUSE. And you mention in your testimony that 

U.S. consumers face difficulties recovering in U.S. courts or enforcing U.S. judgments abroad—in fact, more difficulty than many foreign consumers face in the reverse situation. So in light of that 

lack of reciprocality, if you will, what would the effect be if foreign 

countries retaliated and imposed similar rules as the service of 

14 

process legislation? Would that be significant, or are American 

manufacturers already held accountable abroad? 

Ms. TEITZ. Well, U.S. manufacturers are already held accountable abroad. Many of these consumers come to the U.S. and sue 

our manufacturers here because they prefer our legal system, they 

prefer the jury, they prefer large pain and suffering, they prefer 

the opportunity to be part of a class action. So I think it is more 

likely that they will come here, and if they do get a judgment overseas, the enforcement of foreign judgments incoming is a matter of 

State law, but as a practical matter, the Uniform Foreign Money 

Judgment Recognition Act and its amended version tend to enforce 

judgments as long as there was personal jurisdiction. And usually 

our notions of personal jurisdiction are sufficient to accept what 

was used there. 

Chairman WHITEHOUSE. So this really would be a matter of balancing rather than creating what one might call a race to the bottom? 

Ms. TEITZ. I would think that is the case. Certainly, one of the 

things to keep in mind, for instance, in terms of jurisdiction, in the 

European countries at the moment, normally a person injured can 

sue at the place of injury, and that is not always true here. A perfect example is a recent case out of the Third Circuit that had to 

do with an airplane crash. But, nonetheless, you could not sue at 

the site of injury. Conceivably, you may be able to sue a Swiss company that imports lots and lots of its planes to the U.S. in Colorado, but that is not clear even at this point. 

So I think that our notions of personal jurisdiction in certain 

areas are narrower because they are activity based and have a constitutional component and, therefore, they look at what the defendant does rather than where the injury occurs. 

Chairman WHITEHOUSE. The distinguished Ranking Member. 

Senator SESSIONS. Thank you, Mr. Chairman. 

Mr. Stefan, first let me say how much I appreciate the Mitchell 

Company and its good work. It is one of Alabama’s and Mobile’s 

finest companies, and we wish you every success. 

You have contracted with an attorney. Have you yet gotten service of process? And how long has it been? 

Mr. STEFAN. Can I let my attorney address that? 

Senator SESSIONS. All right. 

Mr. Nicholas. Good morning, Senator Sessions. 

Senator SESSIONS. You are? 

Mr. Nicholas. I am Steve Nicholas with Cunningham Bounds. 

Senator SESSIONS. Well, Cunningham Bounds knows how to get 

service, if anybody does. 

Mr. STEFAN. They know how to get a judgment, too. 

Senator SESSIONS. They are one of the best plaintiff law firms in 

America, quite an honorable and effective group. 

Mr. Nicholas. Thank you, Senator. It is my understanding the 

complaints have been translated and they have been sent over to 

Germany and China, respectively, but exactly where they are in 

the process, I cannot tell you. We started that process probably 8 

weeks ago, so while we sue local defendants, distributors, and, of 

course, we have service over them, but everybody is just sort of sitting there waiting for the foreign defendants to appear. 

15 

Senator SESSIONS. Well, it is just a big problem. I guess you have 

had to spend considerable hours in research, and there is no one 

easy source to go find exactly how to get this done. Is that fair to 

say? 

Mr. Nicholas. Well, the service issues, there are companies out 

there that will do it for you—of course, for a fee. And so to get service over the two foreign defendants will cost the Mitchell Company 

ultimately a little over $5,000, and it is the delay involved, and we 

hope it will all work out and we will be able to get that service. 

Senator SESSIONS. All right. Now, I think I like what Mr. 

Schwartz said, because I do know that major foreign companies, 

really good companies that invest in Alabama and other places, 

want to know about the legal system. They want to know what 

they are subjected to, and if they think they are going to a haven 

for abusive torts, it makes them nervous. They are not as willing 

to invest in that area. And so these are matters that are very important. 

It is also unthinkable that we would allow a system to occur in 

which our American manufacturers are more liable and more subject to lawsuits than a foreign manufacturer. If they sell in the 

United States, seeks access to our markets, they should be subject 

to the same rules. 

And, Mr. Schwartz, I like your statement a lot, which is that we 

should be able to tell them precisely what they are subjected to and 

what kind of liability insurance they may need to have or what 

kind of behavior they need to demonstrate to avoid getting sued in 

U.S. Federal court. 

Mr. Gowen, you have filed these lawsuits, I believe. Do you think 

that is something that makes sense to you, what the professor 

said—who, by the way, is the editor of Prosser on Torts and one 

of the great legal minds in the country. 

Mr. GOWEN. Absolutely, Senator, and I must say that although 

I was flattered, I was not quite sure that I or my colleagues have 

quite the draconian level of power that Mr. Schwartz ascribed to 

us in his testimony. But—— 

Senator SESSIONS. You have been known to get companies’ attention. 

Mr. GOWEN. Well, we have, and we think that is a good thing 

because we think that that gives them some considerable incentive 

to increase the safety of their products. And when we apply the 

principles of safety engineering to prove a product liability case, 

the term ‘‘strict liability’’ is strictly a misnomer. You do have to 

prove that the product was defectively designed, defectively manufactured, defectively sold, which is essentially the same as proving 

that it was done negligently. And it is a considerable burden. It is 

a considerable litigation. But that is where the litigation should 

take place, not on the issue of civil procedure. 

In response to Senator Whitehouse’s question on the issue of jurisdiction and the comments that Mr. Schwartz made, Mr. Stefan 

does not have any idea of what is going to happen next in his litigation once they come and answer because he is going to get a brief 

saying that the court in Alabama does not have jurisdiction. 

Senator SESSIONS. That is what the defendant will say. 

16 

Mr. GOWEN. And that is what the defendant will say. And when 

I testified in the same hearing that Mr. Schwartz did in November 

of 2007, the Asahi case had been cited 2,600 times. I checked just 

yesterday, and it has now been cited 5,778 times, which tells you 

how often that this defense is being raised in the Federal courts, 

and then involves substantial briefing. As Professor Teitz said, 

there was just a decision from the Third Circuit this week involving an airplane crash. 

So it is a considerable problem, and I think it is one that Congress should consider addressing through the consent to jurisdiction mechanism, and as Professor Schwartz said, Justice O’Connor 

did set forth an invitation to Congress to act in this manner. 

Senator SESSIONS. Briefly, how comfortable are you with Justice 

O’Connor’s suggestion? 

Mr. GOWEN. I am very comfortable with her suggestion. I am not 

so comfortable with the factors that she set forth in her opinion. 

I think Justice Brennan set forth in the stream of commerce approach to the jurisdictional issue a much more realistic thing, because I think our system of commerce has grown where these companies in the trillion dollar range are sending products to what 

they call the American market, and then they come and say, ‘‘But 

we are not selling it to the State of New Jersey or the State of Alabama or the State of Pennsylvania.’’ And it is simply impossible to 

sell to the American market without the product going to one of the 

States. 

Senator SESSIONS. Professor Teitz, what about the—are there 

any dangers to the American companies that if we do the wrong 

thing, our companies could be subjected to similar type circumstances where perhaps the courts are less objective in foreign 

countries? Do you see any concern there? 

Ms. TEITZ. I think there is certainly always the danger that 

countries adopt reciprocal legislation, but at this point, I think in 

general, our computers are at a competitive disadvantage because 

of their being subject to suit here and overseas for that matter, and 

they are getting judgments, parties getting judgments in Germany 

and bringing them over here to be enforced where there are assets. 

Once upon a time, it was not quite as bad because foreign companies generally had assets in the U.S. so you could enforce a judgment you got here against one of them here. But that, of course, 

has changed. With a click of the mouse, one can move assets offshore and then you are stuck. 

Senator SESSIONS. Well, I remember one that I was involved in, 

at least for a while, involving an antique automobile, and involving 

a great ally of ours, Germany. But the person agreed, at least I 

thought, ended up spending more money, and I am not sure he 

ever got the car. The expense of litigating abroad really can be significant and can wipe out any gain you get from an ultimate victory. 

Mr. GOWEN. Senator, if I might, in response to your question, the 

common practice, if one of our companies is sued in this country 

by a group or individual foreign plaintiff is to file a form non-convenience petition and ask the court to send it back to the country 

of origin. And that has occurred in pharmaceutical litigation. It has 

occurred in oil company litigation. It has occurred in numerous 

17 

areas, so that the American companies are actually saying to the 

United States courts that they would rather be sued in England or 

Germany or wherever their product has caused harm. 

Mr. SCHWARTZ. I think you can meet the Asahi case head on 

without having to go to dissents, because as I mentioned just before 

you came in, Senator, the Asahi case was a strange case. It was 

a case of two foreign companies seeking to use a California court 

for their dispute which arose abroad. And I would throw it out, and 

probably both of you would. It was not where a person was injured 

in California by a product sold in California. And Justice O’Connor 

in her opinion made that distinction clear. 

So if your jurisdiction is over cases where somebody has been injured or there has been property damage, and you assemble the 

contacts nationwide, as she suggested, and place the jurisdiction in 

Federal courts, first you gain a little bit more in terrorem effect, 

meaning to make those folks, who we are going to tell them about 

the tort system, worry a little bit that they can be sued here. Second, you address the 5,700 cases interpreting this decision of a plurality of 21 years ago. So you cut down on litigation. You have clarity. You provide at least some in terrorem effect to foreign manufacturers, and I do think it is good for them to know about our tort 

system. 

The tort tax situation, which I very briefly said, is intriguing. 

One company I represent makes the best, I think, respirators in 

the world, but they pay a tort tax on each product. A Chinese company comes in with a cheap perversion, they can sell it for much 

less because they do not pay any liability. And it is blatant unfair 

competition that needs to be addressed. 

Chairman WHITEHOUSE. Professor, just to follow up a little bit on 

Asahi, if I can be amateur lawyer for 2 seconds, the principle that 

we are talking about that comes out of the Asahi decision is the 

sort of purposefulness test that is required for there to be jurisdiction in any particular State. And as I read it, the five judges who 

joined in the concurring opinions, all in one way or another disassociated themselves from that part of the opinion. So you actually 

have a majority of the Supreme Court that refused to sign on to 

that principle, and yet it seems to have become—gained considerable currency. It is an interesting phenomenon that a minority of 

the Court in that sense through its plurality opinion has set the 

law when a majority of the Court said, you know, we are not comfortable with that. Do you agree with that reasoning? 

Mr. SCHWARTZ. Absolutely. You read the case exactly right, and 

you make a map with these plurality opinions, which for anybody 

are difficult to read. You did exactly the right thing, and that is, 

map out where each Justice made his or her statement. So you 

have a majority of the Court there—I agree with your analysis of 

the case, yes, sir. 

Chairman WHITEHOUSE. It creates a very bizarre anomaly, as I 

read it, which is that you can be a company that wants to sell a 

product in the United States, that definitely, assuredly, purposefully wants to sell its product in the United States; but because tort 

law tends to be a State law, State court matter, and because of this 

purposefulness requirement, you can intend to sell it in the United 

States and then not intend to sell it in any particular State, with 

18 

the result that your product is everywhere physically and yet nowhere legally for purposes of jurisdiction. 

Mr. SCHWARTZ. That is absolutely correct. 

Chairman WHITEHOUSE. It is a puzzle, isn’t it? 

Mr. SCHWARTZ. Well, I think you can solve the cases cause—with 

5,700 cites, the case has caused more confusion than it is worth. 

It is unlikely that the Court is going to be addressing the issue 

again soon. You have been given an invitation by the court to come 

into this area. It is not as if the Court is saying we are the only 

body that can tell you what to do. Justice O’Conner provided a road 

map. Your reading of the case is exactly right. And I would encourage you to address the jurisdictional issue as well as the service of 

process issue. And Mr. Gowen makes a good point about identification and also enforcement. 

Chairman WHITEHOUSE. Should we require consent to jurisdiction as part of the service of process legislation? Would you join the 

other two legal witnesses in agreeing with that and making the 

panel unanimous? 

Mr. SCHWARTZ. Yes, if it meets the basic constitutional requirements, because probably you have the same constitutional requirements for consent that you would have for obtaining jurisdiction. 

So I would concur as long as the basic constitutional requirements 

are met. 

Chairman WHITEHOUSE. You would still have to have minimum 

contacts, but you would not necessarily have to have purposefulness. 

Mr. SCHWARTZ. Yes, Senator. 

Chairman WHITEHOUSE. OK. I understand. 

One interesting point that was raised by the discussion between 

the Ranking Member and Mr. Stefan and his attorney is that there 

are other parties, domestic parties, American distributors and so 

forth, involved in your litigation. As I understand it—and this is 

a question for the lawyers—as a general proposition, if you assume 

that the damages that Mr. Stefan’s clients have experienced are 

worth $1 million—that is just what it is. It is a $1 million case, 

and we all know that that is a given. And you have an array of 

different defendants, the distributors, perhaps Mitchell itself, 

stores that sold it—who knows? There could be an array of them. 

It does not make the damages any less simply because the foreign 

defendants cannot be found. Under principles of joint and several 

liability, the $1 million does not get carved up and go away. And 

so, in effect, by dodging responsibility under the American law, not 

only did they cause the American manufacturer to lose out, not 

only did they cause Mr. Stefan’s company to have to take on a 

project of coping with irate consumers who, frankly, are not truly 

your problem, they are their problem; but you also have the other 

constellation of defendants who, if they are not found, will end up 

bearing their share of the costs in litigation out of the eventual 

judgment. So they are sort of triply loading up other American 

businesses in an uncompetitive way. Is that a fair explanation? Let 

me start with Mr. Gowen and then Professor Teitz and then Professor Schwartz. 

Mr. GOWEN. Yes, I think it is very fairly stated, Senator, and I 

think all of us want to see American companies succeed. And this 

19 

is an area where there is definite unfairness because the American 

companies can be left holding the bag because they cannot get 

them there. As you say, the damages do not go down or do not go 

away. These folks just are able to avoid their responsibility or, you 

know, sufficiently add complexity to the case before you can ever 

get them to the court, that it becomes extremely onerous to get 

them there. 

Chairman WHITEHOUSE. And, of course, we focused a certain 

amount in this discussion on the commercial defendants and the 

business effect of this. But behind all of that is some, in this case, 

Alabaman who is out of their house. 

Mr. GOWEN. That is right. 

Chairman WHITEHOUSE. Or who cannot get the air conditioner 

up and rolling because the coils have corroded out. And I gather 

the weather can be pretty warm down there sometimes. You need 

an air conditioner. So there is a real human cost in addition to the 

business cost. 

Professor Teitz. 

Ms. TEITZ. I think that as a practical matter as well, what happens is if you are a lawyer who is consulted about this, you would 

advise the client to go after the domestic defendants because there 

are so many procedural hurdles; and if you have a Chinese defendant, who you ultimately get jurisdiction over, the question is: Are 

you going to be able to enforce a judgment? Are there any assets 

in the U.S. or debtors to the Chinese company in the U.S.? So they 

may be for all purposes not really a viable defendant anyway. So 

if you already have a viable defendant who has joint and several 

liability, why necessarily continue on that? 

Chairman WHITEHOUSE. Yes, I understand. Some people might 

not even take the effort that Mr. Stefan’s company did to chase 

down the true miscreants if they are satisfied that they can collect 

their judgments from the American companies, and the injustice 

compounds itself. 

Professor Schwartz, did you want to comment on that? 

Mr. SCHWARTZ. I think that you have stated this very, very well, 

because it is in terms that everybody can understand. 

Senator SESSIONS. I would just note for the record that the august professor has complimented you twice. That is—— 

Chairman WHITEHOUSE. I did not do that well in law school. 

[Laughter.] 

Mr. SCHWARTZ. I taught at his school 10 years before he was 

there, and as I said in my beginning remarks, that is why he probably did well, I had already left. 

If this issue is broken down into terms that everybody can understand, I think it will get solved. When I hear it discussed, it is discussed in too complex a manner. But you put it well. No. 1, the 

rules let a foreign manufacturer take away business from American 

companies, and right now that is something that rings true. We are 

worried about jobs in this country. We are worried about business 

in this country. 

Second, the foreign company can sell it cheaper because it does 

not pay the tort tax and the American company does. 

And then, third, the irony is that under our joint and several liability rules, some American distributor or manufacturer who did 

20 

not do anything wrong or marginally was involved pays the whole 

liability. 

And if you break it down into those three things and just talk 

about it over and over again, the media will pick it up, and you 

will get some wind behind the sails of some legislation that can address the problem. 

I think it would be addressed when you have consensus other 

than when other issues that seem more important to some people, 

take the front seat. But this is something that is affecting this gentleman, businesses all over America, and people who are left with 

nobody to sue in some situations. 

Chairman WHITEHOUSE. Well, let me ask the distinguished 

Ranking Member to conclude the questioning of this panel, unless 

another Senator should turn up with a question that they are 

burning to ask. And we will then close the hearing after that. 

Senator SESSIONS. Thank you. 

Well, I do think it is something we can fix and we should fix. It 

is not impossible. And as a practical matter, Mr. Schwartz, what 

about a requirement—I do not know where it would be in the system, but that the products themselves, where practical, should 

have on it the original manufacturer or at least some requirement 

that if a distributor sells it in the United States, that they have 

on record information dealing with who actually manufactured the 

product? 

Mr. SCHWARTZ. You are absolutely right, Senator. You have to 

address the identification issue, and that may be a very practical 

way to do it. If we do not know whose product it is, as I recall 

when I did plaintiffs’ work, and certainly Mr. Gowen, you do not 

know where to begin. So I think a requirement of that type, carefully worked out, carefully crafted, is essential to having the portal 

open so these companies can be held responsible. 

Senator SESSIONS. You suggested there is some danger if we get 

too far abroad in what we write as a legislative fix that could create political controversies. But what about the question of FederalState jurisdictions or to what extent should it be Federal if a product is sold in all 50 States? And what about venue, forum shopping, 

where if a product is sold in all 50 States, the plaintiff could then 

choose the one county that has one judge that they like and file a 

lawsuit there? 

Mr. SCHWARTZ. You are so kind to ask that question. You know, 

I trademarked a term called ‘‘judicial hellholes,’’ and I will not address any of the States of this Committee, but yes, they become 

places where people go, and I think your solutions to this issue 

should be in Federal courts, which are neutral in their application, 

and not create pendant jurisdiction problems and other problems 

where State court jurisdiction could result in situations that adversely affect domestic manufacturers. 

Some of the House legislation unintentionally did that, and for 

getting a solution, we should stick to the core problem, it is a national problem. Sandra Day O’Connor, Justice O’Connor, said it 

was national in scope. She provided a road map, and I do not think 

it would be good to have litigation tourism going on by solving a 

problem and creating another one that we do not want. 

21 

Senator SESSIONS. Well, thank you. I believe we have made some 

progress, and I look forward to working with you. 

Chairman WHITEHOUSE. I thank the distinguished Ranking 

Member. I thank the witnesses. I would note just in response to 

the very interesting colloquy between the Ranking Member and 

Professor Schwartz that if there is such a thing as a judicial 

hellhole, there are probably ones on both sides of the aisle, and 

what you would also not want is to allow the foreign defective product manufacturer to be able to choose venues in which their defense was favored. So that is an issue very much worth working 

on, but I think particularly the questions of service of process and 

of consent to jurisdiction have emerged from this hearing as one 

where there appears to be both room for progress, unanimity, and 

some real practical benefit from going forward. 

So I am grateful to the witnesses for having framed it this well. 

I am grateful to the Ranking Member for his cooperation and his 

staff’s cooperation in pulling this hearing together in so collegial a 

fashion. 

The record will remain open for another week if anybody wishes 

to supplement the record. Without objection, and with the Ranking 

Member’s consent, I will add into the record a statement of Chairman Leahy, the Chairman of the Judiciary Committee, on this 

question. And if there is no further business, the hearing will stand 

adjourned. 

[Whereupon, at 11:33 a.m., the Subcommittee was adjourned.] 

[Questions and answers and submissions for the record follow.] 

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