China Esquire

Just wanted to post quickly about more and more melamine developments.  The first is not Sanlu, believe it or not.  Not milk.  It’s eggs.  CNN published an article entitled “ Hong Kong finds excessive melamine in eggs“.  Here is an excerpt:

HONG KONG, China (AP) — Excessive levels of the industrial chemical melamine in Chinese eggs might be traced to fertilizer fed to chickens, the Hong Kong government said.

In a statement late Saturday, the government said it found 4.7 parts per million of melamine in the eggs produced by a division of China’s Dalian Hanwei Enterprise Group based in the northeastern port city Dalian.

The legal limit of melamine in Hong Kong is 2.5 ppm.

Hong Kong Secretary for Food and Health York Chow said the melamine may have come from fertilizer fed to chickens that laid the eggs. “The preliminary opinion experts have given us is that there is a problem with the fertilizer,” Chow told reporters.

Chow said Hong Kong officials will step up checks of eggs imported from China.

This really has got to stop.  But unfortunately, without severe legal and/or regulatory penalties, the only way that this sort of stuff will ever stop is when the bottom line gets hurt…  badly.  (like I am betting Sanlu will probably never recover its profitability)

That being said, it sure doesn’t help the perceptions of China here in the U.S.  I had some acquaintances I know decide to stop buying Chinese produce because of some rather suspect tasting stuff in some pears recently.  It didn’t seem to matter that no one got sick.  The normal reaction is that this stuff must be no good because its from China.  I don’t necessarily agree with the reasoning, but I do note this: the public perception around these parts is getting worse…  and this is the SF Bay Area.  No wonder Obama and Biden get so much support when they bad mouth China (or Japan/Korea for that matter) in the rest of this country…

The other thing I wanted to highlight was something that Stan Abrams caught.  (Dan Harris also posted on it, and I commented on both)  I am not going to comment at length right now, but depending on how interesting the complaint is, I just might have to chime in…  in a more in-depth manner than just commenting. From Radio Free Asia:

Parents of Chinese children who died or became ill after drinking infant milk formula contaminated with melamine say they will sue a subsidiary of a Chinese milk powder manufacturer based in the U.S. state of Maryland.
A member of one of the affected families surnamed Liu said Qingdao Shengyuan Milk Co. Ltd., a dairy products manufacturer based in the eastern China city of Qingdao, had a Delaware-registered investment subsidiary with offices in Maryland, rendering it subject to U.S. law.

“We have signed a contract with a Maryland-based lawyer who will represent us in this collective compensation suit,” Liu said.

“There are milk victim parents who are willing to pay for the legal fees and expenses and who want to pursue justice in the United States,” he said.

Very very interesting.  Will post more if and when more developments happen with this.

Just got this email on the late side, so I apologize for the lack of notice.  My alma mater, UC Hastings, is sponsoring a conference entitled “ Cities and Counties in the Global Economy: Local Immigration and Economic Policies under a Microscope“.  Time and location:

October 24, 2008
8:30 am to 4:00 pm, Reception to Follow

UC Hastings College of the Law
198 McAllister Street, San Francisco, CA 94102

And here is some more information on the topics to be covered:

Cities and counties respond to the global economy in creative and sometimes controversial ways.  On the economic side, cities flex their economic muscle through community development agreements, project labor agreements, living wage ordinances and the like. On the immigration side, day laborer ordinances, sanctuary and non-cooperation policies, and state and federal preemption dominate council rooms and courtrooms.

Do these policies work?  What legal issues do they raise?  What challenges do they pose for the basic legal, political and economic framework of local government?

Should be intriguing, though I don’t think I can make it on such sort notice personally.  The more detailed brochure can be found here, and registration link is here.

The International Herald Tribune (tagline: the New York Times Global Edition), published an article reiterating some not-so-surprising news, entitled “ Lawsuits in China’s milk scandal unlikely to be settled in court“.  ( h/t to CDT)

Of course, what was reported was nothing new to the readers of this blog:

The parents filed a lawsuit Monday in the arid northwest province of Gansu where the family lives, to try to wrest more than $152,000 in compensation from Sanlu Group, the maker of the baby formula that Kaixuan had been drinking.

It seemed like a clear-cut liability case – since last month, Sanlu has been at the center of China’s biggest contaminated food crisis in years. But as in two other courts now dealing with such lawsuits, the judge has so far declined to hear the case.

Chinese officials routinely favor producers over consumers and rarely hold companies or their shareholders to account even in major cases of malfeasance. Product liability lawsuits remain difficult to file and harder still to win, especially if the company involved has state ownership or close connections to officials who also oversee the courts.

But Yi and his wife are among only a handful of Chinese who have filed a lawsuit against a dairy company. The plaintiffs are all individual families and lawyers say there is almost zero chance that any judge would consider a class-action lawsuit since those are highly discouraged in China.

“This is a product liability case that in a Western country would turn into a class-action lawsuit,” Zhang continued. “But I think social stability is the government’s main concern. They don’t want to see so many people getting involved in one lawsuit – this might threaten social stability.”

So, that’s 3 lawsuits against Sanlu that have been reported.  And 3 lawsuits where the judge has declined to hear the case.  How convenient.  I am still not sure how a judge can elect to not hear a case like this for what is obviously political reasons.  I am not saying that American judges don’t get political.  (some very much do)  But on the whole, at least they don’t look like puppets for the government or government-based policies…  That being said, I thought once was normal, twice okay… but 3 dismissals already.  Either that Chinese judge is really scared of the government or just plain unwilling to go with Chinese public sentiment. I’d say the former.

Government officials have told parents and lawyers in the milk cases that their complaints can be resolved through out-of-court compensation payments.

Local governments in Sichuan Province employed the same strategy with grieving parents whose children died in school collapses during the May 12 earthquake. Over the summer, the governments gave compensation to the parents if they signed papers agreeing to drop demands for investigations into shoddy school construction. Most of the parents accepted the money.

As with the school collapses, the milk scandal involves a web of complicity tying company executives to government officials, which means any lawsuit is politically sensitive. To prevent a public airing of grievances, the government will pressure complainants to sign individual compensation agreements, said Teng Biao, a lawyer in Beijing who is collecting material for a possible class-action lawsuit.

“Traditionally in China, politics is always higher than the law,” he said.

Sad indeed.  I look forward to the day when the rule of law takes over.  I don’t want to reiterate my point that I think the government’s handling of the crisis ends up encouraging bad behavior, so I will just quote from my prior post:

I don’t think the Chinese government’s method of compensation is all that fair in terms of pain and suffering (and time and nuisance value) by just paying all treatment fees.  But it is great in terms of promoting social stability and trying to quell the unrest.  What’s the downside?  Ultimately, such an action likely will encourage would-be offenders to continue to market garbage products.  And of course, true justice isn’t really served.  The government ends up shielding the companies at the cost of damaged parties.

Maybe the fourth time will be the charm…

Not an angel.  An “Angell”, as in Boston’s Edwards Angell Palmer & Dodge.  The National Law Journal picked up very briefly on this story today:

 The 600-lawyer Boston-based Edwards Angell Palmer & Dodge is entering the Chinese legal market through an association with the newly formed firm Lister Swartz, comprised of two long-time Hong Kong attorneys.

Martin Lister, an Edwards Angell partner with more than 20 years in practice in London and Asia, and Kristi L. Swartz, a Hong Kong attorney who operated for a dozen years as the sole principal of Swartz Solicitors, have formed Lister Swartz. The two attorneys specialize in corporate and securities law.

“Expanding our client service capacity formally into Asia is consistent with the Firm’s strategy,” Walter G.D. Reed, managing partner of Edwards Angell, said in a written statement. “Hong Kong is the right place for us to be and in direct response to the needs of our increasingly global client base. I’m pleased that Lister Swartz will lead EAPD’s efforts in Hong Kong.”

Both Lister and Swartz are trained HK solicitors (see here), so it looks like Edwards Angell may be here for the long haul. Very interesting that the firm isn’t aiming for Beijing or Shanghai first, as it seems like those are the hot places to go for firms aspiring to build China practices.  However, HK seems to me to be a good choice that is overlooked.  I hope this office does well.

Well, it seems like national government assistance and local government discouragement (a.k.a. pressure) didn’t prevent what the government as a whole was trying to avoid all along with Sanlu: the lawsuit.  While I had thought it would be some time before one of these cases was filed, I was wrong.

The first lawsuit was reported by Bloomberg today ( h/t to CDT, which always does a good job scooping me):

The parents of a one-year-old boy sickened by tainted milk powder filed a lawsuit against Sanlu Group Co., seeking 150,000 yuan ($21,913) in compensation, the Beijing Youth Daily reported.

The boy was found to have kidney stones after he drank more than 100 bags of Sanlu’s milk powder since he was born in July 2007 in Henan province, the state-run newspaper said over the weekend, court documents.

Sanlu officials were unavailable for comment today and haven’t returned calls over the past two weeks. The company, in a letter of apology on its Web site, has said it “is heart stricken by the damage that we’ve caused.” Government and business offices are closed in China for a week-long holiday.

This should be interesting since I didn’t think that pain and suffering could be recoverable.  Since I don’t have a pleading in hand, I cannot comment on what causes of action are being used as the grounds for the case…  and of course, what the grounds for the damages are.  But this should prove to be an interesting test case.  If the family makes out well, then the floodgates may open wide for litigation.  Just imagine how much a wrongful death case could potentially be worth as it strikes the heart of Chinese values in family.

However, the problem?  Local government pressure.  And also the Chinese aversion to litigation to solve problems unless push really does come to shove.  I don’t know how much of a chilling effect these two things will have on the likelihood of lawsuits.  Should prove interesting.  (almost makes me wish I could do a sociological study about this instead of talking about law)

Stay tuned.  I know I will.

UPDATE: China Law Prof Blog picked up the Chinese version from Beijing Youth Daily.