US Bill Would Allow Americans To Sue Foreign Companies In US

By Josh Mitchell

Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- A U.S. House panel is set to vote Wednesday on legislation that would allow Americans to sue foreign consumer-product makers in U.S. courts, following a series of high-profile recalls of cars, toys and other products in recent years.

The bill, known as the Foreign Manufacturer Legal Accountability Act, could have the biggest impact on foreign companies without U.S. subsidiaries, which are practically and legally tougher to sue. Americans generally must sue those manufacturers overseas, a process that is more costly and time-consuming than if they were to sue them in the U.S., according to congressional aides.

The bill, introduced by Rep. Betty Sutton (D., Ohio), responds to cases such as the import of defective drywall from China during the housing boom that has been blamed for causing health problems. It has more than 60 cosponsors, mostly Democrats, and has gained the support of House Energy and Commerce Committee Chairman Henry Waxman (D., Calif.), whose committee is scheduled to consider the legislation Wednesday.

Foreign companies oppose the legislation, saying it would drive up manufacturing costs and run afoul of World Trade Organization rules. They also warn that the bill would prompt other countries to impose retaliatory measures that would stifle trade at a time when the Obama administration is trying to stimulate U.S. exports.

Consumer advocates say U.S. consumers have limited legal recourse to recover damages from foreign manufacturers, giving those companies an advantage over domestic companies.

"If foreign entities have the benefit of selling products and making profits from sales in the U.S., they should be accountable if the product causes harm," Ami Gadhia, policy counsel for the Consumers Union, publisher of Consumer Reports, testified at a House hearing last month.

Andrew Popper, an American University law professor, said the threat of lawsuits is needed to deter foreign companies from taking shortcuts in the design and manufacture of products.

"When you create the realistic possibility for liability, you activate incentives to make safer and more efficient products," Popper testified.

But foreign companies point out that consumers already can sue U.S. distributors and retailers that sell foreign products.

"We think it's a terrible amount of overkill that's going to hurt everybody," said Michael Stanton, president of the Association of International Automobile Manufacturers, whose members include Toyota Motor Corp. (TM, 7203.TO), Honda Motor Co. Ltd. (HMC, 7267.TO) and Nissan Motor Co. Ltd. (NSANY, 7201.TO). "You would have lawyers in the United States seeking to depose people in other countries. That's way beyond the common practice of what we do now. And so many of the trial lawyers would be after the fishing expedition."

He pointed out that U.S. consumers are already able to sue a foreign manufacturer's U.S. subsidiary in the U.S. Toyota Motor Sales USA Inc., owned by Toyota Motor Corp., is facing lawsuits over the recall of more than 8 million vehicles globally for sudden-acceleration problems.

-By Josh Mitchell, Dow Jones Newswires; 202-862-6637; joshua.mitchell@dowjones.com