China

Suing Chinese Companies in U.S. Courts

Chinese companies sued in U.S. courts are often relatively easy marks because they typically have no clue how to handle a United States litigation matter.

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US china flagsA couple of years ago, I wrote an Above the Law article, entitled, “Suing Chinese Companies In The United States Is Usually A Waste Of Time,” stating that it is “almost always a waste of time to sue Chinese companies in United States courts” because Chinese courts do not enforce U.S. court judgments.

Chinese courts still do not enforce U.S. court judgments. But with more Chinese companies doing sufficient business in the United States so as to make collection of United States judgments more likely, I am seeing an uptick in lawsuits appropriately brought against Chinese companies in U.S. courts. What is interesting about these cases is how Chinese companies are responding.

Chinese companies sued in U.S. courts are often relatively easy marks because they typically have no clue how to handle a United States litigation matter. Just as these Chinese companies so often run their businesses outside of China just as though they are in China, so too do they tend to handle their U.S. litigation.

American litigation is nothing like litigation in China, and here are some of the salient differences:

  • Litigation moves fast in China — really fast. It is not uncommon to file a lawsuit and have the trial and verdict within three months. In the United States, it is more like three years.
  • Generally speaking, in the United States, everything hinges on the witnesses. Documents are, of course, also critical, but you generally need a witness to get a document into evidence. In China, documents pretty much completely trump witness testimony.
  • In the United States, one often files a lawsuit and then garners evidence through discovery from the other side to help prove it. In China, you are to a large extent stuck with the hand you have before you file your lawsuit.

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  • Forget about trying to bribe a U.S. federal court judge. Forget about it. In China, one always has to at least consider the “influence” of a particular party.
  • In China, collecting on a judgment can be very difficult, and once the court issues its decision, it does not have a lot of power to aid in collection. Stan Abrams over at the China Hearsay blog did a nice post on this, entitled, “Enforcing China Court Decisions: Help Is On The Way?” This is not true of United States courts, which do not take at all kindly to defendants they believe are skirting their obligation to pay. United States courts have all sorts of powers to enforce their judgments and they do not hesitate to use them.

All of these things tend to cause Chinese companies to throw up their hands and treat U.S. litigation as they treat Chinese litigation, meaning they tend to engage in the following conduct, which can be detrimental to their cases here:

  • Failing to understand the time and money needed to engage in litigation in the United States.
  • Failing to understand the importance of complying with the discovery rules.

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  • Failing to hire legal counsel on the basis of quality, rather than price.
  • Failing to understand that just because you have a well-known lawyer, you are not necessarily guaranteed to prevail.
  • Failing to understand that U.S courts actually enforce their judgments and that engaging in convoluted efforts to avoid paying on a judgment is a great way to bring down the wrath of the court against you.
  • Failing to realize that you will lose at least some of your motions, and firing your lawyer after every such loss does not make for a good litigation strategy.

The bottom line is that if Chinese companies are going to be doing business internationally, they are going to have to get used to the idea of being sued outside of China and they are going to have to start realizing they are not in Canton any more. Until this happens, their won-loss record in these “away” courts is likely to be dismal.

N.B. I know Canton is now Guangzhou, but I wanted to pick a place that sounded as much like “Kansas” as possible.

Dan Harris is a founding member of Harris Moure, an international law firm with lawyers in Seattle, Portland, San Francisco, Barcelona, and Beijing. He is also a co-editor of the China Law Blog. You can reach him by email at firm@harrismoure.com.

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