By Nate Raymond 

Update: Just after we published this story, Judge Fallon issued a 142-page opinion denying Taishan's motion to vacate two default judgments in federal class actions by homeowners and homebuilders and declining to dismiss two other class actions, after finding the court had personal jurisdiction over the company. "Taishan seeks to insulate itself from personal jurisdiction by arguing that it did not know the identity of the final purchasers or users of its drywall," Fallon wrote. "The evidence suggests otherwise."

For all the litigation arising out of defective Chinese drywall installed in thousands of U.S. homes, the largest Chinese manufacturer of the odorous product, Taishan Gypsum Co Ltd, has been a tough one to hold liable in U.S. courts.

Unlike Germany's Knauf International, which reached a landmark settlement last year, Taishan allowed default judgments to mount before finally making a n appearance to resist U.S. jurisdiction. Taishan argued it didn't itself distribute the product in the United States and that the actual sales took place in China and were governed by its laws.

But a ruling Friday by a state judge in Florida could provide an opportunity to land damages against Taishan. In a 16-page opinion, Miami-Dade Circuit Judge Joseph Farina denied a motion by Taishan to vacate a 2010 default judgment against the company and declined to dismiss the case on the grounds of lack of personal jurisdiction.

The ruling came in litigation by home builder Lennar Corp seeking to recoup the costs of repairing homes it constructed with Chinese drywall, which gave off foul smells and allegedly caused some occupants health problems. The lawsuit was one of the hundreds pending involving Chinese drywall, which found its way into thousands of homes during a building surge following Hurricanes Rita and Katrina in 2005 and 2007.

Hilarie Bass of Greenberg Traurig, a lawyer for Lennar Corp and other home builders suing Taishan, said the ruling marked the first time since lawsuits began piling up in 2009 that a judge held that a Chinese manufacturer of drywall was subject to U.S. jurisdiction. Bass said she plans to ask the court on Friday to set a date for a damages trial. "I would expect this is an opinion that will be potentially referred to for years as first of its kind," Bass said.

The decision in some ways provides a roadmap for establishing jurisdiction over a foreign manufacturer like Taishan, which had hired Hogan Lovells to fight off homeowner and builder claims following the 2010 default. After determining that the actions of a subsidiary Taishan controlled could be attributed to the parent company, Farina set about determining to what extent Florida's long-arm statute would give the state court jurisdiction over the company.

Evidence showed that the company had indeed conducted business in the state, the judge determined, mailing drywall samples to Florida companies and going so far as inviting potential customers on trips to China to scope out its headquarters. Some drywall was customized to include a phone number in Tampa, Florida, and Taishan controlled some of the shipping arrangements to Florida customers.

Farina also rejected Taishan's argument that it couldn't be sued because the home builders had sustained only economic rather than property damages. "It is enough under the long-arm statute that the type of Taishan drywall that injured homeowners, and caused the damages sustained by the plaintiffs, was otherwise available for purchase in Florida," he wrote.

While limited to the state court proceedings, the ruling could provide a preview of a similar decision expected by U.S. District Judge Eldon Fallon in New Orleans, who is overseeing the 310-lawsuit Chinese drywall multidistrict litigation. Fallon and Farina, via teleconference, heard arguments together on June 29 as Taishan's lawyers at Hogan Lovells sought to vacate federal defaults against it and dismiss lawsuits in the multidistrict litigation on the same grounds. A ruling by Fallon is expected in the next few weeks.

Bass said she is expecting Taishan to appeal to Florida's 3rd District Court of Appeal in Miami. In a statement, Taishan counsel Joe Cyr of Hogan Lovells expressed displeasure at the ruling but stopped short of saying the company would appeal. "We believe that the court was in error for all the reasons reflected in our papers and discussed at the hearing," he said.

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