Tips on Pursuing Subrogation Claims Against International Defendants

By Denise Johnson | May 16, 2014

According to David Brisco, an attorney with Cozen O’Connor, imported products are increasing in the U.S. In 1998, just 20 percent of products sold in the U.S. were imported. By 2007, 44 percent were imported, according to the Consumer Product Safety Commission. With the increase in imported products comes an increase in recalls. According to CPSC 2007 statistics, 82.4 percent of recalls in the U.S. were for imported products.

During a recent webinar, Brisco explained how to pursue subrogation claims against international defendants.

The subrogation attorney pointed to the chain of distribution as a good starting point. For example, in some states, like California, all parties in the chain of distribution are strictly liable.

He defined the stream of commerce doctrine – a foreign manufacturer that uses a U.S. distributor to market its products in the U.S. is subject to jurisdiction in any state where an injury occurs.

Other states require suing a manufacturer. Sometimes, everyone in the chain of distribution is sued and fault is apportioned to absent defendants. In cases where U.S. defendants have insufficient funds or where a product was sold directly to an insured, international subrogation may be the only possible source of recovery.

According to Brisco, there are three perceived hurdles in subrogating against an international defendant:

  1. Knowing who and how to serve the foreign defendant.
  2. Determining whether there is jurisdiction over the foreign defendant in a U.S. court.
  3. Determining whether a U.S. judgment will be enforceable overseas.

The Cozen O’Connor attorney said that though a foreign defendant may be served, that doesn’t mean a company representative will appear in court.

Additionally, Brisco explained that specific jurisdiction applies when the cause of action arose out of the defendant’s contacts with the forum state (where the loss occurred), while general jurisdiction applies when a cause of action didn’t arise out of the foreign defendant’s contacts with the forum state.

He explained the three methods of service of process. One is via international treaty through the Hague Convention. This method takes anywhere from six to 12 months to complete service. Another method is through letters rogatory which requires use of the country’s diplomatic process. Lastly, service can be made on a U.S. subsidiary of the foreign entity. According to Brisco, this is typically allowed if there is ample contact between both, if there is likelihood that notification will be communicated between the two entities and if there is a relationship between the two companies. He said the easiest way to verify this is by reviewing the U.S. company’s website or by paying for a business search.

The average cost to serve under the Hague Convention is $400. The costs associated with service on a foreign country mainly relate to translation fees. Brisco recommended using experienced international service companies. The companies can provide assistance with a country’s central authority and with service issues that delay service.

There are five considerations to enforcing a U.S. judgment overseas:

  • Jurisdiction –A country will do its own jurisdiction analysis.
  • Notice – Service under the Hague Convention can satisfy this.
  • Judgment on Merits – No defaults.
  • Public Policy – No punitive damages.
  • Reciprocity – Does the U.S. recognize their judgments?

Brisco suggested hiring counsel in instances where the loss occurs overseas, when enforcing a U.S. judgment and in instances where there is no U.S. personal jurisdiction.

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