FINDINGS OF FACT AND CONCLUSIONS OF LAW
The matter came on for trial before the Court, sitting without a jury, on June 2 and 3, 2009. At the conclusion of the presentation of evidence and arguments, and after further post-trial briefing by the parties, the matter was taken under submission.
The Court makes the following findings of fact and reaches the following conclusions of law in support of its verdict in favor of plaintiffs and against defendant in this action.
1. Plaintiff Hubei Gezhouba Sanlian Industrial Co., Ltd. ("Sanlian") is a business located at 17 Qingbo Road, Yichang City, Hubei Province, People's Republic of China ("PRC"). Plaintiff Hubei Pinghu Cruise Co., Ltd. ("Pinghu") is a business located at 87 Dongshau Avenue, Yichang City, Hubei Province, PRC.
2. Defendant Robinson Helicopter Company, Inc. ("RHC") is a California corporation with its principal place of business located at 2901 Airport Drive, Torrance, California.
3. Pinghu and the predecessor ("Sanlian Industries") of Sanlian filed an action on March 14, 1995 in the Los Angeles Superior Court entitled China Gezhouba United Indus. Co., et al. v. Robinson Helicopter Co., Inc., et al., case number YC022805 ("California State Action"). The complaint alleged RHC had designed and manufactured a model R-44 helicopter that crashed into the Yangtze River in the PRC on March 22, 1994. The complaint in the California State Action alleged damages from the crash against RHC based on theories of negligence, strict liability, and breach of implied warranty.
4. RHC moved to stay or dismiss the California State Action on the ground of forum non conveniens. In support of its motion, RHC argued the PRC was a more suitable and convenient forum for the litigation, that the PRC has an independent judiciary, that the Chinese legal system follows due process of law, and that a Chinese court would exercise jurisdiction over the case. RHC agreed to submit to the jurisdiction of the appropriate court in China, toll the statute of limitations during the pendency of the California State Action, and to abide by any final judgment rendered in China. The motion was granted and the California State Action was stayed.
5. On January 14, 2001, Sanlian and Pinghu filed an action against RHC in the Higher People's Court of Hubei Province ("Higher Court") in the PRC, Hubei Gezhouba Sanlian Indus. Co., Ltd., et al. v. Robinson Helicopter Co., Inc., Case No. (2001) E-Min-Si-Chu-1 ("PRC Action"), in which they sought damages against RHC based on the March 22, 1994 crash of the R-44 helicopter into the Yangtze River.
6. On February 17, 2004, RHC was served with a Summons, Statement of Complaint, Notification of Appearance, and related papers in the PRC Action (Exs. 3A, 3C, 3E, 3K, 3M, 3O), which notified RHC of a trial or hearing set for 9:00 a.m. on March 25, 2004, before the Higher Court. Service and notice of the PRC Action is demonstrated by the following facts:
a. On February 17, 2004, a process server left these documents with RHC's receptionist at the front desk of its facility in Torrance, California. This was done after speaking to Elizabeth Rougeau, an employee of RHC and administrative assistant to Tim Goetz, RHC's General Counsel and Chief Financial Officer.
b. Ms. Rougeau explained that the process server could leave documents with the receptionist if he wanted to.
c. The documents were placed in Mr. Goetz's in-box at the front desk. They were collected by Ms. Rougeau and she took possession of them the same day (February 17, 2004). She then put them on Mr. Goetz's desk.
d. Mr. Goetz saw the English-language documents (Exs. 3A, 3C, 3E, 3K, 3M, and 3O) after they had been placed on his desk, and he was aware in February of 2004 of the PRC Action and the trial or hearing in the PRC Action set for March 25, 2004. Mr. Goetz sent copies of the documents he received to some attorneys in Hong Kong. He discussed the documents with those attorneys. Mr. Goetz also sent the documents to RHC's Chinese dealer, and they told Mr. Goetz they would send a representative to the trial or hearing. The representative was barred from the hearing because she was not a party.
e. The process server, through the United States Department of Justice's Office of International Judicial Assistance, completed and returned to the Higher Court the Certificate (Ex. 19-5) showing compliance with Article 5(a) of the Hague Convention on the Service Abroad of Judicial and Extra-judicial Documents in Civil or Commercial Matters ("Hague Convention"), April 24, 1967, 20 U.S.T. 361, T.I.A.S. No. 6638.
f. Both the United States and China are signatories to the Hague Convention.
7. The Higher Court held a trial on March 25, 2004. RHC did not appear in the PRC Action and it failed to take any other steps to participate in it or to request a continuance of the trial. At the trial, a three-judge panel considered extensive evidence submitted by the plaintiffs as well as evidence collected by the Higher Court itself. On December 10, 2004, the Higher Court issued its judgment ("PRC Judgment") in favor of Sanlian and Pinghu and against RHC. The relevant portions of the PRC judgment, which is 36 pages long, provide as follows:
a. Sanlian is the transferee of the substantive and procedural rights of Sanlian Industries, which purchased the R-44 helicopter that crashed into the Yangtze River on March 22, 1994. Sanlian acquired its rights in this matter through a capital transfer from Sanlian Industries, under which it acquired all substantive and procedural rights concerning the subject matter of the claims in the PRC Action. Pinghu was the owner of the tourist boat, the "excursion steamer 'Pinghu 2000,'" from which the R-44 helicopter was operating on March 22, 1994.
b. On the afternoon of March 22, 1994, the R-44 helicopter took off from the Pinghu 2000 with three passengers. Six minutes later, it crashed into the Yangtze River. The three passengers died. The crash was the result of defects in the production of the R-44 helicopter.
c. The Higher Court has jurisdiction and the case is not barred by the statute of limitations.
d. RHC was served with legal documents on February 17, 2004 in the PRC Action, including a "summons of court session," as prescribed in the Hague Convention. RHC refused to appear in court at the trial held on March 25, 2004.
e. Sanlian was awarded damages against RHC in the amount of $261,000 (U.S.) with interest from March 23, 1993 (later corrected to the day after the accident, see infra) "according to interest rates of loans for U.S. dollars of the corresponding period of the People's Bank of China." Sanlian was also awarded damages for economic losses in the additional amount of $628,463.56, with interest to be calculated from the day after the accident according to interest rates of loans for U.S. dollars of the corresponding period of the People's Bank of China. RHC was also ordered to compensate Sanlian within 15 days of the effective date of the PRC judgment for attorney's fees in the sum of $37,000 (U.S.).
f. Pinghu was awarded damages against RHC for economic losses in the amount of RMB 15,083,100 Yuan with interest from September 26, 1994 (the date Pinghu was ordered by the PRC government to suspend its business operations as a result of the crash) to be calculated according to interest rates for loans for RMB of the corresponding period by the People's Bank of China. The award of economic losses to Pinghu was for the period from September 26, 1994 through December 31, 1995. The PRC Judgment denied Pinghu's request ...