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Changing legal culture, involvement of foreign companies may make lawsuits more likely in China after disappearance of Flight 370.

Summary: As plaintiff’s attorneys continue their attempts – mainly in China – to solicit clients among the grieving families of the passengers on the still-missing Malaysia ...

As plaintiff's attorneys continue their attempts -- mainly in China -- to solicit clients among the grieving families of the passengers on the still-missing Malaysia Airlines Flight 370, two American scholars on the Chinese judiciary believe there is no cultural bias against filing lawsuits in that nation.

With two-thirds of the 227 passengers on the flight being Chinese, the legal culture of that nation becomes important for any future litigation.

"I don't think there is a culture of 'aversion to litigation' -- Chinese people are plenty willing to sue, if they think their dispute will be resolved fairly and efficiently," Rachel Stern, who teaches at the University of California, Berkeley, law school and its Jurisprudence and Social Policy Program, said in an e-mail to Inside Counsel. "The bigger problem is that the courts routinely screen cases and turn away cases that are politically sensitive. And then, once the cases are in court, judges tend to be wary of large payouts."

These families will still have other legal options open to them, such as filing lawsuits in foreign courts, possibly -- as some veteran aviation lawyers have suggested -- even in the United States, where payouts would likely be larger than in China.

It was reported this week by The New York Times that the highest award ever given by a court in China for a death of a passenger in a plane crash worked out to about $140,000 a passenger. That was for the Henan Airlines crash in 2010.

But that case related to a Chinese airline, and there may be an important distinction regarding this Malaysian flight.

"What Chinese courts have awarded Chinese plaintiffs to fatal plane crashes involving Chinese airlines may be totally separate (and probably far lower) than what Chinese plaintiffs might seek in either Chinese or foreign courts, especially for international flights covered by the Montreal and Warsaw Conventions and where a foreign insurance carrier might have provided coverage beyond statutory or treaty limits," James V. Feinerman, associate dean for International and Transnational Programs at Georgetown University Law Center and who also is a scholar in Asian law, said in an e-mail.

If the crash involved a Chinese airline or manufacturer, the Chinese government "would likely discourage lawsuits (and encourage quieter settlements,)" he said. But this case relates to a Malaysian airline and the maker of the jet was Boeing, which has its headquarters in Chicago, and the engine manufacturer is Rolls-Royce from the United Kingdom.

The Chinese government in this instance "has little incentive to discourage plaintiffs from taking on a foreign airline or aircraft manufacturer," Feinerman said.

"Indeed, given the current charged atmosphere, it would almost be a safety valve to release the pent-up resentments about Malaysia Airlines' many failings in this incident to let Chinese plaintiffs 'go to town' in both Chinese and foreign judicial fora against Malaysia Airlines," Feinerman added.

In addition, The Times reported that some of passengers' relatives are already taking insurance payments. For instance, The China Life Insurance Company said 32 of the passengers were policy holders, and the company has paid out $670,400 among seven of the passengers' families as of March 25, according to news reports.

It is likely, but not known for sure, that the payments from China Life Insurance Company to families of passengers on Flight 370 were as a result of passengers who had purchased travel or flight insurance, rather than the company being the liability provider for Malaysian Airlines.

Feinerman also suspects these payments "may be in addition to, not in lieu of, insurance claims that might be asserted against Malaysia Airlines and its insurer" and "without knowing more, the amounts might be the payments due pursuant to the insurance terms."

"Of course, it might also be in lieu of a larger claim that might be asserted, perhaps buying them off with a prompt payment in return for avoiding a prolonged court process," he added.

Feinerman says the families taking insurance payments "may indicate a desire to 'double dip' on the part of those insured by China Life - they can still sue and seek damages from Malaysia Airlines and - if fault can be determined - from Boeing or Rolls-Royce for aircraft or engine malfunction."

The Times was told by Zhang Qihuan, a lawyer who has been talking to relatives of passengers, families could "settle" for a "much higher amount out of court" if they "keep quiet."

"As for the larger amount if plaintiffs 'kept quiet,' again I think that might be the case - though unlikely - if Chinese entities were involved. In my experience, such cases usually involve a somewhat smaller, but much more immediate payment, as an inducement to settle. Taking a case to court in China, especially with a governmentally related defendant, is fraught with uncertainty," Feinerman said. "Chinese courts are often corrupt, or slow to handle sensitive cases; there are numerous ways for intervention which may delay or thwart even a well-deserved award or judgment. As we say in the West, 'a bird in the hand...'"

Looking at the larger picture of litigation in China, Feinerman says there has been an increasing "willingness" in China "to press legal claims, but that has been a growing trend long before this incident."

Before the late 1970s there was an unwillingness to take cases to court in China, he explained. "That has changed over the past three and half decades. China is far from as litigious as the United States, but in circumstances such as plane crashes and other disasters, there is now a much greater alacrity for seeking redress in court. If plaintiffs have a sense that the 'legal culture' in Malaysia or internationally is different in this regard from that of China, they may also be willing to take advantage of those norms."

In addition, Stern, who has written widely on environmental litigation in China, says that in general, "Chinese courts have long been reluctant to award high payouts for fear of setting a precedent."

"This trend is pretty clear in the environmental arena, where the government typically sets up a compensation fund for people who have suffered losses due to major pollution incidents, rather than allow litigation to proceed," she added. "The 2011 Bohai oil spill is a good example of an environmental accident that culminated in a compensation fund rather than litigation."

All of this is no doubt being watched carefully by attorneys now trying to recruit clients among the passengers' families.

Chicago's Ribbeck Law sent six of its employees to Beijing, China, and six to Kuala Lumpur, Malaysia, according to The Times. That same law firm claims it will represent half of the passengers' families in the Malaysian Airlines flight, news reports said, but in the last week had two pre-trial discovery petitions thrown out of a Chicago court in connection with the missing flight. Ribbeck named one relative of a passenger as a current client, but not all of those passenger's relatives agreed, news reports said.

Other law firms are contacting passengers' families, too, The Times reported.

It is also noteworthy that the Malaysia Airlines flight is covered by a no-fault provision in the Montreal Convention. That means if it can be proven that there was an accident and a life was lost, about $175,000 would be given to a passenger's relatives.

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Cook County judge sends lesson to Chicago law firm regarding missing Malaysia Airlines jet

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Publication:Inside Counsel
Geographic Code:9CHIN
Date:Apr 4, 2014
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