Further Thoughts About Missouri’s COVID Suit Against China

 

Image by Mohamed Hassan from Pixabay

As previously discussed at TLB, the Eighth Circuit recently held that the Foreign Sovereign Immunities Act (FSIA) does not shield the People’s Republic of China from suit on one of the claims that Missouri has brought against it arising from the COVID-19 pandemic. Specifically, the court of appeals held that Missouri could move forward with its claim “that China hoarded personal-protective equipment while the rest of the world was in the dark about the disease.” In this post, I take a closer look at that claim, asking whether Missouri law applies and whether Missouri can prove its claim.

The Eighth Circuit’s Decision

Missouri’s complaint names a number of Chinese defendants: the People’s Republic of China, the Chinese Communist Party, several government ministries, the governments of Hubei Province and the City of Wuhan, the Wuhan Institute of Virology, and the Chinese Academy of Sciences. The defendants allegedly engaged in abnormally dangerous activities by conducting  research on corona viruses, created a public nuisance by concealing information and failing to stop the virus’s spread, breached their duties by allowing the transmission of the virus, and breached their duties by hoarding personal-protective equipment (PPE).

As Haley Anderson recounted in detail in her earlier post, the Eighth Circuit held that all the defendants, including the Chinese Communist Party, are covered by the FSIA. The court found the FSIA’s non-commercial tort exception, § 1605(a)(5), inapplicable because the defendants were exercising discretionary functions. And the court found that most of Missouri’s claims did not fit within the FSIA’s commercial activity exception, § 1605(a)(2), either.

The sole exception was Missouri’s claim that the defendants hoarded PPE. By allegedly taking over factories that made PPE, buying up supplies from abroad, and selling lower quality products to the United States, the defendants engaged in commercial activities, the court concluded, and those activities had a “direct effect” in the United States. Judge Lavenski Smith dissented, disagreeing that the complaint adequately alleged the required direct effect.

The Questions on Remand

None of the defendants appeared to defend the claims, leaving it to two amicus briefs to present arguments on the other side. It seems doubtful that the defendants will appear on remand either. This means that the district court (Judge Stephen Limbaugh) will be responsible for questioning Missouri’s arguments on the merits. Section 1608(e) of the FSIA provides: “No judgment by default shall be entered … against a foreign state … unless the claimant establishes his claim or right to relief by evidence satisfactory to the court.”

Among the questions Judge Limbaugh will face are these: (1) does Missouri tort law apply to the claim that the defendants hoarded PPE; (2) if so, does Missouri law establish a duty on the defendants with respect to Missouri and her citizens; (3) if so, did the defendants breach that duty; and (4) if so, did the breach cause the plaintiffs’ injuries. I consider each of these questions in turn.

Does Missouri Law Apply?

For present purposes, I assume that Missouri and Chinese tort law differ on at least some key issues. To determine the applicable law in cases of conflict, a federal court sitting in Missouri must apply that state’s choice of law rules.

For torts, Missouri follows the Restatement (Second) of Conflicts. Section 145 provides the general rule for tort conflicts: “[t]he rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties.” (On the specific issues that are likely to be determinative here, such as the duty of care and proximate cause, §§ 159 and 160 refer the court to § 145, while also stating that “[t]he applicable law will usually be the local law of the state where the injury occurred.”)

To decide which state has the most significant relationship, a court must consider both the contacts listed in § 145(2) and the principles listed in § 6. The relevant contacts are:

(a) the place where the injury occurred,

(b) the place where the conduct causing the injury occurred,

(c) the domicil, residence, nationality, place of incorporation and place of business of the parties, and

(d) the place where the relationship, if any, between the parties is centered.

In this case, there is no relationship between Missouri and the defendants, and the other contacts divide evenly between Missouri and China. Missouri is where the injury occurred and where the plaintiffs are from; China is where the conduct occurred and where the defendants are from.

This brings us to the principles in § 6, which in my view favor the application of Chinese law. The principles are:

(a) the needs of the interstate and international systems,

(b) the relevant policies of the forum,

(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,

(d) the protection of justified expectations,

(e) the basic policies underlying the particular field of law,

(f) certainty, predictability and uniformity of result, and

(g) ease in the determination and application of the law to be applied.

To begin with (b) and (c), it seems doubtful that Missouri has a stronger interest than China in determining the duty of care for Chinese defendants responding to a pandemic in China.

The needs of the international system and the interests of certainty, predictability, and uniformity also favor Chinese law. If Missouri law were to apply in this case to establish the duty of care for Chinese defendants in China, then by the same logic so would the laws of every other state in the United States and, indeed, the laws of every other country in the world. After all, the complaint does not allege that the defendants singled out Missouri or directed their actions towards the state. And if China’s conduct restricting supplies of PPE can be governed by foreign law, so can the conduct of other nations (including the United States). Imposing duties of care during the pandemic on every country, under the laws of every other country, is an invitation to chaos.

If Missouri Law Applies, Does It Establish a Duty of Care?

What if Missouri law applies? According to paragraph 164 of the complaint:

Under Missouri law, a defendant is liable for breach of duty where a plaintiff establishes “(1) legal duty on the part of the defendant to conform to a certain standard of conduct to protect others against unreasonable risks; (2) a breach of that duty; (3) a proximate cause between the conduct and the resulting injury; and (4) actual damages to the claimant’s person or property” (quoting Hoover’s Dairy, Inc. v. Mid-America Dairymen Inc., 700 S.W.2d 426, 431 (Mo. 1985)).

“Where the existence of a duty is established, however, it is not one to protect against every possible injury which might occur,” the Missouri Supreme Court continued in Hoover’s Dairy. “Rather, it is generally measured by whether or not a reasonably prudent person would have anticipated danger and provided against it” (quotation marks and citations omitted).

To establish a legal duty, Hoover’s Dairy held, the plaintiff must either establish actual or constructive knowledge that injury might result or a relationship between the parties establishing a duty of care. As another Missouri court wrote, elaborating the Hoover Dairy test, “[t]here must exist in addition to foreseeability a legal relationship sufficient to impose upon the defendant a duty to prevent the injury.” It is hard for me to see how Missouri can prove either the knowledge or the legal relationship required under Missouri law to show that the Chinese defendants owed a duty of care to Missouri and her citizens.

If the Defendants Did Have a Duty of Care, Did They Breach It?

Missouri’s complaint relies on a New York Times article reporting that, when the pandemic hit, China stopped exporting masks and started buying up supplies from other countries. It also quotes a Washington Post article reporting comments by White House Advisor Peter Navarro that China was trying to corner the market on PPE. On the other hand, prioritizing domestic needs and buying more from abroad might be considered reasonable responses for a country trying to control a new and deadly pandemic. And, as the same Washington Post article reported, the White House had been encouraging sales of PPE to China. A subsequent study found that, although China’s exports of PPE initially decreased, they had mostly resumed by April 2020 and dramatically increased thereafter.

If There Was a Breach, Did It Cause the Plaintiffs’ Injuries?

Judge Limbaugh will also have to determine whether any breach of duty by the defendants caused the plaintiffs’ injuries. According to the Missouri Supreme Court, “[i]n all negligence cases, Missouri courts require the plaintiff to prove the defendant’s acts were both the actual and proximate cause of the plaintiff’s damage.” Actual cause “asks whether the plaintiff would have been injured but for some conduct on the defendant’s behalf.” Proximate cause looks at the foreseeable risks and “ensures events that are too far removed from the ultimate injury or damage do not provide a basis for liability even if they are causal in fact.”

Proving causation looks like a huge problem for Missouri. It will have to show that the defendants’ alleged hoarding of PPE was the “but for” cause of injuries sustained in that state. And even if Missouri can show this, it will additionally have to show that the injuries were foreseeable and not too far removed from the defendants’ conduct. Disentangling the factors contributing to illnesses and deaths from COVID in Missouri may prove difficult. As Chimène Keitner noted shortly after Missouri filed its complaint, Missouri was one of the last states to adopt a stay-at-home order to control the spread of the virus.

Conclusion

Missouri’s claim that Missouri tort law applies to Chinese defendants in China, creating a duty of care with respect to Missouri and its citizens and requiring the defendants to send scarce PPE to Missouri rather than using it in China, seems like a stretch. I am also struck by the contrast between Missouri’s claims in this case and an amicus brief it recently filed in another case currently before the Eighth Circuit.

In Reid v. Doe Run Resources Corp. (see Maggie Gardner’s posts here and here), Peruvian children alleged that they were seriously injured by toxic emissions from a facility in Peru run by a Missouri corporation. They sued the Missouri corporation and others under Missouri tort law, and the defendants sought to dismiss on grounds of international comity (Maggie and I filed an amicus brief at the Eighth Circuit arguing against this).

In Reid, the plaintiffs are foreign, and the defendants are from Missouri, whereas in the present case the plaintiffs are from Missouri, and the defendants are foreign. Still, some of the Missouri Attorney General’s arguments in Reid seem applicable to its own claims against China. Missouri has “only a tenuous interest” in the Peru case, the AG wrote. “None of the alleged conduct occurred in Missouri. None of the alleged victims appears to have been residents of Missouri. And although Missouri takes its own environmental laws very seriously, none of these laws govern conduct occurring outside the United States.”

In Reid, the Missouri AG also worried about the suit’s foreign relations implications. “[I]t is against Missouri’s interest to become entangled in an international dispute with Peru,” the AG wrote. Peru had to balance conflicting goals. “If this case is permitted to proceed in Missouri courts, it risks overriding that sovereign decision by Peru,” the AG continued. Missouri was poorly equipped to handle any diplomatic fallout. “Unlike the United States, which can engage in foreign affairs diplomacy to resolve concerns about foreign litigation, Missouri’s foreign affairs toolbox is limited. Missouri has very few means it can use to mitigate tension with Peru that may be created by these cases in the future.” One wonders if Missouri’s case against China crossed the AG’s mind when he signed the brief in Reid.