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When they got the case, Miami attorneys Thomas and Elizabeth Culmo had virtually no information about the allegedly defective motor scooter that had caused their client a serious spinal injury. There was no company name, logo or vehicle identification number on the scooter. It was purchased at a seasonal Christmas kiosk at the Dolphin Mall, which was no longer in business and had no insurance. When they discovered that the scooter probably was manufactured in China, they were told that it would be nearly impossible to recover damages unless the company had assets in the United States. Despite those obstacles, on Dec. 13 the Culmos won a $2.7 million settlement for Jorge Perez of Doral, Fla., a deaf man with cerebral palsy who fell off his Chinese-manufactured Leoch scooter after the front wheel came loose. The Culmos achieved the settlement through international detective work. They tied a Garden Grove, Calif., company, Leoch.com LLC, to the scooter’s manufacturer, Shenzhen Leoch E-vehicle Co. Ltd. in the Chinese city of Shenzhen. As a result, they were able to settle with Leoch.com’s liability insurer, Evanston Insurance Co. in Evanston, Ill. Evanston’s attorney, Ricardo Cata of Wilson Elser Moskowitz Edelman & Dicker in Miami, declined to comment on the settlement. The Culmos previously had settled with the distributor of the scooter, Miami-based GSM Worldwide Inc., for a nominal sum that Culmo declined to reveal. GSM is owned by Rafael Rayek. Typically, it is difficult or impossible for U.S. plaintiffs to recover damages from foreign companies, according to Pedro Martinez-Fraga, chair of Greenberg Traurig’s Miami international litigation and arbitration department, who was not involved in the case. The United States does not have reciprocal treaties to force other countries to recognize judgments in U.S. courts. As products are increasingly being imported, particularly from China, U.S. consumers have less protection from defective goods. Being able to prove that a U.S. company was responsible for the defect is one of the few ways a plaintiff can recover. “The U.S. to date does not have a single treaty for the recognition and enforcement of judgments,” Martinez-Fraga said. A Miami product liability lawyer not involved in the case tipped his hat to the Culmos for their work in the Perez case. “What this tells me more than anything else, for any injured victim, you have to be tenacious and have good lawyers and overcome any legal excuse,” said David Bianchi, a partner at Stewart Tilghman Fox & Bianchi. Defendants “will think of more excuses than you can imagine.” CALIFORNIA COMPANY DENIED LINK Perez’s mother, Martha, paid $200 for the battery-operated scooter in 2003. The scooter could travel at 10 miles per hour. As the Culmos eventually discovered, the scooter’s front fork, which holds the wheel hub in place, did not use locking screws. The screws used on the scooter could loosen while it was in use, causing the wheel to come off. In December 2003, Jorge Perez, then 44, was injured when he fell off the scooter, after the front wheel came off. He sustained a spinal injury and was temporarily rendered quadriplegic. The Culmos filed a product liability suit on Perez’s behalf in Miami-Dade Circuit Court in January 2004, but they figured they had little chance of recovering anything for Perez. “The conventional wisdom was that we wouldn’t be able to recover,” Thomas Culmo said. All the Culmos had to work with was an owner’s manual with no company name. But the manual did include a model number. When they contacted Rayek, the Miami distributor, he had invoices listing Shenzhen Leoch E-vehicle as the manufacturer. Based on a tip from Rayek, the Culmos believed the manufacturer was connected to a company in Garden Grove, Calif., called Leoch.com. When the Culmos called Leoch.com, company officials denied any connection to the scooter or Shenzhen Leoch E-vehicle. But according to Web sites for both companies, the businesses were controlled by Chinese nationals Hui “Heidi” Peng and Li Dong, a married couple. The couple also owned or controlled two other California-based companies, D & P International Research and Development Corp. and Leoch Battery Corp., as well as the Chinese company Shenzhen Battery and Technology Co. All five businesses used the logo of a horse’s head that was trademarked by Peng. That was the first step in linking the companies to the Chinese manufacturer. But the Culmos still did not have enough legally to link the scooter to Leoch.com. LUCKY BREAK In 2004, the Culmos caught a lucky break. Leoch.com issued a recall for scooters sold at Target stores. Those scooters had a different issue — electrical problems caused them to catch fire. Thomas Culmo said that after spotting an ad in the Miami Herald announcing the recall, he realized it was the same scooter Martha Perez had purchased. When the Culmos called the phone number listed in the ad, Peng answered. The number was for Leoch.com — the same company that previously had denied any connection to the scooter. This led the Culmos to subpoena Target’s records. They received cooperation from the retailer’s legal department. Thomas Culmo said the records showed that Shenzhen Leoch E-vehicle and Leoch.com were working together to produce scooters for Target. The Target executive who brokered the deal between the chain and Leoch.com gave the Culmos a brochure showing that the Target scooters came from the same factory as the scooter ridden by Perez. At that point, the Culmos felt confident enough about the connection between the scooter purchased by Martha Perez and the California companies to file suit against Leoch.com and D & P. The companies initially fought the Miami-Dade suit on jurisdictional grounds, claiming that they did not have any involvement with Perez’s scooter or the distributor. Rayek, however, had a fax from Peng on Leoch.com stationery in which Peng referred to the Chinese factory as “our factory” and which listed contacts of retailers who wished to sell their scooters. Rayek and Peng previously had met at trade shows in Hong Kong and Las Vegas. Rayek testified in a deposition that Peng represented the California businesses and the Chinese factory as the same corporation. Peng was deposed in California. She denied knowledge of the Chinese factory and the Miami distributor. When she was shown the Target brochure, she conceded that there was a connection, but denied that Leoch.com owned the Shenzhen factory. She said she did not remember sending the fax. The Culmos hired an attorney in China who verified that Shenzhen Leoch E-vehicle was a joint venture owned by Peng and Dong. Leoch.com owned 60 percent of the factory, and Peng was listed as the company’s representative and chairwoman of the joint venture. The significance of this find was that the owners of a joint venture could be held vicariously liable for the company that created the defective scooter. The California companies then dropped their jurisdictional defense and answered the complaint by saying the scooter was not their product. That defense was overcome when an expert identified the scooter’s battery as a Leoch battery. THREAT OF BAD FAITH SUIT The last hurdle was Evanston Insurance. It said the policy for Leoch.com had a joint venture exclusion and there was no coverage under the policy. A joint venture exclusion would free the carrier from having to cover claims coming from businesses that Leoch.com owned with another company. But the Culmos argued that the liability policy was purchased specifically at the request of Target to cover scooters sold at Target stores. The policy only covered scooters, and Leoch.com only manufactured scooters at its joint venture factory in China. So if the policy did not cover scooters manufactured by the joint venture entity, it did not cover anything, they contended. The Culmos demanded that Evanston Insurance pay Perez the $3 million policy limit. Leoch.com agreed that the insurer should pay. The Culmos imposed a deadline on Evanston Insurance, giving it until Dec. 18 to pay the full policy limit or they would go forward with a product liability suit. If that case resulted in a verdict in excess of the policy limit, the Culmos warned that they would file a bad faith suit against Evanston Insurance. Evanston Insurance settled a few days before the deadline. As part of the agreement, D & P International Research and Development was released from liability. Leoch.com’s liability policy was a so-called wasting policy, which means that any attorney fees and costs incurred defending the claim are deducted from the liability payout. As a result, the settlement was for less than $3 million. The Culmos also reached a low-six figure settlement with the Dolphin Mall last week. They decided not to pursue action against the seasonal kiosk retailer because the company already had dissolved and had no insurance.

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