A Higher Ruling

by Derek Rockers

Well, what do you think about this case?" the judge asked me. I was at a courthouse in Ningbo, a coastal city south of Shanghai, observing a meeting between the judge and two Chinese attorneys from the law firm that was hosting me for the week. The firm represented a corporate defendant, and the judge had called the attorneys to his office to discuss the case. Obviously, I didn't want to say anything that could negatively impact their client in any way.

"I really shouldn't comment," I replied, "other than to say that I think my host's client clearly did nothing wrong and should win this case." The junior attorney interpreted what I said, and the judge laughed. What followed was one of the most interesting conversations I heard during my time in China this past summer.

I was Sheppard Mullin Richter & Hampton's participant in the San Francisco?Shanghai Sister City exchange program. It's like a student foreign exchange program, except that instead of universities sending students to study abroad, businesses send executives to work in another country.

The previous winter, my firm's San Francisco office had hosted an executive from Shanghai Shenda Co., a large, state-owned textile company. Though I'm based in Los Angeles, I was then chosen to work at the Chinese company because of my personal and professional interest in China. As part of the exchange, I also worked at two different Chinese law firms, including the one in Ningbo.

Without going into the specific facts of the case, suffice it to say that the plaintiffs were residents of a small village, and the defendant was a company that did business there. The attorneys from Ningbo argued strenuously that all actions taken by their client complied with the law. The judge acknowledged that it was certainly possible that the company had not broken the law, but, surprisingly, said that didn't mean it could not be subject to liability in this case.

"The defendant may very well have complied with all laws," the judge said, "however, the villagers' quality of life has been negatively impacted, and without the actions of the defendant their quality of life would not be so affected. The result in this case should be the one that is best for overall societal harmony." With that, my hosts thanked the judge for his time and thoughts and told him they would be sending along further information. We then left his office.

The judge had not yet entered a final ruling, so the lawyers still had time to present additional arguments on behalf of their client. However, they thought it didn't look good: Their client had deep pockets, and if paying damages to the villagers would be, in the judge's view, best for societal harmony, then the company would likely be out of luck.

Even though the attorneys from my host firm were clearly not happy about the judge's views, they were not terribly surprised. I had known before I arrived in China that the Chinese legal system is based on Confucianism and Buddhism, and thus there are no legal absolutes regarding fairness. I tried to imagine a similar scenario taking place in the United States, telling a client, "Great news! The judge is going to rule that you are innocent of violating any laws. However, he still may make you pay a lot of money to the plaintiffs because that will help ease their anger."

I learned a lot during my time in China. The Ningbo judge taught me one of my biggest lessons: When doing business in China, it is important to not only obtain competent, knowledgeable counsel to help navigate the legal system, but also to be cognizant of how your actions affect the Chinese people, and behave accordingly.

Derek Rockers is an associate in the corporate practice group of Sheppard Mullin Richter & Hampton's Century City office.

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