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July 29, 2010 |
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| August 10, 2009 |
By: John Pacenti |
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ith thousands of homeowners claiming their houses and health are deteriorating from sulphur-emitting Chinese drywall, a federal judge in New Orleans is intent on fast-tracking a handful of cases for trial, attorneys say.
The first of these bellwether lawsuits could be tried by the end of the year, a timetable that encourages homeowners to think settlement. In contrast, drywall maker and defendant Knauf Plasterboard Tianjin welcomes home inspections and is investigating “practical solutions” but denies any health effects from its drywall.
About 600 tainted Chinese drywall lawsuits have been consolidated in multi-district litigation under U.S. District Judge Eldon E. Fallon for pretrial issues. With the help of plaintiff and defense steering committees, Fallon will select five cases to test the waters.
“He is moving extremely fast, which is the right thing because people are living in homes that are toxic to them,” said Victor Diaz, a partner at Podhurst Orseck in Miami and a member of the MDL plaintiff steering committee.
Homeowner attorneys see the past as a guide. Fallon supervised the $4.85 billion Merck settlement in Vioxx cases, one of the largest pharmaceutical settlements on record. It was reached only after plaintiffs, who claimed the withdrawn painkiller caused heart attacks and strokes, lost a series of jury trials.
The estimated 600 Chinese drywall cases — a number bound to grow — are under the same judge’s control.
“Fast-tracking is an understatement. It’s a rocket docket. And he means business,” said attorney Ervin Gonzalez, a class-action specialist with Colson Hicks Eidson in Coral Gables who also is on the plaintiff steering committee. “He wants the first case tried by the end of the year, and he wants an inspection of every home. He wants to be able to get to the bottom of the problem.”
A status conference is scheduled for Tuesday to work out an inspection plan, among other issues.
Fallon has ordered each side to select 10 cases to jump start the process of turning over documents and other information. He has said the initial trials most likely will involve claims limited to property damage as opposed to personal injury.
The plaintiff bar has been in a feeding frenzy on Chinese drywall litigation, filing a litany of lawsuits in federal and state courts, naming Chinese drywall manufacturers as well as developers, builders, subcontractors and suppliers.
Knauf Plasterboard Tianjin, one of the leading manufacturers named in the federal litigation, responded to a series of questions with a statement.
“Even today there remains wild and unsubstantiated speculation as to the size and scope of the issues relating to the Chinese drywall that is claimed to be causing problems in the affected homes,” the Knauf statement said.
Defendants including KPT are represented by several South Florida attorneys — Donald J. Hayden of Baker & McKenzie in Miami, Hilarie Bass and Mark A. Salky of Greenberg Traurig in Miami, and Jan Douglas Atlas and Jeffrey Backman of Adorno & Yoss in Fort Lauderdale. Bass was defense liaison counsel as an attorney for Aetna in a racketeering class action against major managed care companies, which produced several settlements.
In the drywall cases, KPT said Fallon’s inspection order and a requirement that all claimants fill out fact sheets “will substantially narrow the scope of the litigation and finally put to rest the speculation as to the number of homes that are impacted by Chinese drywall.”
About 500 million pounds of Chinese drywall was imported during the U.S. housing boom from 2004 to 2007, meaning as many as 100,000 homes could contain the tainted material, plaintiffs claim.
KPT and sister companies in China are related to Germany’s building materials maker Knauf Group. Whether plaintiff attorneys can tap into the German company’s deep pockets will be major point of contention.
“I think we are going to be able to show the parent company had control and the right of control, and that makes them liable under the law,” said Gonzalez, who helped shepherd a $100 million settlement with Service Corporation International, the world’s largest funeral services firm, for alleged burial misdeeds at Menorah Gardens cemeteries in Broward and Palm Beach counties.
KPT responds it sees no basis in law to extend liability to the German group.
Some U.S. drywall makers have been named as defendants in a few lawsuits, and KPT claims other Chinese manufacturers supplied U.S. builders as well.
How the litigation plays out won’t be simple. Homeowners claim the only solution is to tear down affected homes nearly to the foundation.
In response, KTP said it “continues to thoroughly investigate complaints made by homeowners and to investigate practical solutions that could resolve the issues raised in affected homes in a cost-effective and less intrusive manner.”
Gonzalez and Diaz say new evidence indicates the gas can be absorbed into the wood in wood-frame homes as well as linen, mattresses, furniture and other household items.
Diaz said the manufacturing process also will be an issue — whether materials came from a mine with high sulphur concentrations or if drywall was made with synthetic gypsum. Natural gypsum is the main ingredient in drywall.
“The more we learn, the more we realize it’s a very complicated problem, and it’s more than just Knauf. There are other manufacturers that we believe manufactured drywall causing the problem,” Diaz said.
The personal injury aspect also is a significant issue because some residents complained of respiratory problems such as asthma as well as headaches, rashes and other ailments, he said.
“Whether that is a permanent health link is an open question,” Diaz said. The Environmental Protection Agency, Consumer Product Safety Commission and state Health Department are conducting drywall investigations.
The KPT defense team said the company’s primary focus has been ensuring the health and safety of its end users and has responded to inquiries by builders that raised health concerns. But the company said its experts have found no health risk to residents.
“No evidence to date has been provided that changes KPT’s original determination that there are no health risks to the homeowners,” the Knauf statement said.
Telltale signs of trouble to many owners is the smell of rotten eggs and corrosion, especially in appliances like air conditioning units. Some of the Chinese drywall has been found by plaintiff experts to contain biological material that decays, especially in humid climates, and reacts with gypsum or other materials that should not be present.
Homes with Chinese drywall have been found throughout the nation, but plaintiff attorneys say the epicenter for problem homes is Florida.
Diaz blames “a combination of cost-cutting as well as lack of regulation and government oversight in China.”
Besides the federal litigation, a number of lawsuits have been filed in state courts, which are generally more friendly than federal courts to class actions. But Gonzalez said it would be wise for those litigants to join the MDL action.
“The defendants that are local may not have the financial wherewithal for the claims,” he said.
Despite the various issues bubbling up in the drywall litigation, Gonzalez insists it’s best to keep it simple: If homes were built with a substandard or possibly toxic product, the manufacturer and builder are liable.
“The homeowner is entitled a safe place to live,” he said. “It’s going to be very difficult for these cases to be defended.”
At present, the cases have been consolidated in front of Fallon for pretrial purposes. Trials would be conducted where the cases were filed unless the parties agree to have them litigated in New Orleans.
KPT, the lightning rod on the defense side, said it is the only company that has come forward and tried to address homeowners’ concerns.
“KPT has invested considerable time and resources toward determining these complaints by homeowners. To date, it is the only involved Chinese manufacturer to come back into the market, investigate the claims and respond to the lawsuits in which they have been served.”
John Pacenti can be reached at john.pacenti@incisivemedia.com or at (305) 347-6638. |
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