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Families Win Chinese-Drywall Case

Source: WSJ

Posted on 09 Apr 2010

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A federal district judge in New Orleans awarded $2.6 million in damages Thursday to seven Virginia families who sued a Chinese drywall manufacturer, in a case that has been closely watched by homeowners, home builders and insurers.

Judge Eldon Fallon, in federal district court in New Orleans, issued the judgment in favor of homeowners who sued Taishan Gypsum Company Ltd., a Chinese state-owned drywall manufacturer, according to court documents. Taishan Gypsum did not appear in court to defend itself.

It is unclear whether the judgment will be paid by Taishan or how they can be made to pay under current laws.

Millions of tons of Chinese drywall, or gypsum board, were imported into the U.S. from about 2004 through 2007 when a shortage developed after record hurricane seasons at the height of the building boom.

In the past few years, thousands of homeowners have filed complaints with state and federal agencies saying the drywall emits irritating fumes, corrodes metals and breaks down electrical appliances.

The U.S. Consumer Product Safety Commission, the agency charged with protecting Americans from unsafe household products, last week released interim remediation guidelines and said certain Chinese drywall samples emitted hydrogen sulfide, a flammable gas with a rotten-egg smell, at rates 100 times greater than non-Chinese drywall samples. The commission declined to comment on the judge's decision Thursday.

A spokesman for the Chinese Embassy in Washington, D.C., said he was not informed of the specifics of the case, and wouldn't comment, for now.

Judge Fallon ordered Taishan Gypsum, which never answered the complaint nor appeared at any U.S. hearing, to remove and replace all the drywall, copper plumbing, air conditioning and ventilation units, insulation and electrical wiring, as well as flooring in affected homes.

The judge also ordered Taishan to pay for the relocation of homeowners for four to six months while their homes are being repaired, even in homes only partly built with tainted material. Judge Fallon set aside health claims for later trials.

The 100-plus page opinion "gives tremendous guidance and...goes well beyond the seven families that were involved," said Richard Serpe, an attorney for the Virginia homeowners, adding that the ruling could set a precedent for other owners of houses that were built with defective drywall from China.

Thursday's ruling could help set the tone for how thousands of other claims are handled by federal and state courts, legal experts say. In addition to Taishan Gypsum, other companies based in China, including, Knauf Plasterboard Tianjin, or KPT, are facing lawsuits by homeowners and home builders.

A ruling in another lawsuit, Hernandez vs. Knauf, is expected shortly. That case is also being heard in New Orleans federal court by Judge Fallon as part of complex multi-district litigation against Chinese drywall makers.

Builders including Lennar Corp., who have used the Chinese drywall, also have filed product-liability lawsuits against some Chinese drywall manufacturers and distributors. Lennar declined to comment.

KPT said Thursday's ruling "was a default proceeding against Taishan Gypsum Co Ltd. in which Taishan did not present any evidence" and "unlike Taishan, KPT presented its evidence in the Hernandez trial and is awaiting a ruling from Judge Eldon Fallon in that matter." The company also said it would continue to work with the commission, state regulators and others in evaluating the concerns.

Until the Hernandez decision comes out, "we will not have a firm indication of how future cases may play out," said Russ Herman, a court-appointed liaison attorney for the plaintiffs in the Chinese drywall multidistrict litigation, which involves thousands of claims and multiple defendants, including drywall makers, importers, distributors, builders, installers and insurers.