Thousands of Americans claim that their houses were built with defective drywall made in China. This year, they got some relief, thanks to a settlement with a U.S. company that distributed the drywall. The homeowners’ lead lawyers have now set their sights on an elusive Chinese manufacturer.
The drywall, imported into the United States during the housing boom of the mid-2000s, allegedly gives off fumes that corrode internal wiring and cause respiratory problems. A flood of lawsuits were consolidated in a multidistrict litigation in federal district court in New Orleans in 2009.
Earlier this year, the plaintiffs’ lawyers won a $53 million settlement from Banner Supply Co., an American company that distributed the drywall. Now the plaintiffs are focusing on two Chinese manufacturers, Taishan Gypsum Co. (Jiangyin), Ltd., and Knauf Plasterboard (Tianjin) Co. Ltd., which is owned by Knauf Gips KG of Germany.
At press time Knauf had agreed to fix more than 700 homes as part of a remediation program that could serve as a model for a comprehensive settlement, according to its counsel, Gregory Wallance, a partner at Kaye Scholer. Another 600 homes are undergoing inspection in order to join that program, says Wallance. But thousands of claims against Knauf are still pending, including two slated for trial in Florida state court in late 2011 and early 2012.
Unlike Knauf, Taishan didn’t show up in court at first. Federal district judge Eldon Fallon, who is overseeing the multidistrict litigation, entered a default judgment against Taishan for $2.6 million in a suit brought by seven homeowners. In June 2010 the company made its court debut and appealed that judgment on the grounds that American courts have no jurisdiction over it.
Fallon ordered discovery on the extent of Taishan’s dealings in the United States. Lawyers for the plaintiffs flew to China to depose Taishan executives, but the witnesses were uncooperative, according to lead plaintiffs counsel Arnold Levin of Levin, Fishbein, Sedran & Berman. In an unusual move, Judge Fallon announced his intention to go to China to oversee a second round of depositions in January 2012, says Levin.
A ruling on jurisdictional matters from Fallon is expected next year. If the case goes forward on the merits, “Taishan intends to stand behind the quality of its drywall,” says its counsel, Joe Cyr, a partner at Hogan Lovells.