Negligence Ruling in Florida Chinese Drywall Litigation

The judge overseeing one part of the litigation involving Chinese drywall -- the Florida class action -- has issued an important ruling on the negligence claims. Bennett v. Centerline Homes Inc. et al., No. 2009-ca-014458 (Palm Beach County, Fla.)

Defendants moved to dismiss the negligence claims, arguing they had no duty to protect the plaintiffs from the unknown and unforeseeable harm of the drywall.  The court found that there was no duty to inspect or test the drywall for a latent defect, and thus to warn the plaintiffs.  Florida law does not impose a duty to inspect a product for a latent defect, or to warn others about a latent defect, unless the product is inherently dangerous (which drywall is not).

Home builders, installers or suppliers of allegedly defective Chinese drywall could only be held negligent if it is established that the companies were aware that the drywall was defective, through actual or implied notice.  But the issue whether a defendant had notice of a defect must be
determined on an individual, case-by-case basis.  Thus, the court declined to grant the motion on an omnibus basis. 

As we have noted before, according to the allegations of the litigation, a shortage of drywall made in the U.S. caused many builders to use imported Chinese drywall during Florida's construction boom between 2004 and 2006. Much of the drywall was used in construction after Hurricane Katrina.  Lawsuits filed over the drywall issues allege that excessive sulfur levels in the Chinese-made products are causing health effects and problems with air conditioning systems, appliances, internal wiring and other electrical systems. The U.S. Judicial Panel on Multidistrict Litigation consolidated the lawsuits in the U.S. District Court for the Eastern District of Louisiana.  Other defendants, including building supply distributors, general contractors and installers, face  litigation in state courts, like this one.

Update on Chinese Drywall Litigation

The Consumer Product Safety Commission last week announced the results of testing performed by the Lawrence Berkeley National Laboratory on allegedly defective drywall samples.  Among the findings, most of the drywall that has allegedly caused personal injury and corroded electrical components in various homes throughout the U.S. was indeed manufactured in China;  specifically,  the most reactive sulfur-emitting drywall samples were all produced in China, according to the CPSC.  The worst-testing samples of the Chinese drywall showed emission rates of hydrogen sulfide 100 times greater than non-Chinese drywall samples.

CPSC released the names of the 10 worst-performing samples, including those of Knauf Plasterboard (Tianjin) Co. Ltd. for drywall manufactured in 2005, Taian Taishan Plasterboard Co. Ltd. for drywall manufactured in 2006, Shandong Taihe Dongxin Co. for drywall manufactured in 2005, Beijing New Building Materials for drywall manufactured in 2009.  Drywall samples manufactured in the United States in the same period contained low or no detectable emissions of hydrogen sulfide, according to the agency. 

At the U.S.-China Strategic and Economic Dialogue meetings in Beijing May 24-25, U.S. officials reportedly pressed the Chinese government to facilitate a meeting between CPSC and the Chinese drywall companies whose products were used in U.S. homes, and which exhibit the emissions identified during the testing procedures. The Strategic and Economic Dialogue represents the highest-level bilateral forum to discuss a broad range of issues between the two nations.

Federal cases concerning the drywall products are coordinated in multidistrict litigation pending in the U.S. District Court for the Eastern District of Louisiana. More than 7,000 plaintiffs have claimed that Chinese-made drywall in their homes emits sulfide gases that corrode electrical wiring and/or cause personal injury such as nasal damage and other respiratory problems.  In the first trial, the court ordered Taishan Gypsum to pay $2.6 million to seven plaintiffs last April. In the second trial, the court ordered Knauf Plasterboard to pay a plaintiff family $164,000.  In re: Chinese-Manufactured Drywall Products Liability Litigation, MDL No. 2047 (E.D. La.).

Cases are also pending in state court, and a state trial court in Miami recently certified a class in this litigation. Harrell v. South Kendall Construction Corp. et al., No. 09-008401 (11th Judicial Circuit, Fla.). Following a hearing last Thursday, Judge Farina granted class certification, the first Chinese drywall case to be certified. The class consists of approximately 150 claimants who were purchasers of homes in three subdivisions of the Keys Gate community there. The class alleged that those homes were built using Chinese drywall. Defendants are home builder Kendall Construction Corp., Palm Isles Holdings LLC, broker Keys Gates Realty Inc, and supplier Banner Supply Co.

The court found that a predominating common issue in each class member's case is whether the drywall installed in his or her house was defective. The trial court found that the alleged defect, the potential to emit sulfur gases that can cause damage, is inherent in the physical characteristics of the product and thus has a uniform nature. With one supplier and one builder allegedly involved, the court distinguished the case from other product defect cases in which individual issues are typically found to predominate.

The opinion noted that differences among proof of damages has typically not defeated class certification. The court stressed that if individual class member homeowners were to file their own separate actions, the court would be confronted with a multiplicity of lawsuits that would unnecessarily burden the court system and create the risk of inconsistent rulings and contradictory judgments.

While the court was clearly influenced by the belief that the issues surrounding the allegedly defective product were "unaffected by outside variables," like the way the product was used, its analysis of predominance is quite questionable.  For example, it concluded that a common issue was whether the defective drywall damaged the homes of the putative class members, and thus that the issue of injury (whether the drywall damaged all the homes) could be proved with class-wide evidence.  The fact is that enough of the drywall was imported to damage more than 50,000 homes; yet only a small percentage of that has been observed. Thus, it may be that any number of factors may be impacting the damage drywall is or is not causing in a particular house. Moreover, it is far too simplistic to talk about the injury or "damage" being caused, when there are hotly debated issues about whether there is injury to, or the need for remediation of, non-problem drywall, insulation, flex duct, molding, encapsulated wiring, counter tops, and a whole host of house components. Similar issues will relate to the causation of corrosion of a home’s electrical wiring or AC system.  

Update on Chinese Drywall MDL

A quick update on the Chinese Drywall MDL.  With the recent filing of an omnibus complaint, approximately 3,000 plaintiffs are now involved in the product liability litigation over Chinese-made drywall, against approximately 600 defendants. In re: Chinese-Manufactured Drywall Products Liability Litigation, MDL No, 2047 (E.D. La.).  Plaintiffs allege generally that sulfur levels in the Chinese-made products are abnormally high, causing problems with air conditioning systems, appliances, internal wiring and other electrical systems, as well as personal injuries.  

The drywall imported from China could have been used throughout the United States in as many as an estimated 300,000 recently built or renovated homes. The U.S. Consumer Product Safety Commission reported on studies linking Chinese drywall installed in homes to elevated levels of hydrogen sulfide and the potential corrosion of metals.

Recently, the MDL court appointed Michael K. Rozen of Feinberg Rozen, LLP as a Special Master in this proceeding under Federal Rule of Civil Procedure 53. Pursuant to the order of the Court, Special Master Rozen shall carry out those tasks he deems appropriate to fully explore opportunities for an ultimate resolution between the various parties. 

At the December status conference, the court explored issues relating to the various profile forms: Plaintiff Profile Form, a Defendant Manufacturers’ Profile Form, a Contractor/Installer Profile Form, a Builder Defendant Profile Form and a Defendant Distributor Profile Form, and the Importer/Exporter/Broker Profile Form. And how to handle a party's failure to complete the required form. Another agenda item was prioritizing the many pending motions. The parties addressed some discovery disputes, including ESI.

An important issue also discussed was the the Court's general plan to establish initial  “bellwether” trials. The Court has further advised the parties that any such trials will be limited to property damage only. The parties have been discussing the protocol and procedure for selecting bellwether trial candidates. The Plaintiff Steering Committee has suggested a sufficient representative sample of cases be selected with regard to geography, concentration of properties, distinctive facts and certain legal issues. The defendants suggest that the selection of bellwether plaintiffs must be limited to the plaintiffs that have submitted profile forms where personal injuries are not claimed. A list of these plaintiff properties has been made available to the PSC and the Court. The parties were directed to continue to discuss the selection of bellwether trials.

It is already clear that the drywall litigation will be complicated. Homeowners are suing builders, installers, distributors and manufacturers. There are multiple levels of insurance litigation, as in some states plaintiffs may also bring direct actions against the insurers for any of those categories of defendants; some homeowners are also in dispute with their carriers as to coverage. Several defendants have sued their carriers. In some cases, insurance companies have already filed declaratory judgment actions on these issues. Moreover, there are cross-claims among categories of defendants, as builders are suing distributors, manufacturers, and their insurers.

As noted here before , a major issue is product identification, i.e., the identification of the maker and seller of the drywall in each plaintiff's building. Plaintiffs in the MDL have already identified 28 foreign labels that they allege may be involved.  Class action motions remain pending, among the difficult case management issues.  Indeed, some of the cases may end up being resolved as part of bankruptcy proceedings.

CPSC Releases Study of Chinese Drywall

To date, CPSC has received more than 2000 reports from 32 states, the District of Columbia and Puerto Rico, from consumers and homeowners concerned about alleged problem drywall from China in their homes. The majority of consumer complaints on allegedly defective drywall have come from Florida and Louisiana.

The CPSC last week released a study of Hydrogen Sulfide Gas in connection with its Chinese drywall investigation.  Specifically, CPSC released results from a major indoor air study of 51 homes, and initial reports from two studies of alleged corrosion in homes with Chinese drywall. The 51 home study was actually contracted by CPSC and done by Environmental Health & Engineering (EH&E). The  two preliminary reports on corrosion safety issues are from the Sandia National Laboratories’ (SNL) Materials and Engineering Center concerning the long-term electrical safety hazards of conductor metal components, and the National Institute of Standards and Technology (NIST), studying the corrosion effects on fire safety components taken from complaint homes.

EH&E compared 41 “complaint” homes in five states selected from CPSC’s consumer
incident report database, with 10 non-complaint homes built around the same time in the
same areas as the complaint homes. Homes were sampled between July and September
2009. The EH&E findings were that hydrogen sulfide gas appears to be the essential component that causes copper and silver sulfide corrosion found in the complaint homes. Other factors,
including air exchange rates, formaldehyde and other air contaminants appear to contribute to the
reported problems.  The reports do not explain how the hydrogen sulfide gas is being created in homes built with Chinese drywall. (Earlier studies found varying amounts of elemental sulfur in the Chinese drywall.)

In terms of method, EH&E exposed copper and silver test strips, known as coupons, in homes for a period of about two weeks. The coupons showed significantly higher rates of corrosion in complaint homes than in the control homes. The dominant species of corrosion on the coupons were copper sulfide and silver sulfide, as determined by additional laboratory tests. Visual inspection and evaluation of ground wire corrosion also revealed statistically significant greater ground wire corrosion in complaint homes compared to non-complaint homes. The EH&E study also found that by using hand-held x-ray fluorescence and Fourier Transform Infrared instruments, they were able to detect markers that could identify Chinese-made dry wall at a sheet-by-sheet level.

The study did not link the corrosion with any long term safety effects, which are still under investigation. The levels reported, however, are well below the amount associated with long term health effects in the literature.

Like the EH&E study, initial reports from SNL and NIST show copper and silver sulfide corrosion on samples of metal taken from homes with problem drywall.

In terms of next steps, CPSC continues to search for homes exhibiting the alleged corrosion and health effects under study. Second, the federal Interagency Task Force has established an Identification and Remediation Protocol Team of scientists and engineers. This Team will try to use the results of the EH&E study and other information to design a screening protocol to identify homes with this problem.  Because professional air sample testing, and destructive testing of drywall both are costly, the Protocol Team is trying to develop quick, cost-efficient evaluation methods to identify homes with these problems. The Protocol Team will also look at remediation protocols, to see what cost-efficiency improvements to current remediation practices, if any, may be available, and what guidance should be issued on doing the work safely.

CPSC believes it has secured the cooperation of the Chinese Government to help identify the sources and causes of this problem. The agency believes that no new Chinese drywall has entered the United States in 2009. CPSC is also working with an ASTM committee that has just initiated discussions on the formulation of a proposed new standard on inspection of drywall for air quality issues.

Federal Inter-agency Task Force Releases Preliminary Test Results On Chinese Drywall

The federal inter-agency task force investigating alleged problems with Chinese-made drywall released initial results of three studies last week, which may impact the MDL litigation. The CPSC, the EPA, HUD, the CDC, and the Agency for Toxic Substance and Disease Registry are members of the task force. Health departments in Florida, Louisiana, and Virginia have also participated in the task force. An executive summary of the studies, and the draft studies themselves are available here.


To date, close to 2000 consumers have contacted the CPSC to report alleged problems in their homes. The primary issues reported are: 1) corrosion, or blackening, of indoor metals, such as electrical components and central air conditioning system evaporator coils; and 2) various health symptoms, including persistent cough, bloody and runny noses, headaches, difficulty in breathing and irritated and itchy eyes and skin. Imported drywall from China came into more widespread use after hurricanes in 2004 and 2005 led to a surge in home reconstruction and caused shortages of North American-made drywall.

In sum, the three studies involved:
(1) Elemental and Chemical Testing: The study of the elemental and chemical composition of drywall samples showed higher concentrations of elemental sulfur and strontium in Chinese drywall than in non-Chinese drywall. The elemental and chemical testing of Chinese and non-Chinese drywall samples was undertaken to characterize the specific chemical composition of the drywall. The results were expected to identify differences between the two sets of drywall that might account for the reported corrosion and health issues. While the studies have discovered certain differences between Chinese and non-Chinese drywall, further studies must be completed, said the report, to determine any nexus between the drywall and the reported health and corrosion issues. The analysis was conducted on 17 samples of drywall collected from warehouses, suppliers and manufacturers. These samples were unpainted and uninstalled.

(2) Chamber Studies: Preliminary results of ongoing testing to detect gases emitted from drywall in laboratory chambers showed higher emissions of total volatile sulfur gases from Chinese than from non-Chinese drywall. The chamber studies, conducted by Lawrence Berkeley National Laboratory, were intended to isolate the chemicals emitted from drywall. From these chamber studies, said the task force, it was possible to isolate the drywall emissions from the interferences of other materials or furnishings in a house that might emit or absorb such emissions. No comprehensive exposure and risk assessment has yet been carried out.

(3) Indoor Air Studies: Indoor air testing of 10 homes in Florida and Louisiana was conducted to identify and measure contaminants and to inform a drywall home indoor air testing protocol. The tests did not detect the presence or found only very limited or occasional indications of sulfur compounds of particular interest to the task force – hydrogen sulfide, carbon disulfide, and carbonyl sulfide. Concentrations of two known irritant compounds, acetaldehyde and
formaldehyde, were detected at concentrations that could exacerbate conditions such as asthma in sensitive populations, but were found in both homes with and without Chinese drywall. The levels of formaldehyde were not unusual for new homes, however, said the report. The results of the air testing in this very small sample of homes was being reported to offer a very preliminary indication of what compounds may be present in the indoor environments of homes in Florida and Louisiana with and without Chinese drywall.


The agencies expect the results of an air-sampling study of 50 homes in late November. An engineering analysis of electrical and fire safety issues is also forthcoming. .A study of long-term corrosion issues, that seeks to simulate decades of exposure and corrosion, will not be completed until June of 2010.

The study follows in the wake of the four-day U.S.-China summit that aimed to reinforce the notion that the United States—specifically the CPSC—will hold accountable importers of products into the United States if their products pose hazards or violate safety standards. The CPSC delegation reportedly discussed drywall safety concerns with Chinese government officials.

The CPSC stressed that this report was preliminary; the findings of each report released today must be considered within the limitations of each study and viewed in the context of the overall drywall investigation, which is still ongoing. While the studies have discovered certain differences between Chinese and non-Chinese drywall, further studies must be completed to determine any nexus between the drywall and the reported health and corrosion issues.
 

Chinese Drywall Update

On the eve of the 3rd biennial United States--China Consumer Product Safety Summit, to be held in China, the head of the Consumer Product Safety Commission reported she will press Chinese officials on whether new regulatory standards need to be set for drywall composition. CPSC Chairwoman Inez Tenenbaum said she also would inquire whether the Chinese were willing to provide compensation for the damage from tainted drywall.

In its latest status report on the Chinese drywall issues, the CPSC noted that it had received 1192 consumer complaints, from 24 different states. The majority of the reports continue to be from Florida, Louisiana, and Virginia. The focus of the federal drywall team has remained pursuing the scientific bases of the possible problems, and tracing the chain of commerce of the drywall.

CPSC reports it has completed principal field work for a 50 home indoor air sampling program, coordinated the state and federal response to allegations of radioactive phosphogypsum in Chinese drywall, and completed 75 in-depth site investigations, with another 20 in progress. Long-term air sampling tests will be completed later this month. The evaluation of the results is expected to be complete before November. (Phosphogypsum is a gypsum that has elevated levels of naturally occurring potassium, thorium and uranium radionuclides and decay products.) The CPSC coordinated testing and reporting results for radioactive phosphogypsum contamination in drywall with the Florida Department of Health and the EPA National Air and Radiation Environmental Laboratory. The results of the technical review showed that no radiological hazard was present. EPA is conducting elemental analyses of 15 drywall samples. EPA expects to complete its analyses of drywall samples in the next few weeks.

CPSC continues to analyze the information received from consumers, builders, importers, manufacturers, and suppliers of drywall to determine how much imported drywall may be affected and where that drywall has been installed. To date, CPSC staff has confirmed that during 2006, 6,997,456 sheets of Chinese drywall were imported into the U.S.

As readers of MassTortDefense know, litigation has been filed over the drywall issues, alleging that sulfur levels in the Chinese-made products are abnormally high, causing problems with air conditioning systems, appliances, internal wiring and other electrical systems.  Approximately 200 cases are pending in the MDL. In re: Chinese-Manufactured Drywall Products Liability Litigation, No. 09-md-02047 (E.D. La.).

In the MDL , the next status conference is scheduled for Thursday, November 19, 2009. Recently, the court  issued an order regarding a "Revised Exporter, Importer, or Broker Defendant Profile Form.”  All defendant drywall exporters, importers, or brokers must complete this Profile Form.  The form, inter alia, requires information on exemplar transactions concerning the exportation/importation/brokering of Chinese Drywall for import/export to the United States between 2001 and 2009, including but not limited to purchases, sales, consignments, shipments, transfers, deliveries, receipts, or other distributions.  The form requires information to identify any markings on the Chinese Drywall product (e.g., lot number, batch number, serial number, color markings, UPC codes, etc.) involved in this transaction; a list all trademarks of the product, and any markings or means of identification employed to track or identify the Chinese Drywall.

The issue of linking the specific product that allegedly harmed a plaintiff to the defendants who made and sold that particular product -- often termed "product identification" -- is an essential aspect of the cause in fact inquiry and is often problematic in toxic tort litigation.