Drywall Litigation Update

The Georgia Superior Court has preliminarily approved a $6.5 million settlement between the Lowe's home improvement stores and a nationwide proposed class of drywall purchasers. Vereen v. Lowe's Home Centers Inc., SU10-CV-2267B (Ga. Super. Ct., Muscogee Cty.).

The proposed resolution of this piece of the drywall litigation would provide Lowe's gift certificates ranging from $50 to $2,000 to any consumer who purchased drywall (not just from China), as well as cash awards of up to $2,500, if the claimant can provide documentation of damages and proof of purchase. That is, plaintiffs who provide proof of purchase of drywall from Lowe's but have no proof of actual damages would receive gift cards valued up to $250. Class members unable to provide a proof of purchase would receive $50 gift cards.

Under the settlement, Lowe's also agreed to pay attorneys' fees and expenses up to 30% of the class fund, as well as $1 million to the plaintiff attorneys for administration of claims. The settlement purports to release Lowe's from all drywall claims.The Georgia court conditionally certified a settlement class and set a final fairness hearing for November 19th.

But the proposed settlement has apparently drawn objections from participants in the federal Chinese drywall multidistrict litigation, who are arguing that the settlement fund is too small and that the settlement would interfere with federal jurisdiction.  The plaintiffs' steering committee for the Chinese drywall multidistrict litigation in the Eastern District of Louisiana went so far as to move to enjoin the state court from moving ahead with the settlement, arguing that the benefit to the class is too small, and the attorneys' fees too large. Ironically, these plaintiff attorneys assert that the form of the class benefit, i.e.,  a gift card, is also improper.

The MDL lawyers assert that the parties involved in the MDL have been negotiating towards a global settlement, and allowing the state court, one-defendant settlement to go forward would simply undermine those efforts.  They called on the federal court, pursuant to the Anti-Injunction Act, to enjoin state court proceedings where, as here, it is allegedly necessary in aid of its jurisdiction or to protect or effectuate its judgments.

Readers will recall that after Hurricanes Katrina and Rita in 2005, drywall was imported from China to address a shortage of drywall required for repairs and new construction. After the drywall was installed, homeowners began to complain of smells, gas emanations, corrosion of appliances and electrical fixtures, and other alleged property damage. The lawsuits typically allege that sulfur compound levels in the drywall are too high, causing issues with air conditioning systems, electrical appliances, internal wiring, and other electrical systems in homes. Plaintiffs also allege the drywall produces a rotten egg-like stench and causes a variety of respiratory and other health problems for those who live in the affected homes.

So far, a few bench or jury bellwether trials have been completed, with mixed results.
 
 

Update On Chinese Drywall Litigation

The Consumer Products Safety Committee has reported that it has received approval from the Chinese for a visit to China in connection with the drywall issues, and that CPSC staff is working with the Chinese government to arrange an investigative visit beginning later this month.  The CPSC has asked to visit several sites of interest in its investigation of issues related to the tainted drywall, which we have posted about before.

The CPSC reports that it has now received a total of 810 reports related to the allegedly defective drywall, including complaints from two additional states, Pennsylvania and South Carolina. That means the Commission has received reports from homeowners in 23 states and the District of Columbia. The majority of the reports continue to be from Florida, Louisiana, and Virginia.  About 6.2 million sheets of Chinese drywall were imported into the U.S. during 2006.

As part of its investigation, the Commission notes the:
• Start of the Lawrence Berkeley National Laboratory chamber testing of various drywall samples to isolate specific emissions.
• Start of a 50 home indoor air sampling program.
• Site visit to a synthetic drywall manufacturing facility.
• Completion of testing for radioactive phosphogypsum contamination in drywall, in coordination with the Florida Department of Health and the EPA National Air and Radiation Environmental Laboratory. 

The EPA is conducting elemental analyses of 15 drywall samples, with a tentative date for completing its analyses of drywall samples by late August. The CPSC's engineering staff has visited seven homes in Florida, Louisiana and Virginia to gather samples of electrical, plumbing and safety systems. CPSC also has hosted a call among attorneys general of impacted States to coordinate and exchange information about State-level efforts.

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. In June, the U.S. Judicial Panel on Multidistrict Litigation consolidated the lawsuits in the U.S. District Court for the Eastern District of Louisiana. More than 90 suits were on the docket as part of the MDL as of last week. Plaintiffs have asked the court to certify the matter as a class action. In re: Chinese-Manufactured Drywall Products Liability Litigation, MDL 2047.

The monthly status conference in the MDL was held last week before Judge Fallon. At the conference, the court considered issues raised by Liaison Counsel, including pre-trial orders, property inspections, Plaintiff and Defendant profile forms, an evidence preservation order, state court settings, state/federal coordination, discovery issues, Freedom of Information Act/ public records requests, trial settings in federal court, tolling agreement/suspension of prescription, plaintiffs' request for a class action, insurance issues, service of pleadings electronically, and the master complaint. A full report can be found here. 

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