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Court sides with Chinese drywall owners

$2.6 million award may be uncollectable

Apr. 8, 2010


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1:10 A.M. — A federal judge Thursday gave seven Virginia homeowners who sued a Chinese company over defective drywall what they asked for.

It remains to be seen when, how or even if their $2.6 million award will be collected.

U.S. District Court Judge Eldon Fallon issued the ruling in a bellwether product liability case against Taishan Gypsum Company.

It’s the first trial in more than 3,000 lawsuits filed across the country over the tainted product. The lawsuits all have been consolidated under Fallon in multidistrict litigation in New Orleans, and his ruling is expected to set the trend for future suits.

Many of those lawsuits were filed by residents of Lee County, which has at least 2,500 homes with defective drywall. According to estimates in Fallon’s ruling, they could have about $430 million in collective damages.

The drywall, imported mostly between 2004 and 2007, emits sulfur compounds that corrode air conditioning coils, electrical wiring, metal on appliances, electronics, jewelry and plumbing fixtures. Residents of homes that have the drywall complain of health issues from nosebleeds to respiratory problems.

Arnold Levin, lead attorney for the plaintiffs, was pleased with the ruling.

“It is a major step in getting our people’s homes taken down to the studs and refurbishing their homes so they can get back in,” he said.

Fallon issued sweeping guidelines for fixing the drywall that have the rule of law — at least when these seven plaintiffs are concerned.

Levin said the judge’s fix-it protocol is not inconsistent with interim guidelines issued last Friday by the Consumer Product Safety Commission. Both the commission and Fallon’s ruling call for the drywall to be removed and replaced, along with wiring, electrical components and gas-service piping.

But Fallon went beyond the commission in ruling in favor of the seven Virginia plaintiffs, calling for removal and replacement of the entire HVAC system, insulation, damaged appliances and electronics such as TVs and computers, carpet, hardwood and vinyl flooring and cabinetry.

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Inez Tenenbaum, commission chairman, said last Friday that commission guidelines provide a foundation for Congress to consider policy options and explore federal relief for homeowners.

The commission had no reaction Thursday.

“We have decided to refrain from commenting directly on the judge's ruling today and want to let our announcement from last week speak for itself,” Scott Wolfson, commission spokesman, said by e-mail.

The ruling set the cost of refurbishing a home at $86 a square foot. That means for an average size home of 2,000 square feet, the cost would be $172,000.

If enough drywall was imported to build 60,000 homes, the cost to fix it, at an average of 2,000 square feet per home, would be $10.3 billion.

The drywall is found in 37 states and Puerto Rico. In Lee County, the property appraiser has identified 2,505 homes that had values reduced because of drywall.

Using the same formula for those 2,505 homes, the repair bill would be about $430 million.

While Fallon’s ruling has the force of law for these seven plaintiffs, Levin said he will not stop there.

“This is just the beginning for Taishan,” he said. In two weeks, he will file a motion for a class action lawsuit to extend the ruling to all homes constructed with Taishan drywall, Levin said.

The only problem is, civil judgments in U.S. courts aren’t enforced in China. Taishan Gypsum never acknowledged the lawsuit or appeared in court to defend its case.

Richard Kampf, a Cape Coral homeowner who represents a grass-roots organization of about 350 homeowners with defective drywall, has a 3,200-square-foot home.

Under the Fallon ruling, the cost to repair his home would be $275,200.

“As a homeowner, I’d rather have this one,” he said of the judge’s protocol.

If the courts are unable to recover damages from makers of defective Chinese drywall, he favors a remedy suggested in a News-Press editorial Tuesday — have the government create a national fund to help pay for repairs, and look to insurers, builders and other parties to help with the fund. Then get the Chinese government and manufacturers to pay up.

Kampf, a retired U.S. Environmental Protection Agency administrator, said that method would be similar to the way the federal Superfund works: If a company causing the problem won’t fix it, the government will, then go after the company for three times the damages.

U.S. Sen. Bill Nelson, D-Orlando, said the judge’s ruling gives homeowners a legal target.

“Now homeowners have somebody to put in their sights,” he said. “Meantime, I’m going to keep pushing our government hard to step up the pressure on the Chinese to get the companies over there to pay up.”

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