Court proceedings started last week in Miami, Florida, in
the first state-level class action lawsuit targeting suppliers
of defective Chinese-made drywall. Homeowners represented by
attorney Ervin Gonzalez are suing Banner Supply, a Miami-based
drywall distributor, and Knauf Plasterboard Tianjin, the
Chinese-based, but German-owned, drywall manufacturer.
Documents unsealed in the case revealed that Knauf and Banner
were aware of problems with the drywall as early as 2006. But
the two companies entered into a confidential agreement not to
inform other parties (including homeowners or builders) about
the drywall's deficiencies.
The Sarasota Herald-Tribune has the story
("
Unsealed drywall documents show how information was
stifled," by Aaron Kessler). And the
2007 agreement between Knauf and Banner is now publicly
available at the website of non-profit news organization Pro
Publica.
In the agreement, Banner recognizes its own goal "to avoid
any protracted, time-consuming and costly dispute," and agrees
to accept Knauf's offer: replacing the stinky Chinese drywall
with 48,000 sheets of U.S.-made product. In return, Banner
promised to say nothing to anyone: "Claimants," the agreement
reads, "shall not make statements regarding any perceived or
actual smell or health risks relating to Knauf Tianjin
plasterboard or assist any party in pursuing any claims,
demands, or litigation against Knauf Tianjin." If Banner
breathed a word to anyone — in person, in the press,
on websites or in Internet chat rooms — Knauf would be
entitled to stop shipment of the replacement drywall, the
agreement specified.
In court this month, attorney Ervin Gonzalez took Banner to
task for choosing this path. Banner-supplied drywall, Gonzalez
said, was installed in the home bought by his clients, Lisa and
Armin Seifart, four days after Banner and Knauf sealed their
deal — and Gonzalez says Banner had a duty to stop
that work. "They had the knowledge. They had the power.
Instead, they used it to protect themselves," Gonzalez told the
jury. The Miami Herald has more details
("
Miami-Dade jury hears Chinese drywall case," by Nirvi
Shah).
Gonzalez' argument — that Banner was negligent in
its dealings with the Seifarts and other members of the injured
class — may be the central dispute in the Miami case,
where the main facts are not contested. Banner has already
conceded that gas emitted by the drywall damaged the Seifarts'
property, and has said that the company will pay the
approximately $700,000 cost to repair the $1.6 million home,
including temporary housing and damage to contents. But
Gonzalez is angling for additional punitive damages based on a
claim of negligence. Banner, for its part, argues that the
drywall supplier was just behaving like a responsible business.
"It's not about covering up," Banner attorney Peter Spillis
told the jury.
But the unsealed documents in the case indicate that others,
including at least one production builder, were also aware of
the drywall problem early on — and kept quiet. "The
company, WCI Communities, was so concerned that it started
planning to tear out the material and rebuild the houses. But
it never disclosed the problem to the bulk of its customers or
to government authorities," reports the Sarasota Herald-Tribune
(
"A builder's secret: defective Chinese drywall," by Aaron
Kessler). By late 2006, Knauf, drywall distributors, drywall
contractors, and builders were doing active damage control,
carrying on an alarmed discussion by letter, by email, and in
person, the Herald-Tribune reports — but nobody warned
home buyers.
Meanwhile, there's action on another front. Taishan Gypsum,
the Chinese government-owned manufacturer that failed to appear
in New Orleans Federal court this spring, has decided to appeal
the default judgment entered against the company in that
proceeding. "Taishan Gypsum Co. Ltd.'s filing on Thursday marks
the first time that the company owned by the Chinese government
has responded to any lawsuit filed against it in the United
States," reports the Norfolk Virginian-Pilot
("
Chinese drywall maker appeals federal judge's ruling," by
Josh Brown). Chinese-based companies routinely ignore court
judgments imposed by other countries, so Taishan's move comes
as a pleasant surprise. "We consider it an extremely positive
development that they're showing up," Richard Serpe, a Norfolk
attorney who represents the local homeowners, told the
Virginian-Pilot.