As expected, Federal Judge Eldon Fallon has ruled in favor of the plaintiffs in a case against defective Chinese drywall manufacturer Knauf Plasterboard Tianjin. Fallon awarded the plaintiffs, Tatum and Charlene Hernandez of Mandeville, Louisiana, $164,049.64 in damages, plus attorney and legal costs in the case. In a comprehensive finding of fact and law, the judge ordered a full remediation of the Hernandez home, which he said must include removal and replacement of all the drywall in the home, as well as the entire electrical system, plumbing, hvac system, possibly the flooring, and any cabinetry or other components that block access to the defective drywall. The ruling echoes a similar ruling in the previous "bellwether" case decided by Judge Fallon last month against Chinese firm Taishan Gypsum. And the findings of fact and law will be applied to all similar cases brought into the New Orleans Federal court as part of the "Multi-District Litigation," over which Judge Fallon presides. But considerable doubt remains about whether, and when, homeowners or builders may be able to collect any damages in the complicated class-action suits. Taishan Gypsum, a Chinese firm controlled by the government of the People's Republic of China, will be particularly hard to reach, experts say. Seattle-based international lawyer Dan Harris blogged, "Chinese courts do not enforce U.S. court awards against Chinese companies. They just don't. Period. Therefore, this judgment is almost certainly worthless." And Harris said any effort to seize shipments of Taishan-produced goods in transit or in port would be hard to justify (" Chinese Drywall Plaintiffs Get U.S. Court Judgment Against Chinese Company. Yawn." by Dan Harris). But he held out at least some faint hope that Taishan assets in some third country that recognizes U.S. law (such as South Korea) might be vulnerable to seizure. Plaintiffs who win judgments against Knauf Plasterboard Tianjin, however, may be in a better position. The German-based parent company, Knauf GIPS, has substantial assets in the United States, and extensive ongoing sales of a wide range of products. And according to a report in the South Florida Business Journal, the court has already seen evidence that Knauf's top management knew of complaints concerning Chinese drywall odors as far back as 2006, and was personally involved in subsequent decisions (" Importer explains how he sourced Chinese drywall," by Paul Brinkmann). Reports the Business Journal: "The German owners of global conglomerate Knauf Group were aware of problems with high-sulfur Chinese drywall made at its subsidiary, Knauf Plasterboard Tianjin, as early as 2006, according to the October deposition of a North Miami importer." That's according to a deposition from Salomon Homsany Abadi, who ran the South Florida importing firm La Suprema Enterprise. Abadi testified that a German executive came to Florida to investigate complaints of bad odors caused by Chinese drywall in 2006, and reported back directly to "Mr. Knauf" in Germany. "Mr. Knauf" — described by Abadi as "the orchestra director" — was not identified by first name in the deposition, reports the Business Journal, but the company is run by two cousins named Baldwin Knauf and Nikolaus Knauf. According to Coral Gables, Florida, attorney Ervin Gonzalez, Adabi's story "shows Germany was involved in the operations of Knauf Tianjin, and that opens up the possibility of including the parent company in the lawsuit at some point.” Ever since the Chinese drywall story broke in early 2009, Knauf spokespeople have maintained that Knauf Plasterboard Tianjin operates separately from Knauf GIPS. But the Abadi deposition bears out the confidence of attorneys such as Jordan Chaikin, from the law firm of Parker Waichman Alonso LLP, who told Coastal Connection in March of 2009, "We believe that there is going to be insurance money there, and they are going to be very able to pay. The parent company, Knauf, they manufacture more building supplies than anybody in the world, and they've got plants all around — they are huge. We don't believe collectibility and ability to pay and all that is going to be an issue at all." ( Listen to audio) Payment may take time, however — and meanwhile, homeowners and builders have to deal with their current difficulties. They may also have to make a choice between accepting a settlement in the short run, or holding out for an unknown length of time in hopes of a better payout. According to a report in the Bradenton Herald, Knauf Tianjin representatives have already approached one Florida builder with a compromise offer (" Settlement sought in drywall case," By Duane Marsteller). But according to the paper, builder Lee Wetherington described the offer as too low to be worth considering, saying, "It didn't even come close. I've got attorneys handling this, so I'm going to let them do their thing." Meanwhile, mortgage lenders Fannie Mae and Freddie Mac have granted some temporary relief to the Virginia homeowners who won last month's Federal court decision. And lawmakers are asking for the same kind of help for afflicted Florida homeowners, reports the Sarasota Herald-Tribune (" Senators seek mortgage hiatus for homes with Chinese drywall," by Aaron Kessler). "Florida Sens. Bill Nelson, a Democrat, and George LeMieux, a Republican, and Sen. Mary Landrieu, D-La., wrote a pair of letters Wednesday asking for the assistance for Florida and Louisiana victims," reports the Herald-Tribune. "Last week, Fannie Mae waived mortgage payments for the Virginia homeowners in response to a request from U.S. Sen. Mark Warner, D-Va." And in the U.S. House of Representatives, a "House Contaminated Drywall Caucus" has been meeting with Federal officials to look for immediate solutions for homeowners struggling to cope with the situation. Among the Congressional group: the daughter of two retired Florida residents who are stuck living in a home with the contaminated drywall — complete with foul odors and failing appliances. The Fort Myers News-Press has that story (" In U.S. House, the daughter of a Cape Coral couple tries for drywall help," by Denes Husty and Bart Jansen). In Louisiana, meanwhile, state lawmakers are pushing to make sure that insurance companies can't drop homeowners' policies just because Chinese drywall has been found in the home, reports the Insurance Journal (" Louisiana Bill Would Ban Insurance Cancellations Due to Chinese Drywall," by Melinda Deslatte). "The bill by Sen. Julie Quinn, R-Metairie, would bar property insurers from canceling, refusing to renew, or increasing premiums or deductibles because of Chinese drywall at a property," the Insurance Journal reports. Senator Quinn's bill does not require insurance companies to compensate the victims — only to continue coverage on the properties. However, a Louisiana state district court has removed at least one barrier to homeowners seeking insurance payouts for the drywall problem, the Insurance Journal reported March 30 (" Louisiana Court: Policy Exclusions Can't Be Used to Deny Drywall Claims"). Judge Lloyd J. Medley ruled in the Louisiana case that the pollution exclusion written into most homeowners policies "does not, and was never intended, to apply to residential homeowners claims for damages caused by substandard building materials." This does not settle whether the homeowners in that case, Simon and Rebecca Finger, will receive any relief. But it is a sign of hope for homeowners and builders that, until such time as drywall makers can be held accountable, insurance companies may step in to pay for making the damaged homes livable again.
