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.
