Chinese Drywall Ruling by Lower Courts

Builders may not be at fault - Lower courts make initial ruling on defective drywall

Ted Griggs
September 12, 2010

Separate rulings by two district judges could mean that home builders won't be held responsible for using defective drywall, which leaves homeowners to target distributors and makers of the China-made building material.

"Until you get at least a Court of Appeals ruling on it, it's not a binding precedent," said Mark D. Mese, a partner in the Baton Rouge office of Kean Miller. "But it is a strong indication that two judges in two jurisdictions (East Baton Rouge and St. Tammany parishes) have come to exactly the same conclusion."

The lower court rulings on the state's new home warranty law don't have any impact on homeowners' claims against manufacturers and distributors, Mese said. Homeowners shouldn't be too discouraged because, he said, the culpable parties are still on the hook.

Meanwhile, a settlement for the thousands of federal lawsuits, under the jurisdiction of U.S. District Court Judge Eldon Fallon in New Orleans, appears close. Suppliers, insurers, Knauf Plasterboard Tianjin Co. Ltd., one of the major makers of the alleged faulty drywall, and attorneys took part in a mediation session Aug. 24.

Russ Herman, lead attorney for the plaintiffs, said he could not discuss the mediation but is hopeful that a number of the Louisiana homeowners' claims will be resolved.

But Herman said the district court rulings won't affect the effort to collect damages from the manufacturers and Interior Exterior Building Supply, a New Orleans-based firm that plaintiffs say distributed the tainted drywall.

Builder E. Jacob Fakouri said the lower court rulings could take a tremendous financial burden off his company.

Fakouri said his company used the drywall in building 34 homes. He's probably spent $70,000 on attorneys and copied every document in his office two or three times, to defend himself from a product he said there was no way to tell was defective.

The difference between having good drywall or bad drywall came down to a guy in the warehouse picking from one shelf or another, Fakouri said. The Chinese drywall wasn't special-ordered or less expensive; it came down to the luck of the draw, he said.

"It's amazing that we do that kind of stuff when the guys here manufacturing have to produce good stuff," Fakouri said. "But the guy that's shipping it in can compete with us and doesn't. We need to fix that problem."

Fakouri said builders and homeowners were both victims.

He said he is also suing the drywall makers, and if the lawsuit succeeds, he is hoping the company can go in and fix the drywall problems.

It's unknown how many homes in Louisiana contain the tainted drywall. Plaintiffs attorneys have estimated there may be as many as 7,000 houses affected. Home builders think the number is closer to 1,000. But the numbers continue to rise. Denham Springs resident Wes Summers said it took four years of odd occurrences - soot forming on wooden blinds and constant air conditioning problems - before he realized his house had been built with tainted drywall.

Summers and his wife, Sheri, bought the house in 2006, several months after their home in Ponchatoula was crushed by falling trees during Hurricane Katrina, Summers said. The problems began a few months afterward. Three plasma televisions failed, Summers said. The air conditioning coils were replaced nine times. The refrigerator's coils also had to be replaced, he said.

"It's been an absolute nightmare," Summers said.

He said he and his wife are both having health problems: she suffers from migraines, and both have unexplained weight loss, fatigue and irritability.

"We just thought we were getting old. We didn't know," Summers said.

A few months ago, Summers said a repairman suggested his house might have the faulty drywall. Summers checked in his attic and found the drywall had the Chinese-manufacturing label.

He said he has hired Bruno & Bruno to represent him in the class-action lawsuit.

For now, all the Summers can do is try and be as positive as they can and hope for the best, he said.

Herman said Summers' experience is not unusual.

Generally, people notice a smell like rotten eggs or sulfur, Herman said. A lot of people mistake that smell for fresh paint from new construction or rebuilding.

"And unfortunately the nose becomes accustomed to the smell in three or four weeks," Herman said.

It's not until other problems repeatedly develop with the air conditioner's copper coils or electrical problems that homeowners realize the culprit may be the drywall, Herman said.

Jerry Passman, president of the Capital Region Builders Association, said he supposes the rulings can be seen as a positive for builders, but no one thinks they're out of the woods yet.

"The fact that bad Chinese drywall or bad drywall was marketed to us, and we inadvertently used it in people's houses, that's still got to register on the builder's mind," Passman said. "We only want the best thing for our customers. That's the most important investment they make so we want everything to go perfectly for them in every case."

Passman said he was lucky. He said his supplier made sure his company didn't use any Chinese drywall.

"Even if I would have wanted to buy some Chinese drywall he wouldn't have let me, thank God," Passman said. "Sometimes you have older, more experienced people looking over your shoulder to keep you straight."

Still, Passman doesn't think builders feel relief because of the lower court rulings, but a lot of builders are happy they're still in business.

In Louisiana, most home builders are like Passman, mom-and-pop shops, he said. Small companies don't have the money to pay to make all the repairs necessary.

That's why the Louisiana Home Builders Association asked the state to take $100 million held by the Louisiana Recovery Authority and use it to repair the houses that have tainted drywall, Passman said.

The effort never really gained much support. Among other things, the LRA questioned whether the proposal would violate federal law. LRA officials said it would literally require an act of Congress to use the hurricane recovery funds to repair the faulty drywall problems. The LRA also said the agency already had far more requests for funding than money available.

Jon Luther, executive vice president of the Home Builders Association of Greater New Orleans, said he's not going to say the idea is dead, but there hasn't been a lot of progress.

Still, Luther said the most recent court rulings support the builders' position: that the focus should be on the drywall makers and those who knowingly and willing sold the products.

But it could be a long time before the builders can say they're no longer in the sights of some plaintiffs attorneys, Luther said. It took two years for the district courts to issue rulings that found the same thing the builders have been saying all that time, he said.

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