Chinese Drywall Maker Settles with Builder

Chinese drywall maker Knauf Plasterboard Tianjin Co. Ltd. has reached an agreement to settle with Atlanta-based national home builder Beazer Homes, according to three people familiar with the matter.

As the Herald-Tribune reported May 3, KPT has been negotiating with as many as ten home builders recently.

Knauf Tianjin - commonly called KPT - initially indicated it would provide a response Thursday evening to the Herald-Tribune's questions, but subsequently declined to comment.

J. Kevin Buster, Beazer's attorney, said it was too soon to disclose any details.

"Nothing has been finalized, but we're hoping we'll have something to comment on in the next couple days," Buster said. "The chances are good that we'll all have something to comment on then, but I can't talk about it now."

Buster declined to discuss whether the deal involves only the homes Beazer has already remediated, or all of their affected houses with KPT wallboard.

A settlement with Beazer would be a significant development in the combined litigation against drywall producers, which has been picking up steam since earlier this year under the guidance of U.S. District Court Judge Eldon E. Fallon.

Fallon ruled on April 27 that KPT was responsible to pay a Mandeville, La., couple remediation damages of $164,000, plus attorneys' fees and court costs. He also ruled in a separate case against Taishan Gypsum Co. last month, awarding seven Virginia homeowners a combined $2.6 million.

Fallon signed final judgments in both cases on Monday.

The Herald-Tribune first revealed in April 2009 that Beazer used contaminated Chinese drywall in the Magnolia Lakes development in Fort Myers.

Since that time, Beazer has acknowledged at least 20 homes in Magnolia Lakes were built with Chinese drywall, and another 50 were being investigated as of February. The company said about two dozen homes in its Hampton Lakes development in Tampa also were built with problematic drywall.

In February, two Beazer representatives testified in New Orleans for the plaintiffs in the Germano case against Taishan Gypsum Co.

Ray Phillips, Beazer's Florida vice president, testified that the builder's protocol called for removing all wiring, junction boxes and other parts of the electrical system, and that the company had discovered the sulfur gases could permeate insulated wiring. Phillips said completely gutting a home and replacing the components was the best solution.

Phillips testified that Beazer was spending between $46 to $53 per square foot to remediate its homes, or anywhere from $92,000 to $106,000 for a 2,000-square-foot house.

But Phillips said those costs were likely far below what a normal homeowner would pay on the open market, since Beazer had leverage to bargain down prices and did not have to pay for overhead.

Fallon wound up handing down comprehensive remediation standards that included many aspects of what Beazer had been doing.

KPT is by far the largest manufacturer defendant in the combined drywall litigation. The two omnibus complaints filed against the company and its German parent include more than 3,000 homeowners who claim Chinese wallboard is corroding their homes, resulting in ill health effects, or both.

KPT was given the chance to choose the cases to be tried in the next bellwether trial, coming up at the end of June in New Orleans. Those cases will be a single-family home in Metairie, La. owned by Paul Clement and Celeste Schexnaydre, and a duplex that is part of a new development in Slidell, La., owned by Jon Campbell.