Judge's decision on Chinese drywall award will be bellwether

By Michelle Massey | Mar 5, 2010

After hearing testimony from several Virginia homeowners during a February bench trial against Chinese drywall manufacturer Taishan Gypsum Co., U.S. District Judge Eldon Fallon's highly anticipated ruling is expected to be a bellwether.

Taishan Gypsum Co. did not respond to the allegations by the Virginia plaintiffs and did not have a lawyer present during the bench trial. By not responding to the lawsuit, a default judgment was entered that holds the Chinese company liable for the damages caused by the toxic drywall.

The plaintiffs were asking the Court to award $2.6 million, arguing that the defective drywall caused electrical problems and financial difficulties. The only way to repair their homes is to strip the houses down to the studs, they claimed.

The case was the first to go to trial in the multi-district litigation (MDL) against manufacturers, suppliers, and distributors of toxic Chinese drywall. Lawsuits allege the drywall at question has higher hydrogen sulfide emission rates and other sulfur gases, causing property damage, such as corrosion of wire and metal items, and respiratory problems.

If the judge awards the money to the Virginia plaintiffs, they will still face problems collecting against Taishan Gypsum Co. because China will not enforce U.S. civil judgments.

The MDL will help determine if foreign manufacturers can be forced to participate in U.S. lawsuits and also be forced to pay if found liable. Currently, there is legislation pending before Congress that would require foreign companies to participate in U.S.
litigation in order to sell products in the United States.

The Virginia plaintiffs are not alone in the potential problems of collecting from a Chinese manufacturer. Many Louisiana households are facing financial difficulties because of the toxic gypsum board.

The MDL includes a huge class action which was filed in December on behalf of approximately 2,100 individuals, including lead plaintiff Sean Payton, head coach of the New Orleans Saints. Payton claims his family had to move out of their house after electronics began to fail and family members became sick. Payton was one of the first individuals in Louisiana to report drywall related problems.

Many people, like Payton, built their homes during the construction boom following Hurricanes Katrina and Rita. The housing boom caused a short supply of American-manufactured drywall, resulting in a greater demand for the cheaper imported drywall. After the Hurricanes, more than one million sheets of the toxic drywall were imported through the Port of New Orleans.

More than 37 states have reported complaints with the Consumer Product Safety Commission associated with the Chinese drywall.
In a lawsuit to recover only Louisiana's financial losses, Louisiana Attorney General Buddy Caldwell alleges that the fumes released by the gypsum board can cause various health problems, such as respiratory ailments, headaches, breathing difficulty, eye irritation and heart disease.

In early March, Senator David Vitter (R-LA) asked the Consumer Product Safety Commission and the Centers for Disease Control and Prevention to investigate as many as 10 deaths allegedly linked to the toxic drywall. Vitter notes that the agencies' investigations have found "convincing evidence" that Chinese drywall is releasing toxins that are causing a number of problems including health issues. He urges the agencies to ensure the plans to remove the toxins from homes also addresses the health-related impacts.

The class actions are consolidated into the multi-district litigation pending before Fallon.

The next monthly status conference in the MDL will be March 11 at 9:00 a.m.

A second bellwether trial is scheduled to begin March 15 in the New Orleans federal court.

MDL – 2047 IN RE: Chinese –Manufactured Drywall Products Liability Litigation.

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