Judge awards $111.4 million in Chinese drywall litigation

By Glenn Minnis | Feb 11, 2019

Even as he rendered a massive verdict in their favor, U.S. District Court Judge Eldon E. Fallon was compelled to admonish defense attorneys after presiding over multidistrict litigation (MDL) centered on inferior drywall imported from China.

As he handed out the $111.4 million award to 61 different law firms, Fallon chastised attorneys for conduct he characterized as being so deplorable that “corrective legislation” seems the only measure capable of restoring a level of “civility and professionalism to this aspect of complex litigation."

According to Law 360, most troubling to the veteran judge were the “vitriolic” fee requests submitted by at least some of the firms, which were to cover work done for the common benefit of all the plaintiffs through the year 2013. Another $97.2 million is set to be dispersed among firms that directly worked on personal contracts for a grand payout total of $208.6 million.

As part of his ruling, Fallon made certain to highlight that many of the same firms poised to receive common benefits are among those slated to collect significant payment for contract counsel.

The roots of the case heard in the Eastern District of Louisiana courtroom trace back to the early 2000s, a period marred by the ravages of hurricanes Rita and Katrina that created a housing boom in Florida to the point that drywall and other building materials needed to imported to the U.S. Over time, residents on the Gulf and East coasts began to regularly complain about foul odors associated with the imported materials, along with other issues including some where people were actually being physically affected.

Before long, lawsuits targeting the industry were springing up in federal courts, ultimately by 2009 leading to many of the cases being consolidated into a MDL, based on the commonality of many of the allegations. The $111.4 million amount stems from agreements with German-based manufacturer Knauf Gips KG and its international affiliates that market various products here in the U.S and provided a great deal of the supplies that ended up along the coasts.

Claims remain outstanding with the likes of Taishan Gypsum Co. Ltd. and Tai'an Taishan Plasterboard Co. Ltd. As part of their defense, the Taishan entities have contested jurisdiction in the proceedings.

As for the payments made to firms, Philadelphia-based Levin Sedran & Berman LLP and Herman Herman & Katz in New Orleans received the largest amounts at $23.2 million and $22.3 million, respectively. Collectively, the two firms are credited with coordinating cases targeting upwards of 1,650 defendants.

In particular, Sedran & Berman senior partner Arnold Levin, who specializes in the areas of Admiralty Law, Antitrust, Business Torts, Class Actions, Environmental Liability, Mass Torts, Medical Malpractice, Products Liability, and Securities Litigation, is said to have worked on the case around the clock for the last nine years after being placed in charge of a 14-member plaintiffs steering committee (PSC).

Throughout much of the proceedings, the court encouraged all the attorneys to engage in legal action for the benefit of all Knauf litigants, thus making them eligible for common benefit fees.

A “thankless task” is how Fallon deemed the job of rifling through all the information and motions entered before the court over the last decade in order to most accurately pay out the funds.

“At the outset, it is important to note that not all work performed by counsel in this case was common benefit work, since some of it was specific to a personal contract case and not for the common benefit of all cases,” he wrote. “Furthermore, not all common benefit work was valued the same way. For example, work logged for discovery, brief writing, oral presentation to the Court, trial, appeal, or settlement was generally assigned a greater weight or value than time spent ‘assessing the case,’ which generally includes monitoring emails and other common benefit administrative functions. This is especially appropriate when the person who spends time ‘assessing the case’ is not on the PSC and is not charged with performing any common benefit administrative functions. Moreover, in this case it is the Court’s view that the time spent on trial preparation and presentation as well as designing and negotiating the settlement, particularly the latter, was the most valuable in producing the result.”

In all, 57 firms received payments ranging from $2,000 to $10.2 million, while two firms weren’t awarded any compensation either because they hadn't worked any common benefit hours or hadn't presented before the fee committee.

Knauf is represented by Kerry J. Miller and Daniel J. Dysart of Baker Donelson Bearman Caldwell & Berkowitz PC.

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