Judge Fallon last week gave preliminary approval to a $54.5 million settlement between Banner Supply and thousands of homeowners the company supplied with defective Chinese drywall. Most of the affected properties are located in Southwest Florida. Judge Fallon presides over more than 10,000 drywall cases merged in multidistrict litigation in New Orleans. However, like the Inex “settlement”, the preliminary approval does not mean it is a done deal.
Banner, based in Miami, purchased about 1.4 million sheets of Chinese drywall, but says it didn't know of defects. It is estimated that 3,000 homes in Florida have Chinese drywall supplied by Banner.
Meanwhile, some attorneys believe the settlement as it stands is full of unanswered questions and looks like a raw deal. Unless those questions are answered, they will advise their clients to opt out.
There have been many criticisms of the settlement including:
- An estimated payout of $4,000 to $6,000 per homeowner, way short of the amount of money needed to fix drywall-damaged homes.
Homeowners won't be told what amount they will receive until the deadline passes for them to decide whether to take the settlement. The deadline will be in mid-August.
- The settlement terms allow for attorney fees of as much as 32 percent of the $55 million, and no limit on administrative costs.
- Banner is not required to contribute its corporate assets to the settlement fund. The $55 million would come only from four Banner insurers: Chartis, FCCI Insurance Co., Hanover American Insurance Co. and Maryland Casualty Co.
Attorney fees are actually in the control of Judge Fallon. The amount fluctuates from hourly fees to percentages of 40 percent or more among the law firms involved. What Fallon has indicated is that he will not approve any fee that is more than 32 percent.
As to unanswered questions, Fallon will hold a fairness hearing before the settlement is finalized so anyone with objections can have them addressed.
In a statement provided by a spokesman, Banner attorney Michael Peterson of Miami said that Banner "has been severely harmed by misrepresentations made to it."
The toxic and corrosive drywall, imported mostly between 2005 and 2008, emits sulfur compounds that corrode air conditioning coils, electrical wiring, plumbing fixtures and other metal items in the home. Homeowners complain of health problems from respiratory illness to nosebleeds.
There are some dangerous consequences for those Plaintiffs who opt out of the proposed settlement. The biggest problem would be if Banner filed for bankruptcy and Plaintiffs had to pursue their claims through bankruptcy court, which could take years and yield nothing. Plaintiffs would be left holding the bag if no other defendants settles or if any judgment was uncollectible.The alternative of taking some money, no matter how little, looks like a much better decision than opting out of this settlement.
