FRIDAY DEADLINE TO FILE CLAIMS FOR CHINESE DRYWALL SETTLEMENT

This Friday, October 25th, is the deadline to file claim forms for the Chinese Drywall settlement. The settlement is being administered through the MDL out of New Orleans. If you have not filed a claim by Friday, you will be barred from participation in the settlement.

Chinese Drywall Deadline Monday July 8th

The registration deadline for all Chinese drywall settlements administered through Judge Fallon's MDL Court in New Orleans is Monday July 8th. All claimants who wish to participate in any of the various settlements must register their claims by this date or they will be prohibited from receiving settlement monies or remediation. Claim forms are not due at this time, but to file a claim form you must register.

Jury Verdict a Defeat for Chinese Drywall Homeowners

A federal jury last week ruled in favor of the New Orleans drywall supplier, Interior/Exterior Supply, that distributed the toxic and corrosive Knauf-brand imported Chinese drywall. Judge Fallon, the presiding judge over the Chinese drywall MDL, oversaw the week-long trial and found that the company did not know that the materials purchased from Knauf were defective.

Knauf Plasterboard Tianjin, a major manufacturer of problem drywall from China, agreed last year to pay hundreds of millions of dollars to repair 4,500 homes ruined with its product. That proposed settlement is still awaiting final court approval from Judge Fallon.

One of the major impacts of this verdict is how it affects other distributors of Knauf-brand drywall and Taishan-brand drywall in the MDL and the many other state-filed cases throughout the United States.

 

Chinese Drywall Fairness Hearing Heard Today

Today, the much anticipated fairness hearing occurred in Judge Fallon's courtroom in New Orleans. Judge Fallon is the presiding judge over the Chinese drywall MDL. A call-in line was not set up, so attorneys outside of the courtroom could not monitor the hearing. Judge Fallon was urged to accept the proposed settlement agreements between the Plaintiffs and the Defendants.

What complicates matters is that the different agreements ultimately affect different categories of Plaintiffs. Also, the deadlines for the Defendants to opt-out of the agreements have been extended past today's date. Below are two links to stories covering the hearing. Of note is the figure that 300 or so Plaintiffs have opted out of the proposed settlements.

http://www.chron.com/news/article/Judge-urged-to-approve-Chinese-drywall-settlements-4033488.php

http://www.myfoxal.com/story/20086215/judge-urged-to-approve-chinese-drywall-settlements

Legislation Passes House to Ban Sale of Toxic Chinese Drywall

The Bradenton (FL) Times reported, "US Rep. Vern Buchanan, (R-FL), co-sponsored legislation that passed the US House, which would ban the sale of toxic Chinese drywall and offer relief to thousands of Florida homeowners who've been victims of its use." The Times noted that "the Contaminated Drywall Safety Act makes Chinese-manufactured drywall a banned hazardous material under the Consumer Product Safety Act, meaning it cannot be imported into the US, and requires the Consumer Product Safety Commission to issue guidelines to ensure that existing drywall is properly disposed of." Also, the bill "calls on the Secretary of State to demand that Chinese manufacturers comply with any legal decisions and remedies for affected American homeowners." The legislation has passed the House and now moves to the Senate for consideration.

The Daily Press (VA) reported, "The toxic drywall has affected thousands across the United States, including hundreds in Hampton Roads, such as the Hollymeade neighborhood in Newport News. The defective drywall was used during the mid-2000s building boom when there was a shortage of American-made drywall." The story added that "many homeowners have complained of health problems resulting from a strong 'rotten eggs' smell, including headaches and respiratory problems."

I am not sure what this legislation will accomplish. The information that is out there shows toxic drywall was imported into our country between 2005 and 2008. I have seen no information indicating that toxic Chinese drywall is still being imported for use in the U.S. This legislation appears to be more of a way for politicians to say they are doing something in an election year, when the problem is already out of the bag. I do think that the part of the bill calling for the Chinese manufacturers to comply with any verdicts against them is interesting, but do not see how it could be enforceable.

Knauf CDW Proposed Settlement Agreement

The proposed settlement agreement with Knauf filed with the Court last week is a complicated document and many people are asking a number of questions about it. A majority of the questions I have been asked deal with the so-called “cash out option” from the uncapped fund.

The cash out option will not be determined by dollar-per-square foot. The homeowner will need estimates for remediation of their home. One will be done by Xactimate and the other by another contractor which can be Moss. Xactimate is basically a computer program where the contractor will plug in certain information particular to that home. They will put in bids for the home and the homeowner will be able to view the bids online. The homeowner can take the higher of the two bids or 65% of the Xactimate bid. Typically Xactimate is a much higher bid than the regular bid. The homeowner will get a cash out equivalent to the bid he chooses minus $4.50 per square foot. This subtraction is roughly the difference in the $8.50 per square foot move out lump sum for homeowners in the pilot program because the homeowners who select the "cash out" poption are not moving out to have their home remediated.

There are some requirements for the cash out option. One, there cannot be a mortgage on the home or if there is, the homeowner must provide a release by the mortgagee or lien holder. Second, the homeowner must record the existence of reactive CDW in the local property clerks’ office, if permitted by local law. Third, the homeowner must covenant to inform subsequent purchasers of the home of the presence of KPT drywall. There is specific language in the settlement agreement that they must state under oath. 

As far as an approved remediation plan, that information is located in Exhibit F, starting at page 179 of the agreement, found here: http://www.laed.uscourts.gov/Drywall/12-21-11.kpt.global.settlement.pdf

It is almost exactly the same as the pilot program remediation plan (which is a somewhat different plan than the plan laid out in the Hernandez decision). The main difference between this plan and the pilot program plan is that all appliances in homes under 3500 square feet are automatically replaced. For homes greater than 3500 square feet, appliances are replaced if signs of corrosion are found. The theory is that homes over 3500 square have higher-end appliances such as Vikings, and the cost to replace these items is significant if they are not damaged or appear compromised by CDW. This really comes into effect when getting a bid for the self-remediation aspect of the settlement and does not truly effect the protocol for remediating a home.

It is unclear right now what to do about homes that have KPT drywall on only one floor or in an added bathroom, bedroom, expanded kitchen, etc. That scenario is not clearly addressed by the proposed settlement agreement. I would suspect that the homeowner would have to get a bid to replace only those areas affected by KPT drywall and can get an approved contractor to do the work.

GLOBAL SETTLEMENT ANNOUNCED FOR CHINESE DRYWALL KNAUF CLAIMS

On Thursday in New Orleans, Judge Fallon announced at the monthly status conference for the Chinese Drywall MDL that a global settlement has been reached with Knauf (KPT).　The settlement will include all plaintiffs who filed claims against KPT prior to December 9, 2011.

The final settlement document is not presently available.　It will be made public and posted on the Court's website December 20, 2011.

The general terms of the settlement were described as follows:

The homeowner will have three (3) options to choose from.

1. The homeowner can participate in a remediation performed by Moss Construction (essentially the same settlement as the pilot remediation program); or,

2. A self-remediation with a "qualified contractor" of the homeowner’s choosing; or,

3. A pure cash-out option. The cash-out option will not include the $8.50 per square foot for move out cost. In addition, the cash-out option will be provided at a $4.00 per square foot discount from the remediation cost.

Finally, the settlement will create a $30 million "other loss," fund. Plaintiffs can make claims against this fund for economic losses caused by Chinese drywall as well as claims for personal injuries. The economic losses envisioned for this fund include those homeowners who have been foreclosed on or were forced into a short-sale because of toxic and corrosive Chinese drywall.

In addition, Knauf has agreed to pay attorneys’ fees and costs up to $160 million. This option will make homeowners whole because attorney’s fees will not be taken out from this option.

There will be no details of the settlement until the settlement documents are released on December 20, 2011. A preliminary settlement approval hearing will be held on January 4, 2012. After that, it is anticipated that a fairness hearing will be held in front of Judge Fallon sometime in either June or July of 2012.

For those homeowners whose claims are already in the pilot remediation program, this settlement should have little effect on that process moving forward.