August 27, 2010

Knauf Gips, a German manufacturing company, continues to argue that it is not responsible for the defective Chinese drywall produced by its subsidiary Knauf Plasterboard Tinjian, according to an article from ProPublica.org, “Documents Tie German Company to Chinese Subsidiary That Produced Defective Drywall.”

Knauf Gips claims that Knauf Plasterboard Tinjian, its subsidiary, produced the defective drywall and therefore should be the entity financially responsible.

However, documents filed in Germany and in United States courts show that Knauf Gips is strongly involved in the management of its subsidiaries, which includes quality control, finding raw materials, and dealing with the issues arising from the defective Chinese drywall.

Steven Glickerstien, one of Knauf Tinjian’s attorneys here in the US has stated, “Each Corporation is a separate legal entity, responsible only for its sales and its own profits.”

The Consumer Product Safety Commission Drywall Information Center website states that they have “received about 3,526 reports from residents in 38 states, the District of Columbia, American Samoa, and Puerto Rico who believe their health symptoms or the corrosion of certain metal components in their homes are related to problem drywall.”

Today the CPSC has released, “Summary of Revision 1 to the Interim Guidance – Identification of Homes with Corrosion from Problem Drywall.”

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The remediation trial currently underway in U.S. District Court – with Judge Eldon Fallon presiding – has produced some noteworthy and interesting testimony: the best way to cure a home contaminated with defective Chinese drywall may be to “gut” it. – read on for an elaboration of what exactly “gutting a home” entails.

This case is essentially a “default” hearing – Virginia plaintiffs are up against an entity known as Taishan gypsum Co., but the company is not participating in litigation.  This company is owned by the Chinese government and the Consumer Product Safety Commission has received thousands of complaints surrounding Chinese drywall.

The Herald Tribune reported that one of plaintiff’s attorneys noted that when one Norfolk Supply company imported goods from Taishan, the company sought to use Chinese standards rather than international safety standards.  Norfolk attorney, Richard Serpe (another plaintiff’s attorney), stated that the Norfolk business (known as Venture Supply) distributed Chinese “material” and even used new vehicles to transport the goods outside of Virginia to other states.

The plaintiffs are asserting that based upon scientific studies, the best option for curing Chinese drywall-laden homes is to “gut” the house.  This means that all wiring, metals, and affected materials in the home MUST be removed.  The Herald Tribune article referenced previously notes that one Florida homebuilder’s vice president said that first, his company thought that the insulated wiring inside walls of homes would not be affected.  He was wrong however, and his company’s protocol for fixing homes now includes a process aimed at removing all electrical components affected.

Last Thursday, one party to the litigation made a somewhat surprising move.  Knauf Plasterboard Tianjin Co. Ltd. suddenly withdrew from the defense.  Did Judge Fallon stall the trial? – No.  Consistent with his demeanor thus far, Judge Fallon only made slight reference to Knauf’s withdrawal and the litigation shall press on.

The multi-district litigation taking place in the Eastern District of Louisiana has produced some interesting new developments.  The trial involves plaintiffs from Virginia, and is being carefully followed by consumers across the country.  See our recent article here.

Not just consumers are closely keeping tabs, however.  Manufacturers, construction businesses, and insurance companies are also interested in the results.  The focal point of the initial trial is not intended to be one of finding fault necessarily; rather, it is expected to establish and inquire the amount of money needed to fix homes.  “Gutting” the homes is what some agencies have suggested.

Judge Eldon Fallon ruled on Wednesday that homes constructed with Chinese drywall by Knauf Plasterboard Tianjin could not be adequately fixed by installing an “air filtration system.”  The South Florida Business Journal reported that Judge Fallon found that Knauf’s contention was “scientifically unsupported.”

Who is Knauf? – Knauf is German owned, yet maintains a presence in China.  The reason it involved itself in the case was based its interest in proposing solutions.  The actual defendant in the case is Taishan Gypsum Co., Ltd – Taishan was found in default back in November, because of failing to appear and participate.

This Friday, February 26, 2010, a hearing is scheduled to determine whether certain experts are qualified to testify regarding the Chinese drywall toxicity, among other inquiries.

Judge Fallon, in finding that air filtration is not enough to fix defective drywall-laden homes, is seeming to acknowledge the toxicity of the drywall.  The drywall has been reported to the CPSC as the source of such a vast amount of problems, that many people following this case were not surprised with the air filtration  ruling.

A hearing on experts will take place Friday.  The goal is to determine which experts are qualified to offer quality opinions regarding complex issues implicated by the Chinese drywall at issue.

For months, thousands of homeowners, businesses, insurance companies, and others have been awaiting the start of the multi district litigation taking place in New Orleans – The Eastern District Federal Court.  (Reported from the New Orleans Business News Section of Nola.com)

The Case Name: Germano et al. v. Taishan Gypsum Co. Ltd.

Why the Case is Important: This “trial” case is being carefully watched by an array of persons – both human persons and business entities, domestic and foreign.  What is the big deal? The case is expected to provide a threshold estimate of what it costs to repair a home that has been devastated by defective drywall.

The case also represents a bigger problem with regard to a public policy issue facing our nation.  We will save that article for another day, however, for now keep in mind that  the Chinese government owns many of the businesses that produce products imported into the United States; these products have caused numerous injuries in the past – not solely limited to drywall.  (Recall, the toys, cribs, and other defective imports that have headlined recent news articles).

What is the Next Step?: On Friday, February 26, 2010, a hearing will take place to decide on qualified experts.  The opinions that the experts will provide in court will have important influences upon the case, thus the hearing is an important procedural step.

The second “test trial” is expected to start March 15

One of the latest complaints to the Consumer Product Safety Commission (CPSC) regarding Chinese drywall comes from a major distributor of hardware to hang pictures, Monkey Hook.  According to this article, a letter was written by a company representative to the CPSC urging additional investigations, specifically aimed at “structural integrity.”  The problem in this context is allegedly the presence of moisture.  The logistics of imported Chinese drywall is such that lengthy Ocean voyages are needed to import, thus exposing it to potential sources of moisture.

The scientific investigations that have been performed by the CPSC and Environmental Protection Agency (EPA) have primarily focused on the corrosion of metals and toxic gasses/fumes that have been reported from a wide array of states.  The CPSC has in fact confirmed a link between corrosion and the presence of Chinese manufactured drywall.  According to some, a corollary issue to the noxious fumes may be the presence of humidity.  As one industry representative explained, moisture may play a role in speeding up the process of the release of fumes.

Deciphering the causes of hardware failures with regard to industries that manufacture, distribute or sell products that assume quality drywall is in place is important when assessing whether the products those businesses themselves produce are faulty.  For example, Monkey Hook has expressed that the hardware they distribute relies on drywall rather than a “stud” to provide support.  The consequences are that their products suffer load capacity variations.  The presence of defective drywall has been referred to as an “uncontrollable variable” that may or may not be covered by warranty provisions.

Unfortunately, when disaster looms there are generally opportunities for some to profit off of the despair of others.  While federal agencies like the Consumer Product Safety Commission, the Environmental Protection Agency, and others are investigating the scientific links to reported health and product issues, another agency has been called upon to inquire into profiteering quick-fix drywall solution promoters.  Namely, the Federal Trade Commission has been addressed by some lawmakers seeking to avoid this side-issue.

The Mississippi Business Journal reported that Sen. Thad Cochran (R. Miss) and Roger Wicker have joined other lawmakers in requesting the federal government provide help for consumers who may be targeted by suspicious, profit-driven corporations or persons who offer quick-fix toxic drywall solutions.  Specifically, the Federal Trade Commission received correspondence from the senators who requested that there be investigations into persons offering solutions to drywall, amidst the already ongoing scientific investigations.

The Senators noted in the letter to the FTC, “As we work together with the designated federal and state agencies to develop real solutions to the problems created by contaminated drywall, it is important that the FTC ensure that homeowners are protected from companies seeking to make fast money off the misfortune of these homeowners.”

While homeowners are in an understandably dire situation (facing second mortgages, renting homes, or even living in trailers temporarily), consumers must differentiate between mere shams, and legitimate remediation remedies.  As the trials in the multidistrict litigation process draw closer, it is the hope of many State Senators that these concerns are brought to light, and letters to various agencies, like that mentioned above, will prompt federal authorities to combat the issue on all fronts.

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As more and more homeowners are making the unfortunate discovery that the residence they call “home” is in fact a potentially dangerous environment, it is no wonder that lawsuits have been filed across the nation.  Most profoundly, the multidistrict litigation underway in New Orleans is raising the question as to the difficulty foreseeable in obtaining participation by foreign defendants. (as reported by Nola.com)

In many lawsuits involving product liability claims, harmed individuals can sue an entire chain of supply.  The manufacturer of the product is generally at the top or beginning of such a chain.  In the case of allegedly defective and/or dangerous Chinese drywall, manufacturers tend to be either based in partly or wholly in China.

The issue that is raised when foreign manufacturers are implicated is that international trade agreements view health and safety regulations as “barriers” to commerce.  As a result, the importation of products to the United states that may not meet safety standards is a reality our society is dealing with.  Countries like China that have large populations with low consumer spending sometimes seek to export massive amounts of products to operate an economy.  Resulting from this trend is the situation presently seen in the United States – an influx in consumer goods that are prompting headlines – from defective children’s toys, and now, potentially hazardous drywall.  The word “potentially” is used, because while there is much evidence suggesting toxicity and the presence of certain dangerous compounds, the nexus between reported symptoms and the compounds themselves is expected to be established officially when various federal agencies, namely the Consumer Product Safety Commission, releases its findings this Fall.

Experts are predicting that the Chinese economy will surpass Japan’s in the near future, which would make it the second largest in the world (behind the United States).  It is a time where Americans are growing wary of Chinese imports, which raises the obvious issue of whether U.S. regulations and standards of importation are what they should be.  In recent years, the U.S. has seen a flow of products that have been deemed unsafe.  The most recent (and perhaps most dire) consumer product to raise such concern is Chinese drywall.

The safety of consumers is paramount – primarily when children are implicated.  It is one matter if a product is tainted with “faulty” components, but when a good is tainted with a dangerous drug or harmful compound, a figurative line of tolerance is crossed if not crossed already due to simply being a “poor product”.  Furthermore, when the said product in question has the potential to harm children, the issue becomes exponentially more egregious.  Chinese drywall has elicited thousands of consumer complaints, some alleging health consequences.  Like many environmental hazards, children and the elderly may be especially prone to risk.

4.2 million tainted toys from China – aqua dots – were recalled in 2007 after they were found to contain a drug that induced sickness in children.  Other examples of faulty Chinese imports, as reported by the Washington Post, include apples preserved with a chemical linked to certain cancer, frozen fish loaded with antibiotics, and illegal pesticides found in mushrooms.

Federal agencies like the Consumer Product Safety Commission and Environmental Protection Agency are investigating thousands of complaints surrounding defective Chinese drywall and hope to bring some conclusivity to establishing a nexus.  Hopefully, the issue our nation is facing with regard to Chinese drywall will serve as a wakeup call for increased pressure on foreign manufacturers to comply with healthy standards of consumer goods.

If you suspect your home was built with defective Chinese drywall you are probably quite worried. You do not know where to get relief, who to speak with, or what to do next. This is a difficult position to be in, but you are not alone. In fact, you may be surprised to find out that others in your area are facing the same situation.

Was your home built by the same builder as your neighbors? Did all the homes in your plan go up at the same time? If you answered yes to both of these questions, and your home has Chinese drywall, there is a very good chance that your neighbors also have this problem. Of course, the only way you will ever know for sure is to ask. Believe it or not, some people don’t know anything about Chinese drywall and continue to live with this problem because they know no better.

If both you and your neighbors find that Chinese drywall was used in your homes, you can begin to expand your reach to see just how many others in your area are victims. The more backing you have the easier it becomes to go after the builder and/or supplier for compensation.

It is important to know if your home was built with Chinese drywall. One step in answering this question is asking your neighbors if they have noticed anything wrong with their property. You may be surprised to find that you are far from alone.