Bloomberg Law
Free Newsletter Sign Up
Login
BROWSE
Bloomberg Law
Welcome
Login
Advanced Search Go
Free Newsletter Sign Up

Chinese-Drywall Settlement Objectors, Opt-Outs Face Long Odds

Dec. 9, 2019, 10:00 AM

Homeowners who object to a proposed $248 million settlement with Chinese-state-linked companies that made allegedly sulphurous drywall will soon have their day in court, but they face long odds in their wishes for a greater fund or a different allocation, attorneys involved with the litigation say.

Those opting out of class actions consolidated in federal court in Louisiana to instead pursue individual litigation against Taishan Gypsum Co. and related companies also face significant costs and risks, the attorneys say.

At least 22 individuals and couples who own or owned homes affected by the allegedly toxic drywall have now objected to the settlement, and 92 have asked to opt out, according to new filings in the U.S. District Court for the Eastern District of Louisiana. The court, which oversees the consolidated litigation, will hold a fairness hearing on the settlement proposal Dec. 11.

The total number of claims by known class members covered by the settlement is 3,689, according to Richard J. Serpe, a plaintiffs’ attorney who helped negotiate the deal.

The cases arose from a shortage of building supplies during reconstructions following Hurricanes Rita and Katrina, which also coincided with a housing boom. Builders then turned to Chinese sources for drywall.

But thousands of homeowners, especially in southern states, began to complain of foul smells, property damage, and health problems. Many homes have required significant rebuilding.

Attorney James V. Doyle Jr., who represents some of the objectors, and almost all of the would-be opt-outs, told the court Nov. 27 that the proposed settlement fund doesn’t cover the homeowners’ remediation costs. And he says the proposed allocation method is unfair. Some plaintiffs would recover less than 10% of their remediation costs, he said. Doyle’s practice is based in Birmingham, Ala.

The numbers show endorsement of the deal, according to Serpe, one of the national class counsel. Some 97.4% of plaintiffs support the class settlement, he said. Less than half of one percent have objected, he said.

To plaintiffs who say the pot should have more money, he says that the negotiating team “exhausted our ability to litigate and negotiate this case.” The settlement is the best that was possible in mediation with Taishan, he told Bloomberg Law.

Attorneys who represent objectors and plaintiffs opting out, however, say there would be more of them but for the difficulties plaintiffs face, particularly in opting out and suing on one’s own.

“Chasing these people in China is a real bang-your-head-on-the-wall exercise,” said Kevin O’Bryon, who represents a couple who intend to opt out. “There’s no small amount of costs in just getting a suit served overseas,” he said. Even if you get a default judgment, collecting on it can be difficult, he said.

Andrew Lemmon, who represents one objector, said there’s “a huge obstacle” in bringing claims against a Chinese company. The costs of litigation were the whole reason for the class-action approach in the first place, he said.

“My client fell into a crack” in the settlement, Lemmon, with the Lemmon Law Firm in Hahnville, La., said. “Some people ended up not getting as much as they need,” he said. “A lot of people are in the same boat.”

Serpe, who practices in Norfolk, Va., said he doesn’t think there’s likely to be movement in how the settlement funds are allocated.

The model was published, and letters with estimated recoveries were sent to plaintiffs, who relied on the information, he said. If the allocation were restructured, it would have to be republished, with a corresponding delay, he said. The litigation has been pending for 11 years, he said.

Even plaintiffs with default judgments in hand are better off not going to trial individually, he said. In litigation with the class, law firms representing Taishan heavily contested every issue and litigated “on a receipt-by-receipt basis for prior repairs,” he said.

An attorney for the Taishan defendants didn’t respond to a request for comment.

The case is In re Chinese-Manuf. Drywall Prods. Liability Litig., E.D. La., MDL No. 2:09-md-2047, objections filed 12/4/19.

To contact the reporter on this story: Martina Barash in Washington at mbarash@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Steven Patrick at spatrick@bloomberglaw.com