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Proposed $248 Million Chinese Drywall Deal Unfair, Objector Says

Dec. 2, 2019, 4:57 PM

A $248 million settlement proposal between homeowners and Chinese state-linked companies that made allegedly sulphurous drywall doesn’t cover the homeowners’ remediation costs, and the proposed allocation method is unfair, a plaintiffs’ attorney told a federal court in Louisiana.

The proposed deal with Taishan Gypsum Co. and related companies would provide members of one class action less than half their remediation costs despite a posture that would allow them to recover fully after trials on damages only, attorney James V. Doyle Jr. said. And plaintiffs in a second class action would recover less than 10% of their remediation costs, he said.

The U.S. District Court for the Eastern District of Louisiana, which oversees the consolidated litigation, shouldn’t approve the settlement proposal in its current form, Doyle said Nov. 27 “on behalf of all plaintiffs” affected by the agreement’s terms.

The cases arose from a shortage of building supplies during reconstructions following Hurricanes Rita and Katrina, which also coincided with a housing boom. Builders 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.

Doyle said a special master, Calvin Mayo, developed an allocation model that distinguishes among homeowners in a way that isn’t consistent with the terms of the agreement, favoring members of one class action and homeowners with certain markings on their drywall.

Participating claimants would benefit more in the likely outcome of a trial than under the settlement, Doyle said. And the deal doesn’t satisfy the homeowners’ main goal, “to recover enough monetary damages to fix their respective homes,” he said.

Judge Eldon E. Fallon gave the agreement preliminary approval in August. Doyle filed the objection in advance of a Dec. 11 fairness hearing.

Herman, Herman & Katz LLC and others represent the plaintiffs. Baker Donelson Bearman Caldwell & Berkowitz, Phelps Dunbar, and others represent the defendants.

Doyle practices in Birmingham, Ala.

The case is In re Chinese-Manufactured Drywall Prods. Liability Litig., E.D. La., MDL No. 2047, objection 11/27/19.

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; Patrick L. Gregory at pgregory@bloomberglaw.com