Bloomberg News

Chinese Drywall Maker to Pay Homeowners to Settle Suits

December 15, 2011

(Updates with company lawyer’s comments starting in sixth paragraph.)

Dec. 15 (Bloomberg) -- Knauf Plasterboard Tianjin Co., a Chinese drywall maker, agreed to pay at least $800 million to settle homeowner claims that faulty building materials contaminated their homes with corrosive sulfur fumes, plaintiffs’ lawyers said.

Knauf agreed to resolve claims involving about 4,500 properties that contain the tainted drywall, lawyers for property owners said today in an e-mailed statement. Homeowners said the faulty wallboard emits gases that corrode copper coils and electrical and plumbing equipment.

“KPT has agreed to provide thousands of families the opportunity to recover losses caused by KPT drywall,” Russ Herman, a New Orleans-based lawyer representing property owners, said in the statement.

The accord was announced today before U.S. District Judge Eldon Fallon in New Orleans, who is overseeing about 12,000 suits filed over the contaminated drywall that have been consolidated for pretrial evidence gathering. KPT is a subsidiary of Iphofen, Germany-based Knauf International, owned by Knauf Group.

The $800 million figure “is wildly speculative and premature given the settlement terms,” Greg Wallance, a KPT lawyer, said today at a press conference. “We are confident the figure will be considerably lower.”

The agreement didn’t contain a minimum or maximum number on the cost of repairing homes with the faulty drywall, Steven Glickstein, another company lawyer, said in a telephone interview.

‘Landmark Settlement’

“Homeowners who can show they have KPT product in their homes will be covered and the costs of those repairs” are covered by the agreement no matter how much the total cost may be to the company, Glickstein said.

The agreement is a “landmark settlement” and a “win- win” proposition for KPT and homeowners, Glickstein said at a press conference earlier today. “We think it’s in the best interest of the homeowners” and will enable KPT to focus on making and selling building materials, he said.

More than 1.1 million sheets of harmful Chinese drywall were used in Louisiana rebuilding projects after hurricanes Katrina and Rita struck in 2005, according to state Attorney General James Caldwell.

Today’s settlement covers both residential and commercial properties, Herman said.

The amount of the settlement will range from $800 million to $1 billion, depending on the number of homeowners who can prove they had KPT drywall, Herman said today at a press conference.

Bidding Process

KPT payments won’t reach that level, Wallance countered. Many plaintiffs don’t have KPT drywall in their homes and actual costs for remediation “will be controlled through a competitive bidding process,” he said. “Those who select a cash option will receive a discounted settlement value.”

About 55 percent of the property owners who may benefit from the settlement live in Florida while 35 percent are Louisiana residents, Wallance said in a telephone interview today.

The settlement doesn’t cover about 6,000 to 8,000 property owners, Herman told the court today. Those plaintiffs are “victims of corporate malfeasance in China,” he said.

The remaining cases involve drywall made in China by units of Taishan Gypsum Co. and Beijing New Building Materials Public Limited Co., the judge said. Fallon said he will travel to Hong Kong to supervise depositions in the suits.

Other drywall suppliers, such as Miami-based Banner Supply Co., agreed in June to pay about $55 million to settle claims over the contaminated building materials made in China.

The consolidated case is In re Chinese-Manufactured Drywall Products Liability Litigation, 2:09-md-02047, U.S. District Court, Eastern District of Louisiana (New Orleans).

--With assistance from Margaret Cronin Fisk in Southfield, Michigan. Editors: Peter Blumberg, Fred Strasser

To contact the reporters on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net; Allen M. Johnson Jr. in New Orleans at allenmct@gmail.com.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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