Chinese Drywall Case: Builders Get a Break

A court decision in Florida recently exonerated homebuilders who'd used Chinese drywall, since they were not within the distribution chain. But they are not completely off the hook.

While builders won't be held to rules of "strict liability" for homes impacted by allegedly toxic Chinese drywall, this ruling is not a "death blow" to anyone's claims, says one of the lead attorneys for the homeowners, who've filed suit to gain compensation for their uninhabitable homes.

These cases have been wending their way through both the federal and state courts for the last few years; meanwhile, many homeowners have been forced to move into temporary housing and wait to find out who will pay to have the drywall removed, as well as for other repairs, so they can again live in their homes.

Regarding the court ruling, Attorney David Durkee said the "strict liability" issue would have been easier to prove because all one needs to show is that the product sold was defective. In his ruling this week, Judge Glenn Kelley of the 15th Judicial Circuit in Palm Beach County, Fla., decided that builders were a servicer and not a seller, distributor or manufacturer, so the "strict liability" rule did not apply to them. Chinese manufacturers of drywall have pretty much ignored U.S. courts.

Builders may still be on the hook legally by two other legal arguments:
  • implied warranty, which means that homeowners will need to prove that the house is not habitable.
  • breach of contract, which means that a builder must sell a home in good quality and habitable condition.

Durkee thinks homeowners have a good chance to win on these issues because the plaintiffs can prove that the Chinese drywall is "toxic and destructive."

Search Homes for Sale Browse through photos of millions of home listings or search foreclosure listings Durkee explained that right now Judge Kelley is ruling on the "omnibus issues." These are the major issues that will set up the "rules of the road" for all the pending litigation. Both plaintiffs and defendants now have more clarity as to what legal theories will stand as each case is individually tried.

One more issue involving the legal liability for drywall installers will be taken up next week.

Installers are in two groups: one group is made up of the servicers who put in the drywall and Durkee expects that they too will not be held to the "strict liability" rule. The second group is the drywall contractors who sell drywall as well as install it. This group may have more liability under the "strict liability" rule.

After the final omnibus hearing next week, Durkee expects the judge to set court dates for the first cases, which will be those who, because of age, need expedited hearings. Durkee thinks that the first actual cases could be heard as early as next May. He expects the judge to set dates next week or in early December.

But at least all the plaintiffs can finally see a light at the end of the tunnel, as the major motions that set the rules of the road are completed.

One other key decision that is moving through federal courts is whether or not insurers or their insured will have to pay the claims. Durkee thinks that settlements will move much faster once that issue is decided.

"We're getting greater clarity" with every ruling, Durkee explained. Once it's known who will be responsible and for how much, all responsible parties will likely look to settle and cut their court costs and attorneys' fees. So the individual drywall cases might never be heard.

Victims saw some evidence of how settlements might play out when German-based drywall manufacturer Knauf Plasterboard Tianjin agreed to pay for repairs to 300 homes in four states as part of the massive federal multidistrict litigation. Durkee says that 34 of the victims he's working with are eligible for this settlement.

HousingWatch talked with Durkee as he was taking scientific measurements in homes of the victims he's helping. He expects that the evidence he is now collecting will help prove that the homes are uninhabitable.

For the victims whose lives have been turned upside down, the faster these issues get settled the better. But now that the "omnibus issues" are almost complete, they may finally get a day in court -- or even better for them, a settlement that allows them to rebuild their homes and their lives.

Lita Epstein has written more than 25 books including "The Complete Idiot's Guide to Personal Bankruptcy."


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