Wall Street Journal on Chinese Drywall: Homeowners’ Class-Action Lawsuit Gains Traction With Release of Incriminating Documents

If you own or occupy a home in Florida, you’ve likely been privy to the ongoing Chinese drywall catastrophe. The construction material is sickening thousands of homeowners, literally corroding their homes, and driving them from an uninhabitable abode they’re still paying a mortgage on. Litigation against the manufacturers, exporters, suppliers, and construction companies using the material, of course, is ongoing; but it just got a major boost with the release of documents which show that parties involved in the export and supply chain knew about the issue – and may have paid to keep it under wraps. The Wall Street Journal reported on the development today. In the article, Victor Diaz, an attorney with our client Podhurst Orseck who is representing 152 Florida homeowners in a high-profile class-action lawsuit, cites the documents as clear evidence that the companies were aware of and concerned about the dangers of their product. He also released seventeen emails from the companies supporting his case.

Documents Shift Attention to Manufacturer in Drywall Case

by Robbie Whelan

Documents released late last week in ongoing litigation related to defective Chinese drywall is shifting more attention to the role played by one Chinese manufacturer, Knauf Plasterboard Tianjin Co., and its German affiliate. The documents came to light during the pre-trial phase of a class action suit brought by 152 Florida homeowners against builders, installers and suppliers of Chinese-made drywall. KPT is one of several companies in China that exported millions of square feet of drywall to the U.S. during the housing boom, and have since been flooded with complaints that the drywall emits sulfurous odors, corrodes electrical wiring and causes respiratory problems. Although KPT isn’t specifically named as a defendant in the suit, one of its suppliers, Banner Supply Co., is named.

On Friday, a Miami-Dade circuit court judge unsealed a 2007 confidential settlement agreement where KPT agreed to pay Banner $557,000 to replace defective drywall with the condition that Banner “not make statements regarding any perceived or actual smell or health risks relating to Knauf Tianjin plasterboard,” to any firm, person, or news media outlet.

Attorney Victor Diaz, who represents the 153 Florida homeowners, says the disclosure shows that KPT was aware of the problem and concerned about the potential fallout. “We can demonstrate a concerted effort to conceal knowledge of this defect from the general public,” he said.

Donald J. Hayden, a partner with Baker & McKenzie LLC, a firm that represents KPT, declined to comment about the agreement except to say “the document speaks for itself, and we have not objected to its release.”

Other documents released earlier in the week appear to establish a closer link between KPT and its German affiliate than the two companies have contended. In a series of 17 email messages from 2006, released by Mr. Diaz, an employee at Knauf Gips KG in Germany, KPT in China and several U.S.-based customers discuss the mounting complaints about the drywall. In one email, a KPT employee in China worries that “the situation … is out of [the distributor’s] control, it will be a big problem not only in Miami but all over the USA market, maybe cover thousand [sic] of houses.” Read more from this Wall Street Journal article.