Wolfe Law Group’s own Scott Wolfe, Jr. provides the leading quote in a recent article from HousingZone.com: Homeowners Increasing Suing Local Builders. Scott gave this quote to the publication:

The best and quickest way to get the drywall out is to go after the builder, who ultimately has to live up to his warranty. If the consumer tinkers with class-action lawsuits that can drag out for months, their warranties start to expire, and their chances of getting something from the builder are slimmer.

If we’ve said it once on this blog, we’ve said it a thousand times (here, here, here, here and here).

While class action suits have their purpose, it presents real challenges to homeowners who are interested in getting the Chinese Drywall out of their property.

The class action suits have their warts, and homeowners may find a better remedy by filing a direct action against their builders, suppliers and insurers.

With every day that passes, however, deadlines are drawing closer. The one year deadline for insurance claims and torts. The 3-4 year deadline with claims in redhibition. And the 1, 2 or 5 year deadlines associated with construction warranty claims.

The worst news about the deadlines being that many, if not most of the statutory periods begin when the drywall was delivered or installed…and not when the homeowner learned of the problem.

All was quiet with regard to individual lawsuits against builders and suppliers, but recent news reports indicate that the remedy is gaining some steam.

The article from HousingZone.com is not alone. The Times Picayune recently reported that homeowners are more frequently suing builders, and Baton Rouge’s Advocate had the same analysis.

Could an avalanche of Homeowner v. Builder suits be on the horizon?

If you’re interested in learning more about bringing a suit against your builder, or your construction company is interested in bringing suit its suppliers and insurers, contact Wolfe Law Group today.

In previous posts, we have discussed the New Home Warranty Act and how it relates to Chinese Drywall damages. However, this Act only applies to new homes.

As to the thousands of post-Katrina renovations and re-models that did not involve a new structure, homeowners must find remedies against their builders elsewhere.

Generally Speaking…Contractors Are Responsible for Defects in Materials and Workmanship

In construction contracts, Louisiana law implies that the contractor will construct the work in a good and workmanlike manner, the work will be suitable for its intended purpose, and the work will be free from defects in workmanship or materials. Peterson Contractors, Inc. v. Herd Producing Company, Inc., 811 So.2d 130 (2 Cir. 2002).

An owner seeking to recover from a contractor bears the burden of proving: 1) both the existence and nature of the defects; 2) that the defects were due to faulty materials or workmanship; and 3) the cost of repairing the defects. Guy T. Williams Realty, Inc. v. Shamrock Construction Company, 564 So.2d 689 (La. 5 Cir. 1990).

Therefore, under Louisiana law, the general rule is that a contractor is responsible for defects in workmanship and/or materials.

Articles 2762 and 2969

Aside from the general concept that contractor’s are responsible for the quality of its workmanship and materials, the Louisiana legislature has given us two articles that set forth a contractor’s liability for its work.

Article 2762: Liability of contractor for damages due to badness of workmanship

If a building, which an architect or other workman has undertaken to make by the job, should fall to ruin either in whole or in part, on account of the badness of the workmanship, the architect or undertaker shall bear the loss if the building falls to ruin in the course of ten years, if it be a stone or brick building, and of five years if it be built in wood or with frames filled with bricks.

Article 2769: Contractor’s liability for non-compliance with contract

If an undertaker fails to do the work he has contracted to do, or if he does not execute it in the manner and at the time he has agreed to do it, he shall be liable in damages for the losses that may ensue from his non-compliance with his contract.

Applying The Rules to Chinese Drywall

Application of these rules and articles to Chinese Drywall is not too difficult.

Although we’re not yet certain as to what exactly is causing the damages associated with Chinese Drywall, it is apparent that Chinese Drywall is a defective material, and that it is causing the ruin of property.

Accordingly, homeowners should be capable of seeking remedy against builders for damages and ruin associated with Chinese Drywall, regardless of whether the drywall was supplied or installed by a subcontractor of the builder (art. 2768), and regardless of whether the builder knew or had reason to know of the defect.

Warranty Provisions in Contracts

While the New Home Warranty Act cannot be waived or limited, this is an exception to the general rule in Louisiana that allows limitations and waivers.

Art. 2503 allows parities to increase, exclude or limit warranties. In Degeneres v. Burgess, the Court stated that the right to limit or waive stautory warranties extends to articles 2762 and 2769.

Therefore, it’s important for homeowners to review the contracts with their builder to determine the exact warranty period and terms applicable to their contract.

Last week, the Wall Street Journal reported that powerhouse builder Lennar Corp. has identified 400 homes in Florida with Chinese Drywall, and has set aside $39.8 million to repair the homes.

This is an enormous amount of money, and it should be a wake-up call to builders and homeowners who have yet to clash over the Chinese Drywall saga.

Would Lennar Co. really spend $39.8 million to repair a problem that wasn’t its fault? Or of which it didn’t have liability?

The answer is obvious, and here is the wake-up call. To homeowners: Seek remedy from your builders. To builders: Prepare to be sued.

Indeed, time is continuing to tick without an onslaught of suits between builders and homeowners, but one has to believe that this is only a matter of time. Time, however, is on neither party’s side.

Homeowners are facing steadfast deadlines in any warranty claims made, or claims in redhibiation. If they wish to seek damages from any insurer (theirs or the home builders), they are likely facing quickly approaching deadlines.

Builders have deadlines themselves. Once they are sued by homeowners, builders will necessarily turn to their insurance companies and suppliers for reimbursement or indemnity. These suits also have impending statutes of limitations, and questions will loom as to whether the builder successfully mitigated its damages.

Lennar Corp. has been a leader among builders from the get-go on the Chinese Drywall problem.

As Chinese Drywall reports became widespread, Lennar Corp. had already begun examining the problem, replacing faulty drywall, relocating residents, and asserting claims against its subcontractors, suppliers and insurance policies.

Lennar Corp. has a lot of liability in this Chinese Drywall crisis, but in the end, they will likely have a lot of protection. That is due to their foresight and good management of the situtation.

Can the same be said for your company?

Baton Rouge’s The Advocate ran a story on June 29th titled “Drywall problems leave many in lurch.”

The story discussed how so many homeowner victims of Chinese Drywall are left in the balance of class action legal battles, failed construction warranty claims and legislative stalemates.

One person interviewed, Darryl Ledet from Praireville, stated that his home was built with Chinese Drywall by Sunrise Homes, and that when he contacted the company about finding defective drywall, “the company sent a letter saying it was not responsible for further repairs because, under Louisiana law, product defects are covered under a one-year warranty.” Ledet’s warranty, the article states, had expired.

Did Ledet’s warranty expire in one-year? Is his cause of action against Sunrise Homes hopeless?

Louisiana New Home Warranty Act

Since Ledet’s homes appears to be a new home, the New Home Warranty Act would likely apply.

The Louisiana New Home Warranty Act provides the “exclusive remedies, warranties, and preemptive periods as between builder and owner…and no other provisions of law relative to warranties and redhibitory vices and defects shall apply.”

As such, if a home qualifies as a “new home” for the purposes of the act, and has Chinese Drywall, the homeowner’s remedy against the builder (and its insurer) will likely lie exclusively in the New Home Warranty Act.

According to La. R.S. 9:3144, every builder warrants the following to the owner, as it may apply to Chinese Drywall claims:

(1) That the home will be free from any defects due to defects in materials or workmanship not regulated by building standards for 1 year.

(2) That the home will be free from major structural defects due to other defects in materials or workmanship not regulated by building standards for 5 years.

1 Year or 5 Years?

One of the first questions to answer with respect to Chinese Drywall damages is whether the applicable warranty period would be 1 year or 5 years.

Since most Chinese Drywall was installed between 2002 and 2008, homeowners first discovering the damage now will have difficulty proceeding against their builder if the 1 year period applies. If the 5 year period applies, builder liability is more likely.

To determine whether the 1 year or 5 year period applies, we must under the meaning of the term “major structural defects.” The definitions portion of the act (9:3143) provides as follows:

Major structural defect’ means any actual physical damage to the following designated load-bearing portions of a home caused by failure of the load-bearing portions which affects their load-bearing functions to the extent the home becomes unsafe, unsanitary or is otherwise unlivable:

(a) Foundaiton systems and footings; (b) Beams; (c) Girders; (d) Lintels; (e) Columns; (f) Walls and partitions; (g) Floor systems; (h) Roof framing systems.

In hopes of having the 5 year warranty apply, one could argue that Chinese Drywall damage is a “major structural defect” as contemplated by the Act because it is actual physical damage to the walls, which affects their load-bearing function to the extent the home becomes unsanitary or otherwise unlivable.

Of course, there is some question as to whether damage to sheetrock is actually damage to a “load-bearing portion” of the home.

A similar question came before the Louisiana First Circuit just a few weeks ago in Hutcherson v. Harvey Smith Construction, Inc., 7 So.3d 775 (1 Cir. 2009).

In the Hutcherson, the home had faulty or failed roof flashing causing leaks. The contractor argued that this was not the failure of any load-bearing portion of the home, and the homeowner argued that the roof as a whole served a load-bearing function, thus qualifying any damage to it as a “major structural defect.”

The court agreed with the homeowner.

HSC’s own expert civil engineer, Dr. Jerry Lynn Householder, testified that roof decking in a house is part of the framing [Pg 7] system and serves a structural function. Dr. Householder further testified that the rotten decking was caused by improper roofing design which allowed water to pool and leak under the shingles. The Hutchersons’ expert roofing consultant, Patrick E. Heil, testified [*10] that the damage to the Hutchersons’ home was not the result of normal wear and tear on a roof, but rather was the consequence of a faulty roof design or the way the roof was built. The trial court concluded that this type of damage was clearly contemplated by the NHWA in LSA-R.S. 9:3143(5) in which actual physical damage to roof framing systems is specifically enumerated as a major structural defect.

Based on this ruling, homeowners may have an argument that the damage to sheetrock and other building elements by the Chinese Drywall constitutes a ‘major structural defect,’ and therefore, that the 5 year warranty period applies.

Is Chinese Drywall Damage Exempt?

Once a warranty period is established, work is not complete in determining whether the New Home Warranty Act provides homeowners a remedy against their builder. Another question is whether the damage is specifically exempt from warranty.

La. R.S. 9:3144(B) lists 19 exemptions from the act. Here are some exemptions that may apply to Chinese Drywall damage:

(B)(4)(f): Any damage to the extent that it is caused or made worse by Dampness, condensation, or other damage due to the failure of the owner to maintain adequate ventilation or drainage.

(B)(14): Bodily injury or damage to personal property.

(B)(19): Mold and mold damage.

Remember, NHWA May Not Apply

Now that we have discussed the New Home Warranty Act to some length, remember that the Act may not apply to every home and every builder/homeowner relationship.

In post-Katrina Louisiana, much work was being performed to renovate damaged homes, and a lot (if not most) of the Chinese Drywall was installed into these projects.

If the Chinese Drywall was installed into an existing facility, the New Home Warranty Act would not likely apply.

On the Chinese Drywall Blog, we’ve frequently forecasted that homeowners will begin bringing suit directly against their builders for Chinese Drywall recovery.

This morning, the New Orleans Times Picayune reported that this is beginning to happen.

The article, titled Homeowners saddled with tainted Chinese Drywall are increasingly suing local builders for damages, suggests that “Louisiana home builders have increasingly become targets of litigation.” And the article profiles a Covington, Louisiana homeowner, Eric Carter, who sued his homebuilder Sunrise Homes.

Over the next few days here on the Chinese Drywall Blog, we will specifically analyze builder liability for Chinese Drywall claims, reviewing the relevant aspects of the New Home Warranty Act and other general builder warranties.

Remember also that Wolfe Law Group’s Scott Wolfe and Doug Reiser will be presenting at a Chinese Drywall seminar in New Orleans, LA on July 31, 2009. The seminar is for attorneys, builders, engineers, homeowners and anyone else affected or interested in the crisis. Read more about the seminar, and how to attend, here.

In the meantime, here are a few posts from our blog reviewing builders’ exposure to imported drywall claims, and explaining the differences between class action litigation and ordinary litigation:

• Builders Starting To Tango with Chinese Drywall Claims
• Builders World Apart on Chinese Drywall
• 3 Reasons Why Class Actions are Bad for Homeowners
• Are Builders Getting a Free Pass on Chinese Drywall Claims? Should They?

Wolfe Law Group’s general construction law blog, the Construction Law Monitor, published three articles over the past two weeks that analyzed the choices faced by builders, homeowners and construction attorneys involved with Chinese Drywall claims.

The three-part series of articles provides these parties with a useful discussion of the decisions that must be confronted as each deal with damages sustained by the installation and supply of tainted drywall.

The article series can be found under the Chinese Drywall Tag on the blog. Or by clicking on one of the following links, whereby each article is briefly discussed.

Builders
This article discusses issues related to making insurance claims, remedying the drywall problem within homes, the duty to mitigate damages and options available to the builder in litigation.

Construction Attorneys
This article discusses the role of class action suits in the imported drywall crisis, warranties and the role of builders in the suits, and how the duty to mitigate damages affects all parties.

Homeowners
This article discusses the choices facing homeowners who have tainted drywall in their homes. It examines the pros and cons of class action suits, individual litigation, and making insurance claims….as well as the ultimate unfortunate job that homeowner might be forced to take: fixing the drywall out of their own pocket (at least for now).

This blog is published by Wolfe Law Group, a construction law practice with offices in Seattle, WA and New Orleans, LA.

Thus far, the blog has focused a great deal on Louisiana news and law related to Chinese Drywall – and the reason is simple: The amount of imported Chinese Drywall in Louisiana is second only to Florida.

Further, Chinese Drywall was by and large imported into Gulf Coast states like Florida, Louisiana, Mississippi, Georgia and Texas.

While the state of Washington is clearly worlds apart from the Gulf Coast region…it’s not out of the woods insofar as Chinese Drywall in concerned. In fact, its among the 12 U.S. states who have imported at least 1 million pounds of tainted drywall from China since January 1, 2006.

A helpful graphic based on data published by the Herald Tribune shows that Washington has imported 2,437,491 pounds of Chinese Drywall since January 1 2006, which is enough to build approximately 270 homes.

As lawsuits gather stem in Florida and Louisiana, and across the Gulf Coast, Washington contractors and suppliers ought to remain viligent and cautious of Chinese Drywall claims.

Have questions about what to do if you installed or supplied tainted drywall? We wrote an Avvo Legal Guide on the topic here…and you can always contact Wolfe Law Group.

Centerline Homes (@FLNewHomes) – a Florida “Neighborhood Home Builder” is the latest contractor to face litigation related to Chinese Drywall.

The suit was filed as a class action, but is unlike other class actions in that it seeks recovery from the builder.

In a comment made to the press, Centerline Homes seems to feel a bit jaded by the Chinese Drywall situation in Floriday, blaming “plaintiff attorneys and the media” for fueling a “hysteria” over Chinese Drywall.

The lawsuit against Centerline Homes will likely be among the 10-15 class action suits set for hearing on May 27th before a U.S. Judicial Panel on Multidistrict Litigation. According to the TC Palm, the suit requests the following from builders:

• Replace all Chinese Drywall, as well as all wiring, pipes, building materials, furniture, appliances and household items ‘affected by sulfur emissions’;
• Have houses tested to make sure they are “sulfur free;”
• Pay homeowners for the loss in the value of their home;
• Give homeowners a lifetime, transferable warrantee on the homes;
• Compensate residents for all current and future health problems resulting from the emissions.

Clearly, tall orders for any builder, and cause for concern for any builders, installers or suppliers out there who supplied or installed Chinese Drywall.

Concerned and wondering what to do? Check out this how-to here.

As the Chinese Drywall crisis unfolded over the last few months, news reports were abound of class action litigation against large drywall manufacturers, but it appeared that builders were getting a “free pass” on liability.

Unfortunately, but inevitably, it appears the tide is changing.

Recently, the shoe dropped for Lennar Co., who was arguably the most predominate home building company facing Chinese Drywall claims. While Lennar Co. made every attempt to thwart litigation, suit was formally filed against them just last week, and they are now preparing a defense and examining applicable exclusions in their insurance policies.

However, large building outfits like Lennar Co. or South Kendall Construction Corp. are no longer alone as builder-defendants in Chinese Drywall claims.

Here are some examples from across the affected areas.

Flannigan v. Stafford Custom Homes, Inc.

Last week, a news station in North Carolina reported that a couple with Chinese Drywall had filed suit against their local builder: Stafford Custom Homes, Inc.

The plaintiff’s counsel in that case, Joel R. Rhine of Lea Rhine Rosbrugh & Chleborowicz was kind enough to share a copy of that complaint with the Chinese Drywall Blog, and its available to read here.

The complaint asserts the following claims against the homebuilder…and importantly, the homebuilder alone:

• Breach of Contract;
• Breach of Implied Warranties;
• Breach of Express Warranties;
• Negligence;
• Negligent Misrepresentation;
• Unfair and Deceptive Trade Practices

As mentioned, the suit against Stafford Custom Homes, Inc. is between the homeowner and the homebuilder only, and the plaintiffs did not bring suit against the subcontractor installer, the drywall supplier or the drywall manufacturer.

It will be interesting to watch this action progress, and especially to see how Stafford Custom Homes, Inc. defends itself in the case. Likely, a claim will be made against Stafford’s General Liability insurance policy, and an argument will ensue about the applicability of the pollution exclusion clause.

Further, the builder will be well-served to take a page out of the Lennar Co. defense book, and file suit against its supplier, installer and the drywall manufacturer.

The case is in Wake Count, North Carolina, and is captioned Flannigan v. Stafford Custom Homes, Inc., General Court of Justice Superior Court Division, No. 09CV006759.

We’ll monitor this case as it moves forward.

Pronto v. Venture Supply, LLC, et al.

In Virginia, another couple has brought a claim against their contractor individually, as opposed to a class action, suit. While the news report breaking the story doesn’t mention the contractors name, the couple also brought suit against Venture Supply, L.L.C., who is the purported supplier of the drywall.

Like Stafford Custom Homes, Venture Supply, L.L.C. is a self-proclaimed “locally owned” company.

The couple in this suit – Benjamin and Holly Pronto – are seeking more than $600,000 in damages associated with the Chinese Drywall contamination.

The estimate of damages by the Prontos is a haunting wake-up call to builders who have unknown exposure to Chinese Drywall claims.

Builders Mutual Insurance Company v. The Dragas Co.

This is another case out of Virgina, but unique in that here an insurance company has sued its insured.

The insured, The Dragas Co., is a Virginia builder who has installed Chinese Drywall in Virginia homes.

According to the report in The Virginian-Pilot, Dragas’ insurance company has denied coverage for Chinese Drywall damages, and has filed suit in federal court asking a federal judge to declare who is responsible for the drywall damages. Download the Complaint here.

Thus far, most news about Chinese Drywall litigation concerns class action suits and large building outfits like WCI or Lennar Co. In North Carolina, however, one news station is reporting a different type of claim, and a claim that we’ve foreshadowed here at the Chinese Drywall Blog.

A local couple in North Carolina has brought a direct action against its builder, Stafford Custom Homes, Inc., for the Chinese Drywall damages. The suit is one of the first – if not the firsts – publicized lawsuits whereby a homeowner has directly brought suit against their builder.

Stafford Custom Homes, Inc. is a local N.C. builder like many builders across the country who may be victims of the Chinese Drywall crisis. On its website, it describes its business as follows:

A developer and builder who values family and creates quality communities that enrich the family lifestyle

It’s nearly certain that Stafford Custom Homes – like so many other local builders – innocently installed this Chinese Drywall. Today, however, they are facing complicated litigation and a potential hefty liability to the homeowners.

It will be interesting to watch this case unfold, and especially to see whether the builder’s GL insurance covers the claim or asserts non-coverage under the policy’s pollution exclusions.

Read a copy of the complaint here: Flannigan v. Stafford Custom Homes, Inc.