Recently in Chinese Drywall legal news is Judge Eldon Fallon’s goal to try the first Chinese Drywall case by the end of 2009.   While I applaud Judge Fallon for his ambition, and do believe that the issues are time-sensitive and should be litigated quickly and aggressively, I think the promise is an empty one.

Trying a Chinese Drywall class action case in 6 months is frankly impossible, and homeowners should not let this news get their hopes up.

A class action specialist in Florida, Ervin Gonzalez, was quoted in an article about Judge Fallon’s intentions saying the following:

Fast-tracking is an understatement. It’s a rocket docket. And he means business.   He wants the first case tried by the end of the year, and he wants an inspection of every home. He wants to be able to get to the bottom of the problem.

Here’s the obvious problem:  He can’t get to the bottom of the problem in the next 5 or 6 months.

The problem is complicated, and the science is in its infancy.   Leading scientist are unsure of whether the problem can be remediated, or whether full replacement of sheetrock is required.   Leading scientist are also unsure about what is actually causing the problem, and whether even replacement of the contaminated sheetrock will be enough to solve the problems.

This is not to mention some serious legal hurdles:  (1) Discovery; (2) Getting all the Defendants on the same page; (3) Identifying all the Defendants; (4) Dragging foreign manufacturers into Judge Fallon’s court.

Judge Fallon’s recent statement is sensational news, but it is false hope for the homeowners, builders and suppliers who are struggling to resolve their Chinese Drywall problems.   The only thing that has happened in his court is the allocation of attorneys fees and attorney leadership – which has nothing to do with the substantive matters.

Deadlines to file suit against builders, subcontractors and insurers are ticking away.  Homeowners, Builders and Subcontractors are all affected by these deadlines, and it’s important that they all make their claims as immediately as possible to avoid the expiration of these claims.

There are problems with class action litigation as it relates to Chinese Drywall damages.  Judge Fallon’s impossible 6-month deadline only underlines those problems.

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.

We authored a legal guide on Avvo.com about what Builders & Suppliers should do If They Have Installed or Supplied Chinese Drywall.

The folks at Coastal Contractor magazine highlighted another such “guide” from attorneys at Wood Smith Hening & Berman, LLP.    The useful guide is titled “Chinese Drywall Personal Injury Claims: Lessons from Prior Mass Torts.”

While our discussion focused on practical choices facing builders and suppliers who should move quickly to mitigate their damages, involve insurance and retain counsel….this guide focuses on the mass tort aspect of the Chinese Drywall claims.

A tort – for the non-lawyer readers – a body of law that addresses, and provides remedies for, civil wrongs not arising out of contractual obligations.  Usually, they are commonly referred to as “personal injury” damages.

As the authors in the Mass Torts guide discuss, the Chinese Drywall claims are interesting in that they present construction defect claims & tort claims.    The authors suggest that builders, suppliers and other effected parties should learn from prior mass tort cases in preparing their defenses.

The thesis is good, and useful for both construction attorneys and construction industry participants faced with these claims.  It ties in to previous discussions here at the Chinese Drywall Blog about whether Class Actions are a right fit for drywall claims and about builder exposure in the claims.

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.

A few posts here at the Chinese Drywall Blog has hinted to this post – now, though, we’re going to lay it out there.

Lately, the class action legal community has been abuzz about Chinese Drywall, and class action suits have been lodged in at least three states.   As this situation unfolds, however, some attorneys are beginning to question whether class action litigation is the best vehicle for homeowners to bring these claims.

Here are the top 3 reasons why Chinese Drywall class action suits are bad for homeowners:

It Won’t Replace Drywall…Or Resolve Itself For Years

The class action suits have mostly named huge foreign manufacturing companies responsible for creating or exporting the defective drywall.  It’s virtually guaranteed that these large-scale suits won’t resolve themselves – much less get properly organized – for years.

Moreover, during the interim period homeowners will not receive any help in getting the defective (and potentially dangerous) drywall out of their homes.

Read more about this problem on Stark & Stark’s Construction Litigation Law Blog, under the article captioned: “Chinese Drywall Class Action Suit May Not Help Homeowners For Years If Ever.”

There Are Collection Problems

Just this morning at the China Law Blog, Dan Harris asked those involved with the class actions suits to “Show [Him] The Money.“   And based on his experience with foreign judgments, here is what he had to say about the potential recovery by Chinese Drywall class plaintiffs:

The US plaintiffs are not likely going to be able to collect anything from the Chinese defendants by suing in them in the United States and collecting from the German defendants is likely to prove difficult as well.

After all the legal complexities and procedural hurdles are dealt with (read: time and money), if the class action plaintiffs are then able to persuade a court that these foreign manufacturers are liable…it might simply be downright difficult to enforce those civil judgments.

Time Is Ticking

Finally, time is now ticking on Chinese Drywall claims.   The class action suits may be giving builders, suppliers and homeowners a bit of false security that all will be well with respect to these claims, allowing the statute of limitations on potential claims and defenses to steadily approach a closing date.

For homeowners, signing up with a class action attorney may give them a false sense of security that their claim is being properly asserted and handled.

However, is the class action attorney sending certified letters to the builders under the New Home Warranty Act?  Is the class action attorney asserting a claim under a tort or contract theory against the builder / installer?  Are homeowners mitigating their damages?

For builders, installers and subcontractors, no news feels like good news.

However, since they are not named in a class action, and suit is not brought against them, they are not mitigating their own damages, asserting necessary defenses, or bringing claims they may have against suppliers and manufacturers.

The shoe has dropped for one builder who has been working hard to avoid entanglement in the Chinese Drywall defective drywall class actions.    According to reports all over the web, Lennar Co. has been officially named in a Florida class action suit over defective drywall.

The significance of Lennar Co.’s involvement with the class action is fairly great, as it begs the question of what exactly distinguishes it from smaller builders who may have also installed Chinese Drywall in homes.   Will these smaller builders soon be named in class actions as well?

It also begs the question of whether class action suits are the answer to homeowner’s woes in the Chinese Drywall crisis.   The question has been hinted here, and written about by Donald Brenner at the Construction Litigation Law Blog.

With regard to the class action suit, Lennar Co. said it had “already established reserves for the estimated cost of replacing the drywall” it has confirmed to be defective Chinese product “to the extent such costs are not covered by insurance.”

As the risk and exposure of builders opens up, the role of a company’s GL insurance will be examined.   More on this later…

Across the county, each state has some type of statute or jurisprudential rule stating that every party to a dispute is burdened with the duty to “mitigate its losses.”   In addition to the legal requirements, this duty shows up contractually as well, and most famously in insurance contracts.

Here is what the Louisiana Civil Code says about mitigation in article 2002:

An obligee must make reasonable efforts to mitigate the damage caused by the obligor’s failure to perform.  When an obligee fails to make these efforts, the obligor may demand that the damages be accordingly reduced.

Earlier this week, we discussed whether builders were getting a “free pass” on the Chinese Drywall defect claims since most affected homeowners have thus far sought remedies through class-action litigation.   In essence, we were alluding to a question clearly posed by Donald Brenner at the Construction Litigation Law Blog:  How does a class action suit help me get the defective material out of my home?

Insofar as the Duty to Mitigate is concerned, how builders, suppliers and homeowners act now is important to how they will remedy this situation.

Sooner or later, insurance companies are going to get involved with these claims, and individual actions are going to be filed against builders and suppliers.   When this happens, there will be questions of whether each party has fulfilled their duty to mitigate.

Here are some example issues:

•  If the imported drywall causes health problems, and a builder / supplier knows it installed the drywall in certain homes.  Do they have a duty to notify the homeowner of the danger, to avoid the homeowner from getting sick or sicker?

•  If defective drywall has ruined approximately 10% of electrical wiring and 25% of the building studs as of today, who is liable for additional damage if the drywall stays in the home is allowed to continue damaging building elements?  In 2 years, if 75% of electrical wiring and 75% of building studs are ruined, is it the homeowners fault for not fixing the drywall problem when it arose?

•  Under the same scenario, will a homeowner be responsible for increased damage if they fail to report the problem to their builder to allow the builder to fix it at that time?

Contact A Construction Litigator

As Mr. Brenner discusses on the Construction Litigation Law Blog, class action suits may not help homeowners for years….or ever.   The simple phone call to a class-action attorney puts your name on their list, but those class action attorneys will not work to get your home repaired in the immediate future…and its likely that they will not help you take precautions as per your duty to mitigate.

Homeowners and condominium associations, contact your builder and exercise your rights under warranty and redhibitation laws while you still have time.

Builders and contractors, investigate your duties under warranty and defective construction laws, contact your insurer, and consider making claims against your suppliers and installers.

All in all, contact an experienced construction litigation attorney to get advice on how to deal with this volatile issue.

Chinese Drywall  is all the rage in construction news across Florida, Louisiana and the Gulf South.   While some reports have discussed builder liability, the majority of news coverage relates to the potential health effects of the imported drywall and the class actions being filed by plaintiffs attorneys across the country.

All of this news and activity leaves two things curiously out of the conversation:

1)  How are homeowners going to get this drywall out of their homes; and

2)  Should builders be called upon to replace the defective materials and damages?

Class Actions Aren’t Getting the Drywall Out

Right now, class action attorneys across the Gulf South are collecting names for mega-product liability lawsuits that could last for years.  In the interim, however, the class action suits aren’t likely to get the Chinese Drywall out of homes.

So, what are homeowners doing about getting the drywall wall out of their property?   What can they do?

Well, unfortunately, the answer to this question leads to the next section of this post, and precisely the reason we’re asking whether builders are getting a ‘free pass’ on Chinese Drywall claims.

It seems that realistically, the only way a homeowner is going to get rid of defective drywall is to either (a) replace it themselves; or (b) contract their builder and make a warranty claim.

The class-actions are focusing on product liability claims against the mega-manufacturers, and therefore, are not assisting their clients with option (b).   Since they are tied up in class action litigation, this could leave homeowners literally stuck with the less desirable option (a).

Where Builders Fit In

Builders, local suppliers and other involved parties – while victims themselves – appear to be largely slipping through the cracks in this Chinese Drywall crisis.

Granted, some large builder outfits like Lennar Co. have been involved with litigation, and have even taken the initiative to repair defective drywall.   In large part, however, perhaps due to the direction of press on imported drywall, it seems that affected homeowners are contacting class action attorneys and not their contractors.

Should builders be at the center of Chinese Drywall complaints?   And notwithstanding this question, should homeowners be at least contacting their builders to take advantage of their warranties, their builders’ insurance policies and more?

More to come…