Chinese Drywall Ruling Lifts Builders’ Prospects

Did builders know? That’s the central question at the heart of a Chinese drywall-related court ruling made public Wednesday.

Judge Glenn Kelley of the 15th Judicial Circuit in Palm Beach County, Fla., said that builders and installers can only be held liable for “negligence” in faulty drywall cases if they had actual or implied notice of a defect in the Chinese manufactured drywall at the time of construction. Plaintiffs must prove that the builders and others should have known the drywall was defective. (This is the judge’s second seemingly pro-builder/supplier ruling.)

While the ruling affects only Palm Beach County, both sides hope it will sway court decisions being made across the Sunshine State and nationwide, particularly in Louisiana’s high-profile multi-district litigation, which consolidated federal drywall cases brought by thousands of aggrieved homeowners.

Builders, suppliers and others involved with construction say there’s no way they could have known that the drywall being used would end up emitting a rotten-egg odor and causing appliances to fail. This, they say, should give them some protection in lawsuits swirling over the issue.

“There is little evidence that many builders or installers had any knowledge — actual or implied — about problems with Chinese manufactured drywall until they were notified of such issues by the plaintiffs themselves — years after construction was completed,” said Stacy Bercun Bohm, a partner with law firm Akerman Senterfitt, which represents several builders dealing with the faulty drywall issue.

The other side sees it much differently.

“It’s as obvious as a banana on the floor. That’s how defective this product is,” said C. David Durkee, the Coral Gables, Fla.-based attorney representing about 20 Palm Beach County plaintiffs. “It’s not a heavy burden in this case. One whiff of the drywall will tell you that it’s not suitable for someone’s home.”

During the housing boom, drywall, which is gypsum pressed between paper and used in walls and ceilings, was imported from China to fill a domestic shortage. A growing number of homeowners — there have been more than 3,810 reports in 42 states and other areas — complain that it generates sulfurous odors and corrosion that tarnishes metals and causes appliances such as air conditioners to fail. The government recommends consumers remove any possibly faulty drywall.

Although no study has yet linked the drywall to specific health problems, homeowners have complained of respiratory issues and headaches. A 2010 report from the Consumer Product Safety Commission identified several brands of Chinese-made “problem drywall” and said that some Chinese-made samples emitted hydrogen sulfide at a rate 100 times greater than non-Chinese drywall boards.

Earlier this month, the CPSC said faulty drywall did not pose a safety hazard to home electrical systems and affected homeowners no longer had to remove electrical wiring.

For several years, builders have feared expensive lawsuits and court settlements over a product largely purchased and installed by subcontractors. Some have even paid to fix the homes themselves. Lennar Corp., one of the biggest builders in Florida, set aside $80.7 million to cover drywall claims from nearly 900 homeowners, according to securities filings.

While several court settlements and decisions have been reached, the role and responsibilities of home-building companies related to drywall remain unclear. Last year, Knauf Plasterboard Tianjin drywall, one of the biggest suppliers of the problematic wallboard, along with suppliers and commercial liability insurers, agreed to remove and replace drywall they made, as well as all electrical wiring, gas tubing and appliances, at 300 homes in four states.