CHINESE DRYWALL CHINESE DRYWALL LITIGATION WEBINARLITIGATION WEBINAR

Wednesday October 21 2009Wednesday October 21 2009Wednesday, October 21, 2009Wednesday, October 21, 2009

Presented ByPresented ByIADC C i L & Li i i IADC C i L & Li i i IADC Construction Law & Litigation IADC Construction Law & Litigation

Committee Committee

PresenterPresenterPresenterPresenter

Robert V. FitzsimmonsRobert V. FitzsimmonsPartnerPartner

Miami OfficeMiami OfficeMiami OfficeMiami Office305.995.5425 phone305.995.5425 phone305.371.7580 fax305.371.7580 faxrfitzsimmons@rumberger comrfitzsimmons@rumberger comrfitzsimmons@rumberger.comrfitzsimmons@rumberger.com

CHINESE DRYWALL CHINESE DRYWALL LITIGATIONLITIGATION

Hurricane KatrinaHurricane KatrinaAugust 2005August 2005

Hurricane WilmaHurricane WilmaOctober 2005October 2005

The damage caused by Hurricane Katrina andThe damage caused by Hurricane Katrina andThe damage caused by Hurricane Katrina and The damage caused by Hurricane Katrina and Hurricane Wilma, combined with the existing Hurricane Wilma, combined with the existing housing boom caused severe shortages ofhousing boom caused severe shortages ofhousing boom, caused severe shortages of housing boom, caused severe shortages of building materials.building materials.

Supplies of domestic drywall could not meetSupplies of domestic drywall could not meetSupplies of domestic drywall could not meet Supplies of domestic drywall could not meet demanddemand

Supplies of domestic drywall could not meetSupplies of domestic drywall could not meetSupplies of domestic drywall could not meet Supplies of domestic drywall could not meet demanddemand

Drywall supplies were being rationed by local Drywall supplies were being rationed by local lilisupplierssuppliers

Suppliers turned to alternative sources includingSuppliers turned to alternative sources includingSuppliers turned to alternative sources, includingSuppliers turned to alternative sources, including

Chi D llChi D llChinese DrywallChinese Drywall

At least 550 million pounds of drywall fromAt least 550 million pounds of drywall fromAt least 550 million pounds of drywall from At least 550 million pounds of drywall from China, enough to build more than 60,000 China, enough to build more than 60,000 ––100 000 average100 000 average--sized homes was importedsized homes was imported100,000 average100,000 average sized homes, was imported sized homes, was imported

In late 2006 the problem appearsIn late 2006 the problem appearsIn late 2006, the problem appears . . .In late 2006, the problem appears . . .

In November 2006 after complaints of an odorIn November 2006 after complaints of an odorIn November 2006 after complaints of an odor In November 2006 after complaints of an odor from the drywall, Knauf Plasterboard Tianjin from the drywall, Knauf Plasterboard Tianjin Co a manufacturer of the Chinese drywallCo a manufacturer of the Chinese drywallCo., a manufacturer of the Chinese drywall, Co., a manufacturer of the Chinese drywall, hired Center for Toxicology and Environmental hired Center for Toxicology and Environmental Health LLC to conduct an air qualityHealth LLC to conduct an air qualityHealth, LLC. to conduct an air quality Health, LLC. to conduct an air quality investigationinvestigation

The Center for Toxicology and EnvironmentalThe Center for Toxicology and EnvironmentalThe Center for Toxicology and Environmental The Center for Toxicology and Environmental Health, L.L.C. (CTEH) performed bulk testing Health, L.L.C. (CTEH) performed bulk testing of the drywall and air quality testingof the drywall and air quality testingof the drywall and air quality testing.of the drywall and air quality testing.The CTEH report suggested that the root cause The CTEH report suggested that the root cause of the drywall smell was from iron disulfide aof the drywall smell was from iron disulfide aof the drywall smell was from iron disulfide, a of the drywall smell was from iron disulfide, a naturallynaturally--occurring mineral in the Chinese occurring mineral in the Chinese gypsum minegypsum minegypsum mine. gypsum mine.

Due to an unusually high number of HVACDue to an unusually high number of HVACDue to an unusually high number of HVAC Due to an unusually high number of HVAC system failures in southwest Florida, one of the system failures in southwest Florida, one of the affected homebuilders Lennar Corporationaffected homebuilders Lennar Corporationaffected homebuilders, Lennar Corporation, affected homebuilders, Lennar Corporation, retained ENVIRON International, Corporation retained ENVIRON International, Corporation (Environ) to perform testing in October 2008(Environ) to perform testing in October 2008(Environ) to perform testing in October 2008 (Environ) to perform testing in October 2008

Environ found that the corrosion caused theEnviron found that the corrosion caused theEnviron found that the corrosion caused the Environ found that the corrosion caused the refrigerant gas to escape and the HVAC units to refrigerant gas to escape and the HVAC units to freezefreeze--upup Materials testing of the observableMaterials testing of the observablefreezefreeze up.up. Materials testing of the observable Materials testing of the observable black residue on the HVAC coils confirmed this black residue on the HVAC coils confirmed this to be sulfurto be sulfur--basedbasedto be sulfurto be sulfur based. based.

Environ’s chamber testing with an unaffectedEnviron’s chamber testing with an unaffectedEnviron s chamber testing with an unaffected Environ s chamber testing with an unaffected copper sample demonstrated that wallboard copper sample demonstrated that wallboard from China emitted carbon disulfide carbonylfrom China emitted carbon disulfide carbonylfrom China emitted carbon disulfide, carbonyl from China emitted carbon disulfide, carbonyl sulfide and hydrogen sulfide resulted in sulfide and hydrogen sulfide resulted in corrosion chemically similar to the coppercorrosion chemically similar to the coppercorrosion chemically similar to the copper corrosion chemically similar to the copper corrosion seen in the affected homes.corrosion seen in the affected homes.

The Florida Department of Health (FDOH)The Florida Department of Health (FDOH)The Florida Department of Health (FDOH), The Florida Department of Health (FDOH), through their State Toxicologist, Dr. David through their State Toxicologist, Dr. David Krause collected and analyzed drywall samplesKrause collected and analyzed drywall samplesKrause, collected and analyzed drywall samples Krause, collected and analyzed drywall samples from a small number of homes in south Florida. from a small number of homes in south Florida. FDOH retained Unified Engineering Inc aFDOH retained Unified Engineering Inc aFDOH retained Unified Engineering, Inc., a FDOH retained Unified Engineering, Inc., a private laboratory, to conduct testing on four private laboratory, to conduct testing on four samples of drywallsamples of drywallsamples of drywall. samples of drywall.

Unified Engineering’s testing indicated that theUnified Engineering’s testing indicated that theUnified Engineering s testing indicated that the Unified Engineering s testing indicated that the Chinese drywall contained significant amounts Chinese drywall contained significant amounts of organic material ranging from five to fifteenof organic material ranging from five to fifteenof organic material, ranging from five to fifteen of organic material, ranging from five to fifteen percent.percent.

Unified Engineering reported that hydrogenUnified Engineering reported that hydrogenUnified Engineering reported that hydrogen Unified Engineering reported that hydrogen sulfide, carbonyl sulfide and carbon disulfide sulfide, carbonyl sulfide and carbon disulfide were all detected at levels between 100 and 1000were all detected at levels between 100 and 1000were all detected at levels between 100 and 1000 were all detected at levels between 100 and 1000 ppb. Trace levels of strontium sulfate were also ppb. Trace levels of strontium sulfate were also found in the drywall suspected to be from Chinafound in the drywall suspected to be from Chinafound in the drywall suspected to be from China found in the drywall suspected to be from China

Consumer ProductConsumer ProductSafety CommissionSafety Commission

Question:Question: What are the health symptoms andWhat are the health symptoms andQuestion: Question: What are the health symptoms and What are the health symptoms and risks?risks?

Consumer ProductConsumer ProductSafety CommissionSafety Commission

Answer:Answer: The most frequently reportedThe most frequently reportedAnswer: Answer: The most frequently reported The most frequently reported symptoms are irritated and itchy eyes and skin, symptoms are irritated and itchy eyes and skin, difficulty in breathing, persistent cough, bloody difficulty in breathing, persistent cough, bloody y g p g yy g p g ynoses, runny noses, recurrent headaches, sinus noses, runny noses, recurrent headaches, sinus infection, and asthma attacks. Since many infection, and asthma attacks. Since many

h h i lh h i lconsumers report that their symptoms lessen or consumers report that their symptoms lessen or go away when they are away from their home, go away when they are away from their home, but return upon rebut return upon re entry it appears that theseentry it appears that thesebut return upon rebut return upon re--entry, it appears that these entry, it appears that these symptoms are shortsymptoms are short--term and related to term and related to something within the homesomething within the homesomething within the home.something within the home.

As of September of this year the U S ConsumerAs of September of this year, the U.S. Consumer Product Safety Commission (CPSC) received more than 1 174 reports from residents in 24more than 1,174 reports from residents in 24 states and the District of Columbia who believe their health symptoms or the corrosion oftheir health symptoms or the corrosion of certain metal components in their homes are related to the presence of drywall produced inrelated to the presence of drywall produced in China.

Consumers largely report that their homes wereConsumers largely report that their homes wereConsumers largely report that their homes were Consumers largely report that their homes were built in 2006 to 2007built in 2006 to 2007

What are residents reporting?

Issues related to indoor airIssues related to indoor air

• a “rotten egg” smell or smell of matches or fireworks in their homes.matches or fireworks in their homes.

Issues related to metal inside homesIssues related to metal inside homes

blackened and corroded metalblackened and corroded metal components in their homes and frequent replacement of metalfrequent replacement of metal components in air conditioning units.

Health symptomsHealth symptoms

irritated and itchy eyes and skin,irritated and itchy eyes and skin, difficulty breathing, persistent coughpersistent cough, bloody noses, runny noses, recurrent headaches, sinus infection, and asthma attacks.

The press picks up the issue in early 2009 andThe press picks up the issue in early 2009 andThe press picks up the issue in early 2009 and The press picks up the issue in early 2009 and lawsuits beginlawsuits begin

The press picks up the issue in early 2009 andThe press picks up the issue in early 2009 andThe press picks up the issue in early 2009 and The press picks up the issue in early 2009 and lawsuits beginlawsuits beginState and Federal casesState and Federal casesState and Federal casesState and Federal cases

The press picks up the issue in early 2009 andThe press picks up the issue in early 2009 andThe press picks up the issue in early 2009 and The press picks up the issue in early 2009 and lawsuits beginlawsuits beginState and Federal casesState and Federal casesState and Federal casesState and Federal casesIndividuals and Class ActionsIndividuals and Class Actions

The press picks up the issue in early 2009 and The press picks up the issue in early 2009 and lawsuits beginlawsuits beginlawsuits beginlawsuits beginState and Federal casesState and Federal casesIndividuals and Class ActionsIndividuals and Class ActionsProperty Damage and Personal InjuryProperty Damage and Personal Injury

The press picks up the issue in early 2009 andThe press picks up the issue in early 2009 andThe press picks up the issue in early 2009 and The press picks up the issue in early 2009 and lawsuits beginlawsuits beginState and Federal casesState and Federal casesState and Federal casesState and Federal casesIndividuals and Class ActionsIndividuals and Class ActionsProperty Damage and Personal InjuryProperty Damage and Personal InjuryMedical MonitoringMedical Monitoringgg

On June 15 2009 a multidistrict litigation orderOn June 15 2009 a multidistrict litigation orderOn June 15, 2009, a multidistrict litigation order On June 15, 2009, a multidistrict litigation order is entered transferring all the federal litigation to is entered transferring all the federal litigation to the Eastern District of Louisiana before Judgethe Eastern District of Louisiana before Judgethe Eastern District of Louisiana before Judge the Eastern District of Louisiana before Judge Eldon E. FallonEldon E. Fallon

On June 15 2009 a multidistrict litigation orderOn June 15 2009 a multidistrict litigation orderOn June 15, 2009, a multidistrict litigation order On June 15, 2009, a multidistrict litigation order is entered transferring all the federal litigation to is entered transferring all the federal litigation to the Eastern District of Louisiana before Judgethe Eastern District of Louisiana before Judgethe Eastern District of Louisiana before Judge the Eastern District of Louisiana before Judge Eldon E. FallonEldon E. FallonSimilar consolidation orders have been enteredSimilar consolidation orders have been enteredSimilar consolidation orders have been entered Similar consolidation orders have been entered in state court actionsin state court actions

On June 15, 2009, a multidistrict litigation order On June 15, 2009, a multidistrict litigation order is entered transferring all the federal litigation tois entered transferring all the federal litigation tois entered transferring all the federal litigation to is entered transferring all the federal litigation to the Eastern District of Louisiana before Judge the Eastern District of Louisiana before Judge Eldon E. FallonEldon E. FallonEldon E. FallonEldon E. FallonSimilar consolidation orders have been entered Similar consolidation orders have been entered in state court actionsin state court actionsin state court actionsin state court actionsJudge Fallon and the state court judges have Judge Fallon and the state court judges have b di i h li i ib di i h li i ibeen coordinating the litigationbeen coordinating the litigation

The DefendantsThe DefendantsThe DefendantsThe Defendants

Homebuilders/DevelopersHomebuilders/DevelopersHomebuilders/DevelopersHomebuilders/Developers

Homebuilders/DevelopersHomebuilders/DevelopersHomebuilders/DevelopersHomebuilders/DevelopersContractorsContractors

Homebuilders/DevelopersHomebuilders/DevelopersHomebuilders/DevelopersHomebuilders/DevelopersContractorsContractorsL l S liL l S liLocal SuppliersLocal Suppliers

Homebuilders/DevelopersHomebuilders/DevelopersHomebuilders/DevelopersHomebuilders/DevelopersContractorsContractorsL l S liL l S liLocal SuppliersLocal SuppliersRetailersRetailers

Homebuilders/DevelopersHomebuilders/DevelopersHomebuilders/DevelopersHomebuilders/DevelopersContractorsContractorsL l S liL l S liLocal SuppliersLocal SuppliersRetailersRetailersImporters/BrokersImporters/Brokers

Homebuilders/DevelopersHomebuilders/DevelopersHomebuilders/DevelopersHomebuilders/DevelopersContractorsContractorsL l S liL l S liLocal SuppliersLocal SuppliersRetailersRetailersImporters/BrokersImporters/BrokersManufacturersManufacturersManufacturersManufacturers

Economic Loss RuleEconomic Loss RuleEconomic Loss RuleEconomic Loss Rule

Economic Loss RuleEconomic Loss RuleEconomic Loss RuleEconomic Loss Rule

If there is no personal injury or damage toIf there is no personal injury or damage toIf there is no personal injury or damage to If there is no personal injury or damage to “other property” . . .“other property” . . .

Economic Loss RuleEconomic Loss RuleEconomic Loss RuleEconomic Loss Rule

Set for hearing in the consolidated cases inSet for hearing in the consolidated cases inSet for hearing in the consolidated cases in Set for hearing in the consolidated cases in Miami Dade County, Florida before Judge Miami Dade County, Florida before Judge Farina on November 13thFarina on November 13thFarina on November 13thFarina on November 13th

Economic Loss RuleEconomic Loss RuleEconomic Loss RuleEconomic Loss Rule

Set for argument in the consolidated cases inSet for argument in the consolidated cases inSet for argument in the consolidated cases in Set for argument in the consolidated cases in Miami Dade County, Florida before Judge Miami Dade County, Florida before Judge Farina on November 13thFarina on November 13thFarina on November 13thFarina on November 13th

S f i h F d l MDL b fS f i h F d l MDL b fSet for argument in the Federal MDL before Set for argument in the Federal MDL before Judge Fallon on November 19thJudge Fallon on November 19th

MDL ProcessMDL ProcessMDL ProcessMDL Process

Plaintiff and Defense Steering CommitteesPlaintiff and Defense Steering CommitteesPlaintiff and Defense Steering CommitteesPlaintiff and Defense Steering Committees

MDL ProcessMDL ProcessMDL ProcessMDL Process

Plaintiff and Defense Steering CommitteesPlaintiff and Defense Steering CommitteesPlaintiff and Defense Steering CommitteesPlaintiff and Defense Steering CommitteesThreshold Inspection ProgramThreshold Inspection Program

MDL ProcessMDL ProcessMDL ProcessMDL Process

Plaintiff and Defense Steering CommitteesPlaintiff and Defense Steering CommitteesPlaintiff and Defense Steering Committees Plaintiff and Defense Steering Committees Threshold Inspection ProgramThreshold Inspection ProgramP fil FP fil FProfile FormsProfile Forms

MDL ProcessMDL ProcessMDL ProcessMDL Process

Plaintiff and Defense Steering CommitteesPlaintiff and Defense Steering CommitteesPlaintiff and Defense Steering Committees Plaintiff and Defense Steering Committees Threshold Inspection ProgramThreshold Inspection ProgramP fil FP fil FProfile FormsProfile FormsDiscoveryDiscovery

MDL ProcessMDL ProcessMDL ProcessMDL Process

Plaintiff and Defense Steering CommitteesPlaintiff and Defense Steering CommitteesPlaintiff and Defense Steering Committees Plaintiff and Defense Steering Committees Threshold Inspection ProgramThreshold Inspection ProgramP fil FP fil FProfile FormsProfile FormsDiscoveryDiscoveryBellwether TrialsBellwether Trials

MDL ProcessMDL ProcessMDL ProcessMDL Process

Bellwether trials to be property damage onlyBellwether trials to be property damage onlyBellwether trials to be property damage onlyBellwether trials to be property damage only

S i J 2010S i J 2010Start in January, 2010Start in January, 2010

MDL ProcessMDL ProcessMDL ProcessMDL Process

Bellwether trials to be property damage onlyBellwether trials to be property damage onlyBellwether trials to be property damage onlyBellwether trials to be property damage only

S i J 2010S i J 2010Start in January, 2010Start in January, 2010

Unresolved IssuesUnresolved IssuesUnresolved IssuesUnresolved Issues

Class action statusClass action statusClass action statusClass action status

Unresolved IssuesUnresolved IssuesUnresolved IssuesUnresolved Issues

Class action statusClass action statusClass action statusClass action status

P l i j iP l i j iPersonal injury causationPersonal injury causation

Unresolved IssuesUnresolved IssuesUnresolved IssuesUnresolved Issues

Class action statusClass action statusClass action statusClass action status

P l i j iP l i j iPersonal injury causationPersonal injury causation

Insurance CoverageInsurance Coverage

Resolution?Resolution?Resolution?Resolution?

CHINESE DRYWALL CHINESE DRYWALL LITIGATION WEBINARLITIGATION WEBINAR

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