New Orleans Construction Product Supplier Settles in Chinese Drywall Suit

April 27, 2011

A settlement agreement has been reached with a New Orleans, La.-based supplier of tainted Chinese drywall in the multi-district litigation (MDL 2047) over the product.

Interior/Exterior Building Supply L.P. and the company’s two primary insurers have reached a settlement in the case that is subject to court approval, according to an announcement by attorneys involved in the case.

The primary insurers will put up the limits of their insurance policies for Interior/Exterior, a regional supplier for Knauf’s Chinese drywall in Texas, Louisiana, Mississippi and Alabama.

At least 1,200 to 1,500 property owners are eligible for portions of the $8 million settlement fund, the Associated Press reported.

Knauf Plasterboard Tianjin (KPT) agreed in October 2010 to participate in a demonstration remediation program in homes that contain drywall manufactured by KPT. The program is funded by KPT and a number of builders, drywall suppliers, including Interior/Exterior Building Supply L.P., and their insurers.

That program began in March and involves about 300 homes in Louisiana, Alabama, Mississippi and Florida.

Hundreds of lawsuits have been filed against homebuilders, developers, installers, realtors, brokers, suppliers, importers, exporters, distributors and manufacturers over drywall from China, which was widely imported into the United States between 2004 and 2006.

Because of the commonality of facts in the various cases, litigation concerning the faulty drywall was designated as multidistrict litigation (MDL). In June 2009 all federal cases were consolidated and assigned to Judge Eldon E. Fallon of the U.S. District Court, Eastern District of Louisiana.

In addition to Interior/Exterior Building Supply, other entities participating in the remediation program include the Louisiana Homebuilders Indemnity Trust, QBE Insurance Group and State Farm Insurance, according to an announcement by a group of plaintiffs’ attorneys involved in the litigation. The Louisiana-based supplier Interior/Exterior Building Supply was an integral component in reaching this agreement and the company has agreed to help fund this pilot program.

Attorney Russ Herman of the law firm Herman, Herman, Katz & Cotlar, L.L.P., said the settlement with Interior/Exterior and its insurers is the first settlement in the MDL with a major supplier of the Chinese drywall.

“Following Court approval, Plaintiffs will proceed to trial later this year against Interior/Exterior’s excess insurers who carry more than $72,000,000 in coverage,” Herman said.

“We have always maintained, and continue to believe, that Interior/Exterior was an innocent seller of Chinese Drywall, and that responsibility for remediation of its harmful effects will ultimately rest with Chinese Drywall manufacturers,” stated Interior/Exterior’s principals in the announcement. “Nonetheless, we are pleased that this settlement will allow many homeowners to remediate and return to their homes as soon as possible, while at the same time relieving them from the burdens of litigation against the installers, suppliers and contractors to whom Interior/Exterior supplied Chinese Drywall.”

It is estimated that between 60,000 – 100,000 homes were built using defective Chinese drywall between 2004 and 2008 throughout the country. The defective drywall has been associated with unpleasant and potentially harmful odors and fumes that corrode metals, including air conditioning units, fixtures and other appliances.

Except for Knauf, the U.S. Consumer Product Safety Commission has been unable to persuade about 13 makers of contaminated drywall to redress American homeowners for the faulty product.

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