Chinese Drywall Damages May Change Foreign Business Laws

A Chinese drywall company is facing increased pressure to compensate thousands of homeowners for selling defective drywall that damaged their homes, but difficulty enforcing U.S. judgments may result in changes to laws regarding foreign companies doing business in this country. 

In recent weeks, Taishan Gypsum has been the target of rulings by state and federal judges overseeing Chinese drywall lawsuits filed by homeowners throughout the U.S. who allege that they suffered damages caused by defective and contaminated drywall imported into the country during a shortage of domestic drywall over the past decade.

The rulings put the Chinese manufacturer on the hook for potentially tens of millions of dollars in damages suffered in homes throughout Florida, Louisiana and other many other states. However, there are currently few means to force foreign companies to honor U.S. judgments, which may make it nearly impossible for plaintiffs to collect the awarded damages from Taishan Gypsum.

As a result, the U.S. House of Representatives has passed a bill that would require the Secretary of State to insist that companies doing business in this country submit to U.S. court jurisdiction. The measure has yet to be taken up by the Senate, but the bill comes at a time when both major U.S. political parties and their candidates for president are trying to appear tough on China.

In late 2008 or early 2009, media reports began to focus on the growing number of homeowners throughout the United States who were experiencing foul smells and corrosion of appliance after having drywall installed in their home since about 2003.

Subsequent investigations by the U.S. Consumer Products Safety Commission (CPSC) and health officials linked the problems to the release of high levels of sulfur compounds used to manufacturer certain drywall products made in China, which were imported during a shortage of U.S.-made drywall because of a housing boom and series of hurricanes that struck the southeastern United States. Many of the problems with the Chinese drywall have been confirmed by laboratory testing.

The majority of the complaints have come from Florida and Louisiana, but the CPSC reports that complaints have come in from 42 different states and two U.S. territories.

Lawsuits have been pursued against Taishan, as well as U.S. subsidiaries, importers and distributors. However, companies subject to the jurisdiction of the U.S. Courts have proven to have insufficient assets to cover the damages caused.

Another company, Knauf Plasterboard Tianjin (KPT) has reached a class action Chinese drywall settlement to pay for repairs to homeowners homes caused by drywall that can be confirmed as coming from the company’s drywall, which is estimated to account for about half of the defective Chinese drywall shipped to the U.S.