Jury Awards Damages for Chinese Drywall to Homeowner

A Florida family has been awarded $2.46 million in the first Chinese drywall lawsuit to be heard by a jury. The decision was seen by some as a “bellwether” case, which could forecast how other juries may respond to similar evidence that will be presented in other trials over Chinese drywall that has caused problems for homeowners throughout the United States.

The lawsuit was filed by Armin Seifart and Lisa Gore in Florida state court against Banner Supply, a Miami-based company that supplies building materials to home builders. The lawsuit alleged that Banner knowingly sold defective drywall to builders, which released a strong smell of rotten eggs that corroded appliances throughout their home.

The U.S. Consumer Products Safety Commission (CPSC) has received more than 3,300 complaints from across the United States from homeowners who say that toxic Chinese wallboard imported between 2004 and 2007 releases sulfuric odors that corrodes wiring throughout the home, damages appliances and causes various health problems. Many of the problems with the Chinese drywall have been confirmed by laboratory testing.

Millions of sheets of the toxic drywall were imported from China into the United States due to a domestic shortage caused by a housing boom and construction following a serious of hurricanes that struck the southeastern United States. The CPSC has confirmed more than 6 million sheets were imported into the country in 2006 alone.

The plaintiffs claimed that Banner Supply made a secret deal to cover up drywall problems with Knauf Plasterboard Taijin, a German company that supplied them with Chinese drywall. Miami-Dade Circuit Judge Joseph Farina allowed the agreement to be unsealed before the trial. The agreement reveals that in 2007, Banner knew of several homes that had bad-smelling drywall and asked Knauf to investigate.

After its investigation, which determined that the sulfur levels in the home were safe, Knauf struck a deal with Banner to stay silent about the problems. In return, Knauf agreed to replace the Chinese drywall it has sold Banner with U.S.-made drywall, and paid Banner for holding it. Banner agreed to be quiet about the problem and not to help other plaintiffs seeking to sue Knauf.

Banner’s attorneys said the company thought the drywall problem was limited to a small batch, and they did not know the scope of the problem at the time the agreement was signed.

The Miami-Dade Circuit Court jury found Banner negligent and in violation of Florida’s deceptive and unfair trade law. They also determined that Banner’s actions lowered the resale value of Seifart and Gore’s home. They awarded the couple $2.46 million, and determined that Banner was 55% liable. The rest of the liability was shared by Knauf and two other companies, however Banner was the only defendant in the lawsuit. Seifart and Gore have filed a separate lawsuit against Knauf in federal court.

Although other trials before a judge have resulted in awards of damages for Chinese drywall, this case if the first to be heard by a jury.

Banner officials have said they are considering an appeal.

In May, a Chinese drywall class action lawsuit was filed against Banner by Miami-area residents of a subdivision built with toxic drywall. Keys Gate Realty and Palm Isles Holdings LLC were also named as defendants. The class action could end up including as many as 152 homeowners.

Homeowners throughout the United States have filed lawsuits over Chinese drywall, naming manufacturers, distributors and builders. In June 2009, all of the federal drywall litigation was consolidated and centralized in an MDL, or Multidistrict Litigation, in New Orleans under U.S. District Judge Eldon Fallon. The lawsuit won by Seifart and Gore was filed in the state court and was not part of the MDL.

Earlier this year in the Federal MDL, Judge Fallon awarded $164,000 to a Louisiana family that filed a Chinese drywall lawsuit against Knauf. The ruling equated to about $81 per square foot. Since that ruling, Knauf has begun seeking settlements with U.S. builders who bought their drywall.

Judge Fallon has also issued a ruling that awarded $2.6 million to seven Virginia families who filed a lawsuit against China-based Taishan Gypsum Co. over drywall problems. However, it is unclear how the families will collect, since China does not acknowledge civil lawsuit judgments in the U.S., and the company did not send a representative to court to answer the charges.