Judge Awards $2.6M for Chinese Drywall Claims, with Little Chance of Collection

In a case last week, United States District Judge Eldon Fallon ruled against Taishan Gypsum Co., a Chinese-based drywall manufacturer, awarding more than $2.6m to seven families whose homes were built with allegedly defective products produced by the company. However, Taishan did not appear in court for the hearing in a telling sign of how much precedence the company puts in the US court resolution. So while the law firm representing the plaintiffs in the case is calling the ruling “precedent setting,” actually recovering those funds may be difficult considering Taishan’s track record in the case. Matt Jacobs is a Washington, DC-based attorney at the Jenner & Block law firm. While Jacobs is not involved in the Taishan litigation, he told HousingWire: “It is very difficult to pursue any foreign-based company because of jurisdictional limitations and the ability to get them into US courts and there’s always a problem executing a judgment against a foreign company.” Analysts at Fitch Ratings warned last fall that struggling construction companies should not peg any hopes on getting much back from suppliers of Chinese drywall, if they plan to seek recourse through litigation. Drywall manufacturers based in China will likely ignore lawsuits filed against them in US court, Fitch said, as civil judgments in US courts are not enforced in China. Baron & Budd, a Dallas-based law firm that participated in representing plaintiffs in the Taishan case, said the ruling came as part of the multi-district litigation (MDL) making its way through the US District Court in New Orleans. “These homeowners have already suffered terrible losses and have received no help from their insurance companies, their builders, their mortgage lenders, or the manufacturers,” said Bruce Steckler, Baron & Budd shareholder and member of the plaintiffs’ steering committee in the MDL case. “We’re pleased that Judge Fallon saw the seriousness of the damages, and we will do everything we can to enforce this court’s judgment against Taishan.” The US Consumer Product Safety Commission (CPSC) said more than 3,000 homeowners reported their homes may be built with the defective drywall. According to CPSC research, the defective drywall emits volatile sulfur compounds and is linked to blackening of copper electrical wiring and air conditioning evaporator coils in affected homes. The CPSC and the Department of Housing and Urban Development (HUD) said the only successful method for homeowners to remediate the drywall is to completely remove all possible problem drywall from their homes, and replace electrical components and wiring, gas service piping, fire suppression sprinkler systems, smoke alarms and carbon monoxide alarms, an expensive proposition, particularly for homeowners who need to fix the problem immediately, but may be struggling to get coverage by homeowners insurance or through their builder. Last week, Fannie Mae (FNM) agreed to provide six-month mortgage forbearances to 20 Virginia borrowers whose homes were built with the drywall. Homeowners forced out their properties by the drywall must find alternative housing while repairs are made, putting a financial strain on borrowers. The Fannie Mae forbearances in Virginia is just one of the latest such offerings by mortgage holders. A lawyer in Florida secured mortgage abatements for his clients last summer. In addition, a concurrent resolution in the House of Representatives called for banks and mortgage servicers to assist homeowners struggling with toxic drywall. Write to Austin Kilgore. The author held no relevant investments.

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