Mar 18 2009
three class actions go after chinese manufacturers
Looks like Chinese manufacturers are causing yet another legal fuss here. This time its drywall. CNN ran an article yesterday entitled “ Chinese-made drywall ruining homes, owners say“. It seems that people in multiple states–Florida and Louisiana–are having issues with dry wall emitting corrosive gases. And it’s gotten bad enough to not only trigger three law suits, but three separate class actions. (2 in Florida, 1 in Louisiana)
CNN reports:
Officials are looking into claims that Chinese-made drywall installed in some Florida homes is emitting smelly, corrosive gases and ruining household systems such as air conditioners, the Consumer Product Safety Commission says.
The Florida Health Department, which is investigating whether the drywall poses any health risks, said it has received more than 140 homeowner complaints. And class-action lawsuits allege defective drywall has caused problems in at least three states — Florida, Louisiana and Alabama — while some attorneys involved claim such drywall may have been used in tens of thousands of U.S. homes.
And of course, as is standard in all products suits, homeowners are claiming injury… all in the name of damages:
Homeowners’ lawsuits contend the drywall has caused them to suffer health problems such as headaches and sore throats and face huge repair expenses.
The drywall is alleged to have high levels of sulfur and, according to homeowners’ complaints, the sulfur-based gases smell of rotten eggs and corrode piping and wiring, causing electronics and appliances to fail.
And of course, this is where the article caught my eye… because it names the “culprit”:
Michael Foreman, head of construction consulting firm Foreman & Associates in Sarasota, Florida, said he’s been investigating drywall complaints in that state since last year and is sharing information with at least one group of lawyers preparing lawsuits on the matter. Based on shipping records, Foreman estimates the United States in 2006 and the first two months of 2007 imported enough drywall from Chinese manufacturers named in lawsuits to produce at least 50,000 homes at a size of 2,000 square feet each.
Two Florida attorneys involved in separate class-action lawsuits, Gonzalez and Jordan Chaikin, said they, too, believe shipping records indicate tens of thousands of residences in the United States, with a good chunk of them in Florida, may have drywall from the manufacturers.
In Miami, Gonzalez filed his class-action lawsuit for homeowners this month. The suit names as defendants three China-based drywall manufacturers that the plaintiffs say are affiliates of Germany-based manufacturer Knauf Gips KG. Knauf Gips KG was also named, along with three Florida developers and two distributors.
Joerg Schanow, a member of Knauf Gips’ board, said in a telephone interview with CNN that the Chinese manufacturers named in the suit are part of Knauf Group, but not controlled by Knauf Gips KG.
“We here in Germany do not manufacture Chinese drywall. [Knauf Gips KG has] never asked companies to manufacture Chinese drywall for us or on our behalf. And there is no relationship at all,” Schanow said. “I’m confident we will rebut this.”
Chinese sourcing strikes again. Ultimately the biggest loser is going to be Knauf Gips: (1) they have a PR mess on their hands, (2) they have alleged ties to Chinese drywall manufacturers, and so, are labeled as a company that does some of its sourcing in China, (3) and people are going to accuse them of not doing enough due diligence, whether they did or not. Talk about a lose-lose situation. Even if they win the lawsuits, it simply makes them look bad.
It also makes me wonder how much this may open up the gates for more class actions. Ironically, even with the economy being what it is, I’m surprised I haven’t heard more news about class action lawsuits. I may not be actively litigating anymore, but it’s simply a lot less information flowing my way about such products suits that I didn’t anticipate. Even if plaintiffs win, the “bad guys” in China will still get away and the deep pocket German parent is going to get stuck with a painful bill. So while I feel that this system keeps America safe, it still does very little to discourage bad behavior by Chinese manufacturers.
Moral of the story… choose only those folks in China you really trust. And then vet them again. And then do more due diligence. And then vet them again. Yes, its painful. But at least that’s the only way you’ll win a PR campaign, even if you win or lose the lawsuit.
