Chinese drywall claims continue to settle

Source:, May 21, 2012
By: Jonathan Carr, Weil Gotshal & Manges LLP

We continue to follow the Chinese drywall litigation. A piece of this litigation closed last week, as a Florida real estate developer agreed to a settlement with a class of condominium owners who alleged that drywall manufactured in China that was used to construct their homes caused health problems and home damage. The settlement between RCR Holdings II LLC and the class of 182 named plaintiffs and 67 additional homeowners in the Villa Largo complex in Boynton Beach, Florida has been agreed for $4.8 million, but it must be approved by U.S. District Judge Eldon E. Fallon. If in fact approved by Judge Fallon, the settlement will resolve all Chinese drywall claims against RCR Holdings II LLC despite the fact that over 10,000 Chinese drywall cases have been filed. And in particular for this class of plaintiffs and this case, their claims will still exist against Coastal Construction (a South Florida builder), Precision Drywall Inc. (a contractor), La Suprema Enterprise Inc. (an importer), and Banner Supply Co. Inc. (a supplier).

The facts that brought this class of plaintiffs to file suit against RCR Holdings II LLC are similar to other cases filed in the drywall litigation. Here, after the plaintiffs moved into the Villa Largo complex, they allegedly experienced a variety of structural problems, including pipe and wire corrosion and computer and television malfunctions. Some of the residents also reported that they suffered symptoms of nerve sensory inflammation. These problems led the plaintiffs to investigate and test their homes, where they discovered that the drywall was manufactured in China and emitted sulfur compounds known to cause the problems the plaintiffs were suffering.

In its defense, RCR Holdings II LLC stated that it had no role in the use of the Chinese drywall in the Villa Largo complex. Instead, it claimed that it was the contractual responsibility of Coastal Construction to use a domestic drywall in these homes, and Coastal never actually did.

Additionally, the parties were also able to reach a resolution because RCR’s insurance carrier agreed to contribute funds to the settlement. In terms of how the settlement process will work, the $4.8 million will be given to the class of plaintiffs as part of a distribution plan to be submitted at the completion of the case. And the total amount of attorneys’ fees and expenses cannot exceed one-third of the total settlement amount and must be drawn from the settlement fund.

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