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CPSC Chair Tenenbaum Seeks China's Help In Paying Chinese Drywall Claims in U.S.

14 comments

The story of ruined homes, hopes and dreams in the U.S. Southeast has been raging in the news for almost a year: Drywall From China Causes Concern Over Sulfur Odor In Homes – by Wayne Parsons January 02, 2009. The first question that comes to mind for an attorney like me is how do you get a company in China to pay for damage that their product causes in the U.S. Defective Product Accountability for Foreign Manufacturers by Joe Saunders.

So how does the first woman who contacted me about Chinese Drywall in her home in Florida get the money to fix her problem? She was a single mother with a little girl and a new home tha reeked of sulfur smells to the point it made them both physically ill. The builder of the home was gone and probably bankrupt. To solve the problem, all of the drywall in the home would have to be removed and replaced. Think about it. That removing and replacing all of the walls in the house is a huge _ and expensive _ task. Well lawyers across the Southeast are filing lawsuits for aggrieved homeowners, but collecting any money may be an entirely different matter. It would be great if the U.S. Chamber of Commerce would stop its lobbying for insurance company behemoths like AIG and start helping Americans who are hurt get justice. But then all the U.S. Chamber of Commerce cares about is keeping the executive bonuses rolling in to the insurance industry fat cats. To heck with a single mother and her daughter in ruined home in Florida. She’s nobody to them.

Lucky for all of us, President Obama has appointed some consumer advocates to agencies like the Consumer Product Safety Commission. After 16 years of Presidents Clinton and Bush ordering consumer and environmental agencies to back off regulating commerce and protecting the environment, there are signs of life in federal agencies that protect American consumers.

The Wall Street Journal (10/16, A3, Trottman) reports that in an interview prior to her trip next week to China for a consumer product safety summit, Consumer Product Safety Commission Chairman Inez Tenenbaum said she intends to ask China to assist in paying for damage caused in US homes by defective Chinese drywall. Said Tenenbaum, "I will find out if any discussions are going on in China about the costs, are they prepared to participate in providing funds, and what would it take for that to occur." She also intends to discuss a US regulatory standard for drywall composition.

Fallon denies motion to shift discovery to the Hague. The New Orleans Times-Picayune (10/15, Mowbray) reported, "U.S. District Court Judge Eldon Fallon denied a motion Thursday by the German company Knauf Gips to conduct discovery in the Chinese drywall litigation under the rules of international litigation in the Hague. Plaintiffs and U.S. companies view the move as a sign that Fallon, the judge presiding over the national consolidated litigation over Chinese drywall in New Orleans, will fight to hold foreign manufacturers of Chinese drywall accountable."

The Bradenton (FL) Herald (10/16, Marsteller) reports that Fallon "said he will not dismiss several suits against Knauf Gips KG," a German drywall manufacturer "that says it has nothing to do with Chinese drywall." Knauf Gips "argued the suits against it should be dismissed, saying U.S. courts lack jurisdiction because the company is based in Germany and has no business dealings in the United States." But Fallon said that "the company’s request would jeopardize plans to hold the first ‘bellwether’ trial in January."

ABC World News (10/15, story 10, 2:10, Gibson) reported, "A federal court in New Orleans held a hearing today about a growing problem for tens of thousands of American families. They have filed lawsuits alleging that drywall, made in China, is defective, ruining their homes and their health, and now some are finding their homeowners insurance is being canceled because of it." Desperate homeowners "are trying everything. Many are suing their builders and drywall manufacturers. And some have tried making insurance claims to get compensated, but insurance companies say their contracts clearly state they’re not responsible for construction defects."

CBS /AP (10/15) reported, "Thousands of homeowners nationwide who bought new houses constructed from [Chinese drywall] are finding their hopes dashed, their lives in limbo. And officials warn that cases…in which insurers drop policies or send notices of non renewal based on the presence of the Chinese drywall will become rampant as insurance companies process the hundreds of claims in the pipeline." Because mortgage companies "require homeowners to insure their properties, they are then at risk of foreclosure, yet no law prevents the cancellations."

Nelson blasts move. Sarasota (FL) Herald Tribune (10/16, Kessler) reports, "U.S. Sen. Bill Nelson, D-Fla., lashed out at some of Florida’s top insurance companies Thursday in response to several of them starting to drop coverage for homeowners who have tainted Chinese drywall." Nelson "fired off a number of letters to Florida companies," in one of which he "demanded that Bradley Meier, chief executive of Universal Property and Casualty Insurance Co. – one of the companies that has started dropping Chinese drywall victims – immediately provide ‘a statement regarding your company’s policy on claims and coverage relating to contaminated Chinese drywall.’"

Insurance reform is absolutely necessary in the U.S. as is now becoming apparant to all of us as the true facts of what is wrong with health care in America traces to the marble facades of the huge insurnace companies that dominate politics in Congress with their unlimited lobbying money.

14 Comments

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  1. The_Observer says:
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    Re: Chinese Drywall
    The manufacturer of the product may be making product for local use or other countries which means there will be differing safety standards and pricing points. It is the responsibility of the importer for a country with regards to the condition of any imports. The importer is the one who specifies the parameters of the product he requires. When he gets the products then he has to ensure that that those same products: (1) meet his requirements, and (2) conform to any federal and state safety regulations. This should be done before distributing the product for sale. If the product doesn’t meet standards then the importer should not distribute it. I doubt that asking an exporter’s government to get involved in a CIVIL matter will get very far as this would create a precedent and open a flood-gate of claims for this and other products.

  2. Joshua says:
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    Defective and toxic drywall manufactured in and imported from China has forced thousands of Americans to leave their new homes. It has caused skin irritations and trouble breathing.

    As more time passes, more homes are being tested and eventually gutted of this serious health concern. No home is safer than another. If you live in new home, it is possible it was constructed using this inferior and dangerous product.

    New homes in Louisiana and Nevada to multi-million-dollar condos in Florida, where the problem started, are included.

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    Thanks for the Comments. The issues raised by The Observer are serious and raise the question of food safety as well. I do not agree that the U.S. should turn over our health and safety from products and food to an “importer”. Does an “importer” have adequate insurance and assets to pay the claims if 100,000 people die from Salmonella or thousands of homes need to gutted and have all of their walls repaced? I am interested in how the Observer thinks this would work in practice? What we need is to make sure that countries that want to export their products to the U.S., be it food or drywall, have the smae safety standards that we do in the U.S. Then our Government should have reasonablre regulatory oversight of what comes into the U.S. so innocent consumers don’t get hurt. The record of business to self police these matters clearly shows that it will not happen. People will get hurt and then the companies will go bankrupt and disappear leaving consumers with unsurmountable problems. I am interested in hearing back from The Observer on this subject. And who are you and who do you work for?

  4. Steve Lombardi says:
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    If this weren’t so serious it would be comical. Really, instead of having a vigorous litigation system we now ask for permission from the Chinese to stand up for Americans who were sold shoddy and defective products that were installed in their homes. You gotta love it. The whole tort reform mentality literally just came home to roost. Where are the American Tort Reform Association and the U.S. Chamber of Commerce when you need them? What’s the matter cat got your tongue Mr. ATRA? Where are these tort reform organizations when it comes to time to make manufacturers act responsibly? Where are they out for a hot cup of coffee as they give the cold shoulder to the American consumer? And you the American consumer; I’m not letting you off the hook. Why not call the ATRA and the US Chamber of Commerce? Why call the “blood sucking lawyers”? You know the ones you’ve been calling greedy. For all of you homeowners that voted for tort reform candidates you have no one to blame except yourselves. Now will you admit to yourself and publicly that you made a huge mistake with voting for tort reform or will you continue to blame the lawyers for lining the pockets of all the Wall Street CEO’s?

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    Well said Mr. Lombardi! As usual you get past the surface of an issue and identify where the rubber hits the road!!

  6. The_Observer says:
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    @Wayne Parsons
    In my youth I worked as a buyer for electronic manufacturers as well as retailers (large and small chains) and although I’m not a lawyer I had to be aware of things related to products such as quality, standards and legal liability of the corporations that I worked for. Chinese supplied products run the gamut in price terms from unbelievably low to reasonably priced but then the quality accordingly rises as well. I still have friends working as buyers and they get to go overseas to make sure that the quality of product they ordered from China (or any other supply country) is the product to be shipped. Better precaution than having to mop up after bad publicity. The government and the different industry bodies have their standards. If you doubt me, next time take a look at the imprinted text on your power adapter for your laptop computers and that is just the power supply!
    Unfortunately as in many industries, failure to adhere to standards or violations of them are only caught post-scandal. Importers or manufacturers themselves (if they are based in the USA and importing their manufactures) have a duty to make sure the products for the US market conform to standards. Say, a GSM cell-phone made and imported from China would have to conform to the two freq. bands that the US uses for GSM. You would not import a phone unnecessarily to the USA that works in Australia, China, etc, where the freq. bands used are diff. (parallel imports of these by non-official importers is another story). In addition, before the phones can be distributed and sold in the USA, at least the FCC would have to approve them.
    In the case of dry-wall the manufacturer may be making dry-wall for different markets with different climates. A drywall made for a hot dry climate would be different for one made for a coolish damp environment. Americans use imperial measurements whereas the rest of the world uses metric units. If a manufacturer has not set up office in the USA to distribute dry-wall then it’s up to the importer (who may even give the imports his brand-name) to make sure the building materials are suitable and up to scratch. The chains of complaints for dry-wall should go like this. Home-owner complains to builder; builder complains to supplier; supplier complains to wholesaler who may or may not be the importer; importer deals with international supplier. All these are civil complaints and all and any can sue for any number of reasons as the lawyers will tell you. The problem is that any and all along the way, depending on the size of the entity and their pockets, may and do go bankrupt. The situation at the moment where after the Chinese dry-wall company, Taishan Gypsum Co. was in default in a class action lawsuit because they weren’t in court. This is the civil judgment that the US administration will probably NOT bring up with the Chinese government. Generally if an importer is a big one or a builder client who imports a lot of dry-wall from the same suppliers then the threat of cutting-off future orders to the same suppliers generally leads to some settlement and sharing of costs that the importer incurs for faulty materials. Currently it seems that either the dry-wall importers may have gone bust or the lawyers may not know who the importers are yet. One German dry-wall company, Knauf Gips KG, is being sued in the US but they claim that they have no business dealings in the United States. The company has said that suits also wrongly claim that three Chinese drywall manufacturers — Knauf Plasterboard Tianjin Co., Knauf Plasterboard Wuhu Co. Ltd., and Guandong Knauf New Building Product Material Co. Ltd. — are NOT subsidiaries of Knauf Gips.

    See: http://www.bradenton.com/business/story/1782290.html

    As I said this whole matter is not as simple as some people make it out to be.

  7. The_Observer says:
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    I quoted:
    “The company has said that suits also wrongly claim that three Chinese drywall manufacturers — Knauf Plasterboard Tianjin Co., Knauf Plasterboard Wuhu Co. Ltd., and Guandong Knauf New Building Product Material Co. Ltd. — are NOT subsidiaries of Knauf Gips.”

    when I should have written:
    “The company CLAIMS that three Chinese drywall manufacturers — Knauf Plasterboard Tianjin Co., Knauf Plasterboard Wuhu Co. Ltd., and Guandong Knauf New Building Product Material Co. Ltd. — are NOT subsidiaries of Knauf Gips.”

  8. Steve Lombardi says:
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    Wayne: I thought about my comment and want to make sure it’s perfectly clear. So allow me to clarify for those who believe tort reform is the answer to lower taxes and insurance bills. All of you Florida homeowners that voted for the Bush Doctrine and tort reformer candidates need not apply for relief by hiring a lawyer. After all it’s you that vote to do away with the right to receive fair compensation through the tort system. In other words, with your votes you loaded the tort reform gun, and then allowed your candidates to point it at your own foot; and now you must suffer the consequences for which you voted. There is no loophole for pro-tort reform voters who suffer from the torts of others;, but thought the roulette table would never pull their number. Your number has now been drawn and if you’re honest you will do one of two things. 1. Admit you were wrong and write to the American Tort Reform Association telling them to stop trying to turn this country into a Communist Regime. 2. The next time you hear a candidate talk about tort reform you will shout him/her down till they leave the auditorium. You will publicly admit you were wrong and tell them why. And if you don’t, get ready for the Communist Tort Deform Association to turn this country into a drywall cesspool of crappy/shoddy products that maim, poison and kill working Americans. Wayne, is that plain enough?

  9. The_Observer says:
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    @Steve Lombardi
    Forgive my limited legal understanding but I don’t think much tort reform has occurred in the USA under this current administration and legislature yet. As I said any of the parties to this dry-wall situation can and have been suing entities along the “chain”. What I was trying to point out was (1) who I thought were the main actors and their responsibilities. It doesn’t mean that just because you can sue someone or some entity that it is the correct target. (2) The practicality of a particular lawsuit, e.g the enforceability of one countries laws and civil judgments on another country’s entities where those laws and judgments are not recognized through treaty or some other agreement between the countries.

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    Dear Observer: Thanks for your thoughtful comments. We at Injury Board are fully aware of the legal technicalities and practicalities of complex products liability claims because that is what we do. And you seem to have a pretty good understanding for a non-lawyer and I agree with much of what you say. The issue is how to make an economic business model in every company, everywhere that makes money selling products in the US, that accounts for harm caused by those products due to defects in the products. A lot of Melamine got into baby food made in China. It wasn’t because babies in other countries need Melaimine in their food. It was because it made money for the Chinese manufacturer. As an attorney I keep seeing a lack of basic moraliuty by businesses. If they can get away with it they do. Make the money today, shut down the operation or hide behind corporate lawyers and foreign governments. Our produts liability law in the US let’s us tag the distributors and others in the chaoin but theyt send in cadres of blue suits from their law firms and plaed ignorance. Then all of thenm say “hey, the federal and state regulators let these products be sold so we vshould be free from b;lame, make the government pay! In the end many times no one pays.

    Lombardi is 100% right about tort reform. First we saw every adminsitration since Reagan (and this includes 8 years with Clinton) dismantle the regulatory agencies charged with safegurading consumers. they just stopped regulating and let free enterprise do anything it wants, and that animal only wants money. That is de facto tort reform (can I call it tort deform?) in that it takes away a layer of consumer protection. Then these same adminstrations appointed federal judges who have gutted the rigfhts of people to sue these characters and I am talking about suing the American manufacturers and distributors. They want to use things like an FDA approval as a bar to any suit despite the fact that the FDA can’t look that closely at all problems with a drug because the agency has been stripped of budget and staff to do that. Finally, these politicians have whipped the public into hating attorneys and lawsuits and have passed significant tort reform around the country. I second Lombardi that the voters who support cutting off access to the courts for consumers should take their medicine or change their tune.

    Anyway I appreciate it that you took the time to lay out your thoughts, most of which i agree with.

  11. The_Observer says:
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    @Wayne Parsons
    Thanks for the compliments. Make no mistake, I am in favor of better enforcement of product safety regulation. But that means paying for more inspectors who make life uncomfortable for politicians with their reports.
    One example of a protected industry is the financial one. i.e. Wall Street. The banks are regulated by the Federal Reserve which is a funny mixture of private and government body whose governors are appointed by the bankers themselves. A case of the fox running the hen-house. All the protections set up in response to the Great Depression were removed over time. This and greed contributed to the biggest financial crisis in modern times. The banks and other financial institutions then had to get bailout money from the public after which the senior management then made off like bandits with huge bonuses. The icing for these financial types was that they got added legal protection in early 2008. See: Stoneridge Investment Partners v. Scientific-Atlanta

    http://www.washingtonpost.com/wp-dyn/content/article/2008/01/15/AR2008011501329.html

    Here, the Supreme Court strictly limited the ability of investors who lost money through corporate fraud to sue other businesses that may have helped facilitate the crime.
    Don’t know if I should laugh or cry.

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    Just keep doing what you are doing and try to get to the thruth. The public can make adifference if they know the truth but there is so much spin these days that they can’t tell up from down.

  13. The_Observer says:
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    For those who are interested, an article link below comparing Wall St. to the mob:

    http://www.atimes.com/atimes/Global_Economy/KJ22Dj01.html

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    Thanks. Very interesting.