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NEWS & INSIGHTS
Publications
14 MAY 2009
Chinese Drywall: Emerging Litigation and Potential New Regulations
PRODUCT LIABILITY AND TOXIC TORTS ALERT
Kimberly K. Egan Christopher G. Campbell George Gigounas
Drywall from China, alleged to be defective, is poised to become the next product blamed for “sick house syndrome.” As the number of “Chinese drywall” lawsuits rises, the Consumer Product Safety Commission is taking action. More than 60,000 homes have been built with Chinese drywall since 2004 in southeastern states including Florida, Georgia, Louisiana, North Carolina and Virginia. Homeowners complain that a “rotten egg” sulfur smell emanates from the walls; gases from the drywall corrode electrical wiring and copper coils in air conditioners and blacken faucets and silver jewelry; and the product emits fumes that harm homeowners’ health—for instance, causing nosebleeds, insomnia, migraines, joint swelling and dizziness. In Florida, eight class action suits have been filed against builders and manufacturers focusing on the use of Chinese drywall in construction. Class actions are also on file in California, Louisiana, Ohio and Alabama. Plaintiffs’ lawyers predict the volume of such cases will only increase. Further, the problems allegedly associated with drywall may not be isolated to Chinese-made product and may implicate US manufacturers. Drywall is made from gypsum compressed between layers of heavy paperboard. Gypsum, a soft mineral, is mined around the world, including in China. In addition, some gypsum is made with fly ash, a byproduct of coal-burning power plants. Both Chinese and United States drywall manufacturers use fly ash. One lawsuit has alleged that drywall made in the United States poses the same problems as drywall made in China because of the use of fly ash. In response to these complaints, the Florida Department of Health has begun an investigation and the
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United States Consumer Protection Safety Commission (CPSC) has asked Congress for emergency funding to study the issue. Members of the Florida delegation have drafted legislation to ban Chinese drywall temporarily and to require CPSC to promulgate new rules to regulate it. CPSC is Taking Action The CPSC is already moving ahead on several fronts regarding Chinese drywall. On May 1, 2009, Commissioner and Acting Chairman Nancy Nord wrote a letter to Senator Bill Nelson (D-FL), who sponsors proposed federal legislation, regarding CPSC's efforts and plans and describing an urgent, inter-governmental investigation involving CPSC, EPA, CDC and DHHS. CPSC’s plans and activities include the following: Preparing a health risk assessment by examining the drywall itself -- developing quantitative and qualitative data on the defective drywall through elemental characterization, chamber studies and inhome monitoring. Examining and testing home components (wiring, appliances) that may be affected by drywall emitting gases. Investigating the product life cycle of drywall, from its material component sourcing through end-use incident reports. Working closely (even exchanging representatives) with its counterpart agency in China, which is conducting a parallel investigation. Implementing specific FAQ responses and resources for public inquiry. Planning to coordinate with state agencies. Finally, the CPSC has submitted an emergency budget request to Congress for funds to pay for public outreach, including a website and a rapid response system, investigative travel and additional work required for the above analyses and studies. The Drywall Safety Act of 2009 Senators Nelson and Mary Landrieu (D-LA) introduced the Drywall Safety Act of 2009 in the US Senate on March 30, 2009 to address potentially defective Chinese-manufactured drywall in residential homes. Congressman Robert Wexler (D-FL) introduced an identical bill in the House of Representatives on April 2, 2009 (co-sponsored by Representatives from Florida, Virginia, Wisconsin and Mississippi). The bill has three key provisions: (1) It would require an in-depth CPSC study. The CPSC (in conjunction with the National Institute for Standards and Technology and the US EPA) would be required to study "the material and chemical composition" of samples of drywall imported from China between 2004 and 2007 and used in US homes in (at least) Florida, Louisiana, Mississippi, Texas and Virginia. The study would also review the effect of the drywall chemicals on metal wiring, HVAC units and other metal fixtures, and would assess health and environmental impacts. The bill, if passed, would require that a study be completed within 120 days and submitted to Congress. Such a study would likely play a key role in litigation over the drywall.
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(2) It could require CPSC regulation of drywall materials. The bill, if passed, would require CPSC to consider, within 180 days of passage, whether a specific consumer product safety standard must be developed to regulate material composition in drywall and to protect the health and safety of residential homeowners. (3) It would temporarily ban offending drywall. The bill, if passed, would require CPSC to impose an interim ban and notice requirement on drywall exceeding 5 percent organic compounds by weight. Within 30 days of passage, the bill would require the CPSC to designate such drywall as a product with a defect constituting a substantial product hazard, and to issue orders to manufacturers, distributors and retailers to notify consumers of such designation. The ban would last until the CPSC determined it was not necessary to protect health and safety of residential homeowners. The House of Representatives also recently approved a drywall-related amendment to the Mortgage Reform and Anti-Predatory Lending Act, H.R. 1728. This is the first drywall-related legislation to be approved by the House or Senate. If enacted, it would require the Department of Housing and Urban Development to study the effect on residential mortgage loan foreclosures of (i) the presence of Chinese drywall in homes, and (ii) the availability of insurance for homes with Chinese drywall. Is Your Company Part of the Drywall Product Distribution Chain? While it is still early on both the legislative and litigation fronts, US, Chinese and other companies that have any role in the chain of distribution for drywall products should take note of these issues. Whether involved in manufacturing, importing, distributing, installing, or simply using drywall, those businesses should evaluate their inventory and quality control procedures to ensure compliance with CPSC requirements and assess their level of preparation and protection in the event of litigation.
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