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Robert Trigaux

Chinese drywall maker Knauf, awash in lawsuits, settling with more home builders


Wake up and good morning. A settlement reached by Knauf Plasterboard Tianjin Co., one of the companies tangled in litigation over defective Chinese-made drywall, and homebuilder Beazer Homes USA Inc. suggests Knauf is moving quickly to settle claims before lawsuits go to court. Beazer reportedly used problem drywall in about two-dozen homes in its Hampton Lakes development in Tampa and in its Magnolia Lakes development in Fort Myers.

 But some industry officials like John C. "Chuck" Fowke (in photo), president of the Florida Home Builders Association, question whether settlements that provide homeowners money for remediation work go far enough, the Wall Street Journal reports.

Representing Knauf, Kerry Miller, a partner at New Orleans law firm Frilot LLC, told the Journal that a settlement had been reached and that Knauf is in talks with between six and 10 other builders that had used its Chinese-made wallboard. Settlements are expected within weeks.

Knauf already faces nearly 200 federal lawsuits, mostly from homeowners, over the defective drywall.

Also known as gypsum board, defective drywall imported from China during the housing boom produces sulfurous odors, corrodes metal and, in some case, causes health problems. Home builders, under pressure to fix affected homes, are suing the manufacturers and other parties to cover their costs.

For some additional background on the Chinese drywall controversy, check out eight earlier Venture blog posts on the subject, compiled here. According to the Journal, here's an update on the legal battles:

* Beazer has identified about 50 homes in southwest Florida where subcontractors installed defective product in fiscal 2006 and 2007. It has warranty reserves of nearly $27 million, a figure that could grow should additional cases be confirmed.

* Homebuilder Lennar Corp. has set aside nearly $81 million to repair about 750 homes in Florida.

* Three builders have sued Knauf. Two of them, independent companies based in Florida, are Heritage Homes of Northwest Florida and Mitchell Co. Beazer made claims against KPT but never formally filed suit.

The U.S. Consumer Product Safety Commission (here's the CPSC's Drywall Information Center) has received nearly 3,300 reports from 37 states and other areas. According to the Journal, experts estimate it costs about $100,000 to pull out bad drywall and replace corroded electrical wiring and appliances in an average-sized home. Consulting firm Towers Watson has estimated U.S. drywall damages of $15 billion to $25 billion. Here's the complete Wall Street Journal story.

-- Robert Trigaux, Times Business Columnist

[Last modified: Tuesday, June 1, 2010 11:27am]


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