Louisiana AG Sues Chinese Drywall Manufacturers

[Update 1: Adds Knauf statement] The Louisiana attorney general filed a lawsuit against 23 companies alleged to have been involved in the manufacturing, distribution or installation of defective drywall produced in China and used to rebuild homes after hurricanes Katrina and Rita. “In pursuit of profit, defendants proactively pushed their defective Chinese drywall into Louisiana in massive quantities, knowing that domestic supplies were very low and that Louisiana desperately needed drywall to commence its rebuilding efforts,” state attorney general James Caldwell wrote in his complaint. The suit alleges fraud, negligence, violations of expressed and implied warranties and the state’s unfair trade practices and consumer protection laws and its product liability act. It seeks unspecified damages to remediate the drywall problem in the state, cover trial expenses and punitive relief. Six of the companies named in the suit are subsidiaries of Knauf, a German building materials company that’s already a party in a massive consumer lawsuit. As HousingWire previously reported, Knauf has been a major target of consumer advocates. In a statement, Knauf said it is aware of the suit, and said it is cooperating with the attorney general’s office, as well as other state and federal regulators, and will continue to do so despite the lawsuit. “Although we wish to resolve the situation and allay homeowner concerns about property issues through the implementation of an appropriate remediation or repair strategy, scientific evidence establishes that KPT drywall has no harmful long-term health effects and is not toxic to humans or animals,” the statement said. “We are disappointed that the Attorney General’s office has chosen to include allegations in this suit that directly contradict our scientific findings and reports of other regulatory agencies, which had been shared with that office.” According to the suit, another defendant, Beijing New Building Materials Company (BNBM) is an “agency or instrumentality” of the People’s Republic of China. BNBM and two of its subsidiaries listed in the suit are firms engaged in “commercial activity carried on in the United States by a foreign state.” Attempts to reach BNBM representatives were not successful. The suit claims the drywall was manufactured with waste material from scrubbers from coal-fired power plants, called “fly ash,” which the suit alleges emits sulfur components and was not adequately inspected or cleaned before its use in the building materials. The suit claims the Louisiana Department of Health and Hospitals has received nearly 1,000 reports of medial complaints “believed to be caused by defendants’ drywall,” including difficulty breathing, asthma attacks, and other respiratory problems. “Contrary to their written warranties, the drywall provided by Knauf…was not free from defects in materials and/or workmanship,” the suit said. Matthew Jacobs, a Washington DC-based attorney at the Jenner & Block law firm, represents homebuilders in cases against Chinese drywall claims. While not a party to the suit, Jacobs reviewed the case and said he believes the complaint is comprehensive, well-pleaded and indicates a lot of work on part of the State. “It shows that the State of Louisiana is serious about pursuing many of the entities involved in the CDW [Chinese drywall] situation, and will put considerable resources into attempting to recover on behalf of the citizens of Louisiana.” “It is not quite akin to what the state did in connection with the tobacco wars of the 1990s. But it certainly increases the level of attention that will be have to be given by these companies to all the issues surrounding liability for CDW claims, including whether they can recover some of these potential losses — including defense costs — from the many insurance companies that clearly insured these types of risks,” Jacobs added. Write to Austin Kilgore.