Chinese drywall settlement for thousands in Florida goes to court Thursday

The following article was published in the Naples Daily News on July 13, 2011:

Chinese drywall settlement for thousands in Florida goes to court on Thursday

By Laura Layden

Nicole Rodriguez hasn’t gotten a dime to replace her tainted Chinese drywall.

Yet, the East Naples resident is considering opting out of a proposed $54.5 million settlement agreement with Banner Supply Co., the Miami-based company that supplied the corrosive wall board discovered in her home and thousands of others across Florida.

While the proposed multimillion-dollar settlement might sound generous, some attorneys are questioning whether it’s enough money to truly help homeowners.

At the same time, the settlement is opposed by builders and installers who are facing claims because they used Chinese drywall supplied by Banner. They say they were unfairly excluded from negotiations as defendants in the class-action case.

The settlement would include attorney fees, which could eat up as much as 32 percent of the total, and it would cover other “administrative costs.” Some estimate the settlement might get homeowners only $4,000 to $6,000.

“It doesn’t seem to be a very fair settlement if it’s not going to fix our home,” said a frustrated Rodriguez, 27.

Her Coral Gables attorney, David Durkee, who represents 300 Chinese drywall victims across the state, is telling his clients they may want to opt out of the settlement as proposed because it lacks transparency and appears to be unfair to homeowners.

Homeowners have until August to decide whether to be part of the settlement.

There is a hearing on the settlement agreement before a federal judge, Eldon Fallon, Thursday in New Orleans. The proposed settlement was announced last month.

“It is standard practice for agreements such as these to be reviewed by the court for fairness, and this is exactly what is going to occur here,” said Michael Peterson, with Peterson & Espino in Miami, who represents Banner Supply. “Importantly, no homeowner, nor attorney representing any homeowner, has filed any objection with the court to the settlement agreement.”

Durkee, with Roberts & Durkee, said he’s not filed an objection because the standard for preliminary approval is so low.

“In the future, there will be another opportunity to object to final approval. Legally, an objection at final approval has a greater chance of being granted,” he said.

More than half of his clients will be directly affected by the proposed settlement with Banner, if approved, Durkee said.

Banner, the company’s insurers and the homeowners’ attorneys involved in negotiating the settlement describe it as “fair, reasonable and

adequate.”

Leonard A. Davis, a partner in Herman, Herman, Katz & Cotlar LLP in New Orleans who represented homeowners in the negotiations, said he expects the judge to consider and discuss at Thursday’s hearing all the concerns that have been raised about the agreement.

“Stay tuned to the hearing,” he said.

Durkee and other attorneys who weren’t involved in the negotiations – including Victor Diaz, a Miami Beach attorney who also represents hundreds of Chinese drywall victims in Florida – question why the settlement is solely funded by Banner’s insurers and why the supplier isn’t being asked to “pitch in” any money.

Peterson, Banner’s attorney, said the small company has suffered greatly itself because of the tainted drywall it acquired.

“Banner plans to pursue all available remedies and to seek recovery of the substantial damages Banner has suffered both to Banner’s business and Banner’s 58-year reputation in the construction industry from all parties who are responsible for such damages,” he said.

More than 20 builders and a group of installers have filed motions objecting to the proposed settlement.

In its objection, Lennar Homes Inc., headquartered in Miami, argues it has spent tens of millions of dollars repairing hundreds of homes that had defective Chinese drywall supplied by Banner and that as a result it is the largest member of the settlement class, stepping into the shoes of its home buyers in property damage claims.

“Lennar was not informed of or even provided a copy of the proposed Banner settlement agreement until after it was executed,” the court filing says.

At a court hearing last month, Hilarie Bass, a Miami attorney representing Lennar and a steering committee for home builders involved in the case, said, “I understand it’s a complicated deal. It may be the best deal possible. But I can assure you, it is much easier to cut a deal when you’re excluding one of the most important classes or subclasses of relevant interested parties, and that’s what I believe has been done.”

Other builders that haven’t fixed homes with Chinese drywall fear “they have nothing to gain and everything to lose” by participating in the proposed settlement. As part of the settlement, it appears builders would forego any right to settlement funds and release claims against all other parties, except manufacturers, an attorney for Excel Construction of Southwest Florida Inc. argues in a court filing.

There are still so many unanswered questions for all parties involved in the lawsuit, Durkee said.

Those questions include how many homeowners will receive money from the settlement and exactly how much they’ll get.

From 2004 to 2008, it’s estimated that 60,000 to 100,000 homes were built throughout the country using the defective Chinese drywall from a number of suppliers. The Banner settlement could cover thousands of people in Florida.

The cost to repair Nicole Rodriguez’s 2,000-square-foot home in East Naples could be as much as $200,000. That amount doesn’t include other damages her family has suffered, including paying rent for another home because they can’t live in the one they bought.

Nicole and her husband, Leo, 38, moved out of their three-bedroom villa off Sanctuary Drive more than a year ago after discovering the Chinese drywall. Their son spent the first 2-1/2 years of his life living in the home before the couple realized it was the root of their many problems, from corroded air-conditioning coils to damaged electrical wiring.

“I can tell you my son has battled asthma and respiratory problems since he was born,” Rodriguez said. “If you are breathing toxic chemicals as a newborn, what is that going to do to you?”

The Banner settlement may cover less than 5 percent of the cost of repairing the Rodriguez home.

“The ultimate objective of this would be to get these people back in their homes,” Durkee said. “We are hopeful and we are fighting at least for the minimum of trying to get these folks’ houses back.”

Though Banner isn’t the only company to blame for the Chinese drywall, some homeowners fear it will be the only company that will step to the plate to help them fix their problems.

Nicole Rodriguez is a student and a waitress; her husband is a firefighter. They’ve struggled to pay rent, while trying to keep up with a mortgage and the monthly fees they’re charged for owning a home in Blue Heron. They bought their home in 2007.

“We were trying to do the right thing, live the American dream, buy a house,” Rodriguez said. “We did the right thing. We always paid our mortgage on time, Then it all came around to bite us.”

For the Rodriguez family and other Chinese drywall victims, the clock is ticking.

“Some of these victims are going to start losing their homes,” Durkee said. “Some of the victims are going to have to live in these homes because they don’t want to go into foreclosure and therefore they are going to get sick.”

When the proposed settlement was announced, judge Fallon ordered that all state court cases involving Banner be halted. That put the Rodriguez case, pending in Collier Circuit Court, on hold. Attorneys have filed objections to the judge’s order, saying it was a dangerous precedent and not legally appropriate.

“Justice delayed is justice denied,” said Diaz, the Miami Beach attorney with V.M. Diaz & Partners representing Chinese drywall victims in Florida.

It’s still unclear whether homeowners will be able to pursue their cases in state court if they opt out of the federal class-action settlement.

“Ultimately, that will be determined by the court,” Diaz said.

Find this article here:  http://www.naplesnews.com/news/2011/jul/13/chinese-drywall-Banner-Supply-Lennar-class-action/