In a 108-page Findings of Fact and Conclusions of Law, Judge Eldon Fallon of the Federal District Court for the Eastern District of Louisiana filed a long-anticipated opinion which addresses the nature and extent of the remediation required for the seven representative Virginia plaintiffs selected for this “bellwether” trial. For those interested in how Judge Fallon resolved the many issues before him, and who may not have the time or stamina to withstand over 100 pages of legal reasoning, I have done the “heavy lifting” for you by summarizing the high points! This article will dissect the opinion and summarize Judge Fallon’s remediation conclusions.
In general, the opinion can be divided into three parts: First, the background of the case, and even the background of the Chinese drywall at the heart of the case. Second, the effects that the drywall has on the items found within the Plaintiffs’ homes which are in need of remediation, and the types of remediation called for in light of the damages sustained by the homeowners’ property. Third, Judge Fallon details the remediation required by each of the seven Plaintiffs and assigns a dollar amount to them.
The first part of Judge Fallon’s opinion is essentially a review of the procedural history of the case, along with some background information about drywall. He details the drywall manufacturing process and notes how the elevated levels of sulfur and strontium found in the Chinese drywall are generally accepted as the root cause of the damages suffered by property owners. Judge Fallon makes three important observations with respect to at least one of the drywall importers and their relationship with the Chinese manufacturer:
1. That “The drywall product was never tested pursuant to the United States ASTM standard”
2. That this importer of the Chinese Drywall “Relied on a representation that Chinese testing was equivalent to the U.S. testing standards.”
3. That even though “certificates of quality” were issued by the Chinese government presumably for the drywall they exported, “The Certificate of Quality Management System Certification issued predates the production of the drywall shipped to the United States by at least two years.”
The second part of the opinion represents the core of this dispute. In it Judge Fallon addresses each aspect of the remediation and carefully lays out what he has decided needs to be done in order to address the problem drywall as well as the proximate damages it has caused. Those familiar with the case(s) know that the Plaintiffs had requested far more comprehensive remediation than that offered by many on the other side. Below I will list the components of the homes subject to remediation and summarize Judge Fallon’s conclusions as the nature and extent of what his court will require:
Drywall – Upon consideration of the “partial” and “complete” drywall removal approaches, Judge Fallon concludes that all of the drywall in each of the affected homes (with the exception of one home where the drywall was “localized” in a room constructed in the basement as an add-on) must be removed and replaced, whether “CDW” (Chinese Drywall) or non-CDW.
Electrical wiring – Weighing the safety and cost considerations again, Judge Fallon decides that all of the electrical wiring in the homes, again with the exception of the “localized” home, must be replaced.
Copper plumbing – The cleaning and/or selective replacement theory again fails to win Judge Fallon’s approval, and he says that all of the copper pipes in the affected homes must be replaced.
HVAC systems – Since the HVAC systems combine electrical and plumbing components, these also must be replaced entirely, although the components found outside the homes can be evaluated on a case-by-case basis. Judge Fallon also includes the ductwork in each home as part of the system which must be replaced in its entirety.
Selective electrical devices and appliances – In this section Judge Fallon observes that most electrical devices found in the Plaintiffs’ homes contain circuit boards, copper, and silver, all of which are susceptible to the same type of damage suffered by the electrical wiring, plumbing and HVAC systems already being replaced. Instead of a blanket statement, however, he notes instead that “Most of the appliances and electronics located in the representative homes need to be replaced.”
Flooring – Judge Fallon notes that the drywall removal process will make it extremely difficult if not impossible to protect hardwood, vinyl and even tile flooring. In addition, the need to “air out” each home as part of the remediation process will have additional damaging effects on flooring. He will require that all hardwood and vinyl flooring be replaced, but allows for tile flooring to be retained if it can be adequately protected.
Items requiring removal in order to remove drywall – Here Judge Fallon observes that many items which may not require removal or replacement on their own will indeed need to be both removed and replaced due to the need to get at the drywall. Examples he provides are kitchen cabinets, molding, countertops and bathroom fixtures. Although it may be possible to carefully remove these items, then store them for later reinstallation, Judge Fallon has decided that it will be more cost effective to remove and replace such items.
Insulation – While the drywall removal is ongoing, the insulation in the homes will suffer from dust and sulfur gas contamination, therefore requiring removal and replacement.
Judge Fallon’s rationale for requiring such an exhaustive treatment often centers around the following criteria:
1. The need to remove all traces of the offending drywall,
2. The cost effectiveness of removing household items which may not have been directly affected, but the careful removal and storage of which would exceed the cost of removal and replacement, e.g. carpeting.
3. The efficiency offered by removal and replacement of items such as wiring and plumbing after the drywall removal has exposed each, providing the ideal opportunity to do so.
4. Safety. Where certain items may have some useful life left, electrical appliances for example, their safe operation, in Judge Fallon’s opinion, has been compromised, requiring replacement.
Other issues before Judge Fallon which are addressed include his conclusion that each affected home must be vacuumed and washed after all of the above items have been removed, his requirement that an engineering company certify that each home is safe upon completion of the remediation, and the need to provide each homeowner with a written guarantee that the home is free from contamination as well as damaged components. He also decides that each family will be provided with alternate living expenses while the remediation is ongoing, but declines to make property devaluation a recoverable item, stating that the homes should be repaired fully via the remediation, and that such an award would be too speculative. Other losses recoverable include damages to personal property and costs from foreclosure or bankruptcy associated with the drywall-affected homes where appropriate. Finally, in order to address the “loss of use and enjoyment” damages element, Judge Fallon awards each of the homeowners, with the exception of the “localized” Plaintiffs, $100,000 each. A smaller award of $30,000 is awarded to the “localized” Plaintiff. The final section of Judge Fallon’s opinion covers each of the Plaintiff’s unique circumstances, the damages suffered by them, and assigns a dollar award to each.
The full text of Judge Fallon’s opinion is available from the LexisNexis File & Serve system. Call our toll free number to register for access (888-529-7587), and for current users the “Transaction ID” for this opinion (30477699) will take you directly to the document.
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