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Proposed Lowe’s Drywall Settlement Offers Small Payouts to Victims, Big Fees for Attorneys

A class-action agreement over tainted drywall could pay off plaintiffs with Lowe’s gift cards. Lawyers in another large drywall case have attacked the settlement.

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A Lowe's home improvement store in South San Francisco, California. (Justin Sullivan/Getty Images)

Lowe’s Companies Inc., the nation’s No. 2 home improvement chain, has set off a legal firestorm by agreeing to a national settlement over tainted drywall in a class-action suit being decided in a Georgia state court.

The $6.5 million settlement would pay relatively small amounts to individuals who had the tainted drywall in their homes. But the handful of attorneys who quietly negotiated the deal will receive a separate payment of $2.1 million. Victims will be compensated mostly in Lowe’s gift cards, offered in the amounts of $50, $250 or $2,000, depending on the level of documentation they can provide. Those who can prove they’ve suffered more than $2,000 in damages may also receive up to $2,500 in cash.

Customers would not necessarily receive full refunds for the defective product they purchased. For example, someone who spent $10,000 on drywall would still only qualify for a maximum of $4,500 in cash and gift cards.

Under the agreement, individuals would waive all legal rights to sue the North Carolina-based company for property damage or medical claims related to the drywall.

The figures involved are small compared with what the federal courts have established as the general cost of repairing a home contaminated by defective drywall, which emits large amounts of sulfur gases that can corrode electrical wiring and trigger respiratory problems. The U.S. Consumer Product Safety Commission says the only way to repair such homes is to remove the drywall and electrical wiring, a job that can cost $100,000 or more. A Miami jury recently awarded $2.5 million in damages to the owners of a home built using drywall from a South Florida supplier.

The class-action settlement would automatically apply to Lowe’s customers throughout the nation, unless they notify the Superior Court of Muscogee County, Ga. by Nov. 9 that they want to opt out. Those who don’t meet that deadline automatically lose their right to sue Lowe’s.

The agreement won’t become final until it is signed by Superior Court Judge Bobby Peters, who has already given his preliminary approval. Peters will hear arguments for and against the agreement on Nov. 19.  By that time, however, anyone who wants to opt out of the class action lawsuit must have done so already.

Attorneys who are representing plaintiffs in the nation’s largest drywall case, which is focusing on drywall manufactured in China, have already attacked the settlement. Late Monday the lead attorneys filed a motion before U.S. District Judge Eldon Fallon, who is overseeing the multi-district federal case in New Orleans, asking him to block the Georgia settlement. They say the payments to victims are too small, the attorney fees too large and that the agreement “interferes with and erodes” the federal litigation and Fallon’s own authority to deal with the wide scope of the drywall problem.

To back up their argument, they cite the Class Action Fairness Act of 2005 and a number of subsequent court decisions to establish that gift cards and coupons are not appropriate and often lead to the enrichment of attorneys at the expense of victims.

At this point, the attorneys in the Georgia settlement say they have about 40 defective-drywall cases against Lowe’s. Some of their clients are also plaintiffs in the combined federal case, which involves thousands of homeowners, builders and suppliers.

In e-mailed responses to questions, Lowe’s spokespersons said the company does not believe the drywall it sold was defective. They also said Lowe’s vendors have assured the company that they never sold it any Chinese drywall. Lowe’s “entered into this agreement as part of our commitment to serving our customers,” they said.

Lowe’s officials declined to be interviewed for this story, and the company’s attorneys didn’t respond to phone calls and e-mails. The spokespersons directed questions about details of the settlement to Don Barrett, an attorney for the plaintiffs. Barrett, who led the settlement negotiations, commended the company for “stepping up to the plate” and disputed criticisms aimed at the deal.

“It’s been obvious to us in our aggressive negotiations that they are concerned about their customers and their own reputation,” said Barrett, who was on vacation and consented to only a brief interview.

Barrett said the drywall that the lead plaintiff in his case bought from Lowe’s has no markings to signify its origin.

The settlement has touched a nerve with lawyers who are pursuing the growing issue of American drywall that appears to be causing the same corrosion and health problems as the defective Chinese drywall.

They said the Lowe’s settlement could set back efforts to determine the scope of U.S. cases and shield Lowe’s from having to disclose critical information they are seeking.

“This is a total shutting of the door — there’s no light with this,” said Robert Gary, whose clients are suing several U.S. manufacturers including National Gypsum, based in Charlotte, N.C., as well as Lowe’s. “If this happens, they’re not going to give us anything, they’re going to say the case is over, it’s been settled.”

Gary said he believes the settlement was designed to do one thing – seal off Lowe’s from any liability over all the drywall it has ever sold, before more homeowners can come forward.

“This settlement isn’t about what the plaintiffs are getting,” he said. “It’s about what they are giving up.”

Under the agreement, Lowe’s customers will not receive notice of the settlement in the mail, the traditional method of contact in class-action cases. Instead, Barrett said the plaintiffs will hire a company to set up a website and place ads in publications like Parade Magazine. He said notices will also be placed at the bottom of receipts received by customers shopping at Lowe’s.

Lowe’s has not provided a list of its drywall customers to Barrett and his associates, and a company spokeswoman would not comment on whether such a list will be produced.

ProPublica and the Herald-Tribune found that the settlement already is causing confusion among plaintiffs in the federal drywall litigation.

Antione Carter, a 73-year-old Slidell, La., resident and his wife used drywall from Lowe’s to rebuild their home after it was destroyed by Hurricane Katrina in 2005. Since then, they have had strange air conditioner and microwave failures, and last year an inspector said their problems were consistent with bad drywall.

Carter’s case has been handled by two firms, one in Texas and the other in Louisiana. He said one of the attorneys called him last week, told him about the agreement, and said he had 30 days to find another attorney or drop his case against Lowe’s. But a document filed with Judge Fallon’s court on Friday by David Matthews of Matthews & Associates of Houston indicates that Carter’s claim against Lowe’s has already been dropped.

Julie Rhoades, a colleague of Matthews whose name is also on the document, said Christopher Coffin, who is handling Carter’s case in Louisiana, had arranged for Matthews’ firm to file the document for Carter and Matthews’ other clients who had filed lawsuits against Lowe’s. Coffin did not immediately respond to calls for comment.

Carter said he had not given anyone permission to drop his case.

“I do not want to drop it,” he said. “I would like to have another attorney.”

“If they’re not at fault, why are they going to give a couple of thousand dollars?” Carter said, referring to Lowe’s. “There’s something suspicious somewhere.”

Carter said he is afraid that he’ll be left to fend for himself.

“We’re just in the dark here. We don’t know what’s going on,” he said.

Coffin’s firm, Pendley, Baudin & Coffin LLP, is also representing John Grissom, a Monroe, La., resident who used drywall from Lowe’s to build his home in 2006. Grissom was also surprised to learn that Matthews & Associates had filed documents on his behalf in Fallon’s court on Friday. In his case, however, the documents said he was dropping his lawsuit against his builder, not Lowe’s.

Rhoades, Matthews’ associate, told ProPublica and the Herald-Tribune it was possible that some other attorney involved in the case had mistakenly included the name of Grissom’s builder, rather than Lowe’s, when the document was drafted.

“Absolutely not,” Grissom said when asked whether his attorneys had his permission to drop his claims against anyone. He said he did not know anything about the Georgia agreement until he was contacted by ProPublica and the Herald-Tribune.

Under the proposed Georgia settlement, people who bought defective drywall from Lowe’s are eligible for three levels of compensation, depending on their record keeping and proof of damage to their home or health.

To receive the maximum amount —a $2,000 gift card plus $2,500 in cash — they need a receipt or a credit card statement showing that they bought drywall at Lowe’s. They must also prove through an independent third party that they have more than $2,000 of damage to their home or more than $2,000 in medical bills.

It is not clear what qualifies as “independent” proof. It’s also unclear whether they must already have spent money on remediation or doctor’s bills, or if they can show they’ll need to spend it in the future to remedy the problem.

Customers who have a receipt but can’t supply independent proof of damages are eligible for a maximum of $250 in Lowe’s gift cards.

Those who have neither proof of damages nor proof of purchase, but claim their drywall was bought at Lowe’s, are eligible for a $50 gift card if a settlement administrator hired by the plaintiffs determines that those claims are valid.

You act like this is something unusual. The damaged parties get bupkes and the lawyers get new Mercedes all around.

Ever wonder why tort reform never gets very far in a Congress/Senate/White House full of lawyers?

Hilda E. DAvis

Aug. 11, 2010, 4:23 p.m.

What a crock.  Once again it sounds like the injured will be hurt again.  They won’t receive compensation for medical expenses, much less enough to repair their homes, or do what is necessary, as should have been done.  Hopefully, this attorney will stand strong on his opinions and fight for those hurt.  Let Lowe’s take the loss.  Who ever heard of getting a Lowe’s Gift card for damanges?  Darndest I ever heard in my 71 yrs.

Amazing the way these companies are able to subvert the law. As for this lawyer, Don Barrett he should put a sign on himself that says “I can be bought” for selling out, and it’s a disgrace that a Superior Court Judge would agree to this. This Superior Court judge, “Bobby Peters, who has already given his preliminary approval” should recuse himself.

Hopefully, U.S. District Judge Eldon Fallon will see through this farce of an agreement, and over rule the Georgia court.

As for hating attorneys, try living with this stuff in your home and having the company that made this crap not give a damn, the federal government not giving a damn, and the only one fighting for you is an attorney.

Great work Joaquin, Aaron, and ProPublica!
As has been the case over and over again, ProPublica brings us information that no one else seems interested in covering.

After reading this article, and the doings of the Lowe’s plaintiffs attorneys, it seems possible that there are some shenanigans going on in back rooms.  It sure seems strange that plaintiffs are “filing” paperwork that they aren’t aware of.

At the minimum, that appears to be unethical on the part of the plaintiffs’ attorneys.

Keep “peeling the onion” ProPublica.  Where’s the smoke there’s a good bet there’s a hidden fire raging.

terrible work by Joaquin, Aaron and Problica.  I am very involved in this case and what you have reported is a travesty to everything media related.  Half of what you have reported is not only inaccurate but totally incorrect.  You should be ashamed

@ Jon Laird - The reason tort reform never goes anywhere is because when it’s presented by Republicans it’s only to do with stopping the punishment of corporations for malfeasance. It has nothing to do with lawyer fees.

Proponents of tort reform are only interested in letting corporations off when their bad behavior or policy injures the general public.

Gege, Care to provide some details?

IF i could, I would.  Not in a position to do so.

Let’s not forget that every gift card Lowe’s issues will be tax deductible for them as well.

Mssrs Sapien and Kessler,

what are the health related issues one might associate with this bad drywall?
What states/areas of the country are included?
What exact website is available for either opting in/opting out etc…?

Great initial reporting, but it leaves the millions of small, do-it-yourselfers who may have purchsed this junk, to weed through a haystack looking for a needle that might not even be there.

EVERY SINGLE PERSON WHO HAS A DRYWALL PROBLEM SHOULD IMMEDIATELY OPT OUT OF THIS SUIT!

Pass it along - every single plaintiff should opt out and bring their own cases to courts in their home states - your home state has jurisdiction because it’s where the home is located.

Don’t rely or even trust any attorney already involved in this suit! Ever - all they care about is getting paid and what’s in it for them - that’s the reason the Bush Administration acted to put the brakes on class action lawsuits (Bush actually did a number of things that benefitted this country too). In class action cases the attorneys ALWAYS make millions - that’s why they run television ads asking “Did you suffer from this or that”? Not because they give a damn - they know they’ll get millions in fees and the poor people who’re wronged will get a check for $5.00.

If you know anyone involved in this matter - please tell them to fill out the form in the claim packet and mail it in & OPT OUT as soon as possible. After the settlement news attorneys all over the country will take these cases on contingency (you get paid - they get paid) because that’s the ONLY way people will be compensated fairly - let the courts in their own jurisdiction decide (unless they have Lowe’s stock).

Good luck

Yes the evil lawyers are at it again. This has nothing to do with Lowes screwing the victims by getting a settlement in Georgia. I wonder what the settlement would have looked like if it had be delivered in a Florida court. Florida being one of the principle areas where the toxic drywall was sold.

Exactly PadrePio. Why was this case decided in a Georgia court when the majority of plaintiffs reside in Florida? Smells like forum shopping to me & even if the lawyers convinced people they are obligated by some “Arbitration clause” in the receipt for the drywall that simply is not true. The place of most significance - being where the drywall was installed and the home is located- is the place of jurisdiction. It’s called conflict of laws and even first year law strudents know that.

I think the attorneys (another word for thief) decided Lowe’s battalion of lawyers looked better in their suits so decided to go along with them. I’ve seen that very thing happen many times before.

Get out of this settlement people. Before it’s too late.

Brenda Brincku

Aug. 16, 2010, 2:01 p.m.

I want to thank Joaquin from ProPublica, Aaron Kessler from Herald-Tribune & CBS News. You did an excellent job reporting this story. This will help the victims understand their rights & be able to know what is going on with this case. The Lowes victims may of never found out about this until it is to late on November 9th. How many of us know those receipts fade with time? So even if those victims saved their receipts they could be unreadable by now. How fair is that? I guess that $50 gift card could buy them a tarp to sleep under because that is all they would have left because they wouldn’t be able to repair their house for $50. The Lowes victims need to write the judge & complain about this settlement as soon as possible. This whole settlement is unfair & the victims need to fight back & not let this settlement take place.

Gideon Grunfeld

Aug. 16, 2010, 5:25 p.m.

There are a few aspects of this case that aren’t very clear in the article.  It seems that the plaintiffs’ lawyer, Barrett, is basically admitting that he has a pretty weak case against Lowe’s. He says that his lead plaintiff bought drywall at Lowe’s but the lawyer can’t show where this drywall was manufactured.  Lowe’s naturally says that it’s suppliers didn’t provide it with tainted drywall.  Thus, how would a jury have any basis to tie the specific drywall purchased by the lead plaintiff to Lowe’s?  Maybe that’s why the settlement amounts are so low.

As for the people who would be getting $50, this seems to be a courtesy payment by Lowe’s.  These are for people who can’t even show they bought drywall from Lowe’s, let alone that they suffered any damages from their purchase. I think this is what the Lowe’s representative quoted in article was trying to say, but the article isn’t very clear about this.

I agree with the prior comments suggesting that ultimately the judges have to step up and look into this case more deeply and see whether this settlement is at all fair.  The tentative settlement would give the lawyers about 25% percent of the total amount paid by Lowe’s.  This is less than what most lawyer’s get when they take a case on a contingency basis. But the article does point to some suspicious details, and it really is up to the judges to dig deep and find out what’s going before they approve this settlement.
http://www.lawyeronaleash.com/index.php/blog/

I do not think the judge will bother to examine the specifics of this case - whether or not there are grounds to support a further review of the evidence as submitted by either party. It is the job of a jury to decide the facts of a case - the judge decides matters of law. As this case is in the settlement phase, and did not go to trial there is no jury involvement.

If this case is a class action surely at least some plaintiffs have receipts showing where the purchase was made. If at Lowe’s (or any other supplier) the plywood will have a Lot# imprinted on it and that number can be traced back to the manufacturer, so it is unlikely the plaintiff attorney does not have sufficient evidence to try the case or trace responsibility back to Lowe’s. I cannot imagine any supplier would be willing to settle to the tune of millions unless there is at least some evidence of their culpability in a product liability case. And this is a product liability case - or tort case for srtict liability. Tort cases usually always include damage awards because the “justice” part requires returning the plaintiff to the position they would have been in but for the tort. So, I agree something is not right with this case.

Why would Lowe’s settle for millions if there is no evidence supporting their involvement?

Why does the settlement not include damages for the plaintiffs?

If plaintiffs read the claim forms they received to be included in the class action, there should be a paragraph or two notifying members of the right to show up and be heard at the settlement conference. But because it looks like this case may have been forum-shopped that will probably be unlikely. If I was a plaintiff in this suit and my home was now a piece of jumk and all I was offered in compensation was $50 or $4500, I’d show up at that settlement conference.

@Gege:  If the facts are so secret that you can’t discuss them, then it hardly seems fair to chastise others for getting things wrong.  When someone is willing to talk, then I’m sure ProPublica and others will be willing to listen.

Disclaimer: I’m a new lawyer.

I think this article is absurd.  Here are the facts: if an individual person wants to sue Lowe’s, they have to file a lawsuit, hire experts, conduct discovery, conduct settlement negotiations and, if it doesn’t settle, conduct a trial.  And who do they hire for this?  A lawyer, who will get 33.33% of the recovery, and will also get reimbursed the expenses (which are going to be huge in order to fight Lowe’s).  That’s litigation: time-consuming, expensive, and difficult.  Guess what?  Most people would never bring a lawsuit for the $2,000 loss they suffered.  That’s why we have class actions! 

MOST PEOPLE are MUCH better off having all their small claims consolidated, with only 1 set of experts, depositions, negotiations, etc.  The economy is better off, too: Lowe’s gets sued (good for accountability), but doesn’t have to spend a ton of extra resources defending 100+ individual lawsuits that are all based on the same facts.

So the lawyers end up with 1/3, like they would have anyway!  Believe me, at the end of the day, getting the actual amount you were damaged out of a lawsuit is a good day.  Besides, if you’re injured more than the $4,500 or whatever, YOU CAN OPT OUT!  But you won’t be smart to do that unless you lost way more than $4,500, because then you have to actually pay for your litigation.  So, being in the class is win-win-win: better recovery for plaintiffs, fewer costs to the company, and better for corporate accountability (because most of those folks never would have sued).

The irony of this article is that “tort reform” folks are actually advocating against a system that gets more for people, and based on what?  The feeling that the plaintiffs should get more than they were damaged?  That is, a windfall?  Ridiculous.

I’m not involved in this case, but it is always amazing to me how people can criticize attorneys and cases without truly knowing any of the facts and circumstances.  Each case is different, and you cannot rely on sound bites to decide what is right or wrong.

Also, even if these attorneys are wrong for settling this case, and I am NOT implying that they are, that does not make all attorneys dishonest, money grubbing, bad individuals.  Every industry has its good and bad apples.  The medical industry, car salesmen, brokers, landscape architects, contractors, plumbers, etc.  They all have good ones and bad ones, and the legal industry is no different.

Our firm has helped numerous individuals over the years, and they have been more than satisfied with our work.  Could you find some who weren’t?  Of course.  We aren’t perfect.  I think people need to really look at the system before they throw it out.  Tort reform only protects huge corporate and insurance interests, and it punishes those with legitimate claims.  Caps on damages don’t hurt frivolous claims.  They hurt meritorious claims.  Frivolous claims should be capped at zero, and there are systems in place to do that:  Rule 11 Sanctions, Litigation Accountability Acts, and Judges.  Those cases usually get dismissed anyway.  It is only a few which make it through the system and which the U.S. Chamber of commerce promotes in order to continue their tort reform assault, and even those few are explained fully - see http://www.HotCoffeeTheMovie.com.  No one really understands what happened in that case because it was used by the Chamber to promote tort reform.

My two cents.

Bobby Blanchard

Aug. 19, 2010, 8:35 a.m.

If anything, this case shows the damage done by past tort reforms and the conservative Judges who always side with the large corpoarations and never the injured individual. You know the lawyers wanted to get as much as possible for their clients and obviously realized they couldn’t under the current tort reforms. Tort reform legislation gets passed every year in every state, the uninformed should stop complaining and use a little common sense to figure out why the consumer is always left holding the bag. It is not the plaintiffs lawyers who want them to get “too little.”.

Do you work for free?  Do you go to work everyday and refuse a paycheck because you don’t need to pay for groceries, mortgage or a car? Law firms and those they employ are business people, and could not provide the services they offer without remuneration. Plaintiff’s firms and trial lawyers who work on contingency assume all of the risk of representing clients, so that the client doesn’t bear that cost and obligation.  For every case that results in an award for the client and his attorney, there are a dozen that don’t. 

Class actions are some of the riskiest and most expensive matters for a law firm to undertake, but result in awards for more victims than would otherwise occur.  I, personally, would not be able to afford the time or expense of a lawsuit to recover $1,000, and so would not pursue it if not for an opportunity to join a class action.

I don’t know the details of this case, but the comments generally lambasting the trial bar are out of line.  It may seem like a windfall when taken out of context, but this judgment and others like it would never have been possible for these individual victims if an attorney hadn’t decided to accept the risk of representing them - with no way of predicting whether he would be repaid for his time and efforts. 

If any excoriating is to be done, it should be directed at the companies that are causing injury, not the companies seeking to redress injury.

Will E. You’re a new lawyer? Congratulations on passing the bar & becoming a lawyer. I wish you great success in your career. 

I live in the SW - and worked as a paralegal for over 12 years (paralegal degree) - mainly trademarks & patents. It’s true lawsuits require alot of work - research, evidence, depos, experts, discovery, court dates, etc. Product liability can be very complicated, it takes money for depositions, experts, discovery, travel, etc. that’s why most firms won’t take cases like that (from individuals) without a retainer.

In this case though, the work - discovery, depositions, experts, etc. has mostly already been done (in Florida). What risk will a firm representing a smaller plaintiff class against the same defendants and the same product take? Will the firm depose key people not already deposed, hire new experts? I don’t see where the GA attorneys would be expending large sums in their case unless they plan to duplicate depositions, expert opinions, voluminous discovery docs, travel alot, etc.

In Oklahoma - if a case is settled the fee is usually somewhere between 30-33% but if it goes to trial the fee goes up to 50%. I think that’s standard.

Reform of the class action system – which has become a system of jackpot justice for personal injury lawyers needs to happen on a federal level.

Some states like Texas has already taken charge of this issue by Governor Perry signing into law comprehensive civil justice reforms, which included provisions to limit attorneys’ fees in class action lawsuits and end the practice of awarding coupons to plaintiffs, unless that’s how the lawyers are paid, too.
Class action lawsuits were intended to speed the handling of multiple cases by allowing individuals with the same grievances to file a single claim. They were supposed to be the little guy’s best shot for justice. But unfortunately, class actions are increasingly becoming a tool for personal injury lawyers to “cash in” in the name of consumer rights. Action needs to happen in Congress-if plaintiffs receive gift cards, then so should the attorneys!

LOWES HAS BEEN GIVING ME THE “RUN A ROUND” WILL NOT GIVE ME ANY ANSWER ANY OF MY QUESTIONS! I AM OPTING OUT SEE YALL IN COURT!!!!!

Mike: I believe you’re doing the right thing by opting out of this obvious windfall for the GA attorneys who are even worse than Lowes because they’re trying to unfairly enrich themselves on the backs of people suffering.

Do some research before you choose the next lawyer:
A.  Take everything you find published about the drywall suits in ProPublica.
B.  Another article came out about 5-6 days ago that reported the drywall was traced to a German company with direct shipping ties to Florida builders but are trying to shield themselves from responsibility.
C.  Google the German manufacturer when you get the name of the company and take everything you find out about them with you too.
D.  Go to http://www.pacer.gov (you may need to pay a fee but worth it) and search for the Florida case - pleadings in the case are public record and you can find alot of info from reading the pleadings (your attorney will probably do that as well).
E. Keep current contact info on the builder who built your home - then research that company too to find out as much as you can about them, same for anyone else involved in building your home.

Research, research. research & good luck to you - it couldn’t be any worse than what’s offered to you now.

I bought all my drywall for my house in Tulsa @ the 15th and Yale store.  I installed all the drywall myself and now my wife and I have lung problems… Any suggestions

This article is part of an ongoing investigation:
Tainted Drywall

Tainted Drywall: How Companies Kept Silent While Homeowners Suffered

Foul air from Chinese-made drywall has created a nightmare for thousands of homeowners.

The Story So Far

ProPublica and the Sarasota Herald-Tribune began examining in May 2010 what was—or wasn’t—being done to help people whose homes had been built with contaminated drywall. The problematic drywall, much of it imported from China, emitted foul odors and frequently caused mysterious failures of new appliances and electronics. Worse yet, some residents complained of serious respiratory problems, bloody noses, and migraines.
More »

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