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Drywall Manufacturer Agrees to Settlement

Knauf Plasterboard Tianjin is the first manufacturer to agree to settle defective drywall cases lodged in federal court. The settlement could pay to repair more than 5,000 homes, plaintiffs’ attorneys say.

Knauf Plasterboard Tianjin has agreed to pay millions of dollars to settle legal claims arising from the sale of defective Chinese drywall, attorneys for the company and homeowners said today.

The lawsuit against KPT, a subsidiary of a German conglomerate, and other drywall manufacturers was filed in 2009 in New Orleans federal court. At a news conference this morning, plaintiff’s attorneys said that the settlement could pay for the repairs of up to 5,200 homes, mostly along the Gulf Coast where the board was imported to feed the housing boom and rebuild homes after Hurricanes Katrina and Rita. Studies have shown that the drywall releases sulfur gas that can corrode electrical wiring and trigger respiratory irritation.

As ProPublica and the Sarasota Herald-Tribune reported last year, nearly 7,000 homes were built with the defective material. According to recent court filings, that number has since increased to more than 10,000. Plaintiff’s attorneys estimate that over half of those affected homes were built with drywall made by KPT.

Under the terms of the settlement, KPT will set up two funds: One, capped at $30 million, will pay for medical claims and economic losses, such as foreclosure. The other, which has no cap, is designated for remediation.

Homeowners seeking to tap the repair fund will have to submit claims by an as-yet-unspecified date. Then inspectors hired by KPT will visit the homes and check to see who manufactured the drywall. If a home contains board from different manufacturers, KPT will pay for its share of repairs. Homeowners can opt to take cash instead of making upgrades.

Russ Herman, the lead plaintiffs’ attorney, estimated that the total value of the settlement could be $800 million to $1 billion. KPT attorneys disputed the estimate.

“The figure that has been provided by the [Plaintiff’s attorneys] is wildly speculative and premature given the settlement terms. We are confident the figure will be considerably lower,” said Greg Wallance, an attorney representing KPT.

KPT is the first drywall company embroiled in the litigation to settle and the only foreign manufacturer to participate in the legal proceedings.

Herman vowed to keep up the fight against other manufacturers.

“To them we pledge, ‘Keep the faith.’ Our journey does not end here,” he said.

Medical claims may be difficult to prove because the federal Centers for Disease Control and Prevention has yet to find a clear connection between the sulfur gasses released by bad drywall and long-term health problems. Health regulators have acknowledged, however, that exposure to the gasses can trigger nosebleeds and headaches. The CDC is conducting a more in-depth investigation into the health effects.

The settlement requires final approval by U.S. District Judge Eldon Fallon, which is slated for mid-2012, according to KPT attorneys.

Last year, ProPublica and the Sarasota Herald-Tribune’s investigation found that KPT’s German parent, Knauf Gips, was closely involved in the management of its Chinese subsidiaries, and played a role in overseeing quality control, finding raw materials and dealing with rising concerns over the defective drywall.

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