Journalism in the Public Interest

Lowe’s Drywall Settlement Continues to Be Scrutinized; Attorneys Defend Fees

Consumer advocates say the victims of tainted drywall are getting the short end of a class action settlement with Lowe’s. Plaintiffs’ attorneys say their $2.1 million cut of the deal is appropriate.


A Lowe's store on Aug. 18, 2008, in Brooklyn, N.Y. Lowe's Companies Inc. recently reached a settlement in a class action lawsuit over defective drywall. (Spencer Platt/Getty Images)

Criticism of a Lowe's Companies Inc. settlement in a class action lawsuit over defective drywall is mounting as details emerge about the plan, which has been given preliminary approval by a Georgia state court.

Consumer advocates say the agreement sets aside too much money for the plaintiffs' attorneys and has an inadequate plan for alerting Lowe's customers to the nationwide settlement.

The lawyers who negotiated the deal with Lowe's represent about 40 people who say they bought drywall from the North Carolina-based chain. Lowe's has said it does not believe the drywall it sold was defective and that its vendors have assured it that they never supplied Lowe's with any of the Chinese drywall that is the focus of a much larger drywall case that's being heard in federal court in New Orleans.

Lowe's is one of a long list of defendants in that case, which has thousands of plaintiffs and includes lawsuits brought by scores of attorneys all over the country against drywall manufacturers, distributors, builders and insurers.

The settlement in the Georgia case would give people who allegedly bought defective drywall at Lowe's a maximum of $4,500 in cash and gift cards and a minimum of a $50 gift card, even if they spent far more than that on their drywall. It would also require them to waive their right to sue the company for property damage or medical claims. Repairing a house with defective drywall requires not only removing and replacing the drywall but also the electrical wiring, air-conditioning systems and other appliances, a job that has cost some homeowners $100,000 or more.

Lowe's customers who don't like those terms have until Nov. 9 to file a formal letter saying they've chosen to opt out of the agreement. If they don't meet that deadline, they'll automatically be included in the settlement and lose their right to sue Lowe's.

According to the agreement, the letters must be sent to a single mailing address to be considered valid for opting out. But the plaintiffs' attorneys have yet to establish such a mailing address, saying they won't be doing so until later this month. That's when they'll also begin notifying Lowe's customers of the settlement by placing information on the receipts of current Lowe's customers and by hiring a company to set up a website and place ads in publications like Parade Magazine. They will not, however, send notices directly by mail.

Ed Mierzwinski, consumer product director for the U.S. Public Interest Research Group, a nonprofit consumer advocacy organization, said the notification plan is inadequate because many Lowe's customers may not learn of the settlement and could lose their right to sue without even knowing it.

"I cannot believe the judge would approve these notice disclosures," Mierzwinski said. "When people get their Sunday paper, a lot of them throw away Parade Magazine along with all of the other inserts that come in the paper."

Consumer advocates say notification plans for class action lawsuits customarily involve contacting potential claimants directly by mail, using a list of all the people who bought the type of product that may be defective. But Don Barrett, the lead plaintiffs' attorney, said Lowe's hasn't provided a list of its drywall customers.

Chris Ahearn, a Lowe's spokeswoman, said Lowe's doesn't have contact information for customers who paid for their drywall in cash. For those who paid with a credit card, she said "there would be some information potentially available, but we can't generate a complete and accurate list."

Ira Rheingold, executive director of the National Association of Consumer Advocates, said directly contacting potential claimants is essential.

"I find it hard to believe that it's that hard for them to figure out who bought what," Rheingold said. "I mean, that's part of their business model, right? It may be more expensive for them to figure that out and send them notices in the mail, but that really is the appropriate thing for them to do."

Brian Wolfman, a visiting professor at the Georgetown University Law Center, said too much of the Lowe's settlement money is going to the plaintiffs' attorneys.

Barrett, the lead attorney in the case, said the attorneys would get about 23 percent of the total $9.6 million settlement, which provides $6.5 million for the victims, $1 million for the cost of administering the settlement, and $2.1 million for the attorneys. He defended the agreement and said 23 percent is "on the lower end of fees paid in settlements."

But a close reading of the settlement shows that percentage could grow, because the agreement stipulates that if the plan doesn't draw enough claimants to pay out at least $2.5 million in cash and gift cards, Lowe's would keep the remaining $4 million that was set aside for the plaintiffs. If that happens, the lawyers would still be paid $2.1 million, which means they would receive almost as much as their clients.

If Lowe's received more than $6.5 million in claims, the amounts that individual claimants can receive would shrink.

An agreement that allows a defendant to keep money that is left over from a settlement is called a reversionary settlement, Wolfman said.

"Reversionary settlements provide the class lawyers no incentive to put money in their clients' pockets and make it possible for the lawyers to walk away with far too much of the goodies," said Wolfman, referring to reversionary settlements in general. Wolfman previously worked as director of the litigation group for Public Citizen, a public interest law firm. "Reversionary settlements are particularly problematic when notice to the class is not robust, because then it is more likely that there will be left-over money that reverts to the defendant."

Wolfman and Mierzwinski criticized the $1 million set aside to administer the settlement as being too high in comparison to what the claimants are likely to receive. Under the agreement, the plaintiffs' lawyers will choose the settlement administrator.

Barrett said the $1 million fee is reasonable. It's unclear whether any money left over from the administrator fund would be returned to Lowe's or be made available to its customers.

The Lowe's settlement is also being slammed by the lead lawyers in the multi-district litigation being heard in New Orleans. They filed a motion last week seeking to block the settlement, claiming it provides only minimal compensation to drywall victims, overly generous fees to the attorneys who negotiated it, and is an attempt to circumvent the federal court's effort to deal with the issue globally.

On Thursday, during a status hearing in the federal case, Judge Eldon E. Fallon said, "I'm particularly interested in whether any settlement in state court interferes with" the multi-district litigation.

Judge Bobby Peters, who is presiding over the Lowe's case in the Superior Court of Muscogee County, Ga., told ProPublica and the Sarasota Herald-Tribune that he would be willing to extend the Nov. 9 deadline for plaintiffs to opt out of the settlement.

"If anybody felt like they needed more time, I'd take that under consideration, but that's what the parties agreed upon," Peters said. "Both plaintiffs and defendants requested that date."

Erich Riesenberg

Aug. 17, 2010, 9:39 a.m.

This is typical legal process.

Few judges seem to have the courage or interest in actually focusing on justice rather than judicial efficiency.

Everyone who really matters wins big, the lawyers, the companies, the judge has a pleasant court experience.

I have the perfect solution: confine all the lawyers, officers of Lowe’s corporation even the Judge, along with their immediate family members to live in these houses that have the effected dry wall. Their food stuff can be delivered, their computers made available so they can work at home, whereby then maybe justice would truly be served! No one would be allowed to leave for the whole year, save for emergency health reasons, but not due to the contaminated dry wall. This may seem harsh, but what about the terme of & amount of settlement?

My first question is why was this case even brought in Georgia the first place? Why weren’t these plaintiffs joined with the federal class-action in Florida? Even if they thought it was a good idea to bring suit in their home state because of convenience, the settlement terms stink so their attorney should’ve advised them to turn it down and made a motion to withdraw to allow plaintiff to take their chances with the Florida case.

But then the Georgia attorneys wouldn’t have potentially gotten millions in fees, or been involved in the case at all. Could it be that the Georgia attorneys just hopped into bed with Lowe’s knowing all along that this would happen? Sounds like it to me. The attorneys from both sides meet behind closed doors - without the people who’ve suffered being allowed to participatel. It becomes real clear real quick who has the power and the money - the corporation.

The attorneys left the room patting each other on the back and making plans to go for drinks.

This case is an example of why people in general don’t trust lawyers. And it’s a shame because most attorneys are ethical, caring professionals who take their responsibility as officers of the court very seriously, knowing that they stand at the gateway to justice.

Shame, shame, shame on these Georgia plaintiff ambulance chasers because they took a very bad thing and made it much worse.

This is systemic. Look at the attorney compensation in the tobacco settlement. Same crap.What are the hourly rates? It’s almost like it’s predesignated. The people who suffer the consequences of these corporate blunders always loose. In this case also looking for the lowest price or convenience, (that in itself has it’s price). This is also coming from Ga. where corruption is rampant but then again what political system in this country is not. I hate responding to these things cause like I said, this is systemic, very broad-reaching and ends up looking like rambling because it hits many different levels and entities of our society.

Sounds like a plot from a book. What I don’t understand is, why doesn’t the judge see what’s going on? Could it be that they are in on it?
It’s a shame that this sort of thing has to happen in a country as great as ours ! But greed has always destroyed everything anyone has tried to build up. Can you imagine what would have happened in the “good old days” if something like this came to light? The lawyers AND the judges would have been lynched !

Attorneys and MDs, especially specialists seem to have the opinion that they deserve to become millionaires at the expense of their clients, the former with the connivance of judges. Both classes are responsible for the increasing in equality of wealth in this country, frequently undeservedly.
  Justice is available only to the rich and those willing to give up 30+% of their judgments. Hourly billings at $300 plus are totally out of reason. But the system is complex enough that it is rarely feasible for people to act as their own attorneys, and often judges will penalize such claimants.

Thank you for your info. I am sure there is someone who can do something about this sort of shenanigans. I just wonder why they don’t !

Illiterate people should not be allowed to post here.

Perhaps you’re right, assuming you’re including yourself in your 1 liner. People vent, even if they are wrong, off point, misinformed, exposed to one sided factoids, fooled again by some who just have nothing better to do, than spout off to be spouting off. Isn’t this a great country, free speech and all?

You’re absolutely right Bill. Who were you speaking of?
Can you imagine? Lawyers should be magicians also. At $300 per, they turn a 10 minute call into an hour. Tada!!! Applause please

What I find so completely disheartening is the comments left.  You all attack the lawyers while Lowes is giving out $50 gift cards FOR THEIR STORES to compensate people for over $100,000 damage done due to them selling shoddy materials.  Hello???  I guess we can’t sue the manufacturer because they’re in China?

The comments generally bashing attorneys and class actions are disheartening, although if there are specific shenanigans going on in this particular action, they should be exposed. 

On the class action issue: class actions are a GREAT way to conduct a lawsuit like this, for one simple reason: otherwise, NONE of these people would get ANYTHING.  Why?  Because, unless you’re rich enough to hire a bunch of lawyers on retainer, it wouldn’t make sense to sue Lowe’s for the $500 you lost in replacing drywall (which would be a lot of drywall!). 

Litigation is time consuming and expensive.  By consolidating their small claims in a class action, people who otherwise would either not have sued at all, or would have lost almost all of their recovery to the costs of the litigation (paying experts, reporters at depositions, fees, etc.), are able to get the entire amount they lost.  And if they think it is not enough, they can opt out!  The lawyers get the same 33.33% they would otherwise get—and have a reason to bother doing the lawsuit, which they wouldn’t have for a $500 loss.

Can any of the complainers here think of another way to make that happen?

It also helps the economy, as Lowe’s has to pay up (good corporate accountability helps all businesses, since it keeps the playing field level), but they do not have to spend a lot of extra capital on defending possibly thousands of individual lawsuits.  Maybe I’m aware of all this because I am a lawyer, but they are still the facts, regardless.

Again, anyone complaining about the class-action system want to suggest a better way?

Why, yes.  How about a consumer protection agency that would bring criminal charges against corporations that unduly endanger the population by selling shoddy products?  I am not a lawyer, but I do remember distinctly at one time that if I bought a toaster 40 years ago and my house burnt down because of the poor design of the toaster, the manufacturer was held responsible for damages, like my house. 
Class action is the only way right now, but it’s not enough to dissuade corporations because fines and fees for screwing up are only a small fraction of the profits made selling crap made in china. 
It seems to me that maybe we should lock up people who profit by stealing from others, like in this case.  If you read carefully, you’d have noticed that the losses in many cases were more like $100,000 due to the downstream repairs needed caused by this shoddy drywall.

Will E, you make a good point as far as the class action goes, but the settlement amount isn’t enough to cover replacing all that will need replacing. Then there’s the matter of signing a release not to sue for any other related issues. As for the rants, well, this is a free country, and we all learn something from it. True, some are flippant, but then, isn’t the low ball settlement just like a slap in the face? I’m not sure, but I would think that Lowes has insurance premiums that covers just this sort of thing? Also, they should be suing the the parties they bought the dry wall from in the first place. The mind set of business in this country has taken a nose dive today, which is just another black eye for the consumer. After all, if the consumer didn’t buy, then where would the business people get the money to pay those outlandish salaries?

I understand all that has been said and yes, class action is the only feasable way to regain SOME of the damage.
But I have seen a check, made out to me, for a dime! How much did the attorney spend to get me that dime? And how much did HE receive?
Also, when I was 20 yrs old, I was involved in an accident that almost took my lower leg off. I sued, and received a check for somewhere around $1200 !!
I never did find out how much the attorney received, but I am sure that it was more than $1200.
So how do we explain a check for ten cents?
I’m not bitter, just po’d that this sort of thing could happen with nobody even caring.
I watched a show on TV one day called “American Greed”. Three attorneys sued the tobacco industry and made MILLIONS ! The clients were paid something like a few thousand apiece, after their son or father died. The attorneys were brought up on charghes and got between 10 and 20 yrs! THAT’S what should happen. Ya think?

breed311,  agree with you. In this case, they should also line their jail cell with the dry wall too.

Never thought of that but yes, long range punishment ! I like it !  lmao

You peopole are all FOOLS.  Lowe’s didn’t even supply Chinese drywall.  I am very close this litigation and have documentation to prove it.  You should HAVE PROOF BEFORE YOU OPEN YOU BIG MOUTHS!!!

Gee, Jack, maybe you should learn how to write English before you call people fools, in writing, in English.

annie b, kudos, maybe jack is one of those little boys who hasn’t anything else to do but pretend to be who he isn’t.

I am the drywall guy, and live in NC.  To my knowledge, and I’ve followed this pretty closely, Lowe’s didn’t sell any Chinese drywall.  And what is this stuff about electrical wiring and appliances needing to be replaced?  HVAC, maybe, but I doubt it.  I’m a far leftie, and ready to believe plenty about corporate behavior, but my bs detector went off big time as I read this article.



I reside in NORTHWEST INDIANA,and installed some of LOWES drywall in MAY -JUNE 2010.Can anyone tell me when and how it becomes apparent that i purchased this tainted drywall?DAVE

Charleton Zimmerman

Sep. 14, 2010, 12:04 p.m.

Been in construction since 1970, learned old contracting addage,when I was apprentice, from Master Contractor- ” If it lasts a YEAR WHERE IN THE CLEAR! ” This thought process is the basis of the “NEW CAPITALISM” !  This is how we got in this economic mess in this Great Country of Ours!  I’am also a Veteran ,and cry what this has become!

Apparently the “scrutiny” did not amount to much - the settlement was announced nationwide in last Sunday’s paper. The maximum claim amount - with a receipt and provable damages is $4500 ($2000 gift card + $2000 cash). Sad.

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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