Thousands of Florida homeowners with toxic Chinese-made drywall may soon get enough money to redo their homes.
China-based drywall manufacturer Knauf Plasterboard Tianjin Co., whose parent company is located in Germany, offered this week to pay hundreds of millions of dollars to resolve a class-action lawsuit with homeowners who say the bad drywall made their homes unlivable and worthless.
The proposed settlement received preliminary approval from a federal judge in New Orleans.
Under the settlement, Knauf would create an uncapped fund to repair about 4,500 homes. About 55 percent of the homes are in Florida.
Anthony Martino, a Tampa-based attorney for homeowners with Chinese drywall, says this settlement will help many people in Florida.
"The money that will be infused back into the particular homeowner's hands will allow them to repair these homes, make them marketable, sellable if they choose," Martino said. "The alternative is they walk away, and that's bad for Florida's economy."
In his order, U.S. District Judge Eldon Fallon said he thinks the proposed class-action settlement is "fair, reasonable and adequate," was negotiated in good faith and is "within the range of possible judicial approval."
It's the largest settlement of its kind so far.
The deal also would create a separate fund capped at $30 million to pay for other types of losses, including those blaming drywall for health problems.
Fallon, who presides over more than 10,000 claims involving Chinese drywall, will hold a hearing on the agreement in June before deciding whether to give his final approval.
It costs about $100,000 to replace drywall in an average house.
Now, the homeowners have to decide whether to accept the settlement and hope they get enough money. Their other option is to fight for more.
"At least on its face, if they're going to be compensated for all the losses they've sustained … it's a good deal," Martino said. "Each of these families will have to look at the costs and determine if it works for them."
Several companies had objected to the proposed settlement. Centerline Homes Construction Inc. of Coral Springs complained that the deal contains "too many contingencies, ambiguities and uncertainties … to make a reasonably informed decision about their position."
Lawyers for other homebuilders accused in lawsuits of using Chinese drywall argued that "inconsistencies and unanswered questions" could have been avoided if they had been involved in the negotiations, Fallon noted.
The deal calls for Knauf to initially deposit $200 million in the repairs fund, which would be replenished as needed. A lead attorney for the plaintiffs has said the settlement is worth between $800 million and $1 billion, but a lawyer for the Chinese company disputed that estimate.
Steve Glickstein, a Knauf Plasterboard Tianjin attorney, said the company is pleased the judge granted preliminary approval and is confident the settlement will receive final approval.
Roughly 35 percent of the homeowners involved live in Louisiana. The deal would resolve cases filed in both state and federal court.
Attorneys' fees and costs paid by Knauf are capped at $160 million and will not be deducted from homeowners' shares of the settlement money.
Chinese drywall was used in the construction of thousands of homes, mainly in the South, after a series of hurricanes in 2005 and before the housing bubble burst. The problems it has caused range from a foul odor to corrosion of pipes and wiring.