On the Pulse...Defective Drywall Litigation Practice Group Profile

Once it became clear that claims related to defective drywall manufactured in China were going to be filed at a near epidemic level, the leadership of Marshall, Dennehey, Warner, Coleman & Goggin recognized its clients would be drastically affected and would need representation. They swiftly acted and put together a team of attorneys geographically located across the state of Florida with experience representing builders and general contractors in construction defect claims; manufacturers and distributors in products liability claims; homeowner associations and real estate professionals; and insurance companies in first and third party coverage claims; as well as defending mass tort and class action litigation.

2010: A Chinese Drywall Odyssey

In 2009, we faced many questions: "What is Chinese Drywall?"; "What's wrong with it?"; "What's it doing to our insureds' homes?"; "How many homes are really affected?"; "Is it really making people sick?"; "Is there coverage for this claim?"; "Who is responsible?"; "Does a CGL policy provide coverage for defective drywall?"; "Does the carrier owe its insured defense 'and' indemnity for a defective drywall claim?"; "Who is going to pay for this?"

Most of these questions remain unanswered a year later. As the scientific community and the government begin to formulate a consensus and trials take place in federal and state courts, many of the above questions will be answered in 2010. Of course, some will not!

Nationwide, there are more than 500 lawsuits pending, with approximately two-thirds in federal court (and subject to the MDL) and the rest in state courts. Of those pending in state courts, the majority are pending in Florida.

Initial estimates suggested defective Chinese Drywall had been installed in as many as 100,000 homes nationwide. Those numbers have now been drastically reduced and will likely fall between 25,000 and 50,000 homes nationwide.

Federal Court

In early 2010, we expect the first "bellwether" trials to take place in New Orleans. Depositions began in late fall '09, and Judge Fallon, who presides over the MDL, directed the parties to select "property damage only/lone defendant" cases to be tried at that time.

In addition to the MDL litigation, the first coverage action is presently pending in the United States District Court for the Southern District of Florida. In that case, General Fidelity Insurance Company v. Foster, et al., (Case No. 9:09-cv-80743-KMM), General Fidelity seeks to have the court determine it owes no duty to defend or indemnify its insured for claims of defective Chinese Drywall under the terms, conditions and exclusions in a CGL policy. On December 4, 2009, the MDL found the coverage action to present different questions or facts and law, rejected transfer of this coverage case, and returned the case to the Southern District of Florida to be decided separate and apart from the proceedings of the MDL.

State Court

As Florida, and Miami-Dade County in particular, dominate the state court actions, we expect the first state court trials to take place in Miami-Dade Circuit Court sometime in spring 2010. The state court actions have abided by and followed Judge Fallon's MDL Pre-Trial Orders. By all accounts, Judge Fallon has been in contact with Florida Circuit Court Judges presiding over Chinese Drywall cases and has even participated in hearings on significant legal and evidentiary issues. Accordingly, we can expect the outcome of the state court proceedings to be consistent with that of the MDL and federal court proceedings.

Once the trials have taken place and judgments entered, the focus will turn to "is there coverage for these claims?" and "who is going to pay the judgments?"

What's Ahead for Chinese Drywall Litigation

In that judgments in favor of homeowners for the property damage claims is an almost certainty, a number of questions will likely remain as 2010 turns to 2011: Is the defective drywall also causing "bodily injury"?; How many homes are really affected?; Will the government issue a recall?; What is the true capital exposure?; Does a CGL policy provide coverage for these claims? If not, who will pay the claims?; Will the "pollution" exclusion be treated differently from state-to-state?; Will Chinese manufacturers abide by the verdicts and pay judgments? If not, then what?; As these cases proceed to trial in state and federal courts, what appellate issues will arise?

The Marshall Dennehey Defective Drywall Litigation Practice Group

Marshall Dennehey's Defective Drywall Litigation Practice Group consists of attorneys in its Ft. Lauderdale, Orlando, Jacksonville and Tampa offices with considerable experience in all areas of the law affected by the onslaught of Chinese Drywall claims and lawsuits. In addition to Florida, team members are also licensed to practice in the state and federal courts located in Mississippi, Louisiana, and Michigan, as well as the federal appellate courts. We are also fortunate enough to have the support of our colleagues in the firm's other 18 offices.

Our Defective Drywall Litigation attorneys are currently representing defendants in both state and federal district courts, as well as class action litigation in the bankruptcy court for the United States District Court of Delaware (with assistance from our Wilmington, Delaware, office). In addition to speaking at nationwide conferences on various issues facing drywall litigation, group members provide clients with regular updates on the latest developments on such key topics as: the state of the ongoing MDL in New Orleans; CPSC bulletins and reports; coverage decisions which may effect drywall claims; new lawsuits being filed which may substantially effect the landscape of future claims and litigation; scientific studies of the health effects related to defective drywall; and remediation protocols as they are developed.

We welcome the opportunity to work with you in evaluating and defending your Chinese Drywall claims, lawsuits, and class action litigation. Consistent with our firm's proactive approach and philosophy, we welcome the opportunity to advise you on all aspects of these claims, whether it be the science, potential health risks, array of legal liabilities, and coverage issues for property damage and bodily injury in both first and third party claims.

* Michael is a shareholder in the Fort Lauderdale, Florida, office. He can be contacted at (954) 847-4921 or mapacker@mdwcg.com.

Defense Digest, Vol. 16, No. 1, March 2010