United States District Court, E.D. Louisiana
IN RE CHINESE-MANUFACTURED DRYWALL PRODUCTS LIABILITY LITIGATION THIS DOCUMENT RELATES TO ALL CASES
ORDER AND REASONS
E. FALLON, UNITED STATES DISTRICT JUDGE.
the Court is Howard and Cheri Rapp's ("The
Rapps") Objection and Motion for Reconsideration of the
Special Master's Opinion and Decree (R. Doc. 20300-1).
Having read the parties' briefs and reviewed the
applicable law, the Court now issues this Order and Reasons.
2004 through 2006, the housing boom in Florida and rebuilding
efforts necessitated by Hurricanes Rita and Katrina led to a
shortage of construction materials, including drywall. As a
result, drywall manufactured in China was brought into the
United States and used in the construction and refurbishing
of homes in coastal areas of the country, notably the Gulf
Coast and East Coast. Sometime after the installation of the
Chinese drywall, homeowners began to complain of emissions of
smelly gasses, the corrosion and blackening of metal wiring,
surfaces, and objects, and the breaking down of appliances
and electrical devices in their homes. In re
Chinese-Manufactured Drywall Prod. Liab. Litig., 894
F.Supp.2d 819, 829 (E.D.La. 2012), qff'd, 742
F.3d 576 (5th Cir. 2014). Many of these homeowners also began
to complain of various physical afflictions believed to be
caused by the Chinese drywall. Accordingly, these homeowners
began to file suit in various state and federal courts
against homebuilders, developers, installers, realtors,
brokers, suppliers, importers, exporters, distributors, and
manufacturers who were involved with the Chinese drywall.
Because of the commonality of facts in the various cases,
this litigation was designated as multidistrict litigation.
Pursuant to a Transfer Order from the United States Judicial
Panel on Multidistrict Litigation on June 15, 2009, all
federal cases involving Chinese drywall were consolidated for
pretrial proceedings in MDL 2047 in the U.S. District Court,
Eastern District of Louisiana.
Chinese drywall at issue was largely manufactured by two
groups of defendants: (1) the Knauf Entities, and (2) the
Taishan Entities. The litigation has focused upon these two
entities and their downstream associates. The present motion
relates to the proceedings against the Knauf Entities.
Knauf Entities are German-based, international manufacturers
of building products, including drywall, whose Chinese
subsidiary, Knauf Plasterboard (Tianjin) Co., Ltd.
("KPT"), advertised and sold its Chinese drywall in
the United States. The Knauf Entities are named defendants in
numerous cases consolidated with the MDL litigation and
litigation in state courts. The Knauf Entities first entered
their appearance in the MDL litigation on July 2, 2009.
See (R. Doc. 18). On November 2, 2009, in Pretrial
Order No. 17, KPT agreed to a limited waiver of service.
See (R. Doc. 401). On March 15-19, 2010, the Court
presided over a bellwether trial in Hernandez v. Knauf
Gips KG, Case No. 09-6050, involving a homeowner's
claims against KPT for defective drywall. See (R.
Doc. 2713). For purposes of the trial, KPT stipulated that
its Chinese drywall "emits certain reduced sulfur gases
and the drywall emits an odor." Id. The Court
found in favor of the plaintiff family in Hernandez,
issued a detailed Findings of Fact and Conclusions of Law
(“Hernandez FOFCOL"), see id.,
and entered a Judgment in the amount of $164, 049.64,
including remediation damages in the amount of $136, 940.46,
which represented a cost of $81.13 per square foot based on
the footprint square footage of the house. See (R.
on October 14, 2010, the Knauf Entities entered into a pilot
remediation program with the Plaintiffs' Steering
Committee ("PSC") in the MDL. This program was
largely based upon the remediation protocol formulated by the
Court in Hernandez. The Knauf pilot remediation
program is ongoing and has, at present, remediated over 2,
000 homes containing KPT Chinese drywall using the same
protocol. The Rapps, owners of two rental properties in
Waveland Mississippi that were damaged during Hurricane
Katrina, seeks to recover from Knauf pursuant to the Knauf
Settlement Agreement for remediation work they undertook in
28th, 2016, Special Master Daniel J. Balhoff ("Special
Master") issued an Opinion and Decree denying the
Rapp's recovery under the Knauf Settlement Agreement. R.
Doc. 20300-1 at 2. The Opinion notes that the Rapps removed
the allegedly defective drywall from their home on September
21, 2009 without first photographing the drywall or
contemporaneously documenting its presence in some other way.
R. Doc. 20300-1 at 1. Further, the Special Master noted that
the physical samples provided by the Rapps came from the
already-removed drywall. R. Doc. 20300-1 at 1. Pretrial Order
No. 1, issued at least three months before the remediation
process began, requires claimants to preserve relevant
physical evidence. R. Doc. 20300-1 at 1. The Opinion
acknowledges that some evidence was preserved, but notes that
it was preserved in a manner that made it impossible for him
to determine how much Knauf-manufactured drywall was present
in the home. R. Doc. 20300-1 at 2. Because the Rapp's
failure to properly preserve evidence made it impossible for
the Special Master to determine how much Knauf drywall was
present, he found in favor of Knauf. R. Doc. 20300-1 at 2.
Rapps, residents of Bay St. Louis, Mississippi, own two
rental properties in Waveland Mississippi, located at 249
Gulfside Street and 300 Gulfside Street. R. Doc. 20300 at 2.
Both properties were damaged during Hurricane Katrina and
subsequently remediated. The Rapps argue that they have
provided evidence that KPT Drywall was used to remediate
their property. Further, they aver they fully complied with
the preservation protocol enacted by this Court, and that the
Special Master thus erred in finding in Knauf s favor. R.
Doc. 20300 at 2. In particular, the Rapps note that the
evidence they submitted included multiple physical samples
and photographs of Knauf drywall, electrical components,
photographs of the homes post-remediation, expense receipts,
floor plans, affidavits, and official reports, consistent
with the explicit requirements of Pretrial Order No. 1, and
attach as an exhibit electronic confirmations of these
submissions dating back to February 4, 2011. R. Doc. 20300 at
Rapps contend that they were in full compliance with Pretrial
Order Number 1, which was the only preservation protocol in
place at the time their homes were undergoing remediation. R.
Doc. 20300 at 4. They additionally argue that the more
rigorous preservation standard of Pre-Trial Order 1(B) should
not apply because it was enacted in October 2009 and thus was
not operative at the time of their remediation. R. Doc. 20300
at 4. Stressing that they made a good faith effort to
remediate their homes in order to minimize their losses, the
Rapps argue that the Special Master erred in finding that
they failed to preserve evidence of defective KPT drywall. R.
Doc. 20300 at 4.
opposition to the Rapp's Objection, Knauf Defendants
argue that the Special Master correctly determined that the
Plaintiffs prejudiced the Knauf Defendants by failing to
appropriately preserve evidence and presenting evidence in an
untrustworthy and unreliable manner. R. Doc. 20446 at 1, 6.
In particular, the Knauf Defendants stress that the lack of
drywall evidence precluded a determination of how much KPT
drywall was present in the properties, the same photographic
materials was used to evidence KPT drywall in different
properties, the newest photographs did not depict KPT
drywall, and the cost documentation failed to demonstrate
that remediation took place in either property. R. Doc. 20446
at 2. The Knauf Defendants allege that the Rapps provided
virtually no evidence of KPT drywall until 2015, even though
the homes were allegedly remediated in 2009. R. Doc. 20446 at
the Knauf Defendants argue that PTO 1(B), which requires
plaintiffs to provide "photographs and/or video images
of all drywall removed from the Affected Property during
remediation, " mandated compliance even though the Court
had not yet issued the order when the remediation allegedly
began. R. Doc. 20446 at 4. In support of this contention,
Defendants point to the broad scope of PTO 1 and basic norms
of evidence preservation, ultimately arguing that the
Rapp's disposal of drywall, failure to take verifiable
photographs of the product in the properties, and failure to
label any of the boards in order ...