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In re Chinese-Manufactured Drywall Products Liability Litigation

United States District Court, E.D. Louisiana

February 8, 2018


         SECTION “L” (5)



         The All Writs Act, 28 U.S.C. § 1651, empowers federal courts to enjoin state proceedings that interfere, derogate, or conflict with federal judgments, orders, or settlements. This authority, though great and broad, is limited by the Anti-Injunction Act, 28 U.S.C. § 2283, which demands respect for state courts. Arguing that exceptions to the Anti-Injunction Act warrant exercise of such extraordinary authority, Defendant Interior Exterior Building Supply (“InEx”) invites this Court to halt an ongoing Louisiana judicial proceeding against it based on a settlement agreement reached in the Chinese-Manufactured Drywall multidistrict litigation.[1] See Rec. Doc. 20891.

         The state court action in question is filed by Winston Burns, Jr. and Wendy Burns against Livers Construction, Inc., and relates to the installation of allegedly defective Chinese drywall in their residence. Subsequently, Livers filed a third-party demand against InEx, claiming that InEx sold Livers the allegedly defective drywall. The Burns oppose InEx's instant motion for injunctive relief. Rec. Doc. 21032. The Court heard oral argument in this matter on January 23, 2018. Having considered the parties' submissions, arguments, and applicable law, the Court now issues this Order and Reasons.

         I. BACKGROUND

         A. Chinese-Manufactured Drywall Multidistrict Litigation

         From 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 to construct and refurbish 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 foul-smelling gas, the corrosion and blackening of metal wiring, surfaces, and objects, and the breaking down of appliances and electrical devices in their homes. See In re Chinese-Manufactured Drywall Prods. Liab. Litig., 894 F.Supp.2d 819, 829-30 (E.D. La. 2012), aff'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.

         These homeowners then 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 a 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 09-2047 before this Court.

         The 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, and has proceeded on strikingly different tracks for the claims against each group. The instant motion and opinion relate to matters in the Knauf track.

         B. The Knauf Defendant

         The 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. Rec. Doc. 18. Thereafter, the Court presided over a bellwether trial in Hernandez v. Knauf Gips KG, No. 09-6050, involving a homeowner's claims against KPT for defective drywall. See Rec. Doc. 2713. The Court found in favor of the plaintiff family in Hernandez, issued a detailed Findings of Fact and Conclusions of Law, 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 Rec. Doc. 3012.

         Subsequently, 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 from the evidence in Hernandez. The Knauf pilot remediation program is ongoing and has, at present, remediated more than 2, 200 homes containing KPT Chinese drywall using the same general protocol. At the Court's urging, the parties began working together to monetize this program and make it available to a broader class of plaintiffs.

         On December 20, 2011, the Knauf Entities and the PSC entered into a global, class Settlement Agreement (“Knauf Settlement Agreement”), which is designed to resolve all Knauf-related, Chinese drywall claims. See Rec. Doc. 12061-5. In addition to the Knauf Settlement Agreement, numerous defendants in the chain-of-commerce with the Knauf Entities have entered into class settlement agreements, the effect of which settles almost all of the Knauf Entities' chain-of-commerce litigation.

         C. Interior Exterior Building Supply

         As a result of its role in purchasing and supplying allegedly defective Chinese drywall, InEx is among the defendants in the Knauf Entities' chain-of-commerce litigation. Following Hurricane Katrina, InEx, a major supplier of construction materials in the Gulf Coast area, distributed Chinese drywall manufactured both by various Knauf entities and by certain Taishan entities. InEx sold drywall to suppliers, developers, homebuilders, and installers in a number of states, predominantly Alabama, Louisiana, Mississippi, and Texas. The InEx-related Chinese drywall eventually ended up in the homes of numerous individuals who filed claims against InEx, seeking relief for the property damage and personal injuries they have sustained as a result of the presence of drywall in their homes. Additionally, homebuilders who repaired these homes at their own cost have filed claims against InEx.

         Because of its role with Chinese drywall, InEx became the subject of a class certification hearing and a jury trial, both of which were initially scheduled for the summer of 2011. In preparation for these proceedings, extensive discovery was conducted. As a result, various mediations between the Plaintiffs' Steering Committee, InEx, and the Insurers were held in an effort to resolve the claims against InEx, which resulted in the InEx Settlement Agreement.

         D. Knauf and InEx Settlement Agreements

         In February 2013, the Court issued an Order and Judgment concerning the Knauf entities. Rec. Doc. 16570. The Order and Judgment certified five settlement classes-InEx, Banner, Knauf, L&W Supply Corporation, and Global Settlement-and granted final approval to five individual class settlements between the plaintiffs suffering property damages and personal injuries from Chinese drywall and the various Knauf entities responsible for the use of Chinese drywall in affected properties (“Settling Defendants”). The five class settlements included in the Order and Judgment are “all ...

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