United States District Court, E.D. Louisiana
IN RE CHINESE-MANUFACTURED DRYWALL PRODUCTS LIABILITY LITIGATION THIS DOCUMENT RELATES TO: ALL CASES
ORDER & REASONS
E. Fallon United States District Judge.
the Court is Plaintiffs' “Motion to Construe
Settlement Agreement and Define Scope of Review.” R.
Doc. 21805. The Knauf Defendants have filed an opposition. R.
Doc. 21827. Plaintiffs have filed a reply, R. Doc. 21849,
Defendants have filed a surreply, R. Doc. 21853. Having
considered the applicable law and the parties' arguments,
the Court is ready to rule.
2004 through 2006, a housing boom in parts of the United
States and rebuilding efforts necessitated by Hurricanes Rita
and Katrina in the Gulf South 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 and East Coasts.
Sometime after the Chinese drywall was installed, homeowners
began to complain of foul-smelling odors, 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 have been caused by the Chinese
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.
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 on these two
entities and their downstream associates and has proceeded on
strikingly different tracks for the claims against each
group. Relevant to this Order are the Knauf
Defendants. 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.
Knauf Entities are named defendants in numerous cases
consolidated with the MDL litigation as well as litigation in
state courts. The Knauf Entities did not contest jurisdiction
and first entered their appearance in the MDL litigation on
July 2, 2009. See Rec. Doc. 18. On November 2, 2009,
in Pretrial Order No. 17, KPT agreed to a limited waiver of
service. See Rec. Doc. 401. After a period of
intense discovery, the court set various bellwether trials.
From March 15-19, 2010, 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. For purposes of the
trial, Knauf stipulated that KPT Chinese drywall “emits
certain reduced sulfur gases and the drywall emits an
odor.” Id. The Court, based on the evidence
presented, found the KPT Drywall was a defective product and
issued a detailed Findings of Fact and Conclusions of Law in
favor of Plaintiff Hernendez (“Hernandez FOF
/COL”), 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 Rec. Doc. 3012.
October 14, 2010, Knauf agreed to participate in a pilot
program to remediate a number of homes using the remediation
protocol formulated by the Court in Hernandez. The
Knauf pilot remediation program has, at present, remediated
over 2, 800 homes containing KPT Chinese drywall using
essentially the same protocol. At the Court's urging,
after a number of homes had been remediated, the parties
began working together to monetize this program and make it
available to a broader class of plaintiffs. Thereafter, the
PSC and Knauf entered into settlement discussions, and on
December 20, 2011, some two years after the formation of this
MDL, the PSC reached a global remediation settlement with
Knauf, which is designed to resolve all Knauf-related Chinese
drywall claims. R. Doc. 16407-3. This agreement (the
“Knauf Class Settlement Agreement”) applied to
all claimants who filed suit against Knauf on or before
December 9, 2011.
August 12, 2013, Plaintiffs' and Defendants' Liaison
counsel entered into a second settlement agreement addressing
claims filed after December 9, 2011 (the “New Claims
Settlement Agreement”). R. Doc.16978-1. Under the New
Claims Settlement Agreement, Claimants who gave notice prior
to October 25, 2013 and qualified under the terms of the New
Claims Agreement, were eligible to seek benefits under the
Knauf Class Settlement Agreement, subject to the requirements
set forth in both agreements. R. Doc. 16978-1.
the terms of the settlements, the claimants with KPT Chinese
drywall (drywall manufactured by Knauf's Chinese
subsidiary) were offered several options. Under Option 1, the
claimants were offered the opportunity to receive a complete,
environmentally certified remediation of their properties.
Under Option 2, the claimants were offered cash reimbursement
in the event the home was already remediated. Finally, under
Option 3, claimants were offered a cash payment instead of
remediation as well as the opportunity to receive monetary
benefits from the Knauf downstream chain of commerce entities
to compensate them for other specifically designated losses.
The total amount of the Knauf Settlement is approximately
assist in the adjudication of this MDL, and pursuant to the
settlement agreements' terms, the Court appointed Dan
Balhoff to serve as Special Master. Relevant to this motion,
at the direction of the Court, the Special Master was tasked
with determining eligibility for settlement benefits for
sixteen already remediated properties. He reviewed the
relevant documents and submissions of the interested parties
and issued his report and recommendations and supplemental
report and recommendations on August 10, 2018 and August 22,
2018, respectively. R. Docs. 21838, 21839. On October 1,
2018, Plaintiffs filed the instant motion, arguing that the
Special Master's review of these claims exceeded the
scope of his authority under both the Knauf Class Settlement
Agreement and New Claims Settlement Agreement. R. Doc. 21805.
argue the Special Master exceeded the scope of his authority
under the Knauf settlement agreements in issuing his report
and recommendations regarding whether the sixteen already
remediated properties in dispute are eligible for settlement
funds. According to Plaintiffs, the Special Master's
authority is limited to a determination of reimbursable costs
only. R. Doc. 21805-1 at 2. In opposition, Defendants submit
the Court and the Special Master have an obligation under the
terms of the ...