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In re Chinese-Manufactured Drywall Products Liability Litigation

United States District Court, E.D. Louisiana

May 16, 2019


         SECTION L (5)

          ORDER & REASONS

          Eldon E. Fallon, U.S. District Court Judge

         Before the Court is a Motion for the Immediate Disbursement of Attorneys' Fees (the “Motion”) filed by Krupnick Campbell (“Movant”), R. Doc. 22130, in which several parties have joined, R. Docs. 22131, 22134, 22141, 22147, 22159, 22164, 22168, 22169.[1] The Motion is opposed, R. Doc. 22172, to which Movant has filed a reply, R. Doc. 22175. Relatedly, on March 20, 2019, Parker Waichman, LLP (“Parker”) filed a “Motion for Partial Disbursement of Fees Awarded by the Court.” R. Doc. 22170. Thereafter, on March 22, 2019, Parker filed a motion seeking to strike Movant's Motion, R. Doc. 22181, to which Movant filed an opposition, R. Doc. 22183. On March 14, 2019, McCallum, Hoaglund, Cook & Irby, LLP (“McCallum”) and Gentle, Turner, Sexton & Harbison (“Gentle Turner”) filed a Motion for Disbursement of Individually Retained Counsels' Fees. R. Doc. 22151, 22168. The Court heard oral argument on the motions on April 23, 2019. R. Doc. 22227. The motions being related, the Court now rules on them simultaneously.

         I. BACKGROUND

         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 in the United States, 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 foul-smelling gasses, 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 (E.D. La. 2012), aff'd, 742 F.3d 576 (5th Cir. 2014). Many of these homeowners also began to report various physical afflictions allegedly caused by the Chinese drywall.

         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 June 15, 2009 transfer order from the United States Judicial Panel on Multidistrict Litigation, all federal cases involving Chinese-manufactured drywall were consolidated for pretrial proceedings in MDL 2047 in the United States District Court for the Eastern District of Louisiana.

         The Chinese drywall at issue was largely manufactured by two groups of defendants: (1) the Knauf entities and (2) the Taishan entities. Because the Taishan entities contested jurisdiction at the outset and refused to accept service of process, it was necessary to conduct this litigation along two tracks. The first track involved the Knauf entities.

         The Knauf entities (“Knauf”) 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 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, to March 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.

         On 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 the Hernandez case. The Knauf pilot remediation program has 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. After a bellwether trial involving the downstream Knauf distributor, North River, numerous other settlement agreements were also reached with other downstream entities in the chain of commerce with the Knauf. These entities included various distributers, builders, and installers (and their insurers) of the Knauf-manufactured Chinese drywall.

         On 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.

         Under 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.

         As part of the Knauf remediation settlement, Defendants also agreed to pay reasonable costs, including the cost of administering the program and an additional amount for attorneys' fees, which includes both the fees for contract counsel and those for common benefit counsel. This payment relieves every claimant of all contingency fee and cost reimbursement obligations to both retained contract counsel and common benefit counsel (with exception of the Virginia litigants), and thus represents an amount which otherwise would have been payable by the claimants out of their settlement recovery.

         The claimants having received their appropriate portion of the settlement funds, the Court endeavored to allocate attorneys' fees to contract counsel and common benefit counsel pursuant to Pre-Trial Order 28 (“PTO 28”). R. Docs. 17379, 20282. PTO 28 lays out the multi-step process by which the Court disbursed attorneys' fees: (1) a review of time and expenses, (2) the submission of an initial affidavit for compensation for common benefit work and reimbursement of expenses, (3) the filing of a joint fee petition, (4) the filing of a request for common benefit assessment for any Chinese Drywall case or claim not participating as a Class Member or claimant in any of the various Class Action Settlement Agreements, (5) establishing common benefit and individual fees, and finally (6) allocating the common benefit fees. R. Doc. 17379. Throughout this process, the Court was aided by Special Master Daniel Balhoff, Court-Appointed CPA Philip Garrett, and Court-Appointed Settlement Administrator BrownGreer.

         After completing steps one through four, the Court proceeded to step five to “determine the total amount of the common benefit fund and the amount of funds for individual counsel for claimants.” Id. at ¶ 10. In its January 31, 2018 order, the Court found the appropriate split between contract counsel and common benefit counsel was fifty-two percent for common benefit counsel and forty-eight for contract counsel. R. Doc. 21168. Thereafter, on February 4, 2019, the Court proceeded to step six, allotting the common benefit fund to various firms in differing amounts. R. Doc. 22089. The next day, the Court issued its final judgment regarding common benefit attorneys' fees (the “Final Judgment”). R. Doc. 22092. On March 5, 2019, Parker filed a notice of appeal with respect to the Court's April 5, 2019 judgment, R. Doc. 22123; on March 6, 2019, Anderson Kill, PC also filed a notice of appeal, R. Doc. 22123; and on March 7, 2019, the Alters Law Firm filed a notice of appeal, R. Doc. 22129 (collectively the “Appealing Parties”).[2]


         a. Movant's Motion Seeking Immediate Disbursement of Attorneys' Fees [R. Doc. 22130]

         On March 8, 2019, Movant filed a motion seeking the immediate disbursement of attorneys' fees pursuant to the Court's Final Judgment, R. Doc. 22130, in which several parties have joined, R. Docs. 22131, 22134, 22141, 22147, 22159, 22164, 22169. In its Motion, Movant argues the Knauf Settlement Agreements “made clear this Court would consider and rule upon the allocation of all attorneys' fees and that any right of appeal as to the Court's determination of attorneys' fee allocation was waived.” R. Doc. 22130 at 1. In support of its argument, Movant points to language in both Agreements. Id. at 5-6. The Knauf Settlement Agreement states in pertinent part:

The PSC shall be entitled to petition the Court for an award of attorneys' fees and costs, and provided that the PSC does not seek an award of attorneys' fees and costs exceeding $160 million from the Knauf Defendants, the Knauf Defendants agree not to oppose any such request. All attorneys' fees and costs as well as the allocation of attorneys' fees and costs among the PSC, common benefit counsel authorized and working at the direction of the PSC, other common benefit counsel, Settlement Class Counsel and individual retained counsel are subject to the approval of the Court and to a ...

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