There is hope that a recent favorable circuit court ruling in Florida limiting damages against home builders by owners of houses with defective Chinese-made drywall will spread to other states where the cases are being tried. The case, known as Marlene Bennett vs. Centerline Homes, Inc., consolidated a number of lawsuits by owners of homes with defective drywall against various builders.
And, on Nov. 5, Florida Circuit Court Judge Glenn D. Kelley in Palm Beach County made two rulings that were favorable to home builders involved in the case--and perhaps beyond.
First, he ruled that builders are only responsible for whatever their contracts with buyers cover, which limits the issues for which homeowners can sue, such as pain and suffering.
Second, he said that the builders could not be held strictly liable because neither did they manufacture the product nor did they belong to the chain that distributed it. Rather, similar to the buyers, builders were the end-users of the drywall product, according to the judge's reasoning.
“This is really one of the first decisions that have come out regarding a builder’s liability,” said Stacy Bercun Bohm, an attorney for Akerman Senterfitt who is representing some of the builders included in the case. “We are hopeful that judges in other circuit courts and federal courts will follow this ruling as well.”
Indeed, the New Orleans-based judge presiding over all the federal Chinese drywall lawsuits has looked toward other judges’ decisions in the past when making rulings, according to Bohm.
Stephen Mysliwiec, an attorney at DLA Piper who represents builders in product liability, construction defect, and insurance coverage cases, also said this case's rulings are beneficial to home builders.
Mysliwiec said that this decision makes it likely that drywall manufacturers and distributors will be assessed more of the damages for Chinese-made drywall, encouraging the manufacturers and distributors to settle cases. For example, Knauf Plasterboard Tianjin, a major manufacturer of defective drywall, agreed in October to a preliminary settlement and will remediate 300 homes built with 95% or more Knauf drywall.
“The ruling should encourage Knauf to expand its drywall remediation program,” Mysliwiec asserted. “It's good economic policy to make the person pay who was responsible for the problem and who is in the best position to fix the problem and stop the problem from happening again."
He also said that the judge's ruling saying that builders are not strictly liable because they were not in the manufacturing and distribution chain will also be helpful in limiting damages in other litigation, he said. “The ruling is consistent with the builders' view that they were victims, like the homeowners,” Mysliwiec said.
Still, home builders are still far from off the hook in the Palm Beach case, said Bohm. The judge has yet to decide on breach of contract and warranty claims against the builders as well as another set of motions the judge hasn’t heard yet.
The ruling also did still leave builders at risk of personal injury claims from homeowners who say their health was impacted by the bad drywall. Homeowners exposed to the sulfur-emitting drywall have complained of headaches and other medical maladies that they say are related to their exposure to the product. “Those claims will survive this ruling,” Bohm said.
Still, the ruling that holds builders' liability to what was in the contracts for the most part should have the impact of seriously limiting total awards against builders, such as the nearly $2.5 million in damages that a jury in Miami ordered Banner Supply, a supplier of the defective drywall, was ordered to pay a couple whose home had Chinese drywall. The award covered the costs of replacing the drywall as well as loss in value of the home due to the use of the notorious Chinese drywall.
The builder of that home wasn’t included in the trial or the financial damages; it settled its part of the case out of court.
The NAHB declined to comment on the Florida judge's ruling for now, according to spokeswoman Donna Reichle, given the possibility that the decision could be appealed.
Teresa Burney is a senior editor for BUILDER and BIG BUILDER magazines.