Although the “pilot program” for remediation launched by the Chinese Drywall Litigation Multidistrict Litigation (MDL No. 2047, E.D. La.) is going smoothly and has repaired a number of plaintiffs’ homes, thousands of damaged homes remain and the homeowners are continuing to suffer with the effects, said Bob Brown of Baron & Budd speaking on the HB Teleconference, Defective Drywall Cases in 2011 and Beyond, on Nov. 8.

Brown said that the pilot program—which involves 300 homes in Florida containing defective drywall manufactured by the Chinese company KPT—was not meant as a settlement of the litigation, but rather to explore the possibility of performing remediation on affected homes.

“There are just so many homes that need to be done, there has got to be another way to resolve these matters,” said Brown.

He said that, as part of the program, only those homes that contain KPT drywall almost exclusively qualify for remediation.  Inspectors will visit a home and cut 10 holes in the drywall to look for a KPT logo.  If three or more walls contain other brands or are not marked “KPT”, the house is rejected.  Therefore, homes that contain 70 percent KPT drywall are not accepted for remediation, he said.

“We have a real problem with that in that our experience has shown that KPT is one of the most offensive drywalls out there that are made in China,” he said. “You know a KPT house when you walk in there.”

The defective drywall has a tendency to corrode and emit noxious sulfur odors.

Matt Jacobs of Jenner and Block, who represents policyholders in the litigation said that choice of forum and choice of state law are important factors for those involved to consider.

“By and large I think it benefits both sides to pick a forum where you can quickly and comprehensively reach the merits and a tribunal that’s equipped to deal with complex issues like these,” he said.

He said that a major issue regarding choice of law is the pollution exclusion for Chinese drywall.

“A number of state courts have ruled on the so-called total pollution exclusion to Chinese drywall and have come out with different outcomes,” he said.

Jacobs said that he is “surprised” at how few policyholders have raised motions on choice of law.

“If you’re a policyholder out there you do need to be thinking about these issues… I would say at the very least you need at least some level of discovery regarding the facts surrounding the place of contracting, where the contracts were performed … the location of the subject matter,” he said.

Greg Leopold of Leopold Kuvin said that an important recent development has been litigation regarding domestic drywall manufacturers.  He said that early in the litigation, it was assumed that all of the defective drywall was manufactured in China.

“So lots of homes that had corrosion that was believed to be caused by Chinese drywall were sucked into MDL 2047 before really there was any developed litigation or identity amongst manufacturers and before there was really an idea the fact that there might be manufacturers other than Chinese manufacturers that had drywall that was problematic,” he said.

He said, due to this early presumption, trials didn’t focus on liability but rather only damages and determining what amount of remediation was required in a home containing Chinese drywall.

“There wasn’t much of an exploration until down the line to determine the manufacturer,” he said.  However, after that effort started moving forward, a motion to centralize the non-Chinese drywall litigation was raised before the Judicial Panel on Multidistrict Litigation (JPML).

The motion was denied, “in part because the manufacturers appeared at the hearing before the JPML and argued there was simply too much trade secret information between the manufacturers to allow for effective centralization.”

“While some of the markers are the same as Chinese drywall they certainly aren’t identical; and because really there wasn’t too much development of the liability part of the Chinese drywall litigation, that is going to be a far more pivotal point in the domestic drywall litigation,” said Leopold.

Click here to purchase the recording from the November teleconference.