Miami-based Banner Supply Co. has sued Knauf Gips of Germany, an international conglomerate, alleging that it lied about the defective drywall it manufactured in China, causing the small company millions in damages.
On Thursday, a federal judge gave preliminary approval to a $54.5 million class-action settlement between Banner Supply and thousands of homeowners in Florida who sued the company for supplying the defective wallboard found in their homes.
Banner Supply filed its lawsuit on Friday in U.S. District Court in eastern Louisiana, seeking more than $100 million in damages.
“The Knauf defendants, all arms of a sprawling German industrial giant, lied to Banner about defective drywall Knauf manufactured in China and shipped to the United States,” the lawsuit states. “Knauf then compounded its fraud by trying to evade responsibility, shifting blame entirely onto small Florida businesses, such as Banner, that relied on Knauf to tell the truth. Banner … did nothing more than distribute Knauf drywall after receiving certifications and warranties from Knauf that it was fit for use.”
When Banner began receiving complaints about odors from the drywall, Knauf sent a senior executive to Florida to investigate. “Knauf then told Banner and others that it had commissioned independent testing of Knauf Drywall, and that Knauf had concluded its drywall was not defective …,” the complaint states.
Knauf admitted that in 2006, while assuring Banner that “the difference in smell is no more than the difference between Chinese natural gypsum plasterboard and synthetic plasterboard,” it actually knew that its drywall was defective and its assurances were false, the complaint states. Knauf also knew that the sulfur emitted from the drywall would corrode materials commonly used in construction.
“Rather than take responsibility for its actions, Knauf instead claims that it is not subject to U.S. law,” said Michael Peterson of the Peterson & Espino law firm in Miami, who represents Banner Supply and its related companies. “It is essentially telling American customers that no judgment against Knauf would ever be enforced in the People’s Republic of China,” where Knauf manufactures drywall.
“The result is that small U.S. businesses, such as Banner, are links in the distribution chain have become targets of class-action lawsuits brought on behalf of aggrieved homeowners,” Peterson said. “This is a classic situation where a David has been pitted against a Goliath.”
“This cross-claim seeks compensation for Banner’s loss of business and reputation and will place liability for the defective drywall where it belongs, with Knauf, the manufacturer,” Peterson said. “Knauf shouldn’t be permitted to profit by concealing defects from the citizens of Florida while businesses like Banner are left to clean up its mess.”
Banner received about 100 million square feet of Chinese-manufactured drywall, primarily from Knauf. Banner then sold what it later discovered was defective Knauf drywall to other companies in Florida. Banner later received complaints from homebuilders about odor from the drywall.
“Knauf’s deceit has severely damaged Banner’s business and exposed it to significant liabilities,” Peterson said.