Miami-based Banner Supply Co. has sued Knauf Gips of Germany for more than $100 million, claiming it was devastated by the lies the Chinese conglomerate told about its defective drywall.
In the lawsuit, Banner says Knauf’s false claims about the fitness of its drywall has taken a financial toll on the small supplier.
Banner received 100 million square feet of Chinese-manufactured drywall, primarily from Knauf, and then sold it to other companies. Banner later received complaints from homebuilders about the corrosive, foul-smelling wallboard.
On Thursday, a federal judge in New Orleans gave preliminary approval to a $54.5 million class-action settlement between Banner and thousands of homeowners in Florida who sued the company for supplying the defective drywall found in their homes. The settlement could include owners in Southwest Florida, many of whom are still fighting to get their homes repaired.
“Knauf’s deceit has severely damaged Banner’s business and exposed it to significant liabilities,” said Michael Peterson with Peterson & Espino in Miami, who represents Banner, in a statement.
According to Banner’s lawsuit, Knauf sent a senior executive to Florida to investigate complaints and then told Banner and others that independent testing of its drywall concluded that it was “not defective.”
Banner Supply filed its lawsuit on Friday in federal court in eastern Louisiana.
“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.”
Steven Glickstein, a New York attorney with Kaye Scholer, who represents Knauf, said a jury in Miami-Dade County has already determined that Banner is also to blame for troubles with the tainted drywall.
“The jury found Banner to be 55 percent at fault because Banner knew of the problems with the Chinese drywall and didn’t tell its customers,” he said.
In the Miami case, the homeowners, Armin and Lisa Seifart, were awarded $2.4 million. Knauf was not included in the lawsuit.
While Banner has agreed to a nearly $55 million settlement with homeowners involved in the federal class-action suit, Glickstein points out that the money would be paid by the company’s insurers, not the supplier itself. That makes him question the amount of damages Banner is demanding.
“We all know from experience that anybody can put any number in a complaint and it doesn’t have to bear any resemblance to reality,” Glickstein said.
Banner contends that the liability for the defective drywall belongs with Knauf, not its suppliers. “Knauf shouldn’t be permitted to profit by concealing defects from the citizens of Florida while businesses like Banner are left to clean up the mess,” Peterson said.
While a judge has preliminarily approved the Banner settlement, it faces opposition from some attorneys and Florida victims. At a press conference Friday, Miami-Dade homeowners Charles and Sandra Puckett announced they would be among the first ones to opt out of the settlement. Instead, they will continue fighting Banner in a lawsuit they’ve already filed. Their trial is scheduled for April of next year.
The Pucketts fear they’ll only get a few thousands dollars from the settlement, not nearly enough to repair their home and cover their other losses.
Two Chinese drywall attorneys in Miami-Dade County, David Durkee and Victor Diaz, say individual actions filed in state court will be better for homeowners because their damages will be considered individually.
“We represent about 170 individual claims in Florida and right now we anticipate the majority of those to be opting out,” said Durkee, who has clients in Southwest Florida.
Victims have until August to decide whether to accept or opt out of the deal.
Those who oppose the settlement have a number of concerns. They say the settlement doesn’t include information on individual payouts and how the money will be divided; more than 50 percent of the settlement will go toward attorneys’ fees and costs, and there is a lack of transparency about whether Banner has the ability to pay more money than what has been offered.
“We have to make sure that a corporation like Banner does not have the financial ability to pitch in one nickel,” Durkee said.
He said if one homeowner opts out, Banner has the right to cancel the settlement and say “We don’t want do to this.”
Banner is taking the wrong approach with its lawsuit against Knauf, Glickstein said. The focus should be more on getting homes repaired.
“This is a problem that will be solved through cooperation, not litigation,” he said.
Through a pilot program, Knauf is working to fix homes at no cost to the owners, Glickstein pointed out. Currently, there are 367 homes in the program. Work has been completed on 33.
Knauf’s hope, Glickstein said, is to be able to repair all homes with its defective Chinese drywall.
“I would have hoped that instead of throwing bricks, Banner would have approached this in a cooperative way,” he said. “But at the end of the day, KPT (Knauf) is not going to allow the lawsuit to change its behaviors. It’s going to defend the false allegations in the complaint.”
Connect with Laura Layden at www.naplesnews.com/staff/laura_layden.