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Chinese Drywall Supplier Agreed to Keep Quiet, Unsealed Documents Show

Jun 7, 2010 | Parker Waichman LLP

Documents unsealed in a Miami Chinese drywall class action lawsuit include a 2006 agreement between Florida-based Banner Supply and Knauf Plasterboard that required Banner to keep quiet about the tainted wallboard. Other documents unsealed on Friday also revealed that Banner wouldn’t even agree to take the defective drywall from Knauf when the manufacturer offered to give it away, free of charge.

Since late 2008, the Consumer Products Safety Commission (CPSC) has received more than 3,000 reports from residents in 37 states, the District of Columbia, and Puerto Rico regarding defective Chinese drywall. Gases emitted from Chinese drywall are being blamed for significant property damage, including damage to HVAC systems, smoke detectors, electrical wiring, metal plumbing components, and other household appliances. These gases also produce a sulfurous odor that permeates homes, and cause metals, including air conditioning coils and even jewelry, to corrode. People living with Chinese drywall have also suffered eye, respiratory and sinus problems that may be linked to the gases.

While the CPSC only started receiving drywall complaints in late 2008, the documents unsealed by Miami-Dade Circuit Court Judge Joseph Farina appeared to show both Knauf Plasterboard and Banner Supply knew of the problem years earlier. The trial, which is set to begin today, is the first jury trial of a Chinese drywall lawsuit. Only Banner Supply is named as a defendant. Two other defendants have settled their cases, while Knauf is named in a separate lawsuit pending in federal court.

According to plaintiffs, WCI Communities, which bought some of the Knauf drywall from Banner, reported to Banner that noxious odors from the wallboard were keeping some buyers from closing on their sales. According to the Sarasota Herald Tribune, WCI began planning to rip out the drywall and replace it with American brands, but kept quiet about the problem.

According to the Associated Press, under the confidential arrangement unsealed Friday, Knauf agreed to provide Banner Supply with thousands of pieces of U.S.-produced plasterboard and to pay the company $7,300 per month to store the Chinese product. In return, Banner would stay quiet about problems – both the odor and any health related risks – with the wallboard. The settlement, which was signed in December 2006, states that breaching the confidentiality provisions “could cause irreparable harm to Knauf Tianjin.”

A few months after that agreement was struck, Knauf Plasterboard offered to right-out give Banner Supply the defective drywall at no charge, with the stipulation that it be sold overseas and not in the U.S.. But Banner didn’t want it because of liability concerns, according to depositions.

Despite the existence of these documents, Banner Supply maintains it had no prior knowledge of the drywall’s serious issues. The company’s attorney told the South Florida Business Journal that when it signed the 2006 agreement, it had no idea about the extent of the problem.

“All we knew was there was a complaint related to smell, five homes in WCI had it, and test results showed no health concern,” the attorney said. “There was no indication of corrosion or personal injury.

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