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Lennar Corp. Named in Chinese Drywall Suit

Apr 21, 2009 | Parker Waichman LLP

Lennar Corp., one of the biggest home builders in Florida, faces a class action lawsuit over defective Chinese drywall.  According to the Associated Press, Lennar disclosed the lawsuit in a filing with the Securities and Exchange Commission (SEC) yesterday.

Chinese drywall reportedly emits sulfur fumes that produce a “rotten eggs” odor and cause metals, such as air conditioning coils, to corrode. The fumes have also been associated with respiratory and sinus problems in some residents. In some homes, the drywall problems have been so severe that families have had to move, and some builders have begun gutting and replacing drywall in the buildings.

Usually, drywall is manufactured in the U.S., but the rebuilding necessitated by the devastating 2006 hurricane season, and housing boom that was occurring at the same time, prompted many builders to buy drywall from China. Investigators are still trying to determine how much drywall was imported. Estimates indicate the drywall may be in more than 100,000 homes, more than 35,000 in Florida alone. The Florida Health Department has so far received 265 complaints regarding the toxic drywall.  Other states reporting drywall problems include Mississippi, Louisiana and Virginia.

Lennar Corp. was one of the first Florida builders to acknowledge having used Chinese drywall.  Other Florida builders known to have used Chinese drywall include, Taylor Morrison, WCI, Meritage Homes, Ryland Homes, Transeastern and Standard Pacific.

The class action lawsuit that names Lennar was filed in U.S. District Court for the Southern District of Florida.  The named plaintiffs in the suit claim they bought two homes built by Lennar that were made with the Chinese drywall, which they contend emits sulfur gasses and other fumes, the Associated Press said.

In its SEC filing, Lennar said it established reserves for the estimated cost of replacing drywall and other materials in its homes, but noted that it expects any additional costs beyond its reserves to be covered by insurance, the Associated Press said.

Earlier this year, Lennar began removing tainted drywall from many of its Florida homes.  In January, the company issued a statement in which it promised to absorb all costs related to the drywall replacement, including relocation expenses for people living in the houses.

In February, Lennar also filed suit against the manufacturers and suppliers of Chinese drywall, including the Chinese firms Knauf Plasterboard and  Tianjin Co., Taishan Gypsum, as well as Banner Supply of Florida.  The lawsuit claims the defendants sold “defective gypsum” drywall that was installed in homes built by Lennar, which “caused substantial damage” to the company.  The Lennar lawsuit also charged 12 installers with breach of contract and breach of express and implied warranty. Lennar claimed that independent subcontractors installed the defective Chinese drywall in some homes, and it was  unaware it was being used.


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