WCI Communities' Bankruptcy Plan, Chinese Drywall Trust OK'dAug 28, 2009 | Parker Waichman LLP A bankruptcy judge has approved WCI Communities Inc.'s plan to set up a Chinese Drywall Trust. The funds in the trust will be used to help homeowners living in WCI-built developments pursue claims against the parties responsible for the tainted drywall in their homes.
Consumers in 24 states have filed a total of 1046 Chinese drywall complaints with the Consumer Products Safety Commission (CPSC). Gases emitted from the 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, similar to fireworks or rotten eggs, that permeates homes, and cause metals, including air conditioning coils and even jewelry, to corrode.
Earlier this summer, tests conducted by the Environmental Protection Agency (EPA) found that Chinese-manufactured drywall contained elevated levels of strontium sulfide, as well as the presence of several organic compounds associated with the production of acrylic paint that were not present in samples of U.S.-made drywall. The Florida health department is expected to release further test results that could shed more light on potential health hazards posed by the drywall in September. The EPA and other government agencies are also conducting additional health testing, and those results should also be available soon.
WCI, which filed for Chapter 11 bankruptcy in August, is one of the Florida homebuilders that has acknowledged using Chinese drywall in homes it built. The company has said it believes it built at least 200 homes using the material. Just a month prior to its bankruptcy filing, the company said it was setting aside $11 million for homes that needed air conditioning coil replacement.
Earlier this week, Judge Kevin J. Carey approved the firm's reorganization plan, paving the way for WCI to emerge from bankruptcy. Included in the plan is the Chinese Drywall Trust, which WCI will fund with $900,000. That money will help to offset the cost of litigation against insurers and other companies involved in Chinese drywall disaster.