In re Chinese-Manufactured Drywall Prods. Liab. Litig.
| Decision Date | 28 November 2022 |
| Docket Number | MDL Docket 09-md-2047 |
| Parties | IN RE CHINESE-MANUFACTURED DRYWALL PRODUCTS LIABILITY LITIGATION v. TAISHAN GYPSUM CO., LTD. F/K/A SHANDONG TAIHE DONGXIN CO., LTD.; TAIAN TAISHAN PLASTERBOARD CO., LTD., ET AL., 211-cv-01395-EEF-JCW THIS DOCUMENT RELATES TO EDUARDO AND CARMEN AMORIN, ET AL. individually and on behalf of other similarly situated |
| Court | U.S. District Court — Eastern District of Louisiana |
SECTION “L” (5)
REPORT AND RECOMMENDATION
By an Order of reference dated November 2020, this matter came before the undersigned for a determination of damages under Rule 55 of the Federal Rules of Civil Procedure. (Rec. doc 22976). This matter concerns the claims of two sets of plaintiffs, John and Jill Carter (the “Carters”) and Gene and Darla Gibbs (the “Gibbs”) against Taishan Gypsum Company and related entities (“Taishan” or “Defendant”). Taishan is one of many manufacturers of Chinese Drywall that were included as defendants in a years-long multidistrict litigation (“MDL”) in this District. What sets Taishan apart from the other defendants is that it was defaulted by the District Judge long before this matter came before the undersigned. Accordingly, the only issue to be decided by this Court is the quantum of damages, if any, due these two sets of plaintiffs as a result of the Chinese Drywall installed in their respective homes.
As noted, the District Judge referred these cases to the undersigned “to hold an evidentiary hearing and determine damages, if any, pursuant to Federal Rule of Civil Procedure 55(b)(2).” (Id.) (emphasis added). Leading up to that evidentiary hearing, which took place a full year later than contemplated by the District Judge, the parties engaged in substantial briefing and argument, primarily occasioned by Plaintiffs' and their counsel's ongoing refusal to accept rulings of this Court and Plaintiff's counsel's occasional nonappearance at scheduled hearings and status conferences. Because the Court has, throughout these proceedings, been sensitive to the fact that these homeowners are seeking to recover against a defaulted defendant who is clearly responsible for the defective Chinese Drywall in their homes, it has repeatedly given Plaintiffs and their counsel the opportunity to marshal their best evidence and put on their best case. This approach has been, at times, to the detriment of, if not prejudicial to, Taishan.
Having thoroughly reviewed all of the pleadings and arguments, the evidence and testimony presented at the evidentiary hearing, and the law, the Court is now prepared to make its Report and Recommendation to the District Judge.
Normally, in an Order and Reasons or Report and Recommendation such as this one, the Court would address the procedural history of the case before discussing the law applicable to Plaintiffs' claims. However, the Court finds that a straightforward threshold discussion of the applicable law is essential here to understand the convoluted procedural history of these two cases, as so much of that history involved Plaintiffs (and their counsel) seeking to convince the Court to apply some law other than that which is applicable to their claims.
To begin, the parties expressly agree that the Carter and Gibbs cases are governed by Alabama law. (Rec. docs. 23329, 23330).[1] This, as it turns out, is quite important.
These are essentially tort actions for damages to Plaintiffs' real property.[2] Under Alabama law, when the cost to remediate real property exceeds the diminution in value of that property, the proper measure for alleged damage is the diminution in value of that property. See Poffenbarger v. Merit Energy Co., 972 So.2d 792 (Ala. 2007).; see also Dialysis Clinic, Inc. v. City of Dothan, No. 1:10-CV-1051-WKW [WO], 2012 U.S. Dist. LEXIS 156351, at *7-11 (M.D. Ala. Nov. 1, 2012).[3]
In Poffenbarger, the plaintiff property owners brought suit against an energy company asserting claims of trespass, nuisance, wantonness, and negligence arising from an oil leak that damaged their property, which required remediation estimated to cost more than $2.6 million. 972 So.2d at 793. By contrast, expert appraisals showed the current land value of that property to be $32,628, which was a diminution of a mere $6,000 from the original purchase price. Id. Despite the gross disparity in these numbers, the Alabama Supreme Court held that "the appropriate measure of direct, compensatory damages to real property generally is the diminution in the value of that property, even when the cost to remediate the property exceeds the diminution in the value thereof." Id. at 801.
The Poffenbarger court cemented Alabama's strong - if harsh - policy supporting diminution as the proper measure: “Awarding money damages in an amount many times over the actual value of the land at issue . . . may not serve the end of making the victim whole as much as it raises the specter of a windfall to a victim who, in many cases, will have little or no incentive to spend those moneys to repair land that, even upon full remediation, will be worth only a small fraction of the money so expended.” Id. at 801-02.
The Poffenbarger decision has been uniformly followed by the Alabama state and federal courts. As recently as 2020, in Leftwich v. Brewster, the plaintiff alleged that the defendant's negligence had caused his house to collapse and become uninhabitable. 306 So.3d 26, 28, 36-38 (Ala. 2020). The Alabama Supreme Court affirmed the trial court's exclusion of evidence of repair costs because diminution in value of the plaintiff's home was the only appropriate measure of damages. Id.
One Alabama federal court examining Alabama law observed that the notion that diminution in value was the exclusive remedy for damage to real property was "a matter of hornbook law," "quite well settled," and "a principle [] so uncontroversial that the Alabama Supreme Court did not have occasion to expressly affirm it until" Poffenbarger in 2007. Dialysis Clinic, 2012 U.S. Dist. LEXIS 156351, at *7-11. That court rejected a property owner's efforts to recover costs to rebuild a structure destroyed by flooding caused by the defendant's negligence, and instead strictly limited damages to diminution in property value, despite the "financial and practical realities of the case" otherwise favoring repair and relocation. Id. at *10-11. That court recognized the harshness of the rule, but noted that, even when “the Poffenbargers, whose property lost only $6,000 of its market value, faced estimated remediation costs of over $2,000,000,” the Alabama Supreme Court in Poffenbarger "unflinchingly applied the diminution-in-value rule." Id. at *11. The Dialysis Clinic court applied the diminution in value rule, concluding that "the equities of this case cannot change the rule this court is duty-bound to apply." Id.
There is no doubt that this rule is harsh but, just as in Dialysis Clinic, this Court, applying Alabama law, is duty-bound to follow it. Particularly germane to these two cases is one additional federal decision interpreting Alabama law on these issues.
Evaluating the admissibility of repair costs in a property-damage case, the District Court for the Southern District of Alabama found that, while “the appropriate measure of direct, compensatory damages to real property generally is the diminution in the value of that property, even when the cost to remediate the property exceeds the diminution in the value thereof,” it is also true that “evidence of repair costs remains admissible to show diminution in value for injury to real estate, but diminution in value remains the measure of damages even when remediation costs exceed that diminution in value.” Kerns v. Pro-Foam of South Ala., Inc., 572, F.Supp.2d 1303, 1307 (S.D. Ala. 2007) (citing Poffenbarger 972 So.2d at 800-01).
As will be detailed below, Plaintiffs and their counsel spent the better part of a year trying to convince this Court to apply some other - in fact, any other - rule so that they could ultimately recover in this case something close to their estimated repair/remediation costs. The Court gave them multiple opportunities to (1) make the case that their measure of damages was something other than diminution in the value of their homes, and (2) failing that endeavor, marshal the evidence necessary to demonstrate the value of such diminution. The Court will detail this chaotic procedural history below and return thereafter to an analysis of Plaintiffs' damages claims under Alabama law.
The procedural history of this MDL is long and more than well-described in multiple pleadings and orders in this record, which comprises over 23,000 entries (to date). The following brief description will suffice for purposes of these matters.
On June 13, 2011, the Plaintiffs' Steering Committee (“PSC”) filed the Amorin Complaint in the Eastern District of Louisiana. That complaint sought certification of a nationwide class of homeowners of real property located in the United States “containing problematic drywall manufactured, sold, distributed, and/or supplied by the Defendants.” Amorin v. Taishan Gypsum Co. Ltd., Civ. A. No. 2:11-cv-1395, E.D. La., (Rec. doc. 1 at ¶ 119). In 2012, the PSC amended the Amorin Complaint to name thousands of specific claimants as putative class members in an “Omnibus Class Action Complaint in Intervention.” Rec. Doc. 16225 (Omnibus Complaints XV, the “Intervention Complaint”). The amended complaint attached a list of 4,072 alleged “class members” to the Amorin class-action complaint. The Carters and Gibbs were among those listed.
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