Lessons Learned Can Benefit Chinese Drywall Defense

Asbestos then tobacco then pharmaceuticals. Each an extensive and expensive litigation. Now comes Chinese drywall, which could very well be the next tidal wave.

We have already been out in the field working on the Chinese drywall matter and have spoken to several clients that are in the beginning stages of strategic development. If you aren’t familiar, the issue involves the installation of drywall imported from China during the housing boom from 2004 to 2008, as well as after hurricanes Katrina and Rita. During that time, there wasn’t enough supply of U.S.-manufactured drywall to meet demand, so builders were forced to import it. The Chinese drywall in question has proven to be high in sulfur compounds that could potentially cause property damage, emit a “rotten egg” odor and be hazardous to one’s health, although there is undoubtedly much debate to be had about the claims. Initial estimates say that it costs more than $90,000 to rid a residence of the drywall and/or its toxins; as many as 100,000 homes are estimated to contain it (at least partially).

The lawsuit is multi-district litigation; since May 2009, more than 20 defendants have been named in more than 1,000 civil actions filed by homeowners. These are mainly the builders at this time, but everyone from insurance companies to architects to suppliers are likely to be involved at down the road. So this is almost assuredly just the tip of the iceberg, although it’s hard to imagine it being as large as the tobacco litigation.

So what have we learned from past civil actions such as these? I was fortunate (or unfortunate, depending on the day) to work on both the tobacco and pharma litigations, and what we’ve done for our Chinese drywall clients is take a comprehensive view of the past to see what worked, extract best practices, adapt them to the current circumstances, attack the problem and, we anticipate, build some repeatable processes.

One thing I witnessed during both the tobacco and pharma cases was the inefficiency of having dozens of law firms requesting, processing and reviewing the same data; millions upon millions of dollars were likely lost during the process. Constant education of reviewers and outside counsel, no chain of information and consistency were constant concerns. All of this can be easily avoided in the Chinese drywall matter.

Here is a glimpse of the comprehensive planning that’s required as well as a few of our recommendations:

  1. Be proactive. Decide early on to handle the documents head-on and upfront. Don’t wait to start because you think it might go away; it won’t and you’ll only be behind.
  2. Create efficient processes. The proliferation of technology is a true aid versus prior civil matters of similar or larger size, but working with partners who have repeatable, proven protocols is also key.
  3. Budget properly. This is tied closely with #2. With the implementation of repeatable processes, accurate budgeting is a wonderful byproduct.
  4. Collaborate. There is no substitute for collaboration between the discovery team and outside counsel (as well as the client). If it’s not a central component of your planning, then it’s next to impossible to build the processes that are essential in achieving consistency and efficiency.

Streamline, budget, collaborate. These are a few of the hallmarks of successful document management in these large cases. These steps certainly put the client in the best position to handle the many multi-jurisdictional lawsuits.

As I mentioned, we are already working on this matter and will have a lot to report back in the coming months as this issue heats up even more. We anticipate a lot of redundancy and that our discovery team is going to provide efficiency and streamlined processes to each of our clients that face this litigation.