Joaquin Sapien and Aaron Kessler
ProPublica and Sarasota Herald-Tribune
Lowe’s Companies Inc. has dramatically increased the amount of money it is prepared to offer customers whose health or homes were harmed by defective drywall they bought from its stores. Those customers are now eligible for up to $100,000 in cash, instead of the maximum $4,500 in cash and gift cards that was previously agreed upon in a class action lawsuit that is being negotiated in a Georgia state court.
Lowe’s latest offer, filed on Thursday, comes just over two months after ProPublica and the Sarasota Herald-Tribune reported that the settlement originally offered by the nation’s No. 2 home improvement chain provided big payouts to the plaintiff’s attorneys but relatively small amounts of cash and gift cards to drywall victims.
The earlier settlement set aside $6.5 million for victims and $2.1 million for the attorneys who negotiated the agreement. Under the newly amended settlement, which was negotiated by a separate team of attorneys, Lowe’s has set aside an additional $2.25 million for the victims. The original attorneys will still get $2.1 million in fees. The new attorneys will receive a separate fee based on how many $100,000-claims Lowe’s eventually pays.
“This proposed amendment strongly enhances the potential benefits to Lowe’s customers,” said Gregg Weiss, an attorney who helped negotiate the deal on behalf of his client, Chris Brucker, a corrections officer who bought drywall from Lowe’s in 2006 to build his three-bedroom home in Arcadia, Fla.
Lowe’s spokeswoman Chris Ahearn said that she couldn’t discuss the settlement because it hasn’t been finalized. Judge Bobby Peters is expected to hear arguments for and against the settlement at a fairness hearing next month.
Under the original settlement, Lowe’s drywall customers were eligible for a maximum of $2,500 in cash and a $2,000 gift card if they had a receipt or a credit card statement showing they had bought drywall at Lowe’s. In order to qualify for the cash and gift card, they had to prove through an “independent third party” that they had more than $2,000 of damage to their home or more than $2,000 in medical bills.
Under the new agreement, Lowe’s customers can receive $100,000 in cash if they provide an estimate from an independent contractor showing that they will or already have suffered at least $4,500 worth of property damage — or if they have at least $4,500 worth of medical bills from symptoms related to bad drywall.
The earlier settlement also included two other levels of compensation that remain unchanged: a $50 gift card for customers who had no proof of purchase but said they bought drywall from Lowe’s, and a $250 gift card for Lowe’s customers who had proof of purchase but no documentation that they suffered any damages.
Public interest attorneys and consumer advocates criticized the original settlement for a variety of reasons, including the hefty attorneys’ fees.
“The ProPublica and Herald-Tribune stories brought to the attention of Lowe’s concerns with the settlement, which I believe they have corrected in the amended settlement agreement,” said Robert Gary, another attorney representing Brucker.
Like thousands of homeowners around the country, Brucker learned that his drywall was defective after his air conditioner failed in 2007 and he began doing research about appliance failures. Malfunctioning air conditioners have become a tell-tale sign of defective drywall, which releases sulfur gases that can corrode electrical wiring and trigger respiratory problems, nosebleeds, irritated eyes and migraines.
The U.S. Consumer Product Safety Commission says the only way to repair homes with defective drywall is to remove and replace the drywall and electrical wiring. The CPSC has received complaints from more than 3,600 homeowners about defective drywall.
Brucker said he is grateful to Lowe’s and his attorneys for getting him some financial relief — but he also said the settlement won’t cover the cost of repairing his home.
He estimates that it’s going to be “somewhere around the $200,000 mark to gut it and re-do it. Plus there are other expenses of living elsewhere during the construction. It’s nowhere near enough to make me whole again. But it’s a start, and you got to start somewhere.”
Most of the drywall that has caused problems was imported from China. But Brucker’s drywall was made by National Gypsum, based in Charlotte, N.C. He is also suing National Gypsum.
“From our standpoint this is the first acknowledgement of any problems related to American drywall anywhere,” Gary said. “Lowe’s has told me that they didn’t sell any Chinese drywall, so as far as we know this settlement is going to pertain solely to American board.”
National Gypsum did not respond to a request for comment in time for publication.
Despite Lowe’s assurances that it sold only American drywall, the proposed settlement in that case has touched a nerve with attorneys in the multi-district litigation in New Orleans federal court, which is focused strictly on Chinese drywall.
Plaintiffs’ attorneys involved in that case asked U.S. District Court Judge Eldon E. Fallon to block the original Lowe’s settlement, arguing that it “interferes with and erodes” the federal litigation and Fallon’s authority to deal with the wide scope of the drywall problem. Fallon has scheduled a hearing on the matter for next week.
Patrick Pendley, one of the plaintiffs’ attorneys who negotiated the original Lowe’s settlement in the Georgia case, argued in court filings that it is “a defective domestic-drywall case which will affect a minuscule number of Chinese drywall claims in the MDL against a single defendant — Lowe’s.” He said there could be “thousands of non-Chinese drywall claims” against Lowe’s that would be blocked if Fallon squashed the settlement.
Lowe’s attorney, Francis V. Liantonio, Jr., challenged Fallon’s power to block the settlement, stating in court documents that the federal court “has no jurisdiction to review the Georgia court’s orders.”
Russ Herman, the lead counsel for the plaintiffs in the federal case, told ProPublica and the Herald-Tribune that his clients will continue to oppose the Lowe’s agreement as long as it appears to include Chinese drywall.
“There’s one way to cure this situation: just take the word 2018Chinese’ drywall out of that settlement,” Herman said. “If Lowe’s is going to contend under oath that they sold no Chinese drywall, then there’s no reason they should be forcing Chinese drywall homeowners to release their claims against the company.”
Herman said his clients aren’t convinced that Lowe’s didn’t sell Chinese drywall. He said his team of attorneys is investigating whether Lowe’s bought drywall from Interior-Exterior Building Supply, one of the Louisiana-based suppliers at the center of the Chinese drywall case.
“As far as I’m concerned either they [Lowe’s] are telling the truth or they’re not. If they’re telling the truth, then eliminate Chinese drywall from your settlement,” Herman said.
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