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From Products Liability Law Daily, October 5, 2015

Chinese drywall “stigma” claim remains outside scope of MDL settlement agreements

By Pamela C. Maloney, J.D.

A condo building owner’s “stigma” claim, pursuant to which the owner sought damages for the property’s loss of market value as a result of the building’s close proximity to a building in which defective Chinese drywall had been installed was not barred by the settlement agreements reached in the Chinese drywall multi-district products liability litigation, the U.S. court of Appeals for the Fifth Circuit ruled in a decision not for publication. The appellate court affirmed the district court’s refusal to enjoin the action (In re: Chinese –Manufactured Drywall Products Liability Litigation, October 2, 2015, Per curiam.).

Background. Although the Florida condo owned by Ralph Mangiarelli did not contain defective Chinese drywall, units in a building in the general vicinity of Mangiarelli’s building did contain the defective drywall. Mangiarelli filed a “stigma” claim in state court seeking monetary damages, arguing that because the other building had defective drywall, the real estate in his building had lost market value. The defendants sought to enjoin the stigma claim on the grounds that they fell under the Global Settlement Agreement and the Banner settlement agreement and because Mangiarelli never “opted out” of the agreement, he was enjoined from filing a state court action.

The federal district court determined that Mangiarelli’s stigma claim did not fall within the scope of the settlement agreements and, thus, it was not barred by the settlement agreements [see Products Liability Law Daily’s November 6, 2014 analysis]. The court refused to enjoin the action and defendants Sixty Fifth and One, LLC and Banner Supply Company Pompano, LLC, appealed.

Viability of “stigma” claims. In upholding the district court’s ruling, the Fifth Circuit rejected the defendants’ arguments that the condo owner fell within the broad definition of class member contained in each settlement agreement and that the class definitions are distinct from any provision concerning “affected property.” The Fifth Circuit explained that the class member definitions could not be considered in isolation but must be considered in the context of the agreements as a whole. Both settlement agreements apportioned funds based on each “affected property” and, therefore, with the exception of personal injury claimants, the settlement agreements limit recovery to those individuals who own, lease, or otherwise have a close tie to a property containing Chinese drywall. In addition, the Global agreement’s opt-out provisions contemplate only those class members seeking damages to an “affected property” and the claimant registration form requires that a claimant submit information regarding his or her “affected property.”

In this case, the condo building did not qualify as an affective property because it did not contain Chinese drywall. As a result, the condo owner was never entitled to a benefit under either of the settlement agreements in exchange for releasing his stigma claims. Therefore, it would be “nonsensical” to find that the condo owner was a class member for purposes of the settlement agreements, the Fifth Circuit concluded.

The case is No. 14-31355.

Attorneys: Charles David Durkee (Roberts & Durkee) for Ralph Mangiarelli, Jr. Jeffrey M. Paskert (Mills, Paskert & Divers) for Sixty-Fifth and One, LLC. Michael Patrick Peterson (Peterson, Baldor & Maranges, PLLC) for Banner Supply Co. Pompano, LLC.

Companies: Sixty-Fifth and One, LLC; Banner Supply Co. Pompano, LLC

MainStory: TopStory ClassActLitigationNews BuildingConstructionNews LouisianaNews MississippiNews TexasNews

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