Millions spent on Chinese drywall litigation without much to show for it

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wwltv.com

Posted on July 8, 2013 at 10:27 PM

Updated Tuesday, Jul 9 at 4:56 AM

David Hammer / Eyewitness News
Email: dhammer@wwltv.com | Twitter: @davidhammerWWL

NEW ORLEANS -- Eyewitness Investigates used a public records request to discover that state taxpayers have paid a Colorado lawyer and his firm $3.5 million over four years to represent Attorney General Buddy Caldwell in the massive Chinese drywall litigation.

That's in spite of the fact that thousands of private plaintiffs already settled their claims against the Chinese drywall manufacturers, their affiliates and installers 18 months ago – and despite being nearly invisible, even to leading plaintiffs’ lawyers who say they weren’t aware the state had any claims.

“I started this case and until you came to my office today, I had no idea the state was even in it,” said Danny Becnel, who represented New Orleans Saints Coach Sean Payton in his case against the drywall manufacturers and is now on a committee of plaintiffs lawyers who negotiated a $1.2 billion settlement in December 2011.

Those plaintiffs represent thousands of home and property owners who got Chinese-made drywall from the German company Knauf, the Chinese firm Taishan and others and later discovered rotten egg smells, toxic chemicals and corrosive damage to electronics.

The drywall was a scourge across the South during a shortage of drywall and the rebuilding boom after Hurricane Katrina. The state filed its own claims in Orleans Parish, saying it wanted the defendants to cover costs for determining which public buildings got the contaminated drywall and cover losses in tax revenues stemming from lowered assessments and increased Citizens Insurance credits.

But those claims were not part of any settlement, and so the state has continued to pursue them quietly, without filing a single document in the court record. Meanwhile, the costs for outside lawyers have mounted, with their contracts amended again and again to extend their work. 

Perkins Coie started out with a $300,000 deal in July 2009. Then it was amended, about every six months. It went to an $800,000 cap, then to $1.1 million, then to $1.75 million, then to $2.65 million, then to $3.125 million. When that extension expired in July 2012, Perkins Coie started drawing on a $250,000 extension, which later grew to $410,000 to run through June 30, 2013. As of the end of May, there were only about $3,000 left.

“So here we are four years and 3-point-5 million dollars later and I would suggest to you it doesn’t appear the state has a whole lot to show for it and I think the citizens and the taxpayers of the state have the right to question if this has been a good use of taxpayers’ time and resources,” said Melissa Landry, head of the watchdog group Louisiana Lawsuit Abuse Watch.

In May, Landry spoke to us about Caldwell’s practice of hiring top campaign contributors as contract lawyers on the taxpayers’ dime, sometimes using fees that she and others consider a violation of the state Constitution.

For the contaminated drywall case, Caldwell hired two of his favorite outside law firms, run by his campaign chief Allen Usry and his campaign treasurer Wade Shows. Their two firms have made close to $1 million in four years on this case.

But the really big money has gone to a Colorado lawyer who doesn’t appear to have contributed anything to Caldwell’s political career. Caldwell’s office said they hired David Black and his firm Perkins Coie because Black has special expertise that Usry and Shows don’t – in complex product liability cases, especially engineering issues and the federal Consumer Products Safety Commission.

“I’m at a loss. I don’t know why you would need a separate cause of action and a separate set of lawyers to do the same thing that the plaintiffs committee is charged with the responsibility of doing,” Becnel said.

Assistant Attorney General Trey Phillips answered our questions by email. He said Black’s role expanded unexpectedly when the in-house attorney leading the case, Assistant Attorney General Bryan McMinn, died in 2010.

When we asked what work Black had performed for all the money, and where the state’s claims stand, Phillips said: “The state’s case is progressing appropriately.”

In 2011, before the settlement, Black filed 11 documents among thousands in the court record, all seeking to take depositions from defense witnesses. The Perkins Coie website says Black flew to Germany, London and Hong Kong to take testimony on behalf of the state of Louisiana.

Becnel said he doesn’t understand why Black needed to take depositions when the plaintiffs’ lawyers were already doing it.

“Somebody could have said these are the questions we want Mr. Herman or Mr. Levin or any one of the members of the plaintiffs committee taking depositions to ask,” Becnel said. “You don’t need to fly somebody to China.”

Although Black hasn’t filed anything in the court in the last two years, he’s still billing taxpayers for travel, lodging and work time. And the firm keeps adding other attorneys’ billable hours, as well.
Perkins Coie billed an average of $46,000 a month since the settlement. In June 2012, Black traveled between Denver and New Orleans three times, costing taxpayers nearly $3,000 in that month alone, just for airfare, taxis, hotels and meals.

That doesn’t even include the $43,000 Black charged that same month, at $444 an hour, to work nearly 100 hours on the case.

The state’s lawsuit asks for Knauf, Taishan and others to pay the costs of determining which public buildings have Chinese drywall in them. But when we asked Black and the Attorney General’s office to tell us if they’ve determined that or have any idea how many state buildings need to be remediated, they did not answer.

“You don’t need to hire separate counsel to go because the claim is not different than anyone else’s claim, because you either have Chinese drywall by Knauf or Taishan or you don’t,” Becnel said.
 

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