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Chinese drywall lawsuit moved to New Orleans

Judge rules Florida not venue for suit by Chartis, Lexington

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Chinese drywall lawsuit moved to New Orleans

TAMPA, Fla.—A federal judge in a Florida court has ordered a lawsuit brought by Chartis Inc. and subsidiary Lexington Insurance Co. concerning Chinese drywall coverage be transferred to New Orleans, where multidistrict litigation is pending.

Judge Steven D. Merryday of the U.S. District Court for the Middle District of Florida in Tampa last week ordered that Chartis' case be moved to U.S. District Court for the Eastern District Court of Louisiana as part of the MDL.

The defendants in the case, Bonita Springs, Fla.-based homebuilder WCI Communities Inc. and WCI Trustee Robert C. Pate, sought to dismiss or to transfer Chartis' case, alleging the insurer violated the “first filed” rule and was engaged in “a flagrant and belated attempt at forum shopping,” according to court documents.

In his capacity as the trustee for the WCI Drywall Trust, which was formed in July 2009 after the homebuilder and its subsidiaries went bankrupt, Mr. Pate filed suit in December 2009 against 14 insurers, including Chartis, that sold liability insurance to WCI in the New Orleans MDL.

On June 29, Chartis sued WCI and sought a declaratory judgment on the same subject matter in the Tampa, Fla., court.

Citing the first-filed rule, Judge Merryday ordered Chartis' case transferred to the New Orleans MDL.

“This action shares both a party and a substantial, overlapping issue with the first-filed action. Both the first-filed action and this action require a determination as to whether the insurer has the duty to indemnify under the relevant policy for a claim arising from defective Chinese drywall,” Judge Merryday wrote. “Furthermore, the plaintiffs fail to show a compelling circumstance warranting disregard of the first-filed rule.”

New York-based Chartis had argued that it sought dismissal of Mr. Pate's suit in its first-filed action and that Mr. Pate's filing in Louisiana was “forum shopping.”

Attorneys familiar with the MDL and other Chinese drywall disputes previously have commented that Louisiana's judicial climate typically is favorable to the policyholder, while Florida usually is more pro-insurer.

According to the Consumer Product Safety Commission, about 3,600 complaints about Chinese drywall have been filed in 38 states including the District of Columbia, American Samoa and Puerto Rico.