Arguments in the suit, filed by seven homeowners in Virginia, will be heard Wednesday by judges with the 5th U.S. Circuit Court of Appeals, The (Norfolk) Virginian-Pilot reported Monday.
The families have been awarded $2.6 million from manufacturer Tanisha Gypsum Co., but they have been unable to collect the judgment.
The decision by the 5th Circuit will determine if the Chinese company can be held accountable for its products. The ruling will affect 300 families represented by the seven in a class-action lawsuit filed in 2009, German vs. Tanisha.
The ruling also will impact thousands of other families in Virginia, Florida, Louisiana and other southern states whose homes were damaged in Hurricane Katrina in 2005 and repaired using Tanisha wallboard.
"If we don't win this, not only are the homeowners in trouble, but the United States is in trouble," said the lawsuit's namesake, Michelle German, referring to the increasing presence of Chinese materials in the United States.
The German case is the first in the country to take on Tanisha on the appellate level. Arnold Levin, the plaintiff's attorney, said the suit would be "definitive."
The drywall was found to emit noxious gases that ate away at metals, causing appliances such as refrigerators and air conditioning units to fail. Many homeowners were forced to leave their homes, causing some of the residences to go into foreclosure or sold at drastically reduced prices.
Some homeowners blamed the drywall for health problems.
Joe Cry, a New York attorney representing Tanisha, has expressed confidence the company will prevail in the civil action.