Trials a Costly Way to Settle Home Buyer Disputes
Convention-goers attending a Jan. 12 educational seminar in Orlando, Fla. received several tips on how to stay out of court and avoid a losing verdict in the event that they are ever involved in a legal case.
To help steer clear of litigation, builders need to communicate effectively with their customers and provide a courteous and rapid response to their complaints.
“When a customer comes to you with a problem, be it water intrusion or mold, you need to know how to listen and to calm them. Don’t dismiss their concerns and be sure to respond to their complaint within 24 hours,” said Andrew Gold, chairman of the litigation department at Kluger, Peretz, Kaplan and Berlin in Miami, Fla.
Yet even when builders offer to resolve potential problems, Gold acknowledged that there will be occasions when a home owner will insist on filing a legal claim.
In these cases, he said, it is always best for builders to seek mediation or arbitration, or at the very least, to avoid a jury trial.
“Three reasons to stay out of court: cost, cost and cost,” said Gold, who noted that jury trials can run from $300,000 to $2 million.
In addition, Brenda Radmacher, a partner in the California firm of Wood, Smith, Henning and Berman, said that builders who enter jury trials also run the risk of ruining their reputations and jeopardizing their chance of obtaining insurance in the future.
“Eighty-five percent of jurors make their decision within the first five minutes of coming into the court room,” said Radmacher. “It’s a huge risk going to jury.”
Builders were cautioned that the hottest area on the plaintiffs’ side is “electronic discovery,” where any e-mails issued by the company can be used against them in a court of law.
“Even though you hit the delete button, e-mails are not gone,” said Gold. “The toughest time in a lawsuit is when a client writes an obnoxious e-mail and the jury sees it. Every employee must understand that anything they put in writing may one day come before a juror. And if you did write it, don’t shred it. Destroying documents is bad. You are much better off defending the documents.”
To avoid the court room, builders should have written contracts and purchase agreements with home owners that include a mediation provision in which both parties must request mediation prior to arbitration or litigation.
Mediation is a non-binding, formal settlement conference that offers huge cost-savings.
Radmacher described arbitration as a “mini-trial, without all the bells and whistles.”
The advantage of arbitration is that it is generally faster and less expensive than a jury trial and allows the defendant to avoid runaway verdicts. Drawbacks include limited review and discovery, which hampers the ability of the defendant to receive pertinent information from the plaintiff.
Panelists advised builders to provide buyers with a home owners guide prior to closing and have them sign an acknowledgement of receipt. This document should be included with other closing documents.
Builders were also encouraged to keep detailed insurance records of their subcontractors and to update their indemnity and insurance requirements.
Radmacher provided the following lessons learned from mold cases that have gone to trial:
- Avoid the claim, avoid the lawsuit. No one wins in litigation.
- Always wear the white hat.
- Don’t hide, conceal or do anything to support fraud cause of action.
- Immediately address water claims with thoughtful action.
- Don’t mislead, don’t guess and don’t speculate.
- Consult with lawyers.
- Aggressively defend the case.
- Recognize bad facts, bad possible plaintiffs.
- Plan for media spin.
- If all else fails, use common sense.
To learn more about these issues, e-mail David Jaffe at NAHB, or call him at 800-368-5242 x8317.