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Homebuilders may have constructed a fortress
Sunday, 19 September 2004
Homebuilders may have constructed a fortress
Some say their political donations have cost consumers the right to file suit 
 San Antonio Express-News
When Delores Rollins bought her dream home in the Hart Ranch subdivision off De Zavala Road seven years ago, she had no idea the purchase would draw her into the state and national political fray…   Rollins believes she has wound up on the short end of a long-term effort by Texas homebuilders to protect themselves from paying for their mistakes...  Hoagland said the broad reforms pushed through in Bush's first term — caps on punitive damages, restrictions on venue-shopping and limits on shared liability, among others — may have benefited the homebuilding industry…   ""How many times do they have to win?"" said James of the Consumers Union. ""I think the deal is that it's not about logic, it's not about justice, it's about muscle. And the business community has a ton of muscle, and they don't want to be liable for anything.""

Homebuilders may have constructed a fortress
Some say their political donations have cost consumers the right to file suit
Joseph S. Stroud - Express News
When Delores Rollins bought her dream home in the Hart Ranch subdivision off De Zavala Road seven years ago, she had no idea the purchase would draw her into the state and national political fray.

But now, after dealing with cracks in the walls, floors and driveway, a dispute about a fence, leaks in the roof and a mold problem, Rollins believes she has wound up on the short end of a long-term effort by Texas homebuilders to protect themselves from paying for their mistakes.

Rollins bought her house in 1997 from Perry Homes, owned by Bob Perry of Houston, whose recent notoriety as a financial backer of Swift Boat Veterans for Truth merely is the latest example of his political largesse.

When she heard about his involvement, made the connection to the company and looked into his other political spending, Rollins said: "I was just amazed."

"It doesn't take a rocket scientist to say, 'If I give you X amount of dollars, you scratch my back and I'm gonna scratch yours,'" she said. "So when I build these houses, and if something goes wrong, these average citizens who have finally realized the American dream ... don't have any recourse."

In addition to the $200,000 he gave the veterans' group, Perry, the largest single political contributor in Texas, has donated almost $6.3 million to state and national candidates and committees since 2000, according to state and federal campaign finance records.

Perry has given the maximum allowable $2,000 contribution to the re-election campaign of President Bush, and he donated $46,000 to his two runs for governor, according to Texans for Public Justice, a left-leaning campaign finance watchdog group in Austin.

Perry also has backed Gov. Rick Perry (no relation), Lt. Gov. David Dewhurst and a host of other candidates — most but not all of them Republicans.

In addition to their Texas activities, Bob Perry, his wife and business also gave $617,000 to Republican candidates in other states, according to an organization that monitors state-level campaign financing, the Center for Money in State Politics.

Recent news reports have portrayed Perry, 71, as a low-key contributor, and lawmakers he has supported say he rarely asks for anything. Many never have met him and say his style is to find causes and candidates he likes and support them quietly.

"He doesn't play the game like you expect people to play the game," said Bill Miller, an Austin lobbyist who represents Perry Homes on legislative matters and has served as a spokesman for Bob Perry in recent weeks. "He doesn't weigh in."

And yet Perry, who declined to be interviewed for this article, is one of several Texas homebuilders who have spent lavishly in the political arena — though none of them approach Perry's multimillion-dollar level of contributions.

Overall, Texas homebuilders have given some $7 million to support political candidates and causes since 2000, according to state and federal campaign finance records.

And what have they gotten for their money?

Better government for all, if you ask them. They say lawsuit reform measures passed over more than a decade have begun to stem a tidal wave of frivolous lawsuits and led to lower home prices and insurance rates than in states where lawyers operate with less restraint — California, for example.

But ask Rollins and various consumer advocates the same question and they'll say Perry and his fellow homebuilders have used the money to construct a fortress around themselves by all but eliminating the buyer's ability to sue.

Through a series of lawsuit reforms out of Austin and changes to contracts over the past 15 years, they have forced homebuyers such as Rollins into a mandatory "dispute resolution" process before they can go to court. Such a process has obvious appeal for a company such as Perry Homes, the target of at least 62 lawsuits in recent years, according to court records.

When Rollins has complained to Perry about problems at her two-story, contemporary-style home, Perry officials have made minor repairs but have told her most of what she wants fixed isn't their responsibility.

She has talked to lawyers but never has tried to sue, though she said she has spent some $20,000 of her own money making repairs. She said the lawyers told her she'd have to pursue arbitration before they could take her case to court.

To Rollins, that means Perry "got all the protection that he needed."

Mark Eberwine, a San Antonio building inspector, said changes in the law making it more difficult to sue have harmed the quality of construction. Builders have become less accountable, he said, as homeowners' ability to force them to fix mistakes has diminished.

"The building industry has thrown a lot of money at legislation, and what they've done is they've put themselves in a position where they're really untouchable," Eberwine said.

The builders' efforts culminated last year with a bill creating the Texas Residential Construction Commission, a new agency established to resolve disputes between homeowners and builders.

Among Gov. Perry's appointees to the nine-member commission was John Krugh, corporate counsel for Perry Homes — who also had a primary role in drafting the bill.

Gov. Perry, who has received $275,000 from Bob Perry since 2000, said through a spokeswoman that there was no connection between the donations he received and his appointments to the commission, which have been criticized as giving the homebuilding industry a majority voice.

Kathy Walt, the governor's press secretary, said the legislation dictated that four of the nine commissioners represent the construction industry.

"Clearly, the Legislature thought it was important to have people who have knowledge of the industry serving on that commission," she said.

Though the agency remains in its formative stages, some legislators — including Sen. Robert Duncan, R-Lubbock, a recipient of Perry campaign contributions who co-sponsored the original bill — say early appointments and drafts of new building standards threaten to tilt the playing field in favor of builders.

"I would think if you want a good process you've got to have both sides involved," Duncan, who declined to be interviewed for this article, said at a legislative hearing last month.

That criticism prompted the recent appointment of two plaintiff's lawyers and a consumer advocate to an advisory task force developing minimum building standards, Krugh said.

Krugh acknowledged his primary role in drafting the legislation. He did so, he said, as co-chairman of the Building Standards Task Force for the Texas Association of Builders.

Krugh also acknowledged the commission represented a move toward "self-regulation" by the industry, similar to how the legal or medical profession operates. But he said he is committed to developing a fair process for resolving conflict between consumers and homebuilders.

"I want this to be a commission in which consumers feel that they are welcome and that they find resolution to their complaints," he said. "Going to the commission and getting your complaint resolved will be a lot less expensive and a lot less time-consuming than arbitration and litigation."

What Krugh doesn't dispute is that it's harder to take homebuilders to court than it was 15 years ago. But he said that's better for everybody.

"Homeowners don't benefit through lawsuits," he said. "It only protracts and prolongs getting things fixed."

The new system worked well for Tim and Susanna Evens of Houston, who filed a complaint to the commission about cracked and popping pinewood boards in the flooring and stairs of their Houston townhouse in January. Tim Evens said Perry Homes, the builder, has agreed to replace the flooring.

"They realized it didn't work too well, and they're resolving the issue," Evens said. "And we didn't have to go to court on it, and they responded, and we're very happy with the resolution."

Origins of tort reform

Lawsuits against homebuilders were commonplace after 1973, when the Legislature passed the Deceptive Trade Practices Act.

Approved in a wave of reforms after a scandal forced the speaker of the Texas House to resign, the new law made it easier for consumers to sue businesses that lied, cheated or misrepresented what they were offering. Overriding a previous legal standard that required proof of outright fraud, it also gave juries the option of awarding triple damages.

During debate on the bill, according to an article in Texas Lawyer, then-Rep. Carl Parker, D-Port Arthur, responded to an amendment to exempt licensed professionals from the law by saying, "Mr. Speaker and members, I have heard of a license to steal, but this is the first time I have ever seen it offered as an amendment to a bill."

The amendment failed, the law passed and plaintiff's attorneys had a field day. Even consumer groups acknowledge the act was widely abused.

"It got used in a lot of these $3 million homes where it was the wrong color or something," said Reggie James, director of the Consumers Union's Austin office. "And you could jack a builder around pretty good and force them to settle."

The pendulum began to swing back toward homebuilders in 1989. That's when the Legislature passed the Residential Construction Liability Act, which gave builders a new set of standards for resolving disputes with customers. The standards, which superceded the Deceptive Trade Practices Act, included strict new limits on damages.

Around the same time, many homebuilders began including mandatory arbitration clauses in their contracts. The clauses essentially require homebuyers to waive their right to sue — a right guaranteed under the Seventh Amendment to the U.S. Constitution.

So far, at least, both the Texas and U.S. Supreme Courts have ruled that arbitration provisions can be enforced as long as both parties sign off on them.

Krugh said Perry Homes used such clauses in the past but doesn't anymore. But Rollins said she had one in the contract for her home.

Even after the 1989 law, frivolous lawsuits continued to plague the courts and drive up insurance costs, according to business advocacy groups.

Those organizations include Texans for Lawsuit Reform, founded in 1994 by three Houston businessmen, including two from the construction industry. That group, which campaign finance records show has received at least $415,000 from Bob Perry, argued that Texas remained a magnet for venue-shopping lawyers seeking an easy win in court.

Ken Hoagland, spokesman for Texans for Lawsuit Reform, said Texas was among the worst states in the nation for lawsuit abuse by the time George W. Bush made it a cornerstone of his 1994 campaign for governor.

Hoagland said the broad reforms pushed through in Bush's first term — caps on punitive damages, restrictions on venue-shopping and limits on shared liability, among others — may have benefited the homebuilding industry but never were tailored for it.

"Most people who have done business in Texas have suffered frivolous lawsuits," Hoagland said. "So is there an interest in the business community in making the civil justice system better? You bet."

Hoagland said his group has scrupulously avoided promoting legislation that would benefit a single industry, especially homebuilding. That was because one of its founders, Richard Weekley, had been a homebuilder in the past. His brother, David Weekley, remains the president of Weekley Homes, a Houston-based company and the second-largest political contributor among Texas homebuilders.

The ample support Texans for Lawsuit Reform has received from homebuilders hasn't altered its course, Hoagland said.

As for what Perry got for his money, he said: "My guess is that he hopes that his money will create better public policy that will not only benefit him directly but will benefit the state of Texas as a whole.

"We all have something to gain with a better civil justice system."

The Rove connection

Some observers credit Karl Rove, political adviser to President Bush, with recognizing the value of lawsuit reform as a fund-raising tool for Bush's 1994 run for governor against Ann Richards, the Democratic incumbent.

"Tort reform, the effort to shield businesses from rising jury awards in personal-injury lawsuits, was standard Republican boilerplate, but Rove wanted that issue elevated," wrote James Moore and Wayne Slater in their 2003 book "Bush's Brain: How Karl Rove Made George W. Bush Presidential." "Although he would never admit it, he had to know that its most ardent advocates in Texas could provide millions of dollars in campaign contributions needed to unseat Richards."

But by the early 1990s, lawsuit reform had made its way into the national political conversation, in part through the efforts of Bush's father.

When he accepted the nomination at the 1992 Republican National Convention, then-President George Bush — himself a beneficiary of Bob Perry's contributions both times he ran for president — framed the issue as a campaign against another class of special interests.

"We must sue each other less and care for each other more," he said. "I am fighting to reform our legal system, to put an end to crazy lawsuits. If that means climbing into the ring with the trial lawyers, well, let me just say, round one starts tonight.

"After all, my opponent's campaign is being backed by practically every trial lawyer who ever wore a tasselled loafer," said Bush, who was running against Bill Clinton that year.

For the most part, the political tug of war over lawsuit reform has taken place between the business and legal communities, and lawyers groups have spent lavishly on political campaigns, too.

According to Texans for Public Justice, lawyers and lobbyists spent nearly $20 million on individual candidates and political action committees in the 2002 election cycle in Texas, compared with about $8 million spent by the construction industry, including homebuilders.

Though some of the lawyers' contributions came in pursuit of other interests, lawyers' groups have opposed lawsuit reform vigorously at both the state and national level. And according to the Center for Public Integrity, law firms and lawyers are among the biggest backers of Democratic presidential candidate John Kerry.

Conspicuously missing from the political conversation, at least in terms of the money they spend on political campaigns, are consumers. In terms of homebuilding, their interests have been defended for the most part by grass-roots groups of aggrieved homeowners, usually with limited funds.

In the meantime, lawsuit reform advocates have continued to try to build on the reforms approved in 1995. Their efforts fell short in 1997, but in 1999 new reforms passed, including limits on some legal fees.

More reform coming

Lawsuit reform advocates say there is more work to be done to fix the civil justice system. A recent survey by the U.S. Chamber of Commerce found that Texas remains the sixth-worst state in the nation in terms of the fairness and efficiency of its court system.

Hoagland, the spokesman for Texans for Lawsuit Reforms, said abuse of the system is especially rampant among plaintiffs making asbestos claims, his group's next target.

Consumer groups, meanwhile, say they keep thinking the move toward tort reform will end at some point, and that reform advocates will someday be satisfied.

"How many times do they have to win?" said James of the Consumers Union. "I think the deal is that it's not about logic, it's not about justice, it's about muscle. And the business community has a ton of muscle, and they don't want to be liable for anything."

For Rollins, the San Antonio homeowner, the entire experience has been educational. She said that what she has learned is that Perry's contributions get the attention of lawmakers, who then take steps to protect him.

"I think that the whole state of Texas protects business, no matter what kind of business it is," she said. "And the average person, it's just 'Bye-bye.'"

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