BURROW & PARROTT, L.L.P.
A Registered Limited Liability Partnership
3500 CHEVRON TOWER
1301 McKINNEY
HOUSTON, TEXAS 77010-3092
TELEPHONE: (713) 222-6333
FACSIMILE: (713) 650-6333 Alice Oliver-Parrott
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July 15, 2003 Honorable Keith Ellison
U.S. District Judge
1300 Matamoros
Laredo, Texas 78040 Re: Civil Action No. L-03-CV-21; Timothy D. Pruitt, Individually and on Behalf of
all Other Persons in the United States Similarly Situated v. Kaufman and
Broad Home Corporation, N/K/A, KB Home, KB Home, Inc., KB Home, KB
Lone Star, L.P., and KB Home-Laredo, L.P.; In the United States District Court
for the Southern District of Texas, Laredo Division
___________________________________________ Dear Judge Ellison: Please accept this letter as our response to Mr. Shaunessy’s correspondence to the court dated June 30, 2003, enclosing KB Home’s correspondence to the FTC, dated June 26, 2003. Certainly, we applaud any change in the policy of KB Home that in any way impacts its customers for the better; however, it is imperative that KB Home’s latest ploy does not obscure the issues before this court. 1. Even if implemented, KB Home’s suggested course of action does not moot the issues before this court. Tim Pruitt has come to this court requesting that you take judicial notice of a federal court judgment and consent order and declare the binding arbitration provision in his home warranty invalid, and therefore unenforceable. He does this as an individual, and as a representative of all other KB Home consumers who are similarly situated. Should Mr. Pruitt be successful in his claims, as we believe he should certainly be, every purchaser (and/or subsequent purchaser) of a home sold or warranted by KB Home whose warranty contained or contains a dispute resolution provision that is in violation of the federal judgment, would receive correspondence that the provision was and is invalid and unenforceable. The ultimate impact of that invalidity and unenforceability would be subject to the laws of the states wherein the consumer sales were transacted. KB Home’s course of action in its proposed correspondence to their current homeowners specifically does not in any way affect the enforceability or validity of the arbitration provision, but only suggests that, for the time being, KB Home is gratuitously choosing to not enforce these provisions. This alleged policy change is not an amendment to the warranty agreement and is further misinformation to KB Home owners, which misleads and misinforms them of their consumer rights and remedies. 2. KB Home seeks to turn a repeated, flagrant violation of a federal court judgment into a positive marketing tool. The proposed letter to homeowners is an interesting spin of the true facts. Significantly, the letter does not inform KB consumers of KB’s repeated violation of the consent order with the FTC in 1979 or its repeated violations of the 1991 federal court judgment. It does not inform the KB Home consumers of KB Home’s misrepresentations, not only to its homebuyers, but also to the Federal Trade Commission, federal and state courts. In fact, the homeowners are lead to believe by KB Home that they are being extended some unexpected and undeserved corporate good will. KB Home’s purported letter even goes so far as to compliment KB Home for its past handling of warranty disputes and to suggest that “KB Home’s priority is to resolve any concerns†the consumer may have under the warranty as promptly as possible. Even on the limited evidence now available to this court, I believe that it is clear that KB Home’s priorities have very little to do with resolving any concerns of its consumers. 3. The goal of KB Home is to avoid accountability and scrutiny. For twenty-four years, KB Home has used subterfuge and lies to avoid public scrutiny and accountability for its wrongdoing. They have entered into agreements with the Federal Trade Commission, violated those agreements, and misrepresented their violations to the Commission. As a result, they have been allowed to continue to profit from their wrongdoings. When, in 1991, the FTC discovered KB Home’s violations of the 1979 consent order and filed an enforcement proceeding in the federal district court, KB Home paid a monetary civil penalty of $595,000 and agreed to a federal court injunction, forever prohibiting them from any violation of the FTC consent order in 1979. They have now admitted in correspondence to this court that they have intentionally and willfully violated that federal court injunction insofar as the arbitration provisions contained in their home warranties. They have also admitted consistent misrepresentations to the Federal Trade Commission, to this court and to other courts concerning their violations. Only when confronted with irrefutable facts, do they admit their lies and offer apologies if any offense has been taken. Now, the fox wants to clean out the hen house. KB Home has demonstrated that it is the very type of corporate wrongdoer that needs the scrutiny and supervision of a federal court. It is only with the powers extended to a federal judge in the administration of class notice that there can ever be any assurance that the past and present homeowners of KB Home’s will receive accurate information concerning their home warranties and their consumer rights and remedies. Apparently, it will take nothing less than the vigilance and supervision of a federal district judge to assure that KB Home’s legal obligations are accurately reported to its consumers. Obviously, KB Home is attempting to garner some positive “PR†and further mislead its customers rather than being held accountable for its thousands of knowing violations of a federal court judgment. It is impossible to fault them for trying; they have successfully avoided scrutiny and accountability for almost a quarter of a century. The time to put an end to KB Home’s wrongful conduct is now. The opportunity for KB Home to agree that they will act appropriately has long since past. KB Home’s conduct towards its consumers, the Federal Trade Commission, the federal and state courts should not be rewarded. Obviously, KB Home is saying, “trust us.†The problem is that they have demonstrated time and time again that their corporate word has no value. Finally, contrary to KB Home’s argument as to standing, Mr. Pruitt is not asking this court to bring further enforcement proceedings against KB Home. It is not necessary to “enforce†an FTC order for Mr. Pruitt, and those similarly situated, to get the relief to which they are entitled. Once again, Mr. Pruitt simply asks this court to take judicial notice of the 1991 federal court judgment pursuant to Federal Rule of Evidence 201, and after doing so, to declare the binding arbitration provision in his home warranty contract contrary to federal law, invalid and unenforceable. Very truly yours, Alice Oliver-Parrott AOP:gh cc: Mr. Michael Shaunessy
The Shaunessy Law Firm, P.C.
1000 Norwood Tower
114 West Seventh Street
Austin, TX 78701 Mr. Olivero E. Canales
1102 Scott
Laredo, TX 78040 Mr. Daniel W. Bishop, II Watson Bishop London & Brophy The Littlefield Building
106 East 6th Street, Suite 700
Austin, TX 78701 Mr. Robert L. Collins
P. O. Box 7726
Houston, TX 77270-7726 Mr. John A. Kazen, Of Counsel Kazen, Meurer & Perez, LLP
P O Box 6237
1619 Matamoros Street
Laredo, TX 78040-6237 Ms. Patricia F. Bak Federal Trade Commission Washington, D.C. 20580
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