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KB Home Settles Class Action Binding Arbitration Case
The settlement Wednesday of a class-action lawsuit against KB Home over a binding arbitration clause in homebuyer’s warranties will affect thousands of Texas homeowners...With the settlement of this class-action suit it effectively declares that KB Home and its subsidiaries binding arbitration clauses are invalid, and that homeowners can now sue KB Home in a court of law rather than being forced into binding arbitration over construction defects.
— PRESS RELEASE —
FOR IMMEDIATE RELEASE Contact: Janet Ahmad
February 23, 2006
KB Home Settles Class Action Binding Arbitration Case
San Antonio – The settlement Wednesday of a class-action lawsuit against KB Home over a binding arbitration clause in homebuyer’s warranties will affect thousands of Texas homeowners.
Lawyers representing KB homeowners claimed that KB Home misled and misinformed homeowners of their consumer rights and remedies, that their actions were in violation of the 1979 federal consent decree, and the binding madatory arbitration clause was invalid and unenforceable.
With the settlement of this class-action suit it effectively declares that KB Home and its subsidiaries binding arbitration clauses are invalid, and that homeowners can now sue KB Home in a court of law rather than being forced into binding arbitration over construction defects.
Houston lawyer Alice Oliver-Parrott, the attorney who brought the lawsuit and ultimately reached a settlement agreement with KB Home was granted a provisional certification by Judge Solomon Casseb of the Class Action and approval of the Court mandated and supervised notice of the settlement to be sent to all homes built after January 1, 1996.
“It is our expectation that this Texas Class Action Settlement will spark other class-actions to be brought on behalf of homeowners in other states like California, Arizona, Florida and the many other states were KB Home has a history of requiring homeowners to agree to mandatory binding arbitration in its contracts and warranty agreements,†said Janet Ahmad, national president of HomeOwners for Better Building (HOBB).
In 1999, the FTC warned KB Home to cease inserting binding arbitrations in their contracts and warranties and warned that it violated a 1979 FTC consent order. The FTC made repeated attempts to get KB Home to stop but the nation’s fifth largest builder continued to ignore the FTC until February 2001 when they gave assurances that it would stop. Finally, in August last year, the FTC announced that KB Home would pay a $2 million civil penalty to settle charges that it violated the terms of a 1979 consent order. http://www.ftc.gov/opa/2005/08/kbhome.htm
“We and other consumer groups are still in disbelief that a multi-billion-dollar corporation giant like KB Home, whose CEO earned a compensation in 2004 of $47 million, could continually ignore a federal court order, and then pay only a $2 million token fine,†concluded Ahmad.
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