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The Honorable J. Lee McPhearson
Circuit Court of Choctaw County
Choctaw County Court House
Suite 16
117 South Mulberry
Butler, Alabama 36909

Dear Judge McPhearson:

HomeOwners for Better Building (HOBB) was asked by Mr. Don Smith, a Centex homeowner with ABTCO siding, to review the proposed ABTCO siding settlement. HOBB understands the tremendous effort by both sides in their search for a fair settlement, and we understand this is a mutually agreed to settlement. Unfortunately we have been asked to determine solely if the settlement is fair, not if the effort in reaching this settlement was adequate or in good faith. The question is very simple, "Is this settlement fair?".

After review of the proposed settlement and discussions with plaintiffs council and LP product managers, it is the opinion of HOBB that this settlement is not fair to affected homeowners. Therefore HOBB opposes the settlement on many different aspects as detailed in the attached report and requests to be present at the Fairness Hearing as representing Mr. Smith's interests.

HomeOwners for Better Building encourages discussion with the attorneys to help resolve any issues we have with the settlement. We can meet at our convenience if they so chose to do so.
 

John R. Cobarruvias
President, HomeOwners for Better Building, Houston
14646 Cardinal Creek CT
Houston, TX 77062
 

Don Smith
15426 Spring 
San Antonio, Texas 78247-1830
 

Executive Summary:
HOBB has been privileged to 2.5 years of experience with the Masonite and LP siding settlements. We have seen what is good about the settlement and what has been an absolute disasters. It was hoped future siding settlements would take these experiences into consideration and prevent a repeat of history. In many ways, the ABTCO settlement has, but in some of the most important aspects, notification and payment, it has not. 

I personally have spearheaded the effort to assist homeowners in my subdivision of 2000 homes with the Masonite settlement. We have approximately 400 Masonite homes with 33 on my street alone. Our homes are about 11 years old and valued at approximately $150,000 with an average of 1200 sq. ft of siding. I have also assisted a small community of about 300 homes with the vast majority being Masonite. These homes are small $30,000-$45,000 homes owned by low income families. The homes have about 800 sq. ft on the average and are about 17 years old. Many of my comments below stem from the years of experience from these subdivision.

There are many problems with the settlement which we object to, but our strongest objection is the lack of adequate notification to potential claimants, and the amount of payments to the homeowners with affected siding. These are all discussed in detail below.

Lack of Notification of Potential Claimants
HOBB has reviewed the list of very impressive ad campaigns submitted by Mr. Guin class counsel, but regardless of what has been provided, proposed, or implemented, the fact remains, this settlement has not been publicized well. HOBB is in the business of knowing about defects in homes along with Homeowners Against Deficient Dwellings, Advocates for Quality Construction, and Sick Of Bad Builders, and yet we have seen absolutely nothing on TV, print or on radio except one ad in the back of Parade Magazine.

We have asked Mr. Guin and Mr. Dennis Kaufman, Director of Product Support at LP to provide us a copy of the TV commercial which aired on CNN, ESPN..etc, and we have yet to receive it. Likewise, we have yet to see it on the air. And although the ABTCO claims website is by far one of the best, many homeowners still are not on the internet, and the website is not known on the search engines. A search on ABTCO on the major search engines have resulted in no hits to the abtcoclaims.com in the top 50 sites

If a consumer protection organization such as HOBB, does not notice an ad campaign about defective siding products, when we are actually in the business of knowing about them, then the common homeowner would most probably not either.

In contrast, the Weyerhaeuser settlement has been aired on radio and in print on many occasions. We have received reports from many different homeowners and I personally have been approached by friends and co-workers who are familiar with my volunteer activities.

We are also concerned about the fact that the notification campaign is now over. There is no schedule of notification for the remainder of the settlement. This, coupled with the above inadequate notification, was one of the biggest failures of the Masonite siding settlement. 4 Million homeowners affected, yet the overwhelming majority of them are not aware of the existence of the funds. 

We do not understand why proper and effective notification cannot be implemented. Since ABTCO does not believe their product is defective, they should have no objections to proper notification. These notified homeowners would probably not submit a claim since the product is not damaged. HOBB believes proper notification means radio ads on home improvement shows, notification in the sports page of the major city newspapers on a periodic basis throughout the life of the settlement.

As stated, the list of ads provided by Mr. Guin is very impressive, yet has been absolutely a total failure as was the Masonite settlement. HOBB considers the notification plan unfair to the affected homeowners.

Regionally Adjusted Figure
If a homeowner has damaged ABTCO siding and has no deductions based upon the settlement, then according to the settlement, they should receive an amount reflecting the "average" cost of removal, replacement and painting. This proposed "average", in reality, is about $2.00/sq ft too little.

Again, the Masonite settlement has proven beyond any doubt whatsoever, the regionally adjusted price is too low and represents a value much lower than the lowest estimates for repairs. The ABTCO settlement is no different. Again, this was a major disaster with the Masonite settlement.

We have been privileged to hundreds of claims with the Masonite settlement and have witnessed homeowners having to take loans for the repairs to their homes. In no case have we ever seen the amount provided by Masonite for 100% coverage with no deductions to be adequate to remove, replace, and paint a home. Since the ABTCO settlement has followed the same pattern, we do not expect homeowners to be fairly compensated.

In just a few cases we have seen the amount to be about 15% less than what is required, but this particular contractor was not insured, bonded, or even had a company record or name. Homeowners trying to make ends meet are having to resort to using these contractors risking injury, liability, and receiving no warranty. This is all due to the fact the regionally adjusted price is just too low.

Again, Mr. Guin has provided substantial evidence of working with adjusters to determine the regionally adjusted price index. But again, regardless of the credentials or amount of effort put into this calculations it is way too short. It is believed, as with insurance estimates, the amounts from RS Means type of organizations are always lowballed in relation to the actual costs of repairs. In most case where homeowners have disputed insurance results with factual data on the amount for repairs, the offer amount is usually raised to the lowest bid. Again, this is not an average, but it is at the very least more than what is initially proposed. 

Furthermore, it is unclear as to what was used in their calculations. The calculations should be based upon removal, replace, painting of siding and siding only. Not roofing, plywood, or anything else.

As a side comment, we have asked and Mr. Dennis Kaufman, Director of Product Support at LP and Mr. Guin to provide the name and address of a contractor willing to perform this work at this rate. We have many many homeowners who would appreciate this information. We have yet to receive this information.

HOBB considers the reasonably adjusted rate unfair to the affected homeowners.

Unreimbursed Expenditures Time Limit
Homeowners who have replaced their siding can apply for reimbursement if a number of conditions are met including not knowing of the settlement, and if the repairs were made prior to Nov 2000. Considering the lack of notification of the settlement, the vast majority of the affected homeowners will not know about the settlement. They will perform the necessary repairs and therefore will disqualify themselves from the settlement. This is the sole fault of the lack of notification by council on both sides and creating such an inadequate time limit for this type of claim process.  

This problem is another major failure of the Masonite settlement. Again, many homeowners are not aware of the siding settlement. In the Masonite case homeowners were allowed 18 months, and yet this is still not adequate given the lack of proper or effective notification. In contrast, the ABTCO settlement allows only a few months.

There is absolutely no need for this short time limit. If a homeowner is not aware of the settlement because of the inadequate notification and can successfully apply for the reimbursement, they should be granted that opportunity. Given the lack of notification and the period for this settlement, this time limit should be no less than 5 years after final judgement. HOBB considers this timelimit as unfair to the affected homeowners.

Deductions for Painting.
The ABTCO settlement will deduct for not painting every 5 years.. There are few words besides ridiculous to describe this. If a product requires painting every 5 years, either the manufacturer is banking on the homeownerís ignorance, or the product shouldnít be used on homes. Paint is sold as 15, 20, and 25 year life. Homeowners should never have to paint a house every 5 years. This is just plain ridiculous. At the very least this deduction rate should be applied only after 10 years. HOBB considers this deduction as unfair to the affected homeowners.

Accelerated Payment Program
It is unclear how this will be implemented. Given the record of the LP settlement and the similarities to the early payment program, it is reluctantly believed this APP is the LP early payment program written into the settlement and the LP early payment program was an absolute disaster. We believe this will be abused and homeowners will be offered a check for much less than what is deserved. Homeowners, with check in hand, will be coerced into accepting this payment for fear of receiving less. 

As stated in 5.11 "If the amount of damage payment cannot be reasonably be calculated from the information, the amount of the APP offer shall be set by the defendant in good faith, applying the compensation principles set forth in this settlement." If the amount of damage payment cannot be reasonably calculated, the property should be physically inspected. What this statement means to HOBB, in basic terms, is lowballing. If the homeowner were allowed to  calculate this amount in "good faith", HOBB would agree with this statement. Unfortunately given the past history of LP and the LP settlement, "good faith" has little meaning.

There is little in this settlement which will alieve our concern on this issue. There is no access to statistics concerning the number of applications, the number of early settlement offers, the number accepted, etc. These statistics will be available to the attorneys, but not to any consumer based organizations. We believe if this is not abused and used as a method of lowballing homeowners it could be a quick and fair settlement process. 

Unfortunately given the history of LP and the LP settlement, we cannot agree this will be fair to the homeowners without modifications. HOBB considers the accelerated payment program unfair to the affected homeowners.

Reasonably Appropriate Substitute
Reasonably Appropriate substitute is too vague. As an example, in the Masonite settlement, an appropriate substitute includes their competitors products and yet they will not stand by their competitors warranty or warrant the product. We believe the definition of Reasonably Appropriate Substitute should be specific and include ONLY ABTCO products. This should be explicitly stated. Without this, HOBB considers this unfair to the affected homeowners.

80% Rule
According to section 5.16, homeowner will be paid in 2 installments, 80% upfront, and 20% after repairs. Homeowners should be provided the payment in a lump sum. It has been well established the amount of money received from this settlement will be far short to cover any repairs. Without the entire amount the homeowner may not elect to fix their homes. This also seems like another "scheme" knowing most homeowners would just give up and not file. HOBB considers the 80% unfair to the affected homeowners.

Section 5.15 Reasonably Prompt Manner
Unless this is defined in specific days, the amount of time for claims to be processed could be anything. As with the Masonite settlement, the claims admin make every effort to inspect within 90 days. If they inspect in 360 days, that is the effort. In section 6.1 again it is stated "the inspector will use its best efforts to insure the inspection will occur in 45 days". This should be explicitly stated as "the inspector will inspect within 45 days." HOBB considers this lack of promptness unfair to the affected homeowners.

Section 6.6. second inspections
This is an unreasonable requirement. If the homeowner requests a second inspection and the results are lower, the homeowner should receive the higher of the two with a deduction for the second inspection. Basing this on having 25% more damage in the second inspection is unfair and will only deter homeowners from trying to receive fair treatment. HOBB considers this 25% rule unfair to the affected homeowners.

Section 12.1 Opt Out date
If a homeowner is not aware of the settlement and cannot get the settlement document in a timely manner, how can they opt out in a timely manner? HOBB considers this opt out date unfair to the affected homeowners.

Other Concerns
Lack of Disclosure prior to the fairness hearing
HOBB is very concerned about the method used leading up to this settlement being approved. It is believed this settlement, as written, is cast in stone and this exercise of the Fairness Hearing is in vain and only  procedural in nature. Applications have already been mailed to potential claimants and are available on the internet. The details of the settlement are reflected in the applications. In all this seems like a "done deal". 

HOBB being in the business of knowing of defects in the home business could not get a copy of the settlement for review and had to rely on a copy off the internet and the notices.  Because of this and again, lack of adequate notification, we have had little time to prepare this report. Unlike class counsel, we are volunteers spending our own time and money doing this. It seems grossly unfair to allow only a few days to provide adequate statements and comments.

Opt Out Period and review of the settlement
There was no timely notification prior to the opt out period, and very little if any time to adequately review the settlement document. We felt we  were being discouraged in opposing any aspects of the settlement because it could jeopardize the settlement. This was never our intentions. We were asked to review the settlement for fairness, and that is what we did with what little we had.

On several occasions we asked for specific information from the class counsel and LP such as copies of the ABTCO settlement commercials, and clarification of the fees and awards to the attorneys. And we were either delayed or had to ask very specific questions or we are still waiting for the material. Again, this hindered our review.

Past History
We are concerned that the experiences provided by the Masonite and LP settlement have not been reviewed or heeded. There is a vast amount of information and data which shows what is fair and what has been a disaster. We are concerned that a few of the points in the ABTCO settlement have an LP flavor much like the early payments provided by LP. This has been a complete total disaster for LP homeowners and must be avoided. The ABTCO early payment program seems to be fashioned around the LP program, yet built into the settlement.

Field Inspection Report
Homeowners should have access to the Field Inspection Report. It should be provided to the homeowner on demand. If the homeowner wishes to repair the damaged siding on their homes, the report should tell them which boards were considered damaged.

Attorneys fees and awards
After many questions to class counsel, we finally understood that along with the $7 Million, class counsel will receive a percentage of the claims paid, over what the homeowners will receive. HOBB believes this should be explicitly disclosed in the settlement agreement.

Unreimbursed Expenditures Proof of Damage
Very few homeowners take pictures of the damage to their house prior to repairs. The Masonite settlement realized this and allowed the homeowners to use a letter from their contractor stating the siding was damaged prior to repairs. The ABTCO settlement should do the same.