SAN ANTONIO, Texas -- KB Home promotes itself as a company that builds inexpensive tract homes for people such as Elena C. Rocha. The 68-year-old restaurant worker spent her life's savings of $123,000 on a new KB home here last year. But soon after she and two grown daughters moved in last September, problems surfaced. She says a toilet malfunctioned, a hallway wall separated from the ceiling, and water leaked in beneath the front door. The Rochas made repeated complaints to KB, some of which the company now acknowledges it ignored. Frustrated, Mrs. Rocha and her older daughter, Grace, joined about 15 protesters, including other disgruntled KB customers and homeowner activists, on a road leading to a nearby company sales center.

In March, KB responded. The Los Angeles-based homebuilder, one of the nation's five biggest, sued Mrs. Rocha and eight other alleged protesters in a state court in Tarrant County, Texas. The suit seeks $20 million in damages for what the company says was the malicious damage the defendants did to its reputation and business.

KB has since dropped Mrs. Rocha and some others from the suit, leaving only one KB homeowner among the remaining defendants. But sitting at her dining room table, Mrs. Rocha recounts many sleepless nights and worries that somehow the company will take away her house.

Builders say they are facing an increasing number of construction-related lawsuits as new homes go up at a record pace nationwide. But disputes involving KB in Texas -- where the company sells nearly a third of its homes -- stand out for the aggressiveness displayed by both sides.

In addition to twice taking the rare step of suing customers, KB has threatened to publicize two adversaries' criminal records. It has snapped pictures of protesters and their car license plates. KB has also tangled with the Army Corps of Engineers over the safety of a KB development in Arlington, Texas, built on the site of a former bombing range.

Since late 2001, more than 100 homeowners have filed suit against KB in Texas, plaintiffs' lawyers say. The vast majority of those plaintiffs are involved in a pair of suits concerning whether KB made sufficient disclosure of conditions at the subdivision in Arlington, which opened in 2000. A KB spokeswoman declines to say how many customers are suing the company nationwide, but adds that the litigation "doesn't have a material effect on the company." KB sold 7,873 homes in Texas last year -- 31% of its nationwide total of 25,565.

The company attributes most of its problems in Texas to Janet Ahmad, an amateur consumer activist from San Antonio. She has never owned a KB house but has made a personal mission of going after the company. KB named Mrs. Ahmad in the Tarrant County lawsuit, accusing her of slander and employing sensationalist tactics to draw media attention. Last week, a Tarrant County grand jury indicted her on charges of planting a small World War II-era bomb at the Arlington subdivision in January 2002. She faces two felony counts for fabricating or tampering with evidence to influence a civil lawsuit and a police investigation. KB has also accused Mrs. Ahmad of orchestrating pickets and hiring day laborers to bolster their numbers. Mrs. Ahmad denies planting the bomb or hiring stand-in protesters. "This is nonsense," she says of the indictment. "How do you accuse someone of planting a bomb on a bombing range?"

John J. Walsh, an outside lawyer for KB, said in a letter Friday that "Ms. Ahmad's credibility is under clear and direct attack from the Texas authorities." He condemned "her sheer recklessness, her lack of acquaintance with the truth, and the fact that her picketing and media-generating campaigns are causing great distress and pain, and threatening economic loss of value to the satisfied KB Home buyers in the Texas subdivisions she has singled out."

The company makes no apologies for using tough tactics when faced with what it considers false accusations concerning a small fraction of its customers. "KB has an obligation to protect its institutional integrity, its shareholder value, its employees and its thousands of satisfied purchasers," Mr. Walsh said in an earlier letter. The company says it carefully tracks repair requests and tries to respond quickly.

Mrs. Ahmad and her allies say their tactics are legal. The 61-year-old wife of a physician began her campaign against builders and contractors in the 1970s, after a protracted fight with the builder of her own home. She heads Homeowners for Better Building, an advocacy group based in San Antonio.

Formerly known as Kaufman & Broad Home Corp., KB was started in 1957 by developers Donald Kaufman and Eli Broad to build a limited selection of inexpensive houses. KB's sales in Texas have slumped lately because it has sold out of houses in San Antonio and has struggled in the Austin area, where a technology-heavy local economy is limping, says Larry Oglesby, KB's regional general manager. Bad publicity from protests and suits has also hurt, he says.

But nationwide, KB's revenue rose 10%, to $5.03 billion, in the fiscal year that ended Nov. 30, 2002. The company improved its profits by 47%, to $314.4 million, by raising prices, mostly in California, and offering upgrades, such as whirlpool tubs. Its stock closed at $56.94 Friday in composite 4 p.m. NYSE trading, down from a 52-week high of $71.55 in June. Analysts attribute the stock's slide to rising interest rates, among other factors.

In the late 1970s, the Federal Trade Commission accused KB of selling homes in Illinois with serious defects. Without admitting or denying liability, the company settled the allegations in 1979 by agreeing to a consent decree. The judicially enforced decree prohibited KB from requiring that consumers submit complaints to binding arbitration. This cleared the way for unhappy customers to sue KB in court. Companies generally see expert arbitrators as more sympathetic to them than lay jurors are.

A homeowner's suit, filed in March in federal court in Laredo, Texas, showed that KB was enforcing mandatory-arbitration clauses. After much wrangling over what the consent decree forbade, KB has reaffirmed that the decree broadly bans mandatory arbitration. In July, the company began sending letters to tens of thousands of homebuyers, telling them they need not submit to binding arbitration if they prefer to sue.

Almost all of the more than 100 homebuyers suing KB in Texas live in Southridge Hills, the subdivision in Arlington. KB built the development on land used by the Navy in the 1940s as a practice-bombing range, and people still occasionally find ordnance in the area. The explosives are about eight inches long and resemble tiny torpedoes. The Army Corps of Engineers has said in public meetings that people who come across the practice bombs should call 911, so emergency workers can dispose of them safely. There haven't been any explosions at Southridge Hills.

About 550 families have moved into Southridge Hills so far. The homeowner suits filed in Tarrant County allege that KB failed to disclose fully the presence of the ordnance. The suits had been held up by legal skirmishing over the arbitration issue, but with that issue now resolved, plaintiffs' attorneys say they hope the cases will move forward.

KB says the suits are baseless, asserting that it has made all proper disclosures in its sales documents. KB's outside lawyer, Mr. Walsh, said in his letter that "the site was long ago remediated and certified by the U.S. government and the [Army] Corps of Engineers as free of any hazards from its former use."

But the Army Corps of Engineers disagrees. In a September 2001 letter, the corps responded to an inquiry from a plaintiffs' lawyer by saying that there wasn't a danger of chemical contamination at Southridge Hills. KB obtained a copy of the letter and began distributing it to buttress the contention that there was no safety risk at the subdivision.

This prompted the corps to send KB a letter in November 2001, demanding that the company cease misrepresenting the government's position. The corps said that any old bombs remaining at the subdivision could pose "a potential safety hazard, i.e., one which could hurt or kill someone if not properly handled."

Brian Condike, a project manager with the corps, says in an interview that the agency recently awarded a contract valued at nearly $1 million to clear Southridge Hills of remaining ordnance. "If we thought this site was safe, we wouldn't be awarding all this money to remove these items," Mr. Condike says. The cleanup is scheduled to start in October.

Mr. Condike says that the remediation and certification to which KB referred is a clearance issued in 1956 by an Army bomb-removal group. That unit cleared the area's surface of bombs and said it could be used "for any above-surface use to which the land is suited." But Mr. Condike says that building homes is "absolutely not an above-surface use" and that KB is "misrepresenting" the 1956 certification.

The company says that before acquiring the land, it had thorough environmental testing done. KB adds that its employees didn't find a single explosive when moving "miles of earth" and digging "deep trenches" as the land was prepared for construction.

In its suit in Tarrant County, KB alleges that its antagonists have deceitfully tried to ignite panic over Southridge Hills. The suit says that Mrs. Ahmad planted one of the small bombs at Southridge Hills and called 911 to draw emergency workers and media attention. That allegation was reinforced by last week's criminal indictment of Mrs. Ahmad, who faces up to 10 years in prison if convicted.

An Arlington police officer who responded to the 911 call said in a civil deposition in December 2002 that he believed that the bomb had been brought to the site, not found there. A police report about the incident said that the bomb recovered was "very dry," even though it had been removed from "rather wet black clay since it had been raining the previous day." In a separate civil deposition taken last November, an acquaintance of Mrs. Ahmad's testified that the activist told her she had planted the bomb.

Mrs. Ahmad says in an interview that, contrary to the accounts of others at the scene, she legitimately discovered the bomb at the site and then dialed 911. But the criminal charges could hurt the credibility of those homeowners who have worked with the activist.

Some KB customers wish Mrs. Ahmad would just go away. Mark S. Herrera, who owns a home in the San Antonio subdivision of Bridgewood, says the activist used "scare tactics" when she led a demonstration in his neighborhood in July. He fears such protests will bring down property values.

Robert Collins, a plaintiffs' lawyer in Houston who has consulted with Mrs. Ahmad, says people elsewhere in Texas with complaints about KB homes have held off on filing suit because of the uncertainty about mandatory arbitration. Now that it is clear that customers may go to court, Mr. Collins and a small group of other Texas attorneys he is working with have begun to file suits on behalf of about 200 disgruntled KB homebuyers they say they have signed up as clients. Twelve of these suits have been filed in state court in Bexar County. One of those attorneys is defending Mrs. Ahmad in the $20 million lawsuit and against the felony charges.

One disgruntled homeowner is Mrs. Rocha, although a suit hasn't yet been filed on her behalf. Her problems began last year, shortly after she bought her house in Tara West, a community of 130 KB homes in San Antonio named for the plantation in "Gone with the Wind." More troubling than the toilet that didn't flush properly, the bathtubs that drained too slowly, and even the water that seeped in through the front door after rainstorms, she says, was the wall in the hallway upstairs that started to tear away from the ceiling.

The Rochas lodged a series of complaints with KB. At one point, KB sent a plumber to fix the bath drains, but nothing more. A KB spokeswoman confirms that the company "dropped the ball" on some early requests by the Rochas. The company tried to make up for that by installing a free sink in the bathroom of the master bedroom, the spokeswoman says.

One block away, Roberto and Nubel Rodriguez discovered last November that the foundation of their one-story $104,000 house was buckling. The couple had purchased the new dwelling and moved in with their two daughters only a year earlier.

KB offered to install underground supports for the foundation. But Mr. Rodriguez says KB then delayed, and he ran out of patience. The company had already irritated him by trying to fix cracks in his walls with only tape and paint, he says. "I started thinking, chances are they're going to do another [bad] job," Mr. Rodriguez, a 33-year-old electrician, says.

KB says its repairs have been consistent with the standards of its wallboard manufacturer. The company says Mr. Rodriguez requested the delay in fixing the foundation during the Christmas holiday. The company also says the Rodriguezes are an example of customers who have signed on with Mr. Collins and then stalled on needed repairs in the interest of bolstering possible lawsuits.

The Rodriguezes say they signed on with Mr. Collins in January, after telling KB not to repair the foundation. The Rochas say they hired the attorney after KB sued them in March.

Mr. Rodriguez got in touch with Mrs. Ahmad after finding a Web site she operated. She came to his house in February for a meeting with about 40 Tara West homeowners, including Mrs. Rocha. Mrs. Ahmad told the KB customers that the quickest way to get a builder's attention is attracting the media. "It's the homeowners who picket that get something," she says in an interview.

A few days later, Mrs. Rocha decided to join protesters under a KB billboard that directed drivers to a new home development. Mrs. Rocha held a sign her granddaughter had made on yellow poster board, showing a house splitting in two.

Suddenly, the Rochas say they got attention. KB employees came knocking to see if they needed repairs. But then in March, the Rochas heard on the radio that KB had sued a group of protesters who allegedly posed as homeowners. To their surprise, the Rochas later found out they were named in the suit. In addition to seeking damages, the suit sought a judicial injunction barring the Rochas, Mrs. Ahmad and others from demonstrating.

In June, KB dropped six of the nine defendants, including Mrs. Rocha and one of her daughters. The remaining defendants are Mrs. Ahmad, her son and a KB homeowner in Arlington who accompanied Mrs. Ahmad on the day she allegedly planted the bomb.

KB says it made a mistake naming the six people in the suit who have since been dropped. The company says it hired a private investigator to photograph demonstrators and their license plates to figure out who they were. Outdated motor-vehicle records apparently showed the dropped defendants as not living in KB Homes. That led company employees to conclude that they weren't really unhappy homeowners, but had been hired to picket, the company says. KB sued even though its repair people were simultaneously offering to fix the Rocha house.

KB critics don't buy the explanation. "KB is ruthless; they filed the lawsuit to shut the protesters up," says John R. Cobarruvias, president of the Texas chapter of Homeowners Against Deficient Dwellings, a nonprofit advocacy group.

The feuding has been fierce elsewhere in Texas, too. Last fall, KB homeowners Yolanda and Andrew Brammer started organizing pickets in their tract, located in the small town of Kyle, near Austin. The Brammers bought their two-story house in December 2000. KB made some repairs at their request and in July 2001, paid the couple $2,000 for wages the Brammers said they lost while supervising the repairs. The Brammers agreed to keep the deal confidential.

Since then, the Brammers said they found more problems. After they appeared on a local television-news program last October, complaining about a leaky roof and dipping floors, they received a letter from KB, threatening to reveal Mr. Brammer's criminal record "to any media who happen to inquire" about the demonstrations. Public records show that Mr. Brammer, 34, was convicted for misdemeanor marijuana possession in 1997 in a Texas court.

In December, KB obtained an order from a state-court judge in Travis County, Texas, barring the Brammers and their attorneys from discussing the matter. A state appellate court later narrowed that order. KB says it checked Mr. Brammer's background only after he intimidated KB employees near the company's office in Kyle last November. During a court hearing in December on KB's injunction request, Judge Paul Davis concluded from the bench that Mr. Brammer "has physically threatened and verbally abused" KB's employees and customers. In recent weeks, the Brammers reached an out-of-court settlement with KB, which both sides decline to discuss.

Corrections & Amplifications:

The Online Journal, in a headline in an early edition on the Web site, incorrectly characterized the legal situation of a consumer activist from San Antonio. Janet Ahmad has been indicted for allegedly fabricating or tampering with evidence to influence a civil lawsuit and a police investigation. She denies the charges, and the criminal case has not been concluded.

Write to Queena Sook Kim at queena.kim@wsj.com

Updated August 18, 2003 1:10 p.m.

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