Laredo –  KB Home will be in district court today at 9 o’clock, on a class-certification hearing over a binding arbitration clause in homebuyer warranty, in which the parties hope to get approval to proceed with a class-action lawsuit on behalf of many homeowners.

 At issue is 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 that the clause is invalid and unenforceable.

Houston lawyer Alice Oliver-Parrott, the attorney representing homeowners, says that if they win the approval, she will ask the judge to have KB Home notify consumers that binding arbitration provisions are void and unenforceable. 

KB Home has a history of requiring homeowners to agree to mandatory binding arbitration as a warranty agreement, and was recently fined by the Federal Trade Commission (FTC).   

In December 1999, the FTC warned KB Home to cease inserting binding arbitrations in their contracts and warranties and warned that it violated a 1997 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

Consumer groups are still in disbelief at the idea 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 order, and then pay only a $2 million token fine.