KB Home to notify homeowners they can sue them.

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One Great Victory!

Due to a Federal Trade Commission (FTC) consent decree KB Home will release all homebuyers from

Binding Arbitration. KB Home is in the process of notifying all of their customers with defective homes

that they can sue them.

Janet Ahmad, PresidentHomeOwners for Better Building

Armstrong, President Florida Chapterhttp://www.hobb.org

The Wall Street Journal

KB Home Frees Buyers From Binding Arbitration

KB Home, one of the nation's largest homebuilders, is sending letters totens of thousands of its home buyers releasing them from abinding-arbitration provision in their warranties and purchase contracts,freeing them to press any disputes in the courts.

Dow - Smart Money.com

Breaking NewsKB Home Releases Buyers From Binding Arbitrationhttp://www.smartmoney.com/bn/ON/index.cfm?story=ON-20030701-000005-0009

CNN Money

KB Home revamps dispute policy

Homebuilder releases buyers from binding arbitration pacts, customers can now use courts.

http://money.cnn.com/2003/07/01/news/companies/kb_homes.reut/index.htm

San Express News

KB Home changes contract

"They have been under a court order (from the FTC) since 1991 and have literally misled thousands of consumers as to their rights and remedies," said Oliver-Parrott, a lawyer for Pruitt, who filed the Laredo lawsuit against KB Home.

http://news.mysanantonio.com/story.cfm?xla=saen & xlb=110 & xlc=1019334 & xld=110

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The Wall Street Journal

KB Home Frees Buyers From Binding Arbitration By Queena Sook Kim July 1, 2003

KB Home, one of the nation's largest homebuilders, is sending letters totens of thousands of its home buyers releasing them from abinding-arbitration provision in their warranties and purchase contracts,freeing them to press any disputes in the courts. The move comes as the Federal Trade Commission has been asking the LosAngeles-based home builder about its use of binding-arbitration clauses. KBHome entered into a consent decree with the FTC in 1979 which didn't allowfor such arbitration. The two sides reaffirmed the consent decree in 1991. KB Home says its revised policy wasn't required by the FTC, but acknowledgedthat it has been in discussions with the agency about conflictinginterpretations of the order. "Some of this was part of our conversationwith them, but we decided to make the changes voluntarily," said KBspokeswoman Deborah Hotaling.

The Wall Street Journal The move comes as the Federal Trade Commission has been asking the LosAngeles-based home builder about its use of binding-arbitration clauses. KBHome entered into a consent decree with the FTC in 1979 which didn't allowfor such arbitration.

The two sides reaffirmed the consent decree in 1991. KB Home says its revised policy wasn't required by the FTC, but acknowledgedthat it has been in discussions with the agency about conflictinginterpretations of the order. "Some of this was part of our conversationwith them, but we decided to make the changes voluntarily," said KBspokeswoman Deborah Hotaling. The FTC declined to comment on the KB move. However, Frisby, anassistant director in the division of enforcement, said that the FTCinformed the home builder in 1995 that binding arbitration "would not complywith the order." The original 1979 order came after FTC regulators said the company wasbuilding faulty homes and offering inadequate warranties. It required thebuilder to provide construction warranties without binding arbitration. KBmaintains that most home builders have adopted binding arbitration so thatit should be allowed to do so as well. KB is the only home builder to beoperating under an FTC consent agreement. Consumer advocates oppose binding arbitration because they say it is stackedagainst the homeowner. "I only know one homeowner who has ever won inbinding arbitration," said Seats, president of Homeowners AgainstDeficient Dwellings, a consumer group in Liberty, Mo. "Homeowners usuallylose and have to pay the homebuilder for attorney costs," she added. KB's action comes at a time when the pace of new home building andconstruction-defect claims are hitting a record pace. Plaintiff attorneyssay that home builders have required binding arbitration to keep complaintsout of the courts. Binding-arbitration provisions require homeowners to giveup their right to sue and take their disputes to a third-party arbiter whosedecision can't be appealed. Critics of binding arbitration say that its cost, which can be as much as$6,000, discourages homeowners from pursuing claims. Plaintiff attorneys mayaccept cases on a contingent-fee basis, making it easier for disgruntledhomeowners to file lawsuits. The revised policy continues to require arbitration for disputes, but backsaway from making the decision binding. *************************************************************

San Express News

KB Home changes contract

By Adolfo Pesquera

Express-News Business Writer

07/01/03

In a break with past practices, KB Home told the Federal Trade Commission on Monday that it will tell its customers a warranty dispute settled through arbitration will not necessarily be binding.

The move is significant for homeowners locked in disputes with KB Home, San 's dominant homebuilder. Some KB Home customers have decided not to pursue warranty claims through arbitration — in which a third party acts as "judge" in the matter — because there has been no chance of appeal to a court, where a judge and jury would settle a dispute. KB Home announced the contract change in a letter to the FTC dated June 30. The change affects customers nationwide. In making binding arbitration optional, the nation's fifth-largest homebuilder took into consideration comments by the FTC staff that future and past consumers of KB Home "need to be considered in dealing with the warranty revision," Barton P. Pachino, KB Home's general counsel, said in a statement. The FTC has monitored KB Home for 12 years because of difficulties consumers had with its warranties, and the commission issued a court order, known as a consent decree, requiring the company to stop forcing disputes into arbitration. KB Home spokeswoman Teague said the revision is motivated by talks with homeowners. But consumer advocate and lawyer Alice Oliver-Parrott said the company is acting now because it's facing a class-action lawsuit in Laredo federal court. "They have been under a court order (from the FTC) since 1991 and have literally misled thousands of consumers as to their rights and remedies," said Oliver-Parrott, a lawyer for Pruitt, who filed the Laredo lawsuit against KB Home. KB Home sought to have a federal judge send the dispute with Pruitt to binding arbitration. But Oliver-Parrott noted that the KB Home's contract was in violation of the 1991 FTC consent decree. KB Home lawyer Shaunessy argued that the FTC knew of its practices and had shown by its silence that it wasn't concerned. He said the FTC requested that KB Home tell the court that the company told the FTC that since June 2001 it wouldn't try to enforce mandatory binding arbitration. Under the contract revision, only KB Home would be bound by the arbitrator's decision. A homeowner could still go to court, Teague said. "Most homeowners simply want their homes fixed," she said. "In the vast majority of situations, issues are resolved through meetings, conferences and informal processes such as mediation." In its letter to the FTC, KB Home said it will make the warranty revision effective July 21 and mail notification letters to all affected KB Home customers in the United States during the next 60 days. Los Angeles-based KB Home became a force in San in 1996, when it bought homebuilder Rayco. Today, it is the dominant builder in San , with 31 percent of the new residential construction market. Oliver-Parrott said the company's decision is a step in the right direction, but the letter to homeowners doesn't tell them their existing contract is illegal. Also, she said the letter doesn't address past cases that settled through arbitration, nor does it deal with homeowners who were discouraged from pursuing a claim within the time-limited warranty because they couldn't afford arbitration. By submitting the letter now, KB Home is trying to avoid a court-supervised substitute that would ensure full compliance, she said. "They want to tell us they will figure out how to fix it," Oliver-Parrott said. "They've had over a decade to do that. In my mind, they've sacrificed that right."