By Matt Melamed and Paul Bland
Among consumer advocates, advocates for home buyers and home owners, and lawyers who represent consumers, Construction Arbitration Services ("CAS") is notorious for being cozy with the home construction industry and for often ruling for builders and against home buyers and home owners. In 2004, consumer advocates Public Citizen issued a report raising a number of concerns about CAS. [<a href="http://www.citizen.org/pressroom/release.cfm?ID=1775">Read the report here</a>.] While we at Public Justice don’t know of any broad study of outcomes in CAS arbitration cases, we have been contacted over the years by many home owners and home buyers who strongly believed that CAS had ignored the evidence in their cases and ruled against them inappropriately. (We have never taken a case for one of these consumers, in large part because the legal standards for challenging an arbitrator’s ruling are generally almost impossibly high – arbitrators’ decisions are frequently not overturned even when arbitrators get the law or the facts wrong.)
In a recent case in Louisiana, though, court filings suggest that CAS has clearly crossed the line into inappropriate behavior. According to court documents, the arbitrator provided by CAS, Ben DeVries, destroyed all evidence submitted during an arbitration hearing within days of issuing the arbitration award. Worse, the pleadings in the case set out that DeVries destroyed the evidence AFTER the plaintiffs had told him in writing that they planned to appeal the award and AFTER DeVries had promised to safeguard the evidence. CAS and DeVries now face a motion for contempt in the 26th Judicial District Court, Bosser County, Louisiana – a motion supported by an affidavit in which opposing counsel, the builder’s attorney, states that he also heard DeVries promise to safeguard the evidence. In response, CAS has graciously offered . . . a free arbitration proceeding.
The underlying matter, Gilbert v. Robert Angel Builder, Inc., was initiated by a husband and wife seeking completion of their new custom-built home and repair of damages resulting from alleged deficiencies in the construction that had been completed. The deficiencies and damages specified include, but are not limited to:
A leak in the master shower led to massive structural damage in the home’s walls and floor. The seat was not placed in the shower pan, causing the leak. Angel’s own subcontractor testified that he was instructed by Angel to build the shower improperly because Angel did not have enough money built into the contract to build the shower properly.
The front doors leaked and water intrusion damaged the interior flooring and door frames. The front doors lacked sill pans and were not properly designed, composed, or installed.
Replacement of the hardwood floor (required due to the above-described water damage) was complicated because the floor was improperly installed. The Angel glued the floor, contrary to national guidelines for hardwood floor installation.
Water intrusion through the bedroom doors, which Angel suggested curing by sealing the doors shut. Angel invited the Gilberts to avoid local code violations and minimize potential resale value by re-labeling the room as a study.
The finish on the front door and windows failed to last six months. Protective stain was only applied after significant moisture intrusion that resulted from Angel leaving the doors and windows exposed to the elements prior to finishing.
The Gilberts’ expert witness – George "Geep" Moore, President of the Louisiana Home Builders Association – examined the house and testified in detail about the substandard workmanship and materials that led to the defects. The Gilberts contracted to spend more than $550,000 for construction of a new, custom-built home. They spent nearly $200,000 in addition on repairs and completion of construction (a sum that does not include legal fees and arbitration costs).
The Gilberts filed suit in Louisiana state court. Angel countersued for the last remaining construction payment, which the Gilberts had placed in escrow to be released when construction was complete as agreed by the parties in the construction contract. The Louisiana Court of Appeal consolidated the claims and sent them to CAS.
The Gilberts’ attorney – David Szwak, Chairman of the Consumer Protection Section of the Louisiana State Bar Association – hired a court reporter to create a transcript of the arbitration hearing. After the hearing, arbitrator DeVries took the entire body of original evidence submitted during the arbitration hearing with him to Texas, where he lives, including the original copy of the transcript from the first day of the two-day arbitration hearing (Szwak maintains a duplicate copy) and the original plans for the Gilberts’ house. DeVries allegedly told attorneys for both the Gilberts and Angel that he’d "safeguard" the evidence.
While the arbitration award ultimately ordered Angel to pay the Gilberts some of the damages they sustained, it appears from court documents to be deficient. In a ruling that Szwak argues is contrary to the Louisiana Home Warranty Act ("NHWA") (La. Rev. Stat. Ann. § 9:3141, et seq.), DeVries ruled that the Gilberts were in default for not paying the final $20,000 under the construction contract, $20,000 that the parties had contracted would be held in escrow until construction was completed and all defects were cured. Angel admitted during the arbitration hearing that he never completed construction nor repaired all defects.
Further, DeVries awarded a mere $9,000 to the Gilberts for the shower repair, relying on an estimate by Angel’s expert – who had never seen the damage, was unaware that the Gilberts had submitted numerous punch lists, did not know of or account for the structural damage to the walls resulting from the leak, and was shocked at the facts established at trial that Angel had not previously disclosed – over testimony from plaintiffs’ expert witness Moore and Angel’s own subcontractor that more than 80 hours of labor plus new materials were required. DeVries did not award anything to address the damage to the doors and windows and awarded only a portion of the attorney’s fee which the Gilberts said they had incurred. Even when DeVries was right, he was wrong: while he properly awarded $48,580.74 for replacement of the hardwood floor, he decided – over testimony by both the Gilberts’ and Angel’s expert witnesses – that gluing the floor down was not improper. Thus, DeVries failed to award damages for the increased labor to remove the damaged floor.
In sum, the evidence set forth in the pleadings indicates that arbitrator DeVries awarded the Gilberts $114,000 to fix nearly $200,000 of what the Gilberts argued were clearly established damages.
Under Louisiana law, the Gilberts had three months to challenge DeVries’ award, and on June 28, 2008, 78 days after the award, the Gilberts filed a motion to vacate or modify and correct the award. Szwak, the Gilberts’ attorney, also took the unusual step, within days after the award was entered, of asking the court to order the arbitrators not to destroy the evidence. On July 1, 2008, in response to a discovery motion filed by Szwak, the Louisiana District Court issued an order that defendants CAS and DeVries deliver all evidence submitted during arbitration to the court. In response, DeVries sent a letter to the clerk saying he’d destroyed all the evidence "after 20 days" from the date of the award.
Not only had Szwak given clear notice to DeVries during the arbitration hearing that the Gilberts intended to file a motion to vacate or modify and correct the award, and not only had DeVries promised to safeguard the evidence (a promise opposing counsel has attested to), but Szwak had sent a letter by fax and email to CAS directing them to file the arbitration evidence with the district court 18 days after the award was entered. Accordingly, the documents demonstrate that DeVries destroyed the evidence after CAS received the fax asking for the evidence to be delivered to the district court.
In response to the contempt motion [<a href="http://www.myfaircredit.com/forum/viewtopic.php?p=14691&sid=f6a95cb07e14bdda804a1e38aed293c0">read the motion here</a>] CAS has offered to pay for the time and cost it takes the Gilberts to reconstruct the evidence and for the cost of the original house plans destroyed by DeVries. In addition, CAS has tentatively agreed to a no deference referral for the appeal and a refund to the Gilberts for all costs of the arbitration. Mysteriously, CAS has also offered help in trying to "locate" the destroyed evidence, which begs the question whether something even stranger than DeVries’ destruction of evidence is going on. And finally, CAS has offered a free arbitration proceeding. (Thank you sir, may I have another.)
The contempt proceeding, originally scheduled for September 15, was continued due to inclement weather and will likely be heard in November. The matter is Gilbert, et al. v. Robert Angel Builder, Inc., No. 126,995-B, 26th Judicial District Court, Bossier Parish, Louisiana.