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.
Cutting corners when building a house is never a good thing. You want to build something that will last with good quality equipment.
Posted by: Used Bucket Truck | Wednesday, September 30, 2009 at 09:45 AM
you have to be careful when purchasing a new home or havign one built. Many builder like to cut corners anyway that they can to save them a little money.
Posted by: boom trucks | Saturday, May 16, 2009 at 10:10 AM
look at all the lawyers who jumped all over this post hah
Posted by: used digger trucks | Friday, May 08, 2009 at 10:17 AM
Masella Law has helped many Driving While Intoxicated or DUI clients through the years and we can help you with your DUI situation as well.
Posted by: South Carolina DUI Lawyer | Monday, April 13, 2009 at 06:59 AM
On September 23, 2008, we posted an entry to CP & L, "Construction Arbitration Services' Arbitrator Allegedly Destroys Evidence, Faces Motion for Contempt," about the alleged destruction of evidence by a Construction Arbitraition Services ("CAS") arbitrator, Ben DeVries. DeVries allegedly destroyed the evidence after being told in writing that the award would be appealed, and after DeVries had promised to safeguard the evidence.
On January 15, 2009, Judge Ford R. Stinson, Jr. of the 26th Judicial District Court, Bossier Parish, Louisiana, held CAS and DeVries in constructive contempt for the "obstruction or interference with the orderly administration of justice." CAS and DeVries were fined $500.
Posted by: Paul Bland | Friday, January 23, 2009 at 12:27 PM
The motion for contempt was argued and the trial court requested supplemental briefing, which has been completed and we are awaiting a ruling.
Posted by: David Szwak, Attorney | Sunday, December 28, 2008 at 04:22 AM
About 8 months ago I experienced a horrible decision
by a knucklehead arbitrator named Palo Flores, where
this arbitrator unjustly and definitely wrongfully
awarded arbitration ruling to an architect who did
everything wrong in to a AIA and later Design Build
contract. The property was never purchased, due to
financing problems. The architect knew about the
project trying to get financing. In fact, it was
proven that he was negotiating to get finance for the
owner, yet he went ahead and did the whole 9 yards of
architect works without getting approval from the
owner from one phase to the next.⨠He wrongfully
filled application on behalf of the owner with city of
Plano, TX, claiming that we own the property.⨠He
had also hired unlicensed engineers to do civil
engineering work. There was conflict of interest
proven. ⨠There was misrepresentation of
qualifications and ability to the project proven.â¨
There was lack of knowledge about building design and
standards and codes proven.⨠With all that, this
knucklehead arbitrator gave benefit to⨠GHADER MIRAK
AFSHAR(GMA) Architect.⨠THE RULING HAS HAD A RALLY
OF MORE THAN $300,000.00 IN MY LIFE, SENDING ME TO
ALMOST BANKRUPTCY. It destroyed my credit life and now
trying to get justice through courts.⨠Greatly
appreciate help and advise from any source that I can
get.
Yours truly,
Mansour Nazer Fassihi
Posted by: Mansour Nazer Fassihi | Wednesday, October 01, 2008 at 05:58 PM
about 8 months ago i experienced a horrer desision by an knokell head Arbitrator named
Palo Flores.
where this arbitrtor unjustley and defenitely wrongfulley awarded an arbitration rulling to an architect who did every thing wrong in to a AIA and later Design Build contract.the property was never purchased,due to financing.the architect knew about the project trying to get financing,in fact it was proven that he was negotiating to get finance for the owner,yet he went aheadd and did the whole 9 yards of architect works without getting aproval from the owner from one fase to the next.
he wrongfulley filled application on behalf of the owner with city of plano Tx
that we own the proplerty.
ha also had hired unlicenced engineers to do civil engineering.
there was conflict of interest proven.
ther was mis representation of work ability proven.
ther was lack of knowledge about design bild proven.
with all that this knokell head Aribitrator gave benefit to
GHADER MIRAK AFSHAR(GMA)Architect.
THE RULLING HAS HAD A RALLEY OF MORE THAN$300,000.00 IN MY LIFE.
SENDING ME TO ALMOST BANKRUPCY.
destroyed my credit life.
and know trying to get jujment,through courts.
need help and advise from any soucr that i can get.
sin your truley
Mansour Nazer Fassihi
there was
Posted by: Mansour Nazer Fassihi | Wednesday, October 01, 2008 at 04:35 PM
Yet another story of arbitration-gone-wild. I applaud you guys for getting this stuff out there. I can't imagine why there isn't more coverage of these types of travesties by mainstream media. I've reprinted on my blog at www.arbitrationhorrorstories.com - I hope you don't mind.
Posted by: Ehren Bragg | Tuesday, September 30, 2008 at 03:37 PM
I am so glad to see this case exposed! I almost got stuck arbitrating with CAS during a construction defect case w/a builder. The clause was in a separate warranty policy that I didn't see until after closing because the builder buys the policy. I was able to get out of arbitration because I found out from a consumer org (hadd.com) in time, that FHA and VA buyers do not have to arbitrate w/warranty co's. They may use the courts, too. By retaining my right to sue, I had leverage that I would not have had with arbitration as my only recourse. That allowed me to hang onto the case and eventually settle and recover my damages. The regulation is in the Code of Federal Regulations, Title 24, Section 203.204(g)and can be found here: http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=5c571d2a713abf1744f87b3e3a531944&rgn=div8&view=text&node=24:2.1.1.2.4.1.89.67&idno=24 (24 CFR 203.204(g).) You can also find it on Cornell Law School's site or of course in a law library, etc.
I wish every lawyer that considered taking homeowners' cases knew this regulation. It has now been used in one recent court decision which I will to find a free internet link to and come back and post, (or at least the case name). I can only imagine how many FHA and VA buyers don't have to arbitrate, but end up in it anyway, because so few know about this law.
The National Association of Home Builders has tried to do away with the CFR regulation. Of course if the Arbitration Fairness Act passes, it should all be a moot point.
NAHB to Banking Committee, scroll down to Single Family FHA to read how they courted HUD to remove this protection from mandatory arbitration for govt backed buyers:
http://banking.senate.gov/01_11hrg/112901/curtis.htm
Posted by: Cindy | Tuesday, September 23, 2008 at 08:53 PM