Jordan Fogal

The Anatomy of Arbitration

When someone in Texas has a serious problem with a new home they are forced into a vortex of red tape that becomes a cavernous catch 22. This labyrinth does not come close to Lewis Carols' rabbit hole. This unending journey is being perpetrated on the public in order to protect builders from responsibility for their unethical behavior.

First, you try to reason with the builder: you call, write letters, faxes, emails, and fill out warranty forms. These efforts ultimately fail.

Second, you find a lawyer who explains you cannot sue your builder because you have an arbitration clause.

Third, you report the builders to the Better Business Bureau (“BBB”). You dutifully fill out all the papers for the BBB. Unfortunately, after some time you realize that there is nothing they can do but expel the builder and refer the file to the Attorney General.

Fourth, you go to the Attorney General's office. You are told to fill out a complaint and given a complaint number. You do as you are told and are given an incorrect file number. Months later they tell you that this incorrect number is why they haven't been able to follow up. You are given another file number then you are asked for all the paper work associated with your claim. It is then supposedly mailed to the builder. You comply and you wait. After a few more months they say cannot help one person. So others go to their office and add to your complaint pages and pages of documentation. You wait. You ask Senator Ellis and Representative Coleman to write the AG on your behalf and they receive letters from the AG's office saying you never filed a complaint.(The AG's office has no intention of doing anything but referring you to the Texas Residential Construction Commission. So why are they wasting all your time and effort. Are they trying to discourage you? The AG's office refers to the TRCC as tricky and explain, since tricky things are not as simple as when they just had to file with the DTPA.

Finally, John Owens, Deputy Director tells you the truth. He says your file is not lost it is right there in front of him. He tells you, last year the AG's office had over 12,000+ complaints filed against home builders and they do not have the money or the staff to deal with it. But if you can come up with the needed funds to hire an investigator then the DA's office might investigate.

Fifth, you go to TRCC.(Tricky.) You do the paper work, you pay the money, you prove you don't live in a condo because they aren't covered. Ms. Durso requires you have a plot plan with exact footage from other houses, to prove yourself. Then you have to prove you qualify for SIRP and RCLA. Which really doesn't matter anyway? If you qualify and go though the process and the TRCC agrees that you have a defective house, you get a worthless piece of paper. They give the builder yet another 90 days to correct the defects. At the end of the 90 days the builder says, NO, I am not going to fix anything. I am filing on the homeowner in arbitration. So you end up, just where you would if you had never been to TRCC in the first place. TRCC takes the word of the builder, even though you provide them with documentation from state agencies that is in direct conflict to what they say.

The TRCC allows the builder to substitute: houses, people, documents and lawyers and does not notify the victims when they have an investigation hearing. TRCC makes out like they do not even know that a hoax is being pulled. They then tell you they have punished the builder who has destroyed and adversely affected the people involved... by not letting them apply for yet another registration. We are homeless and they cannot have another corporation to add to their shell game. The TRCC “really” showed those bad builders.

Sixth, you go to arbitration. After these first five steps and the year or two it has taken you to get this far you are completely disgusted with the entire system that is supposed to protect consumers. You have lost your home because you could not afford the hundreds of thousands of dollars to correctly rebuild it. You have had to abandoned your home and hold up in a small apartment. You have lost your down payment, your money, and your credit. All of this is because the state of Texas allows renegade builders to get away with building substandard, defective homes. These defects so bad homeowners insurance won't even cover them.

Since you have to prove what the builder already knows and pay all these fees and for a lawyer and pay for somewhere else to live, you find yourself broke. The builders’ lawyers tell you that is fine, you will not be allowed to participate in the arbitration proceedings and will be ruled on in abstensia. You tell the arbitration company you cannot afford to pay an arbitrator and you are having to maintain a house you can't live in and keep the lights, water, and insurance on the house even though you can't live in it, so the builder won't use that as an excuse to blame you for it's condition and smell. The builder and arbitration company proceed as if you have said nothing and are insignificant and hire an arbitrator. They schedule the first conference call. The builder's lawyers the arbitrator and arbitration company are on the line, and you tell the arbitrator you cannot pay him and that you told them all not to hire him under the pretense that you could. He makes a ruling. Since the builder did not pay his fees to the arbitrator and you can't either, the case is dismissed.

Seventh, you go to civil court. You assume wrongly, that since you have been dismissed in arbitration you have the right to go to court and prove fraud. You go to a hearing and the judge orders you to file a counter claim in arbitration and that you are compelled to do so. He does state kindly that no matter how his feelings are in the case, the legislature favors arbitration. Therefore he cannot rule from the bench and you are thrown once again into the pit of despair.

Eigth, arbitration begins again. Arbitration is a contractual agreement between the builders and the arbitration companies? They already have a relationship that works extremely well. The builder will be their constant stream of revenue and they will save the builder millions of dollars, by allowing them to cheaply throw up defective improperly constructed and still get a quality price.

The cost is of arbitration is horrible and it is not just counterclaim filing fees: $4250. It is case management fees, $2500, arbitrators fees, $2250, pre and post study payments, 1687.50, stenographers, discovery, binders for every one and copies of everything for the builders their lawyers and the arbitrator ... even the room rent, $75.00. All the burden of proof is on the homeowner. You spend money for pictures, expert testimony, expert witnesses, power point presentations and 187 exhibits and the builders and their lawyers walk in with one witness and 37 pages in a little white binder. They have done this so many times. They laugh at you, denigrate you and tell one another that if you get a judgment of an award against them, then you will see what real negotiations are all about. After all, they have no money in that corporation any more so you will end up with nothing.

If arbitration is so fair and wonderful why is it mandatory and why is it forced on the public?
Arbitration companies do not know how much it is eventually going to cost you, because they do not know how many days the arbitrator and the builder intend to hold you hostage. They do not care as long as this "nonprofit" agency gets its spoils. They conduct themselves like a demented collection agency. Indeed, they call themselves the facilitator. Like something out of the Godfather. The arbitration company emails you a paper to fill out ... they want all your credit card information so they can just charge what ever costs as they accrue. You are going to be in debt, for the rest of your life, because this builder builds defective homes.

Arbitrators will protect and defend fraud, unethical behavior and allow the builder to provide evidence to prove you are the reason the house he built is uninhabitable...and this entire proceeding is all your fault? It is crazy. They are trying to prove: you did not want your home, your money, or your credit. They try to argue that you wanted to live in an apartment and spend the last four years in torment. Of course, the arbitrators agree with them.

Arbitrators turn a blind eye to blatant perjury. They will detract any pertinent information that would be written into the record that makes their meal ticket look like what they are. They have a symbolic and joyful relationship with the builder. Indeed, they attend functions together because some of the builders’ lawyers are also arbitrators themselves. They laugh and cut up and the arbitrator is on speed dial to the builders’ lawyers. Money talks here. Repeat offenders are protected. No one will tell you how many times this builder has been there. Even though you know three different cases against them are going on at the same time. And the builder also has numerous cases against them in court with homeowners who were not crippled by the consumer cursed arbitration clause. Even though they were so far spared arbitration they are up against a big builder so they have been tied up for over three years. These people are from your same neighborhood.

Ninth, the award is “bestowed”. The word award is a cruel joke in itself. It sounds like a present or a surprise. You aren't going to be surprised. You know exactly what has happened to you. The privatization of the justice system has held you down while the builders came at you from behind.

"Only in Texas can you buy your own state agency and regulate yourself," said Representative Garnet Coleman speaking of the TRCC.

The TRCC bought by Bob Perry of Perry homes with "donations," and his lawyer sits on the commission.

In 1774, John Adams said,

"Representative government and trial by Jury are the heart and lungs of liberty. Without them we have no other fortification against being ridden like horses, fleeced like sheep, worked like cattle and fed and clothed like swine.

Mr. Adams must have had a premonition of the arbitration atrocity to come.

As an American, I believe liberty, freedom and patriotism still ring in our hearts, but no longer in our laws.

Jordan Fogal: Author Bio | Other Posts
Posted at 9:32 AM, Mar 14, 2007 in
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A huge point that must be emphasized here is that mandatory arbitration is outrageously expensive: there are literally fees for everything -- filing fee; hearing fee; arbitrator's fees; post-hearing brieff review fees; etc. The courthouse doors are closed.

For all thatmoney, you than have the privilege of being judged by a pro-industry attorney. Usually, the "arbitrator" lawyer or ex-judge has a background in protecting large companies in lawsuits.

Has anyone thought of introducing an anti-arbitration bill in Congress? How about an "arbitration bill or rights." Something?

Posted by: D H | March 14, 2007 3:42 PM

Just last week a Binding Mandatory Arbitration (BMA) bill was been filed in Texas and another filed by US Congressman Charles Gonzalez on the federal level. “Give Me Back My Rights.” a Washington DC based coalition comprised of approximately two dozen consumer groups is seriously working on a number of other BMA bills that should be filed soon. Stay tuned...

Posted by: Janet Ahmad | March 14, 2007 10:15 PM