Falcon settles lawsuit: Expansive soils cost builder $2.57 million

By Steve Raabe
Denver Post Business Writer

Falcon Homes Inc. has agreed to pay $2.57 million to settle a class-action lawsuit brought by owners whose Highlands Ranch homes were built on potentially destructive expansive soils.

The settlement, still subject to court approval, calls for Falcon to spend the money on repairs to homes it built in the Douglas County community from 1987 to 1995.

Four homeowners in Highlands Ranch had filed suit last year, alleging that Falcon knowingly built homes on expansive soils, and failed to construct the homes with features that would mitigate damage from swelling soils.

The suit later was designated a class-action to include 305 owners whose homes were built by Falcon.

Expansive soils, such as claylike bentonite, are common to Colorado’s Front Range. The soils cause trouble when they become wet and swell, exerting a force so strong that it will heave, crack or buckle concrete foundations, floors and walls.

The problems often occur on concrete-slab basement floors poured directly atop expansive soils. Damage can be mitigated by using structurally supported wood floors instead of concrete slabs.

Under the proposed settlement, homeowners represented in the suit may choose to replace the floors with new slabs or with structural wood floors. New slabs require a 15 present deductible payment by the homeowner; new wood floors require a 20 percent payment.

Homeowners may also take a one-time cash payment of $2,000 which releases Falcon from any further liability.

“While we could have fought this in court over the next five to seven years, we thought it was in the best interests of our customers to provide them with a guarantee rather than spending money on attorney fees, which ultimately may not have benefited anyone,” said Darrell Schmidt, president of Falcon.

Falcon has agreed to pay $546,670 in attorneys’ fees to Scott Sullan , the homeowners’ lawyer.

Sullan described the settlement as “extremely fair for the homeowners, providing many different benefits.”

Sullan is representing plaintiffs in three similar expansive soil lawsuits against Highlands Ranch developer Mission Viejo Co., Richmond Homes and Ryland Homes.

Sullan previously settled another suit against defunct homebuilder Wood Bros. for $1.45 million on behalf of 13 Highlands Ranch homeowners.

Schmidt of Falcon said that as a result of the Highlands Ranch problems, Falcon has initiated new policies to build structural wood floors for all homes with walkout basements or with soils that have swelling potential exceeding 2 percent.

“We’re taking the proactive lead in the industry,” Schmidt said. “This is an unprecedented attitude on the part of homebuilders.”

Falcon sold 300 new homes last year in metro Denver, ranking it as the area’s ninth largest builder, according to Home Builders Research.