Homebuilders, Trial Lawyers Go Toe To Toe: Millions At Stake In Bill On Homeowners’ Lawsuits

By Trent Seibert
Denver Post Staff Writer

Threats, arm-twisting and accusations of lobbying violations are all part of a heated feud at the state Capitol over a bill that would radically change the rights of homeowners to sue builders.

Driving the debate are the millions of dollars that are at stake. The homebuilders who support the bill and the trial lawyers who want to kill it insist they each have the homeowners’ best interests in mind, but each side stands to gain or lose fortunes.

The measure, which would prohibit homeowners from suing homebuilders for triple damages in cases of shoddy construction, passed a Senate committee Monday. It already cleared the House after contentious debate and now goes to the full Senate.

“Just about every available lobbyist in town has been hired by the homebuilders to get this bill through,” said Gary Tobey, an attorney helping the Community Associations Institute’s Colorado Legislative action Committee fight the bill.

The homebuilders’ lobby called that an exaggeration and accused trial lawyers of similar tactics.

“The intimidation by these guys in nasty,” said Debbie Tamlin, the owner of Fort Collins-based ZTI Group, who has been championing the bill. “They have a lot at stake. It’s a huge amount of money we’re taking about.”

A glimpse into court records - often closed under settlement agreements- provides insight into the amount of cash at the center of this controversial bill.

The attorneys, and the homeowners in these cases said the developers built their homes extremely poorly, citing a litany of problems, including faulty roofs, windows, decks, drainage and foundations.

In a Westminster case settled in 2000, the developer of the Village at Horizon Pointe subdivision settled complaints against him for $5.9 million . The attorney took $1.96 million in fees and was reimbursed for $440,000 in out-of-pocket expenses.

In a case settled in 2002 against the developer of Promontory Point development in Westminster, the builder paid $5.7 million after homeowners took their complaints to court. The law firm collected more than $2 million, records show.

And a case in which four Jefferson County homeowners sued a developer ended in August 2002 with the developer ordered to pay $6.2 million in damages. From that, records show, attorney fees and expenses added up to $1.25 million.

Attorneys who take these kinds of cases say that the threat of triple damages in one of the few hammers homeowners have to bring builders to the table.

But these kinds of settlements force developers to pay up, and, of course, allow these kinds of paydays for lawyers. If House Bill 1161 is successful, such large awards are likely to dry up.

Experts in the field say that about 60 such lawsuits have been filed since January 2001, and firms that specialize in such suits can make $8 million to $10 million annually representing homeowners against developers.

The lobbying is expected to remain intense all week in advance of a floor debate and vote in the Senate.

Indeed, on Monday, just as they have every day for nearly a month, lobbyists, along with those who personally have much to lose or gain with the passage of the bill, flooded the Capitol, such as the dozens of small-business owners who rallied there before the committee vote.

One vocal critic of the bill is attorney Scott Sullan, who has spent weeks at the Capitol meeting with lawmakers in an effort to kill the measure. Sullan’s firm, Vanatta, Sullan, Sandgrund & Sullan, which charges $285 per hour, according to court records, has made millions of dollars from cases against developers.

Sullan said his firm typically collects a third of the settlements he gets from suing the developers for their construction defects.

His is volunteering his time, he said, to help defeat the bill. Sullan said the issue is not about attorneys’ fees but about consumers’ rights that are being threatened at the Capitol.

“Right now, big business is calling the shots down here,” he said.

Sullan is open about how his firm makes much of its money, but he also points a finger at the homebuilders pushing the bill.

“It certainly begs the question,” Sullan said. “Why are the builders down here? They want to keep millions and millions in their pockets instead of fixing homes.”

Sullan has won some successes. The bill, which many had originally thought would pass handily, just squeaked by in the House in a Jan. 27 vote.

Sullan on Monday was not happy, through, with amendments added in the Senate Business Affairs and Labor Committee. They exempt government entities such as local municipalities and public utilities from the bill’s provisions.

The bill’s passage in not guaranteed when it is debated before the full Senate.

Senate Majority Leader Norma Anderson, R-Lakewood, said the lobbying effort, particularly from the homebuilders’ side, has been so ugly that it may jeopardize its passage in the Senate.

“I think they could hurt themselves,” Anderson said.

Those in the homebuilders’ lobby deny their tactics are untoward and say they are pushing their bill to keep costs down for future homeowners.

Still, the court records underscore how much homebuilders can gain if Sullan and his allies succeed in their efforts to kill the bill.

The Colorado Association of Home Builders has mounted a costly lobbying effort and has hired high-priced lobbyists, including former Sen. Steve Durham.

One example of pressure comes from the Colorado Water Congress, which on Monday accused the top lobbyist with the state Home Builders Association of threatening that group. The Home Builders Association retorted that the congress uses lobbyists with links to trial lawyers.

The Home Builders Association has also requested that the secretary of state investigate Sullan for violation of state lobby laws.

Sullan calls the charges, which include his failing to file as a lobbyist with the secretary of state’s office, “dirty pool,” since he does not have to file because he is not representing anyone at the Capitol.

“It’s a frivolous complaint,” he said.

The homebuilders’ lobby also has the resources to open doors at the Capitol.

Developers and related industries are the largest special-interest campaign contributor in Colorado, with development interests contributing at least $2.7 million to Colorado candidates and to the major political parties between 1996 and 2002.

“This is pure partisan politics, pushing through a bill that benefits the No. 1 campaign contributor in the state,” Sullan said.

Those opposing the bill, including Sullan, have also made a name for themselves through campaign contributions.

Organized trial lawyers groups and other attorneys who share those groups’ interests have donated more than $200,000 to Colorado campaigns since 1998. Sullan and his associates have made $34,200 in campaign contributions over the past four years.

“I think that the effort you see from both sides shows the magnitude of the issue,” said Virginia Morrison Love, who lobbies for the homebuilders.

Source: Denver Post, February 11, 2003, page 1A