Homeowners vs. builder: Highlands Ranch case widely viewed as landmark

By Steve Raabe
Denver Post Business Writer

Nearly 1,000 Highlands Ranch homeowners square off against metro Denver’s biggest developer next week in a landmark lawsuit on swelling soils.

The class-action suit in Douglas County Court alleges that Highlands Ranch developer Mission Viejo Co. knowingly built homes between 1984 and 1990 on lots with potentially harmful expansive soils. The expansion caused heaving and buckling of floors and walls in the homes, the suit alleges.

Mission Viejo has denied the claims, setting the stage for a jury trial that ultimately could determine if millions of dollars in damages will be awarded to the homeowners.

The case is the biggest expansive-soil lawsuit ever filed in Colorado, and one of the largest in the nation, legal experts say.

Although it won’t technically be precedent-setting unless it advances to an appeals court, the trial will be closely watched by consumer and development interests as a bellwether of the willingness of a jury to assess major monetary damages against builders.

Damage amounts have not yet been identified in the lawsuit. The Colorado Geological Survey estimates that throughout Colorado, expansive-soil problems may cause at least $26 million in damages each year.

Because of a growing number of lawsuits, builders and local governments have begun adopting new construction techniques that mitigate potential damage, such as excavating expansive soil at building sites and replacing it with “clean” fill. For years, governments relied on uniform building codes that didn’t address the specific problems of soil swelling.

Colorado’s Front Range is prime territory for legal tests because thousands of homes sit atop a potential minefield of soils and rocks that expand when they get wet.

Until the 1960s, the problem was little-known because most of central Denver is built on sandy soils that aren’t subject to swelling.

But urban growth pushed development to outlying areas that have higher expansive properties, especially in southern, western and northern suburbs where soils and bedrock contain clay-like minerals that absorb moisture.

When suburban homeowners begin irrigating their formerly arid property, the swelling soils can cause structural problems that in extreme cases have made homes unlivable with buckling floors, doors and windows that won’t close, and huge cracks in walls.

The issue is troublesome for builders and developers, said Lawrence Watson, chairman of the construction litigation committee of the American Bar Association.

Builders typically take soil samples from their sites, Watson said, but some areas have geologic conditions that change every few feet.

“In the final analysis, all they know is what’s in the hole they dug,” he said. “It could be a big problem 3 feet away.”

“Then it becomes a budget issue,” Watson continued. “The more borings you take, the more engineering analysis is done, and the more money the developer spends.”

In the Highlands Ranch lawsuit, attorneys for 957 affected homeowners claim that Mission Viejo built homes on soil that its own geotechnical engineers identified as having high swell potential.

Mission Viejo then failed to adequately disclose the conditions to homeowners, the suit alleges, and failed to build the homes with structurally supported wood basement floors that are more resistant to buckling than conventional slab concrete floors.

Mission Viejo, a subsidiary of Philip Morris Inc., is the owner of the sprawling, 22,000-acre Highlands Ranch community in northern Douglas County. The company quit building homes several years ago but now sells home sites to other homebuilders.

Joe Blake, senior vice president of Mission Viejo, denied all of the suit’s allegations. “We have been consistent in this matter all along,” he said. “Our company and our people have built our homes properly.”

Other lawsuits in metro Denver have been filed against Richmond Homes, US Home, Ryland Homes and Merit Homes.

Last year, Falcon Homes agreed to pay $2.57 million to settle a class-action lawsuit brought by 305 Highlands Ranch homeowners.