The legal bane of homebuilders

By Christine Tatum
Denver Post Staff Writer

Games of free association with executives running Colorado construction companies often turn profane when Scott Sullan’s name  comes up.

“Greedy,” “rabid” and “scum-sucker” are among the nicest words they use to describe Sullan, perhaps the lawyer most despised by the state’s building industry. He is the man hundreds of Colorado home and business owners called last year alone when roofs collapsed, basements flooded or foundations cracked, and they couldn’t get the companies responsible for the work to fix them. His Denver firm, Vanatta Sullan Sandgrund & Sullan , has made millions from builders’ mistakes.

Sullan’s legal brawls are spilling from the courtroom onto the Nov.2 Colorado ballot. Voters will be asked to decide the fate of proposed Amendment 34. That measure would lift some limits on the money property owners can collect in lawsuits against builders. It would also prohibit state lawmakers from capping some damage awards – a power they wielded last year over Sullan’s protests with the passage of the bitterly contested House Bill 1161.

That legislation placed detailed limits on construction lawsuits. It was co-sponsored by Rep. Gregg Rippy, a Glenwood Springs Republican who co-owns a construction company, and by Sen. Andy McElhany, a Republican real estate agent from Colorado Springs. The Senate, largely along party lines, approved HB 1161 by one vote – thanks in part to a swing vote from Democratic Sen. Abel Tapia, a civil engineer in Pueblo who counts builders among his clients.

HB 1161 has led to some hard conversations in Sullan’s modest office in the Denver Tech Center. In a small, white-wall conference room devoid of the opulent finishes found in some of the city’s biggest law firms, he matter-of-factly hits many clients with harsh economics:

 “When all is said and done, you will probably have to pay the substantial costs of litigation from any money you receive to repair your property,” Sullan said to a visitor, his wide and easy smile dissolving with each word. “Chances are good you won’t have enough money to make the repairs that brought you to me in the first place.”

Amendment 34 would change that he says.

A carpenter’s apprentice

Sullan, 51, was a boy in Illinois when he developed his architect father’s knack for envisioning building plans in three dimensions.

He spent his teens working as a laborer on construction sites. He put himself through law school with the money he earned as a carpenter’s apprentice.

By the time he took his first legal job in a Colorado firm, Sullan knew how to build houses and office buildings from start to finish. Higher-ups at the firm took advantage of his expertise. Nobody, it seemed, wanted to touch cases having to do with construction defects.

“I was the only one who understood it, so it all fell to me,” Sullan said.

That was 30 years ago. Sullan calculates that he has worked every day since – and so intently that he waited six years to hang paintings stacked against a wall in his office.

“I’m passionate about what I do,” he said.

And he’s wildly successful at it. Between 1994 and 1997, Sullan received roughly $5 million in fees for handling seven class-action suits filed on behalf of more than 14,000 Colorado homeowners whose houses were built on potentially destructive expansive soils. Sullan argued that builders knowingly constructed on ground that could swell, exerting a force so strong that is would heave, crack or buckle concrete foundations, floors and walls. He pegged the problem to the construction industry’s then-widely accepted practice of pouring concrete-slab basement floors directly on soil.

“A worthy opponent”

Some builders settled quickly after watching Sullan at work in 1996. That March, he wrangled a jury verdict on behalf of 957 Highlands Ranch homeowners that ultimately led developer Mission Viejo Co. to spend millions on home repairs.

For three weeks, he matched wits with Mission Viejo’s attorney, James Brosnahan, a legal stalwart from San Francisco who had prosecuted former Defense Secretary Casper Weinberger during the Iran-Contra scandal. The courtroom was packed with lawyers wanting to see a local boy square off against one of he nation’s most respected trial lawyers.

“It was a David-and-Goliath situation, and Scott handled himself very well throughout it,” said David Higgins of Higgins Hopkins McLain & Roswell, a Lakewood firm whose construction-industry clients have opposed Sullan on several occasions. “He earned a lot of respect and has proved to be a worthy opponent since.”

During the trial, officials with Richmond Homes told Sullan they wanted to settle a separate class-action case he had filed on behalf of 12,300 Richmond homeowners. He tried Mission Viejo by day and negotiated with Richmond at night.  In June 1996, Richmond agreed to pay Sullan’s firm $1.9 million and to spend tens of millions more to remedy problems.

Some builders who have handed Sullan his biggest settlement checks – such as Melody Homes, Richmond Homes and Village Homes – are now the biggest contributors to a campaign working to squelch the proposed Amendment 34.

Prodded by Poundstone

Sullan decided to champion the constitutional amendment after watching legislators debate, and ultimately approve HB 1161 in April 2003. The amendment wasn’t his idea originally. He said he was staring forlornly into a cup of coffee in the Capitol’s cafeteria only minutes after the bill’s approval when lobbyist Freda Poundstone brusquely pulled up a chair.

Poundstone, 78, is a political dynamo who knows how to get what she wants. As mayor of Greenwood Village, she treated President Reagan to lavish fundraisers at her home. Two amendments to the state’s constitution already bear her name.

“We’ve got to take this to the people,” Poundstone said she told Sullan , waving a fist in the air.

She told him about shoddy construction work in her own home, wincing as she described the sewage discovered under a basement floor because a sump pump had been installed improperly.

Sullan listened politely and walked away. But Poundstone wouldn’t let up. She pushed him to pony up for a firm that would help her collect enough signatures to get the issue on the November ballot. Her high heels clicking across parking lots throughout metro Denver, Poundstone delivered.

Sullan , who rarely deviates from his work wardrobe of navy pants and crisp button-down shirts monogrammed with his initials, wanted to keep the proposed amendment simple. He chose 97 words to override portions of HB 1161 with the following goals:

• Giving owners of commercial and public property the right to recover direct economic costs related to loss of use. The law allows only residential property owners to collect those damages, Sullan said. That means landlords can’t recoup lost rent, and store owners can’t recover lost inventory due to shoddy construction, he said.
  
  
•  Allowing property owners to collect for probable damages.” We have ways of knowing that beams are going to fall and floors are going to heave,” Sullan said. “You shouldn’t have to wait for something bad to happen before you can ask the builder to fix it.”
  
  
• Stripping “construction professionals” of immunity from lawsuits granted to them but not anybody else. If sued, Sullan said, average homeowners don’t have the same protections as the building industry.
  
  
• Ensuring that owners collect their attorneys’ fee in addition to damages. Sullan interprets current law to mean that only owners who successfully prove fraud are entitled to legal fees. And those fees, he says, combined with the fraud damages are capped at $250,000.
  
  

Despite his respect for Sullan , Higgins says his “worthy opponent” is off track this time. If damages aren’t more tightly controlled, builders’ insurance premiums will rise, potentially driving small construction companies out of business and almost certainly resulting in higher costs for consumers, he said.

The threat of higher insurance rates is a linchpin of the construction industry’s opposition to Amendment 34.

Higgins concedes, however, that Sullan has made a good point regarding 1161’s failure to address commercial property owners’ rights to recover direct economics damages tied to loss of use.

“I don’t think we need a constitutional amendment to fix it,” he said.

What really stumps Higgins is why Sullan would associate himself with a proposal that “smacks of self-preservation.”

Sullan knows better than anyone that construction defects cases are settled more often than tried and that there are “protections all over the place in the system to soften a lot of the seemingly hard-case stories,” he said.

“At the end of the day, Scott knows how the math is done,” Higgins said. “And neither he nor his clients are hurting, believe me.”

Sullan said his support of Amendment 34 has nothing to do with protecting his practice – a team of seven lawyers and six assistants who choose from among only the most lucrative construction defects cases – or his paycheck.

“This is about doing what is right.”