Although recovery for home building has been looking up for a while—with new-home starts in 2013 up 18 percent over 2012 and new-home sales in January at their highest level since July 2008—coming
Lawsuits R Us
The building industry has its own collection of furies, forces that hound their victims relentlessly. And they are coming soon to your town.
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In Greek mythology, the worst fate that could befall a person was to be tormented by the Furies. They were the original winged monsters — three of them. Hideous creatures. Female. (I’m just stating facts here, not expressing opinions.) Their specialty was avenging fathers who had been killed by their children, but they happily pursued evildoers of all varieties.
The building industry has its own collection of furies, forces that hound their victims relentlessly. And they are coming soon to your town. Early this summer, we saw the incredibly biased attack by Dateline NBC on Pulte Homes. It’s not our place to tell "the other side of the story" — but if you guessed that there was one, you were right. Don’t think for a moment that there aren’t aggressive, young television wannabes in your town who wouldn’t sell their souls for a similar story. And if they have to spin against you to get the ratings, they’ll be only too happy to oblige.
Shortly afterward, the Boston Globe series came out attacking Toll Brothers and K. Hovnanian. Friends in each of those firms assert that that reporting also was highly biased.
These stories affect all of us, adding to the general negative attitude about our industry. In time, the listeners and readers will forget which specific builders were cited; it will just land in their gut as "those damned builders."
But as bad as the print and TV media can be, their impact pales compared with that of Fury No. 3. Who is it? Well, if you want to ruin your day, browse on over to constructiondefects.com and stare into the face of evil. I nominate one Thomas E. Miller as the construction industry’s "Prince of Darkness." While we’re at it, we might as well toss in a nomination for his daughter Rachel as "Princess of Darkness." Now, in case you think I’m being a bit harsh here, out of several thousand words on his Web site, in the very first sentence are the words "recover over $400 million." I’m sure that if you sat down and had a chat with Tom and Rachel, they’d spin you a good tale about their selfless acts of protecting innocent homeowners from ruthless, heartless builders. But when the first sentence on your site is about the money... well, it’s about the money.
This firm is very aggressive. It has an impressive staff with big pedigrees. They tell you right up front they aren’t very interested in "one home at a time" cases. Class action is where it’s at. The more the better. They aim for at least 50% of the homeowners in any development. Their take is 25% to 33%, and you can bet the average is toward the higher figure. Let’s make a guess of 30% as an overall average. That means their firm has taken in about $120 million from builders (out of the $400 million awarded). With 10 principals listed, I’d assume they are doing all right. Rachel, with the rather unique title of "marketing partner," is quoted in The Orange County Register as follows: "I have a yacht called Sea of Defects docked in front of my home on Balboa Island. It’s raised a few eyebrows." Charming. This isn’t something I dug up. They brag about it on the Web site.
I don’t begrudge people making a buck — even a few million bucks. But I sure like it a lot better when someone gets it for doing something useful. No doubt a lot of the builders who got sued deserved it. And some of the homeowners wanted only what was coming to them, fair and square. Someone has to help them. Let’s face it: There are still players in this industry who pull mind-boggling crap. Or in David Letterman-ese, "Stupid Builder Tricks." But Jane Smiley, in her recent novel Horse Sense, refers to the "parasitic legal class," and as I perused the Miller firm’s brochure, the term kept ringing in my ears. I don’t think there is an altruistic volume in the Miller law library.
Are the Millers coming your way? They have practiced and/or consulted in 12 states, and are signing up partners in other states as a way to spread their wings. They are doing public seminars now, with a slick brochure titled "Construction Defect Law for Community Associations." The Millers have authored a new consumer handbook, Home and Condo Defects: A Consumer Guide to Faulty Construction. Check out the Web site for the dates of their book-signing tour at a bookstore near you (I’m not kidding).
But it doesn’t matter if the Millers come. Someone else will. Here’s a fun fact for you: This country has 37 times more attorneys per capita than Japan does. Interesting statistic, don’t you think? OK, let’s say that Japan has only half as many attorneys as it needs. Doubtful, but let’s go with it. That says to me that we have about 18 times more attorneys than we need in the United States. Said another way: For every right- thinking attorney doing good, useful work, contributing to society, about 17 well-educated, upwardly mobile, highly trained and supremely motivated people are making work for the rest of us — and at our expense. A total of 400,000 of them and counting, the last time I saw the figure — and they’re looking for work.
So there you have the building industry’s three furies: print media, TV and the legal profession. There is huge money in the business of tormenting builders. So what can you do? I see three options. First, you can quit. Sell out, get out, run, hide, do something sensible for a living. Some are taking this option, but it’s not much of a solution for most. Second, you can keep doing what you’re doing. Just roll the dice and risk paying the piper, because I think if the Millers, et al., get ahold of you, you’re in for a spanking of the worst kind.
But there is a third approach: Get yourself in shape. Start selecting people like your business depended on it, because it does. Train them on how to do everything right the first time until they can do it in their sleep, and then let them do it. Quit turning over people — the cost is killing you. Don’t do dumb management things such as jamming projects and product out before they’re ready. You spend $10 there for every buck you think you saved. Have processes that get the projects ready on schedule, and then build them on schedule. Hire the best trades and suppliers and treat them like your best friends, not some throwaway commodities. And build what you know how to build on a schedule you can handle. Quit building liabilities just because you found a hot piece of ground and the sales are there.
Of course, there’s a lot more to it than that. But challenge yourself on just those points, and you’ll be busy for a couple of years. We in this industry are doing far too many things that make it easy for the Millers and their friends to get rich off of us and spend their time on yachts off Balboa Island. It’s time to put a few attorneys out of work. As long as we keep insisting on being good targets, the furies will be there, hounding, tormenting, extracting their pound of flesh. Will you be their next victim?
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