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Colorado Home Astroturf



Astroturf appears to be popular these days in Colorado.

As Walter noted in an earlier post today, the Independence Institute's Dave Kopel writes at Volokh pointing to his column in The Rocky Mountain News that unearths some less-than-full reporting at the Denver Post. It seems the newly left-tilting Colorado legislature is looking at a bill that would prohibit home buyers and home builders from contractually waiving buyers' rights to sue in tort, above any warranty. As Kopel notes:

The main proponent of the pro-lawsuit bill is the Colorado Home Alliance, which obviously played an important role in helping the Post with the article. The article quoted from real estate contracts which had been obtained by the alliance, and relied on the alliance for a text box which listed 19 builders that have used waivers.

Oddly enough, however, the article never quoted a named spokesperson from the alliance. The article, by way of background, discussed a failed 2004 ballot initiative (Amendment 34) that would have removed some legislatively imposed limits on homeowner lawsuits. Clay Vigoda - the political consultant who ran the pro-lawsuit initiative - also happens to be the registered owner of the Colorado Home Alliance Web site.

The Colorado Home Alliance and the Post both deserve praise for warning homebuyers about the dangers of signing a contract without carefully reading all the terms. But it's hard to see why an article that mentions the pro-34 campaign and the alliance wouldn't mention the overlap between the two groups.

But it gets better. Just who is the Colorado Home Alliance? I did a little digging to find out.

"Colorado Home Alliance" ("CHA") appears to be nothing more than an "Astroturf" (faux-grass roots) organization for two prominent Colorado construction defects firms, McKenzie Rhody & Hearn in Denver and Vanatta, Sullan, Sandgrund, Sullan & Smith in the capital's southern suburb of Greenwood Village.

Just how do I know this?

Looking at the Colorado Secretary of State's list of registered lobbyists, as of February 2, 2007, the same Clay Vigoda is listed as under the employ of the CHA and the law firms listed above. Vigoda's listed office, 5618 S. Geneva St. in Greenwood Village, and his phone number, 303-320-8352, are the same as those listed for the CHA.

Long-time readers of our site will recall Walter's posting, citing the Denver Post in July 2004, that these same two construction defects firms worked to get the ultimately unsuccessful Amendment 34 on the ballot and gave at least $117,500 to the effort (as of July 2004). As reported in the September 2004 Colorado Springs Business Journal:

The passage of Colorado House Bill 1161 mandated that homebuilders be allowed an opportunity to rectify construction defects before a homeowner or commercial property owner could file a lawsuit. Proponents of the bill said state legislators initiated HB 1161 because of rapidly rising liability insurance costs and increasing construction lawsuits.

Gov. Bill Owens signed HB 1161 on April 25, 2003, and two days later Denver lawyers Scott Sullen and Cass McKenzie filed an initiative that counteracts the legislation. Amendment 34, which is slated for the November ballot, prohibits restrictions on any property owner's right to file a lawsuit for the recovery of damages.

A spokesman for the home builders stated in the same 2004 Colorado Springs Business Journal article that "average multi-family attached housing per-unit liability insurance cost is $10,000" in Colorado, with rates some 7 to 8 percent higher in Denver. Obviously, such costs are relevant to lower income first-home purchasers. The experience in California, prior to its adoption of a "right to repair" law similar to Colorado's 2003 HB 1161, is instructive. As we described in the Manhattan Institute's 2005 Trial Lawyers, Inc.: California report:

[T]he construction of new condos�-the home of choice for asset-strapped first-time homeowners�-plummeted from 18,691 units in 1994 to 2,945 in 1999. In the mid-1990s, 30 percent of new houses in California were condos; by 2000, only 2 percent were condos. Areas of the state that were job engines in the 1990s, such as Silicon Valley, have started to lose population in part because of the lack of affordable housing. In 2002, California was building one new house for every 3.5 new jobs, barely half of what economists say is required to support growth.

The problem harkens back to the early 1980s, when .... lawyers started blanketing condo communities with flyers listing a litany of potential defects, from leaky windows to loose carpet corners.... To dig into as many deep pockets as possible, lawyers typically name as defendants as many as 60 subcontractors on a project�-and all their insurers�i-ncluding some who had nothing to do with that portion of the construction where defects are being alleged. As a result, portable-toilet vendors are being dragged into lawsuits over construction flaws, and roofers are being named in litigation over tennis-court defects, inflating costs and causing cases to drag on for years.

The "right to repair" issue passed into Colorado law in HB 1161, like a similar provision passed in California, is designed to stop excessive litigation and make housing more affordable. The same is true of allowing home buyers to opt-out of tort. Forbidding home buyers to contract away non-warranty tort rights does nothing more than increase the costs of home building for all, since there's nothing to prevent a prospective home buyer to insist on a tort remedy in his insurance contract, for a (likely sizable) premium. Many would of course pass on the additional remedy -- much to the dismay of the McKenzie Rhody's and Vanatta, Sullan's of the world.

 

 


Rafael Mangual
Project Manager,
Legal Policy
rmangual@manhattan-institute.org

Katherine Lazarski
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.