"RESOLVED TO SOLVE" - FINDING SOLUTIONS TO DISAGREEMENTS
Updated January 1, 2004
Centex Homes’ mission is to build quality homes and neighborhoods that exceed the expectations we have established with our customers. The great majority of our customers are satisfied with our service and their new homes.
When disagreements do arise, we usually resolve them directly with our customers. In rare instances, an agreement cannot be reached and, in that unlikely event, our contracts call for using arbitration to reach a resolution. (In California, we sometimes use a similar process called judicial reference, which is a slightly different method of alternative dispute resolution that we describe in one of the bookmarks below.) Our home purchase contracts require the use of arbitration because we find it usually to be fair, fast and less expensive than litigation for our customers and ourselves.
WHAT IS ARBITRATION?
Arbitration is a method of resolving disputes without going to court. An independent and impartial third-party decision-maker (called an arbitrator or neutral) listens to each side and then decides how best to resolve the situation. This often proves to be a fair way for both sides to settle a disagreement without the cost or time associated with litigation.
Our contracts specify the use of the arbitration processes and procedures of the American Arbitration Association, the world’s leading provider of conflict management and dispute resolution services. We made this choice because of the American Arbitration Association’s reputation and geographic reach. In addition, the American Arbitration Association now has specialized procedures specifically tailored for residential construction disputes. We have no affiliations with the American Arbitration Association and we get no benefit from referring disagreements to them.
HOW DOES ARBITRATION DIFFER FROM LITIGATION?
Litigation uses the court system and government judges. The court system has many rules and procedures and only lawyers are qualified to help people navigate through the system (although once in a while people go to court without a lawyer). Because of its rules, procedural safeguards and complexity, the court system can be a slow and expensive way to decide disputes.
Usually arbitration uses neutral parties as decision-makers who are provided by impartial organizations. With the American Arbitration Association both parties have equal voices in choosing the decision-maker. As arbitration has fewer rules and procedures, the parties often don’t need to use lawyers although they still may choose to do so. If you are unsure of your rights you should consult an attorney. You have the right to get a lawyer's advice and representation, as do we. Nevertheless, in routine disagreements, our company will take a lawyer to the arbitration only if the customer takes a lawyer to the arbitration.
Like a judge, the arbitrator makes decisions and awards allowable in any court of law; however, unlike in court, the arbitrator’s decision is final and cannot be appealed by either side. (In California, subject to certain limitations, the arbitrator's decision is reviewable by a panel of arbitrators at the request of either side.) Each side is eligible to receive the same remedies in arbitration as are available in court even though hearings are often informal, can even be held over the phone and held in a neutral location or a person’s home instead of a courtroom.
WHAT IS JUDICIAL PREFERENCE (CALIFORNIA ONLY)?
In California, our contracts for homes sold from February 1999 through December 2002 required the mandatory use of mediation (see the next paragraph), followed if necessary by judicial reference. Judicial reference uses a neutral person (called a referee), who is a retired judge, as the decision-maker. Both parties have an equal voice in choosing the referee. As judicial reference is outside the court system, the parties don’t have to use lawyers, saving time and often money. The referee makes decisions and awards that are allowable in any court of law and they can be appealed by either side.
WHAT IS MEDIATION (REQUIRED IN CALIFORNIA ONLY)
Mediation is a method of resolving disputes voluntarily with the help of an independent and impartial facilitator (called a mediator or neutral) without having to go to court. Hearings are informal and held in a neutral location or a person’s home instead of a courtroom. The mediator works with the parties to help them find a mutually agreeable resolution to the situation. If the parties don’t agree on a solution the mediator will not impose one on them. Some people like mediation because a neutral person helps the parties to find common ground. If you don't live in California but want to mediate a disagreement with us, let us know.
WHAT IS THE AMERICAN ARBITRATION ASSOCIATION?
Founded in 1926, the not-for-profit American Arbitration Association is the world’s leading provider of conflict management and dispute resolution services. In 2000, the American Arbitration Association handled nearly 200,000 cases needing a wide range of disputes through mediation, arbitration, elections and other out-of-court settlement techniques.
The association – with 37 offices in the United States and 53 cooperative agreements with arbitral institutions in 38 countries – provides a forum for the hearing of disputes, case administration, tested rules and procedures, and a roster of impartial experts to hear and resolve cases. The association is committed to providing exceptional neutrals, proficient case management, dedicated personnel, advanced education and training, and innovative process knowledge to meet the conflict management and dispute resolutions needs of the public.
The American Arbitration Association’s policy on consumer arbitration is guided by the state of existing law, as well as its obligation to act in an impartial manner. The association supports the principles of the Consumer Due Process Protocol to maintain fairness in arbital matters.
WHAT IS THE CONSUMER DUE PROCESS PROTOCOL?
The Consumer Due Process Protocol establishes principles that should be observed to ensure that the arbitration process is fundamentally fair. It was developed by the National Consumer Disputes Advisory Committee, a panel convened by the American Arbitration Association that included a former state judge, consumers’ rights advocates, government consumer affairs officials and members of the business and academic worlds.
Highlights of the Consumer Due Process Protocol’s Statement of Principles include:
- Full disclosure of the arbitration process
- Both parties have equal voice in selecting the arbitrator
- Both parties maintain right to seek relief in small claims court
- Reasonable costs, time limits and location of hearing(s)
- Right to be represented by an attorney or other
- Written explanation of award, if requested
The complete Protocol is available at Consumer Due Process Protocol. We have tried to follow the recommendations of the Consumer Due Process Protocol in designing our arbitration and judicial reference programs.
WHAT ARE THE ADVANTAGES OF ARBITRATION?
Arbitration is usually cheaper, faster, and more informal than litigation. The parties have greater control in determining when and where the matter will be decided. For example, arbitrations sometimes are conducted in the home of one of the parties to the disagreement.
In arbitration, the parties may agree beforehand to the specific rules under which the case will be heard. For example, the parties may agree to limit the number of witnesses each will present, and set boundaries on the amount and type of evidence that will be presented. The parties also may agree on how the arbitrator should go about determining or allocating damages, expenses, attorney fees, and arbitration costs.
Choosing the arbitrator – the "judge" for these proceedings – is also in the hands of the parties. The parties may choose to use a decision-maker experienced in the subject matter of the dispute. As some cases involve complex evidence, testimony, and documents, the arbitrator’s knowledge allows for a quick understanding of the issues, which in turn can save time and expense.
WHAT ARE THE COSTS OF ARBITRATION?
For claims that are above $10,000, (see the “Important Update” below), the American Arbitration Association requires the filing party to pay certain fees which are based on the dollar amount of the disagreement to be settled:
- A nonrefundable initial filing fee is payable in full by a filing party when a claim, counterclaim or additional claim is filed.
- A case service fee will be incurred for all cases that proceed to their first hearing. This fee will be payable in advance at the time that the first hearing is scheduled. This fee will be refunded at the conclusion of the case if no hearings have occurred.
Details on the administrative fees, including a fee schedule, can be found by clicking on the “Rules/ Procedures” tab near the top of the American Arbitration Association web site, then clicking on “Rules,” and, finally, clicking on “Commercial Dispute Resolution Procedures, Effective September 1, 2000.” The administrative fees are listed at the very end of that section.
We provide in contracts signed after January 2002 that we will split the cost of the administrative fees with our customers, no matter who makes the formal request for arbitration. Also, even if your contract is an earlier version whose arbitration clause does not include a fee-sharing promise, we will split the filing fee and case service fee with you. We will pay 100 percent of these fees if the arbitrator decides that we should when he or she resolves the disagreement. (In California only, we will advance 100% of the filing fee, case service fee and arbitrator's fee. We will let the arbitrator decide how these fees ultimately should be split between the parties.) Other costs, such as lawyers’ fees or payment for expert witnesses’ time, could possibly be incurred if either party chooses to use them. The party who uses these services pays their costs.
Important Update: On July 1, 2003, the American Arbitration Association adopted special rules applicable to arbitrations between owners and builders regarding residential construction. These special rules are called the “Supplementary Procedures for Residential Construction Disputes,” and they provide for the builder to take a bigger share of the fees in disagreements between builders and owners involving amounts less than $10,000.00. We will, of course, follow the Supplementary Procedures for Residential Construction Disputes. This means that we will bear more than half of the fees when required, even though the contract may say that we just split the fees equally.
The following charts show fictitious examples of how the costs of settling a disagreement can vary between litigation and arbitration, and also whether a lawyer is involved. In each of the first two cases the fee rules in the Supplementary Procedures for Residential Construction Disputes have been applied.
Example 1: Mary believes she is owed $6,000 by Centex; the court or arbitrator agrees and awards Mary $6,000.
| The size of Mary’s claim ($6,000) calls for fees set by the Supplementary Procedures for Residential Construction Disputes |
Litigation
(lawyer on contingent fee) |
Arbitration
(lawyer on contingent fee) |
Arbitration
(lawyer on hourly fee) |
Arbitration without lawyer |
| Award to Mary |
$6,000 |
$6,000 |
$6,000 |
$6,000 |
| Filing fee |
($325) |
$0 |
$0 |
$0 |
| Case service fee |
$0 |
$0 |
$0 |
$0 |
| Arbitrator’s fee |
$0 |
($125) |
($125) |
($125) |
| Expert’ fees |
fees vary |
fees vary |
fees vary |
fees vary |
| Attorney’s fee |
($2,000) |
($2,000) |
($1,500) |
$0 |
| Mary’s net recovery before paying expert fees |
$3,675 |
$3,875 |
$4,375 |
$5,875 |
Example 2: Tom believes that he is owed $15,000 by Centex Homes; the court or arbitrator disagrees and awards Tom nothing.
| The size of Tom’s claim ($15,000) calls for fees set by the Supplementary Procedures for Residential Construction Disputes |
Litigation
(lawyer on contingent fee) |
Arbitration
(lawyer on contingent fee) |
Arbitration
(lawyer on hourly fee) |
Arbitration without lawyer |
| Award to Tom |
$0 |
$0 |
$0 |
$0 |
| Filing fee |
($325) |
$0 |
$0 |
$0 |
| Case service fee |
$0 |
$150.00 |
$150.00 |
$150.00 |
| Arbitrator’s fee |
$0 |
($375) |
($375) |
($375) |
| Expert’ fees |
fees vary |
fees vary |
fees vary |
fees vary |
| Attorney’s fee |
$0 |
$0 |
($3,000) |
$0 |
| Tom’s net recovery before paying expert fees |
($325) |
($525) |
($3,525) |
($525) |
Example 3: Harry believes that he is owed $80,000 by Centex Homes; the court or arbitrator agrees and awards Harry $80,000.
| The size of Harry’s claim ($80,000) calls for the standard AAA fee structure |
Litigation
(lawyer on contingent fee) |
Arbitration
(lawyer on contingent fee) |
Arbitration
(lawyer on hourly fee) |
Arbitration without lawyer |
| Award to Mary |
$80,000 |
$80,000 |
$80,000 |
$80,000 |
| Filing fee |
($325) |
($750) |
($750) |
($7,505) |
| Case service fee |
$0 |
($375) |
($375) |
($375) |
| Arbitrator’s fee |
$0 |
($1,000) |
($1,000) |
($1,000) |
| Expert’ fees |
fees vary |
fees vary |
fees vary |
fees vary |
| Attorney’s fee |
($26,667) |
($26,667) |
($15,000) |
$0 |
| Harry’s net recovery before paying expert fees |
$53,008 |
$51,208 |
$62,875 |
$77,875 |
Please note that the figures shown above are estimates and that real costs may vary
according to location and circumstances. Also, recoveries may vary according to the
skill with which a party (helped by its expert(s) and/or attorney) presents its case. The
case service fee in the first two examples is shown as $0 in each example because AAA
currently waives the case service fee for claims under $75,000. In the third example, the
fees shown are half the AAA rate because we have agreed to split them with our
customers. The filing fee listed under the litigation scenario is the filing fee for Dallas
County District Courts effective January 2002. Filing fees in other locations may be more
or less. The lawyer’s fee in the “contingent-fee” example is one-third of the recovery.
A lawyer who charges a contingent fee agrees to get paid only if he or she wins the case
for the client. The fee is often a fraction of the award, usually one-third. Finally, a
consumer that sues a company, or takes it to arbitration, some-times is awarded its
attorneys fees by the court or arbitrator, depending on the applicable law and the
contract between the parties.
HOW DOES THE ARBITRATION PROCESS WORK?
For arbitration to begin, one party needs to file a claim with a neutral, nonprofit arbitration organization, such as the American Arbitration Association, which we specify in our contracts. After the organization opens a case file, it sends to the parties a list of proposed arbitrators. These arbitrators must have no ties to either party. After the parties agree to an arbitrator from the list, a hearing date is set in a neutral location or a mutually agreed upon site, such as a person’s home. For cases less than $10,000, the hearing can even be done simply by submitting written materials, although either party has the right to request a hearing.
Arbitration hearings are attended by the parties involved, their attorneys (if being used), the arbitrator, and any witnesses the parties may have. Each party has the opportunity to make an opening statement, present evidence, question witnesses, and make a closing statement. During this presentation, the formal rules of evidence followed in courts generally do not apply.
After consideration of the evidence, the arbitrator makes a legally binding decision that can be enforced in the same manner as a civil court judgment. The decision is binding on both sides, and no appeals can be made. (In California, subject to certain limitations, the arbitrator's decision is reviewable by a panel of arbitrators at the request of either side.)
In order to file a claim with the American Arbitration Association, you should call the office nearest you. You can find the nearest office by going on the American Arbitration Association web site and clicking on the Contact button in the top right-hand corner of the page. You will find there a list of all of the offices of the American Arbitration Association. You can call or write the office to request an arbitration.
DOES THIS MEAN I HAVE GIVEN UP MY RIGHTS TO GO TO COURT?
Yes, and so have we, with one exception. A customer can go to small claims court if the disagreement qualifies for small claims court (rules vary according to locality and the terms of your contract). Most small claims courts have simplified rules, allow or require parties to describe their cases without using lawyers, rely on judges and not juries to make decisions, and reach decisions promptly, very similar to the arbitration process.
WHAT IS SMALL CLAIMS COURT?
Small claims court provides an informal, uncomplicated proceeding to resolve small disputes that do not involve enough money to warrant the expense of formal litigation. Trials are informal, and most people who appear in small claims court do not have a lawyer. In small claims court, the amount involved cannot exceed a specified amount, usually $5,000. These courts are found in most states and the courts’ rules vary from state to state.
WHAT IF MY CONTRACT HAS NO PROVISION THAT REQUIRES ARBITRATION OR JUDICIAL REFERENCE?
We haven’t always specified the use of arbitration (or judicial reference) in our contracts. Your contract may not require either one. This means that either we or you can go to court to have any unresolved disagreement heard by the court. But we can also agree now to hire a mediator to help us reach a resolution, or we can go to arbitration and have the arbitrator hear our disagreement. We will still split the filing fee, case service fee and arbitrator’s fee with you (in California, we will advance these fees) or follow the fee rules of the Supplementary Procedures for Consumer-Related Disputes, if those apply. We believe in alternative dispute resolution and will use it whenever possible to resolve disagreements with you.
WHAT IF I HAVE A COMPLAINT ABOUT THE COVERAGE UNDER THE NEW HOME WARRANTY THAT CAME WITH MY HOME, ISSUED BY RESIDENTIAL WARRANTY CORPORATION?
Here’s the short answer to this question: if your complaint is about the coverage for Years 1 and 2 in your home warranty, your disagreement is with us and you have the choice of arbitrating with us under the rules in the new home sale contract that you signed with us, or following the arbitration rules in the warranty from Residential Warranty Corporation. If your disagreement under your home warranty relates to the coverage in Years 3 through 10, then your disagreement is with someone else and you must follow the dispute resolution procedures in the warranty. Our process for resolving disagreements covers only disagreements that you may have with us, and not disagreements between you and others, such as the warranty company.
If the short answer is hard to follow, here’s the long answer:
In the process of purchasing a home from Centex, most of our customers get a “10 Year Written Warranty For New Homes” from Residential Warranty Corporation (“RWC”). This warranty is an extra benefit that we pay for. For purposes of warranty responsibility, the RWC warranty is broken into two pieces - the “Year 1 and Year 2" warranties, and the “Years 3 through 10" warranties. As the builder of your home we give the “Year 1 and Year 2" warranties. We are the “warrantor” of those warranties. Another company, called Western Pacific Mutual Insurance Company (“Western Pacific”), gives the “Years 3 through 10" warranties. It is the “warrantor” of those warranties. Western Pacific also agrees to step in to fulfill our responsibilities in Years 1 and 2 if we go out of business. This is typical of so-called “insured warranties” - there is another company standing behind the builder’s warranty promises.
If you file a claim for coverage under your “Year 1 and Year 2" warranties, and you are unhappy with the response, then your disagreement is with us. You could file your arbitration under the arbitration provisions of your new home contract with us, or you could follow the arbitration rules in the warranty from Residential Warranty Corporation. If you file a claim under your “Years 3 through 10" warranties, and you are unhappy with the response, then your disagreement is with the other warrantor, Western Pacific. You would file your arbitration with Western Pacific under the dispute resolution procedures in the warranty.
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