Caveat Emptor: Can Buying This Home Cost You Your Rights?

The branch of the homebuilding company, Mercedes Homes, operating in Brevard County Florida, writes into the fine print of their contracts that customers cannot complain about inferior construction to their neighbors. They actually filed a lawsuit against one woman for doing so:

Jay Ann Contardi couldn't imagine a problem any worse than the deluge of rainwater pouring into her leaking home. That is, until she ran afoul of the aggressive lawyers representing her builder, Mercedes Homes.

"It has changed my life. I'm afraid to talk to my neighbors. I'm afraid to walk my daughter to the bus stop. I'm afraid to talk to you right now," she told NewsChannel 2 reporter Dan Billow.

She's not the only one. Other Mercedes homeowners asked us to protect their identities.

"I feel like I'm in a police state. I can't do anything. I have no avenues. I have nowhere to turn," one homeowner said. That's what it feels like when you're sued for talking to your neighbor.

In the company's plush corporate offices, executives hatched a plan to make buyers sign away their First Amendment rights.

"It's there in black and white. The customer should read his or her contract thoroughly before they enter into it," said Patrick Roche, Mercedes Attorney.

When you buy a Mercedes home, the fine print says you can't complain to your neighbors, call the news media or even carry a picket sign, even if your new quarter-million dollar home leaks through the roof, walls and windows.

OK, so the tone of that report is hardly balanced (it has everything except demonic laughter playing behind the lawyer's statement) and Contardi did more than talk to her neighbors, she distributed flyers. But that should still be something she's allowed to do if what the flyers contain is true. What I don't understand about all the angry Mercedes Homes customers is that supposedly the work was guaranteed. On their website you find:

Our Warranties Mean Peace-of-Mind
Choosing a builder to construct your new home is a major decision. When considering Mercedes Home -- take note of this fact: We're so confident of our building standards, that we back every home with a one- and two-year limited warranty as well as a ten-year structural warranty.

You'll sleep easy knowing that you chose a company that stands behind its product 100% and will be there for you even after you've moved into your new home.

Of course, if they were really that confident about their work, they'd hardly need to write a clause into the contract forbidding discussing complaints with one's neighbors. I don't imagine it's easy to get a copy of that contract (I've looked a little), but they do have one of the strictest Privacy Statements I've seen on a website, so maybe we're looking at a corporate culture problem here:

Prospective purchasers must visit a Mercedes Homes sales office and enter a written contract with Mercedes Homes in order to purchase a home.... Mercedes Homes and its subsidiaries expressly disclaim any liability for damages, costs and expenses arising out of or in any way connected with the use of this website, and by utilizing this website, you AGREE THAT THERE ARE NO REMEDIES FOR NEGLIGENCE, OR UNDER STRICT LIABILITY, OR BREACH OF WARRANTY OR CONTRACT, INCLUDING BUT NOT LIMITED TO INDIRECT, CONSEQUENTIAL, PUNITIVE OR INCIDENTAL DAMAGES, EVEN IF YOU GIVE NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. (emphasis theirs)

Folks on this message board are confirming this woman's opinion about this company. I know from experience, builders will always have unhappy customers. It's the nature of the relationship and the amount of money involved, but when this many people are unsatisfied, it might be worth while considering another option.

merci Ondine

Comments

[wilfred]

Another good laugh, corporate America just LOVES this country, waving the flag while muzzling free speech. Isn't that the same reason burglars gag their captives while they rob the house?

[Sebastian Holsclaw]

Probably the easiest way to combat this is to publicize it. Good job Edward.

[Jesurgislac]

Why would you want to combat it, Sebastian? Mercedes Homes are merely following the standard set by the Bush administration... ;-)

Okay, that's a bad joke. But it was the first comparator that occurred to me.

Someone post an open thread where we can discuss bad political jokes and Terry Pratchett. Or write haiku. Can we have haiku even if Moe isn't there any more?

[Bill]

Is this even legal?

Can you really sign away your first amendment rights like this?

[Slartibartfast]

There are ways around this sort of thing. First of all, if the home is not built to code, you can go to the county code inspector. Even bringing this up in discussion with the builder has been known to get their attention.

[radish]

I was under the impression (from some limited exposure to tenancy law in IL many years ago) that contractual clauses like this rarely hold up in court. They provide an excuse for SLAPP-type intimidation suits but tend not to be enforceable in the long run because of conflicts with statutory protections... You can't, er didn't used to could, sign away certain rights and privileges, even by accident. YMMV.

Hopefully the Contardis will persevere, and will draw strength from the press releases the FL Governor's office will be issuing any minute now with scathing denunciations of Mercedes' frivolous lawsuits and bad-faith business practices.

[xanax]

Is this even legal? Can you really sign away your first amendment rights...?

1) Probably not.
2) Except in a Florida court.
3) Any home-purchase contract is a starting point. If a contract contains unacceptable clauses, cross them out and intial the emendations. Then sign it.
4) If the other party doesn't accept your changes, buy a different house.

[blogbudsman]

There's got to be more to this story. Preposterous. Sue me, I'm screeming from the highest hill - the home is crap. Sebastian's right, Edward's post is the beginning of the end of this scheme. Probably a feeble attempt to 'defend' against Alar type situations with the apple industry and Oprahs encounter with the beef industry.

[Edward]

Any home-purchase contract is a starting point. If a contract contains unacceptable clauses, cross them out and intial the emendations.

To that I'd add it seems that buyers should pay their lawyers to read over the contract looking for such hidden gems, no? Or is that usually not necessary (asks the apartment dweller)?

[Slartibartfast]

There's certainly other approaches. You could band together a bunch of neighbors, rent a lawyer (or, better yet, have a lawyer as one of your neighbors) and countersue. The visibility and subsequent negative publicity will have some leverage that a single person complaining lacks. Another approach is to invite friends over and have them see the problems, and have THEM make a public stink about it.

[Bob]

"Is this even legal? Can you really sign away your first amendment rights...?"

Attention idiots, First Amendment rights apply to the GOVERNMENT, not to business. If those morons chose to sign a contract without reading it, then that's their problem. Not knowing of Caveat Emptor by the time you are old enough to buy a house borders upon the insane.

[Slartibartfast]

Attention idiots, First Amendment rights apply to the GOVERNMENT

Interesting position. Who's doing the enforcing, here?

[venivedi]

Man, I'd LOVE to be the lawyer representing these folks in an action. I don't care what kind of contract these folks have, a judge would toss out stuff like this in an instant. That plus you'd argue it to a jury AND ask for punitive damages.

So you're on a jury, you hear this story, judge says it's OK to award actual AND punitive damages. What are you gonna do??

Yep, you're gonna be royally pissed off and award my client lots of money.

Plus the publicity I'd get!! What a windfall!!

[vida]

First amendment rights do apply only against government action, but I certainly would not call someone an idiot for not knowing that. Confidentiality clauses in contracts are commonplace. However, you would normally find them in business-to-business contracts - not agreements between businesses and consumers.

[crionna]

Uh, I really have to, ahem, come down on the side of, cough cough, those recommending that folks read the contract before spending a 1/4 mil on something.

Let's just say that venividi should work pretty hard to get me off the jury during voire dire lest I award damages to the county for his plaintiff wasting the time of the judge, jury, court officers etc.

[Anarch]

Riffing off crionna's point a little, I've always wondered whether the principle of "It's in the contract, hence it's your fault for not noticing it" is legitimate in today's modern age of "confusopolies". There's a marked limit as to the amount of information a person can understand -- marked in relation to the complexity that can be induced without too much difficulty* -- and I'm curious as to whether it could or should be desirable to have laws enforcing a certain maximal level of complexity in particular spheres.

* This is somewhat related to the problem of factorization and d-log in that the "function" increasing the complexity of a phrase is easy to compute but its inverse is very hard to compute. It's actually worse, though, since English complexity is ill-specified which means that a very obfuscated piece of text can have multiple divergent interpretations whereas a simple one in general has only two or three.**

** Holding linguistic drift constant, of course. Once you start parsing 200-year old text (e.g. the Constitution) all bets are off.

[Anarch]

Probably a feeble attempt to 'defend' ... Oprahs encounter with the beef industry.

You know, I'm positive there's a gratuitously vicious joke to be made here but I just can't find it. Any help?

[Ereshkigal]

It could go to court-- almost anything can go to court in a contracts suit-- but if ever there was an opportunity to void a contractual clause as "against good public policy" this seem to beamong the top ten.

Courts tend to dislike truly sticky adhesion clauses. And the horses they rode in on.

[Jackmormon]

The legal debate I can't really comment on, but the PR for this company, once the inevitable word about inevitable problems like this, will be deadly. Anyone (er, else) want to talk about how much this sucks as a business plan?

[liberal japonicus]

Riffing off crionna's point a little, I've always wondered whether the principle of "It's in the contract, hence it's your fault for not noticing it" is legitimate in today's modern age of "confusopolies".

Good point. There's been a number of bloggers writing of late about credit card companies writing absurd clauses that dictate that if you had a late payment in the past year, they will jack up the interest on any remaining balance to usurious levels. I realize that some here might have an interest in getting lawyers more work, but do you really think increasing the 'cost' (in terms of time and effort) of analyzing transactions is really helpful in encouraging economic growth?

ps. just kidding about the lawyer thing.

[Sebastian Holsclaw]

Definitely a poor decision from a long-term PR perspective. Whichever lawyer drafted that clause would have done his client a far better service to reccommend against it.

[Jay C.]

Of course, this, like virtually every other blog-comment discussion of legal points or principles, is going to need the huge screaming IANAL!!! disclaimer from yrs. truly, (and corrections from the legal community will be graciously accepted) but a couple of things stand out in the Mercedes Homes flap:

- First, confidentiality agreements, typically, IIRC, apply to settlements of suits - it seems to me that a contract mandating "confidentiality" of complaints re MH's construction quality (with subsequent legal penalties) would violate numerous legal/Constitutional rights of homebuyers right off the bat: whether or not this provision is buried in small print in the body of a lengthy contract, even I know that a "private" contract cannot be considered valid if it violates any outstanding provisions of the law: in this case, whatever consumer-protection regulations the State of Florida has in effect.

- Second: even though Bob, in his 4:40 post, puts it a bit crudely, there IS a sort of "Caveat Emptor" effect in operation here: while those clauses in Mercedes Homes' contracts may be outrageous - well, maybe this is just the reaction of a longtime New Yorker, but anyone who spends as much as this on a house really ought to get a legal review of the contract: not that this excuses MH, of course, but, yes, not noticing an egregious restriction like this is, well, pretty careless.

Slightly OT, but, what does "YMMV" mean?

[Edward]

JayC,

I only found the following in the Acronym dictionary: Your Mileage May Vary

Which makes sense here.

[tonydismukes]

Leaving aside outrage at the company for writing the clause and snarkiness at the homebuyers for not catching it, can we get any actual lawyerly opinions from any actual lawyers (Von?)on how likely this sort of thing is to stand up in court?

I know, I know ... you haven't seen the actual contract, it's not your area of specialty, you're a lawyer but not our lawyer, etc. Can any lawyers offer at least a general idea of the likely issues involved?

[trilobite]

Just as a theoretical abstract discussion not meant in any way as advice:

You can put anything you want into a contract.

One big exception: contracts to accomplish illegal ends are void -- as in "I put a contract out on him, Rico, he'll be sleepin' wit' da fishes." That is not a valid contract. But there's nothing illegal about not talking.

It is unlawful to violate the constitution, but as above, the First Amendment in no way applies between private parties neither of whom are state agents. Some state constitutions' free speech clauses apply against private parties (California's used to, not sure if it still does), but I seem to recall that Florida is not one of those states.

You can sometimes get a contract or some part of it deemed unenforceable by reason of unconscionability. Unconscionable is hard to define, it's a "know it when I see it" sort of thing. And while the word sounds as though it means "it's so bad we won't enforce it," the theory is more that "it's so bad, nobody woulld have agreed to it if they had a choice, so we're going to go against the usual presumption that the signer actually read and understood the contract and freely decided its benefits outweighed its costs."

"Presume," btw, means much more than "assume." A "presumption" is taken to be true unless strongly rebutted, and a conclusive presumption is non-rebuttable. That a person read his contract when he had a meaningful opportunity to negotiate is pretty conclusive as presumptions go.

For that reason, it helps if there was "procedural inequity" in the negotiation process -- a confusing provision in fine print in a boilerplate clause in a take-it-or-leave-it contract between a consumer and a big company that dominates the field is much more likely to be deemed unconscionable than a provision in plain language in a contract negotiated between two businessmen of roughly equal standing. This one is in-between -- obviously, the realtor is a repeat player, but a $250,000 item is not your average consumer item, and the buyers could have gone elsewhere. Presumably, they had a meaningful opportunity to negotiate. A court will usually, under those circumstances, presume that they read their contract and decided its benefits outweighed its costs to them. Therefore, it should be enforced against them - otherwise, nobody could trust contracts at all.

Is "Don't discuss this" unconscionable even in the sense of "outrageous"? Offhand, I don't see why. I don't LIKE it, but there's no direct economic harm or risk of personal injury from not speaking publicly about your disputes with someone. Lots of people might find it advantageous to have a no-dirty-laundry rule -- as in, "what happens in Vegas stays in Vegas." You might be very glad to have a contract with your creditors that says "the Company may not report any of our disputes to Experian."

Basically, sounds like they got screwed. But they made the bed themselves.

The scary part is, what if all Florida realtors start incorporating this clause? Or all companies, everywhere? Will enough consumers boycott to make it profitable for companies to avoid using this clause? I have my doubts. Note that so far, nobody has revolted at having to arbitrate their credit card disputes, which you would think might have given some people pause.

[fdl]

IAAL, but this is NOT legal advice.

In California, at least, you could get review of the contract under two theories: unconscionability and in violation of public policy.

Both of these doctrines tend toward ruminative justice (so my gut tells me), but unconscionability generally looks at the impact of the clause on the signer, why the public policy doctrine looks at effects on the general public.

Given California's strong anti-SLAPP (strategic lawsuit against public participation) law, i think that if the homebuilder sued for breach of contract, for violation of the gag clause, the judge would be unlikely to enforce it.

Francis

[tonydismukes]

Follow up question for the lawyers. Suppose the contract is held to be enforceable. Does it then become a relevant question as to what penalties (if any) are listed by the contract for violation of the clause? If no penalties are explicitly spelled out ($5000 per gripe to the neighbor or whatever), how would the consequences be determined? The company obviously wouldn't want to say "deals off, we want our house back", since they'd have to give back the money. If it goes to court or arbitration, how would the judge decide damages?

[fdl]

tony:

best guess is that the Company would put on expert evidence regarding the damage done to its reputation, including things like lost sales. BUT, this is highly dependent on the language of the contract, which I haven't read and don't intend to.

Required disclaimer: I am not your lawyer. I am not giving legal advice. This conversation is not in my professional capacity, but is just idle chit-chat. Yes, I'm probably taking this too far but the State Bar is not known for its sense of humor.

Francis

[crionna]

Anyone (er, else) want to talk about how much this sucks as a business plan?

Actually, its pretty good knowing Americans (being one helps that knowledge). For better or worse (usually the latter unfortunately) we want what we want when we want it and that usually means right this second.

So, perhaps Mercedes is offering homes at a great price and/or with a wonderful interest rate. Many Americans are going to look past some of the crap in a contract because they want what they want whe..well you get the idea.

Also, in CA a number of years ago I had a tandem bike stolen (a really cool aluminum Cannondale, purple, anyone seen it?) under circumstances that did not reflect well on the security in our building (the guard held the door open for the crook, literally, and accepted the explanation that at 3am he was taking it to have the rear wheel fixed, the very rear wheel that was still KRYPTONITED TO THE FENCE). Needless to say the security co. coughed up replacement cost, but I had to sign a paper that said I wouldn't reveal their name. Pretty standard I'd guess.