Fronterra Village Multifamily Community Association, Inc. v. Pulte Home Corporation:  A Case Study

by Jeff Kerrane & Duncan Griffiths ArticlesColorado

March 15, 2012

From the Attorney's Perspective

When it rained, the common  areas flooded. The homeowners had to fight off mosquitoes. The roofs leaked.  Water would  get behind the siding and wood  trim. In the winter, the sidewalks  became  dangerous because  of ice. Homeowners had to skate to their mailboxes  to retrieve their mail. Strong winds caused  roof shingles to blow off and siding to become  loose. The concrete  had deteriorated, heaved, settled, and cracked.

The board  of directors  of the young  Fronterra  Village Community  Association realized  that with each new weather event, the association  was draining  its funds to make repairs that were well beyond  normal maintenance. Efforts to have Pulte make repairs were unsuccessful. Making matters worse, the new association’s reserve  account was insufficient to make the needed repairs.

In June 2007, with no relief in sight, the board hired Benson, Kerrane, Storz & Nelson to represent the association against Pulte for their construction defect claims. As is typical for these  types of cases, Benson, Kerrane, Storz & Nelson entered  into a written contingency-fee agreement with the association. The agreement stipulated  that the firm would  advance all litigation expenses, and would  receive one-third  of anything  recovered as attorneys’ fees. The contingency-fee arrangement assured  the association  it would  not have to pay any fees or costs until the end of the case. Fees and costs would  be paid out of the eventual  recovery,  and not from the association’s reserves  or special assessments.

To understand better  the problems  Fronterra  was experiencing, we sent a team of architects and engineers to investigate  the defects. Additionally, we mailed a questionnaire to the homeowners asking them to identify the problems  they were experiencing in their units. 

Upon learning  the association  had hired our firm to pursue  construction defect claims, Pulte began  scrambling to limit its legal liability. One of its vice presidents sent a letter to each of the homeowners promising  to make any necessary  repairs and telling them: “We believe that homeowners associations  who rely upon lawyers to resolve concerns  they may have typically generate litigation in your community  where  only lawyers will be the winners.  Rather than spending time making demands through  lawyers, we simply ask that you call us if indeed there is an issue with the original construction of your home.”

While the letter was intended to dissuade  the Fronterra homeowners from pursuing construction- defect claims, it seemed  to have little effect. Homeowners were frustrated with the conditions  in the common  areas, supportive of the association’s efforts to pursue its claims, yet suspicious  of Pulte’s motive in sending  the letter.

Only a month after Pulte sent its letter to the homeowners, Pulte sent Fronterra’s general  counsel attorney  a draft release  for multiple Pulte projects in order for Pulte to fund their reserve  accounts.  The release  was broad  and would  have released  all of the association’s claims, even though  it did not mention  specific claims. Had the association  signed  this document, its entire case would have been  over.

While investigating  problems  with vinyl siding, the association’s architect made a startling discovery--the firewalls between the units at Fronterra  were not properly constructed. Initial estimates  were that the cost of needed firewall repairs could easily be in the millions of dollars, an impossibly expensive repair for the association.  We contacted  the local building  official and fire marshall to set up a meeting  to discuss interim measures  to protect the residents.  In response, Pulte’s engineer  met with the building  official and fire marshall and sent them a letter downplaying the firewall issues, stating: “Should an issue of non-compliance be determined with an important  life safety component... [Pulte’s engineer]  has and will take action as required.”  As a result, both the building  official and the fire marshall said that they viewed  the matter as a civil dispute between the parties and would  not take a position  or meet with the association.

By January, 2008, our experts  had completed their initial investigation,  and we sent a formal notice of claim letter to Pulte. Under Colorado  law, Pulte had 60 days to investigate the defects and send  a formal response to the association. Because  of the extent  of the defects, the association  agreed to give Pulte additional  time to investigate.

Ultimately we agreed  to enter into a “Plan B” agreement with Pulte. Under the Plan B agreement, the association’s experts  and Pulte’s experts  would  meet to discuss an agreed- upon  scope  of repairs. The intent was that the agreed-upon scope  would  ultimately be sent out to contractors  to bid, and the bids would  form the basis for settlement.  However, the Plan B negotiations  fell apart and the parties could not come to an agreement, so this scope  was never sent out for bid. Over the next several months,  our experts  and Pulte’s experts  performed inspections and testing on the property and met several times to develop  a repair plan. At one point, we discussed  with Pulte having a firewall built to simulate the firewalls at Fronterra  and have the wall burn-tested at a laboratory  in Texas. The test would  have cost about $20,000.00. Ultimately we were not able to agree upon  the specifications  for the wall to be tested, so the test never happened.

By July, 2009, the board  of directors  had grown  frustrated that Plan B had not resulted  in a resolution.  Initially, the association  filed a lawsuit against Pulte, but because  of a contractual  arbitration  clause, the case was transferred to arbitration. There is a common  misconception that arbitration  is more expedient and less expensive  than a trial. In Adams County District Court, it costs $224 to file a lawsuit. By comparison, the arbiter’s fees, totaling more than $66,000, far exceed the costs that would  have been  paid to the District Court. At the request  of Pulte and the subcontractor defendants, the arbitration  hearing  was scheduled for January, 2011, more than a year and a half after the association  had filed its lawsuit. This wait for the association  was comparable to the length of time the association  likely would  have spent  in District Court.

In April, 2010, the association  changed management companies and began  working  with Silvia Gregory of Westwind  Management  Group.  Almost immediately  after Silvia took over management of the association,  a severe hail storm caused  damage  to the roofs and much of the vinyl siding. Fortunately,  the association  had sufficient insurance  to pay for a complete  replacement of their roofs and much of took the depositions of Silvia and of Chris Loffredo, the association’s president. Depositions  of managers  and board members  are one of the most difficult parts of a construction defect case because  they require  hours of preparation. Managers should  always be compensated for their time performing  exceptional tasks outside  of their management agreement, such as preparing for a deposition. For board members,  however, there is no compensation for their time, other  than the benefits  to the association  of a good  recovery.

While most depositions are friendly events, the deposition that Pulte took of Silvia was one of the most contentious depositions I have experienced. I can only imagine that for Silvia, it was two of the longest days she ever experienced as a business  manager.  Although it was a tough  deposition, Silvia did an excellent job, and represented the association  well.

During the course  of the arbitration,  the parties took depositions of about  40 witnesses  and filed more than 600 motions,  discovery  requests  and other  pleadings,  and produced hundreds of thousands of pages  of documents. During one deposition late in the discovery  process, we learned  for the first time that Pulte had, on its own, performed a burn test of a firewall, and the wall failed the test. We thought  that our discovery  of the failed burn test was the “smoking gun” that would  force Pulte to settle the case and pay the association  for the firewall defects. Pulte, however, seemed  unfazed  by its own failed test, offering only $1,044,000.00 to settle the case. The association offered to settle its claims for $7,524,000.00. With the parties so far apart, it was clear the case would  proceed to a full arbitration  hearing.

Our legal team for the arbitration  hearing  consisted  of attorneys  Jeff Kerrane and Duncan  Griffiths, paralegal  Juleen McGrane, and law clerk Allison Vetter. The arbitration hearing lasted about  three weeks,  with more than 30 witnesses.  While the attorneys  spent  most of the time questioning and cross-examining witnesses,  Juleen and Allison played  critical roles. Juleen’s job was to coordinate the witnesses  and exhibits, making sure that witnesses showed  up on time and that an entire room full of documents was organized  and available for the attorneys as each witness testified. Allison’s job was to review daily transcripts  of testimony,  prepare  witnesses  and perform  legal research  as issues came up during  the hearing.

Both Silvia and Chris testified again at arbitration,  looking like relaxed  and experienced witnesses.  They provided information  critical to the association’s case and did an excellent  job. In the end, the association  received  an award  of $6.8 million against Pulte, in addition  to a separate  confidential settlement  for grading  and drainage  defects. Pulte paid the entire amount  in full within days of the award. The association  is now in the process  of interviewing contractors  and engineers to make repairs.


From the Manager's Perspective

I became  the association  business  manager  for the Fronterra  Village Multifamily Community  Association in April of 2010. At that time, the construction defect case was already in progress.  This article describes  my role as the manager  from April of 2010 through  today.

After the dust had settled from the management transition, the first event for me in Fronterra  Village’s construction defect case was to meet with the attorneys  from Benson Kerrane Storz & Nelson.  I met with Jeff Kerrane to go over what items were considered part of the construction defect case so that I would  know  how to handle  them in my day-to- day management of the community.  Due to their volume, I do not think I had a complete  understanding of all the issues the community  was facing because  of the defects, especially  the inadequate firewall construction. As time went on, I gained  a better  understanding of the defect issues, but even after meeting  with Jeff, I did not realize how involved I would  be in the case. I had only worked  on a small construction defect case in another  association,  but it was settled before  any type of court proceedings occurred.

Approximately  a month  into managing  Fronterra  Village, the community  was pounded by a hail storm that caused over $1.2 million in damages.  Much of the north-facing siding was replaced  and each building  received  a new roof through  an insurance  claim. Due to the hail damage,  the roofing claims were removed  from the construction defect case. Once all of the hail damage  was repaired,  it was time to focus on the construction defect case itself.

Benson Kerrane Storz & Nelson had set up a client portal on its website  to help inform residents  of the status of the case and on which homeowners could view certain documents. This was an extremely  helpful resource,  as I used this access to become better acquainted with the main reports  from each side of the case. I also had a resource  to send homeowners to when  they called Westwind Management  for an update.  Homeowner calls were minimal due to the fact that Jeff and the board  had previously  held homeowner meetings  and fielded questions in relation to the case. I also had to know  how to respond to potential  buyers in the community  and to make sure the construction defect case was properly  disclosed.  I often referred  to Jeff for the correct wording  for these types of inquiries and responses. A positive and open  communication style between the attorney  and the manager  is a must, and I would  say, through  this entire process,  most helpful for me.

A few weeks  before  depositions were to start, the settlement discussions  began.  The board  did not accept  a settlement  offer from Pulte, and decided  it would  be best for the homeowners—and have the best chance  of getting the repairs to the community  completed—if  the legal process were continued. The next step was deposition testimony. In my seven years of association  management, I have never participated in a deposition. In order to prepare for my testimony, I had to learn and fully remember over seven years of work orders, as well as meetings  with the board  and with contractors  that I did not attend because  I was not the original manager.  This speaks  to the importance of good  work order management and taking proper  meeting  minutes. Understanding the work orders was extremely  valuable, since they helped  the board at the initial time of discovery determine there was an issue with the construction of the condominiums. I have a general understanding of gutters, roof leaks and soffits, but in my preparation for the deposition, I learned  much more than I ever thought  I would.  Looking back on it now, the knowledge I gained  about  the construction side of the industry has helped  me immensely  in managing  all my associations.

I went through  two days of being questioned, under  oath, on all that had occurred  since the inception  of Fronterra Village. Think of being in a room with over ten attorneys, which included  the attorney  for the builder  and for every sub-contractor that ever set foot in the community.  They are all there to ask you, as the association’s representative, why the gutter failed or why you did not clean a drain that ran uphill. You also have the association’s attorney  next to you questioning why the opposing counsel  is asking you a certain question,  which you are still obligated  to answer. You are truly on the hot seat. After two days of deposition, the arbitration  started. Now instead  of deposition, I was on the witness stand giving testimony.  Many of the questions had already been  asked  in deposition!

From my viewpoint,  all of the preparation and review could not prepare me for the burden  I felt to the association  and the board.  I understood that I needed to answer  these questions to the best of my ability, because  the homeowners were depending on me. I wanted  to do the very best for them. I kept thinking, “What if I answer  this incorrectly and it negatively impacts the association?” This was a stress I did not expect. The other  aspect for the portfolio  manager  is the time involved  for the preparation and actual deposition or testimony  for one association,  while still having six other associations  that require  attention  during  the focus on the one association’s construction defect case.

After Fronterra  Village was awarded  funds to make the needed repairs, as a manager  who participated in the proceedings, I had a sense of excitement  to notify the board and homeowners that an award  had been  received.  I felt a sense of accomplishment in knowing  I did my part as a strong, confident association  business  manager. Now that there are funds to make the repairs, I can help the board  decide  how to make the repairs and who to hire. I can also inform the homeowners that, because  of the board’s hard work and diligence, their units will be safe and finally complete.

My suggestion is that managers  educate  themselves  on construction defects. As a manager,  you do not realize what a vital role you will play. This education needs  to include what will occur before, during  and after a case, in order prepare  you for the mental and physical road upon which you are about to travel.


From the President of the Board's Perspective

W e moved  in in April of 2009. We were not informed  of the lawsuit at that time. After realizing how the association  was being run, I decided  to work with or on the board  to make the association  a better  place in which to live.

I came on the board  around  August of 2009. This is when I started working  with Benson Kerrane Storz & Nelson on the lawsuit and when  things really started moving. The board  realized that keeping  the homeowners informed  without  breaking any confidentially  is a very difficult task.

The most important  things that I had to deal with were keeping  the homeowners informed,  and working  with the attorneys.  Also, we kept the homeowners apprised as to all construction people  on-site. As things progressed, one important  task was making sure the attorneys  had all the information  that they needed to proceed with the case. I had to be available a number of times to talk to the attorneys,  be at meetings,  give depositions and the like. One day I had to walk around  with an attorney  and a person  from the construction company, and take and record over 700 pictures. This alone took all three of us over eight hours. I even had to teach the attorney  how to shovel snow!

For two days it was necessary  for us to spend  time in an attorney’s office downtown and one of those days all we did was stare at the clock! This took time out of my normal schedule  and, on one of those days, the attorney  had a flat tire in the cold, blowing  snow.

Finally the arbitration  was at hand,  and the attorneys helped  prepare  me for my testimony.  With their help, I was able to get the 700 pictures  into evidence. The most important  thing that I have to say is that attorneys  are hired for a reason,  and it is important  to listen to them and follow their advice.


This article details a construction defect case from start to finish, including the perspectives of the attorneys, the community association manager, and the board president. Fronterra Village Multifamily Community Association, Inc. v. Pulte Home Corporation:  A Case Study  it was published in CAI RMC's Common Interests Magazine.