Indulge yourself – and moi – for about 15 minutes in a string of true stories, designed to show “the why” and the experiences that demonstrates that this plan can work, because it has already worked on a different level.  We’ll tee up a concept that could be worth millions to your firm, and billions to our industry.

Before you start reading, a serious Tip.

Don’t rush or skim this, or you’ll miss key points. If you don’t have 15 minutes to read this carefully, to absorb the points and see how it applies to the MH Industry today, then please read this later.

For your sake and those in the biz you care about, do take the time to read this thoroughly and analytically.

>>> Executive Summary: A smart use of litigation could profitably yield a series of breakthroughs for the factory-built-home industry.  Using the tips that follow the upside is amazing, and the downside is mostly time.  How, you ask?  That’s the purpose of this column…

…let’s get started…

Back in Time…to tee up the Future

Let’s go back to a time when I’d been in the MH industry about a year. Across the street from the retail center I was first hired by was a modular home outlet. Our side of the street sold manufactured homes – what some today refer to as “HUDs,” a short-form, insider-slang term for the HUD Code for manufactured housing, or a manfuactured home. There were dozens of sales centers on Shields Boulevard in OKC – “52 dealers sales lots” to be precise – the day when I entered the MH industry as a rookie retail sales person back in 1981.

I knew less than zero then about the industry’s politics, much less about the white hats and black hats that existed in the factory-built housing space. Yes, there were good people in business then and now. But then I knew nothing about the short-sighted vision too many had.  I knew even less about:

• the lies,
• dirty tricks,
• misrepresentations,
• sloppiness,
• and such that all too often went on.

In my relative naiveté about the rough and tumble of MH in those days, I presumed that most people were honest and most people treated customers and employees well…

Well…?

The fellow that hired me for my first sales opportunity in MH decided to strike out on his own, perhaps a year or so after I started at that multiple-location retail center. I guess because I was selling a number of homes, he wanted me to be to be part of his new store’s team. Okay, and even before he had anything – and I mean, anything:

• no lot,
• no inventory,
• no ads,
• essentially, nada

…I used some lead cards which I was given, and that led to a retail customer who bought a home from me before that sales center even opened. I sold that home off a photocopy of the factory’s floor plan. Your’s truly collected the deposit at a restaurant over soda or other drink, did the paper work, etc. The customer had seen that floorplan’s model on display at another company’s retail center, one represented by another division of the same multiple-plant factory-home builder. It wasn’t an easy sale, but it wasn’t a miracle sale either.

The deal for a sharp, new multi-sectional made, the home was ordered, then delivered and finally the sale closed. It was commission time, and this grand fellow I went to work for decided for whatever reason to stiff me. Not only was he going to stiff me, he wanted the advance back on the commission that he had given me. 

Being a red-blooded American, I refused to give back the advance, and proceeded to get another position at another company.

Well, that son-of-a-gun sued me in small claims court. I was stunned at his chutzpah, but showed up in court confident of the outcome. Little did I know what I was in for…three people stood up for his case: himself, a guy about my age that had likewise followed him into this new MH adventure and his bookkeeper.

All three perjured themselves, lied through their teeth about what had happened. It was my word against the three of those guys and their words, and the judge ruled against me.

Once more, I was stunned…

A Victorious Defeat

The Magyar side of my American blood boiled up on the spot. I turned to the guy who was cheating me, and right in front of the judge, said words to the effect that:

You’ve lied, these other two fellows have lied too, and you won’t get a dime from me now or ever.

The guy was bigger and much badder than me, but there must have been something about what and how I said it, because he and all believed me.

That was the last I heard of it.  Looking back, I was foolish on multiple levels, he might have tried other things to collect on his ill gotten gains. 2 side notes; it was the older guy – the semi-retired bookkeeper – who most disappointed me in the matter, because I thought of him as a truly honest man. It taught me that some will say or do anything for the sake of a few bucks.  The other side note?  The guy who cheated me didn’t last very long in business. Valuable lessons, all...that “defeat” was priceless.  It was also the last time I lost in court.

The Bigger Lessons

That taught me what every good lender or good business person knows. Document, document, document. Don’t leave anything to chance. Have the records to prove your case, should a case ever arise.

There were other lessons too.  Like trying to see yourself objectively, and to see who you’re working for objectively. Seek and work with those good, honest and moral people.

But from a purely legal standpoint, you document everything, and provide the proper disclosures. Never over promise, and never under deliver.

Application of those lessons since…and…the MH tee up…back to the future…

The MH industry has not always and everywhere done things correctly, as anyone with any history of this business knows. No industry is made up of only saints! We’re sinners all, and we simply hope that we each do our best to let our better angels guide our actions personally and professionally, rather than listening to those demonic voices that promise some quick and seemingly attractive result, if only we cross the wrong line(s).

Well years passed from the story above. I had a retailer center of my own, aided in part by a gent whom I’d gone to work for and sold a bunch of homes for while with him.

During the years that sales center was opened:

• We never had a single retail-customer lawsuit.
• We never had a single attorney call or letter on behalf of any retail customer.
• I only recall one BBB complaint, which was readily resolved.
• We didn’t overpromise, we didn’t under-deliver. We documented everything!  We had happy customers and referrals.

But there was one guy, a supplier working for a pretty sizable firm, who tried to doublecross our MH retail operation, and by implication, me too.  I didn’t plan on or foresee having an issue with him.  A week before, if you had told me that an action was coming, I’d have thought no way.  But we were ready in this respect, because we documented everything. 

…turning a painful chapter into a Pattern for Professional Victory…

As noted, a couple of years after we opened, one of our suppliers decided to try to pull a fast one, by using the courts. In that fellow’s defense, you should know that it was tough times in MH then. While we were growing like wildfire, 80% of the retailers in Oklahoma folded in the late 1980s, not unlike the meltdowns of post 1998 and post 2008.  It was not unlike many parts of the U.S. now.

Desperate people often try desperate things during “desparate times.”  That doesn’t excuse the fellow, but it does help someone understand his behavior.

They sued my business, and we counter-sued. Because my team and I had documented everything, I was able to sue by using an attorney on a contingency-fee basis.

We won that case, handily.

We’re approaching the meaty moral of the story, and what this concept can mean for the factory-built home industry. So let’s move on…

Big Guys vs. Little Guys…or – how to Level the playing field…on Contingency!

One of the huge challenges facing any business or industry today is the high cost of litigation. You have to have deep pockets to pay for the attorney. You have to have deep pockets to sue or to defend against a legal action (law suit).

Or do you?

Not necessarily!  What I learned – the hard way – was that if you documented well, and had a really solid case, an attorney or law firm could take a case on a contingency fee basis.

That was the first of a number of periodic legal victories.  Something would come up, about every 6 to 8 years, when after all other options had been exhausted, there were times I turned to using an attorney on contingency.  That was done either to sue or to counter-sue someone or some entity that had been grossly unjust; and each time our side won.

Attorneys would say, wow, you make a great witness. Or Wow, you have records that document your claim. That loss years before prepared me for legal victories. Each time, be it in court after trial, or by settlement pre-trial, the other party essentially paid for everything, and then they paid our operation and attorney too.

As a fringe benefit, the longer the case would go on, the higher our opposition’s legal bills. 

Now, let me rapidly add once more, that I’m not a sue happy guy. Note this happened roughly every 6 to 8 years. Why? Because I’m not crazy about using the legal system at all, if its avoidable.

For those who’ve not had the experience, legal actions take a lot of time and effort. Depositions, documents, travel, time away from your business, all of that and more have to be considered. A suit can take months (if you’re lucky, its fast and the other side sees you’ll win and they settle). Or it can take years.  Over the years, we’ve seen both the rapid and slow outcomes.

But so long as the other side has assets and aren’t judgment proof,

• if all else has been tried and hasn’t succeeded,
• with the right documentation,
• witnesses as needed,
• the right, motivated attorney or firm;

then by all means, be prepared to hammer down on the person, persons or entity that has wronged you.  

Question.  Do you think MH has been harmed by the media, with false or sloppy reports?  Do you think alphabet agencies or organizations have harmed MH, knowing that what they were doing was unjust or wrong?  Do you recall how even Big Tobacco was beaten by attorneys in court?

The Hidden Risks and Benefits of Contingency

In business litigation, most of the time, the other party’s attorney may never believe that your attorney is working on a contingency basis. While business suits handled on contingency fee basis are getting a bit more common than in years past, this type of case in business law is different than the accident or malpractice attorneys that go after an insurance company.

One challenge is that even if the other party’s attorney knows about the contigency basis your attorney is working for, the other party’s attorney sometimes could care less.  The other party’s attorney is working hourly.  They don’t mind having a case, be it a winner or a loser, drag on for months or years.  After all, so long as their client keeps writing the checks, they get paid: win, lose or draw.

That said, if the other party understands that your attorney is on contingency, while they’re paying the legal bills to defend and/or sue your operation on an hourly basis…

…well, the odds they settle goes up. It no longer matters how big or small or how deep (or not) you or your operation or pockets happens to be. Because your attorney has signed on for the duration.

As noted above, you want an attorney (or better yet, a sizable firm) that has experience at this kind of litigation, and has the deep pockets themselves. If your attorney has a track record of winning, and they discover your attorney is working on a contigency fee basis, then the issue becomes very clear to the other party.  Examples:

• Your opponent won’t wear you down, by running up your legal fees.
• The longer a case goes, and the stronger your claim, the less likely your contingency attorney will want you to settle a strong claim (they do have to listen to you, but they clearly have their own motivations too, since their paycheck and payday arise from the success of your case).
• Remember, I’m not an attorney and I’m not giving legal advice; so talk to an attorney for details on this concept.  This is a layman’s take – albiet a layman that has had to go down this path before…and won using it repeatedly.

…This is the lesson learned, and how it can apply to MH companies…or the industry at large!

Over a year ago, I sat back and pondered some of these experiences, and thought about issues facing the factory built home industry.  We could go into:

• financing,
• CFPB,
• HUD,
• FHFA,
• GSEs,
• or other alphabet soup operations…

…but let me focus on an area that I discussed with a pair of attorneys who do this kind of work.  That area was the media and under what circumstances someone/some operation in media were liable for what they published, that was demonstrably and unjustly harmful to

• a business’ or person’s reputation,
• a group of businesses or operations,
• or the industry at large.  

Here’s what I was told, by the “suits.”  

You can sue – either individually, as a business or professional entity or in some cases, as a class action – over false, misleading or unjustly damaging reports.

Are there check-boxes that need to be crossed off for such suits?  As in anything else, of course.  

But what if a media person or outlet failed in their due dilgence, and either negligently or knowingly/willfully engaged in publishing/broadcasting one or more reports that were harmful. Is there potential recourse against such media?

Yes.

What might a proper application of this concept be worth to firms in MH, or to the industry at large?  

Depending on the media outlet, topic and impact/damages, it could mean millions…to billions of dollars.

We’ve mentioned this in passing before, and today are fulfiling our promise to do a report on the concept.  

We’ll explore this more at a later date.  In the mean time, any media that might be reading this, please be advised that we’ve carefully been building a list of dozens of attorneys interested in doing such work.

A sampling:

Further, we’ve been doing the kind of documentation needed on behalf of the industry needed for potential class action suits.  We’ve been doing preparation in various ways, setting the legal foundations that are useful or necessary – to make the alphabet soup operations and/or the media’s liablity actionable.

Closing thought for today.

This concept isn’t going to replace lobbying, negotiations or other efforts.  I don’t believe in putting all the eggs in one basket.  As noted, I’m not crazy about suits to begin with, but there are times it really, really does make good sense.

But properly done, this is a relatively low risk, high value way for an MH company – ours, or any other(s) – to level the playing field against an adversary that unfairly doesn’t respond in any other way.  ##

By L. A. “Tony” Kovach.

Connect – https://www.linkedin.com/in/latonykovach

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MHC-MD.com and LATonyKovach.com.