A federal appeals court in New Orleans has told Fleetwood Enterprises Inc., the country's largest mobile home manufacturer, that it will have to notify 4,000 owners of its homes that their dwellings do not meet federal construction standards and could be damaged by high winds, rain and other conditions.
The Department of Housing and Urban Development, which regulates the mobile home industry, ordered the company to send the notices a year ago. Fleetwood sued the department and won in a Waco, Tex., federal district court, but the ruling was overturned two weeks ago by the 5th Circuit Court of Appeals in New Orleans.
Lawrence F. Hennenberger, a Fleetwood attorney, said the company is "evaluating the opinion and considering" what its next step will be. One option is to petition the U.S. Supreme Court, asking for a review of the circuit court decision, Hennenberger said. If no legal action is taken, however, the company would have to issue the notices ordered by HUD "at some point in time," he said.
The 4,000 mobile homes are part of group of 80,000 made by Fleetwood between 1981 and 1984. While HUD believes there may be problems with all 80,000, HUD officials said the company did not have the resources to investigate the entire group.
Fleetwood refused to attend a hearing on the alleged violations scheduled by HUD in April 1986, arguing that the federal agency does not have the authority to hold open, formal hearings when the manufacturer objects. Instead, the company filed a lawsuit in Texas, where the homes were built, in an effort to halt the hearing.
The company's request for a preliminary injunction was unsuccessful, and HUD went ahead with the hearing before Judge Alan W. Heifetz, the department's chief administrative law judge. Heifetz ruled that walls in some of the mobile homes, the metal straps that hold down the roof in others and floors in some models fail to meet federal manufacturing standards. Defects in the 4,000 homes investigated by HUD made the dwellings subject to damage by high winds, roof leaks, buckling of walls and floors, cracking of interior walls, separations between walls and roof or floor and other problems, Heifetz ruled.
Heifetz said that owners must be told the ways in which their dwellings fail to meet standards and the problems that could result, and that Fleetwood would not pay for engineering analyses and repairs. The judge noted that engineering studies could cost from $100 to $800 and repairs from $100 to $500 for each mobile home. HUD cannot order a manufacturer to make repairs unless "an unreasonable risk of injury or death" is present, which engineers say is not the case with the Fleetwood homes.
In its suit against HUD, the company argued that it was legally entitled to a closed, informal hearing under provisions of the National Manufactured Housing Construction and Safety Standards Act. A company official said in an affidavit given to the court that production design and engineering information divulged in a public hearing would hurt Fleetwood's business.
When HUD appealed to the New Orleans circuit court after the Texas court ruled in Fleetwood's favor, government attorneys argued that the law gives the department authority to hold either a closed or open formal session. HUD said a formal hearing was needed because the outcome "might have serious economic consequences for Fleetwood and because the case involved complex technical issues and differing interpretations of regulatory standards."
"The situation with HUD involves engineering interpretations of the way homes were built," according to David R. Marriner, Fleetwood treasurer and spokesman. He said the company has had "very few complaints" involving the engineering defects cited by the department.
Mobile homes must meet HUD standards to qualify for Federal Housing Administration mortgage insurance, a status vital to the industry because most purchasers could not qualify for a loan without federal insurance.
A trial is scheduled Aug. 24 in another court battle involving the mobile home industry, and a third case is pending in a Washington federal district court. The trial, to be held in South Bend, Ind., has been ordered in a suit filed in December by the Arlington-based Manufactured Housing Institute. The organization wants to reverse a HUD decision that manufacturers cannot remove chassis from mobile homes before they are installed on permanent foundations.
Several manufacturers report that sales of removable-chassis homes now account for 15 percent to 30 percent of their business, according to the Indiana court documents. If HUD wins that case, it could cost the industry millions of dollars, as well as trigger layoffs, plant closings and retooling, the documents said.
Critics say more and more mobile homes are being installed on permanent foundations but are not subject to local building codes and other regulations applied to conventionally built houses. They say local regulations governing construction of conventional homes are more rigorous than the federal regulations for mobile homes.
HUD told manufacturers last summer that it was enforcing an existing rule governing removable chasses, not changing its regulations.
The Association for Regulatory Reform, another mobile home industry group, filed the Washington suit, also seeking to reverse the HUD decision on removable chasses.