Manufactured Home Construction and Safety Standards; Notice of Settlement

SUMMARY: Pursuant to a Stipulation and Order of Settlement and

Dismissal issued by the United States District Court for the Southern

District of New York on September 7, 1995, HUD is providing notice of a

settlement of the case entitled and numbered Thinking Vents, Inc. v.

Henry Cisneros, Secretary of Housing and Urban Development, 94 Civ.

8488 (AGS).

DATES: November 9, 1995.

FOR FURTHER INFORMATION CONTACT: Philip W. Schulte, Acting Director,

Manufactured Housing and Construction Standards Division, Department of

Housing and Urban Development, 451 Seventh Street, SW., Room B-133,

Washington, DC 20410-8000. Telephone: (voice) (202) 755-7420; (TDD)

(202) 708-4594. (These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION: Accordingly, the following attachment is the

Stipulation and Order of Settlement and Dismissal issued by the United

States District Court for the Southern District of New York on

September 7, 1995 in the case entitled and numbered Thinking Vents,

Inc. v. Henry Cisneros, Secretary of Housing and Urban Development, 94

Civ. 8488 (AGS).

Dated: October 6, 1995.

Nicolas P. Retsinas,

Assistant Secretary for Housing-Federal Housing Commissioner.

Attachment--United States District Court Southern District of New

York

94 Civ. 8488 (AGS).

Thinking Vents, Inc., Plaintiff, v. Henry Cisneros, Secretary of

Housing and Urban Development, in his official capacity, Defendant.

Stipulation and Order of Settlement and Dismissal

Whereas, plaintiff THINKING VENTS, Inc. (``TVI'') commenced this

action in the United States District Court for the Southern District of

New York, seeking injunctive and monetary relief from defendant HENRY

CISNEROS, SECRETARY OF HOUSING AND URBAN DEVELOPMENT (``HUD''); and

Whereas, the parties to this Stipulation and Order of Settlement

and Dismissal (``Stipulation and Order'') seek to resolve this action

without resort to further litigation;

It is hereby stipulated and agreed, by and between plaintiff TVI,

and defendant HUD, as follows:

1. Plaintiff hereby dismisses this action with prejudice and

without costs, disbursements, or attorneys' fees.

2. Upon this Stipulation being So Ordered by the Court, HUD shall

issue a letter in the form annexed hereto as Exhibit A. Said letter

shall be effective as of the date the Court signs this Stipulation and

Order, and HUD shall forward the letter to all Design Approval

Inspection Agencies and publish it, along with this Stipulation and

Order, in the Federal Register as soon as practicable.

3. HUD shall, it its own cost, conduct field inspections of 100

homes that, subsequent to the Court's signing of this Stipulation and

Order, have been fitted with the Thinking Cap Ventilation System

(``TCVS'') and sold. Such field inspections shall be conducted in the

manner provided by the testing protocol annexed hereto as Exhibit B,

provided, however, that a home shall not be eligible for a field test

unless: (a) all clothes dryers are vented directly to the outside and

not vented under the home; (b) no open flame heaters are used in the

home unless vented directly outside; (c) the ground under the home does

not have standing water; (d) skirting or underpinning has a minimum of

one foot of ventilation for every 150 square feet of ground area; and

(e) the ground beneath the home has a vapor barrier if the applicable

home owner's manual so requires. The homes inspected shall be selected

by a method of random selection set forth in paragraph 4, with 50 of

the homes located in thermal Zone 3 (the ``North Zone'') and 50 of the

homes located in thermal Zones 2 and 1 (the ``South Zone''). HUD shall

make every effort to complete the inspections within 18 months of the

date this Stipulation and Order has been signed by the Court. However,

in no event shall the inspection period exceed 30 months (``the testing

period'').

4. The homes shall be selected for inspection pursuant to a two-

step process. (a) First, HUD will randomly select on a quarterly basis

two pools of homes in which the TCVS has been installed subsequent to

the Court's signing of this Stipulation and Order from lists of homes

sold in each of the North and South Zones in the previous three months.

One pool shall be for the North Zone and one pool for the South Zone.

Such random selection shall be based on the serial numbers of the homes

on the lists. HUD shall randomly select 10% of the homes on the South

Zone list for the South Zone pool, and 25% of the homes on the North

Zone List for the North Zone pool. In the event that, at the time of a

particular selection, there are fewer than 250 homes sold using the

TCVS, the percentages will be increased to 20% in the South Zone and

40% in the North Zone. TVI shall have the right to be present at such

random selection. (b) Second, from the North and South Zone pools of

homes, HUD will select the homes to be inspected until a sufficient

number of homes that meet the testing conditions set forth in paragraph

3 above have been selected. HUD will select homes based on

considerations of obtaining a representative geographic sampling and

limiting the costs of such inspections. If, however, there is any state

that is not represented by either pool but contains homes in which the

TCVS has been installed, HUD may randomly select up to two homes in

that state for inspection. HUD will give TVI notice of any selections

made.

5. At its option, TVI shall have the right, at its own cost, to

conduct field inspections of the same 100 homes described in paragraphs

3 and 4, above. Such field inspections shall be conducted in the manner

provided by the testing protocol annexed hereto as Exhibit C. If TVI

chooses to conduct its inspection of a particular home on a different

date or time than that designated by HUD, TVI shall give HUD 5 days

notice of the date, time and location of the inspection, and HUD shall

be entitled to attend any such inspection.

6. HUD shall give 5 days notice to TVI of the date, time and

location for each of the field inspections described in paragraph 3,

above, in order to enable TVI to exercise its right to be present at

such inspections. No such inspections shall take place on a Friday,

Saturday or Jewish Holiday. Such Jewish holidays will include those

listed on the schedule annexed hereto as Exhibit D. For subsequent

years, TVI will supply such list to HUD not later than January 31 of

that year.

7. In the event that a home passes TVI's field inspection but fails

HUD's field inspection, TVI may petition the Court to appoint an

arbiter (the ``arbiter'') to determine whether such home passes or

fails the field inspection. At the arbiter's discretion, said arbiter

may visit the subject home(s) to assist the arbiter in reaching

[[Page 56643]]

a determination. The costs associated with the arbiter's work will be

agreed upon by the arbiter with the parties prior to the arbiter

performing any work, and will be borne by the party against which the

arbiter finds.

8. TVI and HUD hereby stipulate and agree that the arbiter, and any

persons duly designated to act on the arbiter's behalf, shall be immune

from personal liability for any conduct undertaken pursuant to this

Stipulation and Order in any action brought by TVI or HUD or by anyone

acting on their behalf, at their behest, or in their interest. TVI and

HUD hereby agree that they will not sue the arbiter, or any persons

duly designated to act on the arbiter's behalf, on account of any

action taken pursuant to the Stipulation and Order.

9. The Court may appoint an arbiter jointly recommended by the

parties. To assist in such appointment, within 15 days of the date the

Court signs this Stipulation and Order, the parties will each nominate

five candidates to be recommended as arbiter, and the parties will use

best efforts to agree upon and jointly recommend such arbiter from such

candidates to the Court.

10. In the event that 94 or more of the homes inspected pass HUD's

field inspection or the determination by the arbiter, then the TCVS

shall be deemed to have passed the test and the letter in the form

annexed hereto as Exhibit A shall remain in effect.

11. In the event that 7 or more of the homes inspected fail HUD's

field inspection and, if such determination is sought, the arbiter's

determination, then the TCVS shall be deemed to have failed the test,

the letter in the form annexed hereto as Exhibit A may be revoked, and

HUD's obligation under paragraph 3 of this Stipulation and Order to

test homes shall terminate. Revocation pursuant to this paragraph and

paragraph 14 below are the only circumstances under which the letter in

the form annexed as Exhibit A may be revoked.

12. In the event that the TCVS fails the test, HUD shall provide

notice to all owners of homes in which the TCVS has been installed that

the TCVS has failed the test; that their homes do not comply with the

applicable Federal Manufactured Home Construction and Safety Standards;

that if there is any moisture damage, TVI will, during the two-year

period following the date of failure of the test, repair, without cost

to the owner, the home and replace the TCVS with a system that meets

the standards; that the TCVS is under a ten year warranty from TVI for

the operation of the TCVS; and that if there are any questions about

the ventilation systems or the notice, the owners can call HUD or the

applicable State Administrative Agency. If, during the testing period

or within two years from the date of the failure of the test as

described in paragraph 11, a notified homeowner's home shows evidence

of damage caused by the TCVS or the homeowner requests that the home be

retrofitted, the home shall be retrofitted, at TVI's cost, with a

ventilation system that brings the home into compliance with the

applicable Federal Manufactured Home Construction and Safety Standards

relating to ventilation, and TVI shall repair, without cost to the

homeowner, any and all damage to the home caused by the installation

and use of the TCVS.

13. During the testing period, TVI shall, on a monthly basis,

provide HUD with two lists, one for the North Zone and one for the

South Zone, of all consumers known to TVI who purchased homes

containing the TCVS during the testing period. Each list shall include

the consumer's address and telephone number, as well as the consumer's

home's serial and HUD label numbers and the dates the consumer's home

was produced and sold. The failure of TVI to provide all such

information for a given home on an occasional basis shall not be a

reason to exclude such home from the selection process if the

information provided is otherwise sufficient to include such home in

the selection process. If necessary to complete the testing within the

testing period, TVI shall provide the consumer lists described above on

a bi-weekly basis.

14. In the event that the random selection procedure described in

paragraph 4 above does not yield 100 homes overall that meet the

conditions for testing set forth in paragraph 3 above, then HUD will

randomly select additional homes for the pools using the procedures set

forth in paragraph 4 until 100 homes have been obtained. If, after

exhaustion of the pools and lists using the procedures set forth above,

there are still not 100 homes that meet the conditions for testing,

then TVI may waive all the conditions set forth in paragraph 3, and HUD

may select such homes to be tested based on considerations of obtaining

a representative geographic sampling and limiting the costs of such

inspections. In the event that TVI fails to grant such wavier, or, if

upon such waiver there are still not 100 homes available for testing,

the letter in the form annexed as Exhibit A may be revoked. In the

event that a minimum of 400 homes containing the TCVS are not sold

during the first 12 months of the testing period, or 200 homes are not

sold in each 6 month period thereafter, than the letter in the form

annexed as Exhibit A may be revoked.

15. TVI shall maintain a general liability insurance policy with

coverage of $2,000,000.00. No later than 60 days after the date this

Stipulation and Order is signed by the Court, TVI shall secure a

product recall policy with coverage of $500,000.00. Within one year of

the date this Stipulation and Order is signed by the Court, TVI shall

secure an umbrella coverage to increase the general liability coverage

to $5,000,000.00, and within two years of the date this Stipulation and

Order is signed by the Court, TVI shall increase the general liability

coverage to $10,000,000.00.

16. TVI shall, during the testing period, provide customers with a

ten year limited warranty as set forth in Exhibit E.

17. TVI shall, no later than 60 days after the date this

Stipulation and Order is signed by the Court, post a bond in the amount

of $50,000.00 to be used in the event that damage occurs or

retrofitting is need or requested that is not covered by the above-

described insurance policies. During the testing period, TVI shall

place 5% of its receipts derived from sales of the TCVs in an escrow

account with an independent financial institution, which sums shall be

available to augment the bond (the ``set aside sum''). A portion of the

set aside sum may be used to administer the escrow account. TVI will

provide HUD with a monthly accounting of the set aside sum.

18. In the event that the TCVs passes the test as set forth in

paragraph 10 above, the bond, and set aside sum, including accrued

interest, will be the property of TVI. TVI will continue to provide a

10-year limited warranty as set forth in Exhibit E for the operation of

the TCVSs it sells in the future. In the event that the TCVS fails the

test as set forth in paragraph 11, the insurance, bond and set aside

sum, and accrued interest, will remain in place for two years following

the determination that TVI has failed the test as set forth in

paragraph 11, and thereafter any sums remaining shall be in the

property of TVI.

19. This Stipulation and Order constitutes the entire understanding

and agreement between the parties with respect to the subject matter of

this Stipulation and Order. All prior or contemporaneous

understandings, discussions, agreements and/or representations with

respect to the said subject matter, whether oral or written, including

the Agreement dated October 22, 1987, and the Alternative Construction

letter issued to Horton

[[Page 56644]]

Homes, are expressly superseded by this Stipulation and Order.

20. This Stipulation and Order will be binding on and will inure to

the benefit of the parties and their respective agents, servants,

employees, successors, assigns, and related, affiliated and subsidiary

entities.

21. This Stipulation and Order will be interpreted and otherwise

governed under the laws of the United States.

22. The Court shall retain jurisdiction over this matter and over

the parties for the purpose of enforcing the terms of the Stipulation

and Order and any Order entered by the Court thereupon. In the event

either party to this Stipulation and Order fails to fulfill is

obligations as set forth herein, the sole remedy will be an application

brought before this Court. Any controversies between the parties

regarding the terms of this Stipulation and Order shall be resolved by

the Court employing such procedures as the Court deems appropriate.

Dated: September 5, 1995, New York, New York.

Thinking Vents, Inc.

By:

Stanley Kolt,

President.

Dated: September 5, 1995, New York, New York.

Laufer & Farkash

Attorneys for Plaintiff

By:

Jacob Laufer (JL 2846)

101 East 52d Street, New York, NY 10022, (212) 308-8500.

Dated: September 5, 1995, Washington, DC.

United States Department of Housing and Urban Development.

By:

Nicholas Retsinas,

Assistant Secretary for Housing.

Dated: September 6, 1995, New York, New York.

Mary Jo White,

United States Attorney for the Southern District of New York Attorney

for Defendant.

By:

Beth E. Coldman (BG-6247),

Assisant United States Attorney, 100 Church Street--19th Floor, New

York, New York 10007, Tel. No.: (212) 385-6225.

So Ordered:

Allen G. Schwartz,

United States District Judge.

Exhibit A

Mr. Stanley Kolt, Chief Executive Officer

Thinking Vents, Inc.

P.O. Box 752

Mamaroneck, New York 10543-0752

Dear Mr. Kolt: Subject to the terms and conditions of the

Stipulation and Order dated September 1, 1995, entered in the case

captioned Thinking Vents, Inc. v. Henry Cisneros, 94 Civ. 8488

(AGS), in the Southern District of New York (the ``Stipulation''),

the U.S. Department of Housing and Urban Development

(``Department'') will take no action with regard to any possible

violations of the provisions of the Manufactured Home Construction

and Safety Standards (``Standard'') and Manufactured Home Procedural

and Enforcement Regulations (``Regulations'') listed below against

any manufactured home manufacturer that installs and utilizes the

Thinking Cap Ventilation System (``TCVS'') in any of its homes.

Accordingly, all Design Approval Primary Inspection Agencies

(``DAPIAs'') are authorized to approve designs utilizing the TCVS,

notwithstanding that said homes are not constructed to the precise

specifications of the following provisions of the Standards and

regulations:

1. 24 C.F.R. Sec. 3280.103(b)(4), ``Whole House Ventilation,''

insofar as interior air will be ventilated through the roof cavity.

2. 24 C.F.R. Sec. 3280.504(c)(1), ``Attic and Roof

Ventilation,'' insofar as neither the minimum free ventilation area

nor a mechanical ventilation system will be installed.

3. 24 C.F.R. Sec. 3280.504(c)(2), ``Attic and Roof

Ventilation,'' insofar as certain single section manufactured homes

that are excepted from attic ventilation required by 24 C.F.R.

Sec. 3280.504(c)(1), have air leakage paths to the attic space that

are not sealed.

4. 24 C.F.R. Sec. 3282.205(c), ``Certification Requirements,''

insofar as the label, in the form required by 24 C.F.R.

Secs. 3280.11 and 3280.362(c)(2), may be placed on each affected

home even though the home is not constructed to the precise

specifications of the Standards set forth above.

A copy of this letter will be forwarded to all DAPIAs. Upon

receipt of this letter, DAPIAs are authorized to approve designs

utilizing the TCVS under the conditions set forth herein. DAPIAs

shall provide the National Conference of States Building Codes and

Standards, Inc. (``NCSBCS'') with a set of approved plans for all

designs to be covered by this letter within 5 days of the date of

approval of such designs. The failure of any manufactured home

design to comply with the precise specifications of the Standards

and Regulations set forth above is not grounds for a DAPIA to deny

approval of any manufactured home design.

Sincerely,

David C. Nimmer,

Director, Office of Manufactured Housing and Regulatory Functions.

Exhibit B--Inspection Protocol Thinking Cap Ventilation System

Purpose of Inspection

To determine if the presence of moisture in the ceiling/roof cavity

is at a level which is known to affect material and structural

degradation.

Method of Inspection

The primary method of inspection is to visually examine the

interior of the ceiling/roof cavity for signs that the wood and wood

based products have reached fiber saturation and for signs of surface

moisture on metal surfaces and other materials of low permeability.

Failure Level of Moisture

The failure level of moisture content shall be fiber saturation

point of the material being evaluated.

The failure level of surface moisture will be when wetting occurs

and/or evidence of moisture accumulation exist.

Indicators That Fiber Saturation is Exceeded For Wood and Wood-Based

Products

Warping, bowing, buckling, delamination, swelling, visible mold,

smell of mold, water marks, wet-to-touch, moisture droplets, ice and

frost build-up, wood rotting or other signs of material decomposition.

Indicators of Excessive Accumulating Surface of Moisture

Ice and frost build-up, puddling of water on vapor retarder, wet

insulation frost and ice on insulation, under surfaces, wet-to-touch,

mold smell, visible mold, water marks on ceiling. Deterioration of

ceiling. Evidence of moisture dripping into walls.

Pass/Fail Criteria

A failure would occur if any of the following conditions are

present:

I. Fiber saturation levels are exceeded as shown by any of the

indicators identified above.

II. Moisture is Accumulating in the Ceiling/Roof cavity as shown by

any of the indicators identified above.

Other Conditions

1. The homes will be set-up in accordance with the Manufactured

Housing Construction and Safety Standards and comply in all relevant

respects with the standards.

2. The Thinking Cap will be inspected to note if the system is open

or closed and the attic and outdoor temperature at the time of the

inspection should be noted on the inspection report.

3. The moisture content of wood framing members may be tested in

accordance in ASTM D4444-94, Standard Test Methods for Use and

Calibration of Hand-Held Moisture Meters.

Exhibit C--Testing Protocol for Thinking Cap Ventilation System

The testing shall consist of an on-site investigation of each of

100 manufactured homes that are equipped with the Thinking Cap

Ventilation System (``the subject homes'').

Stanley Kolt or his representative shall conduct a test to

determine the

[[Page 56645]]

level of moisture in the home. Such test shall be conducted by exposing

the wood members of the attic by removing a single ceiling vent and

determining the quantity of water in the wood. Said quantity shall be

determined by the use of a wood moisture detector. A wood moisture

detector reading of 19 percent or less shall be an acceptable level of

moisture in the wood members of the attic. Should the wood moisture

detector reading be 19 percent or less then the subject home shall be

deemed to have passed the investigation. Should the wood moisture

detector reading be greater than 19 percent, then the subject home

shall be deemed to have failed the investigation.

Exhibit D--Jewish Holidays 1995-96

1995: September 24, 25, 26, 27; October 3, 4, 5, 8, 9, 10, 11, 15, 16,

17, 18.

1996: March 3, 4, 5; April 2, 3, 4, 9, 10, 11; May 23, 24; July 25;

September 15, 16, 22, 23, 24, 30.

Exhibit E--Thinking Vents, Inc.

The ``Thinking Cap'' is a fully automatic natural passive total

home ventilation system. It operates continually without using

electricity. This system improves the ventilation of the occupied space

of the home and attic. To maintain the optimum utilization of the

system with respect to ventilation and therma efficiency, do not block

or impair the automatic operation of the ceiling vents of your home or

the roof. ``Thinking Caps''.

Limited Warranty

Thinking Vents, Inc. warrants each ``Thinking Cap'' ventilation

system against defects in materials and factory workmanship for a

period of ten (10) years from the date of manufacture. If under normal

use and service the ``Thinking Cap'' discloses such defect within the

warranty period, the homeowner may ship the entire unit or any

defective part or parts to the manufacturer, freight prepaid by the

purchaser and the manufacturer shall repair or replace such defective

part or parts as may, in its judgment, be required to return the unit

to full and proper working order.

Consumer Information and Comment Card

1. Owner's: Name-------------------------------------------------------

Address----------------------------------------------------------------

City, State & Zip------------------------------------------------------

Telephone No-----------------------------------------------------------

2. Manufacturer's Name____________ Date Purchased____________

3. Home Model____________ Serial No.____________

4. Date of Manufacture____________ HUD No.____________

5. SQ FT of Home______ Single____ Double____ Triple____Wide

6. How many in household____ Shingle Roof____ Metal Roof____

7. What is your heating system type______________

8. Do you have central air conditioning______________

9. Is this the first ``thinking Cap'' system in any home you have

owned or occupied________

10. Comments-----------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

Please return card so we can best service your ten year

warranty.

[FR Doc. 95-27518 Filed 11-9-95; 8:45 am]

BILLING CODE 4210-27-M