Panel Outline

CONSTRUCTION DEFECTS LITIGATION

Northern California Sessions

Panel Outline

A. PRE-LITIGATION PROCEDURE

1. Calderon Statute (Civil Code §1375) - amended effective July 1, 2002

a. Tolling (Landale-Cameron Court, inc. v. Ahonen (10/10/07) 155 Cal.App. 4^th 1401)

2. SB 800 (Civil Code §§895 et seq) - applicable to new homes sold after January 1, 2003

a. Effectiveness and exclusions

i. Effective dates

ii. “Builder”/”homeowner”

iii. Component part manufacturers

iv. Bodily injury claims

b. Developer’s right to repair

i. Feasibility of time limits following homeowner’s request

(a) 30 days to produce documents

(b) Inspection and testing within 14 days

ii. Evidentiary admissibility

c. Functionality standards

i. Effect on Aas v. Superior Court (2000) 24 Cal. 4^th 627; Windham at Carmel Mountain Ranch Association v. Superior Court (2003) 109 Cal.App. 4^th 1162

ii. Standard of proof

(a) Strict liability?

(b) “Shall not cause water to pass through” vs. “shall be designed and

constructed so as not to permit water to pass through”

d. Statutes of limitation

i. Commencement date - remaining effect of 10 year statute

ii. Warranties - extended protection agreements

e. Insurance coverage

i. Property damage

ii. “Claim”

iii. Feasibility - sufficient time for tender and response?

f. Subcontractors

i. Notice of inspections

ii. Any input into nature and scope of repair? If not, are developer payments “voluntary”?

g. Predicted responses of plaintiffs, developers, subcontractors and carriers

B. STANDING

1. CC 1368.3 - areas of damage which association is obligated to maintain.

2. CCP §382- areas of damage which association is not obligated to maintain or repair. (Raven’s Cove Townhomes v. Knuppe Development (1981) 114 Cal.App. 3d 783)

3. Subsequent Purchasers (Keru Investments v. Cube Company (1998) 63 Cal.App. 4^th 1412; Krusi v. S.J. Amoroso Construction Co., Inc. (2000) 81 Cal.App. 4^th 995; Siegel v. Anderson Homes, Inc. (2004) 118 Cal.App. 4th 994)

4. Class actions (Hicks v. Kaufman and Broad (2001) 89 Cal.App. 4^th 908)

C. PARTIES

1. Contractors - licensing issues

a. Business and Professions Code §7031

b. Recent decisions: M.W. Erectors, Inc. v. Niederhauser Ornamental and Metal Works Co., Inc. (2004) 115 Cal.App. 4^th 512; ICF Kaiser Engineers v. Superior Court (1999) 75 Cal.App. 4^th 226; Construction Financial v. Perlite Plastering Co. (1997) 53 Cal.App. 4^th 170, 61; Hazard, Jr. Enterprises, Inc. v. Insurance Company of the West (1997) 52 Cal.App. 4^th 1088; Ranchwood Communities Ltd. Partnership v. Jim Beat Construction Co. (1996) 49 Cal.App. 4^th 1397; Pacific Custom Pools, Inc. v. Turner Construction Co. (2000) 79 Cal.App. 4^th 1254; Slatkin v. White (2002) 102 Cal.App. 4^th 963

c. Code of Civil Procedure §1029.8 - treble damages for injury caused by unlicensed persons

2. Suspended corporate parties

a. Revenue and Taxation Code §§19719 (amended 1999) and 23301

b. Substantial compliance (Sade Shoe Co., Inc. v. Oschin & Snyder (1990) 217 Cal.App. 3d 1509)

c. Corporate plaintiff- statute continues to run

d. Corporate defendant- special appearance/motion to intervene by carrier (Truck Insurance Exchange v. Superior Court (1997) 60 Cal.App. 4th 342; Garamendi v. Golden Eagle (2004) 116 Cal.App. 4th 694 (previously at 113 Cal.App. 4^th 861); Kaufman & Broad Communities v. Performance Plastering, Inc. (2006) 136 Cal.App. 4^th 212)

3. Shareholders of corporate defendants (Michaelis v. Benavides (1998) 61 Cal.App. 4^th 681 (rev den))

4. Ownership issues (Garriott Crop Dusting Co. v. Superior Court (1990) 221 Cal.App. 3d 783; Century Indemnity v. Hearrean (2002) 98 Cal.App. 4^th 734; The Standard Fire Insurance Company v. The Spectrum Community Association (2006) 141 Cal. App. 4^th 1117)

D. CAUSES OF ACTION

1. Negligence (Aas v. Superior Court (2000) 24 Cal. 4^th 627)

a. Standard of care (The Stonegate HOA v. T.A. Staben (2006) 144 Cal.App. 4^th 740

2. Strict liability/Products Liability

a. Component part analysis (Jimenez v. Superior Court (2002) 29 Cal. 4^th 473; Mesa Vista South Townhome Assn. v. California Portland Cement Co. (2004) 118 Cal.App. 4^th 308 (ordered depublished))

b. Mass producer vs. occasional builder (Fleck v. Bollinger Home Corp. (1997) 54 Cal.App. 4^th 926; Oliver v. Superior Court (1989) 211 Cal.App. 3d 86)

c. Subcontractors and suppliers (Jimenez v. Superior Court (2002) 29 Cal. 4^th 473; Monte Vista v. Superior Court (1991) 226 Cal.App 3^d 1681)

d. Apartments/commercial setting (Gentry Construction Co. v. Superior Court (1989) 212 Cal.App 3d 177)

e. Proof of product defect (Arena v. Owens Corning (1998) 63 Cal.App. 4^th 1178 (rev den); Mesa Vista South Townhome Assn. v. California Portland Cement Co. (2004) 118 Cal.App. 4^th 308 (ordered depublished))

f. Restatement (Third) of Torts: Products Liability, approved 1997

g. New construction – Condominium conversions? (East Hilton Drive HOA v. Western Real Estate Exchange (1982) 136 Cal. 3d 630)

3. Breach of warranty

a. Breach of Express Warranty (All West Electronics, Inc. v. M-B-W, Inc. (1998) 64 Cal.App. 4^th 717)

b. Breach of Implied Warranty (Huang v. Garner (1984) 157 Cal.App. 3d 404)

c. HOA Privity (Windham at Carmel Mountain Ranch Association v. Superior Court (2003) 109 Cal.App. 4^th 1162)

d. Opportunity to Remedy - (Mocek v. Alfa Leisure, Inc. (2003) 114 Cal.App. 4^th 402)

e. Express Warranty Disclaims Implied Warranty (Hicks v. Superior Court (2004) 115 Cal.App. 4^th 77 (review granted))

f. Magnuson-Moss Act – Atkinson v. Elk Corp of Texas (2006) 142 Cal.App. 4^th 212

4. Breach of contract (Vandenberg v. Superior Court (1999) 21 Cal. 4^th 815)

5. Fraud- reliance requirement

a. Restatement (Second) of Torts, §§310 and 311

b. Recent decisions: Gawara v. United States Brass Corp. (1998) 63 Cal.App. 4^th 1341; Randi W. v. Muroc Joint Unified School District (1997) 14 Cal. 4^th 1066

c. Civil Code § 3294- “conscious disregard”

6. Negligent Misrepresentation (Newhall Land & Farming v. Superior Court (1993) 19 Cal.App. 4^th 334; Shekhter v. Seneca Structural Design, Inc. (2004) 121 Cal.App. 4th 1055)

7. Association’s duty to individual members (Ostayan v. Nordhoff Townhomes HOA, Inc. (2003) 110 Cal.App. 4^th 120)

8. Brokers Disclosure Obligation (Michel v. Palos Verdes Network Group, Inc. (2007) 156 Cal.App. 4^th 756)

E. DAMAGES

1. Economic loss/property damage

a. Aas v. Superior Court (2000) 24 Cal. 4^th 627

i.. Situations where property damage is present:

(a) What if the only property damage is to the defective work itself?

(b) Does Aas preclude recovery for cost of repair of a defect which causes consequential damage? (i.e. is liability limited to the consequential damage or does it include the defect which caused the damage?)

(c) Does Aas preclude recovery for “access repairs?” (F&H Construction v. ITT Hartford Insurance Company of the Midwest (2004) 118 Cal.App. 4^th 364)

ii. Solvency of developer

iii. Solvency of subcontractor

b. Mesa Vista South Townhome Association v. California Portland Cement

Company (2004) 118 Cal.App. 4^th 308 (ordered depublished)

c. Recovery under warranty theory (Hicks v. Kaufman and Broad (2001) 89 Cal.App. 4^th 908)

d. Stearman v. Centex Homes (2000) 78 Cal.App. 4^th 611

e. Zamora v. Shell Oil Co. (1997) 55 Cal.App. 4^th 204

f. Fieldstone Co. v. Briggs Plumbing Products, Inc. (1997) 54 Cal.App. 4^th 357

g. Carrau v. Marvin Lumber and Cedar Co. (2001) 93 Cal.App. 4^th 281

h. Carwash of America P.O. LLC v. Windswept Ventures No. 1 (2002) 97 Cal.App. 4^th 540

i. Shekhter v. Seneca Structural Design, Inc. (2004) 121 Cal.App. 4th 1055

j. Robinson Helicopter Co. v. Dana Corp. (2004) 34 Cal.App. 4th 979

2. Emotional distress (Erlich v. Menezes (1999) 21 Cal. 4^th 543)

3. Expert Fees (Stearman v. Centex Homes (2000) 78 Cal.App. 4^th 611; Regan Roofing Co. v. Superior Court (1994) 21 Cal.App. 4^th 1685)

4. Attorney fees

a. Contractual rights

i. Reciprocal under Civil Code § 1717

ii. Heppler v. J.M. Peters Co. (1999) 73 Cal.App. 4^th 1265- assignment and allocation

iii. Xuereb v. Marcus & Millichap (1992) 3 Cal.App. 4^th 1338

iv. M. Perez Company, Inc. v. Base Camp Condominiums Association No. One (2003) 111 Cal.App. 4^th 456

b. The effect of CCP §998 settlement offer on contractual rights to attorney fees (Scott Co. of California v. Blount, Inc. (1999) 20 Cal. 4^th 1103); Vick v. DaCorsi (2003) 110 Cal.App. 4^th 206; Goodman v. Lozano (2008)159 Cal.App. 4^th 1313)

c. Civil Code §1354

d. Stearman damages

e. Private Attorney General (CCP § 1021.5)

f. Tort of another (CCP § 1021.6)

g. Third Party Beneficiary (Shell v. Schmidt (1954) 126 Cal.App. 2d 279; Loduca v.

Polyzos (2007) 153 Cal.App. 4^th 334; Landale-Cameron Court, inc. v. Ahonen (10/10/07) 155 Cal.App. 4^th 1401)

h. Prejudgment interest

i. Loss of use - CACI 3039G

5. Diminution in value v. cost of repair (Orndorff v. Christiania Community Builders (1990) 217 Cal.App. 3d 683; CACI 3039F)

F. JOINT AND SEVERAL LIABILITY

1. Alexander v. Hammarberg (1951) 103 Cal.App. 2d 872

2. Gem Developers v. Hallcraft Homes of San Diego, Inc. (1989) 213 Cal.App. 3d 419

3. Bobrow/Thomas & Associates v. Superior Court (1996) 50 Cal.App. 4^th 1654

4. Expressions at Rancho Niguel Association v. Ahmanson Developments, Inc. (2001) 86 Cal.App. 4^th 1135

5. Ratcliff Architects v. Vanir Construction Management, Inc. (2001) 88 Cal.App. 4^th 595

6. Newhall Land and Farming Co. v. McCarthy Construction (2001) 88 Cal.App. 4^th 769

7. BFGC Architects Planners, Inc. v. Forcum/Mackey Construction, Inc. (2004) 119

Cal.App. 4^th 848; 14 Cal. Rptr. 3d 721

8. Stop Loss Insurance Brokers, Inc. v. Brown & Toland Medical Group (2006) 143

Cal.App. 4^th 1036

G. STATUTE OF LIMITATIONS

1. Section 337.1- is there such thing as a patent defect in the property damage context? (Tomko Woll Group Architects, Inc. v. Superior Court (1996) 46 Cal.App. 4^th 1326; Nash v. MacDonald (2001) 92 Cal.App. 4^th 847 (ordered depublished.))

2. Sections 337.15/337.10

a. Mills v. Forestex Co. (2003) 108 Cal.App. 4^th 625)

b. Equitable Tolling/Equitable Estoppel (Lantzy v. Centex Homes (2003) 89 Cal.App. 4^th 1059; INCO Development Corp. v. Superior Court (2005) 131 Cal.App. 4th 1014)

c. Exceptions (Time For Living, Inc. v. Guy Hatfield Homes (1991) 230 Cal.App. 3d 30)

d. Defendants in possession “at the time any deficiency and improvement constitutes the proximate cause” of damage- subdivision (c)

e. Willful misconduct or fraudulent concealment- subdivision (f) (Acosta v. Glenfed Development (2005) 128 Cal.App. 4th 1278)