Nevada court finds construction defect litigation is intrinsically ill suited to class actions; Court will grant conditional certification to ascertain if there are issues of commonality.
Summary: The Supreme Court reversed class certification in a construction defect case reasoning that the claim was intrinsically ill suited to class action litigation. The court explained that construction defect claims would rarely, except in very specific situations involving breach of warranty or failure to meet design specifications, satisfy the NRCP 23(b) prongs of either predominance or superiority. Furthermore, disparities between class members, whose claims often vary greatly in terms of the type and extent of damage, comparative negligence and the theories of liability on which their claims are advanced, make meeting the typicality requirement of NRCP 23(a)(3) extremely difficult. The Court, however, noted that in some cases they would grant conditional certification, permitting the class to go into the preliminary stages of discovery, including costly expert testimony and destructive testing, in order to formulate their claims and defenses.
Read the Full Text of the CaseCondo owner fraudulently induced to release building developer and general contractor from liability for mold infestation.
Summary: Plaintiff Deborah Lowgren purchased a four unit condominium from defendants Darryl Dalcin and Gordon Inman and their related business entities, the developer and general contractor for the building. Lowgren filed suit for breach of warranty, negligence, fraud, strict liability and negliget infliction of emotional distress 10 years later, alleging that cracks in the roof, outside walls, windows, steps and doors had allowed water infiltration. Lowgren had reported leaks to Defendants in 1994 and Defendants agreed to pay for repairs. In 1997 she reported another leak and Defendants offered to pay her $5,000 for repairs if she signed a general release of existing or future claims, which she did in 1998. Lowgren claimed that Defendants represented that the release applied only to the last round of repairs. Lowgren subsequently discovered that other owners in the complex were experiencing similar problems and in 2001 she discovered mold in the unit and filed suit. Defendants brought a motion for summary judgment, claiming that her claims were barred by the release and the 10 year statute of repose. The trial court granted the motion. The appellate court, however, found that the release was so ambiguous and contradictory that it was not possible to tell if all claims had been waived. Furthermore, while agreeing that the statute of repose barred her property damage claims the appellate court found that her claims for fraud or personal injury were not barred.
Read the Full Text of the Case (10-page PDF)Homeowners association has standing to sue for damages to property that predate its organization.
Summary: Plaintiff, an association of condominium owners brought an action against defendant condominium developers for negligent repair of common areas. A jury returned verdicts in favor of plaintiff and awarded plaintiff damages. Defendant moved for a new trial on the basis that plaintiff lacked standing to sue for damages occurring to the common areas before the association was formally organized. The trial court granted defendant's new trial motion.
The Court of Appeal vacated the trial court's order granting a new trial, holding that plaintiff had a cause of action for damages to the common areas of the condominium project caused by negligent acts or omissions of defendant occurring prior to the formal organization of the association. The court held that, under Code Civ. Proc., 374, plaintiff association had standing to sue on behalf of the member condominium owners and that nothing in 374 suggested that the association's recovery was limited to damages covered by negligent acts occurring during the association's existence. The court noted that defendant executed and rendered a declaration of confidence, conditions and restrictions providing for formation of a homeowners' association having responsibility for repair and maintenance of the common areas, and thus the timing of the association's formal organization was a matter wholly within the control of defendant, who could readily foresee that the association, which was obligated to maintain the common areas, would be damaged by an injury to the common areas caused by defendant's negligence in undertaking repairs in the course of condominium conversion. The court further held that a developer may not make decisions for an association that benefit the developer's own interest at the expense of the association and its members.
Read the Full Text of the Case (5-page PDF)Summary: A California court of appeals has affirmed judgement for the insurers in a dispute over construction defects for a low-income housing project, finding their refusal to participate in the lawsuit or subsequent settlement negotiations did not constitute breach of contract or bad faith.
Read the Full Text of the Case (1-page PDF)Summary: In June the California assembly passed Assembly Bill 758 by a vote of 73 - 0. AB 758 would eliminate the need for subcontractors to buy indemnity insurance that only protects the general contractor from losses and claims even though the general contractor was solely negligent. The Senate is expected to pass the measure, which would take effect January 1, 2006.
AB 758 eliminates Type 1 and Type 2 indemnity language currently used in many construction contracts. Under a contract with Type 1 language, a subcontractor can be held liable for the sole negligence of the general contractor and can also be forced to pay for the legal defense of the general contractor - all without the subcontractor acting in a negligent fashion. The change to the law is expected to lower insurance costs for subcontractors, which in turn could lower construction costs for new homes.
Read the Full Text of the CaseAttorneys fees clause in indemnity agreement is reciprocal under California Civil Code 1717.
Summary: Baldwin Builders (Baldwin) was the developer of Paloma, a seven-subdivision, 239-unit community in San Marcos. Coast Plastering Corporation (Coast) and T&M Framing, Inc. (T&M) entered into subcontracts with Baldwin to perform certain construction work in the Tierra subdivision of the Paloma development. Although the subcontracts included general indemnity provisions, Coast and T&M each executed a stand-alone indemnity agreement with Baldwin, agreeing in relevant part: "The undersigned Subcontractor hereby agrees to indemnify [Baldwin] ... against any claim, loss, damage, expense or liability arising out of acts or omissions of Subcontractor in any way connected with the performance of the subcontract ... unless due solely to [Baldwin's] negligence. ... Subcontractor shall, on request of [Baldwin] ... but at Subcontractor's own expense, defend any suit asserting a claim covered by this indemnity. [***3] Subcontractor shall pay all costs, including attorney's fees, incurred in enforcing this indemnity agreement." In November 1998, the Paloma homeowners filed an action against Baldwin for construction defects in the homes. Baldwin requested that Coast and T&M defend and indemnify it against the claims, but after they refused, it cross-complained against them for express contractual indemnity, implied indemnity, equitable indemnity, contribution, breach of contract, breach of implied warranty, breach of express warranty, negligence and declaratory relief.
Read the Full Text of the Case (11-page PDF)A developer and general contractor can be held liable after 10 years for the willful misconduct of others involved in the project.
Summary: Forty-seven (47) out of fifty-nine (59) homeowners brought an action against developer/general contractor more than 10 years after the recordation of the notice of completion and, therefore, after the expiration of the State of California's statute of repose.
Developer / general contractor filed a summary judgment motion based on the expiration of the statute of limitations.
The Court of Appeal denied the developer/general contractor's summary judgment motion and held that the homeowners had produced sufficient evidence on the question of willful misconduct to defeat the statute of limitations argument. According to the Court, a defendant, acting as the developer and general contractor, could be held liable after 10 years for the willful misconduct of others involved in the project. Evidence existed that, if believed by a trier of fact, would support findings that: (1) willful misconduct had occurred in the construction of the owners' homes and that such misconduct had caused the construction defects of which the owners complained; and (2) the developer/general contractor had at least constructive knowledge of the peril created by the construction activity and the resulting defects, had at least constructive knowledge that injury or damage to future homebuyers was a probable, as opposed to a possible, result of the defects created by the construction activity, and consciously failed to take action to avoid such injury or damage.
Note: It is important to note the developer / general contractor involved did not personally commit any willful misconduct nor did plaintiffs claim they had. More importantly, according to the Court, it was not even necessary for the developer / general contractor to have actual knowledge of the alleged misconduct - constructive knowledge was enough. Such a scenario supports the need for a thorough risk management / quality control program such as the one offered by StructuredRisk, Inc. If such a program were in place, the developer / general contractor would have been able to present the Court with an evidence quality, admissible record of proper construction that likely would have defeated plaintiffs' claims of constructive knowledge by the developer / general contractor.
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