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California Supreme Court Affirms SB800 as Sole Remedy for Construction Defect Claims without Personal Injury

On January 18, 2018, the California Supreme Court affirmed an earlier appellate court decision holding that SB800 (Civil Code sections 895 through 945.5, the “Right to Repair Act”) is the "virtually exclusive remedy" available to a plaintiff in new for-sale residential construction defect cases.

The Court's decision in McMillin Albany, LLC v. Superior Court (opinion here) restores the clarity that many in the development industry thought they had secured when the Right to Repair Act was originally negotiated by stakeholder groups and became law on January 1, 2003. The opinion affirms the 2015 decision from the Fifth Appellate District of the California Court of Appeal (covered here). It also rejects the reasoning and holding in Liberty Mutual Insurance Co. v. Brookfield Crystal Cove, LLC, a 2013 decision from the Fourth Appellate District that permitted property damage claims for construction defects based on common law theories, even though those claims would have been time-barred under SB800. The decision carves out and allows common law claims for defects causing personal injury or death, but that was understood by all parties based on the clear terms of the Act.

The recognition of SB800 as plaintiffs' exclusive remedy for economic loss and property damage claims reinvigorates the statutory requirements for pre-litigation notice and investigation, and reinforces the importance of established statutes of limitation. While some builders may prefer to forego their right to repair and dive straight into litigation, others will welcome the chance to meet with homeowners and perform repairs in hopes of avoiding or limiting litigation. All should welcome the added certainty that comes with shortened statutes of limitation. 

Background

By its terms, the Right to Repair Act applies to any action, which seeks to recover damages arising out of, or related to construction deficiencies in new residential units that are sold after January 1, 2003. The Act sets forth 45 different standards of construction in seven categories and specifies different statutes of limitations ranging from one year to ten years.

The Court's Reasoning in McMillin Albany

The McMillin Albany opinion analyzes both the text of the Right to Repair Act and the legislative history in determining that "the statute here leaves the common law undisturbed in some areas, expressly preserving actions for breach of contract, fraud, and personal injury. (§ 943, subd. (a).) In other areas, however, the Legislature's intent to reshape the rules is patent." 

After reviewing the text of the Act, the Court concludes:

For economic losses, the Legislature intended to supersede Aas and provide a statutory basis for recovery. For personal injuries, the Legislature preserved the status quo, retaining the common law as an avenue for recovery. And for property damage, the Legislature replaced the common law methods of recovery with the new statutory scheme. The Act, in effect, provides that construction defect claims not involving personal injury will be treated the same procedurally going forward whether or not the underlying defects gave rise to any property damage.

The Court also recognized that the Legislature benefitted from input by "the major stakeholders on all sides of construction defect litigation..." and thereby "enacted provisions that reflect a conscious effort to address how and when various categories of damages would be recoverable going forward." Indeed, "the legislative history of the Act confirms that displacement of parts of the existing remedial scheme was no accident, but rather a considered choice to reform construction defect litigation." 

And what becomes of the construction defect plaintiffs who began the McMillin Albany saga back in 2013? They "must comply with the Act's prelitigation procedures before their suit may proceed… McMillin is entitled to a stay." 

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume VIII, Number 22

TRENDING LEGAL ANALYSIS


About this Author

Valentine Hoy, Private investor, Construction Attorney, Allen Matkins, Law Firm
Partner

Valentine S. Hoy is a partner in the firm's San Diego office, who represents businesses, private investors, real estate developers, licensed professionals and builders before courts, juries and arbitrators throughout California in a broad range of cases, many of them involving business-to-business contract and business tort litigation, co-investor disputes, nondisclosure claims, commercial landlord-tenant and construction disputes, and real estate consumer mass tort, class action and homeowner association lawsuits.

619-235-1524
Timothy Hutter, Construction Attorney, real estate disputes, Allen Matkins
Partner

Timothy Hutter is a partner in our San Diego office, where he practices in the firm's Litigation and Land Use groups. Tim's practice focuses primarily on business and real estate disputes, including contract, construction, joint venture, entitlement, land use and commercial landlord/tenant litigation. Many of his projects and cases involve residential and mixed-use projects, and several invoke California's density bonus law to incorporate and develop affordable housing. Tim also handles cases on appeal, and has successfully represented clients in the California Court of Appeal and the California Supreme Court.

COMMUNITY ACTIVITIES

  • City of San Diego's Historical Resources Board (appointed by Mayor Kevin Faulconer and confirmed by City Council in July 2016); Board Vice Chair since March 2017
  • Life Choices Pregnancy Center, Poway, California, Member of Board of Directors
  • Allen Matkins Community Outreach Committee
  • St. Michael's Catholic Church, Poway, California
  • UCLA Real Estate Law Association, Student Mentor (2015-2017)
  • Yale Latino Alumni Association, Member of Latino Alumni Prize Committee (2015)
  • Yale Club of San Diego, member
  • Yale Alumni Schools Committee, member

ACCOLADES

  • Named to San Diego Business Journal’s “Leaders In Law” (2019)
  • Named to Real Estate Forum Magazine's 50 under 40 (2019)
  • Recipient of Connect Media’s Next Generation Award (2019)
  • Building Industry Association of San Diego Icon Award Winner – BIA Associate of the Year (2016, 2018)
  • Named to The Daily Transcript’s 40 under 40 (2017-2019)
  • Named to San Diego Business Journal's Next Top Business Leaders Under 40 (2018)
  • Named to San Diego Metro's San Diego's Best Attorneys (2018)
  • Named to San Diego Metro's 40 under 40 (2017 & 2018)
  • Named to The Daily Transcript’s Top 50 Influential Leaders in San Diego (2018)
  • Building Industry Association of San Diego Icon Award Finalist – BIA Associate of the Year (2015)
  • Building Industry Association of San Diego Icon Award Winner – Rookie of the Year (2014)
  • Featured as Rising Star of the Month in the February 2014 edition of the Attorney Journal, San Diego edition
  • Finalist for the San Diego Business Journal's 2013 and 2014 Emerging Generation Awards (25 in their 20s)
  • Named to The Daily Transcript's Young Attorneys (2012)
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