California Supreme Court Issues Long-Awaited Decision In Construction Defect Case

January 22, 2018

On January 18th 2018, the California Supreme Court ruled in an important construction defect case that resolves a split of authority in California's Appellate Courts and delivers good news for builders of new residential construction. The issue before the Supreme Court in McMillin Albany LLC v. Superior Court (McMillin) was whether a plaintiff homeowner can avoid compliance with the statutory nonadversarial prelitigation procedures in the Right to Repair Act (the "Act", or SB 800) by pleading only common law causes of action for negligence and strict liability when alleging construction defects in a residence sold on or after January 1, 2003.

The Supreme Court held that the Act is the "virtually exclusive remedy" for residential construction defect cases regardless of whether there is actual physical damage to the home, and common law causes of action for negligence and strict liability are barred. The Supreme Court found that the terms of the Act and its legislative history indicate that the legislature intended the Act to be a broad reform package to change existing law by displacing common tort law claims with a statutory cause of action and a mandatory prelitigation process. The Supreme Court also rejected plaintiffs' arguments that the Act could not rationally be applied to defects requiring an emergency response. Although the McMillin case did not arise in an emergency scenario and the Act does not expressly address such circumstances, the Supreme Court stated that a builder which responds to an emergency by taking the maximum time period allowed by the Act does so "at its peril" and the builder is liable for "damages due to the untimely or inadequate response" to the homeowner's claim.

The published opinion is available from the California Judicial Branch.

Jackson Tidus is assessing the impact of this decision and how it may impact a builder's decision whether to "opt in" or "opt out" of the Right to Repair Act's nonadversarial prelitigation procedures. Please contact Edward Galloway, Sheri Marvin or Shannon Mandich if you have any questions about this ruling or its consequences.
 

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