Builders have long awaited a decision on the hot button topic of whether or not homeowners may assert common law causes of action such as negligence and strict liability against builders in relation to construction defects. This past January, the California Supreme Court held the “Right to Repair Act” is the exclusive remedy for construction defect claims. The Court also held that all claims seeking recovery for defect damages are subject to the Right to Repair Act’s pre-litigation procedures, regardless of the allegations present in the pleadings. The decision is a landmark one for builders, general contractors, and developers.
A Brief Background on the Right to Repair Act
Prior to January of this year, there was a split in authority with regard to the Right to Repair Act. According to the California Court of Appeals, the decisions governing the analysis of the standards set forth in the Right to Repair Act were found in Liberty Mutual Insurance Company v. Brookfield Crystal Cove LLC [(2013) 219 Cal.App.4th 98 (“Liberty”)] and Burch v. Superior Court [(2014) 223 Cal.App.4th 1411 (“Burch”)]. According to Liberty and Burch, the Right to Repair Act did not preclude preexisting common law remedies in cases brought by homeowners alleging personal injury or actual property damage and the Act was not the exclusive remedy for lawsuits involving construction defects. Because of this, homeowners were not required to engage in informal pre-litigation procedures involving notice and cure.
The McMillin Case
On January 18, 2018, the California Supreme Court ruled on the matter of McMillin Albany LLC et al v. The Superior Court of Kern County. The decision addressed the California Court of Appeals’ split in authority and effectively overruled the decisions in Liberty and Burch. In McMillin, Carl and Sandra Van Tassel and dozens of others (Plaintiffs) purchased 37 new single-family homes from McMillin Albany LLC, a general contractor and developer. Plaintiffs ultimately sued McMillin, alleging their homes were defective in virtually every aspect. The first amended complaint filed by the Van Tassels included common law claims for negligence, strict products liability, breach of contract, breach of warranty, and a statutory claim for violation of the construction standards set forth in CA Civil Code §896. (Right to Repair Act).
At the trial court level, McMillin sought an order staying the litigation to allow the parties to take advantage of the informal pre-litigation process described within the Right to Repair Act. Plaintiffs did not stipulate, and as a result the trial court denied the motion to stay the proceedings, citing the holdings in Liberty and Burch. McMillan appealed the ruling, and the California Court of Appeals decided, based on the Right to Repair Act, the parties were to engage in the informal pre-litigation process. The Appeals Court also ruled the Right to Repair Act was the exclusive remedy for property damage claims arising out of construction defects.
The Court of Appeals’ ruling was affirmed by the California Supreme Court. The Supreme Court analyzed the plain language of the Right to Repair Act in arriving at the decision. The Court recognized Civil Code section 896 mandates the Right to Repair Act applies to any action seeking construction defect damages as they apply to original construction intended to be sold as an individual dwelling unit. The Court also relied on the language in Civil Code sections 943 and 944 which delineates the damages that may be recovered by homeowners in a construction defect lawsuit as being limited to those described under the Right to Repair Act, absent an express exception. As to the necessity of engaging in informal pre-litigation procedures under the Act, the Court held the parties were subject to them, despite the fact that their common law causes of action were dismissed.
The Court’s holding in McMillan effectively defines the construction defect litigation process involving single-family homes in California. It affirms the intent of the legislature surrounding the Right to Repair Act, ultimately bringing equality for homeowners and builders alike.