Construction Defects Lead to Demolition
May 26, 2011 — CDJ Staff
Ten years after it was built, demolition of Seattle’s McGuire Building has begun, as Jeanne Lang Jones reports in the Puget Sound Business Journal. Construction defects had rendered the 25-story apartment building uninhabitable. The major problem was corroded steel cabling. According to the report, “the building’s owners reached an undisclosed settlement last year with St. Louis-based contractor McCarthy Building Companies.”
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Housing Prices Up through Most of Country
December 20, 2012 — CDJ Staff
Home prices in October were up more than six percent compared with prices in October 2011. The LA Times noted that some of the strongest gains were in California and Arizona. The Phoenix metropolitan area saw a 24.5% rise in home prices. In California, Riverside and Los Angeles were just above the national average, at 7.3% and 6.4%, contributing to the state’s overall nine percent increase.
The news wasn’t good throughout the entire country, as five states did not see any price increases. Mark Fleming, the chief economist at CoreLogic, a research firm in Irvine, California said that “the housing recovery that started earlier in 2012 continues to gain momentum.
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Subcontractor Not Liable for Defending Contractor in Construction Defect Case
February 10, 2012 — CDJ Staff
The California Court of Appeals has ruled on January 9, 2012 in Hensel Phelps Construction Company v. Urata & Sons Cement, upholding the judgment of the lower court.
Hensel Phelps was the general contractor for a high-rise in Sacramento. They were sued by the owners of the building after problems were discovered in the concrete slabs of the building’s parking garage. Instead of welded steel wire mesh, the slabs had been constructed with fiber mesh. Hensel Phelps filed a cross-complaint against Urata Cement, the subcontractor that had performed the cement work. Urata refused to defend Hensel Phelps. The owners’ case was subsequently dismissed due to the statute of limitations.
Although the original case was over, Hensel Phelps continued in their claims against Urata. “Urata argued that a handwritten interlineation required Hensel Phelps to prove Urata was at fault for the injury alleged in the building owners’ complaint before Urata was obliged to defend Hensel Phelps in that action.”
The lower court concluded that Urata would have been obligated to defend Hensel Phelps if the owners’ lawsuit had alleged that the damage was due to the subcontractor’s work or if evidence at trial established this. The lower court found neither of these true. Instead, the use of the fiber mesh was a design issue and “that decision was outside the scope of the subcontractor’s work.”
During the trial, Hensel Phelps conceded that Urata was not at fault. The appeals court could find no reading of the contract that would cause Urata to be obligated to defend Hensel Phelps, calling Hensel Phelps’s reading of the contact as “grammatically infeasible.”
Judges Nicholson, Raye, and Butz upheld the decision of the lower court and awarded costs on appeal to Urata.
Read the court’s decision…
Washington Supreme Court Sides with Lien Claimants in Williams v. Athletic Field
September 30, 2011 — Douglas Reiser, Builders Counsel
The Washington Supreme Court issued their opinion today on Williams v. Athletic Field, perhaps the most talked about construction law case in the past few years. I have discussed this case exhaustively here on Builders Counsel. Today we have a resolution.
In an unanimous opinion issued today, the high court sided with lien filers who followed a sample form provided in RCW 60.04.091. Additionally, the court found that a lien company - and presumably other persons - could sign the lien for the lien claimant, as an agent, without invalidating the lien.
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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
AFL-CIO Joins in $10 Billion Infrastructure Plan
June 30, 2011 — CDJ Staff
The AFL-CIO has announced plans to generate up to $10 billion in funding for infrastructure development, training construction workers, and making buildings more energy efficient, pledging $20 million to retrofit buildings. Bloomberg News reports that union officials made the announcement in Chicago at the Clinton Global Initiative, releasing a statement from Richard Trumka, president of the union, “we, at the AFL-CIO, believe that together, with our partners in business and government, we can profitably invest significant resources to make America more competitive and energy efficient.” A foot injury prevented Mr. Trumka from attending the event.
The statement also quoted Mark Ayers, president of the Building and Construction Trades Department of the AFL-CIO, “the time is now to become intensely focused on the creation of jobs.”
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Lien Law Unlikely To Change — Yet
May 26, 2011 — Melissa Brumback, Construction Law in North Carolina
For those of you following the proposed revisions to the NC lien law that is currently at the NC House Judiciary Subcommittee B, a quick update: the proposed bill (HB 489) is unlikely to be voted on this legislative session due to its unpopularity with several constituency groups, including both the AIA-North Carolinaand the NC Home Builders Association.
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Reprinted courtesy of Melissa Brumback of Ragsdale Liggett PLLC. Ms. Brumback can be contacted at mbrumback@rl-law.com.
Contractor Liable for Soils Settlement in Construction Defect Suit
February 10, 2012 — CDJ Staff
The California Court of Appeals ruled on January 9 in Burrow v. JTL Dev. Corp., a construction defect case in which houses suffered damage due to improperly compacted soil, upholding the decision of the lower court.
Turf Construction entered into a deal with JTL to develop a parcel they acquired. A third firm, Griffin Homes, withdrew from the agreement “when a geotechnical and soils engineering firm reported significant problems with soil stability on 14 of the lots.” Turf Construction then took over compacting and grading the lots. Turf “had never compacted or graded a residential tract before.” Robert Taylor, the owner of Turf, “testified he knew there was a significant problem with unstable soils.”
After homes were built, the plaintiffs bought homes on the site. Shortly thereafter, the homes suffered damage from soil settlement “and the damage progressively worsened.” They separately filed complaints which the court consolidated.
During trial, the plaintiff’s expert said that there had been an inch and a half in both homes and three to five inches in the backyard and pool areas. “He also testified that there would be four to eight inches of future settlement in the next fifteen to twenty years.” The expert for Turf and JTL “testified that soil consolidation was complete and there would be no further settlement.”
Turf and JTL objected to projections made by the plaintiffs’ soil expert, William LaChappelle. Further, they called into question whether it was permissible for him to rely on work by a non-testifying expert, Mark Russell. The court upheld this noting that LaChappelle “said that they arrived at the opinion together, through a cycle of ‘back and forth’ and peer review, and that the opinion that the soil would settle four to eight inches in fifteen to twenty years was his own.”
Turf and JTL contended that the court relied on speculative damage. The appeals court disagreed, stating that the lower court based its award “on evidence of reasonably certain damage.”
Turf also that it was not strictly liable, since it did not own or sell the properties. The court wrote that they “disagree because Turf’s grading activities rendered it strictly liable as a manufacturer of the lots.” The court concluded that “Turf is strictly liable as a manufacturer of the lots.”
Judge Coffee upheld the decision of the lower court with Judges Yegan and Perren concurring.
Read the court’s decision…
MGM Seeks to Demolish Harmon Towers
September 1, 2011 — CJD Staff
Citing public safety concerns and the cost of repair, MGM Resorts International is seeking to demolish the unfinished hotel tower. The company has a few hurdles to go through before they start laying the charges to implode the structure. Any plans would have to be approved by not only Clark County officials, but also the district court has an order blocking any activity during litigation between MGM and the general contractor on the project, Perini Building Company.
Architectural Record reports that MGM states it would take “approximately 18 months to conduct test and come up with an approved, permitted design to fix the Harmon.” MGM feels that repairs would then take another two to three years. Perini contends that they could “provide stamped drawings detailing all necessary repairs within three months.” They attribute MGM’s desire to demolish the building as “buyer’s remorse.”
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Construction Defects Leave Animal Shelter Unusable
October 23, 2012 — CDJ Staff
The Press Democrat reports that the Healdsburg Animal Shelter is proceeding in its lawsuit against the architect, general contractor, and subcontractors of its unfinished new facility. Shelter officials described the building as “effectively uninhabitable,” and the board has suggested that the building might have to be demolished. The chair of the shelter board told donors that “your investment is protected.”
The defects in the building include cracked concrete slabs and gaps around windows. However, even without these defects, the shelter alleges that the architect failed to correct design flaws.
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A Downside of Associational Standing - HOA's Claims Against Subcontractors Barred by Statute of Limitations
March 28, 2012 — Bret Cogdill, Colorado Construction Litigation
In multi-family construction defect litigation in Colorado, homeowners associations rely on associational standing to pursue claims affecting more than two units and to bring claims covering an entire development. This practice broadens an association’s case beyond what individual, aggrieved owners would otherwise bring on their own against a developer or builder-vendor. However, reliance on associational standing to combine homeowners’ defect claims into a single lawsuit has its drawbacks to homeowners.
A recent order in the case Villa Mirage Condominium Owners’ Association, Inc., v. Stetson 162, LLC, et al., in El Paso County District Court, presents an example. There, the HOA unsuccessfully sought a determination from the court that its claims against subcontractors were not barred by the statute of limitations. To do so, the HOAs attempted to apply the Colorado Common Interest Ownership Act (“CCIOA”), which governs the creation and operation of HOAs, and a statute intended to apply to persons under a legal disability.
Under CCIOA, during the period of “declarant control” the developer may appoint members to the association’s executive board until sufficient homeowners have moved into the development and taken seats on the board.
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Reprinted courtesy of Bret Cogdill of Higgins, Hopkins, McClain & Roswell, LLC. Mr. Cogdill can be contacted at cogdill@hhmrlaw.com.
Park District Sues over Leaky Roof
August 2, 2012 — CDJ Staff
The Glen Ellyn Park District has filed suit against multiple firms over the leaks in the Ackerman Sports and Fitness Center. The district alleges at least twenty leaks can be found throughout the facility. In order to prevent further damage, they have put in a system of “buckets, tarps and flexible piping.”
According to the Chicago Daily Herald, the park district has most recently added the project construction manager, the building designer, and insurer that issued a performance bond on the builder. T.A. Bowman Constructors, the builder of the project, sued the park district. They were first name in the district’s countersuit.
The park district isn’t waiting for the outcome of the suit to repair the roof. Instead, they are using existing funds to pay for roof repairs.
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Federal Court Denies Summary Judgment in Leaky Condo Conversion
August 4, 2011 — CDJ Staff
In the US District Court for Illinois, Judge William Hibber has rejected the request for summary judgment sought by the developers of a condominium building in the case of Nautilus Ins. Co. v. 1735 W. Diversey, LLC (the insureds). The insureds renovated a building at 1735 W. Diversey, Chicago, converting it into condominiums. After the project was completed and all units sold, and a condominium association form, one of the owners found that unit suffered leaks during rainstorms. The condo board hired a firm, CRI, to investigate the cause of the leakage. CRI found “water infiltration through the exterior brick masonry walls, build-up of efflorescence on the interior surfaces of the masonry, and periodic spalling of portions of the brick masonry.”
The redevelopment firm had purchased coverage from Nautilus. “Shortly after the Board filed its first complaint, the Insureds tendered the mater to Nautilus and requested that it indemnify and defend them from the Board's underlying claims. Nautilus, however, rejected the Insureds’ tender and denied coverage under both insurance policies.” Nautilus stated that the water leakage did not constitute an occurrence under the policies. The court cited these policies in which an occurrence is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The Illinois courts have determined that construction defects are not accidents.
The court concluded that the insured did not bring forth claims within the coverage of the policies and denied the motion for summary judgment.
Read the court’s decision…
Arizona Homeowners Must Give Notice of Construction Defect Claims
August 2, 2012 — CDJ Staff
Chris Combs of the Combs Law Group notes that “the new home construction industry is recovering” and that some of the buyers of these homes “will have claims for construction defects.” But not so quick on filing that claim.
Under Arizona law, as Mr. Combs notes the law “requires that, at least 90 days before filing any lawsuit, the buyer furnish notice by certified mail to the homebuilder specifying in detail the construction defect.” Only if there is no agreement over proposed repair can the homeowner file a lawsuit.
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Restitution Unlikely in Las Vegas Construction Defect Scam
October 23, 2012 — CDJ Staff
The San Francisco Chronicle reports that the money lost in the Las Vegas HOA fraud cause is probably not recoverable. Victims of the scam have asked the court for restitution, but Judge Lloyd George doubts any of the money will be found, saying “the money is not available, it would appear.”
One Vistana board members not part of the conspiracy told reporters that the $8 million construction defect settlement never went for needed repairs. “Within six months that money was gone,” said Bruce Wallace, a retired Air Force colonel. After the construction defect account was depleted to $450,000, two board members disappeared with the funds.
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Yellow Brass Fittings Play a Crucial Role in Baker v Castle & Cooke Homes
May 10, 2012 — CDJ Staff
Baker v Castle & Cooke Homes Hawaii, et al. is a “class action filed by homeowners who allege that their homes have a construction defect. They allege that their plumbing systems include brass fittings susceptible to corrosion and likely to cause leaks. They bring this action against the developer of their homes and the manufacturers of the brass fittings.”
Zurn, the manufacturer of the allegedly defective brass fittings, sought a dismissal, or if that could not be achieved, then “a more definite statement, of five of the six claims.” Zurn moved for summary judgment on the sixth claim, or alternately sought “summary judgment on one of the five claims it” sought to dismiss.” The court granted in part the motion, and denied the motion for summary judgment.
The developer, Castle & Cooke, sought dismissal of the First Amended Complaint stating “that Plaintiffs have not complied with Hawaii’s Contractor Repair Act, chapter 672E of Hawaii Revised Statutes, which requires, among other things, a plaintiff to give a contractor the results of any testing done before filing an action against that contractor.” The court couldn’t determine “certain facts essential to ruling” on Castle & Cooke’s motion, and therefore denied the motion, but ordered Plaintiffs to submit requested material by the stated deadline.
The Baker v Castle & Cooke case began with the Plaintiffs claim that the use of yellow brass fittings can lead to construction defects. They allege that “yellow brass is particularly susceptible to dezincification, a corrosion process in which zinc leaches into potable water that comes into contact with the brass. According to Plaintiffs, as the brass corrodes, it becomes porous and mechanically weak. Plaintiffs further allege that the PEX systems in the putative class members’ homes have begun to, or are about to, leak water into the walls, ceilings, and floors of their homes. Plaintiffs allege that the leakage will cause water damage and mold growth, exposing the occupants to toxins.”
In response to the plaintiffs’ claims, Zurn argued “because their yellow brass fittings have not failed to date, Plaintiffs fail to allege, and have no evidence showing, that they have suffered any actual injury.” Plaintiffs replied, “even if the fittings have not failed as of today, failure in the future is inevitable.”
However, the court stated, “whether Plaintiffs have suffered any injury, or whether Plaintiffs are attempting to proceed based solely on future injury, implicates Plaintiffs’ standing to bring this action, as well as whether this case is ripe for adjudication.” The court has requested the parties to submit “supplemental briefing on whether this case should be dismissed pursuant to Rule 12(b)(1). In supplemental briefs, Zurn argues that dismissal is appropriate because Plaintiffs lack standing, and Castle & Cooke argues that dismissal is appropriate because Plaintiffs’ claims are not ripe.”
The court continues to discuss the problem of standing: “To establish standing, a plaintiff must demonstrate three things. First, the plaintiff must suffer an "injury-in-fact," which means that there must be a concrete and particularized "invasion of a legally protected interest" and the invasion is actual or imminent. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). Second, the injury must be fairly traceable to the challenged action. Third, a favorable decision must be likely to redress the injury. Id. It is the first element (injury-in-fact) that is in issue here.”
The court found that the plaintiffs do have standing: “Even if the court could not rely on the allegations that the pipes will soon leak, the court would conclude that, for standing purposes, Plaintiffs have a sufficient injury-in-fact in the form of their alleged economic loss.” In a hearing, Plaintiffs argued that their homes had decreased in value.
The court also denied Castle & Cooke’s motion to dismiss based on a lack of ripeness, stating “the same reasons Plaintiffs satisfy the injury-in-fact requirement for standing purposes, they satisfy the constitutional ripeness requirement.”
Plaintiffs asserted six counts against Zurn. Zurn, in response, made a motion to dismiss counts VIII, IX, X, XII, and XIII. The court granted Zurn’s motion for Counts VIII, IX, and X only: “Counts VIII (product liability), IX (negligence), and X (strict liability) sound in tort. Zurn argues that, because Plaintiffs allege no injury other than to the PEX systems and the yellow brass fittings themselves, the economic loss rule bars their tort claims. The court agrees.”
The court disagreed with Zurn’s motion regarding Count XII: “Count XII asserts that Zurn has breached the implied warranty of merchantability. Zurn argues that Count XII is barred by the applicable statute of limitations and that Plaintiffs do not sufficiently allege an injury. The court disagrees.”
Zurn’s motion regarding Count XIII was also denied: “Count XIII asserts that Zurn violated section 480-2 of Hawaii Revised Statutes.” Furthermore, “Plaintiffs allege that Zurn ‘engaged in unfair and deceptive acts or practices when [it] designed, manufactured and sold Yellow Brass Fittings.’ Zurn argues that Plaintiffs fail to state a claim under section 480-2(a) because their claims are barred by the statute of limitations and they do not adequately allege reliance or a cognizable injury. The court disagrees.”
The court denied the motion for summary judgment with respect to Counts XI and XII.
Castle & Cooke sought to dismiss “Plaintiffs’ claims against it under section 672E-2 of Hawaii Revised Statutes, which provides for dismissal when claimants fail to comply with chapter 672E.” There was some discussion regarding the test results. Apparently, the plaintiffs had failed to provide a written notice of claim at least 90 days before filing the action. However, it is unclear if the Plaintiffs have since complied with the requirements of the chapter. “The court has received no supplemental information from either party about whether any test results from another case have been turned over or whether those materials are subject to a confidentiality agreement. The record at this point does not establish noncompliance with the requirement in chapter 672E to provide such information. The court therefore denies the motion to dismiss.”
In summary, “Zurn’s motion to dismiss is granted as to Count VIII, Count IX, and Count X. Zurn’s motion to dismiss is denied with respect to Plaintiffs’ other claims. Zurn’s request for a more definite statement and its summary judgment motion are denied. Plaintiffs are given leave to file an amended Complaint no later than May 21, 2012.” Furthermore, “the court denies Castle & Cooke’s motion, but directs Plaintiffs to file, within two weeks, either a certificate of compliance with section 672E-3(c), or an explanation as to why they have not complied. Castle & Cooke may submit a response within two weeks of Plaintiffs’ submission. Each party’s submission is limited to 1000 words.”
Read the court’s decision…
Manhattan Developer Breaks Ground on $520 Million Project
November 18, 2011 — CDJ Staff
Rebuilding an area of Midtown West that has been condemned for decades, the Gotham Organization has broken ground on a 1,200-unit project that will include housing for a variety of household incomes and a school. One unit of the project will be affordable housing for families of annual incomes up to $40,000. Another will be for middle-income households. Additionally, there will be a 31-story tower with 550 luxury units.
The site CityBiz quotes Mayor Michael Bloomberg, as saying that the project “will grow our economy by creating 2,900 construction-related jobs.” The president of the Gotham Organization, David L. Picket notes that it will “create hundreds of new jobs, generate millions of dollars in revenue for the construction industry, contribute towards the building of a new primary, and provide homes to thousands of New Yorkers.”
Read the full story…
Florida trigger
August 4, 2011 — CDCoverage.com
In Mid-Continent Casualty Co. v. Siena Home Corp., No. 5:08-CV-385-Oc-10GJK (M.D. Fla. July 8, 2011), insured residential real estate developer Siena was sued by homeowners seeking damages for moisture penetration property damage resulting from exterior wall construction defects. Siena’s CGL insurer Mid-Continent filed suit seeking a declaratory judgment of no duty to defend or indemnify in part on the basis that the alleged “property damage” did not manifest during the Mid-Continent policy period.
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Reprinted courtesy of CDCoverage.com
Court Rejects Anti-SLAPP Motion in Construction Defect Suit
September 1, 2011 — CJD Staff
The California Court of Appeals has upheld the denial of an anti-SLAPP motion in Claredon American Insurance Company v. Bishop, Barry, Howe, Haney & Ryder. This case was triggered by a water intrusion problem at a condominium complex, the Terraces at Emerystation, built and sold by Wareham Development Corporation. The insurer, Claredon, retained Risk Enterprise Management as the third party claims administrator. REM retained the law firm Bishop, Barry, Howe, Haney & Ryder. The construction defect case was settled in 2007 and the condo owners moved back by early 2008.
Due to issues with the claims settlement, Claredon filed against REM for “professional negligence, indemnity, apportionment and contribution,” with a cross-complaint that the cross-defendants negligently defended the developer, Wareham.
In response, the cross-defendants filed a motion to strike the cross-complaint under the anti-SLAPP statute. The trial court denied this motion and now this has been upheld by the appeals court.
The court noted that “The fundamental thrust of the cross-complaint is not protected litigation-related speech and petitioning activity undertaken on another’s behalf in a judicial proceeding.”
Read the court’s decision…
