Life After McMillin: Do Negligence and Strict Liability Causes of Action for Construction Defects Still Exist?
The ruling is in but the battle will likely continue over the practical application of SB 800. On January 18, 2018 the California Supreme Court issued its decision in McMillin Albany LLC v. Superior Court, (2018) 4 Cal.5th 241, holding that the statutory prelitigation scheme in The Right to Repair Act (“the Act”) that provides for notice and an opportunity for the Builder to repair defects applies to all claims for construction defects in residential construction sold on or after January 1, 2003, regardless whether the claim is founded on a violation of the Act’s performance standards or a common law claim for negligence or strict liability. (McMillin Albany LLC v. Superior Court (2018) 4 Cal.5th 241, 259.) With this holding, has the Court ruled that common law causes of action for construction defect still survive? If so, what will they look like and what standards will be applied?
The short answer is that it appears that common law causes of action still survive, at least for now, but it is not clear from this decision what they will look like and what standards will apply. Portions of the decision seem to suggest that the Act is the sole and exclusive remedy for construction defect claims: “even in some areas where the common law had supplied a remedy for construction defects resulting in property damage but not personal injury, the text and legislative history [of the statute] reflect a clear and unequivocal intent to supplant common law negligence and strict product liability actions under the Act.” (McMillin, supra, 4 Cal.5th at p. 249, italics added for emphasis.) However, at the end of the decision, the Court seems to be saying that there may still be a place for common law claims for negligence and strict liability alongside the Act but that these causes of action may be subject to the performance standards in the Act.
The McMillin case went up to the Supreme Court on a procedural issue: whether a common law action alleging construction defects resulting in both economic loss and property damage is subject to the Act’s prelitigation notice and cure procedures. The Van Tassels had dismissed their claims under the Act opting to proceed solely on their common law claims including negligence and strict liability. McMillin sought a stay to force the Van Tassels to comply with the Act’s prelitigation procedures. The Supreme Court held that the Van Tassels must comply with the statutory procedures and affirmed the stay issued by the trial court. But the question remained: now that the Van Tassels were left only with common law claims, how would they proceed under the Act?
To understand how the Court dealt with this question, one must first understand how the Court dealt with the narrow procedural question presented by the case. The Court provides a very detailed, clear explanation of the reasons why it felt the Legislature intended for all construction defect claims involving residential construction must comply with the prelitigation requirements of the Act. In summing up its conclusions the Court makes three definitive holdings.
First, for claims involving economic loss only—the kind of claims involved in Aas—the Court holds that the Legislature intended to supersede Aas and provide a statutory basis for recovery. (McMillin, supra, 4 Cal.5th at p. 253.) In other words, the Court clearly agrees that the Act was meant to allow recovery of damages based solely on economic damages. No surprise there. Second, the Court held for personal injuries, the Legislature made no changes to existing law that provides common law remedies for the injured party. (Id.) Nobody has ever contested that. Finally, the Court held that for construction defect claims involving property damage and not just economic loss “the Legislature replaced the common law methods of recovery with the new statutory scheme.” (Id., italics added for emphasis.)
In other words, the Court is not saying that negligence and strict liability are not permitted causes of action. The Court is merely stating that these causes of action must comply with the Act’s statutory scheme just as the same as a claim for economic loss. Here the Court is focusing on the procedure that must be followed. “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 claims gave rise to any property damage.” (Id.)
Having laid out its fundamental premise, the Court then deals with Plaintiff’s arguments regarding the intent of the Legislature and makes light work of them all. In the process, the Court disapproves Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC, (2013) 219 Cal.App.4th 98, and Burch v. Superior Court, (2014) 223 Cal.App.4th 1411, to the extent they are inconsistent with the views expressed in the McMillin opinion.
This is where the decision gets interesting. The Court reminds us that the Van Tassels had dismissed their statutory causes of action for violation of the performance standards under Section 896. One would think at that point that Plaintiffs had to be wondering if they had any claims left given that the Court had ruled that the Act was the sole means of recovery for construction defects. Not so fast. The Court points out that the complaint still rests on allegations of defective construction and that the suit remains an “‘action seeking recovery of damages arising out of, or related to deficiencies in, the residential construction’ of the plaintiffs’ homes (§896) and McMillin’s liability under the Van Tassels’ negligence and strict liability claims depends on the extent to which it [McMillin] violated the standards of sections 896 and 897.” (McMillin, supra, (2018) 4 Cal.5th at p. 259.) WHAT DID THE COURT JUST SAY? Did the Court just say that a plaintiff could bring a common law cause of action for negligence or strict liability based on a violation of the performance standards under section 896? What exactly would that claim look like? What would be the elements of such a cause of action?
To answer these questions, the Court states in the very next paragraph, which also happens to be the last paragraph in the decision: “In holding that claims seeking recovery for construction defect damages are subject to the Act’s prelitigation procedures regardless of how they are pleaded, we have no occasion to address the extent to which a party might rely upon common law principles in pursuing liability under the Act.” (McMillin, supra, (2018) 4 Cal.5th at p. 259.) Is the Court answering “No” to the questions posed above? Probably not. It is simply following the age-old rule that an appellate court will not rule on an issue that is not specifically presented by an appeal, leaving that question for another day.
All we know for sure from McMillin is that every claim for construction defects falling within the scope of the Act must follow the prelitigation procedure. There are no hall passes for negligence and strict liability. The larger question posed by the last two paragraphs in the decision, is whether the law recognizes a cause of action for negligence and strict liability for construction defects based on the standards in Section 896. The answer will have to be worked out by judges and trial attorneys in courtrooms across the State! The parameters of this hybrid cause of action that the Court seems to have posited will need more careful consideration than can be offered on first reading of McMillin v. Superior Court.