Supreme Court Ruling Benefits Homebuilders in Construction Defect Lawsuits

On January 18, 2018, the California Supreme Court issued an opinion that benefits homebuilders in construction defect lawsuits. In McMillan Albany LLC, et al. v. The Superior Court of Kern County, the Court further clarified California’s Right to Repair Act (Civil Code §§ 895 et seq.) (Act) statute, which applies to new homes and condominiums that were built on or after January 1, 2003. When the Act’s mandatory prelitigation procedures for construction defect claims are applicable, homeowners cannot avoid them by filing a lawsuit that only alleges common law causes of action for negligence and strict liability. This further supports a homebuilder’s remedy to perform repairs as provided by the Act.

In McMillan, homeowners filed a lawsuit for construction defects alleging several causes of action, including violation of standards in the Act, negligence and strict liability. When the builder attempted to force the homeowners to comply with the Act’s prelitigation procedures, the homeowners attempted to bypass them by dismissing their cause of action for violation of standards under the Act.

After performing an in depth analysis of the legislative history and text of the statute, the Court determined that the Act was virtually the exclusive remedy for economic loss and property damage arising from construction defects. It also concluded that the Act replaced the common law causes of action for negligence and strict product liability in construction defect claims. Thus, homeowners cannot circumvent the prelitigation procedures by simply dismissing their cause of action for violation of the Act. The Court stated that construction defect claims are subject to the prelitigation procedures in the Act regardless of how the damages are pleaded.