Design and Construction Defects

Contractors performing work in California are required to be licensed by the California State License Board (“CSLB”).  Cal. Bus. & Prof. Code §7065.  Except for sole proprietors, contractors are typically licensed through “qualifiers,” i.e., officers or employees who take a licensing exam and meet other requirements to become licensed on behalf of the contractor’s company.  Contractors who perform work in California without being properly licensed are subject to a world of hurt, including civil and criminal penalties (see, e.g., Cal. Bus. & Prof. Code §§ 7028, 7028.6, 7028.7, 7117, and Cal. Labor Code §§ 1020-1022), and the inability to maintain a lawsuit to recover compensation for their work.  Cal. Bus & Prof. Code § 7031(a); Hydra Tech Systems Ltd. v. Oasis Water Park, 52 Cal.3rd 988 (1991).
Continue Reading Landmark Contractor Licensing Case Limits Disgorgement Remedy in California

A recent California case may force engineering, procurement and construction companies doing business with foreign suppliers to reconsider—and maybe rewrite—their contracts. In Rockefeller Technology Investments (Asia) VII v. Changzhou SinoType Technology Co., Ltd., the California Court of Appeal held that parties may not contract around the formal service requirements of the Convention on the Service Abroad of Judicial and Extrajudicial Documents, commonly referred to as the Hague Service Convention. The decision could have profound implications for international business.
Continue Reading EPC Contractors Procuring from Foreign Companies need to Reconsider their Contracts

Contractors may benefit in making a small equity investment in the projects they construct. The financial benefit can arise from the investment itself and from improved understanding and communication with the owner during construction itself.

In the past, it was not unusual for construction companies to make small equity investments in the projects they worked on. For example, a construction company building a power plant would take a 5% equity interest in the project. By taking a financial stake in the project, contractors planned to protect their business interest in the project. That was the theory, anyway. Many of these investments did not provide the good returns; often-times the return was negative. While the construction company’s management was great at operating the construction business, it was not so great when it came to the financing business. So the idea went out of fashion.
Continue Reading Contractors May Benefit by Taking Equity in the Project They are Constructing

Beacon Residential Community Assoc. v. Skidmore, Owings & Merrill, LLP (Cal. Supreme Court., 07/03/2014, S208173)

On July 3, 2014, the California Supreme Court decided the much watched case Beacon Residential Community Assoc. v. Skidmore, Owings & Merrill, LLP.  The court held that the “principal architect” “owes a duty of care to future homeowners in the design of a residential building . . . even when they do not actually build the project or exercise control over construction.”  (Emph. added.)Continue Reading Principal Architects on Residential Projects Liable for Construction Defects Outside Their Control; Developers and Owners May Pay the Price

This article is the first in a series summarizing construction law developments for 2010.

By Candace Matson, Harold Hamersmith & Helen Lauderdale

1. Centex Homes v. Financial Pacific Life Insurance Co., 2010 U.S. Dist. LEXIS 1995 (E.D. Cal. 2010)
 

After settling numerous homeowners’ construction defect claims – and more than ten years after the homes were substantially completed – a home developer brought suit against one of the concrete fabrication subcontractors for the development seeking indemnity for amounts paid to the homeowners, as well as for damages for breach of the subcontractor’s duties to procure specific insurance and to defend the developer against the homeowners’ claims. The subcontractor brought a motion for summary adjudication on the ground the developer’s claims were barred by the ten year statute of repose contained in Code of Civil Procedure Section 337.15.
 Continue Reading The Year 2010 In Review: Design And Construction Defects Litigation

Landale-Cameron Court, Inc. v. Ahonen (Oct. 10, 2007, B190309 [2nd Dist., Div. 2]), ___ Cal. App. 4th ____; http://www.courtinfo.ca.gov/cgi-bin/opinions

By Thomas B. Snyder and Andriana Ledesma

In Landale-Cameron, the homeowner’s association of a condominium complex ("HOA"), discovered various water leaks to the building and subsequently sued the builder-developers Arnold and Helen Kaufman ("Kaufman") and Petri Ahonen dba Riteway Decking and Flooring ("Riteway") for negligence and contract causes of action.  Riteway moved for summary judgment on the grounds that the complaint was barred because it was filed after the expiration of the three-year statute of limitations for actions involving injury to real property under California Code of Civil Procedure Section 338.Continue Reading Court Of Appeal Finds That A Tolling Agreement Between An HOA And Developer Tolls The Applicable Statute Of Limitations Even As To A Non-Party Subcontractor.

Shepard v. Edward Mackay Enterprises, Inc., et al., — Cal. Rptr. 3d —, No. C052564, 2007 WL 853456 (Cal. Ct. App. Mar. 22, 2007)

While Section 1298.7 of the California Code of Civil Procedure generally allows homebuyers to pursue defect litigation in court regardless of an agreement to arbitrate, the Third District Court of Appeal recently ruled the Federal Arbitration Act preempts California law and binds homebuyers to arbitration provisions when the transaction involves interstate commerce.  Because homes built in California today likely incorporate at least some construction materials originating outside the state and therefore implicate interstate commerce, the court’s ruling may effectively preclude homebuyers from relying on this section of the Code of Civil Procedure to avoid arbitration.Continue Reading Federal Arbitration Act Preempts Contrary California Law and Prevents Purchaser of Real Property from Bringing an Action in Court for Construction and Design Defects

Kemp Bros. Construction, Inc. v. Titan Electric Corp. (2007) Cal.App.4th

By Thomas B. Snyder

In this case, Kemp was a prime contractor on two public works projects for the Los Angeles Unified School District ("LAUSD").  It subcontracted the electrical work to Titan Electric on both projects.  Partway through performance, Titan began to struggle with its payroll obligations and Kemp agreed to informally advance payments to Titan to assist in completing the work.  When problems continued, Kemp stopped the advance payments and Titan was unable to meet its payroll.  Kemp then retained another electrical subcontractor who completed the work.  Simultaneously, Kemp requested that the LAUSD approve Titan’s substitution as the listed subcontractor under Public Contracts Code Section 4107, arguing that Titan was failing and refusing to perform its work and/or delaying or disrupting the progress of the work.  The LAUSD hearing officer agreed that Titan had been disrupting and delaying the work and therefore determined that Kemp had the statutory right to substitute Titan.Continue Reading A Public Entity’s Determination That A Subcontractor Could Be Substituted Under Public Contracts Code Section 4107 Is Denied Preclusive Effect In Subsequent Litigation

McCrary Construction Company v. Metal Deck Specialists, Inc., California Court of Appeal, First Appellate District, November 14, 2004

In McCrary, a general contractor sought indemnity from two of its subcontractors for damages arising from the death of a construction worker who fell through a hole in the metal roof of the project. One subcontractor, Metal Deck Specialists, Inc., was responsible for installing the metal deck system on the roof, and had cut the hole in the roof and left it uncovered. The other subcontractor, Horizon Sheet Metal Co., covered the hole with plywood at the request of the general contractor, but failed to secure the plywood to the metal decking. The accident occurred when the worker lifted the plywood up, and not realizing there was hole beneath it, stepped into the hole and fell to his death.
Continue Reading Court Of Appeal Holds General Contractor Is Not Entitled To Indemnity From Subcontractors Under General Indemnity Clause Because General Contractor Was Actively Negligent