SB 800's Applicability Decided?

March 19, 2018

SB800’s Applicability Decided? 

Open Questions from McMillin Albany v Superior Court

The California Supreme Court’s January 18, 2018 decision in McMillin Albany, LLC, et al. v Superior Court of Kern County ((Carl Van Tassel, Real Party in Interest;  S229762;  Ct. App. 5 F069370) is generally being lauded by the defense bar as a victory.  Indeed, it is a defense decision in that the Court concluded Division 2, Title 7 of the California Civil Code, known as the “Right to Repair Act” [“the Act”], and specifically Civil Code section 896, means what it says in requiring that:

“In any action seeking recovery of damages arising out of, or related to deficiencies in, the residential construction, design, specifications, surveying, planning, supervision, testing, or observation of construction . . . the claimant’s cause or causes of action shall be limited to violation . . . of [standards set forth in The Act] except as specifically set forth in [The Act].”

[Div. 2, Title 7, CA Civil Code, § 896; added by Stats. 2002, Ch. 722, Sec. 3; amended by Stats. 2012, Ch. 770, Sec. 2 (AB 2697); effective January 1, 2013.]

But let’s hold the celebration for just a moment. 

It is true the Court finds that “claims seeking recovery for construction defect damages are subject to the Act’s prelitigation procedures regardless of how they are pleaded” [McMillin, Id., at p. 19] and that if “the operative complaint includes claims resting on allegations that [defendant] defectively constructed the . . . plaintiffs’ home . . . [t]his 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 . . . [such plaintiffs would be] required to initiate the prelitigation procedures provided for in the Act.”  [McMillin, Id., at pp. 18-19.]

However, in the penultimate paragraph of the McMillin decision, Justice Liu, writing for a unanimous Court, cautions the reader as follows:

“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. Nor does our holding embrace claims such as those for breach of contract, fraud, or personal injury that are expressly placed outside the reach of the Act’s exclusivity. (§ 943, subd. (a).)”

[McMillin, Id., at p. 19]

The Court gives no guidance regarding the “common law principles” on which a party might conceivably rely in pursuing an action under The Act.  More perplexing is the apparent disharmony between this statement and the language at page 2 of the decision, where the Court writes that it understands the legislature intended to “supplant the common law with new rules governing the method of recovery in actions alleging property damage.”  It is difficult to reconcile the two seemingly opposing ideas in these statements.

There appears to remain fertile ground for disagreement – and future litigation – over this question of what claims may be pursued and how they may be pursued.  Though it seems clear the pre-litigation procedures of The Act likely will need to be followed before filing suit based on claims that fall squarely under the standards set forth in The Act, there appear to remain open questions about how the case may proceed thereafter.  Watch for updates.  We will be monitoring the appellate dockets for this and other issues raised by McMillin and other construction-related decisions.