California Appellate Court Rejects Liberty Mutual and Requires Plaintiff to Follow the Right to Repair Act’s Pre-Litigation Procedures

On August 26, 2015, in McMillin Albany LLC et al. v. Superior Court (Van Tassell et al.) F069370, the California Court of Appeal, Fifth Appellate District, held that the Right to Repair Act (Cal. Civ. Code §895 et seq.) provides the exclusive remedy for homeowners seeking damages for certain claims for construction defect, regardless of whether or not the defects resulted in property damage. The McMillian Albany LLC (“McMillin”) court explicitly rejected the Fourth Appellate District’s decision in Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 1194, 212, which reached the opposite conclusion just two years prior. The McMillian decision represents a possible step forward for builders that stand to benefit from the Act’s pre-litigation procedures, which include the right to repair alleged defects prior to the start of litigation.

In McMillin, the plaintiff homeowners filed an action against the builders of their homes for alleged construction deficiencies. The builder petitioners moved to stay the litigation until the homeowners complied with the prelitigation procedures of the Right to Repair Act. The homeowners opposed the motion, contending that the Act’s requirements did not apply because their complaint alleged common law claims and did not allege a violation of the Right to Repair Act. The trial court denied the stay and petitioners filed a writ of mandate.

The Court of Appeal reversed the trial court’s decision and mandated that the court grant a stay pending completion of the pre-litigation process. The McMillin court explicitly rejected the court’s decision in Liberty Mutual, which held that plaintiffs could pursue common law claims for construction defect if they could show evidence of actual property damage. The McMillin court found that the Liberty Mutual court improperly neglected to consider certain provisions of the Act, including Civil Code §943, which provides that “no other cause of action for a claim covered by this title or for damages recoverable under Section 944 is allowed,” in rendering its decision. The McMillian court also looked to the legislative comments, which professed that the bill would make major changes to the substance and process of the law governing construction defects. As such, the court concluded that the legislature intended that all claims arising out of certain defects in residential construction be subject to the pre-litigation requirements of the Act.

The McMillin court’s diversion from the holding in Liberty Mutual and the cases that followed creates conflicting legal ground. Until further word from the legislature or review by the California Supreme Court, California courts are free to choose whether to follow the Liberty Mutual line of case law or the McMillin court’s decision and require homeowners to follow the prelitigation procedures set forth in the Right to Repair Act.

Changes to Appellate Practice in Nevada

On November 4, 2014, Nevada voters approved a constitutional amendment establishing the state’s first intermediate appellate court. The new court operates under an unusual “push down” model, in which all appeals are filed with the Supreme Court and then may be assigned to the three-judge Court of Appeals based on the types of issues presented. Recently, new rules went into effect implementing this change. Under the new rules, the Supreme Court shall hear and decide fourteen types of cases. All other case categories will be “presumptively assigned to the Court of Appeals.” The fourteen case categories retained by the Supreme Court are as follows:

(1) Proceedings that invoke the original jurisdiction of the Supreme Court, other than discovery related matters;

(2) Death penalty cases;

(3) Cases involving ballot or election questions;

(4) Cases involving judicial discipline;

(5) Cases involving attorney admission, suspension, discipline, disability, reinstatement and resignation;

(6) Cases involving the approval of prepaid legal service plans;

(7) Questions of law certified by a federal court;

(8) Disputes between branches of government or local governments;

(9) Administrative agency appeals involving tax, water or public utilities commission determinations;

(10) Cases originating in business court;

(11) Appeals from orders denying motions to compel arbitration;

(12) Cases involving the termination of parental rights or NRS Chapter 432B (protection of children from abuse and neglect);

(13) Matters raising as a principal issue a question of first impression involving the United States or Nevada constitution or common law; and

(14) Matters raising as a principal issue a question of statewide public importance or an issue upon which there is an inconsistency in the published decisions of the Court of Appeals or of the Supreme Court or a conflict between published decisions of the two courts.

A litigant who wants his case to be heard by the Supreme Court has only one opportunity to argue that the issues presented in his appeal fall into at least one of the above-listed categories. This opportunity comes in the form of the routing statement now required in every appellate brief by NRAP 28(a)(5). The routing statement must set forth whether the matter is retained by the Supreme Court or assigned to the Court of Appeals under NRAP 17. Parties may argue, however, that the Supreme Court should retain jurisdiction over the case “despite its presumptive assignment to the Court of Appeals, based on a principal issue raised in the matter…” NRAP 17(d), NRAP 28(a)(5). This argument must be accompanied by a clear statement of the relevant issue, citations to the record where the issue was raised and an explanation of the importance of the issue. Id.

Once a case is assigned to the Court of Appeals, a litigant may not move for reassignment. Instead, an aggrieved party may file a petition for Supreme Court review after final disposition of the case by the Court of Appeals. NRAP 40B(a). The petition must state the question presented for review and why the review is warranted.  Parties must remember, however, that Supreme Court review “is not a matter of right but of judicial discretion.” Id. If an appeal failed to meet the requirements of NRAP 17(a) when it was assigned to the Court of Appeals, it is just as unlikely to meet the standard for Supreme Court review of a Court of Appeals decision under NRAP 40B(a). For these reasons, a well drafted routing statement plays a crucial role in whether a litigant’s appeal will be heard by the Supreme Court or “pushed down” to the Court of Appeals.

Appeals filed in construction matters must be evaluated on case by case basis. If an appeal presents a question of first impression, matters of statewide importance, or involves an order denying a motion to compel arbitration, it will likely be heard by the Supreme Court. However, appeals from judgments of $250,000 or less (exclusive of interest and attorneys’ fees) or appeals challenging discovery orders or orders resolving motions in limine will be pushed down to the Court of Appeals. Lawyers who handle appeals in Nevada should carefully review the amended rules of appellate procedure to ensure the best strategy and advocacy for their clients.