Seller Cannot Compel Arbitration for Its Role in Construction Defect Case<
March 01, 2012 —
CDJ STAFFThe buyer of a leaky home in Venice, California cannot be compelled to arbitration with the seller in a construction defect lawsuit, according to a decision in Lindemann v. Hume, which was heard in the California Court of Appeals. Lindemann was the trustee of the Schlei Trust which bought the home and then sued the seller and the builder for construction defects.
The initial owner was the Hancock Park Trust, a real estate trust for Nicholas Cage. Richard Hume was the trustee. In 2002, Cage agreed to buy the home which was being built by the Lee Group. Cage transferred the agreement to the Hancock Park Trust. Hancock had Richard Nazarin, a general contractor, conduct a pre-closing walk through. They also engaged an inspector. Before escrow closed, the Lee Group agreed to provide a ten-year warranty “to remedy and repair any and all damage resulting from water infiltration, intrusion, or flooding due to the fact that the door on the second and third floors of the residence at the Property were not originally installed at least one-half inch (1/2”) to one inch (1”) above the adjacent outside patio tile/floor on each of the second and third floors.”
Cage moved in and experienced water intrusion and flooding. The Lee Group was unable to fix the problems. Hume listed the home for sale. The Kamienowiczs went as far as escrow before backing out of the purchase over concerns about water, after the seller’s agent disclosed “a problem with the drainage system that is currently being addressed by the Lee Group.”
The house was subsequently bought by the Schlei Trust. The purchase agreement included an arbitration clause which included an agreement that “any dispute or claim in Law or equity arising between them out of this Agreement or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration.” The warranty the Lee Group had given to Hancock was transferred to the Schlei trust and Mr. Schlei moved into the home in May 2003.
Lindemann enquired as to whether the work done would prevent future flooding. Nazarin sent Schlei a letter that said that measures had been taken “to prevent that situation from recurring.” In February, 2004, there was flooding and water intrusion. Lindemann filed a lawsuit against the Lee Group and then added the Hancock Park defendants.
The Hancock Park defendants invoked the arbitration clause, arguing that Lindemann’s claims “were only tangentially related to her construction defect causes of action against the Lee Group.” On June 9, 2010, the trial court rejected this claim, ruling that there was a possibility of conflicting rulings on common issues of law. “With respect to both the developer defendants and the seller defendants, the threshold issue is whether there was a problem with the construction of the property in the first instance. If there was no problem with the construction of the property, then there was nothing to fail to disclose.” Later in the ruling, the trial court noted that “the jury could find there was no construction defect on the property, while the arbitration finds there was a construction defect, the sellers knew about it, and the sellers failed to disclose it.” The appeals court noted that while Hancock Park had disclosed the drainage problems to the Kamienowiczs, no such disclosure was made to Sclei.
The appeals court described Hancock Park’s argument that there is no risk of inconsistent rulings as “without merit.” The appeals court said that the issue “is not whether inconsistent rulings are inevitable but whether they are possible if arbitration is ordered.” Further, the court noted that “the Hancock Park defendants and the Lee Group have filed cross-complaints for indemnification against each other, further increasing the risk of inconsistent rulings.”
The court found for Lindemann, awarding her costs.
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OSHA Announces Expansion of “Severe Violator Enforcement Program”
November 15, 2022 —
Kip J. Adams & Steven G. Gatley - Lewis Brisbois(October 28, 2022) - Employers beware! The Occupational Safety and Health Administration (OSHA) is significantly expanding its “Severe Violator Enforcement Program” (SVEP). Employers that are placed into the program by OSHA will be significantly scrutinized, with the potential for very damaging information about their failure to maintain a safe workplace being made public for customers, partners, and vendors to see.
As the name suggests, the program is meant to identify, classify, and then stringently monitor employees deemed to be “severe violators” of the OSH Act. According to the OSHA website alert, to be deemed a “severe violator”, the agency must find that the employer has demonstrated “indifference” to the regulations by committing “willful, repeated, or failure-to-abate” violations.
Reprinted courtesy of
Kip J. Adams, Lewis Brisbois and
Steven G. Gatley, Lewis Brisbois
Mr. Adams may be contacted at Kip.Adams@lewisbrisbois.com
Mr. Gatley may be contacted at Steven.Gatley@lewisbrisbois.com
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The Condo Conundrum: 10 Reasons Why There's a 'For Sale' Shortage in Seattle
December 20, 2017 —
Dave Suggs - CDJ STAFFSeattle Washington is experiencing a shortage of in-city condos. Of the 27,000 units of new housing being built in downtown Seattle, 94 percent will be rentals. As housing prices are rising in the US’s fastest-growing large city, the median home price is $660,000. Dean Jones of the Seattle Magazine reports on why consumers consider condos, but home developers don’t in his article “The Condo Conundrum: 10 Reasons Why There's a 'For Sale' Shortage in Seattle.”
Reason 1, condominiums don’t always offer high returns and can be riskier for the home developer. Reason 2, the Washington State Condo Act “overprotects” buyers of condos with over-the-top warranties that makes everyone in the industry afraid to work with condos. Reason 3, the cost of condo building is increased because of the risk of defect litigation. Reason 4, condo presale buyers are not required to deposit a percentage to invest in a new development and before closing could decide to walk away. Reason 5, there is a lot of interest in apartment buildings from investment groups.
Reason 6, investors whose goal is to own “trophy” assets in rising markets can’t wait the years it takes developers to plan and construct a new multistory community. Reason 7, since rent prices have risen 50 percent on average in the last 7 years, it’s profitable to be a landlord. Reason 8, the millennials who live and work in this tech oriented region prefer to rent because of living through the rise and fall of the housing market. Reason 9, the costs is rising each year to deliver new projects. Reason 10, high-rise zoning was adopted 2 years before the recession, so just as condo development was gearing up, apartment building took over.
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Worker’s Compensation Exclusivity Rule Gets “Trumped” by Indemnity Provision
October 27, 2016 —
Garret Murai – California Construction Law BlogSorry, I couldn’t help myself with the title.
The next case, Aluma Systems Concrete Construction of California v. Nibbi Bros., Inc., California Court of Appeals for the First District, Case No. A145734 (August 16, 2016), discusses the interplay between indemnity provisions and the worker’s compensation exclusivity rule.
The worker’s compensation exclusivity rule generally provides that worker’s compensation insurance is the exclusive remedy of employees for injuries or death arising out of the course and scope of their employment.
In the Aluma case, the California Court of Appeals, addressed what happens when a subcontractor’s employees are injured on a project, sue the general contractor, and the general contractor, pursuant to an indemnity provision in its subcontract, tenders the claim to the subcontractor whose worker’s compensation insurance has already paid the employees.
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Garret Murai, Wendel Rosen Black & Dean LLPMr. Murai may be contacted at
gmurai@wendel.com
Insurer's Motion to Dismiss Complaint for Failure to Cover Collapse Fails
April 13, 2017 —
Tred R. Eyerly – Insurance Law HawaiiThe insurer was unsuccessful in moving to dismiss the property owner's complaint that was filed after coverage for collapse of basement walls was denied. Cyr v. CCAA Fire & Cas. Ins. Co., 2017 U.S. Dist. LEXIS 39387 (D. Conn. March 20, 2017).
The Cyrs began observing cracking patterns in the basement wall of their home. A structural engineer inspected the wall and determined that the cracks were due to a chemical reaction in the concrete that would ultimately render the walls unstable. The Cyrs made a claim with CCAA under their homeowner's policy. The insureds contended that the progressive deterioration of the concrete in the basement walls was a collapse under the policy.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Parks and Degradation: The Mess at Yosemite
September 09, 2024 —
Laura Bliss - BloombergA couple of miles past the western entrance to Yosemite National Park, visitors pass from California into a postcard. The road opens to a majestic view of
Half Dome, El Capitan and Cathedral Rocks—celebrity peaks if ever there were—which form the towering walls of Yosemite Valley. On the pine-scented floor of John Muir’s mountain mansion, the Merced River flows gently by the side of the road as signs point toward trailheads and tourist destinations. Not far from
Curry Village, a cluster of tent cabins and eateries at the eastern end of the road, is a section of employee housing known as the Stables. It was there that Erin Rau found herself wrapped in a sleeping bag one broiling afternoon last summer, wondering whether she was about to die.
Rau was a little over a month into a seasonal job selling goods in the village’s general store. Almost as soon as she arrived from Michigan, she recalls, she got the sense this wouldn’t be the carefree, post-college summer gig she’d imagined. In the evenings, she was left alone to manage a bunch of fellow early-twentysomethings making the same sixteenish bucks an hour until the shop closed at 10. At night a family of ringtail possums would crawl down from the rafters to tear into a display of baked goods, a long-standing issue she says her bosses did nothing to resolve, apart from throwing away half-eaten muffins in the morning. Similarly, deer mice kept leaving droppings on the pillows and sheets in the cabin Rau shared with three other women. When one of her roommates complained, she says, management supplied a Ziploc with a couple of mouse traps, a mask, gloves and some hand wipes, leaving the employees to sort out the rest.
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Laura Bliss, Bloomberg
Excess Must Defend After Primary Improperly Refuses to Do So
August 13, 2014 —
Tred R. Eyerly - Insurance Law HawaiiThe excess insurer had a duty to defend after the primary carrier improperly refused its defense obligations. IMG Worldwide, Inc. v. Westchester Fire Ins. Co., 2014 U.S. App. LEXIS 13703 (6th Cir. July 15, 2014).
IMG was sued for over $300,000,000 for alleged fraud, conversion, civil theft and violations of the Florida Deceptive and Unfair Trade Practice Act (FDUTPA). The lawsuit stemmed from a real estate development project. The plaintiffs had invested in the project and alleged that the developer had sold them undeveloped properties with the promise they would be developed. IMG was a consultant on the project and also licensed to the developer the use of the IMG name and logo in marketing materials. IMG had no contractual obligation to actually develop the property or finance the project.
IMG sought coverage from its primary carrier, Great Divide, and from its excess carrier, Westchester. Both denied coverage and refused to defend.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
The Future of Construction Tech Is Decision Tech
August 06, 2019 —
Bassem Hamdy - Construction ExecutiveIt doesn’t take much to be catastrophically wrong in construction; some bad information, a touch of misleading intel, a few biased opinions mixed with human error and perhaps a little bad luck to top it off. A poor decision early in a project plants itself like a weed—it grows benignly at first, and becomes gravely pervasive at the end.
Being wrong in construction is dangerous. Error leads to leaning towers and broken buildings. Poorly-built structures can hinder economic growth and deprive communities of good infrastructure. For the enterprise, bad decisions can lead to massive financial loss and—worse—human loss on a jobsite.
Despite knowing all the dangers, it seems that flawed data, misleading intel and human error have become traits the industry can’t shake. To be clear, construction is one of—if not the most—complex industry in today’s economy. Companies walk a tight rope between a 2% margin on one side and ruinous loss on the other. Under such conditions, it’s easy to see why sustained good judgement is difficult.
Reprinted courtesy of
Bassem Hamdy, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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