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.4^th 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.