California Residential Right to Repair Act Update: Liberty Mutual rejected. Homeowner Plaintiffs Required to Follow Pre-Litigation Requirements

On December 2, 2016, the Third Appellate District of the California Court of Appeal in Elliott Homes, Inc. v. Superior Court (Hicks et al.) 2016 DJDAR 11930, held that a homeowner must comply with the Right to Repair Act (Cal. Civ. Code §895 et seq.) even in cases where the homeowners do not allege statutory violations set forth in the Right to Repair Act. This decision is in sharp contrast to that of the Fourth Appellate District’s decision in Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4^th 1194. The Fourth District Court in Liberty Mutual determined that the Right to Repair Act does not provide exclusive remedy in cases where actual damage occurred. The result of the Liberty Mutual decision permitted homeowners to sidestep the notice requirements set forth in the Right to Repair Act in cases where only common law causes of action are pled.

In Elliott Homes, the plaintiff homeowners filed an action against the builders of their homes for alleged construction deficiencies. The complaint did not allege statutory violations set forth in the Right to Repair Act, but rather alleged only common law causes of action. The builder petitioners moved to stay the litigation until the homeowners complied with the pre-litigation 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 only common law claims and did not allege violations of the Right to Repair Act. The trial court denied the stay relying on the Fourth Appellate District’s holding in Liberty Mutual. The builders then filed a writ of mandate.

In its review, the Third District addresses in cases where plaintiff homeowners only pled common law cases of action, are the homeowners required to complete the pre-litigation requirements set forth in the Right to Repair Act prior to litigating the common law causes of action? The Elliott Homes Court directly rejects the Fourth Appellate District’s decision in Liberty Mutual Ins. In rejecting Liberty Mutual, the Court concludes that the Right to Repair Act applies to any action seeking recovery of damages arising out of, or related to deficiencies in residential construction. The Court reasons that the statutory language and legislative intent is clear that the Right to Repair Act is intended to apply to all actions seeking recovery of damages. Therefore, the Court concludes that if a homeowner fails to give the builder notice under the Right to Repair Act, the builder may bring a motion to stay the action, pending completion of the pre-litigation requirements. This decision sets up a conflict between the Third and Fourth Appellate Districts and the applicability of the Right to Repair Act to cases where only common law causes of action are pled. Given the conflict, it is likely that the California Supreme Court will take up this matter in the near future.  In the meantime, builders will likely continue to see these divergent issues arise.