Update on The Fallout From The Berkeley Balcony Collapse

Approximately one year ago, six people were killed in Berkeley, California when an apartment building balcony collapsed during a party attended by exchange students form Ireland. As we have previously reported on this blog – Berkeley Balcony Collapse Raises Questions; Bill in Response to Berkeley Balcony Collapse; Berkeley Balcony Collapse Update; and Builder Segue Construction’s Temporary Restraining Order, the legal fallout from this tragedy continues to reverberate.

Most recently, the Alameda County District Attorney decided not to press criminal charges because the investigation determined that it would be difficult to establish evidence sufficient to meet the legal threshold for manslaughter resulting from criminal negligence. No evidence could support a finding that any firm or individual involved with construction and design of the balcony acted with gross negligence or reckless conduct “akin to a disregard to human life…” such that there would be reasonably foreseeable deadly consequences.

Meanwhile, the California State License Board has just completed a nine month long investigation into the five construction companies that were involved in building the balcony and apartment complex in which it was located.

The License Board found that the collapse was caused by “…water incursion that caused dry rot” and that the contractors did not perform their work to “trade standards”. Those five companies are Segue Construction, Etter and Sons Construction, R. Brothers Waterproofing, North State Plastering and the Energy Store of California. They were the general, framing, plastering and waterproofing contractors and also the material supplier of ventilation equipment, respectively.

The License Board has decided to forward its results to the California Justice Department for further proceedings. Punishment could range from an infraction to a license suspension. The Justice Department’s investigation results and findings will not be released until or unless charges are formally filed and no further information about those proceedings is available.

Meanwhile the status of Senate Bill 465, a bill initiated in the California State Senate intended to require all contractors to disclose past felonies or lawsuits alleging defects brought against them for negligence or fraud, was being considered by Committee members for potential action, but lacking a consensus, the bill stalled in Committee.

Stay tuned to this blog site for further updates on these proceedings.

Builder Segue Construction’s Temporary Restraining Order Against The Alameda County District Attorney’s Office Denied

Segue Construction, the builder of the apartments where the balcony collapsed in Berkeley, CA killing six people, sought to obtain a temporary restraining order against the Alameda County District Attorney’s office from investigating the condition of the collapsed deck without Segue’s participation. The Alameda County District attorney is investigating the remnants of the collapsed deck, and another one similar to it, located on the same building and immediately underneath it, as part of a criminal investigation into the accident. Segue’s attorneys argued that crucial evidence in the collapse would be jeopardized by any “destructive testing” of the decks’ remnants and requested that its team be given access to any testing that the Alameda County District attorney’s investigators perform.

In its moving papers Segue argued that allowing it access to observe the deck materials and remnants would not prevent the district attorney from performing its investigations. Segue contended that it was merely requesting the opportunity for its own consultants to be present during any testing of the deck materials and remnants. The district attorney argued that the proposed temporary restraining order would violate section 526 of the California Code of Civil Procedure because it would interfere with the execution of the district attorney’s investigation and prosecution of potential criminal activity. The district attorney further offered that the evidence gathered as part of an ongoing criminal investigation is by its nature confidential and that such confidentiality of the investigation would be destroyed and would compromise the “integrity and viability of the investigative process.”

The district attorney argued that Segue failed to demonstrate that it had any rights with regard to this balcony because it did not own the balcony, and was not part of any formal lawsuit filed against it. The district attorney also contended that if such a temporary restraining order were granted by the court, it could impede future criminal investigations, setting a precedent that would allow “a bank robber …to participate in the fingerprinting of a teller’s station.” The balcony was not its property and other third parties would be denied the same opportunities as Segue would get if it were allowed to participate in the investigation.

More legislative and legal activity is sure to follow.

Berkeley Balcony Collapse Update: New, Stricter City Ordinances; State Bill Narrowly Defeated

As expected, the response to the tragic balcony collapse in Berkeley, California that killed six people has been swift but with mixed results. On the local level, the Berkeley City Council voted Tuesday to make several immediate changes to their local building requirements. First, all new balconies must be made of corrosion-resistant materials and be ventilated to prevent the buildup of moisture. While the investigation into the cause of the collapse is still ongoing, investigators have been pointing to the lack of any venting mechanism on these balconies as a potential cause for the alleged dry rot that is believed to be the cause of the collapse. As well, the council mandated that all balconies in Berkeley be inspected within the next six months and every three years after that. No details were given as to what those inspections would entail (visual or destructive) or who would be conducting the inspections. It will be interesting to see whether the city puts the onerous on the owners or whether this will be a city-run initiative.

Meanwhile, on the state level, a bill that would require contractors to disclose past felonies or lawsuits alleging defects, negligence, or fraud to the California State License Board (SB465) died in committee by a vote of 7-3. Only 8 votes were required for the bill to leave committee and be brought to the floor of the state senate for debate. Four of the committee members abstained from voting citing their concerns that the bill was “half-baked” and that there had not been enough time given to work out the specific details with the state licensing board. Supporters of the bill believe that this defeat in committee likely means that the bill has no chance of passing this year.

While there is mounting public pressure for the legislature to do something in response to this tragedy, passing a “half-baked” bill is not the solution. While there may be some logic in reporting requirements for contractors in certain situations, some significant thought must be given into exactly how that will happen and how the CSLB will treat such reports. Simply reporting the total value of a settlement in a construction defect case does not tell the whole story as to the quality of construction or the negligence of the parties involved. Given the relative ease with which construction defect cases are filed in California and the low threshold required for making allegations of negligence and even fraud, some thought has to be given to how the claims will be treated once they are reported to the CSLB and whether the CSLB has the resources available to conduct an evaluation of each claim for purposes of determining which cases warrant any action against a given contractor. It will be interesting to see how this bill evolves over the next few months before it is brought to the floor for debate.

Bill in Response to Berkeley Balcony Collapse Dies in Committee

Legislation written in response to last month’s deadly balcony collapse in Berkeley failed to advance July 14th in the Assembly Business and Professions Committee and is therefore stalled until next year. It fell one vote short of passage. Senate Bill 465 would have required contractors, and their insurers, to report to the Contractors State License Board settlements in excess of $50,000, or a binding arbitration resulting in an award of more than $25,000 involving cases of defects, fraud, negligence or incompetence. The bill would have made the provisions operative only if the Legislature appropriated money and granted hiring authority to the board for the purpose of acting on the information. The bill was opposed by the California Building Industry Association.

Berkeley Balcony Collapse Raises Questions About Reporting Requirements for Contractors

In the wake of the recent balcony collapse that killed six people in Berkeley, California, questions have been raised regarding past claims made against the general contractor of that building, Segue Construction, particularly those regarding improperly waterproofed balconies at previous projects. Several news stories have discussed past lawsuits from personal injury lawyer firms and settlements involving Segue in which allegations of improperly waterproofed balconies were made on several projects in the bay area. While it is difficult to draw any conclusions as to what occurred in Berkeley from any of these past claims, the question that is now being raised in the media is whether the California State License Board (CSLB) should be tracking claims made against contractors in an effort to keep events like these from occurring in the future.

Currently, there are no reporting requirements in California for contractors who are named as defendants in construction defect litigation matters. The only construction-related entities who have reporting requirements in California are architects (settlements, arbitration awards, or civil judgments in excess of $5,000; California Business and Professions Code section 5588, et seq.) and engineers (settlements in excess of $50,000, or judgments/arbitration awards in excess of $25,000; California Business and Professions Code sections 6770, et seq, and 8776, et seq.).

The real question is whether reporting requirements for all contractors will have the desired effect of reducing defective construction on future projects. Unlike design professionals whose design, if defective, could be used/repeated on multiple, future projects, contractors are generally faced with an entirely new set of circumstances on each new project. From location, to design drawings, to the subcontractors utilized to perform the work, to the materials used and/or specified, each project presents an entirely new set of facts to work within. For general contractors in particular, who more often than not do not self-perform any of the work on a given project, the question is whether a reporting requirement will have the desired effect of deterring defective workmanship when they are not the party actually performing the work.

For the subcontractors who actually perform the work, it’s possible that a reporting requirement may be justified, particularly if a given subcontractor is shown to have a history of defective workmanship. From a practical standpoint, however, one issue will be exactly what each subcontractor is required to report. Unlike design professionals, most contractors do not have a consent clause in their insurance policies, and therefore the insurance carrier defending the claim can resolve the case anyway it sees fit, which may mean paying more money to resolve a case to avoid the uncertainties of trial. As well, there may be numerous non-defect related components to a given settlement such as contractual defense and indemnity obligations as well as the potential threat of joint and several liability with other joint tortfeasors who may have no assets and no insurance. As such, the amount a subcontractor pays to resolve a case may have little correlation to the overall quality of their work. Given the complexity of any potential contractor reporting requirement, for such a requirement to be effective and not negatively impact the building industry, significant resources would need to be added to CLSB to allow the degree of investigation that would be necessary to assure that contractors are treated fairly.

The question has also been posed regarding how confidentiality provisions that appear in many settlement agreements in construction defect cases may affect potential reporting requirements for contractors where the terms of the settlement are to remain confidential. In light of the tragedy that occurred in Berkeley, the media has questioned whether the legislature should ban such confidentiality provisions under to the guise of a greater public safety concern. However, unlike in the narrow situations where the legislature has taken such a drastic step (i.e. medical device claims), it is the rarest of circumstances where construction defects result in significant personal injury, and therefore the public safety argument may not be as strong. In the event the legislature or CSLB does take action to require reporting requirements for contractors, however, a simple carve out in the confidentiality provision allowing the contractor to report only the information required may still allow for the use of such provisions.

Given the international attention the Berkeley balcony collapse has received, the debate is just beginning on this subject and it is likely that the state legislature will have the final say on whether reporting requirements will be extended to contractors.