To Sue or Not to Sue- That Is the Question
By Jan A. Gruen
Home builders typically retain the services of architects, geotechnical engineers and structural engineers to design residences for proper layout, structural safety and geotechnical conditions. Visualize a luxury home located in a canyon with views aplenty. The home is adorned with the nicest interior finishes imaginable. It is perfectly nestled into a hillside. The living room, dining room and family room include vast picture windows that capture the beauty of open space on all sides. It is the nicest home in the subdivision. Priced at a mere $5 million, the would-be home buyer loses all control and must buy. A year later, the home continues its steady movement downslope. Repair is no longer a solution. The dream home is no longer.
When evaluating the claims of homeowners or homeowners' associations, builder counsel must consider whether there are valid claims against the architect, structural engineer or geotechnical engineer who designed the project on behalf of the builder. The assessment can be complicated. Using the example above, the analysis goes something like this: Was the foundation improperly designed? Was it properly designed and improperly constructed? Were geotechnical conditions, including bad soils or water in the slope, to blame? Were corrective measures mandated by the geotechnical engineer and overlooked in the field?
The potential liability of design professionals must also be considered alongside California Code of Civil Procedure section
411.35, which requires that a Certificate of Merit be filed in any action or cross-action against a design professional for indemnity or negligence. This provision is unique to design professionals and is not required when filing suit against subcontractors or materials providers. The Certificate of Merit requires confirmation that the attorney has (1) reviewed the facts of the case, (2) consulted with at least one consultant practicing in the same field as the defendant or cross-defendant, and (3) concluded, based on the review and consultation, that "there is reasonable and meritorious cause for the filing of this action."
Simple enough, but by filing a Certificate of Merit, is the builder admitting that the home has design defects? The contents of a pleading, possibly including a Certificate of Merit, may constitute an admission by the party filing that pleading. (Evid. Code §1220; Brooks v. Brooks (1944) 63 Cal. App.2d 671; Dolinar v. Pedone (1944) 63 Cal. App.2d 169; see also 9 Wigmore Evidence (Chadbourne rev. 1981) §§2588, p. 821; 2590, pp. 822-23; 4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, §413, pp. 510-
511.) While there is no court of appeal case directly on point, it seems fundamentally unfair to require a builder to comply with the Certificate of Merit requirement and thereby "fall on its sword" just to preserve its rights against a potentially liable design professional. Moreover, the statute makes the consultation with the independent design professional completely privileged, suggesting that the legislature intended no effect of admission.
Builders have several good arguments against the contention that filing a Certificate of Merit constitutes an admission of liability. However, caution should still be exercised before asserting that there is reasonable and meritorious cause for filing the action against the named design professional. This is particularly true where the design professional is no longer in business or has no available insurance. Typically, the builder will remain strictly liable for defects and design deficiencies in construction regardless of whether its design professional has the assets or insurance to cover the claim.
At times, filing suit against a design professional is not only appropriate, it is advisable. For more complicated or questionable situations, alternatives exist. It may simply make more sense for a builder to delay filing suit where it has strong contractual indemnity language in its favor along with a contractual attorneys' fees provision. In addition, where liability is uncertain, it may be advisable to enter into an agreement to delay filing liti- gation against the design professional while preserving all rights to do so later. As I always say, let competent counsel guide you.
October 2007 Builder Architect Edition Issue