In an unpublished decision on August 19, the California Court of Appeal, Fourth District, reinstated a class action asserting construction defect claims against a nationwide homebuilder. The case is located at 2015 WL 4940630, at *1 (Cal. Ct. App. Aug. 19, 2015). In reviving the class action, the court of appeal reversed a lower court decision which had stricken the class allegations from the plaintiff's complaint.
The court's decision to reinstate the class means that the class action lawsuit will now proceed to discovery and an evidentiary hearing on whether the class may be certified. This is a significant decision, as it effectively opens the door to class claims against homebuilders (and potentially other service providers employed in the homebuilding industry) arising out of alleged construction defects on California residential development and construction projects.
Class actions are commonly filed in California state and federal courts, as California courts are often viewed by the plaintiff's bar as favorable to class treatment. Allowing class treatment of claims can be a game-changer, as the potential liability may increase exponentially, making even relatively trivial damages claims serious as they are distributed among large classes of plaintiffs.
Construction defect claims, while often pooled together for case management purposes, were previously thought unsuitable for class treatment in California because of the individual factual questions that must be determined on a house-by-house basis. The defendant homebuilder made this argument, but the court rejected it:
Despite defendant's attempts to confuse the issue, there is nothing here based on the allegations of the complaint that suggests that each house is so unique that common facts, such as liability and defenses, cannot be considered as a class.
2015 WL 4940630, at *3. While the decision is, for now, unpublished, it could signal a troubling trend for companies involved in the homebuilding industry in California. It is not yet clear whether the decision will be appealed to the California Supreme Court.
Dentons' California attorneys have significant expertise defending class actions, and particular expertise in California real estate litigation. We will continue to monitor the case, as well as new class action filings in this area, to determine whether construction defect claims are being filed as class actions.
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