CALIFORNIA SUPREME COURT ADOPTS HORVITZ & LEVY'S SUGGESTION TO DEPUBLISH HARMFUL ECONOMIC LOSS DECISION

On August 11, 2004, the California Supreme Court depublished Mesa Vista Townhome Assn. v. California Portland Cement Co. (2004) 118 Cal.App.4th 308, opn. mod. 118 Cal.App.4th 1352a, a Court of Appeal opinion creating an egregious exception to the economic loss rule that would have expanded the potential for liability in construction defect cases.

The economic loss rule as formulated by the California Supreme Court prohibits tort damages for construction defects unless the defect causes damage to property other than the defective product itself, or personal injury. The Court of Appeal in Mesa Vista had determined that an exception to the economic loss rule should apply “when damage to the product itself may be seemingly insignificant today, but is destined to worsen and likely to cause damage to ‘other property’ and perhaps to undermine the very structural integrity of a home.”

Barry Levy and M.C. Sungaila of Horvitz & Levy filed a letter seeking depublication of the opinion. Their depublication request pointed out that the Court of Appeal's holding was based on a misconstruction of the California Supreme Court's decisions in both Aas v. Superior Court (2000) 24 Cal.4th 627 and Jimenez v. Superior Court (2002) 29 Cal.4th 473. As Jimenez makes clear, the economic loss rule requires a defective component to injure some separate part of the property and cause more than just economic loss before a negligence claim can be brought. Moreover, Aas rejected the premise embraced by the Mesa Vista court – that an appreciable threat of future harm to other property can justify imposition of tort liability.

As a result of the Supreme Court's depublication order, the adverse decision in Mesa Vista can no longer be cited or used as authority in other construction defect cases.

If you have further questions about the case, please feel free to contact Barry Levy or M.C. Sungaila at blevy@horvitzlevy.com, msungaila@horvitzlevy.com or (818) 995-0800.

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