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In this case, Horvitz & Levy LLP successfully represented appellant MWI, Inc. on its appeal from a $24 million judgment entered in a construction defect action brought by the Acqua Vista Homeowners’ Association (the HOA) pursuant to SB 800 (Civil Code sections 895 et. seq.).

Under SB 800, a new home buyer is entitled to recover “economic losses” resulting from certain statutorily defined deficiencies that may exist in the construction but have not yet caused actual harm to persons or property.  Such losses may include costs to remedy the deficiency that would not ordinarily be recoverable in a common law cause of action.

The HOA sued various entities for deficiencies in the construction of its new 18-story condominium building, including sewer/storm drain pipe that leaked or corroded prematurely.  To recover from the builder/developer, all the HOA had to prove was that there was leakage and/or corrosion.  The HOA did not have to prove the builder/developer was at fault, or what caused the leakage/corrosion.  If it existed, then the builder/developer was absolutely liable for the cost to remedy the construction deficiency (subject to some affirmative defenses).  According to the HOA, this would require removing all the existing pipe in the building, installing new pipe, and restoring the condominium units to their original condition.

The HOA also sued MWI, the supplier of the pipe.  However, Civil Code section 936 states that as to a nonbuilder, the claimant in an SB 800 action must prove that the defendant’s negligence or breach of contract contributed to the construction deficiency.  The trial court ruled that the negligence standard set forth in section 936 did not apply to the HOA’s claim against MWI, which could have been sued under common law principles of strict liability for a defective product.  The HOA obtained a $24 million judgment against MWI.

Horvitz & Levy represented MWI on appeal.  The Court of Appeal (Fourth District, Division One) issued a published opinion, disagreeing with the HOA and the trial court and holding that the negligence standard set forth in Civil Code section 936 did apply to the HOA’s SB 800 claim against MWI.  Because the HOA had presented no evidence at the trial from which the jury could have found that MWI was negligent, the Court of Appeal reversed the judgment for the HOA with directions to the trial court to enter judgment for MWI.