Legal Landscape Update for Western AAMA

Members of the American Architectural Manufacturers Association’s Western Region have a better feel for the legal lay of the land regarding right-to-repair cases, especially in the western part of the country.

Held in conjunction with GlassBuild America in Las Vegas, the regional gathering featured an agenda of speakers which included the legal update, as well as a board meeting—all completed before its members headed over to the trade show floor opening Tuesday morning.

Indemnification Ruling May Require Group Effort

A California trade organization representing specialty contractors may look to the AAMA for a legal letter of support as it monitors in the state Supreme Court a case involving window maker Weather Shield Manufacturing that could have national ramifications.

The California Professional Association of Specialty Contractors, or CALPASC, is turning to associations representing various building products and construction trades to issue “friend of the court” letters to the state Supreme Court, said Jason Weintraub, a lawyer who serves on CALPASC’s legal action committee. “It’s a very important California case regarding the defense obligations of subcontractors and manufacturers,” he explained.

The background, according to Weintraub: Weather Shield Manufacturing was deemed not negligent during a trial examining faulty construction for its products’ craftsmanship in a particular project. Nevertheless, the state Court of Appeal found that a subcontractor or manufacturer can be compelled to pay for the defense fees of a builder or general contractor in a construction defect lawsuit, regardless of the subcontractor or manufacturer’s lack of negligence. In non-legal terms, this means that Weather Shield got stuck with the bill, even though they committed no wrongdoing in the eyes of the court, Weintraub explained.

Further, it’s not just residential manufacturers and subcontractors that face this challenge, he noted. “This type of indemnity agreement is just as prevalent in commercial work as residential contracts,” he said.
So both CALPASC and Weather Shield itself have hired strong law firms to file briefs to the California Supreme Court, which has agreed to review the appellate ruling (it could take as long as two years to actually make it to the courtroom, Weintraub pointed out).

The good news is that the nod by the Supreme Court to hear the case immediately curtails the appellate indemnification ruling from being cited as a precedent in other cases. The even better news, Weintraub said, is that building product manufacturers and subcontractors will have the right to represent its interests before an important legal body in a ruling that could potentially lay the groundwork for cases everywhere.

“It’s just not that often that we get the chance to air our concerns,” Weintraub noted. “We don’t get a chance to talk to the California Supreme Court very often so we’re going to say all that we need to say.”

Representing CALPASC and its efforts, Weintraub asked the members of AAMA to consider hiring a firm to file an amicus brief for the case. “This organization can bring a unique perspective and address issues to the California Supreme Court that no one else to date has agreed to bring up,” he said.

Both the Western Region as well as the national AAMA board will likely review potential participation in the case.

Refining “Right to Repair” Laws

Weintraub reported to the group that CALPASC is also looking to close loopholes that leave subcontractors and manufacturers exposed in “right to repair” cases. Since 2003, California has had SB800 on the books, its “right to repair” law that requires homeowners to carry out pre-litigation actions before taking a construction default case to court. This means that builders get the opportunity to fix a problem before being sued for it, he said. The SB800 law has been copied in as many as 20 states, and additional states have developed their own “right to repair” rules.

There are a few problems with the law, however, that subcontractors and manufacturers are working to clear up with additional language to the 2007 version of the law. First, there are few disclosure requirements for the builder vis-à-vis their subcontractor, Weintraub explained. A homeowner with a problem will go to their builder (often not even knowing who the subcontractors were for the construction of their home), but a builder is not required to give notice to the subcontractors that an issue is brewing.

Essentially, the subcontractors aren’t given the right to fix a problem before being sued. If a builder chooses to ignore its opportunity to fix the problem, the subcontractor ends up being held responsible for that decision, he said. “Eighty percent of settlement money is paid in total by the subcontractor and only 20 percent is paid by builders,” he noted. “We need to be there at the beginning of the process.”

Additionally, if a builder offers a cash settlement to a homeowner for a problem rather than making an attempt to fix it, the builder can pass that amount through to the subcontractors without advanced notice, according to the current version of the law. So in 2007, CALPASC will focus on disclosure requirements to benefit subcontractors, as well as manufacturers in some cases. “We want to ensure that all parties that build homes are involved as quickly as possible,” he said.

In this vein, CALPASC is also looking for outside support. The group is forming a coalition of industry organizations to offer support of the proposed disclosure revisions, Weintraub said. “It’s clear that our group needs support from your window organization to make changes,” he said.

As a trade organization and lobbying voice, CALPASC has more than 540 members. The group is based in Sacramento, CA, and its Web site is www.calpasc.org.