Monthly Archives: March 2021

Court Finds that Subcontractor Lacks Standing to Appeal Summary Judgment Order Simply Because Subcontractor “Might” Lose at Trial Due to Order

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Garret Murai | California Construction Law Blog

Cases sometimes take unanticipated twists and turns. Atlas Construction Supply, Inc. v. Swinerton Builders, Case No. D076426 (January 26,2021), involving a tragic construction accident, a motion for summary judgment, a motion for good faith settlement, and a stipulated dismissal, is one of those cases.

The Accident

Swinerton Builders was the general contractor on a residential construction project in San Diego, California. Swinerton contracted with J.R. Construction, Inc. to perform concrete work and with Brewer Crane & Rigging, Inc. to perform crane work on the project. J.R. Construction in turn rented a concrete column formwork approximately 10 feet tall and weighing 300 to 400 pounds from Atlas Construction Supply, Inc.

One day on the construction project, Marcus Develasco, Sr. and another co-worker, employees of J.R. Construction, climbed to the top of the formwork to adjust its size. The formwork, which had been positioned on the site by Brewer, was upright but unsupported by braces. When the co-worker stepped off the formwork, Develasco’s weight caused the unsecured formwork to topple over, killing Develasco in the process.

The Wrongful Death Lawsuit

Develasco’s family filed a wrongful death lawsuit against Atlas, Swinerton and Brewer, asserting a product liability claim against Atlas and negligence claims against all three defendants. Atlas, in turn, filed a cross-complaint against Doe defendants for equitable indemnity, contribution and declaratory relief and later substituted Swinerton as one of the Doe defendants.

While the case was pending, Swinerton filed a motion for summary judgment contending that the plaintiffs’ claims against Swinerton was barred under the Privette doctrine. Under the Privette doctrine, unless an exception applies, the hirer of a contract is not liable for injuries or death of an employee of the contractor. Plaintiffs filed an opposition to Swinerton’s motion. So too did Atlas, who argued that under the Hooker exception to the Privette doctrine, Swinerton was liable because it retained control over the safety of conditions on the worksite and that Develasco was killed because of Swinerton’s failed to ensure that conditions on the worksite were safe.

The Trial Court’s Granting of Swinerton’s Motion for Summary Judgment

The trial court issued a tentative ruling granting Swinerton’s motion for summary judgment. In its tentative ruling, the trial court expressly declined to consider Atlas opposition to the motion stating that “granting the motion would not necessarily extinguish” Atlas’ cross-complaint for indemnity, contribution and declaratory relief against Swinerton. However, in its tentative ruling, the Court also directed the parties to submit supplemental briefs on whether Atlas had standing to file an opposition to the motion.

In its supplemental brief, Atlas argued that it had standing because it was adverse to Swinerton having added Swinerton as a Doe defendant in its cross-complaint for indemnity, contribution and declaratory relief. Further, argued Atlas, it had standing because it would be precluded from arguing at trial that Swinerton was liable if the trial court granted Swinerton’s motion. In its final order, the Court sided with Swinerton, noting that the summary judgment statute found at Code of Civil Procedure section 437c does not require the court to “consider multiple oppositions to a motion for summary judgment” because the statute “identifies ‘opposition’ in the singular.”

Swinerton’s Motion for Good Faith Settlement

However, rather than seeking entry of judgment on its motion for summary judgment, Swinerton negotiated a settlement with the plaintiffs, whereby the plaintiffs agreed to dismiss their claims with prejudice against Swinerton in exchange for Swinerton agreeing to waive reimbursement of its costs totaling $5,349.63.

Thereafter, Swinerton filed a motion for good faith settlement and request for dismissal of Atlas’ cross-complaint. Atlas filed an opposition to Swinerton’s motion arguing, as it did in its opposition to Swinerton’s motion for summary judgment, that Swinerton was liable under the Hooker exception to the Privette doctrine. Atlas further argued that it estimated that Plaintiffs recovery at trial would be approximately $2.7 million, that Swinerton was responsible for 75% – 85% of this amount or $2 – $2.3 million dollars, and that  Swinerton’s settlement with the Plaintiffs for a waiver of $5,349.63 in costs was not a good faith settlement.

The Trial Court’s Granting of Swinerton’s Motion for Good Faith Settlement and Atlas’ Stipulated Dismissal

The trial court granted Swinerton’s motion for good faith settlement. However, the Court declined to grant Swinerton’s request to dismiss Atlas’ cross-complaint, finding that Swinerton did not meet its “burden [of establishing] that [Atlas’] claims in the cross-complaint [were] barred by the granting of the good faith settlement” determination.

Thereafter, Swinerton and Atlas filed a stipulated request for dismissal of Atlas’ cross-complaint against Swinerton to permit Atlas to file an appeal. The stipulation stated that the trial court’s order granting Swinerton’s motion for good faith settlement “eliminated any and all rights Atlas may have to recover under [the] cross-complaint,” and “there [was] no legal basis for a trial of Atlas’ cross-complaint against Swinerton . . .” Pursuant to the parties’ stipulation, the trial court dismissed Atlas’ cross-complaint without prejudice.

Later, plaintiffs filed a request for dismissal with prejudice of their complaint against Swinerton.

Atlas then appealed.

The Appeal

On appeal, Atlas challenged three orders: (1) the trial court’s order granting Swinerton’s motion for summary judgment; (2) the trial court’s order granting Swinerton’s motion for good faith settlement; and (3) the stipulated request for dismissal of Atlas’ cross-complaint against Swinerton. Swinerton, in turn, filed a motion to dismiss the appeal on the ground that the 4th District Court of Appeal lacked jurisdiction to consider Atlas’ appeal of the three orders.

Working in reverse order, the Court of Appeal first addressed the stipulated request for dismissal of Atlas’ cross-complaint against Swinerton. On appeal, Swinerton argued that the stipulated request for dismissal was not an appealable judgment because Atlas was still a defendant in the underlying wrongful death case of Plaintiffs. The Court of Appeal disagreed. Citing cases holding that the dismissal of a cross-complaint is a final judgment as between the parties to the cross-complaint, and is appealable, the Court stated:

As Swinerton notes, Atlas remains a defendant in plaintiffs’ underlying wrongful death action. However, the order dismissing Atlas’s cross-complaint resolved all pending causes of action between cross-complainant Atlas and cross-defendant Swinerton. Though the trial court denominated the order as a dismissal without prejudice, the parties did to stipulate to toll the statutes of limitations applicable to the cross-complaint or otherwise agree to facilitate future litigation of the cross-complaint. Thus, the dismissal order is sufficiently final for purposes of the one final judgment rule. Because the order disposed of all causes of action between the parties to the cross-complaint, and those parties did not preserve the voluntarily-dismissed cross-complaint for future litigation, the dismissal order is appealable as a final adjudication of Atlas’ rights against Swinerton.

As to the trial court’s order granting Swinerton’s motion for good faith settlement, Atlas argued on appeal that the order was an intermediate ruling that was reviewable as part of Atlas’ appeal from the order dismissing its cross-complaint. In response, Swinerton argued that the  order was not appealable because Atlas did not try to first seek a writ of mandate of the order.

While noting that Code of Civil Procedure section 877.6(e) permits a losing party to seek immediate appellate review of a good faith settlement determination by filing a petition for writ of mandate, the Court of Appeal noted that there was a split of authority among Divisions within the 4th District Courts of Appeal as to whether Section 877.6(e) is the sole means by which a party may seek review of a good faith settlement determination. 

Note: While splits of authority between Courts of Appeal are rare, splits of authority between divisions of the same Court of Appeal, are even rarer.

In Main Fiber Products, Inc. v. Morgan & Franz Insurance Company (1999) 73 Cal.App.4th 1130, the 4th District Court of Appeal (Division Two) held that Code of Civil Procedure section 877.6(e) is the “exclusive means of review” of a good faith settlement determination. However, in Cahill v. San Diego Gas & Electric Company (2011) 194 Cal.App.4th 939, the 4th District Court of Appeal (Division One) held that use of the term “may” in Section 877.6(e) (“[w]hen a determination of the good faith or lack of good faith of a settlement is made, any party aggrieved by the determination may petition the proper court to review the determination by writ of mandate”) (emphasis added) demonstrated that Section 877.6(e) was permissive, not mandatory, and not the exclusive means of seeking review of a good faith settlement determination. As such, held the Court of Appeal, “we conclude that Atlas is not barred from appealing the good faith settlement determination merely because it did not file a petition for writ of mandate under section 877.6, subdivision (e).

Finally, the Court of Appeal looked at whether Atlas had standing to appeal the trial court’s order granting Swinerton’s motion for summary judgment. On appeal, Atlas argued that order was an interlocutory ruling reviewable on appeal from the order dismissing its cross-complaint. Specifically, Atlas argued that it was aggrieved because as a co-defendant with Swinerton, Atlas shared an interest with the Plaintiffs in establish the negligence of Swinerton. Further, argued Atlas, it was aggrieved because by granting Swinerton’s motion for summary judgment, Atlas would be unable to attribute fault to Swinerton at the wrongful death trial. In response, Swinerton argued that the Court of Appeal lacked jurisdiction because Atlas was not aggrieved by the order granting Swinerton’s motion for summary judgment.

The Court of Appeal agreed with Swinerton. Noting that under Code of Civil Procedure section 902 “[a]ny party aggrieved may appeal in the cases prescribed in this title,” the Court explained that Atlas was not “aggrieved” in the true sense of the word because Atlas’ arguments assumed an outcome that might not actually come to pass:

We are not convinced the mere possibility of future harm to Atlas renders Atlas aggrieved for purposes of section 902. In short, Atlas’s argument rests on a series of ifs — (1) if the wrongful death action proceeds to trial, plaintiffs may move in limine to exclude Atlas from attributing fault to, or commenting on, the absence or involvement of Swinerton; (2) if the plaintiffs file this anticipated motion in limine, the trial court may find that its prior order granting Swinerton’s motion for summary judgment under the Privette doctrine was a determination that Swinerton was “without fault” (§ 437c, subd. (l)), and the court may grant plaintiffs’ motion in limine on that basis; and (3) if Atlas is unable to attribute fault to, or comment on the absence of, Swinerton during trial, it may be found liable to plaintiffs.

“As each of these hypothetical scenarios has not come to pass,” held the Court of Appeal, “Atlas’s alleged injury is mere speculation.” Thus, held the Court, “atlas does not have standing to appeal the summary judgment order in favor of its codefendant, Swinerton.”

Conclusion

Atlas provides a reminder that the Courts of Appeal are arbiters of final judgments not possible, or even extremely likely, judgments. I can understand why it’s a tough pill to swallow for Atlas and its attorneys though. The Court of Appeal didn’t address whether the trial court should have addressed Atlas’ opposition to Swinerton’s motion for summary judgment. And, if the Court of Appeal determined that the trial court should have considered Atlas’ opposition, I would put my money on Swinerton’s motion for summary judgment being denied. Rather, left with one arm tied behind its back (due to its inability to point the finger at Swinerton), the Court of Appeal basically held that Atlas should have proceeded to trial, because it’s still possible that it could have won. Tough one.

Illinois Court Determines Duty to Defend Construction Defect Claims

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Tred R. Eyerly | Insurance Law Hawaii

    Given the underlying allegations of damage to personal property, the court determined the insurer had a duty to defend. Certain Underwriters at Lloyd’s London v. Metropolitan Builders, Inc., 2019 Ill. App. LEXIS 979 (Ill. Ct. App. Dec. 18, 2019).

    Metropolitan was hired as the general contractor for construction, renovation and demolition at contiguous properties – the 1907 Property, 1909 Property, and 1911 Property. During construction activities, the structures on the 1907 Property and 1909 Property collapsed. The existing structures on the properties were later deemed unsafe and were demolished by the city of Chicago. 

    AIG insured the owner of the buildings and paid over $1.8 million for repairs and associated expenses arising from the collapse. AIG then invoked its rights of subrogation against Metropolitan by filing suit. Metropolitan tendered the suit to its insurer, Lloyd’s, who denied coverage and filed for a declaratory judgment. The trial court found the underlying complaint alleged property damage, but not an occurrence. Summary judgment was awarded to Lloyd’s. 

    The appellate court agreed with Lloyd’s that the damage to the real property was not covered by the CGL policy. Metropolitan was the general contractor with overall responsibility for the renovation and conversion of the existing structures into single-family housing. Metropolitan’s allegedly faulty workmanship led to their collapse and ultimate demolition. Thus, the collapse of the structures was not an “accident” or “occurrence”, but was the natural and ordinary result of faulty workmanship on the contractor’s work product. 

    Metropolitan argued that the underlying complaint alleged damage to parts of the property on which Metropolitan was not working. This, however, did not change the court’s conclusion. The properties were under the responsibility of Metropolitan, as general contractor, to convert the structures into single-family homes. Even if the damage extended to parts of the project on which Metropolitan was not currently working, it was still part of Metropolitan’s scope and responsibility, and thus was part of the project itself. 

    The alleged property damage to personal property deserved a different analysis, however. This was damage to something other than the project itself. The underlying complaint gave no description of what “personal property” of the owner was damaged. But it was not clear from the underlying complaint that AIG did not cover claims of damage to the owner’s person property. The admittedly vague references to damage to the owner’s “personal property” were enough to allege “property damage” caused by an occurrence. The allegations were enough to trigger the insurer’s duty to defend. 

Injured Subcontractor Employee Asserts Premise Liability Claim Against General Contractor

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David Adelstein | Florida Construction Legal Updates

In an interesting opinion, an injured employee of an electrical subcontractor sued the general contractor of a parking garage project under a premise liability theory after being injured when stepping on an uncovered floor drain at the project site.  There is no discussion in the opinion as to workers compensation immunity.  Rather, the discussion centers on the injured employee’s premise liability claim as to whether the general contractor “breached its duty to maintain the premises in a reasonably safe condition by leaving the drain uncovered and failing to warn of the danger of the uncovered drain.”  Pratus v. Marzucco’s Construction & Coatings, Inc., 46 Fla.L.Weekly D186a (Fla. 2d DCA 2021)

The trial court granted summary judgment in favor of the general contractor finding that the drain was open and obvious on the site.  The Second District Court of Appeal reversed the summary judgment with a discussion as to premise liability claims, particularly as it pertains to a business invitee, which is what the injured employee of the electrical subcontractor was.

First, the Second District held that as a business invitee, the general contractor owed the injured employee two duties: “(1) the duty to use reasonable care in maintaining the property in a reasonably safe condition; and (2) the duty to warn of dangers of which the owner has or should have knowledge and which are unknown to the invitee and cannot be discovered by the invitee through the exercise of reasonable care. ”  Pratus, supra (internal quotations and citation omitted).

Second, the Second the Second District held that “[t]he obvious danger doctrine provides that an owner or possessor of land is not liable for injuries to an invitee caused by a dangerous condition on the premises when the danger is known or obvious to the injured party, unless the owner or possessor should anticipate the harm despite the fact that the dangerous condition is open and obvious.”  Pratus, supra (internal quotations and citations omitted).

Third, the Second District held that the issue was not whether the floor drain was open and obvious, but whether the uncovered floor drain—the alleged dangerous condition—was open and obvious and involves a consideration of “all of the facts and circumstances surrounding the accident and the alleged dangerous condition.”   Pratus, supra (internal quotations and citations omitted).

And fourth, the Second District held irrespective of whether the alleged dangerous condition was open and obvious, the general contractor “still had a duty to maintain the premises in a reasonably safe condition if it could have anticipated the harm to [the injured employee] as a result of the uncovered drain.” Pratus, supra (internal quotations and citations omitted).  This required the contractor to establish “it should not have anticipated the potential harm to [the injured employee] as a result of the uncovered drain, notwithstanding his knowledge of the danger.”  Id.

Does this case open the door for premise liability claims against a general contractor as a possessor of the construction site?  It is uncertain because of the lack of discussion of workers compensation immunity.  Perhaps this was an issue in the case because there was no workers compensation to cover the inured employee.  Or, perhaps this was an argument around workers compensation immunity.  Regardless, this case highlights the significance in ensuring there are safety protocols and training in place on every project, no matter how big or small!

Court of Appeals Applies Collateral Source Rule in Construction Dispute

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Joseph Davies | Smith Debnam Narron Drake Saintsing & Myers

Legal doctrines develop over time, with judges determined to allocate blame and risk fairly. One such doctrine – an old one – is the “one recovery” rule. The one recovery rule basically means that an injured party should only recover once for any particular injury. In practice, that usually means that if there are two people responsible for a plaintiff’s particular injury (let’s say $100,000 in damages) and one of them pays $75,000, then the plaintiff can only recover $25,000 from the other. However, as with every rule, this one has exceptions.

For the first time, the North Carolina Court of Appeals recently applied one of those exceptions – the collateral source rule – to construction disputes. In Caroline-A-Contracting, LLC v. J. Scott Campell Construction Company, the court explained the basis for the exception and why it applied to the fairly unusual facts of this case. In general, the idea is that it is unfair to allow someone who caused an injury to avoid the full cost because of payments that the injured party recovered from some unrelated (or collateral) party. As the court noted in its conclusion, to the extent such payments overlap and allow a double recovery, “in this situation, the injured party…not the tortfeasor…should reap any such windfall.” As noted above, however, the facts of this case were somewhat unusual.

The collateral source rule most frequently arises in insurance coverage cases (the insurance company being the collateral source), but here it was the result of independent failures by two different subcontractors regarding the same project. The general contractor hired one subcontractor to build a retaining wall. When it was unable to do so, that subcontractor itself hired another company – the plaintiff in this case – to correct its work and build the wall. The plaintiff, however, was similarly unable to complete the work adequately. The general contractor then hired a third company to correct the errors of the previous attempts. Caroline-A-Contracting sued both the original subcontractor (with whom it had a contract) and the general contractor (Campbell Construction, whom it did not). The general contractor alleged counterclaims based on Caroline-A-Contracting’s negligence (not any breach of contract). Caroline-A-Contracting argued that any amounts awarded to Campbell Construction on its counterclaim should be offset by amounts that it had previously recovered from the original subcontractor. The trial court determined that the original subcontractor was in no way related to Caroline-A-Contracting (it was not acting as its agent, for example) and that its payments resulted from its own failures and were independent of the plaintiff’s negligence. Therefore, it was a collateral source, and any payments it made would not reduce Caroline-A-Contracting’s liability for damages caused by its own negligence.

The Court of Appeals affirmed this decision and noted that it appeared to be the first time the doctrine was applied in construction disputes. Because of the unusual facts, the application of the collateral source rule in construction disputes may be limited, but this case confirms that it does, in fact, apply.

The Claim Process – Concurrent Delays: Understanding the Impact on Delay Claims

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Amandeep Kahlon | Bradley Arant boult Cummings

A delay is “concurrent” is a delay to the critical path of the project caused by multiple events not exclusively controlled by one party. If you are impacted by a delay to the critical path that was not within your control but are responsible for another overlapping delay to the critical path, the delays are concurrent, and you may not be able to recover damages for the former delay. You may, however, still be entitled to an extension of the contract time, which is usually classified as an “excusable delay” (contrast, with “compensable delay” where time and money are recoverable).

THE CRITICAL PATH

Whether a delay is concurrent generally depends on who the responsible party was and whether the delay is on the critical path. A contemporaneous delay that does not affect the critical path may not be “concurrent” for purposes of schedule review and analysis. Similarly, if the critical path is delayed simultaneously by two separate events, both outside your control, neither delay will be considered concurrent with respect to your delay claim or defense of the same. However, if the delay impacts from those two events run simultaneously, you may not be entitled to double or duplicative recovery. You will only be able to recover for the actual delay to the critical path.

On complex construction projects, with multiple overlapping activities and, sometimes, multiple critical paths, determination of concurrent delays can be difficult.

SCHEDULE UPDATES

On complex construction projects, with multiple overlapping activities and, sometimes, multiple critical paths, determination of concurrent delays can be difficult. In such circumstances, it may make sense to staff a scheduler to a project full time or even hire an outside scheduling consultant to review and update your schedule regularly as the project progresses and impacts accrue. If you end up in a dispute or claim with a subcontractor, owner, or other party, having consistent and quality schedule updates will help you analyze the different delays to the project and determine responsibility and concurrency.

Sometimes concurrent delays will not show up on schedule updates, but may be revealed when project documentation is reviewed. Certain delays may be reconstructed from project documents like daily reports or material procurement trackers. For example, daily reports may capture impacts from weather or site issues that do not always make it up the food chain to a scheduler or consultant who is updating the schedule. This may be especially true on already heavily impacted projects, where parties are scrambling to keep the project progressing and the schedule is not regularly updated or well-maintained.

CLOSING THOUGHT

Concurrent delays can have a substantial impact on delay disputes on construction projects. If you have, or are facing, a big delay claim, being able to map out possible concurrency will help you value your claim or your exposure better and help you make better commercial and litigation decisions.

If you end up in a dispute or claim with a subcontractor, owner, or other party, having consistent and quality schedule updates will help you analyze the different delays to the project and determine responsibility and concurrency.

Additionally, note that concurrency is a difficult concept for many trained professionals in the construction industry. If you are heading down the path towards litigation, you might also consider concurrency in the context of how a lay judge or jury may view the concept.

If your claim involves a complex delay analysis with concurrent delays over a portion of the delay period, are you going to be able to convince a fact finder that he or she should award you damages? If not, you might reconsider a more aggressive position on your claim.