March 2006 - Tradewinds: Judges Predict Changes In Defect Litigation
By Mandi Harding, FCA Executive Director

“Shortly after I was in office I remember several California attorneys came to my chambers with over 100 pending construction defect cases,” Las Vegas District Court Judge Michael Cherry remembered at the February FCA luncheon. “Prior to winning my seat as a District Court Judge, I was working as a special public defender on murder cases. I still didn’t understand the complexity of construction defect until one day I called a case and 30 lawyers stood up. I must have looked surprise because someone said, ‘Judge, this is a construction defect case.’ So I did what any smart judge would do, I continued the case.”

Cherry and judges Nancy Saitta and Alan Earl discussed construction defect litigation in the wake of a recent Nevada Supreme Court decision. The Court in December ruled in favor of Beazer Homes, ruling the case was wrongfully assigned class-action status. Earl, Saitta and Cherry handle construction defect cases in district court.

Cherry, himself a candidate for the state Supreme Court, highlighted the judges’ accomplishments in clearing construction defect cases: In 2001, district court resolved six of 69 construction defect cases. Since then, the trio has cleared more than two-thirds of the pending cases each year, despite an ever-increasing docket.

“And of course, framers are in every case,” noted Cherry.

Saitta echoed Cherry’s comments about the necessity of forming the three-member panel to clear the court dockets of backlogged construction defect cases.

“We are bound by legislative laws. Whether we agree or not, we have to enforce them,” said Saitta. “We didn’t get a raise to increase our workload by taking on these construction defect cases.”

She encouraged contractors, particularly framing contractors to understand the laws and urged association unification now to be prepared for the 2007 legislative session.

“I predict there will be big changes in ’07 to Chapter 40,” said Saitta. “We have an open door policy and enforce the law fairly. We can’t discuss current cases, but we can answer general questions.”

Earl opened his comments by stating he is a third generation Nevadan who’s grandfather was living here before Las Vegas was even on the map.

While Earl concedes the panel is unable to act as a solving agent for construction defect as an issue, he emphasized Saitta’s remarks in understanding the history of Chapter 40,
“Chapter 40 is paramount. In these cases there are several view points to consider and we know that the toll of settling millions of dollars of cases over the last four years has had an almost catastrophic effect on contractors, especially small contractors.”

Earl said, “We can’t give advice or take sides, but you want to be protected. The mathematics of Chapter 40 are exonerable and falls hardest on subcontractors, understand the process and make your voices heard.”

Cherry noted that the Beazer case “took 3 ½ months, if we had to try the case without extrapolation, it would have taken a year, easy,” said Cherry.

Extrapolation projects a construction problem based on a small sample of houses in a development. Disallowing the procedure makes it more difficult to certify cases as class actions, and makes them much less lucrative for plaintiffs’ attorneys.

“The construction defect panel of judges will most likely be a non-issue in a year’s time. The judges are not satisfied with the Supreme Court decision because it is going to take a lot longer to process those cases compared to what it was taking. However, there should be fewer cases since plaintiff attorneys are going to be less inclined to stir up homeowners (which is an ethics violation), since they are going to have to work more for less money,” AGC Executive Vice President Steve Holloway said. “Rule 23 has been on the books forever. The judges deliberately didn’t apply it, apparently because they were more interested in moving money than in justice.”