In an effort that has taken nearly two and a half years to resolve, the California Supreme Court upheld the greenhouse gas (GHG) analysis in the San Diego Association of Governments’ (SANDAG) Environmental Impact Report (EIR) for their Regional Transportation Plan/Sustainable Communities Strategy (RTP/SCS) (the first such document of its kind initially adopted in 2011). The Supreme Court’s opinion, handed down on July 13, 2017 in the case of Cleveland National Forest Foundation v. San Diego Association of Governments, not only reinforces the general rule that lead agencies under the California Environmental Quality Act (CEQA) have discretion to determine how to evaluate environmental impacts and significant thresholds, but also that executive orders are not legal mandates having the same force of law as legislation that would force a lead agency’s hand in CEQA considerations. BILD appeared as a friend of the court, representing the interests of the building industry as a whole, at multiple levels of the litigation.
At the heart of the lawsuit was the consideration of then-Governor Schwarzenegger’s executive order announcing a goal of reducing GHG to 80% below 1990 levels by 2050. While SANDAG’s EIR included a discussion of the executive order in the EIR for the RTP/SCS, it did not consider adherence to its goal as a requirement, choosing instead to look to applicable legislation found in AB 32 (requiring GHG reductions to 1990 levels by 2020), as a significance threshold. After the case wound its way through the lower courts, the Supreme Court took review on the narrow issue of whether the EIR had to include analysis of the RTP/SCS consistency with the executive order’s GHG reduction goals.
In a very narrow ruling, the Supreme Court found that “based on information available at the time, about the [RTP/SCS’ GHG] impacts and its potential inconsistency with state climate change goals,” the EIR provided sufficient information to the public. However, the Court went on to state that lead agencies, moving forward, would be required in their GHG analyses to “stay in step with evolving scientific knowledge and state regulatory schemes.”
Given the amount of time that has passed since the case first was filed and the laws that have have been adopted to regulate GHG in the state since that time, including SB 32—requiring GHG reductions to 40% below 1990 levels by 2030—the ruling in the SANDAG case may appear to be too little too late. However, the check on executive power represented by the Court’s ruling, especially in the area of GHG regulation, should not go unnoticed.
As regulation of GHG in California continues to evolve and regulatory burdens on the building industry, especially the transportation/infrastructure sectors, grow, BILD will continue to lead the charge against overregulation and will challenge the imposition of unachievable/unrealistic goals for GHG reductions.
BILD would like to thank our outside counsel, Nancy Miller, with Renne Sloan Holtzman Sakai LLP, for her work on the amicus briefs filed on BILD’s behalf.
The Building Industry Legal Defense Foundation (BILD), along with its coalition partners, the California Building Industry Association and Leading Builders of America, garnered a win in the case of Gillotti v. Stewart (No. C075611, Cal. Ct. of App. 3d Dist. Filed 4/26/17, publication order 5/18/17). The case arose from a dispute over alleged damage from removal of trees and their connections to soil placement and driveway leveling.
First, as amicus curie before the Third District Court of Appeal, BILD supported the builder/seller, general contractor, and grading subcontractor of the property in their arguments that SB 800 and its “right to repair” was the exclusive avenue for resolution of an alleged defects at the property—not an action for common law negligence. BILD continues to argue that the Liberty Mutual decision (Liberty Mutual Insurance Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98) was wrongly decided as it allowed for common law claims in construction defect actions despite SB 800’s “right to repair.” The Court of Appeal agreed with BILD and the building industry, rejected Liberty Mutual, and upheld the “right to repair” finding that SB 800 “clearly and unequivocally expresses the legislative intent that the [SB 800] apply to all actions seeking relief of recovery of damages arising out of, or related to deficiencies in, residential construction, except as specifically set forth in [SB 800],” and that SB 800 “does not specifically except actions arising from actual damages.” (Gillotti at *10). After achieving a victory in the opinion in Gillotti¸ BILD had to step in again and fight to have the Court’s opinion published, as it was initially unpublished, which would have made it uncitable as precedent. Upon hearing BILD’s arguments in favor of publication, the Court released its opinion in Gillotti for publication on May 18, 2017.
The Third District Court of Appeal’s opinion in Gillotti is the second time that it has disagreed with Liberty Mutual having also upheld the “right to repair” in the case of Elliott Homes v. Superior Court (Hicks) (2016) 6 Cal.App.5th 333, a case which is currently pending review before the California Supreme Court along with the Fifth Appellate District’s rejection of Liberty Mutual in McMillin Albany LLC v. Superior Court (2015) 192 Cal. Rptr. 3d 53. (BILD is also an amicus curiae in the McMillin case, and our brief can be found here.) Thus, the split between California courts continues to grow regarding how to manage construction defect claims and whether or not to abide by the “right to repair” as the sole remedy.
BILD will continue to defend SB 800 and the “right to repair” and thanks its outside counsel in the Gillotti case, Kathleen Carpenter at Donahue Fitzgerald and Alan Packer at Newmeyer & Dillion for their outstanding work in this matter. A copy of BILD’s amicus brief in the Gillotti case can be found here, and a copy of the request for publication can be found here.
The BILD Foundation is continuing its push to ensure that insurance coverage is readily available to cover potential construction defect claims. Since 2015, BILD has worked on the case of Navigators Specialty Insurance Company v. Moorefield Construction, Inc., first filing a brief as a friend of the court in 2015, and then appearing on behalf of the building industry in oral arguments before the California Court of Appeal in 2016.
BILD’s arguments focused on the fact that the lower court’s ruling in the matter could be used by the insurance industry to deny all construction defect coverage under a theory that every act done by a contractor at a construction site is an intentional act and, thus, is not an “accident” eligible for insurance coverage. Through its outside counsel, Gerard Mooney with the law firm of Rutan & Tucker, LLP, BILD has argued that contractors do not intend to do their work defectively, and that any reasonable interpretation of the term “accident” should cover a contractor’s allegedly defective work, particularly given nearly all construction work is done with knowledge of a potential risk of product failure.
The ruling issued by the Court of Appeal in December 2016 held that no insurance coverage would be available for the contractor in the matter as the contractor’s actions were deliberate acts, not accidents, and that the insured was liable to reimburse the insurer for settlement payments attributed to the required repairs. The Court of Appeal, however, was very careful to limit its ruling to the facts of the case, stating that it was only deciding the particular matter before it and not ruling on all construction defect matters generally. The Court found that in this particular matter, the contractor knew it was performing defective work with either the hope or mistaken belief that the defective work would not cause damage at a later time.
BILD, has now filed a request with the California Supreme Court to depublish the case. Depublishing the case would lessen its potential impact on the building industry as no future court would be able to cite to the case as precedent in future construction defect/insurance lawsuits. BILD seeks to have the case depublished based on our belief that: 1) the Court of Appeals’ opinion goes against well-settled California law that would hold contractor’s actions are “accidents” deserving of coverage; and 2) that the Court’s opinion goes against public policy encouraging building professionals not to consider the consequences of their actions and not to attempt to eliminate or minimize risk of damage; and 3) that the opinion would effectively nullify construction defect policies across the state. BILD has been joined in its Depublication request by the California Building Industry Association and the California Business Properties Association.
On its own motion, the California Supreme Court has extended its time for review in the matter, perhaps signaling its desire to overturn the Court of Appeals’ ruling or, at the least, grant BILD’s Depublication request. As stated by BILD’s outside counsel, Gerard Mooney: “The Court of Appeal's opinion has the potential to jeopardize the insurance coverage upon which many in the building industry rely. It is our hope the California Supreme Court will grant review to consider this important public issue.”