$24 Million Verdict Against Material Supplier Overturned Where Plaintiff Failed To Prove Supplier’s Negligence Or Breach Of Contract Caused A SB800 Violation

By: Jon A. Turigliatto and Chelsea L. Zwart
May 25, 2017

The Fourth District California Court of Appeal published its decision, Acqua Vista Homeowners Assoc. v. MWI, Inc. (2017) 7 Cal.App.5th 1129, holding that claims against a material supplier under SB800 (Civil Code §895, et. seq.) require proof that the SB800 violation was caused by the supplier’s negligence or breach of contract.

In this case, Acqua Vista Homeowners Association (“the HOA”) sued MWI, a supplier of Chinese pipe used in the construction of the Acqua Vista condominium development.  The HOA’s complaint asserted a single cause of action for violation of SB800 standards, and alleged that defective cast iron pipe was used throughout the building.  At trial, the HOA presented evidence that the pipes supplied by MWI contained manufacturing defects, that they leaked, and that the leaks had caused damage to various parts of the condominium development.  The jury returned a special verdict against MWI, and the trial court entered a judgment against MWI in the amount of $23,955,796.28, reflecting the jury’s finding that MWI was 92% responsible for the HOA’s damages.

MWI filed a motion for a directed verdict prior to the jury’s verdict and motion for judgment notwithstanding the verdict following the entry of judgment, both on the grounds that the HOA had failed to present any evidence that MWI had caused a SB800 violation as a result of its negligence or breach of contract, and had therefore failed to prove negligence and causation as required by SB800.  MWI relied on the Fourth District’s prior decision in Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194, and its interpretation therein of Civil Code §936, which states, in relevant part, that the statute applies “to general contractors, subcontractors, material suppliers, individual product manufacturers, and design professionals to the extent that the general contractors, subcontractors, material suppliers, individual product manufacturers, and design professionals caused, in whole or in part, a violation of a particular standard as the result of a negligent act or omission or a breach of contract….”  (emphasis added.)  However, the trial court denied both motions, relying on the last sentence of Civil Code §936, which states in part, “[T]he negligence standard in this section does not apply to any…material supplier…with respect to claims for which strict liability would apply.”

The Court of Appeal reversed and ordered the trial court to enter judgment in favor of MWI.  The Court of Appeal relied on the legislative history of SB800 and on Greystone, which held that the first sentence of Civil Code §936 contains an “explicit adoption of a negligence standard” for SB800 claims against product manufacturers.  The Court of Appeal further reasoned that since Civil Code §936 treats product manufacturers and material suppliers identically, the holding of Greystone must equally apply to material suppliers.

Because the complaint did not state a common law cause of action for strict liability, the HOA was required to prove that the damages were caused by MWI’s negligence or breach of contract. Although, the Court of Appeal found that while the HOA’s evidence may have supported a finding that the manufacturer of the leaking pipes was negligent, the HOA had not provided any evidence that MWI, the supplier, had failed to supply the type of pipe ordered, acted unreasonably in failing to detect any manufacturing defects present in the pipe, or damaged the pipe during transportation.  Accordingly, the HOA could not prove that the alleged SB800 violation was caused, in whole or in part, by MWI’s negligence, omission, or breach of contract.

In light of the decision, homeowners and associations that allege only violations of SB800 standards without asserting a common law cause of action for strict liability cannot prevail by simply producing evidence of a violation, and are required to prove that the violation was caused by the negligent act or omission, or breach of contract, of the defendant contractor, material supplier, or product manufacturer.

Chelsea L. Zwart
Ms. Zwart is an Associate at Chapman Glucksman Dean Roeb & Barger.

About the author

Jon A.Turigliatto

Mr. Turigliatto is a Partner at Chapman Glucksman Dean Roeb & Barger.

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