Friday, September 19, 2014

California Allows Condo Association to Sue Architects for Design Defects Required by Developer

In a decision which was issued in July, the California Supreme Court in Beacon Residential Community Assn. v. Skidmore, Owings & Merrill LLP (July 3, 2014, Case No. S208173) upheld a decision by the California Court of Appeal to allow the subsequent condominium owners to sue the design professionals for their condominium for a construction defect caused specifically by a materials choice approved by the developer for the project.  How did the Court reach its decision?

Factual Background
Skidmore and HKS, Inc. served as the architects of record for The Beacon residential condominiums, a property located in San Francisco. The Beacon was designed for eventual sale as condominiums, though the entire community started as rental units for two years prior to the sale. As the opinion points out, the condo association was formed and all the covenants, conditions, and restrictions were recorded before construction on the project ever began. 

Once the condominiums were sold, residents began to complain about "solar heat gain" when the sun was on their particular side of the building. The association alleged in its complaint that Skidmore and HKS approved the use of less expansive, substandard windows that failed to meet local and state building codes. These windows led to the solar heat gain. The Association also alleged that Skidmore and HKS designed a building that lacked adequate ventilation, had excessive water infiltration, inadequate fire separation, structural cracks, and other safety problems.

Procedural Background
The trial court was not impressed with the allegations against the architects and, after the plaintiff's four attempts to plead causes of action with sufficient factual and legal support, the trial court dismissed the complaint. In so doing, the trial court agreed with the architects on two key points. First, the architects argued that they did not owe a duty of care to the Association or its members under the facts as alleged. Second, the trial court placed the onus for the problems on the fact that the architect looked to and relied on the building developer's approvals for the materials used.

The Association appealed this decision to the Court of Appeal, which reversed. The Court of Appeal held that, at the motion to dismiss/demurrer stage and as a matter of law, the architects have a duty of care toward the Association even without privity. The Architects appealed.

The Supreme Court Decision
The California Supreme Court affirmed the Court of Appeal opinion. While citing to a number of products-liability and contractor-negligence cases, the Supreme Court relied heavily on the same case on which the Court of Appeal relied -- Biakanja v. Irving, 49 Cal. 2d 647 (1958). Biakanja was a notary case relating to the witnessing of a will and whether that notary had any duties to third parties in the performance of that duty. The California Supreme Court held that the answer to that question was "yes" and set forth a number of factors to determine whether a professional has a duty to third parties.

That holding in Biakanja served as the main underpinning for this case. The Supreme Court applied the factors from Biakanja as follows:
  1. The architects' work was intended to benefit homeowners living in the building that the architect designed;
  2. It was foreseeable that the homeowners would be part of a limited class of persons harmed by a negligent design;
  3. The Association's members have been damaged because their homes are unsafe and, at times, uninhabitable;
  4. Because Skidmore and HKS were the sole architects, there is a close connection between their conduct and the injury suffered;
  5. Because the architects played a unique and "well-compensated role" on the project (having been paid over $5 million for their work) and because the architects knew that future homeowners would rely on their specialized expertise, "significant moral blame attaches" to the architects' conduct; and, 
  6. Preventing future harm to homeowners reliant on architects' specialized skills is a sufficient policy to recognize a duty of care.
This decision rests in large part on the fact that this case was at the pleading stage and not at summary judgment. However, it provides a roadmap to those seeking to impose a duty of care on an architect for a subsequent purchaser of a property. 

The California Supreme Court refused to allow the architects to avoid potential liability on the basis that the developer of the property had been advised fully regarding decisions to be made during design. Put another way, the court is saying that the architect of record on a project cannot avoid responsibility for design defects by pointing to owner choices. The architect always must design the project properly.  

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