By: Patrick Paul
Arizona homebuilders will welcome with open arms two recent legal rulings of substantial impact to their industry. In the first decision, on July 28, 2015, in Sullivan v. Pulte Home Corp., No. 1 CA-CV 14-0199, the Arizona Court of Appeals held that homebuilders do not owe a duty of care to subsequent (non-original homeowners) for economic losses arising from latent construction defects unaccompanied by physical injury to persons or other property.
The fairly simple fact scenario follows. In 2000, Pulte Home Corporation sold the home at issue to the original homeowners, who, in 2003, sold the property to the Sullivan Plaintiffs. In 2009, the Sullivans discovered problems with the home’s hillside retaining wall. An engineering firm concluded that Pulte had constructed the retaining wall and prepared the home site without proper structural and safety components, including footings, rebar, and adequate drainage and grading. Pulte declined to make the requested repairs and the Sullivans sued for damages alleging negligence by Pulte.
In a prior review of this case in 2012, the Court of Appeals held that the Sullivan’s negligence claim was not barred by Arizona’s economic loss doctrine. That doctrine bars a plaintiff from pursuing actions seeking monetary damages to property where the parties are in a contractual relationship with one another. In such instances the economic loss doctrine requires that the parties pursue contractual remedies only.
In this most recent review, the Arizona Court of Appeals similarly held that the economic loss doctrine does not bar a subsequent homeowner from pursuing a negligence claim against a homebuilder for economic loss. However, the court also observed that because homebuilders like Pulte owe no duty of care to subsequent homeowners, such a claim would be to no avail.
The appellate court determined that a local building code does not support imposition of a public policy-based duty for purely economic loss and similarly found that Arizona’s statutory and administrative schemes governing licensed contractors did not provide a sufficient basis for holding that homebuilders owe public policy-based tort duties to subsequent homeowners for economic loss.
Although further appellate review and/or legislative action may occur, for the moment, homebuilders can take solace knowing that non-original homeowners will not succeed in asserting construction defect claims against them. Legal Alert: Homebuilders Do Not Owe A Duty of Care to Non-Original Homeowners
In the second ruling issued on August 27th, North Dakota, et. al, v. U.S. E.P.A., Civ. No. 3:15-cv-59, the Federal District Court in North Dakota halted implementation of the United States Environmental Protection Agency’s and Army Corps of Engineers “Waters of The United States” rule.
Arizona and twelve other states sued to block the expansion of federal water protections under this proposed rule. Homebuilders and others in the construction industry expressed concern that the proposed rule was too expansive and could be used to halt or delay construction and development projects.
The Arizona Homebuilders Association hailed the ruling as did Senator John McCain, who noted that he continued “to hear from a number of Arizona farmers, ranchers, and homebuilders who are alarmed that the rule will put their jobs under the thumb of the EPA.”