There is no doubt that real estate is an extremely valuable asset, and when owners decide to develop their real estate investments, they are striving to increase its value. If, however, the development process does not go smoothly and the finished product does not meet expectations, owners likely will be unhappy and seek to recoup the money they spent. Given the value of these investments and the downturn in the real estate market in the mid-to-late 2000s, it comes as no surprise that construction defect litigation continues to be prevalent. Here are four steps to litigate such lawsuits efficiently.
Step One: Comprehend the Nature of the Claim
When an insured becomes involved in a construction defect dispute, it’s important for his lawyer to understand the nature of the purported defect, or defects, as soon as possible. Whether the defects relate to window systems in a commercial office building, mechanical or engineering issues with the plumbing for a multiple building campus, or problems with the door units in a 100-home, single-family residential neighborhood, the first step is to gather as much information as possible about the alleged defects.
Sometimes the insured receives notice of the defects prelitigation through informal meetings, a letter, or an email. Other times, the notification will come from a lawyer. Regardless, once notification of alleged defects is received, counsel should be engaged. This is because, as time progresses, memories fade, potential fixes or remedies for the project may take place, and documents may be misplaced. It’s impossible to know in the early stages of a case what piece of evidence will be necessary to exculpate your client. Thus, it is important to gather as much evidence as possible from the start.
What does this evidence gathering entail? It includes obtaining and reviewing project files, such as architectural and engineering drawings and specifications, daily construction project reports, product submittals, inspection reports, and any documents identifying the purported problems. This process also includes interviewing key witnesses, which may include project superintendents, forepersons, inspectors, and even laborers. There also should be a visit—perhaps multiple visits—to the project site to observe the purported defects.
Step Two: Retain Appropriate Experts Early
After the lawyer has collected evidence at the outset, issues regarding the defects should be raised with an expert. While there are many individuals who say they are experts in various fields of construction, lawyers experienced in defect litigation will know which experts perform better than others. These highly qualified individuals should be retained early, before another party has the opportunity to hire that expert and leave you with a less-skilled option.
Step Three: Develop and Implement a Sound Litigation Strategy
After retaining the best possible expert, it is important for them to perform an initial analysis of the alleged defects. The scope of this initial analysis depends on the scope of the purported defect and budgetary constraints. Regardless of its range, this should be completed early on. This is because the expert’s opinions regarding the defects, testimony from the client and other percipient witnesses, and key documentary evidence will shape the parameters of the defense.
What does this mean? One analogy is to look at the lawsuit like a drive in football. The goal of the drive is to reach the end zone for a touchdown, which, depending on the case, is either to obtain an unqualified victory of no fault or to settle by using the least amount of resources possible. Likewise, to be as efficient as possible, the litigation plan should move the ball forward to accomplish that goal, including implementing a sound discovery and motion strategy.
Hopefully, the client gathered all of the necessary documents at the outset. If that information was not obtained, pointed subpoenas or requests for production of documents should be served in an attempt to locate the evidence relating to the issues in dispute and assist your expert’s opinions. After those documents are obtained and reviewed, key witnesses should be identified and deposed. Don’t ask for unnecessary documents about an unrelated portion of the project or depose witnesses who don’t know anything about the critical issues—that simply wastes time and money. Only engage in discovery that moves the ball toward the end zone.
In addition to efficiently conducting discovery, it is important to involve all necessary parties. The initial analysis, in conjunction with the expert, should identify other parties that could potentially be the source of the problem. This could include the product supplier, design team, or inspectors who didn’t see the problem during construction. Whoever these parties are, they need to be involved in the litigation as soon as possible. If they are friendly to your client, it will assist with gathering all the necessary information at the outset, as well as potentially lining up and implementing a joint defense strategy. If these parties are not aligned with your client, they may have their own insurance that could be a source to minimize the resources expended to litigate the case.
There also are going to be legal issues with which to wrestle. Is the case proceeding in the proper venue? Does the case need to be deemed complex? Is there a problem with the plaintiff’s case that you can exploit with a pretrial motion for summary judgment? It’s important to keep an eye on these types of issues and pursue them to benefit your case while keeping the corresponding costs in check.
In some instances, the plaintiff may be willing to agree to one of your requests to avoid the time and cost of a motion. Other times, and potentially for case dispositive motions, the cost associated with preparing such a motion is justified because it could result in a victory in the case or a reduction in the plaintiff’s settlement value. Decisions on these issues always should be made with an eye on moving your case forward.
Step Four: Assess the Risk of Litigation
The result of litigation is never a certainty. Any result is possible if the case proceeds to trial. Given our judicial system, the hope would be that a reasonable jury would view the evidence similarly to how your expert does, but there is no guarantee of that. Additionally, the opposing party’s expert likely will testify differently from your expert. So it is critical to assess accurately the risk of proceeding to trial—as well as the cost it will take to get there—and to determine the most desirable result (touchdown), whether that is an early settlement, settlement after discovery, or trial. And when the opportunity presents itself to achieve that desired result, through mediation, a pending motion for summary judgment, or otherwise, dedicate the resources necessary to make the result happen.
Of course, the lawsuit is not static. During the discovery process, individuals testify inconsistently from one another. Sometimes new documents come to light that change the perception of what occurred. During motion practice, a judge may issue pretrial rulings or orders that change the complexity of the case. It’s important that these occurrences are given appropriate consideration and weight when assessing the risk of the case. On occasion, these events will cause a change in the value of the litigation, which could be beneficial or detrimental. The key is to keep an open mind as the litigation develops and continue to assess the risk given the developments of the case to achieve the best result possible.
Following these four steps will allow for the efficient litigation of construction defect disputes because:
- The attorney will understand the issues in dispute and will be able to develop and implement an appropriate litigation plan.
- The right experts will be working on your side.
- The risk of the case will be understood at the outset so that appropriate reserves can be established.
- Intelligent decisions regarding settlement and/or trial can be made as the case progresses.