System cuts time for construction-defect suits

Molly Ball

Monday, Nov. 22, 2004 | 9:27 a.m.

The culprit is often stucco.

Stucco responds to temperature. In Southern Nevada's wide range of temperatures, stucco that's not properly applied to the outside of a house will crack. And that's when the lawyers get involved.

Along with the Las Vegas area's population boom has come a boom in construction-defect litigation -- homeowners or groups of homeowners suing developers for faulty building.

In response, the state and county have developed an arsenal of ways to make the system for resolving such conflicts fairer and more efficient.

Not least of these is a courthouse downtown where, every November, three District Court judges go through nearly all such pending lawsuits to make sure they're moving forward.

Established two years ago, the Complex Litigation Center met for the fourth time last week. District Judges Michael Cherry, Allan Earl and Nancy Saitta checked on about 180 cases.

The results have been dramatic: Earl estimates that the average time it takes to resolve a construction-defect lawsuit has been halved, from four to two years.

"We have a very structured system now," Earl said. "Before, these cases were spread among 15 judges. They weren't moving at all -- they were really stagnant."

The judges have made adjustments along the way, turning a concept that originally caused "pandemonium" into one that now takes three days a year, down from a week.

The panel system has become a national model, with states such as Arizona, Colorado and Washington looking to Nevada for possible solutions to their own backlog of such cases.

The special court has received national awards and the judges often speak at conferences. Next year, they will give a presentation at the Brookings Institution, one of Washington D.C.'s premier think tanks, and they are working on a curriculum to be taught at Reno's National Judicial College.

"This is a new area of law," Earl said. "Nevada is one of the states in the forefront of protecting homeowners."

When cases languish in the system, it is homeowners -- trapped in the damaged, sometimes dangerous residences into which they have poured their life savings -- who suffer, Saitta said.

"The best part about what this process has done is it allows resolution in a system where typically there are a lot of barriers," she said.

She added that the judges are not only protecting homeowners -- they are protecting the small subcontracting businesses and big developers that are the engine of the Las Vegas Valley's growth.

The brilliance of the concept lies in its simplicity. The judges are simply bringing together all the parties and checking the status of each case. Without such monitoring, the many parties to such lawsuits -- homeowners and homeowners' associations, developers, contractors, subcontractors, insurance companies -- too often get bogged down.

During the November meetings of the judges' panel, the judges call each case and ask the attorneys where the case stands -- what dates are set for mediation sessions, hearings before special masters, and trials.

Only a small percentage of the cases go to trial -- trials are an arduous process reserved for last resort, when the cases can't be settled. But setting a trial date gives the lawyers a deadline to piece together a settlement.

"This is the biggest courtroom in Southern Nevada," Earl said of the rented space in a downtown law firm building. "It provides for 30 to 40 lawyers -- that's how big these cases are."

The cases are big in a financial sense, too. Earl alone has handled more than $122 million worth of cases, including a single settlement worth more than $26 million.

Eileen Marks, an attorney who usually represents subcontractors in such cases, says the best thing about the special court is the expertise the three judges have developed.

That expertise is both in the particulars of the construction business and in the interpretation of Nevada's detailed statute on construction defect litigation -- a law whose specificity is unique in the country.

The statute, first enacted in 1995, has been amended in every subsequent legislative session. In 2003, lawmakers added a "right of repair" to the law, giving builders accused of defective work a chance to fix the problems before going to court.

Before the special court existed, "You had cases in front of all different judges, and the rulings being made were inconsistent, sometimes on the same issues," Marks said. That meant lawyers never knew what to expect and might spend hours arguing a point that would have been a sure loser in a different courtroom.

Consistent rulings also make settlement a more attractive option, Marks said, because the lawyers can evaluate where the case might go at trial and can make their demands accordingly.

Earl said the three judges hash out the fine points of the law and usually come to a consensus in their interpretation.

"They can figure out what to do for their clients as long as they know what the ground rules are," he said.

Mediation, another growing specialty, is a crucial part of the process, Earl said.

Carl Flick, a former construction defect defense lawyer who now specializes in mediating such cases, said the parties to such cases usually meet for mediation five to seven times before coming before a judge for one or two mandatory settlement conferences.

"The mediator tries to get as much resolved as he can before the (conference) with the judge," Flick said. "Then a nudge from the judge can often make everything fall into place."

Stereotypes about such lawsuits -- on the one hand, that they are "frivolous" litigation brought by money-hungry "trial lawyers," and on the other hand, that the defendants are unscrupulous builders who purposely cut corners in order to cheat homebuyers -- are mostly false, Cherry said.

"The fault lies in growth," he said. "It's hard to get skilled labor when you have such a building boom."

The problems that result are many and varied. Stucco contractors are no better or worse than anyone else, but stucco is one of a few "big-ticket" items that can take up most of the multi-million-dollar settlements of such cases.

Other major items include leaky roofs, soil that expands to shift the foundation, framing, and fire-safety requirements regarding drywall and insulation. Mold is a growing issue.

One of the special court's new projects, begun this year, is an effort to get small subcontractors out of big lawsuits so that the major players only have each other to deal with.

For example, Marks said, a finishing carpenter who installed doors and baseboards in the houses in question might only be liable for $5,000 of a $5 million proposed settlement. The quicker that carpenter gets out of the lawsuit, the more he'll save on attorney's fees, and the quicker the massive lawsuit will move.

And moving those lawsuits is in everybody's interest, Earl said.

"The system is designed to resolve things," he said. "These cases are so big, they involve so much money, they involve homeowners in their homes -- the biggest investment they'll ever make."