At the 22^nd Annual West Coast Casualty Seminar, Plaintiff counsel Michael Kennedy, General Contractor Counsel Matthew Hawk, Subcontractor Counsel Brian Sanders, Claims Manager James Rzpecki and I presented a new protocol for how to litigate construction defect cases. This new protocol is in compliance with the Code of Civil Procedure as well as the current case law.  But, more importantly these new Case Management Orders address the concerns that the parties have with the current process and provides them with admissible evidence in order to adequately evaluate their case and  be prepared to have a meaningful mediation within six months of the litigation.

In preparing for the seminar, the panel obtained comments from parties, judges and special masters regarding current Special Master Case Management Orders.  This included:

“We are overworking those special masters that are effective to the point they don’t become effective.”   Plaintiff Counsel

“It implies you are going to settle and you lose your threat and leverage that you can defense the case.”   General Contractor Attorney

“We have a term for it – A.I. Extortion!”  Subcontractor Attorney

“Insurance Companies are not manned to handle multiple mediations.”  Claims Manager

“I open discovery only when settlement doesn’t happen.  Then I let the parties bombard each other with discovery until they come back to the table.”  Special Master

“I have to monitor them to make sure the case is moving along. If it is not moving along then I make them move it along.  Superior Court Complex Judge

The panel then identified problems with many of the Case Management Orders being used, as they are not in compliance with statutory authority and current case law.  Some of these provisions included:

• Deeming all answers with affirmative defenses and cross-complaints filed.  C.C.P. § 431.30
• Requiring disclosure of information not permitted by the Discovery Act.
• Allowing non-code compliant discovery.  C.C.P. §§ 2030.060, 2031.060  and 2031.220-240
• Staying discovery
• Conducting settlement conferences while controlling case management and discovery.  California Rules of Court, Rule 3.900, Rule 3.920 and Rule 3.1380
• Applying the mediation privilege to settlement conferences.  Ev.C. §1117
• Requiring payment for conducting settlement conferences. C.C.P. §645.1
• Cloaking all communications in the mediation privilege. Ev.C. §1125
• Violating the mediation privilege by communicating with the court. Ev.C. §1119, 1121
• The ability to rule on good faith settlements. Aetna Life Insurance v. Superior Court (1986) 182 CA3d 431
• The ability to issue sanctions for non-compliance of the CMO. Barrientos v. City of Los Angeles (1994) 30 Cal App 4th 63
• Not requiring a report to the court within 20 days after a hearing. C.C.P. §643

More importantly the panel stressed that the current system is Inefficient Use of Time and Money as:

• It is difficult to obtain credible, admissible evidence of liability and damages to more accurately evaluate case.
• Cases are incapable of being resolved early.
• Attorneys and claims adjusters attending multiple unproductive Mandatory Settlement Conferences.
• Not enough time to conduct meaningful discovery as discovery usually opens too close to trial and usually limited to depositions.
• Can’t file dispositive motions.
• Trial dates not maintained.

The panel then presented three new Case Management Orders:

Construction CMO #1   outlines the battle plan for the first 180 days of litigation with the goal of having a meaningful and hopefully successful mediation.

Construction CMO #2    outlines how to proceed with a discovery plan with discovery targeted managed and controlled.

Construction CMO # 3   outlines the discovery deadlines for the last year before trial.  They have been specifically  modified for a complex construction  case that is expert intensive.

The philosophy of these Case Management Orders is that:

• Settlement is advanced simultaneously with trial preparation, instead of sequentially.
• The parties, not the Special Master or mediator, will control the settlement and evaluation process.
• The discovery referee/case manager’s primary client is the court.
• The mediator’s primary client is the parties.
• These Case Management Orders are compliant with the Code of Civil Procedures and current case law.

The panel endorsed this new protocol for the following reasons:

Plaintiffs’ Perspective

• When providing admissible evidence to the defense our clients’ claims carry more credibility than a Statement of Claims.
• Gives carriers the opportunity to sort out coverage before mediation.

Developer/General Contractors’ Perspective

• Assured that all necessary parties are in and participating early.
• Verified discovery allows more meaningful mediation.

Subcontractors’ Perspective

• Discovery-only Referee can help subs get information sooner.
• Claim information based on real, admissible evidence.

Insurance Carriers’ Perspective

• Identifying Insured’s exposure early.
• Claim files can be reserved for the most likely outcome.