California Legislature—2015–16 Regular Session

Assembly Bill No. 1963

Introduced by Assembly Member Calderon

February 12, 2016

An act to amend Section 6000 of the Civil Code, relating to common interest developments.

LEGISLATIVE COUNSEL’S DIGEST

AB 1963, as introduced, Calderon. Common interest developments: construction defects.

Existing law, the Davis-Stirling Common Interest Development Act, requires, until July 1, 2017, specified conditions to be met before an association may file a complaint for damages against a builder, developer, or general contractor of a common interest development based upon a claim for defects in the design or construction of the common interest development.

This bill would delete the inoperative and repeal dates of the above described requirement.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 6000 of the Civil Code is amended to
read:

6000.  

(a) Before an association files a complaint for damages
against a builder, developer, or general contractor (respondent) of
a common interest development based upon a claim for defects in
the design or construction of the common interest development,
all of the requirements of this section shall be satisfied with respect
to the builder, developer, or general contractor.

(b) The association shall serve upon the respondent a “Notice
of Commencement of Legal Proceedings.” The notice shall be
served by certified mail to the registered agent of the respondent,
or if there is no registered agent, then to any officer of the
respondent. If there are no current officers of the respondent,
service shall be upon the person or entity otherwise authorized by
law to receive service of process. Service upon the general
contractor shall be sufficient to initiate the process set forth in this
section with regard to any builder or developer, if the builder or
developer is not amenable to service of process by the foregoing
methods. This notice shall toll all applicable statutes of limitation
and repose, whether contractual or statutory, by and against all
potentially responsible parties, regardless of whether they were
named in the notice, including claims for indemnity applicable to
the claim for the period set forth in subdivision (c). The notice
shall include all of the following:

(1) The name and location of the project.

(2) An initial list of defects sufficient to apprise the respondent
of the general nature of the defects at issue.

(3) A description of the results of the defects, if known.

(4) A summary of the results of a survey or questionnaire
distributed to homeowners to determine the nature and extent of
defects, if a survey has been conducted or a questionnaire has been
distributed.

(5) Either a summary of the results of testing conducted to
determine the nature and extent of defects or the actual test results,
if that testing has been conducted.

(c) Service of the notice shall commence a period, not to exceed
180 days, during which the association, the respondent, and all
other participating parties shall try to resolve the dispute through
the processes set forth in this section. This 180-day period may be
extended for one additional period, not to exceed 180 days, only
upon the mutual agreement of the association, the respondent, and
any parties not deemed peripheral pursuant to paragraph (3) of
subdivision (e). Any extensions beyond the first extension shall
require the agreement of all participating parties. Unless extended,
the dispute resolution process prescribed by this section shall be
deemed completed. All extensions shall continue the tolling period
described in subdivision (b).

(d) Within 25 days of the date the association serves the Notice
of Commencement of Legal Proceedings, the respondent may
request in writing to meet and confer with the board. Unless the
respondent and the association otherwise agree, there shall be not
more than one meeting, which shall take place no later than 10
days from the date of the respondent’s written request, at a mutually
agreeable time and place. The meeting shall be subject to
subdivision (a) of Section 4925 and subdivisions (a) and (b) of
Section 4935. The discussions at the meeting are privileged
communications and are not admissible in evidence in any civil
action, unless the association and the respondent consent in writing
to their admission.

(e) Upon receipt of the notice, the respondent shall, within 60
days, comply with the following:

(1) The respondent shall provide the association with access to,
for inspection and copying of, all plans and specifications,
subcontracts, and other construction files for the project that are
reasonably calculated to lead to the discovery of admissible
evidence regarding the defects claimed. The association shall
provide the respondent with access to, for inspection and copying
of, all files reasonably calculated to lead to the discovery of
admissible evidence regarding the defects claimed, including all
reserve studies, maintenance records and any survey questionnaires,
or results of testing to determine the nature and extent of defects.
To the extent any of the above documents are withheld based on
privilege, a privilege log shall be prepared and submitted to all
other parties. All other potentially responsible parties shall have
the same rights as the respondent regarding the production of
documents upon receipt of written notice of the claim, and shall
produce all relevant documents within 60 days of receipt of the
notice of the claim.

(2) The respondent shall provide written notice by certified mail
to all subcontractors, design professionals, their insurers, and the
insurers of any additional insured whose identities are known to
the respondent or readily ascertainable by review of the project
files or other similar sources and whose potential responsibility
appears on the face of the notice. This notice to subcontractors,
design professionals, and insurers shall include a copy of the Notice
of Commencement of Legal Proceedings, and shall specify the
date and manner by which the parties shall meet and confer to
select a dispute resolution facilitator pursuant to paragraph (1) of
subdivision (f), advise the recipient of its obligation to participate
in the meet and confer or serve a written acknowledgment of receipt
regarding this notice, advise the recipient that it will waive any
challenge to selection of the dispute resolution facilitator if it elects
not to participate in the meet and confer, advise the recipient that
it may seek the assistance of an attorney, and advise the recipient
that it should contact its insurer, if any. Any subcontractor or design
professional, or insurer for that subcontractor, design professional,
or additional insured, who receives written notice from the
respondent regarding the meet and confer shall, prior to the meet
and confer, serve on the respondent a written acknowledgment of
receipt. That subcontractor or design professional shall, within 10
days of service of the written acknowledgment of receipt, provide
to the association and the respondent a Statement of Insurance that
includes both of the following:

(A) The names, addresses, and contact persons, if known, of all
insurance carriers, whether primary or excess and regardless of
whether a deductible or self-insured retention applies, whose
policies were in effect from the commencement of construction
of the subject project to the present and which potentially cover
the subject claims.

(B) The applicable policy numbers for each policy of insurance
provided.

(3) Any subcontractor or design professional, or insurer for that
subcontractor, design professional, or additional insured, who so
chooses, may, at any time, make a written request to the dispute
resolution facilitator for designation as a peripheral party. That
request shall be served contemporaneously on the association and
the respondent. If no objection to that designation is received within
15 days, or upon rejection of that objection, the dispute resolution
facilitator shall designate that subcontractor or design professional
as a peripheral party, and shall thereafter seek to limit the
attendance of that subcontractor or design professional only to
those dispute resolution sessions deemed peripheral party sessions
or to those sessions during which the dispute resolution facilitator
believes settlement as to peripheral parties may be finalized.
Nothing in this subdivision shall preclude a party who has been
designated a peripheral party from being reclassified as a
nonperipheral party, nor shall this subdivision preclude a party
designated as a nonperipheral party from being reclassified as a
peripheral party after notice to all parties and an opportunity to
object. For purposes of this subdivision, a peripheral party is a
party having total claimed exposure of less than twenty-five
thousand dollars ($25,000).

(f) (1) Within 20 days of sending the notice set forth in
paragraph (2) of subdivision (e), the association, respondent,
subcontractors, design professionals, and their insurers who have
been sent a notice as described in paragraph (2) of subdivision (e)
shall meet and confer in an effort to select a dispute resolution
facilitator to preside over the mandatory dispute resolution process
prescribed by this section. Any subcontractor or design professional
who has been given timely notice of this meeting but who does
not participate, waives any challenge he or she may have as to the
selection of the dispute resolution facilitator. The role of the dispute
resolution facilitator is to attempt to resolve the conflict in a fair
manner. The dispute resolution facilitator shall be sufficiently
knowledgeable in the subject matter and be able to devote sufficient
time to the case. The dispute resolution facilitator shall not be
required to reside in or have an office in the county in which the
project is located. The dispute resolution facilitator and the
participating parties shall agree to a date, time, and location to
hold a case management meeting of all parties and the dispute
resolution facilitator, to discuss the claims being asserted and the
scheduling of events under this section. The case management
meeting with the dispute resolution facilitator shall be held within
100 days of service of the Notice of Commencement of Legal
Proceedings at a location in the county where the project is located.
Written notice of the case management meeting with the dispute
resolution facilitator shall be sent by the respondent to the
association, subcontractors and design professionals, and their
insurers who are known to the respondent to be on notice of the
claim, no later than 10 days prior to the case management meeting,
and shall specify its date, time, and location. The dispute resolution
facilitator in consultation with the respondent shall maintain a
contact list of the participating parties.

(2) No later than 10 days prior to the case management meeting,
the dispute resolution facilitator shall disclose to the parties all
matters that could cause a person aware of the facts to reasonably
entertain a doubt that the proposed dispute resolution facilitator
would be able to resolve the conflict in a fair manner. The
facilitator’s disclosure shall include the existence of any ground
specified in Section 170.1 of the Code of Civil Procedure for
disqualification of a judge, any attorney-client relationship the
facilitator has or had with any party or lawyer for a party to the
dispute resolution process, and any professional or significant
personal relationship the facilitator or his or her spouse or minor
child living in the household has or had with any party to the
dispute resolution process. The disclosure shall also be provided
to any subsequently noticed subcontractor or design professional
within 10 days of the notice.

(3) A dispute resolution facilitator shall be disqualified by the
court if he or she fails to comply with this subdivision and any
party to the dispute resolution process serves a notice of
disqualification prior to the case management meeting. If the
dispute resolution facilitator complies with this subdivision, he or
she shall be disqualified by the court on the basis of the disclosure
if any party to the dispute resolution process serves a notice of
disqualification prior to the case management meeting.

(4) If the parties cannot mutually agree to a dispute resolution
facilitator, then each party shall submit a list of three dispute
resolution facilitators. Each party may then strike one nominee
from the other parties’ list, and petition the court, pursuant to the
procedure described in subdivisions (n) and (o), for final selection
of the dispute resolution facilitator. The court may issue an order
for final selection of the dispute resolution facilitator pursuant to
this paragraph.

(5) Any subcontractor or design professional who receives notice
of the association’s claim without having previously received
timely notice of the meet and confer to select the dispute resolution
facilitator shall be notified by the respondent regarding the name,
address, and telephone number of the dispute resolution facilitator.
Any such subcontractor or design professional may serve upon
the parties and the dispute resolution facilitator a written objection
to the dispute resolution facilitator within 15 days of receiving
notice of the claim. Within seven days after service of this
objection, the subcontractor or design professional may petition
the superior court to replace the dispute resolution facilitator. The
court may replace the dispute resolution facilitator only upon a
showing of good cause, liberally construed. Failure to satisfy the
deadlines set forth in this subdivision shall constitute a waiver of
the right to challenge the dispute resolution facilitator.

(6) The costs of the dispute resolution facilitator shall be
apportioned in the following manner: one-third to be paid by the
association; one-third to be paid by the respondent; and one-third
to be paid by the subcontractors and design professionals, as
allocated among them by the dispute resolution facilitator. The
costs of the dispute resolution facilitator shall be recoverable by
the prevailing party in any subsequent litigation pursuant to Section
1032 of the Code of Civil Procedure, provided however that any
nonsettling party may, prior to the filing of the complaint, petition
the facilitator to reallocate the costs of the dispute resolution
facilitator as they apply to any nonsettling party. The determination
of the dispute resolution facilitator with respect to the allocation
of these costs shall be binding in any subsequent litigation. The
dispute resolution facilitator shall take into account all relevant
factors and equities between all parties in the dispute resolution
process when reallocating costs.

(7) In the event the dispute resolution facilitator is replaced at
any time, the case management statement created pursuant to
subdivision (h) shall remain in full force and effect.

(8) The dispute resolution facilitator shall be empowered to
enforce all provisions of this section.

(g) (1) No later than the case management meeting, the parties
shall begin to generate a data compilation showing the following
information regarding the alleged defects at issue:

(A) The scope of the work performed by each potentially
responsible subcontractor.

(B) The tract or phase number in which each subcontractor
provided goods or services, or both.

(C) The units, either by address, unit number, or lot number, at
which each subcontractor provided goods or services, or both.

(2) This data compilation shall be updated as needed to reflect
additional information. Each party attending the case management
meeting, and any subsequent meeting pursuant to this section, shall
provide all information available to that party relevant to this data
compilation.

(h) At the case management meeting, the parties shall, with the
assistance of the dispute resolution facilitator, reach agreement on
a case management statement, which shall set forth all of the
elements set forth in paragraphs (1) to (8), inclusive, except that
the parties may dispense with one or more of these elements if
they agree that it is appropriate to do so. The case management
statement shall provide that the following elements shall take place
in the following order:

(1) Establishment of a document depository, located in the
county where the project is located, for deposit of documents,
defect lists, demands, and other information provided for under
this section. All documents exchanged by the parties and all
documents created pursuant to this subdivision shall be deposited
in the document depository, which shall be available to all parties
throughout the prefiling dispute resolution process and in any
subsequent litigation. When any document is deposited in the
document depository, the party depositing the document shall
provide written notice identifying the document to all other parties.
The costs of maintaining the document depository shall be
apportioned among the parties in the same manner as the costs of
the dispute resolution facilitator.

(2) Provision of a more detailed list of defects by the association
to the respondent after the association completes a visual inspection
of the project. This list of defects shall provide sufficient detail
for the respondent to ensure that all potentially responsible
subcontractors and design professionals are provided with notice
of the dispute resolution process. If not already completed prior
to the case management meeting, the Notice of Commencement
of Legal Proceedings shall be served by the respondent on all
additional subcontractors and design professionals whose potential
responsibility appears on the face of the more detailed list of
defects within seven days of receipt of the more detailed list. The
respondent shall serve a copy of the case management statement,
including the name, address, and telephone number of the dispute
resolution facilitator, to all the potentially responsible
subcontractors and design professionals at the same time.

(3) Nonintrusive visual inspection of the project by the
respondent, subcontractors, and design professionals.

(4) Invasive testing conducted by the association, if the
association deems appropriate. All parties may observe and
photograph any testing conducted by the association pursuant to
this paragraph, but may not take samples or direct testing unless,
by mutual agreement, costs of testing are shared by the parties.

(5) Provision by the association of a comprehensive demand
which provides sufficient detail for the parties to engage in
meaningful dispute resolution as contemplated under this section.

(6) Invasive testing conducted by the respondent, subcontractors,
and design professionals, if they deem appropriate.

(7) Allowance for modification of the demand by the association
if new issues arise during the testing conducted by the respondent,
subcontractor, or design professionals.

(8) Facilitated dispute resolution of the claim, with all parties,
including peripheral parties, as appropriate, and insurers, if any,
present and having settlement authority. The dispute resolution
facilitators shall endeavor to set specific times for the attendance
of specific parties at dispute resolution sessions. If the dispute
resolution facilitator does not set specific times for the attendance
of parties at dispute resolution sessions, the dispute resolution
facilitator shall permit those parties to participate in dispute
resolution sessions by telephone.

(i) In addition to the foregoing elements of the case management
statement described in subdivision (h), upon mutual agreement of
the parties, the dispute resolution facilitator may include any or
all of the following elements in a case management statement: the
exchange of consultant or expert photographs; expert presentations;
expert meetings; or any other mechanism deemed appropriate by
the parties in the interest of resolving the dispute.

(j) The dispute resolution facilitator, with the guidance of the
parties, shall at the time the case management statement is
established, set deadlines for the occurrence of each event set forth
in the case management statement, taking into account such factors
as the size and complexity of the case, and the requirement of this
section that this dispute resolution process not exceed 180 days
absent agreement of the parties to an extension of time.

(k) (1)  begin delete (A) end delete begin delete   end delete At a time to be determined by the dispute resolution
facilitator, the respondent may submit to the association all of the
following:

begin delete

(i)

end delete

begin insert (A) end insert  A request to meet with the board to discuss a written
settlement offer.

begin delete

(ii)

end delete

begin insert (B) end insert  A written settlement offer, and a concise explanation of the
reasons for the terms of the offer.

begin delete

(iii)

end delete

begin insert (C) end insert  A statement that the respondent has access to sufficient
funds to satisfy the conditions of the settlement offer.

begin delete

(iv)

end delete

begin insert (D) end insert  A summary of the results of testing conducted for the
purposes of determining the nature and extent of defects, if this
testing has been conducted, unless the association provided the
respondent with actual test results.

begin delete

(B)

end delete

begin insert (2) end insert  If the respondent does not timely submit the items required
by this subdivision, the association shall be relieved of any further
obligation to satisfy the requirements of this subdivision only.

begin delete

(C)

end delete

begin insert (3) end insert  No less than 10 days after the respondent submits the items
required by this paragraph, the respondent and the board shall meet
and confer about the respondent’s settlement offer.

begin delete

(D)

end delete

begin insert (4) end insert  If the board rejects a settlement offer presented at the
meeting held pursuant to this subdivision, the board shall hold a
meeting open to each member of the association. The meeting
shall be held no less than 15 days before the association
commences an action for damages against the respondent.

begin delete

(E)

end delete

begin insert (5) end insert  No less than 15 days before this meeting is held, a written
notice shall be sent to each member of the association specifying
all of the following:

begin delete

(i)

end delete

begin insert (A) end insert  That a meeting will take place to discuss problems that may
lead to the filing of a civil action, and the time and place of this
meeting.

begin delete

(ii)

end delete

begin insert (B) end insert  The options that are available to address the problems,
including the filing of a civil action and a statement of the various
alternatives that are reasonably foreseeable by the association to
pay for those options and whether these payments are expected to
be made from the use of reserve account funds or the imposition
of regular or special assessments, or emergency assessment
increases.

begin delete

(iii)

end delete

begin insert (C) end insert  The complete text of any written settlement offer, and a
concise explanation of the specific reasons for the terms of the
offer submitted to the board at the meeting held pursuant to
subdivision (d) that was received from the respondent.

begin delete

(F)

end delete

begin insert (6) end insert  The respondent shall pay all expenses attributable to sending
the settlement offer to all members of the association. The
respondent shall also pay the expense of holding the meeting, not
to exceed three dollars ($3) per association member.

begin delete

(G)

end delete

begin insert (7) end insert  The discussions at the meeting and the contents of the notice
and the items required to be specified in the notice pursuant to
subparagraph (E) are privileged communications and are not
admissible in evidence in any civil action, unless the association
consents to their admission.

begin delete

(H)

end delete

begin insert (8) end insert  No more than one request to meet and discuss a written
settlement offer may be made by the respondent pursuant to this
subdivision.

(l) All defect lists and demands, communications, negotiations,
and settlement offers made in the course of the prelitigation dispute
resolution process provided by this section shall be inadmissible
pursuant to Sections 1119 to 1124, inclusive, of the Evidence Code
and all applicable decisional law. This inadmissibility shall not be
extended to any other documents or communications which would
not otherwise be deemed inadmissible.

(m) Any subcontractor or design professional may, at any time,
petition the dispute resolution facilitator to release that party from
the dispute resolution process upon a showing that the
subcontractor or design professional is not potentially responsible
for the defect claims at issue. The petition shall be served
contemporaneously on all other parties, who shall have 15 days
from the date of service to object. If a subcontractor or design
professional is released, and it later appears to the dispute
resolution facilitator that it may be a responsible party in light of
the current defect list or demand, the respondent shall renotice the
party as provided by paragraph (2) of subdivision (e), provide a
copy of the current defect list or demand, and direct the party to
attend a dispute resolution session at a stated time and location. A
party who subsequently appears after having been released by the
dispute resolution facilitator shall not be prejudiced by its absence
from the dispute resolution process as the result of having been
previously released by the dispute resolution facilitator.

(n) Any party may, at any time, petition the superior court in
the county where the project is located, upon a showing of good
cause, and the court may issue an order, for any of the following,
or for appointment of a referee to resolve a dispute regarding any
of the following:

(1) To take a deposition of any party to the process, or subpoena
a third party for deposition or production of documents, which is
necessary to further prelitigation resolution of the dispute.

(2) To resolve any disputes concerning inspection, testing,
production of documents, or exchange of information provided
for under this section.

(3) To resolve any disagreements relative to the timing or
contents of the case management statement.

(4) To authorize internal extensions of timeframes set forth in
the case management statement.

(5) To seek a determination that a settlement is a good faith
settlement pursuant to Section 877.6 of the Code of Civil Procedure
and all related authorities. The page limitations and meet and confer
requirements specified in this section shall not apply to these
motions, which may be made on shortened notice. Instead, these
motions shall be subject to other applicable state law, rules of
court, and local rules. A determination made by the court pursuant
to this motion shall have the same force and effect as the
determination of a postfiling application or motion for good faith
settlement.

(6) To ensure compliance, on shortened notice, with the
obligation to provide a Statement of Insurance pursuant to
paragraph (2) of subdivision (e).

(7) For any other relief appropriate to the enforcement of the
provisions of this section, including the ordering of parties, and
insurers, if any, to the dispute resolution process with settlement
authority.

(o) (1) A petition filed pursuant to subdivision (n) shall be filed
in the superior court in the county in which the project is located.
The court shall hear and decide the petition within 10 days after
filing. The petitioning party shall serve the petition on all parties,
including the date, time, and location of the hearing no later than
five business days prior to the hearing. Any responsive papers
shall be filed and served no later than three business days prior to
the hearing. Any petition or response filed under this section shall
be no more than three pages in length.

(2) All parties shall meet with the dispute resolution facilitator,
if one has been appointed and confer in person or by telephone
prior to the filing of that petition to attempt to resolve the matter
without requiring court intervention.

(p) As used in this section:

(1) “Association” shall have the same meaning as defined in
Section 4080.

(2) “Builder” means the declarant, as defined in Section 4130.

(3) “Common interest development” shall have the same
meaning as in Section 4100, except that it shall not include
developments or projects with less than 20 units.

(q) The alternative dispute resolution process and procedures
described in this section shall have no application or legal effect
other than as described in this section.

(r) This section shall become operative on July 1, 2002, however
it shall not apply to any pending suit or claim for which notice has
previously been given.

begin delete

(s) This section shall become inoperative on July 1, 2017, and,
as of January 1, 2018, is repealed, unless a later enacted statute,
that becomes operative on or before January 1, 2018, deletes or
extends the dates on which it becomes inoperative and is repealed.

end delete