Tuesday, June 22, 2010

Stigma Damages in Construction Defect Litigation

A recent Division III Court of Appeals upheld "stigma damages" in a lawsuit by a homeowner against the contractor that built his home. Although not reported (and therefore cannot be used as binding authority in legal briefs), it reinforces my observation over the last fifteen years that (a) homeowners will get what they ask for from judge or jury, and (b) contractors face an uphill battle in construction defect litigation.

Mr. Khalighi purchased a home built by Mr. Harvey, and problems arise with several aspects of the construction. Trial was a bench trial, meaning no jury. The Court of Appeals affirmed a rather substantial judgment including:

-$106,000 cost to repair improper drainage, adding slope to a garage, and improperly poured footings;
-a 25% contingency ($26K) for unforeseen problems that might be uncovered (rejecting the defense argument that this was speculative);
-stigma damages of $148,000; and
-attorneys’ fees of $135,000.

The trial court judge apparently disregarded entirely the defense expert’s opinion that repair costs were $13,000 and stigma damages no more than $38,000. There was no middle ground; the homeowner got everything he wanted.

I was also surprised to see the Court disregarded the homeowners’ obligation to provide notice of defect under RCW 64.50. It was undisputed that the homeowner failed to give any notice of defect or opportunity to cure. But because the contractor did not point out the homeowners’ obligation, the Court determined he had waived that defense.



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