Gray•Duffy Negotiates Favorable Settlement for General Contractor in Complex Construction Defect Lawsuit

August 2012


Barry D. Brown of Gray•Duffy’s Redwood City office represented DCMI who was the general contractor in a complex construction defect lawsuit. The lawsuit involved four separate projects related to health care/rehabilitation facilities in Santa Cruz and Monterey Counties. In addition, DCMI, represented by its personal counsel, filed an action for recovery of amounts due for the work performed at one of the projects. Ultimately, the case was settled through mediation with the plaintiffs receiving $728,682 and DCMI receiving $50,000.


Pelagia v. DCMI This construction defect case involved four separate projects in Santa Cruz and Monterey Counties making it extremely complex. Ann Butler was the primary plaintiff and the various properties were owned by entities in which Ms. Butler had a controlling interest. The buildings on the four properties were rehabilitation/health facilities of various natures. The plaintiffs sought total damages of approximately $2,000,000. The firm’s client, DCMI, also had a claim for amounts due on one of the projects. DCMI, as the general contractor, performed much of the construction itself, which limited the number of subcontractors who could contribute to a potential settlement, and also resulted in various coverage issues between DCMI and its insurance company. Ultimately, a coverage attorney was retained by DCMI’s insurance company as part of the settlement discussions. Although the plaintiffs and DCMI were common entities in all four projects, for the most part, there were different subcontractors on the projects. Thus, the projects needed to be segregated and analyzed separately. However, at the end of the mediation process, the case was settled globally as to all disputes between the plaintiffs and DCMI. The total settlement amount was $778,682 with the plaintiffs receiving $728,681 and DCMI receiving $50,000. Of the total settlement funds, DCMI’s insurance company paid $257,000; the balance of $521,682 was paid by the subcontractors brought in on DCMI’s cross-complaint for indemnity.

Please Note: This article is necessarily general in nature and is not a substitute for legal advice with respect to any particular case. Readers should consult with an attorney before taking any action affecting their interests.