Gray•Duffy achieves favorable settlement on behalf of subcontractor client in relation to construction defect claim

November 2020


Michelle MacDonald of Gray•Duffy’s Encino office represented a fire sprinkler subcontractor in a property damage and fraudulent misrepresentation matter brought by a homeowner against her general contractor. The general contractor in turn brought a cross-complaint against several of the subcontractors.


Betsey Lee Johnson v. Richard Ciotti

The case involved the construction of a single-family home in Malibu, California. In July 2016, Gray•Duffy’s client, Alta Fire Protection, submitted a written proposal to the general contractor for the installation of a residential fire sprinkler system for the custom residence, a detached three car garage and a guest house. The permit was pulled by the fire sprinkler company in November 2016; the bulk of the work was completed on or before November 22, 2016, and the final payment was made by a different general contractor in May 2018.

The Plaintiff’s complaint did not identify any defects specific to the scope of work of the fire sprinkler subcontractor. It did indicate that there were potential issues of misappropriation of funds by the original subcontractor as well as alleged defects.

Early in the litigation, the Cross-Complainant general contractor circulated an elaborate Case Management Order (CMO) which contemplated discovery and investigation for most of the next year. Gray•Duffy objected to the proposed CMO because no party presented any evidence that the client’s scope of work was implicated in the Plaintiff’s claims. This position was raised with the court in a case management conference and the court ordered the parties to meet and confer as to the objection of fire sprinkler subcontractor.

Gray•Duffy discussed this at length with both Plaintiff Counsel and the attorney for the general contractor. Plaintiff’s Counsel agreed that his client had no complaints concerning the fire sprinklers. However, the Plaintiff was concerned because when the fire sprinkler subcontractor’s job file was compared with her bills incurred during the project, she concluded that she may have paid the General Contractor twice for this work, and one of her allegations was that she was defrauded by the general contractor.

In our discussions, Plaintiff’s Counsel agreed to provide an Issue/Scope of Work Release for the fire sprinklers installed by the fire sprinkler subcontractor in exchange for a Declaration by the client’s principal identifying documents in his job file, his work, the amount of payments and when they were made. Gray•Duffy prepared that Declaration which was signed by the client, and then circulated it to Counsel. Counsel for the Cross-Complainant dismissed the cross-complaint after receiving the issue release executed by Plaintiff’s Counsel. There were no settlement funds tendered on behalf of the client in exchange for the dismissal.

Gray•Duffy aggressively advocated on behalf of the client and was able to expeditiously and successfully resolve this matter in obtaining a favorable settlement.

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.