Montara Owners Assn. v. La Noue Development, LLC

The Montara Owners Association (homeowners) sued developer and general contractor, La Noue Development, LLC for damages caused by design and construction defects in the building of the Montara townhomes. The defects included problems with the framing, siding, decking, and windows, resulting in water intrusion and water damage. La Noue, in turn, filed a third-party complaint against multiple subcontractors, including Vasily Sharabarin, dba Advanced Construction (Sharabarin), who provided siding work on four buildings. Before trial, La Noue settled with the homeowners for $5 million (eliminating the first-party litigation from the case) and also reached settlements with most of the third-party subcontractors. La Noue did not settle with Sharabarin. Because of various pretrial rulings, the only claims submitted to the jury were La Noue’s breach of contract claims against Sharabarin and two other subcontractors. Before trial, the trial court granted summary judgment in favor of Sharabarin on La Noue’s claim for contractual indemnity, on the ground that the indemnification provision on which La Noue had relied was void under ORS 30.140. The trial court also held that the court would decide whether La Noue could recover the attorney fees that it had incurred in defending against the homeowners’ claims as consequential damages for Sharabarin’s breach of contract and that the court would resolve that issue after trial. In its post-trial ruling on the attorney fee issue, the court ultimately held that La Noue could not recover attorney fees as consequential damages in the case, even after trial, and denied La Noue’s claim for those attorney fees. The issues this case presented for the Supreme Court's review centered on: the proper application of ORS 30.140; whether it was error for the trial court to give an instruction on the economic waste doctrine in the absence of any evidence on the alternative measure of damages, diminution in value; and whether a third-party plaintiff can recover attorney fees as consequential damages for a third-party defendant’s breach of contract when the attorney fees were incurred in the first-party litigation in the same action. The Supreme Court concluded that it was error to have given the economic waste instruction. The Court affirmed on the Court of Appeals' decisions as to the other issues presented, and remanded for the trial court to consider the general contractor’s substantive right to attorney fees. View "Montara Owners Assn. v. La Noue Development, LLC" on Justia Law