The Other Target of Billboard Lawyers

As Palmetto Promise has discussed regularly on this blog, there is a glaring problem with the South Carolina civil justice system that allows what we have termed “billboard lawyers” to target legitimate businesses for “nuclear” verdicts just because those businesses are successful, not necessarily because they are at fault. 

The most targeted businesses in the Palmetto State are no doubt trucking firms. Billboard lawyers often even feature tractor trailers on their signs. But there is another class of business in the trial lawyer crosshairs: homebuilders and contractors. South Carolina’s “statute of repose” is designed to give homebuilders a period of eight (8) years after which they cannot be sued. This is to protect against “stale” claims involving old products and structures that naturally decay over time if not properly maintained.

A unique provision in South Carolina law, however, dating back to 1986, takes away reasonable protection from state builders if an attorney chooses to litigate a building code violation as “gross negligence.” (Now, we are back to trucks, because one could drive a truck through the definition of “gross negligence.”) This loose definition has resulted in lawyers pursuing almost every potential construction defect as gross negligence. In a recent South Carolina House ad hoc committee regarding South Carolina’s statute of repose, well-known billboard litigators made a series of claims in an attempt to justify their attacks on homebuilders and contractors. 

The first claim that was made in front of the House committee was that the building code in South Carolina is poorly designed and results in “D-grade” quality homes. This is incorrect. A $300,000 house and a $3 million house are constructed using the same building methods. The difference between the two lies in the finishes and upgrades selected, such as deciding between a granite or marble countertop, or builder-grade fixtures versus luxury fixtures.

The second claim made by South Carolina attorneys was that all building code violations are health and safety issues. This portrayal of construction defects presents several problems for South Carolinians. It mischaracterizes the nature of building code violations and misleads juries about the actual risk posed by minor technical deviations. Additionally, it allows builders and contractors to be targeted indiscriminately for minor construction issues. Finally, the false portrayal of minor building code violations undermines the credibility of legitimate health concerns by grouping them with inconsequential violations.

The South Carolina statute of repose is designed to protect builders and contractors from frivolous lawsuits. In 2005, the SC legislature moved the statute of repose from 11 to 8 years. This decision was in line with the best available data that showed when legitimate construction defect claims typically occur. Other states, such as Michigan and Alaska, have exceptions for gross negligence, but the threshold for what constitutes gross negligence is much higher. South Carolina trial attorneys, as a result, have found a loophole around the statute of repose by claiming that simple building code violations constitute “gross negligence.”

There are other subtleties involving lawyers skirting the statute of repose in order to sue homebuilders and contractors. The pleading standard is low in order to prove gross negligence. South Carolina’s notice pleading rules mean that gross negligence needs only to be alleged in order to survive the initial motions to dismiss. The South Carolina Homebuilders Association cites one example of this practice: “Missing kickout flashing was discovered. Rather than acknowledge that the issue should have been discovered earlier, attorneys argued that failing to install a single flashing component constituted ‘gross negligence’ warranting unlimited liability.”

A better approach for South Carolina exists. There is a middle ground that allows homeowners to pursue legitimate construction defect claims while also protecting homebuilders and contractors from billboard lawyers. Four key steps are needed to ensure that both parties are able to cooperate. 

• First, mandatory good-faith negotiations must be pursued. This allows claims about the alleged defect and proposed repairs to be discussed by both sides. 
• Second, there must be a neutral inspection process in order to ensure fairness to both sides. One option is a court-appointed independent inspector to assess the defect and recommend appropriate remediation. 
• Third, builders should be required to submit detailed repair plans with timelines after they take responsibility for a defect. 
• Finally, when repairs are completed, home builders should provide warranty extensions on the repaired work to ensure it resolves the problem.

A few simple reforms can not only prevent yet another industry dominated by small, family companies from being unfairly targeted in the South Carolina civil justice system, but also lead to an expansion of affordable housing. But that’s a topic for another day.