Document Type

Case Summary

Publication Date

10-11-2007

Case Synopsis

D.R. Horton, Inc. built the First Light at Boulder Ranch Community in Henderson, Nevada, which consists of 138 buildings, with three residential units in each building, totaling 414 residences. There are three different floor plans, each with two possible elevations, for a total of six different types of homes. First Light believed that constructional defects may have existed in each residence, and hired experts to assist it in preparing a NRS 40.465,2 pre-litigation notice of constructional defects. In order to prepare this notice, the experts used visual and invasive testing of a small representative sample of homes, and then extrapolated the percentage of homes in which they believed each defect was present throughout the community. The experts failed to provide D.R. Horton with the addresses or the expert report of the homes they had tested. The notice stated that approximately 160 defects may have existed in various combinations; and estimated that anywhere from 2 to 100 percent of the 414 homes had any combination of the 160 defects. Additionally, First Light did not specify the floor plans, elevations, or addresses of the homes in which it alleged that a particular defect may have existed. First Light, unsatisfied with D.R. Horton’s response to its notice, filed a constructional defect action with the district court. D.R. Horton moved for declaratory judgment, arguing that First Light’s notice was unreasonable and, therefore, statutorily insufficient. The district court denied the motion, and refused to declare First Light’s NRS 40.645 notice statutorily insufficient.3 D.R. Horton filed a petition challenging the district court’s order on the grounds that First Light’s notice was not given in “reasonable detail” as required by NRS 40.645(2), and that the inadequacy of the notice frustrated its opportunity to repair under NRS 40.647.4 After concluding that NRS 40.645 was ambiguous,5 the Nevada Supreme Court reviewed the legislative history behind the statute. The Court held that it was clear that the Legislature intended for contractors to have an opportunity to repair defects, and that contractors are entitled to reasonable notice of alleged defects in order to decide whether to verify and repair those defects.6 The Court noted that there is not an exact formula for determining whether a pre-litigation notice is reasonable, and that the district courts have wide discretion when making that determination. The Court went on to “establish[] a ‘reasonable threshold test,’ which every pre-litigation notice must satisfy, but only if challenged by the contractor.”7 The Court also held “that NRS 40.645(4)(c) requires a claimant to disclose the expert opinions and reports in his possession that were used to prepare his pre-litigation notice.”8 As a result, the Court granted D.R. Horton’s petition in part so that the district court could determine whether First Light’s notice provided the detail necessary to pass the “reasonable threshold test,” and granted the petition to the extent asking the Court to require First Light to disclose the expert reports concerning the alleged defects.

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