Sirrah Enterprises v. Wunderlich (8/9/17)

We had decided that this case was too boring to blog and even tweeted that. But there are aspects of the opinion we couldn’t stop thinking about. We’ll skip the boring parts.

The issue here is “whether the successful party on a claim for breach of the [implied] warranty [of habitability in a residential construction contract] qualifies for an attorney-fee award under either a contractual fee provision or A.R.S. § 12-341.01.” The court answers yes, under both, “because the warranty is imputed into the construction contract, it is a term of the contract. Any claim for breach of that term arises from the contract.”

That’s what the trial court said and that’s what the Court of Appeals said. So why take review?

To make a distinction. The implied warranty of habitability does not create an implied contract; instead, the warranty “is a term imputed by law into express contracts.”

And why is that important? Because under Woodward (1984) the warranty can be enforced by subsequent purchasers, which therefore now means that they can enforce “the express contract”, which means that subsequent purchasers can get attorneys fees. The court disapproves a line of Court of Appeals cases to the effect that claimants not in privity under the original contract were suing under something that was merely implied by law, not the original contract, and therefore couldn’t get fees.

Problem 1: These plaintiffs were the original purchasers, in privity. It seems the court has taken a case and published an opinion for the purpose of addressing an issue the case does not present.

So what? Why shouldn’t the court clarify the law when it has a chance? The reason why not goes to the heart of its function. Ever since the Court of Appeals was created the theory has been that, for several reasons, the Supreme Court doesn’t reach for issues; it doesn’t rule on them unless they’re squarely presented. That’s why its refusal to accept review cannot technically be seen as approval of a Court of Appeals opinion. But this case suggests the opposite; taking review because the court disagrees with dicta means that when the court doesn’t take review it does agree with it. The court isn’t supposed to be in the business of doing either, shouldn’t be signaling that it is, and shouldn’t want to.

If the proper legal analysis necessary to resolve this dispute – whether by affirmance or reversal – were different that what the Court of Appeals employed then of course it would be appropriate to say so. But the lower courts resolved this case correctly and, as to the parties before them, for the correct reasons. Issues about people not in privity were not presented at all, much less squarely. (These parties mentioned them in the course of their arguments but the bright folks at the Supreme Court know that that’s an entirely different thing.)

(But what if you’re a conscientious Supreme Court Justice and you just can’t sleep at night knowing that some people might not be recouping their fees because you haven’t yet had a chance to announce that you disagree with the people downstairs? Then you take the case for the purpose of more-or-less ostentatiously not ruling on the issue: you specifically say that you’re not ruling on it because the case doesn’t raise it, for example, or make some other noticeable remark, or even vacate only certain portions of the Court of Appeals’ opinion. Give we mere lawyers a little credit, we ain’t that dumb; we’ll take the hint and the next time the issue comes up bring you a case.)

Problem 2: The court then doubles down on looking after the interests of parties not before it.

So far it has explained why parties not in privity can recover under the contract’s fee provision. But can they use 12-341.01? Yep, Its simple: the statute “does not have a privity requirement for claims ‘arising out of’’ a contract” so “just as a claim asserted by an original homeowner in privity with a builder can arise from contract, so too can a claim asserted by a subsequent homeowner.” (Citing only one case, and that as a “cf”, suggesting that that the authority for this is slim-to-none or that no one bothered to look very hard.) How this airy conclusion fits with the substantial body of jurisprudence on the statute, and whether the legislature really intended to allow contract fees to people who were never parties to the contract, would make for an interesting analysis. It might even produce the same result. And the court might have gotten good briefing on that had it waited for a case in which the answer mattered to the litigants.

(Opinion: Sirrah v. Wunderlich)