Pennsylvania Governor Rendell Vetoes Residential Construction Dispute Resolution Act After State's AG Says It's Unconstitutional

Says Disputes Would Demand Expensive Legal Assistance



Mar 17, 2006, 00:00 ET from Pennsylvania Office of the Governor

    HARRISBURG, Pa., March 17 /PRNewswire/ -- Governor Edward G. Rendell today
 vetoed House Bill 1467, the so-called Residential Construction Dispute
 Resolution Act, after state Attorney General Tom Corbett said the legislation
 was unconstitutional.
     "The proponents of this bill suggest that it would afford both contractors
 and consumers equal opportunity to resolve their disputes without having to
 resort to expensive litigation," the Governor said in his veto message.  "In
 fact, I believe this bill has the potential to cause both parties to become
 more involved in litigation, requiring them to pay unnecessary legal bills
 and, ultimately, driving up the cost of builders' insurance and new homes as a
 result."
     Governor Rendell said the bill failed to address the real reasons why
 liability insurance premiums are increasing for homebuilders and contractors.
     "Pennsylvania's homebuilders bring pride to our state and, of course,
 their great craftsmanship and productivity have been key ingredients in our
 recent economic turnaround.  I remain willing and open to addressing real
 barriers to progress faced by this great industry.
     "Pennsylvanians would be well served by legislation that addresses many of
 the legitimate concerns raised by homebuilders and that creates a balance by
 imposing a registration and reporting requirement and a victim's compensation
 fund.  I look forward to working with our fine homebuilders and consumer
 organizations to help such a law become a reality."
 
     The Rendell Administration is committed to creating a first-rate public
 education system, protecting our most vulnerable citizens and continuing
 economic investment to support our communities and businesses.  To find out
 more about Governor Rendell's initiatives and to sign up for his weekly
 newsletter, visit his Web site at: http://www.governor.state.pa.us.
 
 
     EDITOR'S NOTE: A copy of Governor Rendell's veto message is attached, as
 is a copy of Attorney General Tom Corbett's opinion.
 
 
     TO THE HONORABLE HOUSE OF REPRESENTATIVES
     OF THE COMMONWEALTH OF PENNSYLVANIA:
 
     I am returning House Bill 1467 without my approval.
     I do so because the Attorney General has determined that, as written, this
 bill does not comport with the Constitution of the Commonwealth of
 Pennsylvania.  The Office of General Counsel concurs in his opinion, and I
 believe his opinion is based on sound interpretation and reasoning.  I have
 attached General Corbett's opinion to this message.
     I also return this bill because I have seen no evidence, in Pennsylvania,
 of a present problem with homebuilder liability insurance costs that would
 require a bill so far-reaching in scope and effect.  The proponents of this
 bill suggest that it would afford both contractors and consumers equal
 opportunity to resolve their disputes without having to resort to expensive
 litigation.  In fact, I believe this bill has the potential to cause both
 parties to become more involved in litigation, requiring them to pay
 unnecessary legal bills and, ultimately, driving up the cost of builders'
 insurance and new homes as a result.
     While I am concerned about the Constitutional issues discussed in General
 Corbett's opinion, I also spent many hours studying the issues presented to me
 by those who proposed the bill, as well as those who asked me not to sign it.
 I listened carefully to the views of the representatives of the homebuilding
 industry who came to see me.  I read their documents and examined the data
 they provided.  I found that while some homebuilders, in fact, are facing
 increases in insurance liability costs, these increases are not a result of
 increased numbers of lawsuits - at least not in our state.  Rather, they are a
 result of trends in the insurance and housing industry that are not addressed
 by House Bill 1467.  Moreover, those who attempted to persuade me of the
 merits of this bill acknowledged that those homebuilders who have mandatory
 arbitration clauses in their contracts are afforded the same, if not greater,
 protections as those outlined in House Bill 1467.  Thus, each homebuilder
 could include mandatory arbitration language in every contract and thereby
 accomplish as much, if not more, than this bill does.
     I also considered the views of citizens who wrote to me on this issue,
 particularly those who are dealing with loss of equity due to the actions of
 the few unscrupulous contractors who prey on the unwary.  In fact, in this
 review, I became convinced that a law to register contractors and
 homebuilders, accompanied by appropriate public reporting requirements, is
 critical to boosting the protection our citizens expect and deserve their
 government to provide.  I also believe we need to legislatively establish a
 fund to compensate victims for damages caused by unscrupulous builders who do
 not have insurance and cannot, or will not, pay for the full value of the
 problems they create.
     Pennsylvania's homebuilders bring pride to our state and, of course, their
 great craftsmanship and productivity have been key ingredients in our recent
 economic turnaround.  I remain willing and open to addressing real barriers to
 progress faced by this great industry.  Likewise, I took an oath to ensure
 that Pennsylvanians are protected from the vagaries of our laws and our
 processes when either serves narrow interests.  Pennsylvanians would be well
 served by legislation that addresses many of the legitimate concerns raised by
 homebuilders, and that creates a balance by imposing a registration and
 reporting requirement, and a victim's compensation fund.  I look forward to
 working with our fine homebuilders and consumer organizations to help such a
 law become a reality.
 
                                       Sincerely,
 
                                       /s/
                                       Edward G. Rendell
                                       Governor
 
 
                                    *******
 
 
                          COMMONWEALTH OF PENNSYLVANIA
                           OFFICE OF ATTORNEY GENERAL
                              HARRISBURG, PA 17120
 
 
     TOM CORBETT
     Attorney General
                                                              March 14, 2006
 
     The Honorable Edward G. Rendell
     Governor
     Room 225, Main Capitol Building
     Harrisburg, PA 17120
 
     Dear Governor Rendell:
 
     You have requested our opinion pursuant to Section 204(a) of the
 Commonwealth Attorneys Act, 72 P.S. 732-204(a), regarding the
 constitutionality of House Bill No. 1467 (HB1467), which has been passed by
 both houses of the General Assembly and presented to you for approval or veto.
 Upon careful review, and after consulting with the Office of General Counsel,
 we have concluded that HB1467 violates Article III, Section 18 of the
 Pennsylvania Constitution, and that its constitutionality under Article V,
 Section 10(c) is suspect.
     Article III, Section 18 authorizes the General Assembly to enact workers
 compensation laws, but provides otherwise, in relevant part, that "in no other
 cases shall the General Assembly limit the amount to be recovered for injuries
 resulting in death, or for injuries to persons or property...."
     HB1467 would establish a mandatory procedure for claiming damages or other
 relief against a contractor because of a construction defect in a dwelling.
 The claimant would be required to follow the procedure prior to filing a
 lawsuit and as a condition of recovering the full amount of damages to which
 the claimant would be entitled by law upon successful prosecution of such
 lawsuit.  The bill provides in Section 4 that "[t]his act shall not apply to
 any claim for personal injury or death."  The bill does not similarly exempt a
 claim for injury to property.  The bill proceeds in Section 5(h) to limit the
 amount that a claimant may recover in a lawsuit seeking damages or other
 relief on account of a construction defect in a dwelling.
     The limit set by Section 5(h) is conditional in that a claimant may
 recover the full amount of damages to which the claimant would be entitled by
 law if, in the mandatory procedure, the contractor offers the claimant either
 no monetary settlement or repair or a monetary settlement or repair that a
 judge or jury later determines to have been unreasonable.  A conditional
 limitation, particularly one that hinges on so tenuous a thread as a
 claimant's prediction of how a judge or jury later will view the
 reasonableness of a contractor's offer, nonetheless is a limitation on the
 amount that a claimant may recover for an injury to property, which Article
 III, Section 18 prohibits.
     In Singer v. Sheppard, 464 Pa. 387 (1975), the Pennsylvania Supreme Court
 rejected an Article III, Section 18 challenge to a provision of the No-Fault
 Motor Vehicle Insurance Act that eliminated recovery in tort for "non-economic
 damages" for a defined class of accident victims. Id. at 396-397.  Observing
 that the Act, rather than restricting damages, created two classes of accident
 victims, each with different, but unlimited, compensable damages, the Court
 held that "[n]othing in Article III, Section 18 prevents the abolition or
 modification of a cause of action." Id at 397.  HB1467 neither abolishes nor
 modifies any cause of action; thus Singer is inapposite.
     The Supreme Court has had little occasion to discuss the purpose of
 Article III, Section 18.  In Singer, the Court said that the original purpose
 of Section 18 was to invalidate a statute that had imposed absolute dollar
 maximums on the damages recoverable by a negligently injured plaintiff. Id. at
 396.  In DeJesus v. Liberty Mutual Insurance Company, 439 Pa. 180, 184 (1970),
 the Court said that "the purpose of Section 18, as amended, was to permit the
 General Assembly to enact a workmen's compensation program, but to preclude
 the enactment of general legislation covering injuries other than those
 arising in the course of employment."  Both statements were context-specific;
 neither affords much assistance in our review of HB1467.
     As Commonwealth Court has explained regarding the construction of
 provisions of the Pennsylvania Constitution by the courts:
 
        "the fundamental rule of construction which guides us is that the
        Constitution's language controls and must be interpreted in its
        popular sense, as understood by the people when they voted on its
        adoption." Moreover, the general principles governing the construction
        of statutes apply also to the interpretation of constitutions. Thus,
        when the language of a constitutional provision "is clear upon its
        face, and when standing alone it is fairly susceptible of but one
        construction, that construction must be given it."
 
 Jubelirer  v. Pennsylvania Department of State, 859 A.2d 874, 876 (Pa. Cmwlth.
 2004), aff'd, 582 Pa. 364 (2005) (citations omitted).
 
     We, too, must be guided by the language of Article III, Section 18,
 interpreted in its popular sense, which admits of but one interpretation: that
 the General Assembly may not limit the amount that may be recovered for
 injuries resulting in death or for injuries to persons or property.  HB1467
 limits the amount that may be recovered for injuries to property because of a
 construction defect in a dwelling; it is therefore, in our opinion,
 unconstitutional.
     Article V, Section 10(c) provides that "[t]he Supreme Court shall have the
 power to prescribe general rules governing practice, procedure and the conduct
 of all courts...."  The Supreme Court has interpreted this provision as
 conferring upon it exclusive power to prescribe the rules of practice and
 procedure in all actions in the Pennsylvania courts.  Payne v. Department of
 Corrections, 582 Pa. 375 (2005).
     HB1467 provides in Section 3(a) that "[i]n every action subject to this
 act, the claimant shall, no later than 75 days before initiating an action
 against a contractor, provide service of written notice of claim on the
 contractor" and in Section 3(b) that "[s]ervice of the notice of the claim
 shall be the equivalent of service of a lawsuit or demand for arbitration with
 respect to imposing on the contractor a legal obligation to pay as damages the
 cost of any repairs and/or monetary payment made to settle the claim."
 (emphasis added).
     By making service of a written notice of claim the equivalent of service
 of a lawsuit, HB1467 arguably makes the mandatory procedure that follows, the
 provisions of which are conspicuously procedural in tone and effect,
 procedural within the meaning of Article V, Section 10(c). See, e.g.: Section
 3(c) (claimant to provide contractor with evidence): Section 5(a) (content of
 claimant's notice of claim); Section 5(b) (contractor to serve written
 response to notice of claim within 15 days); Section 5(d) (contractor to
 provide written response, with discoverable evidence, within 15 days of
 inspection or testing): Section 5(e) (claimant barred from initiating action
 without in-person meeting with contractor.  Having concluded that HB1467
 violates Article III, Section 18, we needn't render a definitive opinion as to
 whether it also violates Article V, Section 10(c).  It is sufficient to
 observe that the constitutionality of HB1467 under Article V, Section 10(c) is
 suspect.
     In summary, it is our opinion, and you are so advised, that HB1467
 violates Article III, Section 18 of the Pennsylvania Constitution, and that
 its constitutionality under Article V, Section 10(c) is suspect.  Since our
 opinion is rendered in aid of your decision to approve or veto HB1467, our
 advice is not binding.
 
                                      Sincerely,
 
                                      /s/
                                      TOM CORBETT
                                      Attorney General
 
     cc: Honorable Barbara Adams
 
 
 
     CONTACT:
     Kate Philips
     717-783-1116
 
 

SOURCE Pennsylvania Office of the Governor
    HARRISBURG, Pa., March 17 /PRNewswire/ -- Governor Edward G. Rendell today
 vetoed House Bill 1467, the so-called Residential Construction Dispute
 Resolution Act, after state Attorney General Tom Corbett said the legislation
 was unconstitutional.
     "The proponents of this bill suggest that it would afford both contractors
 and consumers equal opportunity to resolve their disputes without having to
 resort to expensive litigation," the Governor said in his veto message.  "In
 fact, I believe this bill has the potential to cause both parties to become
 more involved in litigation, requiring them to pay unnecessary legal bills
 and, ultimately, driving up the cost of builders' insurance and new homes as a
 result."
     Governor Rendell said the bill failed to address the real reasons why
 liability insurance premiums are increasing for homebuilders and contractors.
     "Pennsylvania's homebuilders bring pride to our state and, of course,
 their great craftsmanship and productivity have been key ingredients in our
 recent economic turnaround.  I remain willing and open to addressing real
 barriers to progress faced by this great industry.
     "Pennsylvanians would be well served by legislation that addresses many of
 the legitimate concerns raised by homebuilders and that creates a balance by
 imposing a registration and reporting requirement and a victim's compensation
 fund.  I look forward to working with our fine homebuilders and consumer
 organizations to help such a law become a reality."
 
     The Rendell Administration is committed to creating a first-rate public
 education system, protecting our most vulnerable citizens and continuing
 economic investment to support our communities and businesses.  To find out
 more about Governor Rendell's initiatives and to sign up for his weekly
 newsletter, visit his Web site at: http://www.governor.state.pa.us.
 
 
     EDITOR'S NOTE: A copy of Governor Rendell's veto message is attached, as
 is a copy of Attorney General Tom Corbett's opinion.
 
 
     TO THE HONORABLE HOUSE OF REPRESENTATIVES
     OF THE COMMONWEALTH OF PENNSYLVANIA:
 
     I am returning House Bill 1467 without my approval.
     I do so because the Attorney General has determined that, as written, this
 bill does not comport with the Constitution of the Commonwealth of
 Pennsylvania.  The Office of General Counsel concurs in his opinion, and I
 believe his opinion is based on sound interpretation and reasoning.  I have
 attached General Corbett's opinion to this message.
     I also return this bill because I have seen no evidence, in Pennsylvania,
 of a present problem with homebuilder liability insurance costs that would
 require a bill so far-reaching in scope and effect.  The proponents of this
 bill suggest that it would afford both contractors and consumers equal
 opportunity to resolve their disputes without having to resort to expensive
 litigation.  In fact, I believe this bill has the potential to cause both
 parties to become more involved in litigation, requiring them to pay
 unnecessary legal bills and, ultimately, driving up the cost of builders'
 insurance and new homes as a result.
     While I am concerned about the Constitutional issues discussed in General
 Corbett's opinion, I also spent many hours studying the issues presented to me
 by those who proposed the bill, as well as those who asked me not to sign it.
 I listened carefully to the views of the representatives of the homebuilding
 industry who came to see me.  I read their documents and examined the data
 they provided.  I found that while some homebuilders, in fact, are facing
 increases in insurance liability costs, these increases are not a result of
 increased numbers of lawsuits - at least not in our state.  Rather, they are a
 result of trends in the insurance and housing industry that are not addressed
 by House Bill 1467.  Moreover, those who attempted to persuade me of the
 merits of this bill acknowledged that those homebuilders who have mandatory
 arbitration clauses in their contracts are afforded the same, if not greater,
 protections as those outlined in House Bill 1467.  Thus, each homebuilder
 could include mandatory arbitration language in every contract and thereby
 accomplish as much, if not more, than this bill does.
     I also considered the views of citizens who wrote to me on this issue,
 particularly those who are dealing with loss of equity due to the actions of
 the few unscrupulous contractors who prey on the unwary.  In fact, in this
 review, I became convinced that a law to register contractors and
 homebuilders, accompanied by appropriate public reporting requirements, is
 critical to boosting the protection our citizens expect and deserve their
 government to provide.  I also believe we need to legislatively establish a
 fund to compensate victims for damages caused by unscrupulous builders who do
 not have insurance and cannot, or will not, pay for the full value of the
 problems they create.
     Pennsylvania's homebuilders bring pride to our state and, of course, their
 great craftsmanship and productivity have been key ingredients in our recent
 economic turnaround.  I remain willing and open to addressing real barriers to
 progress faced by this great industry.  Likewise, I took an oath to ensure
 that Pennsylvanians are protected from the vagaries of our laws and our
 processes when either serves narrow interests.  Pennsylvanians would be well
 served by legislation that addresses many of the legitimate concerns raised by
 homebuilders, and that creates a balance by imposing a registration and
 reporting requirement, and a victim's compensation fund.  I look forward to
 working with our fine homebuilders and consumer organizations to help such a
 law become a reality.
 
                                       Sincerely,
 
                                       /s/
                                       Edward G. Rendell
                                       Governor
 
 
                                    *******
 
 
                          COMMONWEALTH OF PENNSYLVANIA
                           OFFICE OF ATTORNEY GENERAL
                              HARRISBURG, PA 17120
 
 
     TOM CORBETT
     Attorney General
                                                              March 14, 2006
 
     The Honorable Edward G. Rendell
     Governor
     Room 225, Main Capitol Building
     Harrisburg, PA 17120
 
     Dear Governor Rendell:
 
     You have requested our opinion pursuant to Section 204(a) of the
 Commonwealth Attorneys Act, 72 P.S. 732-204(a), regarding the
 constitutionality of House Bill No. 1467 (HB1467), which has been passed by
 both houses of the General Assembly and presented to you for approval or veto.
 Upon careful review, and after consulting with the Office of General Counsel,
 we have concluded that HB1467 violates Article III, Section 18 of the
 Pennsylvania Constitution, and that its constitutionality under Article V,
 Section 10(c) is suspect.
     Article III, Section 18 authorizes the General Assembly to enact workers
 compensation laws, but provides otherwise, in relevant part, that "in no other
 cases shall the General Assembly limit the amount to be recovered for injuries
 resulting in death, or for injuries to persons or property...."
     HB1467 would establish a mandatory procedure for claiming damages or other
 relief against a contractor because of a construction defect in a dwelling.
 The claimant would be required to follow the procedure prior to filing a
 lawsuit and as a condition of recovering the full amount of damages to which
 the claimant would be entitled by law upon successful prosecution of such
 lawsuit.  The bill provides in Section 4 that "[t]his act shall not apply to
 any claim for personal injury or death."  The bill does not similarly exempt a
 claim for injury to property.  The bill proceeds in Section 5(h) to limit the
 amount that a claimant may recover in a lawsuit seeking damages or other
 relief on account of a construction defect in a dwelling.
     The limit set by Section 5(h) is conditional in that a claimant may
 recover the full amount of damages to which the claimant would be entitled by
 law if, in the mandatory procedure, the contractor offers the claimant either
 no monetary settlement or repair or a monetary settlement or repair that a
 judge or jury later determines to have been unreasonable.  A conditional
 limitation, particularly one that hinges on so tenuous a thread as a
 claimant's prediction of how a judge or jury later will view the
 reasonableness of a contractor's offer, nonetheless is a limitation on the
 amount that a claimant may recover for an injury to property, which Article
 III, Section 18 prohibits.
     In Singer v. Sheppard, 464 Pa. 387 (1975), the Pennsylvania Supreme Court
 rejected an Article III, Section 18 challenge to a provision of the No-Fault
 Motor Vehicle Insurance Act that eliminated recovery in tort for "non-economic
 damages" for a defined class of accident victims. Id. at 396-397.  Observing
 that the Act, rather than restricting damages, created two classes of accident
 victims, each with different, but unlimited, compensable damages, the Court
 held that "[n]othing in Article III, Section 18 prevents the abolition or
 modification of a cause of action." Id at 397.  HB1467 neither abolishes nor
 modifies any cause of action; thus Singer is inapposite.
     The Supreme Court has had little occasion to discuss the purpose of
 Article III, Section 18.  In Singer, the Court said that the original purpose
 of Section 18 was to invalidate a statute that had imposed absolute dollar
 maximums on the damages recoverable by a negligently injured plaintiff. Id. at
 396.  In DeJesus v. Liberty Mutual Insurance Company, 439 Pa. 180, 184 (1970),
 the Court said that "the purpose of Section 18, as amended, was to permit the
 General Assembly to enact a workmen's compensation program, but to preclude
 the enactment of general legislation covering injuries other than those
 arising in the course of employment."  Both statements were context-specific;
 neither affords much assistance in our review of HB1467.
     As Commonwealth Court has explained regarding the construction of
 provisions of the Pennsylvania Constitution by the courts:
 
        "the fundamental rule of construction which guides us is that the
        Constitution's language controls and must be interpreted in its
        popular sense, as understood by the people when they voted on its
        adoption." Moreover, the general principles governing the construction
        of statutes apply also to the interpretation of constitutions. Thus,
        when the language of a constitutional provision "is clear upon its
        face, and when standing alone it is fairly susceptible of but one
        construction, that construction must be given it."
 
 Jubelirer  v. Pennsylvania Department of State, 859 A.2d 874, 876 (Pa. Cmwlth.
 2004), aff'd, 582 Pa. 364 (2005) (citations omitted).
 
     We, too, must be guided by the language of Article III, Section 18,
 interpreted in its popular sense, which admits of but one interpretation: that
 the General Assembly may not limit the amount that may be recovered for
 injuries resulting in death or for injuries to persons or property.  HB1467
 limits the amount that may be recovered for injuries to property because of a
 construction defect in a dwelling; it is therefore, in our opinion,
 unconstitutional.
     Article V, Section 10(c) provides that "[t]he Supreme Court shall have the
 power to prescribe general rules governing practice, procedure and the conduct
 of all courts...."  The Supreme Court has interpreted this provision as
 conferring upon it exclusive power to prescribe the rules of practice and
 procedure in all actions in the Pennsylvania courts.  Payne v. Department of
 Corrections, 582 Pa. 375 (2005).
     HB1467 provides in Section 3(a) that "[i]n every action subject to this
 act, the claimant shall, no later than 75 days before initiating an action
 against a contractor, provide service of written notice of claim on the
 contractor" and in Section 3(b) that "[s]ervice of the notice of the claim
 shall be the equivalent of service of a lawsuit or demand for arbitration with
 respect to imposing on the contractor a legal obligation to pay as damages the
 cost of any repairs and/or monetary payment made to settle the claim."
 (emphasis added).
     By making service of a written notice of claim the equivalent of service
 of a lawsuit, HB1467 arguably makes the mandatory procedure that follows, the
 provisions of which are conspicuously procedural in tone and effect,
 procedural within the meaning of Article V, Section 10(c). See, e.g.: Section
 3(c) (claimant to provide contractor with evidence): Section 5(a) (content of
 claimant's notice of claim); Section 5(b) (contractor to serve written
 response to notice of claim within 15 days); Section 5(d) (contractor to
 provide written response, with discoverable evidence, within 15 days of
 inspection or testing): Section 5(e) (claimant barred from initiating action
 without in-person meeting with contractor.  Having concluded that HB1467
 violates Article III, Section 18, we needn't render a definitive opinion as to
 whether it also violates Article V, Section 10(c).  It is sufficient to
 observe that the constitutionality of HB1467 under Article V, Section 10(c) is
 suspect.
     In summary, it is our opinion, and you are so advised, that HB1467
 violates Article III, Section 18 of the Pennsylvania Constitution, and that
 its constitutionality under Article V, Section 10(c) is suspect.  Since our
 opinion is rendered in aid of your decision to approve or veto HB1467, our
 advice is not binding.
 
                                      Sincerely,
 
                                      /s/
                                      TOM CORBETT
                                      Attorney General
 
     cc: Honorable Barbara Adams
 
 
 
     CONTACT:
     Kate Philips
     717-783-1116
 
 SOURCE  Pennsylvania Office of the Governor