Garret Murai | California Construction Law Blog
In CBRE v. Superior Court, 102 Cal.App.5th 639 (2024), the 4th District Court of Appeal grappled with a thorny and not-so-thorny issue involving injured parties under the Privette doctrine. The less thorny issue was whether application of the Privette doctrine depends on whether a written contract exists between the parties. Spoiler: It does not. The thorny issue was whether the Hooker exception to the Privette doctrine – which applies when a landowner exercises control over a project – should apply where a landowner directs a contractor to perform work that is at odds with legal requirements.
The CBRE Case
Property Reserve, Inc. owns an office building managed by CBRE in San Diego, California. On April 9, 2019, PRI entered into a lease agreement with a new tenant for a suite in the building. The lease required that PRI perform certain tenant improvements.
During lease negotiations, PRI obtained a bid from Crew Builders to perform the tenant improvement work. Crew believed that the tenant improvement work required a permit. While the parties were negotiating the contract, because the standing relationship between the parties, Crew began performing work.
On March 18, 2019, Crew sent CBRE a project schedule that included permitting, noting that the project would need to begin the following week to meet the tenant move-in date. On March 22, 2019, CBRE asked Crew for an updated timeline “without a permit” indicating “we’ll probably get started on this one right away.”
On April 5, 2019, PRI requested that CBRE ask Crew to make changes to the bid, including omitting permits, because PRI did not believe that permits were necessary. On April 8, 2019, Crew submitted a revised bid excluding permit-related line items. On April 9, 2019, PRI gave the ok to begin.
In the course of soliciting bids from subcontractors, Crew indicated that the project “won’t be permitted.” The electrical work was subcontracted to PCF Electric, Inc. which began work on April 10, 2019 although a subcontract was not entered until April 15, 2019.
PCF’s bid included research the existing electrical system and putting it in “safeoff,” also known as “lockout/tagout,” prior to commencing work. PCF’s site superintendent inspected the Project site, traced the circuits, and performed lockout/tagout prior to demolition.
On April 26, 2019, Jake Johnson, an employee of PCF, was working as foreman on the project. Johnson was aware that no permit had been pulled for the project. He also knew that a 277-volt power circuit was tuned on to power the building’s lights. However, Johnson believed that the 277-volt system was “separate and apart” from the 120-volt system he would be working on, as currently required by code. What Johnson did not know was that prior to April 26th someone had removed the lockout/tagout. Uh oh.
While attempting to replace a cover on a junction box labeled as 120-volt and containing wires colors-coded as 120-volt under the current code, Johnson touched a live 277-volt wire, fell off a ladder, and sustained serious injuries. On May 13, 2019, following the accident, CBRE and crew signed a contract. The contract provided that Crew was to obtain all permits, licenses, and approvals necessary to perform and complete the work, at its sole cost and expense.
Johnson later filed suit against PRI, CBRE, Crew and PCF. According to deposition testimony from PCF’s site superintendent, “a foreman on a job site like that should not have trusted color codes or voltages,” and he personally uses both his meter and his “hot stick” to test every “[o]utlet, switch, box, anything. Any wire, any electrical.” PCF’s preconstruction manager further testified that PCF’s protocol was to hot-stick every box, even after inspection and lockout/tagout. CBRE’s expert similarly opined that the best practice is for an electrician to “assume all circuits ‘hot’ until you’ve proved they’re not” and that “[t]here was no possible role for CBRE or PRI, in the required lockout/tagout process.”
While the case was pending, PRI, CBRE, Crew and PCF filed a motion for summary judgment (Note: the appellate decision refers to a “motion for summary judgment,” suggesting a single motion, although it appears that there may have been multiple motions for summary judgment), arguing that Johnson’s claims were barred under the Privette doctrine. Johnson opposed the motion arguing that (1) there was no contract delegating responsibility for workplace safety between CBRE and Crew or PCF at the time of the incident.; and (2) there were material issues of fact as to whether an exception to the Privette doctrine applied.
The trial court agreed with Johnson, finding that there was a triable issue of material fact as to “when” CBRE and PRI hired Crew for the project. However, the trial court granted Crew’s motion for summary judgment, concluding that the Privette doctrine barred Johnson’s claims against Crew because there was no evidence that Crew retained control over any aspect of PCF’s performance of the work and the mislabeled junction box was a “concealed hazard” that was not reasonably discoverable by Crew. The trial court also granted PCF’s motion for summary judgment, finding that workers’ compensation was the sole remedy for Johnson’s injury.
PRI and CBRE appealed.
The Appeal
On appeal, the 4th District Court of Appeal gave an overview of the Privette doctrine and its exceptions, explaining:
In Privette, the California Supreme Court recognized the common law principle that “a person who hired an independent contractor generally was not liable to third parties for injuries caused by the contractor’s negligence in performing the work.” The doctrine presumes that the hirer of an independent contractor “ordinarily delegates to that independent contractor all responsibility for the safety of the contractor’s workers.” This presumption “is grounded in two major principles: first, that independent contractors by definition ordinarily control the manner of their own work; and second, that hirers typically hire independent contractors precisely for their greater ability to perform the contracted work safely and successfully.” Thus, we generally presume “that a hirer delegates all control over the contracted work, and with it all concomitant tort duties, by entrusting work to a contractor.”
However, “that presumption gives way to two recognized exceptions: where the hirer … withholds critical information regarding a concealed hazard … or retains control over the contractor’s work and actually exercises that control in a way that affirmatively contributes to the worker’s injury.”
Explaining its role when appeal is filed to an order following a motion for summary judgment, the Court of Appeal explained:
A trial court shall grant a motion for summary judgment “if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”
As the moving party, Petitioners had the initial burden of establishing that Johnson as plaintiff either could not prove or that there was a complete defense to each cause of action as alleged in the complaint. Assuming Petitioners met that burden by asserting that the Privette doctrine immunized them against all stated causes of action, the burden then shifted to Johnson to present evidence demonstrating a triable issue of material fact: in other words, evidence that would allow a reasonable trier of fact to make a factual finding in favor of Johnson by concluding one of the Privette doctrine’s exceptions applies.
We review the trial court’s order denying Petitioners’ motion for summary judgment under the same legal standard as the trial court and independently assess the correctness of the ruling. [W]e examine the record de novo, liberally construing the evidence in support of the party opposing summary judgment and resolving doubts concerning the evidence in favor of that party.” Nonetheless, a party “cannot avoid summary judgment by asserting facts based on mere speculation and conjecture, but instead must produce admissible evidence raising a triable issue of fact.”
On appeal, PRI and CBRE argued that they had met their initial burden by establishing that, prior to the date of Johnson’s injury, they hired Crew as an independent contractor, who in turn hired PCF, thus activating the Privette doctrine’s presumption of complete delegation. According to PRI and CBRE, the trial court improperly focused on the date the contract with Crew signed and, contrary to the trial court’s finding, the Privette doctrine applies even without a written contract.
In response, Johnson argued that the trial court correctly found that there was a disputed material fact regarding the scope of the agreement, specifically, what safety protocols PRI and CBRE delegated to Crew and when. Johnson further argued that there were triable issues of material fact as to whether one of the Privette doctrine’s exceptions applied, namely, whether PRI and/or CBRE failed to disclose a dangerous, concealed condition with respect to the noncode-compliant electrical wiring or retained control by instructing Crew to proceed without obtaining a permit.
A. The Privette Doctrine Does Not Require a Written Contract to Apply
The Court of Appeal, relying on the California Supreme Court’s decision in Sandoval v. Qualcomm Incorporated, 12 Cal.5th 256 (2021), held that “our high court rejected that premise” and that the Supreme Court had “explained the doctrine is not based in a contractor’s term but rather in the delegation implicit when a hirer turns over control of the worksite to the contractor to undertake the work, whether by written or informal agreement.” “Thus,” held the Court of Appeals, “the nonexistence of a written contract at the time of Johnson’s injury is immaterial.”
The Court of Appeal also found that, whether or not PRI and CBRE delegated control over to Crew prior to the effective date of their contract, did not raise a tradable issue material fact:
Here, as Petitioners assert, undisputed evidence establishes that Petitioners had previously hired Crew, a licensed general contractor, for numerous tenant improvement projects on the property. Petitioners and Crew thus had developed an “understanding” that Crew would begin work on projects before a formal contract was finalized. Petitioners asked Crew to immediately start this project in accordance with that understanding. Crew defined the full scope of the project’s work in its detailed bid and formulated the construction schedule for the project, subject to input from Petitioners. There is no dispute Crew subcontracted all the electrical work for the project to PCF, which began work as a subcontractor on April 10, and no dispute that Johnson was working on the project as an employee of PCF on the day of the incident several weeks later. On this evidence, Petitioners hired Crew and implicitly delegated complete control of the worksite, including its safety, to Crew before the date of Johnson’s injury.
B. The Kinsman Exception to the Privette Doctrine
In Kinsman v. Unocal Corp., 37 Cal.4th 659 (2005), the California Supreme Court held that a landowner can be liable for an injury to a contractor’s employee where (1) “the landowner knew, or should have known, of a latent or concealed preexisting hazardous condition on its property”; (2) “the contractor did not know and could not have reasonably discovered this hazardous condition”; and (3) “the landowner failed to warn the contractor about this condition.”
Focusing on the second prong of Kinsman, the Court of Appeal explained:
To the extent the lack of permits or permit-related plans and drawings is alleged to be a “hazardous condition,” because it potentially allowed conditions not compliant with current code requirements to remain onsite, Petitioners argue that condition was reasonably discoverable by PCF “inquiring whether a permit, as-built drawings, and engineering plans were obtained.” We agree. Johnson cites no evidence showing this simple measure was impracticable or impossible.
To the extent the noncode-compliant junction box itself is the hazardous condition, Johnson acknowledges the trial court granted Crew’s motion for summary judgment based on its finding that there was “no evidence … suggesting PCF—an electrical subcontractor—could not have reasonably discovered the hazardous condition.” Petitioners likewise claim the energized wire was readily discoverable by metering it. Again, we agree.
In short, whether the lack of a permit or as-built drawings was the dangerous condition, or the mislabeled junction box was the dangerous condition, PCF could have asked if a permit had been obtained or if as-built drawings existed and Johnson could have used his hot stick prior to touching the live 277-volt wire. Thus, Johnson could have reasonably discovered the hazardous condition.
C. The Hooker Exception to the Privette Doctrine
In Hooker v. Department of Transportation, 27 Cal.4th 198 (2002), the California Supreme Court held that a landowner can be liable for an injury to a contractor’s employee where the landowner exercised control over its property that affirmatively contributed to the injury.
However, explained the Court of Appeal, since Hooker was decided, the California Supreme Court has clarified and refined the exception. In Sandoval, explained the Court of Appeal, the Supreme Court clarified that “a hirer’s authority over the contracted work amounts to retained control only if the hirer’s exercise of that authority would sufficiently limit the contractor’s freedom to perform the contracted work in the contractor’s own manner,” or, the corollary, “[a] hirer’s authority over noncontract work … does not give rise to a retained control duty unless it has the effect of creating authority over the contracted work.”
Here, held the Court of Appeal, PRI and CBRE only retained control over non contract work that did not create “authority over the contracted work”:
Obtaining permits was never within the scope of the work delegated to Crew. Arguably, obtaining permits also was not noncontract work, given the clarity of the evidence that neither Petitioners nor anyone else ever intended to pull any. But even as noncontract work, the failure to pull permits here “imposed too little a degree of control over” how Crew completed the tenant improvement process, or how PCF completed the electrical work, entrusted to each of them. The evidence here establishes that Crew “approach[ed]” the work “the exact same way as [it] would with a permit.” The evidence also shows PCF and its employees had “ample freedom” to complete the work entrusted to them, even while accommodating any possibly noncode-compliant electrical components by, for example, investigating the site, completing the lockout/tagout protocol and keeping it in place throughout the work, and hot-sticking and metering the wiring. While Johnson notes that PRI controlled access to the building’s electrical rooms, he does not explain how that fact affects these available safety measures.
In short, neither Crew nor PCF was contractually required to obtain permits, nor did PRI or CBRE reserve that responsibility on to themselves, but the lack of delegation over obtaining a permits “imposed too little a degree of control” in any event, since Johnson could have verified whether the lockout/tagout process was in place and could have used his hot stick to test the wire.
If this makes you feel a little uncomfortable, it did so as well, for Justice Kelety of the 4th District Court of Appeal
The Dissent
Justice Kelety, focusing on the direction of PRI and CBRE that permits would not be obtained, dissented stating:
From the outset, the majority characterizes the decision to proceed without permits as a mutual agreement between Petitioners and Crew. The majority then concludes, based at least in part on this characterization, that “the permitting process was never within the scope of the contracted work.” However, when viewed in a light most favorable to Johnson, the evidence supports a conclusion that there was no such agreement, and, further, but for CBRE’s instruction, the permitting would have been within the scope of the work.
First, as to the existence of some kind of “agreement” between the parties, when asked at oral argument, counsel for Petitioners conceded that “Petitioners made the decision not to obtain permits” and instructed Crew not to pursue the permit process. Johnson presented evidence confirming that concession. Crew employee Courtney Ciurej testified that it was typical for CBRE to make the decision whether or not to seek permits, and in this case, they decided not to, to save time and money. Crew had other projects with Petitioners, including projects underway in the same building, and this was the regular course of dealing between CBRE and Crew. CBRE acknowledged that if the contractors were “caught” without the required permits, CBRE and PRI would accept responsibility for any fines or delays resulting from CBRE’s instruction to the contractors to forgo the permit process, showing that they understood the ramifications of that decision.
Second, it is my view that the obligation to obtain permits would have been included within the scope of the contracted work in the absence of CBRE’s instruction to forgo them. In their motion for summary judgment, Petitioners and their expert emphasized that they could not be responsible for any injuries resulting from the lack of permits because the underlying contract required Crew and PCF to obtain all necessary permits. It is true that the written contract included the permitting requirement, but the contract was not executed until after the contractors had been hired, after the work had begun without permits, and after Johnson had been electrocuted; and, the contract made no reference to CBRE’s instruction to the contractors to forgo the permitting process. Under the circumstances, it is hard to see the final contract as anything more than post hoc window dressing. Nonetheless, the inclusion of a permitting requirement in the final contract contradicts the majority’s conclusion that the legally required permits were somehow outside the scope of the contracted work.
Nor is it apparent that CBRE’s instruction to forgo the requisite permitting had no impact on the contractor’s performance of the work. Johnson alleged that by choosing to disregard the mandatory permitting process, Petitioners saved approximately $30,000, primarily by avoiding inspections and the need for engineering or “as-built” drawings of the existing electrical structure. Had those drawing been done, they would have shown changes to circuitry and could have helped identify any unexpected underlying conditions. Petitioners did not truly dispute these allegations. Rather, they again attempt to place the blame on Crew, stating that they “contractually obligated Crew … and Crew … contractually obligated PCF … to obtain whatever permits were required by law to do the work.” At a minimum, there is a disputed issue of fact regarding the impact of Petitioners’ direction not to obtain the requisite permits.
Beyond that, I reject the notion that simply deciding and instructing that the project proceed without permits was all that PRI and CBRE needed to do to remove the permitting process from the scope of work, thereby absolving themselves of any related liability. By endorsing that notion, the majority opinion essentially leaves building owners and property managers like PRI and CBRE free to dictate whether obtaining a legally required permit is within the scope of work for any given contract. This cannot be the case. The parties and the majority agree that the contracted work required a permit. It was not a choice that the parties could simply decide to exclude. It was a legally required step in completing the contracted work, the purpose of which is to “ensure projects comply with the minimum standards that help safeguard life or limb, public health, property and welfare.” Petitioners do not dispute this.
For the same reasons, I also disagree with the majority’s conclusion that we need not consider the policy implication of allowing Privette to shield a hirer from liability in this circumstance simply because the hirer may still be liable for a misdemeanor under the San Diego Municipal Code. As noted above, CBRE had willingly agreed to accept responsibility for consequences if the contractors were “caught” without permits, so it is clear that any remedy associated with such an infraction does little to assist workers like Johnson who are injured because of such decisions. The policy considerations behind the Privette doctrine include fairly spreading the risk created by a contractor’s work and encouraging workplace safety. Allowing hirers to shield themselves from liability by “entering into an upfront agreement to `flout[]’ the law” at the expense of workers serves neither of these purposes. . . .
Finally, the majority suggests that Johnson could have prevented his own injury by using his hot stick or meter to test the wire that ultimately caused his injuries. But the standard for determining liability in this context is also not simply who had the last opportunity to avoid the accident. Rather, absent summary judgment, a jury would be entitled to allocate fault across all relevant parties.
That’s an awfully long quote I know, but one I thought worth quoting verbatim. In short, what Justice Kelety is saying from a technical perspective is that there were triable issues of material fact as to whether PRI and CBRE exercised retained control over the property by directing Crew not to obtain permits, and that from an equitable perspective, shouldn’t PRI and CBRE be responsible for directing Crew not to obtain permits, and in doing so, breaking the law.
I think it’s a compelling argument.
Conclusion
The most straightforward take-away from the case is that a written contract is not necessary for a landowner to argue application of the Privette doctrine. The less straight-forward take away is that a landowner does not exercise retained control under the Hooker exception to Privette doctrine unless the landowner expressly retains such control, and even if a landlord can be said to have impliedly retained control under the Hooker exception, courts will weigh that control against the ability of the injured party to take precautionary measures that would have prevented his or her injury in the first place.
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