RGJ investigates: Somersett rock wall failures in Reno test Nevada construction defect law Two rock walls in Somersett already collapsed. More need repairs. Now, homeowners in the Reno community could owe $20 million while a pending lawsuit could redefine Nevada construction defect law.

Jason Hidalgo | Reno Gazette-Journal

A serious tumble 'Part of (the rock wall) actually fell on the golf course.’

Desert shrubs and three small pine trees dotted a dirt slope overlooking the Somersett Golf and Country Club one morning in August. Just below, a golf cart traveled a paved concrete path while a handful of golfers walked the course nearby.

With clear skies and nary a gust of wind, it was the perfect summer day to get in an early round of golf at the northwest Reno community. Behind the scenes, however, a legal storm was brewing.

At the center of the ongoing battle at Somersett is that same dirt slope — now a linchpin for a construction defect lawsuit that’s pitting residents, contractors and Somersett’s developer against each other. The problems fueling the lawsuit can be traced back to the development’s early beginnings, which started construction during a hot real estate market that marked the turn of the millennium. It wasn’t until just a year and a half ago, however, that those problems literally came crashing down into full view.

In February 2017, a winter storm pummeled the Truckee Meadows with heavy rain as the area experienced its wettest year in recorded history. During that period, parts of a group of key structures encompassing Somersett — its rockery walls — failed, according to the Somersett Owners Association.

Dave Hughes, a 61-year-old resident of Somersett, still remembers the scene at the golf course after a nearby wall collapsed. Hughes pointed to a specific section right next to the paved pathway that was used by the golf cart just a few minutes earlier.

“See that dirt hill over there? There used to be a pretty steep wall where that is,” Hughes said. “Part of that actually fell on the golf course. So the rock wall had to be taken down.”

An avid golfer himself, Hughes remembers standing by the same rock wall many times in the past.

“I used to go up there looking for golf balls,” Hughes said. “Some of the rocks ended up on the cart path below. The damage was bad enough that the path had to be rebuilt.”

With the wall’s collapse occurring late in the day during bad weather, it proved to be a blessing in disguise. Had the walls failed when the golf course was busy, the results could have been much worse.

The rockery wall by the golf course was not the only structure at Somersett to fail during the same rainy period. Another wall in the vicinity of Somersett’s Timaru Trail collapsed as well. The failure of not one but two walls raised concerns about all of the community’s rockery walls, which number more than 300 in common spaces spread out across the development.

Today, the two wall failures serve as the cornerstones for a rocky, multimillion-dollar legal fight. In addition to deciding who’s responsible for repair costs that could potentially reach $20 million or more in a community of about 3,000 homes, the case is also notable for its potential statewide impact. Depending on its outcome, it could change how construction defect laws are interpreted in Nevada, affecting one of the state’s biggest industries.

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On one side of the rock wall lawsuit is the Somersett Owners Association, which represents residents and is seeking compensation to repair every rock wall in the community for “pervasive” defects. On the other side are defendants Somersett Development Co. — which developed the community — as well as construction firm Q&D and rock wall company Parsons Bros. Rockeries. Besides denying liability, all three contend that the statute of repose has run out for claiming construction defects on Somersett’s rockery walls. A statute of repose has similarities to a statute of limitations, but has stricter deadlines and more defined rules than its broader counterpart.

Residents, meanwhile, find themselves caught in the middle of a case that could impact not just their community but their own wallets. The association described the $20 million liability that it is projecting for repairing the walls as a conservative estimate.

Some residents agree with the legal action, saying they should not be responsible for paying to fix the defective work of others. Others are afraid that the legal action could cost them even more in the long run should they lose. Then there are people like Hughes, whose thoughts lie somewhere in between.

Although people’s opinions in the community may vary, there is consensus among residents about one thing.

“I consider myself neutral about the lawsuit — I don’t know enough to say whether it’s a good idea or not,” Hughes said. “One thing everyone agrees on is that we want this issue to be fixed.”

Anatomy of a collapse Somersett Owners Association claims that 13 miles of rock walls could be at risk

Unfortunately for Somersett’s residents, getting a fix is easier said than done.

A year and a half since the two incidents, a set of orange construction cones and yellow warning tape block off pedestrian access to a stretch of sidewalk on Somersett Parkway right next to one of the community’s rock walls. A few miles away at Gypsy Hill Trail near Timaru Trail, another set of orange cones and yellow warning tape prevents access to a sidewalk near yet another rock wall.

With an estimated 70,000 total lineal feet or about 13 miles of rock walls in Somersett, the structures cover a lot of ground — some of which border heavily used roads as well as pedestrian paths. In its lawsuit, Somersett Owners Association claims that practically all of those walls are defective and must be fixed. The association did not mince words in its legal complaint, accusing the defendants of “negligently, carelessly, wrongfully and recklessly” failing to exercise reasonable care in the design, construction and inspection of the rockery walls in question.

“Many of the said breaches of duty resulted in construction which did and does not comply … with building standards and or local building codes,” the lawsuit alleged.

The suit goes on to claim that the defendants misrepresented the condition of their work and “failed to disclose the existence of serious known latent defects and deficiencies.”

Bolstering the homeowners’ association claim of shoddy work is an analysis done by geological and engineering consulting firm American Geotechnical. Somersett Owners Association hired the Sacramento-based company to analyze every rockery wall in the master-planned community. The analysis came back raising serious allegations about the quality of the work done on Somersett’s rock walls.

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According to American Geotechnical’s evaluation, “each of the rockery walls observed has pervasive construction related defects.” During its inspection, the consulting firm found that most of Somersett’s single-tier, two-tier and three-tier rockery walls were built well below the minimum safety factors required for maintaining adequate shear or load-bearing strength.

American Geotechnical says it used three standards set by the Associated Rockery Contractors, the Federal Highway Administration and the Nevada Standard Guidelines for its analysis.

Issues found by American Geotechnical in the Somersett rockery walls include:

An inadequate amount of chinking rocks used, leading to gaps between rocks exceeding 6 inches, oftentimes going past 1 foot of space.

Retained soil was found mixed with drain rock, a sign that filter fabric — which is designed to let water drain through without carrying soil — was likely not used in the rockery walls. Drain rocks also were visible through the rockery walls' void spaces, another indication that filter fabric was lacking.

Rock placement was either not optimal or used the wrong shape, raising concerns about inadequate point bearing on the wall’s lower stones.

The slope of the wall, also known as “wall batter,” was not uniform and also too steep. If a rockery wall’s slope is too steep, inadequate pressure is placed on the soil underneath, leading to increased risk of a wall collapse as the earth pushes back against the rock face.

Overall, the analysis cited inadequate shear strength — which determines how much load a structure can support before failing — as the primary culprit for the failure of the two-tier rock wall on the Trail Ridge Court cul de sac facing the golf course as well as the three-tier wall on Timaru Trail.

American Geotechnical noted that it was not able to review the specific design documentation used by Parsons Bros. for Somersett’s rock walls. It also was not able to do site-specific soil testing for Somersett as well as an analysis of rock quality, the rock wall foundation and sub-drain piping due to time constraints.

CHECK OUR MAP: The RGJ documented more than 340 Somersett rockery walls in common areas that were identified in the American Geotechnical report as being defective. Walls in purple have collapsed, walls in red have a range of issues noted in each individual description and walls in blue aren’t as serious but could still have issues that need repair. You can drag through the map and click on each wall for its status.

Developer, contractor pushback 'We have good insurance.'

Construction defect lawsuits have been a controversial issue in Nevada. The state just saw one of its more infamous cases wrap up this year following an investigation that kicked off more than a decade ago.

In August, Leon Benzer, a former owner of a Las Vegas construction company, was sentenced to serve 12 more years in prison for masterminding a construction defect scheme that used homeowners associations in Southern Nevada to funnel repair work to his company. Benzer also received a 15½-year sentence in 2015 for his role in the scheme, which involved 40 co-conspirators — one of whom committed suicide.

In response to the Somersett Owners Association’s lawsuit, each of the defendants blasted the legal action and raised doubts about its merits.

Lance Semenko, president of Q&D construction, questioned why his company was even included in the lawsuit. Q&D only did grading work and did not construct the rockery walls, Semenko said. Asked why the construction firm was named as one of the defendants, Semenko offered a blunt reply.

“We have good insurance,” Semenko said.

Blake Smith, managing partner of Somersett Development Co., did not respond to multiple requests for comment from the Reno Gazette Journal. Parson Bros. did not return multiple calls for comment as well. In court pleadings obtained by the RGJ, both denied the allegations.

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All three defendants maintained that any fault regarding the rockery walls was caused by a different party. Community developer Somersett Development Company took the extra step of filing legal action against fellow defendants Q&D Construction and Parson Bros.

In its cross-claim, the development company alleged that any defects and damages pertaining to the rock walls were caused by the other two defendants. Somersett Development Company also filed a third-party complaint against Arizona-based design firm Stantec, claiming it was liable for the defects and damages stemming from the rockery wall incident. Stantec denied the allegations that it was at fault.

Somersett Development Company alleged that Somersett Owners Association broke Nevada law as well when it filed the lawsuit. The development company specifically cited Nevada Revised Statute 116, which requires associations to provide written notice to each unit owner and get a majority vote of all its members prior to filing civil action. The developer claims that not all residents were notified or were able to provide input about the lawsuit before it was filed.

Lawyer John Samberg, who represents the Somersett Owners Association, pushed back at allegations that residents were not given sufficient notice. The association stands by its position that it has fulfilled the letter and the spirit of the statute, Samberg said.

“An enormous number of homeowners responded to the ballot and of those that responded, there was a huge majority that voted in favor,” Samberg said. “That provided us with the mandate to proceed with the lawsuit.”

The Nevada Real Estate Division also is examining the issue, Samberg added.

Samberg stressed that the real crux of this case involved the quality, or lack thereof, of the rockery walls. From the Somersett Owners Association’s point of view, one only needs to look at the two rock wall failures to see the legitimacy of its lawsuit.

“The fact that some of these walls are falling down — you don’t need to be an engineer to come to the conclusion that they weren’t built right,” Samberg said.

Even if the association proves that construction defects exist, however, it could still completely fail to get damages for them. The reason comes down to one word: timing.

Too little too late? ‘Unfortunately, they’ve got slick-talking lawyers trying to take these people’s hard-earned dollars.’

Under Nevada’s construction defect law, no claims can be made regarding the deficiency of a project “more than 6 years after (its) substantial completion.”

Construction at Somersett started at 2001, although activity did not get up to speed until later. Despite that, construction of the rockery walls wrapped up more than six years prior to the Somersett Owners Association lawsuit, which was filed on December 2017.

Even the association’s lawyer does not dispute the six-year timeframe set by Nevada law.

“I really think the statute is crystal clear,” Samberg said.

The beauty of the law, however, is that “for every rule, you can have 30 exceptions,” Samberg added.

As an example, Samberg points out that the statute of limitations for a car accident is usually two years. If the person who gets injured is a 16-year-old minor, however, the statute of limitations for that person to file a lawsuit gets paused and doesn’t start until the person becomes an adult and turns 18 years old.

In the case of Somersett, the association’s legal team is pressing a variety of legal theories and, among other things, that certain statutes of limitations for the rockery walls should not start from the date of completion of the structures. Instead it should start at the time that the developer turned over management of the community to Somersett Owners Association. Control of Somersett was turned over by Somersett Development Co. to the association on Jan. 1, 2013 — well within the six-year statute of limitations.

“The association is not yet controlled by the homeowners so it makes sense that you wouldn’t have a right to action until the owners are in a position where, if there’s a problem, they can file a lawsuit,” Samberg said.

During that period of developer control, certain statutes are tolled or paused, according to Samberg. Once the developer hands off, that should trigger the statute of limitations to begin, Samberg said.

The association says it also gave the defendants the option to repair the walls but they have declined to do so.

The association’s proposed interpretation sets a dangerous precedent, said Josh Hicks, a partner at law firm McDonald Carano. Hicks was one of the people who worked on the 2015 construction defect reforms passed by the Nevada Legislature.

By removing the certainty against perpetual liability from construction, insurance becomes tougher to come by, which can lead to several unwanted consequences, Hicks said. Instead of the statute of limitations, Hicks specifically cites the state's statutes of repose. Unlike statutes of limitations, the stricter statutes of repose typically can't be tolled or paused. This makes their start date a key point in the Somersett case.

“If a statute of repose were reset simply because the membership of a homeowners association governing body changed, it’s not a stretch to argue that statutes of repose should reset anytime the ownership of any property changes,” Hicks said. “That will mean the evisceration of longstanding Nevada law, dramatically increased construction costs for contractors and a corresponding significant increase in purchase prices for owners.”

Don Tatro, executive director of the Builders Association of Northern Nevada, believes the statutes are clear and that the Somersett Owners Association is getting bad legal advice.

“Unfortunately, (the association's) got slick-talking lawyers trying to take these people’s hard-earned dollars,” Tatro said. “They’re better off taking the money they’re paying them and using it to do repairs (on the walls).”

Tatro likened the time limits for construction defects to a car warranty. After a set amount of time, the manufacturer can’t be liable for problems that arise from normal wear and tear or lack of upkeep.

Samberg, however, says the rockery wall incident is not normal.

“You’re dealing with structures that are intended to serve their purpose for a really long time,” Samberg said. “You don’t build these big walls out of mud. You build them so they last.”

A rock and a hard place 'The statute says six years. What happens if we lose?'

Hughes parks his truck at Somersett’s Gypsy Hill Trail just across a rockery wall that spans two tiers. Another resident parks on the other side of the street to get mail from a set of mailboxes located just below the wall.

The Gypsy Hill wall, just south of Timaru Trail, is one of the walls that has been repaired, Hughes said.

A real estate agent, Hughes remembers one time when he tried to drive through the street to show some houses but was unable to because access was blocked by construction.

“They took down all these rocks and stacked them on that area over there,” Hughes said. “They sprayed this material on the hill … before they put the rocks back. It was like building a puzzle. They had this huge arm that that would pick up a rock and turn it.”

Just a few yards to the left is a shorter single-tier wall that bends into a curve. Unlike the taller, rebuilt wall, however, the grass and gutter below it are blocked off by orange construction cones.

“I’m not sure why they have those orange cones out there,” Hughes said. “I’m not sure if it’s because it’s unsafe or because they’ll be doing work on it.”

The cones, which can be found below a few other walls around the community, serve as a reminder of the challenges facing Somersett. So far, the problems associated with the rock walls have not been a big deterrent for potential buyers, Hughes said. At the same time, it is having an impact. When showing houses to clients, Hughes has to disclose the wall issue and the potential assessment that residents will have to pay should they end up being responsible for fixing it.

“About 90 percent of them are fine with it,” Hughes said. “Ten percent say they don’t want anything to do with it.”

Although residents are not panicking about the rockery walls, it does get discussed in conversations and parties, Hughes said.

Opinions vary about the lawsuit. Although a majority of the residents who voted ended up deciding to move forward with it, there are serious concerns among those who voted “no” that the lawsuit is unwinnable.

One of those residents is Greg Peek, who believes state statute is quite clear about construction defects. Peek is also president of Reno-based development company ERGS Properties. The statute of repose is one of the key issues for the state’s construction industry, which Peek expects to come out in full force to oppose any interpretation that could water it down. Then there are the legal fees from the lawsuit, which will tack on at least $300,000 to whatever bill the residents will have to foot if things go south, he said.

“Right or wrong, the statute ... is six years,” Peek said. “We can have a discussion about construction defects but that’s a different topic. The statute says six years. What happens if we lose?”

Peek is also upset about the “massive liability issue” the community now faces after the association released the report about the community's rock walls having significant issues. If the projected $20 million in repair costs — which is not final and is still being determined — proves to be accurate and is divided by the number of houses at Somersett once the development is fully built out, residents are looking at a potentially hefty bill.

Somersett has about 3,100 houses finished, according to the developer, with a projected final total of 3,700. This means the community could be on the hook for an assessment of about $5,400 per house. Any potential assessment can change depending on whether all walls are deemed to be in need of fixing and whether those repairs are staggered over several years instead of being carried out immediately.

Peek believes it would have been nice to at least get a second opinion before running with the American Geotechnical report’s results.

“They basically made public that according to this report, we’re looking at upward of $20 million in wall repairs,” Peek said. “Of course, that’s going to have an impact on property values. That’s just insane. I think it’s an inflated scare tactic number.”

The lawsuit was the subject of a spirited debate involving Peek and several other residents at a Nextdoor online forum for Somersett. While several agreed with Peek, others saw value in the lawsuit, including a potential settlement. Some also advocated for patience.

“Before we all commit Hari Kari and leap off of our walls (I have two of them) lets see what happens and approach this thing in a rational manner,” wrote resident Mark Anderson.

Hughes, meanwhile, is trying to stay positive and hopes that things will ultimately work out. As one of the first residents to put money down on Somersett back in 2003, Hughes continues to be a big believer in the neighborhood. Even as the rockery walls cast a shadow of uncertainty on the community, Hughes says he and his wife can’t imagine living anywhere else.

“We love it here,” Hughes said. “We like the terrain, we like the location, we like the golf course. If they can get the developer or Parsons to pay, that would be the best-case scenario. If we end up getting assessed, hopefully, it’s not going to be a huge assessment. Best case would be to get everything taken care of and we don’t have to disclose it anymore moving forward.”

Jason Hidalgo covers business, technology and gaming for the Reno Gazette-Journal. Follow him on Twitter @jasonhidalgo. Support local journalism: RGJ digital subscription.