Reposted from constructionexec.com, Feb. 1, 2020, a publication of Associated Builders and Contractors. Copyright 2020. All rights reserved.
By Jesse R. Lipcius and Frederic X. Shadley
On July 17, 2019, the Ohio Supreme Court issued its decision in New Riegel Local Sch. Dist. Bd. of Educ. v. Buehrer Grp. Architecture & Eng’g, Inc., 157 Ohio St. 3d 164, 133 N.E.3d 482 (2019). In its decision, the Court held that Ohio’s construction statute of repose, codified at Ohio Revised Code 2305.131, applies not only to torts, as it has in the past, but to contract actions as well.1 This was a bold departure from existing Ohio case law and impacts the risks that those in the construction industry (owners, contractors, design professionals, construction managers, suppliers, etc.) face in terms of liability. As a result of New Riegel, an injured party cannot bring any cause of action arising out of a project, whether in tort, contract or otherwise, more than 10 years after substantial completion of that project.
New Riegel concerns the design and construction of a public school building for the New Riegel Local School District in Seneca County, Ohio. The project was substantially completed and approved for occupancy in December 2002. Sometime after moving into the new building, New Riegel School District alleged that condensation, moisture intrusion and other deficiencies were present throughout the building and that these deficiencies were the result of improper design and construction. In 2015, New Riegel School District filed suit, alleging, among other things, breach of contract and breach of express warranty.
Ohio’s construction statute of repose provides that 10 years is the absolute deadline by which a claim to recover damages arising from “a defective and unsafe condition of an improvement to real property” may be brought against any person who “performed services for the improvement to real property” or who “furnished the design, planning, supervision of construction, or construction of the improvement to real property.” In other words, it cuts off liability for injuries arising out of defective/unsafe conditions that are brought more than 10 years after substantial completion of the improvement, regardless of whether a cause of action has accrued or whether any injury has resulted.
The Ohio Supreme Court noted that the intention of the construction statute of repose is to “protect defendants from having to defend against stale claims…the perils of which are the same whether the underlying claim is based in contract or tort.” Interestingly, the Court refused to determine whether the construction statute of repose actually bars New Riegel School District’s claims. An educated inference may be made that because substantial completion occurred in December 2002, any cause of action stemming from that project could only accrue until December 2012.
As New Riegel School District did not file suit until 2015, its claims should be barred. Instead of addressing this natural follow-up question, the Court remanded the case to the Third District Court of Appeals, leaving a huge question mark over the natural consequences of its decision. In fact, Justice Sharon Kennedy addressed this issue in his dissent, noting that remanding the case “does nothing more than add further delay” to actual resolution of this matter. 2
The Ohio Supreme Court’s decision to apply the statute of repose to contract actions was a drastic change from existing Ohio case law and has led many to question whether it provides too much protection to those in the construction industry while leaving potential plaintiffs hung out to dry. It has spurred some to look beyond Ohio law and question what other jurisdictions have to say about contract actions vis-à-vis the construction statute of repose. As it turns out, the vast majority of states, either explicitly through statute or impliedly through case law, extend the application of a construction statute of repose to contract actions.
States that explicitly cover contract actions under the construction statute of repose include Alabama3, Alaska4, Arizona5, Arkansas6, Colorado7, Connecticut8, Delaware9, Florida10, Illinois11, Indiana12, Louisiana13, Minnesota14, New Jersey15, North Carolina16, North Dakota17, Oregon18, South Carolina19, Utah20, Washington21, West Virginia22 and Wyoming23. The oldest statute of repose explicitly covering contract actions dates back to 1970 (Delaware), with the majority of these states enacting the explicit coverage of contract actions in the last 20 years.
Ten states, now including Ohio, utilize case law to extend the construction statute of repose’s coverage to contract actions. These states include California24, Georgia25, Maryland26, Mississippi27, Missouri28, Montana, Nebraska29, Ohio30, Tennessee31 and Texas32. Interestingly, Montana’s construction statute of repose, codified at MCA 27-2-208, excludes contracts, yet in 2017 the Montana Supreme Court dismissed contract claims as barred under the statute of repose in Hill Cty. High Sch. Dist. No. A v. Dick Anderson Constr., Inc., 2017 MT 20, 386 Mont. 223, 390 P.3d 602, reh’g denied (2017). This Montana decision, like that of Ohio’s New Riegel, echoes what appears to be a nationwide shift toward applying construction statutes of repose to all causes of action, whether in tort, contract or otherwise.
However, there are still a handful of states holding out, applying their construction statutes of repose only to tort claims and excluding contract actions. New Mexico explicitly excludes contract actions from its construction statute of repose33, and Massachusetts34, Oklahoma35 and Rhode Island36 explicitly only cover tort actions under their construction statutes of repose. Washington, D.C. also explicitly excludes contracts from its construction statute of repose37. Additionally, Michigan38 courts and federal courts applying Virginia law39 have held that their respective construction statutes of repose do not apply to contract actions.
The remaining 13 states have not taken a clear position on this issue. Some have found early versions of a construction statute of repose to be unconstitutional, but have yet to enact a new version of it. Some states, like Kansas, explicitly state that they have no construction statute of repose: “A cause of action for breach of a written contract, which is controlled by the five–year limitation period found in K.S.A. 60–511(1), accrues at the time of the breach, regardless of when the breach is discovered or is discoverable…For this reason, there is no need for a statute of repose, and none exists with respect to breach of contract claims.” (emphasis added). Dunn v. Dunn, 47 Kan.App.2d 619, 281 P.3d 540 (2012). Still other states have construction statutes of repose, but the language of these statutes is ambiguous, and these states lack case law aiding in their interpretation. These states will almost certainly have to make a decision in the coming years, choosing whether to follow the majority in applying the statute of repose to contract actions.
Given the number of states that have recently decided to apply a construction statute of repose to contract actions, the reasonable expectation is that in time the remaining states will follow this path. Thus, it should only be a matter of time before construction industry participants enjoy enhanced protection under all states’ statutes of repose.
1 “A statute of repose is a statute that bars any suit that is brought after a specified time since the defendant acted, even if this period ends before the plaintiff has suffered a resulting injury.” (Internal citation omitted). New Riegel, supra, at 167, 487.
2 On December 9, 2019, the Third District Court of Appeals issued its decision following remand, holding that the construction statute of repose did indeed bar New Riegel School District’s claims. New Riegel Local Sch. Dist., Bd. of Educ. v. Buehrer Grp. Architecture & Eng’g, Inc., 2019-Ohio-5040, 2019 WL 6701741 (3rd Dist., 2019).
3 Ala. Code § 6-5-221.
4 AS § 09.10.054 and AS § 09.45.899.
5 A.R.S. § 12-552.
6 A.C.A. § 16-56-112.
7 C.R.S.A. § 13-80-104.
8 C.G.S.A. § 52-584a.
9 10 Del.C. § 8127.
10 West’s F.S.A. § 95.11(3)(c).
11 735 ILCS 5/13-214.
12 IC 32-30-1-5.
13 LSA-R.S. 9:2772.
14 M.S.A. § 541.051.
15 N.J.S.A. 2A:14-1.1.
16 N.C.G.S.A. § 1-50.
17 NDCC, 28-01-44.
18 O.R.S. § 12.135.
19 Code 1976 § 15-3-640.
20 U.C.A. 1953 § 78B-2-225.
21 West’s RCWA 4.16.300 and West’s RCWA 4.16.310.
22 W. Va. Code, § 55-2-6a.
23 W.S.1977 § 1-3-111.
24 San Diego Unified Sch. Dist. v. Cty. of San Diego, 170 Cal.App.4th 288, 87 Cal.Rptr.3d 796 (2009).
25 S. States Chem., Inc. v. Tampa Tank & Welding, Inc., 2019 WL 5616691 (Ga. Ct. App., 2019).
26 Hagerstown Elderly Assocs. Ltd. P’ship v. Hagerstown Elderly Bldg. Assocs. Ltd. P’ship, 368 Md. 351, 793 A.2d 579 (2002).
27 Reich v. Jesco, Inc., 526 So.2d 550 (Miss. 1988).
28 Farmer’s All. Mut. Ins. Co. v. Daniels Plumbing, 496 S.W.3d 644 (Mo. Ct. App. 2016).
29 Witherspoon v. Sides Const. Co., 219 Neb. 117, 362 N.W.2d 35 (1985).
30 New Riegel Local Sch. Dist. Bd. of Educ. v. Buehrer Grp. Architecture & Eng’g, Inc., supra.
31 Henry v. Cherokee Const. & Supply Co., 301 S.W.3d 263 (Tenn. Ct. App. 2009).
32 Dallas Mkt. Ctr. Dev. Co. v. Beran & Shelmire, 824 S.W.2d 218 (Tex. App. 1991), writ denied (Oct. 7, 1992).
33 N. M. S. A. 1978, § 37-1-27.
34 M.G.L.A. 260 § 2B.
35 12 Okl.St.Ann. § 109.
36 Gen.Laws 1956, § 9-1-29.
37 DC ST § 12-310.
38 Miller-Davis Co. v. Ahrens Const., Inc., 489 Mich. 355, 802 N.W.2d 33 (2011).
39 Delon Hampton & Assocs., Chartered v. Washington Metro. Area Transit Auth., 943 F.2d 355 (4th Cir. 1991).