Recent Decisions Clarify Statute of Repose

A statute of repose bars claims against a defendant for a given period of time after completion of project. These statutes are stronger than statutes of limitation because tolling is not permitted. Clients including architects, engineers, builders, and contractors should understand their state’s statute of repose to effectively manage and mitigate risk.  Courts continue to interpret many of the most important aspects of their state’s statute of repose. Some of the most litigated issues remain:

1. What constitutes substantial completion sufficient to trigger the statute?
2. To which claims does the statute apply?

 Multi-Phase Construction in Massachusetts
Large projects often involve multiple phases. In D’Allesandro v. Lennar Hingham Holdings, LLC, 2019 WL 5550629, at *3 (D. Mass. 2019), a 150-unit condominium project in Massachusetts was completed over 24 phases. Several owners brought a suit for construction deficiencies and code violations involving the common areas of their buildings. The suit was filed two and half years after completion of the project.

The United States District Court for the District of Massachusetts agreed with plaintiff’s argument that the statute did not run from the time the architect signed off on substantial completion. Instead, it held Massachusetts’s six-year statute of repose was triggered only after the entire project was completed.

The court determined that while plaintiff’s claims for negligence and breach of implied warranty were subject to the statute, it did not apply to claims for intentional misrepresentation, negligent misrepresentation, violation of Massachusetts’ unfair business practices statute, and breach of fiduciary duty.

Ambiguity in Georgia

A recent decision by the Georgia Court of Appeals has left the local construction industry with more questions than answers. In Southern States Chemical, Inc. v. Tampa Tank & Welding, Inc., 836 S.E.2d 617 (Ga. App. 2019),  the enforceability of long-term warranties appears to have been significantly impaired. The court applied the statute of repose against a warranty-contract claim. The court surprised many by holding Georgia’s eight-year statute applied to claims arising from a contractor’s forty-year warranty against defective work.

The improvement in question was a chemical tank and the purported warranty was drafted after it began to leak. To further complicate matters, the court also determined the warranty only covered one year.

This case may be on its way to the Georgia Supreme Court for clarification. All parties to existing warranty agreements are watching closely to determine whether their contracts remain enforceable.

Building owners are concerned because the long-term warranties they bargained for suddenly appear in jeopardy. Contractors are apprehensive because they may no longer have the ability to incentivize construction of high-quality long-term improvements.

Contracts Covered in Ohio
The Supreme Court of Ohio confirmed the Buckeye State’s 10-year statute of repose applies to both tort and contract claims. In New Riegel Local School District Board of Education vs. Buehrer Group Architecture and Engineering, Inc.,157 Ohio St.3d 164 (Ohio 2019), the court clarified any lingering questions about the scope of the law.

In New Riegel, the Supreme Court of Ohio found the statute applies to “all causes of action,” that seek “to recover damages for bodily injury, an injury to real or personal property, or wrongful death, that arises out of a defective and unsafe condition of an improvement to real property *** against a person who performed services for the improvement to real property or a person who furnished the design, planning, supervision of construction, or construction of the improvement to real property.”

Conclusion
Regardless of how broadly these rulings are interpreted, clients contemplating claims involving improvements to real property should avoid unnecessary delay in bringing those claims. Although the broad contours of the statute of repose may seem consistent, essential details continue to be clarified in state courts.
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Patrick McKnight is a January 2020 graduate of Rutgers University earning both his JD and MBA.  Mr. McKnight can be contacted at patrick.joseph.mcknight@gmail.com

Divided Massachusetts Supreme Judicial Court Holds Statute of Repose Bars Alleged Unfair and Deceptive Acts Claims Against Contractor

The Supreme Judicial Court of Massachusetts in Bridgwood v. A.J. Wood Construction, Inc., 2018 WL 4100644 (Mass. 2018) held that statute of repose barred the homeowner's claims that the defendant contractor and subcontractor had committed unfair or deceptive acts (per Mass. Gen. Law c. 93A, s. 2) by failing to perform electrical work in compliance with statutory building and home improvement standards.

 

In 2001, the Newburyport, MA homeowner contracted for a renovation including the replacement of several ceiling light fixtures.  The defendants failed to obtain the proper permits to do so nor arranged for an inspection of the electrical wiring.  This electrical work was not performed to code, but the homeowner was unaware of the non-compliance until the concealed wiring caused a substantial fire in and damage in 2012.  The homeowner filed suit in 2016.

 

In Massachusetts, home improvement contractors are governed, in part, by Mass. Gen. Law c. 142A, s. 1 et seq.  Mass. Gen. Law c. 142A, s. 17 lists a number of prohibited acts including: "violation of the building laws of the commonwealth or of any political subdivision thereof."  Id. c. 142A, s. 17(10).  This law has some teeth because "[v]iolations of any of the provisions of this chapter shall constitute an unfair or deceptive act under the provisions of [Mass. Gen. Law c. 93A]," which carries penalties in addition to direct damages, including the potential for double and treble damages along with attorneys fees.  Here, the Bridgwood homeowner "claim[ed] that the defendants failed to perform the electrical work in compliance with those standards and, therefore, committed unfair or deceptive acts." Bridgwood, 2018 WL 4100644, at *2.

 

For their part defendants argued the homeowner's claim was barred by Massachusetts's 6-year statute of repose of tort claims set forth in Mass.  Gen. Law. c. 260, s. 2B.  The statute of repose is not tolled until the cause of action accrues.  Rather, in Massachusetts, the statutory trigger is substantial completion of the project or when the work is "open[] for use." Id.

 

The homeowner disputed the application of the statute of repose, instead arguing that only the 4-year statute of limitation under c. 93A, triggered "when the cause of action accrued," is the controlling timeline.  The homeowner emphasized that "because the relief available under G. L. c. 93A is 'sui generis,' neither wholly tortious nor wholly contractual in nature, the [tort-based] statute of repose does not apply." Bridgwood, 2018 WL 4100644, at *4. 

The Court disagreed explaining first that a "plaintiff to avoid the statute of repose by relabeling what is essentially a tort claim as a claim under [ ] c. 93A" and instead courts must look at the "gist of the action" to determine whether tort or contract based.  Bridgwood, 2018 WL 4100644, at *4.  Here because the homeowner's "claim is essentially that the defendants failed to perform the electrical work in compliance with the standards set forth in [a state statute and building code], [i]t is indistinguishable from a claim of negligence. Therefore, it sounds in tort and, having been commenced well beyond the six-year deadline, is barred by [the statute of repose]." Id.

The Chief Justice filed a dissent  joined by two other justices that rejected the majority's analyses of c. 93A caselaw and disputed that the legislature intended (or even contemplated) that the prior-enacted statute of repose would control the later-enacted consumer protection statutes.

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Katharine Kohm, Esq. is a committee member for The Dispute Resolver.  She practices construction law at Pierce Atwood, LLP in Providence, Rhode Island.


 

NJ Superior Court Halts End Run Around the Statute of Repose

In the matter Caprioti et al. v. Beazer Homes Corp., the Superior Court of New Jersey halted some artful pleading by the Plaintiffs seemingly intended to avoid the state statute of repose. The homeowner plaintiffs claimed that the builder had violated the New Jersey Consumer Fraud Act “by selling homes . . . without including allegedly pertinent information regarding the type of septic tank used on the properties.” All the homes included a septic system comprised of a chamber tank rather than a conventional stone and pipe system. This chamber characteristic is noteworthy because chamber systems fail prematurely more often than the conventional systems.  The plaintiffs argued is that a reasonable person would want to know this information prior to purchasing the home as it speaks to the homes useful life. They also claimed that the builder had concealed or omitted this information from the plaintiffs.  Many of the plaintiffs did indeed experience major problems including failure of the system, backup, odor, and the cost of more frequent service.

The builder moved for summary judgment on the plaintiffs’ complaints that “were more than 10 years after the purchase of their homes, and are thereby beyond the applicable 10-year Statute of Repose." See N.J. Stat. 2A:14-1.1(a) (“No action, whether in contract, in tort, or otherwise, to recover damages for any deficiency in the design, planning, surveying, supervision or construction of an improvement to real property . . . . shall be brought against any person performing or furnishing the design, planning, surveying, supervision of construction or construction of such improvement to real property, more than 10 years after the performance or furnishing of such services and construction.").  The builder framed the issue as one of alleged inadequate or inferior construction whereas the homeowner plaintiffs stated that their claims “[arose] out of defendant’s unlawful sales practices, not negligent design, planning or construction of their homes.”

The Superior Court sided with the builder and summarily decided and dismissed the plaintiffs’ claims.  In so deciding, the Court emphasized that statutes of repose are intended to be read broadly to “limit the expanding liability of contractors . . . .”  The Court also focused on the fact that the plaintiffs did not dispute that the chamber septic system was an “improvement to real property” alleged to be “insufficient, inadequate, and not functioning properly.”  The Court reasoned that although couched as a misrepresentation “but for the alleged septic system failures, there would be no cause of action.”

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The author, Katharine Kohm, is a committee member for The Dispute Resolver. Katharine practices construction law and commercial litigation in Rhode Island and Massachusetts. She is an associate at Pierce Atwood, LLP in Providence, Rhode Island. She may be contacted at 401-490-3407 or kkohm@PierceAtwood.com.