Statutes of limitations and statutes of repose can be confusing to contractors, but it is extremely important that they understand the difference between the two and, as a recent state appeals court case illustrates, realize that contracting with public entities can bring special rules into play.
In Washington State Major League Baseball Stadium Public Facilities District, et al. v. Huber, Hunt & Nichols – Kiewit Construction Co., et al., 295 P.3d 821 (Wash. 2013), a public entity filed a breach of contract suit against the prime contractor on a major-league baseball stadium project seeking to recover costs it incurred repairing intumescent fire protection coating that delaminated from structural steel. The prime contractor filed third-party complaints against two of its subcontractors: the steel supplier that applied a nonspecified primer to the steel and the fireproofer.
In a previous appeal involving the same case, the Supreme Court of Washington ruled that although the public entity filed the case after the six-year contract statute of limitations period, it would not be dismissed because the statute contains a “for the benefit of the state” exemption. Thus, in Washington state as in many other states, although the statute of limitations applies to suits against the state, no such limit applies to suits by the state.
After the case was remanded to the trial court, the prime filed a motion seeking dismissal on the grounds the case was filed beyond the six-year construction statute of repose period. The subcontractors filed similar motions, seeking dismissal of the prime’s claims against them. The statute of repose in Washington contains no exemption for the state, so the court had to determine whether the state’s cause of action arose within six years following completion of the project. The court ruled that it did not and thus dismissed all claims. The public entity appealed.
The Supreme Court of Washington first explained the difference between a statute of repose and a statute of limitations. It pointed out that the Washington state statute of repose bars an action involving construction unless it accrues (i.e., the plaintiff experiences injury or damage) within six years following completion of the project, whereas the statute of limitations bars a suit filed more than six years after the cause of action accrues. The court noted that “under the statute of repose, the cause of action must have accrued within the six years, and once it has . . . that is the end of the statute of repose inquiry. Whether an accrued claim is timely filed is a different question, involving the statute of limitations, not the statute of repose.”
Unfortunately for the prime, Section 13.7 of the contract contained a provision that states “[a]s to acts or failures to act occurring prior to the relevant date of Substantial Completion . . . any alleged cause of action shall be deemed to have accrued in any and all events not later than such date of Substantial Completion.” This language, the court ruled, meant that although the cause of action otherwise accrued (i.e., delamination occurred) after six years, the parties jointly agreed that they would deem it to have occurred on or before Substantial Completion. The court thus denied the prime’s motion.
Next, the court turned to the motions of the subcontractors, who argued that Section 13.7 of the prime contract did not apply to them. The prime thus faced the possibility of having to defend against the owner without any right of reimbursement from the subcontractors. Fortunately for the prime, the court ruled against the subcontractors based on well-crafted flow-down language in the subcontracts, including “the subcontractor assumes the same obligations and responsibilities toward the general contractor that the general contractor assumes to the owner as set forth in the Prime Contract” and “the subcontractor agrees to make good at their own expense . . . any defect in materials or workmanship which may occur or develop prior to [the prime’s] release from responsibility to [the owner].”
Contractors and subcontractors performing public projects must be well-informed of applicable statutes of limitations and repose and their applicability to the public entities for whom they are working. In addition, contractors must be mindful that their subcontract language is critical to ensuring that these procedural time limits apply equally to their subcontractors, or they may be left without a remedy when facing potential liability to the owner. R&B