The Connecticut Supreme Court's recent unanimous decision in State v. Lombardo Brothers Mason Contractors et. al., 2012 Conn. LEXIS 443 (Conn. Nov. 1, 2012), concluded that the state of Connecticut was immune from statutes of limitation or repose defenses because such statutes do not apply to claims initiated by the state. The Court reversed the trial court’s summary judgment in favor of 27 defendants. Therefore, Connecticut can proceed with its claims against the contractors, subcontractors, design professionals and construction management companies allegedly responsible for the defective design and construction of a law school library 12 years after the project was occupied.
The Lombardo decision casts further doubt on the efficacy of statutes of repose as a basis for Construction Industry Professionals to defend themselves against actions arising out of the alleged defective or unsafe condition of an improvement to real property within a certain number of years after the project's substantial completion. The purpose of statutes of repose is to establish a point in time beyond which a potential defendant should be immune from liability for its past conduct. Statutes of repose are sometimes called non-claim statutes because they cut off certain legal rights if they are not acted on by a certain deadline (the "repose period").
The Lombardo decision serves as a warning to Construction Industry Professionals that if you enter into a public project with a state (or one of its subdivisions), and the project is located in one of the 48 states that have enacted a statute of repose, the public entity is likely to be immune from the statute of repose unless applicable state law has abolished the Nullum Tempus doctrine. See Checklist for Contracts with a Sovereign Entity, below. Therefore, before you enter into a contract with a state or any other public entity, please consult a qualified construction lawyer to determine if the particular state laws governing your proposed contract leave you exposed to never ending risk and then determine how the parties can best allocate that risk and what else you can do to limit your exposure.
Construction Industry Professionals that contract with a sovereign entity need to be aware that the sovereign entity is likely to be immune from the statute of repose unless the Nullum Tempus doctrine: has been expressly abolished by the state’s legislature or state’s courts, can be contractually waived under the state’s applicable law, or otherwise does not apply to the state’s claims.
The Construction Industry Professionals must first determine whether the Nullum Tempus doctrine applies under the laws of the state where the project is located. For example, Arizona’s legislature has enacted a statute confirming the Nullum Tempus doctrine. Pima County v. State, 850 P.2d 115, 117 (Ariz. Ct. App. 1992.) (quoting ARIZ. REV. STAT. § 12-510 (2000)) (Arizona statutes provide, "the state shall not be barred by the limitations of actions prescribed in this chapter.")
The Construction Industry Professionals should not presume that if the applicable state’s law has abolished the doctrine of sovereign immunity that the Nullum Tempus doctrine also no longer applies. According to the Connecticut Supreme Court in Lombardo, only four states have abrogated the Nullum Tempus doctrine. Lombardo, 2012 Conn. LEXIS at *33 n.21 (stating that South Carolina and West Virginia abrogated the doctrine statutorily, but in Colorado and New Jersey, the doctrine was abolished judicially after the courts in those states ended the doctrine of sovereign immunity).
The Construction Industry Professionals must next determine whether the party it is contracting with qualifies as a sovereign entity under the applicable state’s law. According to the Lombardo court, a sovereign entity in Colorado includes not only the state and its subdivisions and agencies, but also extends to towns, townships, public school corporations, etc. In other states, the applicability of the Nullum Tempus doctrine may be limited to the state. City of E. Chicago v. E. Chi. Second Century, Inc., 878 N.E.2d 358 (Ind. Ct. App. 2007), reversed on other grounds by 908 N.E.2d 611 (Ind. 2009) (the nullum tempus doctrine could not save a city’s claims otherwise barred by the statutes of limitation); State v. Stuart, 46 Ind. App. 611, 91 N.E. 613, 615 (1910) (the doctrine "has no application to municipal corporations deriving their powers from the sovereign, though their powers in a limited sense are governmental. Thus the statute runs for or against towns and cities, and also for or against counties.")
If the Nullum Tempus doctrine applies, the Construction Industry Professionals should next determine whether the doctrine can be contractually waived under the applicable state’s laws. See, e.g., Selinsgrove Area School Dist. v. Lobar, Inc., 29 A.3d 137 (Pa. Commw. Ct. 2011) (finding that section 13.7.1 of the General Conditions of the Contract entered into between the District and Lobar rendered the doctrine of nullum tempus inapplicable, and/or waived the doctrine of nullum tempus as a matter of law);Wilson Area School Dist. v. Skepton, 2005 Pa. Dist. & Cnty. Dec. LEXIS 174 (Pa. County Ct. 2005) (finding that the school district had waived the Nullum Tempus doctrine by entering into a contract in which the surety's exposure was limited by incorporating a one-year limitation of action provision consistent with 42 Pa. Cons. Stat. § 5523(3)).
If the Nullum Tempus doctrine can be contractually waived, the Lombardo decision serves as a reminder that Construction Industry Professionals should also confirm that the person signing the contract on behalf of the sovereign entity has authority to bind the sovereign entity on any terms that attempt to establish limitations or caps on liability.
The Lombardo decision also raises additional considerations Construction Industry Entities, such as:
Should the Construction Industry Professional evaluate their pricing and business risk differently when bidding on public work projects for a sovereign entity?
Should the Construction Industry Professional carry insurance coverage for a longer period on completed public works projects and should the sovereign entity share the additional premium expense?
Should the Construction Industry Professional establish a longer document retention period for public projects in comparison to private projects?
Factual background of the Lombardo case.
The Lombardo case arises out of litigation relating to the alleged defective design and construction of the library at the University of Connecticut School of Law. The project was designed beginning in 1992. The library was complete in 1996. Soon thereafter, the state experienced problems with water intrusion. Over the years, the water intrusion proved to be continuing and progressive. The forensic investigation uncovered numerous defects in the building, including but not limited to: (1) improper design and installation of the wall anchoring system, the flashing, the windows, and the roof parapets, (2) improper design and construction of the exterior cavity wall, (3) inadequate waterproofing of the structural steel and the outside face of the building's structural wall, (4) inadequate relieving angles to support the exterior granite facade, and inadequate design of the HVAC system. These defects required the state to complete corrective work.
The state’s forensic engineers were called in and determined there were serious flaws in the building’s envelope and structure. After the corrective work commenced in 2007, additional defects were discovered, including the omission of reinforcing bars in the building’s structural wall. The repairs cost approximately $22 million even though the initial cost of the exterior walls was only $4.5 million. The state initiated the action in 2008 seeking to recover damages from the
companies allegedly responsible for the defective design and construction of the library. The companies named in the lawsuit included construction manager Gilbane Inc.; architects S/L/A/M Collaborative Inc.; Hartman-Cox Architects; general contractor F.B. Mattson Company; and Lombardo Brothers Mason Contractors.
According to a New York Time article, at the time of initial filing, the state sought to recover at least $15 million and perhaps as much as the $23 million spent on the original construction.
In response to the lawsuit, all of the defendants raised time based defenses to the state's claims. Nearly all of the motions to strike and motions for summary judgment that were filed relied upon the statutes of limitation (which require a party to initiate a lawsuit within a certain time after the injury occurs) or statutes of repose (which cut off the ability to sue after a set number of years, whether the complaining party has knowledge of an injury or not). In addition, the Gilbane argued that the state's claims were time-barred by a provision of Gilbane's contract with the state which provided that its services were specifically subject to the 7-year limitation period applicable to architects, professional engineers and land surveyors.
In response to the motions, the state argued it was immune from statutes of limitation and repose by operation of the nullem tempus occurrit regi doctrine -- which means, no time runs against the king. The "Nullum Tempus" doctrine is an English common-law rule that exempts the state from the operation of such statutes. The doctrine is based upon public policy and principles preventing the imposition of fiscal burdens on states and instead allowing the government to
pursue wrongdoers in vindication of public rights without regard to time limitations that might apply to other parties. The defendants argued that the Nullum Tempus doctrine was not part of Connecticut's common law and thus did not
shield the state. In addition, Gilbane argued even if the doctrine applied, the state contractually waived the Nullum Tempus doctrine's immunity by contractually agreeing to be bound by the statutory 7-year limitation period applicable to designers.
The trial court agreed with the defendants. The trial court acknowledged that no reported Connecticut case has ever used the term "Nullum Tempus," but then determined that the Nullum Tempus doctrine was incompatible with the legislative policies underlying statutes of limitation and repose. Thus, the trial court concluded that the Nullum Tempus doctrine was not part of Connecticut's common law and therefore did not shield the state from affirmative defenses that its claims were time barred by the statutes of limitation or repose. In addition, the trial court also concluded that Gilbane was entitled to enforce the 7-year limitation provision in its contract with the state. The state appealed.
make that type of policy judgment.
According to the Connecticut Supreme Court, there are only two situations where a time limitation or repose period could run against the state. The first is when a statute expressly identifies the state as a party against which the limitation or repose period runs or otherwise includes language reflecting the legislature's clear intent to waive the state's sovereign rights. The second is where the state’s claim is based on a separate statute that includes its own
time limitation period as inherent in the rights established by the statute. The Court in Lombardo concluded that these two situations did not apply. Most importantly, the Court held that the Connecticut statutes did not include express language reflecting a legislative intent to waive the state's Nullum Tempus doctrine rights.
The Court also rejected the argument that the state contractually waived its Nullum Tempus rights against Gilbane. The
relevant paragraph of Gilbane’s contract was entitled “Period of Repose” and provided that “[t]he services performed pursuant to this contract shall be considered professional work to which any statutory period of repose then otherwise applicable to design work under Connecticut law shall apply.” The Court held that the commissioner for the Department of Public Works who signed the Gilbane contract lacked authority to contractually waive the state's sovereign rights. Under Connecticut law, the Nullum Tempus doctrine could only be waived by the Legislature itself and; therefore, any contract provision that might intend to waive the state’s Nullum Tempus rights was not binding on the state.
THE LOMBARDO DECISION HAS NATIONWIDE IMPLICATIONS
The Lombardo decision casts further doubt on the efficacy of statutes of repose as a basis for contractors, construction managers, architects, professional engineers and land surveyors to defend themselves against actions arising out of the alleged defective or unsafe condition of an improvement to real property within a certain number of years after the project's substantial completion. Statutes of repose are sometimes called non-claim statutes because they cut off certain legal rights if they are not acted on by a certain deadline (the "repose period"). The purpose of statutes of repose is to establish a point in time beyond which a potential defendant should be immune from liability for its past conduct.
The Connecticut Supreme Court’s 2012 ruling in Lombardo and the Minnesota Supreme Court’s 2011 ruling in Jacobs Engineering Group, Inc. v. Minnesota, 806 N.W.2d 820 (Minn. 2011), cert. denied by Jacobs Engineering Group, Inc. v. Minnesota, 132 S. Ct. 2682 (U.S. 2012), demonstrates that without statutes of limitation or statutes of repose, Construction Industry Professionals could be exposed to liability even multiple decades after the project has been completed.
In my prior blog post and published article, I wrote about the Minnesota Supreme Court's ruling in the Jacobs case affirming that claims could proceed against the engineering firm responsible for the design of the I-35W bridge that collapsed in August of 2007 even though the State's claims were brought more than 40 years after the bridge's completion and 25 years after the engineer's statute of repose rights vested. On May 29, 2012, the U.S. Supreme Court refused to hear the engineer's appeal claiming that the Minnesota Supreme Court wrongly allowed its state legislature to use its victim compensation fund statute as a mechanism to revive claims in violation of the Due Process Clause of the Fourteenth Amendment to the U.S. Constitution.
The result of the Jacobs and Lombardo decisions were largely based on public policy-based legal doctrines and arguments that a state should not have to bear the financial burden of damages caused by defective designs or workmanship. Like the Minnesota Supreme Court’s ruling in the Jacobs case, the Connecticut Supreme Court's unanimous ruling in Lombardo also has broad sweeping impacts on Construction Industry Professionals and the construction insurance industry and reflects the continued "crumbling of the statutes of repose."