Court News Ohio
Court News Ohio
Court News Ohio

Law Limits Time to File Breach-of-Contract Lawsuits for Faulty Construction

Ohio’s construction “statute of repose” applies to both tort and breach-of-contract claims, meaning property owners claiming defective construction by architects, engineers, and contractors must file lawsuits within 10 years of a project’s completion, the Ohio Supreme Court ruled today.

A Supreme Court majority decided that the designers and builders of the New Riegel Local School District’s K-12 building can claim the district waited too long to file a breach-of-contract lawsuit against the companies in 2015. New Riegel claims that faulty design and construction of the school, which was completed in 2002, has led to significant damages and costly repairs.

The decision reversed the Third District Court of Appeals, which stated that it believed Ohio’s 2005 updated version of the statute of repose should bar New Riegel’s lawsuit. The appellate court had ruled it was obliged to follow a 1986 Ohio Supreme Court decision, which found the statute of repose applies only to tort lawsuits and not breach-of-contract claims. Writing for the Supreme Court majority, Justice Judith L. French stated that when state lawmakers revised R.C. 2305.131, it was fully aware of the Court’s prior decisions, and updated the statute of repose to apply to breach-of-contract lawsuits.

A “statute of repose” places a specific time limit on when a lawsuit can be filed.

Chief Justice Maureen O’Connor and Justices Patrick F. Fischer and Michael P. Donnelly joined Justice French’s opinion.

In a separate written opinion, Justice Sharon L. Kennedy concurred in part and dissented in part from the majority opinion. Justice R. Patrick DeWine joined Justice Kennedy’s opinion.

Justice Melody J. Stewart dissented, stating that lawmakers reworded parts of the statute of repose in effect in 1971 and added some provisions, but did not specifically make any changes that would make the law apply to breach-of-contract claims.

District Dissatisfied with School Construction
New Riegel in Seneca County, near Tiffin, partnered with the state through the Ohio Classroom Facilities Assistance Program to construct a new school. The state approved the building for occupancy in December 2002. The district alleged that condensation, moisture intrusion, and other deficiencies exist throughout the building and are the result of improper design and construction.

Buehrer Group Architecture & Engineering contracted with New Riegel to design the school while Studer-Obringer Inc. served as the general contractor. Charles Construction Services Inc. was the roofing contractor. In 2015, New Riegel filed a lawsuit against the three companies and others for breach of contract, asserting that the faulty design and workmanship resulted in damages, including “physical damage to the property.”

The contractors asked the Seneca County Common Pleas Court to dismiss the case, arguing the statute of repose in R.C. 2305.131 barred New Riegel from suing because the project reached substantial completion more than 10 years before the district initiated its case. The trial court agreed, and the district appealed to the Third District Court of Appeals.

The Third District reversed the trial court’s decision. The appellate court stated it was required to follow the Ohio Supreme Court’s 1986 Kosicko v. Charles Shutrump & Sons Co. decision, which found the statute does not apply to breach-of-contract claims. Buehrer and the other companies appealed to the Supreme Court, which agreed to hear the case.

Court Considers Law and Precedent
Justice French wrote that the Court had to both determine the meaning of the current version of R.C. 2305.131 and decide if it was bound by the precedent of past Court rulings based on prior versions of the statute.

The majority opinion explained that Ohio joined a number of states in the 1950s and 1960s to enact construction statutes of repose in response to court decisions holding architects and builders liable for damages long after projects were completed. If a building owner discovers damage caused by faulty construction after the time limit, under a statute of repose, the owner is barred from suing.

The Kosicko decision interpreted the version of R.C. 2305.131 in effect at that time. Enacted in 1971, it stated, “No action to recover damages for any injury to property, real or personal, or for bodily injury or wrongful death, arising out of the defective and unsafe condition of an improvement to real property,.... shall be brought against any person performing services for or furnishing the design, planning, supervision of construction, or construction of such improvement to real property, more than ten years after the performance or furnishing of such services and construction.”

In 1994, the Supreme Court ruled the 1971 version violated the Ohio Constitution because it deprived property owners of the right to sue before they knew or could know about the injuries. In 1996, the General Assembly revised the law to give owners a chance to file a lawsuit once the injuries were known. But that change was incorporated into a larger civil lawsuit reform bill that was challenged and ruled unconstitutional in 1999. In 2004, lawmakers essentially revived the 1996 language, which took effect in 2005.

New Law Broader Than Prior Version
The opinion stated the Court is bound to follow its prior rulings interpreting state law, but when the law is substantially revised it no longer needs to follow its past decisions. The Court announced it did not need to follow Kosicko and could conduct a “fresh review” of R.C. 2305.131.

The opinion stated the 1971 version of R.C. 2305.131 was one paragraph. The latest version reworded the key provisions of the 1971 law, but also added nine paragraphs.

“The current version of R.C. 2305.131, unlike the 1971 version, expressly refers to contract-law concepts, acknowledges that improvements to real property are generally designed and built pursuant to contract, and applies notwithstanding other general statutes of limitations, including those for contract actions,” the opinion stated.

The Court majority ruled the current version of the law applies to contract lawsuits as well as torts.

Court Declines to Rule on Other School Claims
New Riegel argued that not only did the statute of repose not apply to its case, but also that even if it did, the district was still entitled to rely on the 15-year statute of limitations for breach-of-contract cases. The opinion noted Ohio has since reduced the statute of limitations for contract cases to eight years.

Justice French’s opinion stated those arguments are beyond what the Third District ruling addressed and the Supreme Court agreed to consider. The Court remanded the case to the Third District to address the district’s remaining arguments that it is still entitled to sue the contractors.

Opinion Concurring in Part and Dissenting in Part Would Conclude the Case
In her separate opinion, Justice Kennedy agreed with the Court majority that the statute of repose applies to breach of contract claims. However, she dissented from the majority’s decision to return the case to the court of appeals for further proceedings, explaining that in order to fully decide the case, it is necessary to review the district’s argument that R.C. 2305.131(A)(1) does not bar commencement of an action once a claim has accrued . According to the separate opinion, remanding the case to the Third District “does nothing more than add further delay in resolving the matter.”

The separate opinion pointed out that the Court in its 2014 Oaktree Condominium Assn., Inc. v. Hallmark Bldg. Co. decision  already had determined that the 10-year statute of repose bars causes of action that had accrued but were not commenced prior to the running of the 10-year period. It also explained that construing R.C. 2305.131 to apply only to causes of action that accrue after the 10-year repose period has expired “would render large swaths of the statute wholly superfluous” and would disregard the General Assembly’s stated intent, expressed in uncodified law, to enact a true statute of repose (i.e., one that bars accrued claims as well as those that have not yet vested).

She noted that the U.S. Supreme Court had recognized that a statue of repose is similar to a discharge at bankruptcy and acts as a “cutoff” that “puts an outer limit on the right to bring a civil action.” And “[b]ecause the school board brought this breach-of-contract action more than ten years after the substantial completion of the school building, the trial court correctly dismissed the claim as time-barred” and its judgment should be reinstated, the opinion concluded.

Dissent Finds Law Relatively the Same as in the Past
In her dissent, Justice Stewart wrote that R.C. 2305.131(A)(1) has not been changed in any significant way since the 1986 Kosicko decision and that the Court should leave it to the General Assembly to specifically amend it to apply to breach-of-contract  cases.

Justice Stewart noted that several states, including Illinois, Indiana, New Jersey, and Colorado, enacted statute of repose laws that explicitly apply to contract actions. She also wrote that while the majority in today’s ruling characterized the Kosicko decision as “shortsighted,” the Michigan Supreme Court considered language of a similarly worded statute of repose and concluded that it did not apply to breach-of-contract cases. And when the Minnesota Supreme Court ruled that state’s statute of repose only applied to tort cases, Minnesota lawmakers amended the law to make it apply to contact claims as well, the dissenting opinion stated.

“We should not take it upon ourselves to do that which the legislature has chosen not to do,” the opinion concluded.

2018-0189 and 2018-0213. New Riegel Local School Dist. Bd. of Edn. v. Buehrer Group Architecture & Eng., Inc., Slip Opinion No. 2019-Ohio-2851.

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