Statute of Repose Now Applies to Contract Claims
Frantz Ward LLP’s Construction Group is pleased to announce that its client, Ohio Farmers Insurance Company, was successful in overturning a Third Appellate District decision against it.
On July 17, 2019, the Ohio Supreme Court agreed with Frantz Ward LLP’s Construction Group and found that Ohio’s 10-year construction statute of repose is not limited to tort actions, but also applies to contract claims. The case is New Riegel Local School Dist. Bd. of Edn. v. Buehrer Group Architecture & Eng., Inc., Slip Opinion No. 2019-Ohio-2851.
New Riegel is a great victory for designers, constructors and sureties. However, there is much more to come.
To Accrue Or Not To Accrue
In rendering its decision, the Ohio Supreme Court did not reach the issue of whether or not New Riegel’s claims were barred. One of the arguments raised by New Riegel was that Ohio’s statute of repose will “never bar a breach-of-contract claim because such a claim accrues, necessarily within the repose period, when the breach occurs, i.e., when an architect publishes a defective design or when defective construction is performed.” The Court found that this issue was “beyond the scope of the propositions of law that we accepted and because neither the trial court nor the court of appeals addressed it.”
Although this question has been remanded for a determination by the Third Appellate District Court, the concurring opinion of Justices Kennedy and DeWine is instructive. They found this accrual argument properly before the court, and rejected it. Specifically, they held that two entire subsections of the statute would be rendered meaningless, if New Riegel’s argument was correct.
Both Justices Kennedy and DeWine would have affirmed the trial court’s ruling granting judgment in favor of the defendants based upon Ohio’s construction statute of repose.
Time Does Not Run Against the King
The Ohio Supreme Court also did not address New Riegel’s argument that the statute of repose cannot be used against it. The Ohio Supreme Court has held that the State of Ohio, and its agencies, are not subject to general statutes of limitations. State v. Sullivan, 38 Ohio St. 3d 137, 527 N.E.2d 798, 1988 Ohio LEXIS 260. Claimants, like New Riegel, have expanded this concept to argue that they are not subject to the statute of repose. The Third Appellate District may also address this argument on remand.
It is clear that the immunity granted to the State of Ohio and its agencies does not extend to school districts or boards of education. For this reason, New Riegel argues that by bringing its claims in the name of the State of Ohio, it is entitled to that immunity. That argument falls flat as simply bringing an action in the name of the State of Ohio or the United States does not imbue the claimant with the sovereign immunities enjoyed by the government. For example, bringing a Miller Act claim in the name of the United States, does not give the claimant sovereign immunity.
Time Does Not Run Against the King -- Part Deux
A separate issue that may be reached in the New Riegel remand is whether the statute of repose applies to state agencies. The Third Appellate District may review this issue even though the State of Ohio is not a party in this case and New Riegel is not a state agency. In the only decision to date, the Fifth District Court of Appeals found that Ohio’s 10-year construction statute of repose did apply to state agencies. State v. Karl R. Rohrer Assocs., Inc., 2018-Ohio-65.
This is critically important because state agencies are not subject to Ohio’s 8-year contract statute of limitations. Rohrer is the only case setting a limitation on how long state agencies have to bring construction defect claims. This is no small matter as state agencies are major builders in Ohio. The Ohio Department of Transportation invested approximately $2 Billion Dollars on 1,016 projects in 2017. The Ohio Facilities Construction Commission awarded approximately $317 Million Dollars in new contracts and managed appropriations on over 230 projects totaling almost $87 Million Dollars. Both are state agencies and, accordingly, neither is constrained by Ohio’s general statutes of limitations.
So, although New Riegel was a great decision for construction professionals, the question of when Ohio’s construction statute of repose will bar contract claims is far from settled.
New Riegel recently filed a Motion for Reconsideration asking the Ohio Supreme Court to remand this case to the trial court, instead of the Third District Court of Appeals. This motion will likely be opposed. Stay tuned.
Marc Sanchez, Michael Frantz, Jr. and Allison Taller Reich, attorneys in the Frantz Ward Construction Group, guided Ohio Farmers Insurance Company in each stage of this case.
For more information, please visit FrantzWard.com.