The title of this month’s article was my reaction on reading a case early this summer that was decided by the Stark County Ohio Court of Appeals. The plaintiffs , who lost both at trial court and before the appellate court, are likely to appeal yet again, but meanwhile there are some vital points for us relating to any transactions we undertake.
The main arguments of this case center on Ohio’s statutes relating to the time for taking action when a contract exists. While each state’s statutes offer a slightly different variation, Ohio’s laws and the Court’s discussion of them present a good example of the differences between statutes of limitation and statutes of repose.
We begin by noting this case’s Design Contract from July 2002, the General Trades Contract from September 2003, and the December 2005 Contractor’s Payment of Debts and Claims stating that all project payments had been made, all obligations satisfied, and performance of all work, labor and services completed along with a related release of liens. In January 2018, the Board of Education sued for breach of contract, alleging various construction, installation, and materials deficiencies leading to premature deterioration in the roof and building envelope that would require major repairs, including removal and replacement of the roof.
Ohio statutes fall into the category of “repose”, meaning an absolute number of years within which suit must be brought from completion of a project. This differs from statutes of limitations, which also prescribe a number of years within which the plaintiff must sue, but that time frame does not begin until “discovery” of the cause of action. Essentially this means that the time frame is open ended; if someone does not discover a problem until decades after an error occurred, that’s when the statute of limitations begins. Some states, like Ohio, specify periods of repose for anything under contract, so that the time runs from completion of the contract whether or not any problems have been discovered. In Ohio, that timeframe is 10 years, although if the problem is discovered within less than two years from the end of those 10 years, the plaintiff has two full years from that point to initiate a suit. This means that the maximum time under Ohio’s statute of repose would be 11 years and 364 days (except maybe in Leap Year). But the Board of Education sued 13 years after the completion of the contract, based on what it claimed was in the contract.
What exactly did this presumably breached contract say? The Board of Education points to the Ohio School Design Manual as setting all design and construction standards for the contract (but the case does not report if the Manual was specifically referenced). This document provides that ”school building structures and exterior enclosures shall be designed and constructed of materials which will perform satisfactorily for 40 years with only minor maintenance and repairs, and for 100 years before major repairs or replacement of primary structural or exterior enclosure elements is required.” The emphasis is my own—and the reason for the title of this article.
The Board argued that the statute of repose should only apply to tort claims, meaning claims outside of a contract, and that its claims for breach of warranty were not barred by the statutes. Instead, that astounding 100-year provision of the Ohio School Design Manual should apply.
This reasoning was dismissed by both the trial court and the appellate court, with the appellate opinion pointing to the plain language of the law and the clearly stated intent of the Ohio General Assembly in Section 3 of 2004 Amended Substitute Senate Bill 80 (available online at http://archives.legislature.state.oh.us/bills.cfm?ID=125_SB_80 and codified as of the effective date of April 7, 2005, without the statement of intent, as R.C. 2305.131, online at http://codes.ohio.gov/orc/2305).
That intent pointed to the values of “time limits, closure, and peace of mind to potential parties of lawsuits” in repealing certain statutes of limitation and replacing them with statutes of repose. The General Assembly observed the lack of control of service providers over later improvements made to their work, as well as lack of control over or right or opportunity to be made aware of, evaluate effects of, or take action to overcome effects of subsequent forces, uses, and other causes of wear and tear. Significantly, the General Assembly also noted the burden of maintaining records and documentation for unlimited and long periods of time relating to design, planning, supervision of construction, or construction of improvements to real property in light of the lengthy useful lives of those improvements.
Not mentioned in the Senate Bill but clearly relevant is that the longer it takes to litigate, the more unclear the true causes of the problem become, and the harder it will be to find original witnesses. Then there is the problem of format of records: are we able to retrieve data from old floppy disks, or records created in older versions of word processing, COGO, or CAD programs or formats? This brings me back to the language of the Ohio School Design Manual, which presumably was meant to control the contract with its 40- and 100-year construction standards. If there are documents referenced in a contract, let’s take the time to read those standards and specifications before agreeing to take on work that could bite us later on. If in fact the Design Manual was not referenced in the contract, that’s possibly in favor of the defendants (were other standards and specifications mentioned in the contract directly?). But if it was… oh my.
The case is Board of Education of Tuslaw Local School District v. CT Taylor Company, Inc., et al, and a PDF of the Appellate Court opinion can be downloaded here: https://law.justia.com/cases/ohio/fifth-district-court-of-appeals/2019/2018-ca00099.html
Incidentally, the 2019 Ohio School Design Manual is noted as being a set of “standard guidelines” for the construction of school facilities in the state (see https://ofcc.ohio.gov/Resources/OSDM-Ohio-School-Design-Manual), but the same language relating to 40- and 100-year expectations for structural systems and materials are present in Volume 2 of the 2019 edition in Chapter 8, Section 1.01(B). There is a whole different conversation we could have about the meaning of “guidelines,” but that’s for a different time.