The Design Professional's Statute of Repose: Stumbling Blocks to the Defense
of Torts and Contractual Indemnity Claims
July 2002
Kenneth Slavens examines the case of Jordan v Sandwell, Inc., et al., highlighting
the problems that design professionals may encounter when the statute of repose
is raised as a defense.
by Kenneth
A. Slavens
Brown & James,
P.C.
A statute of repose will generally provide a design professional with protection
from claims arising from projects reaching back into the somewhat distant past.
The statutes of repose of the world, however, seldom provide that bright line
that we would all like to have. The statutes usually do not divide the time
continuum of the world's events into those events we have to worry about and
those the law says are no longer our concern. The U.S. District Court for the
Western District of Virginia just dealt with a case that highlighted the problems
that design professionals may encounter when the statute of repose is raised
as a defense. The case is Jordan v Sandwell, Inc., et
al.
This article will not address all of the topics covered in the court's opinion.
Plus, you need to remember that issues related to the statute of repose are
almost always determined by state law. As a result, though this case may demonstrate
the concerns a design professional may encounter, the holding in any particular
state may be completely different.
What Is a Statute of Repose?
In the area of construction liability analysis, most statutes of repose will
provide protection to a given class of people. That protected class is generally
composed of entities whose only relationship to a given project is that of designer,
surveyor, planner, or constructor. The statutes of repose provide that these
entities will only be exposed to liability arising from a project for a given
period of time. That period of time varies from state to state. Once the statute
of repose has run, there is no liability for the protected class, assuming all
conditions of the statute of repose are otherwise satisfied.
The statute of repose is different than the statute of limitations. A statute
of limitations says that once someone has been damaged, that person has a set
period of time within which to initiate a claim to recover for those damages.
A statute of repose is not concerned with when someone is damaged. A statute
of repose looks to when a member of the protected class ended his or her relationship
with the project. A time frame is generally triggered by the termination of
the person's relationship with the project. Once the time period set out in
the statute of repose has lapsed, no claim can be brought for damages arising
out the project at issue.
Factual History and Claims
The claims arose out of personal injury to a worker at a paper mill. The
incident that resulted led to two separate lawsuits. For our purposes, we are
referring to both as the Jordan v Sandwell, et al. lawsuit. Though there are two parties sued, Sandwell Engineering and U.S. Filter,
we will focus only on Sandwell Engineering.
The Accident and the Claims. Clarence Jordan
worked at a paper mill. He worked at the mill owned by Westvaco. On the day
of Mr. Jordan's accident, there was a malfunction in the plant's system that
processed a liquid waste by-product of the milling process, in part, by heating
and boiling the liquid. As a result of the malfunctioning system, Mr. Jordan
was sprayed with the boiling liquid, and he was severely burned.
Mr. Jordan settled his claim with the owner of the plant, Westvaco, for $1
million. He then filed suit against Sandwell Engineering and U.S. Filter, alleging
that both defendants had participated in the design and construction of the
facility.
Westvaco also filed suit against Sandwell Engineering and U.S. Filter alleging
that both had agreed in the contracts with Westvaco to indemnify Westvaco for
the payments it made to Mr. Jordan in settlement of Mr. Jordan's claim.
Statute of Repose. Sandwell Engineering raised
the applicable statute of repose as a defense to the claims made by Jordan and
by Westvaco. The law of Virginia controlled the issues, and the court looked
to the Virginia statute of repose. The Virginia statute of repose, in part,
reads:
No action to recover for any injury to property, real or personal, or for bodily injury or wrongful death,
arising out of the defective or unsafe condition of an improvement to real
property, nor any action for contribution or
indemnity for damages sustained as a result of such injury shall
be brought against any person performing or
furnishing the design, planning surveying, supervision of construction,
or construction of such improvement to real property more than five years after the performance
or furnishing of such services or construction. [Emphasis added.]
Sandwell's Project Involvement. Sandwell provided
its engineering services to Westvaco on the system at issue during the 1989
to 1991 period. Mr. Jordan filed his lawsuit against Sandwell in 1999.
Sandwell's argument is fairly straightforward: it performed or furnished its design services to Westvaco in 1991 at the latest. Sandwell's position was that it had completed
its work and had received final payment by December of 1992. Any claim against
Sandwell must be brought not more than 5 years after the date of completion. Mr. Jordan filed in 1999—7 (payment) or 8 (completion
of services) years later, which is long after the protection of the statute
arose. Sandwell argued by way of a motion that the court should enter a judgment
in its favor.
Mr. Jordan's reply was that there were other activities that extended the
time period during which Sandwell remained exposed for liability arising out
of the defective or unsafe condition.
The Court's Holding on Mr. Jordan's Claim
The court had no problem finding that Sandwell was sued for personal injuries
in its capacity as the designer of the project and that the project constituted
an improvement to real estate. The court struggled somewhat more with an additional
argument made by Mr. Jordan. That argument was that Sandwell was involved in
the project much later than 1991. Mr. Jordan claimed that Sandwell's involvement
with the project was as late as 1995. The court took note that if this claim
was true, then the lawsuit by Mr. Jordan was timely filed.
Mr. Jordan was able to muster some evidence to support his claim of Sandwell's
involvement into the mid-1990s. He demonstrated that in 1995 Sandwell had a
contract with Westvaco to "evaluate anchors, guides, and supports" on the system
on which plaintiff was injured. Mr. Jordan also presented evidence that Sandwell
worked on "pipe bridges" related to the system.
The court described the evidence of additional work as "very limited," and
found the work to be of a completely different nature than the work completed
in 1991. The court considered evidence that the 1995 Sandwell work did not involve
any work that "caused or contributed to" Mr. Jordan's injury. The court concluded:
. . . [T]his court holds that when there is no nexus of causation between
the subsequent work and the system that causes the accident—when, as here,
the subsequent work involves repairs that do not implicate the defects that
allegedly caused injury to the plaintiff—then the original work is completed
[in accord with the statute of repose]. Repair to the struts that hold up
the pipes in the Westvaco Mill had nothing to do with the reasons that the
[system] spewed superheated water onto Mr. Jordan. Thus, the repose period
began when Sandwell completed the initial work, a date no later than December
1992.
The Court's Holding on Westvaco's Claim
Sandwell had a more difficult challenge in trying to convince the court by
way of a motion that the court should enter a judgment in its favor on the claim
of Westvaco. Westvaco's lawsuit alleged that Sandwell agreed in its contracts
with Westvaco to indemnify Westvaco, and that the indemnity agreement included
indemnifying Westvaco for the payments it made to Mr. Jordan in settlement of
Mr. Jordan's claim.
The contract Sandwell entered with Westvaco contained some fairly common
language. The contract read that Sandwell was obligated to indemnify, defend,
and hold harmless Westvaco against any and all losses, costs, fines, penalties,
or expenses resulting from any and all claims, actions, judgments, or demands
arising out of injuries to any person caused by the negligent acts or omissions
of Sandwell.
Sandwell again relied on the Virginia statute of limitations. Sandwell argued
to the court that the claim of Westvaco for indemnity for the $1 million Westvaco
paid in settlement to Mr. Jordan is barred for all of the same reasons that
the direct claim of Mr. Jordan against Sandwell is barred. Westvaco argued that
the statute of repose that Sandwell raised did not even apply to its claim for
indemnity.
The court relied upon the holding of the U.S. Court of Appeals for the Fourth
Circuit to resolve the issue between Westvaco and Sandwell. The court did acknowledge
the language of the statute that clearly encompasses actions for "contribution
or indemnity for damages sustained." The court quoted with approval the language
from the Court of Appeals for the Fourth Circuit that it would use for guidance
to decide the issue between Westvaco and Sandwell. The court quoted:
It will be observed that the statute, by its express terms, is restricted
in its application to what are in effect tort actions to recover for 'injury'
to property and persons, and not to actions in contract. That such is the
proper construction of the statute was recognized in President and Directors, etc. v Madden, [citation
omitted], where the district court held that a District of Columbia statute,
similar in language to [the Virginia statute of repose], did not extend
to 'causes of action sounding in contract.' On appeal we implicitly accepted
this construction of the statute. [citation omitted] Accordingly, since
this action is not one sounding in tort but is one arising out of a specific
written contract of indemnity, it is outside the scope of [the Virginia
statute of repose].
Sandwell argued that there is a strong factual distinction between the case
on which the court had decided to rely and the dispute between Sandwell and
Westvaco. Sandwell pointed out that the case on which the court was relying
dealt with the question of whether the statute of repose barred a claim against
the bonded contractor by a surety for indemnity for payments to the owner under
the bond. The court in the case on which this court is relying was not dealing
with an underlying claim of personal injury but, rather, one of a contractual
obligation. In other words, Sandwell's argument is that there is a strong factual
distinction between indemnity claims arising from the indemnitee's tort liability
(Westvaco) and indemnity claims arising from the indemnitee's contract liability
(the surety in the underlying case).
The court was not persuaded by Sandwell's argument. The court held that the
"relevant" distinction is not the one pointed out by Sandwell, but rather the
nature of the indemnator's obligation to the indemnitee, not the nature of the
indemnitee's obligation to the injured party. In other words, the "relevant"
distinction is the nature of Sandwell's obligation to Westvaco, not the nature
of Westvaco's obligation to Mr. Jordan.
Sandwell also argued that the statute specifically refers to contribution
between the joint tortfeasors that have injured the claimant, and that this
is an implied contract. Sandwell argued that if the implied contract action
of contribution is included within the purview of the statute, clearly contract
actions are covered. The court quickly dismissed this argument by holding that
just because one type of "pseudo-contract" is encompassed by the statute, it
does not follow that all contracts are subject to the statute of repose. The
court went on that "formal contracts of indemnity" are an entirely different
creature than contribution.
Conclusion
Please do not walk away from this short note with the impression that this
reasoning will always apply. However, the case does point out problems design
professionals often face when attempting to rely on the statute of repose.
The first is illustrated by the direct claim of Mr. Jordan against Sandwell.
That problem is the ongoing services for a client and how it affects the statute
of repose. Design professionals cannot exist in a bubble to escape liability.
Sandwell was successful in its arguments in this case. It convinced the court
that the work it continued to perform for its client was unrelated to the injuries
that the claimant suffered. The danger lies, of course, where this is not the
case. Had the return trips by the design professional been to help remedy or
to correct ongoing problems with the system on which the claimant was injured,
I believe we can anticipate a significantly different result from almost any
court. That result would be to delay the triggering of the statute of repose.
If you are continually called back because of problem or a malfunction, you
may need to exercise some professional judgment about when you have to let go
and walk away. If not, you may simply extend your involvement in perpetuity.
You might want to consider writing your client a letter and stating, "I am finished."
At least, you would have a definitive cut-off point.
The other problem illustrated by Westvaco's indemnity claim is the mixing
of contract obligations, tort duties, statutes, and case law. Without commenting
on the logic or correctness of the court's holding, the case does illustrate
that you may want to think about including a time limitation in the contract
for your own benefit. How would the court have ruled if the indemnity provision
only obligated Sandwell for 5 years after final payment, or 10 years after the
last provision of services? We all know that we cannot absolutely avoid liability;
however, we can take some steps to manage it. Since the indemnity claim was
a creature of contract, why not agree with your client as to how long the obligation
will last?
Opinions expressed in Expert Commentary articles are those of the author and are
not necessarily held by the author’s employer or IRMI. This article does not purport
to provide legal, accounting, or other professional advice or opinion. If such advice
is needed, consult with your attorney, accountant, or other qualified adviser.