Best Practices Construction Law : Construction Lawyer & Attorney : Matthew DeVries : Stites & Harbison Law Firm : Green Building & LEED Litigation

Where's Waldo?  The real question is, Where's Matt?  If you've wondered where I have been the past few days, try looking in Texas and North Carolina.  I have been preparing to speak at two construction law conferences in two different states.  Look closely and you might find me.

On Thursday, I will be speaking at the University of Texas School of Law 2010 Construction Law Conference in Dallas, Texas.  I am speaking with Jeffrey Peters of Rimkus Consulting Group and our topic will be: "LEED 101 and Beyond: Incentives, Design, Construction Pitfalls, Certifications and Contracts."  In this workshop, Jeff and I will be talking about the design issues, contracts and certifications for green and sustainable development, including a look at the most common green standards and how they are used to certify green buildings.  We will also talk about the financial incentives driving developers to go “green” and some of the possible challenges with this type of construction.

On Saturday, I am speaking at the North Carolina Bar Construction Law Section Annual Meeting in Greensboro, North Carolina.  Our panel of regional construction lawyers will discuss common construction issues that arise in NC, SC, GA, TN and VA, including statutes of limitations and statutes of repose, lien and bond claim deadlines, contractual quirks and indemnity requirements.

What's in it for you?  Well, if you check back with me on Monday ... and send me an email, a direct message to Twitter @matthewdevries, or a LinkedIn message, I will send you a copy of one, the other, or both presentations.

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Just because you may win on appeal in one claim does not mean that you have properly preserved your other claims.  This was a hard lesson to learn for one developer in the case of B&B Enterprises v. City of Lebanon (pdf), a decision recently issued by the Supreme Court of Tennessee on August 31, 2010.

In B&B Enterprises, the developer of a residential subdivision filed suit against the City, alleging that the planning commission had denied it all economically beneficial use of its property by wrongfully refusing to approve the final plans for two phases of its subdivision. 

Although there is more history to this dispute, the real rub occurred after the developer appealed to the trial court the planning commission's refusal to approve the final plan.  Both the trial court and the appellate court held that the planning commission had acted arbitrarily and capriciously when it declined to approve the plans for Phases Two and Three.  Thereafter, the developer filed a complaint seeking monetary damages based upon claims of regulatory takings and violation of civil rights.

In those proceedings the City argued that the applicable one year statute of limitations barred the developer's claims.  Ultimately, the Supreme Court of Tennessee concluded that the claims were untimely because the developer "knew" that the City's conduct occurred when the planning commission denied the final plans.  The Court rejected the developer's claim that the City's actions were not "permanent" or "complete" because it sought (and won) judicial review of the planning commission's denial.  The Court reasoned:

The Planning Commission’s action on February 26, 2002, put B & B Enterprises on notice that its reasonable investment-backed expectations for the use of its property had been frustrated. Regardless of the eventual outcome of the judicial proceedings, the Planning Commission began interfering with B&B Enterprises’s economically beneficial use of its property by no later than February 26, 2002.

Do you see the fine line here?  The Court focused on the planning commission's actions and not the subsequent actions of the courts.  Again, it is the final decision of the agency that triggers the claim and not whether subsequent review of that decision provides relief.  Since I am a visual-learner, it may be easier to understand the time line this way:

UNTIMELY LAWSUIT = Planning commission's denial→ judicial and appellate review of denial → appellate reversal of denial → suit to seek damages relating to denial.

TIMELY LAWSUIT = Planning commissions denial → review of denial and suit to seek damages relating to denial → judicial and appellate review if necessary.

While you make not agree with the reasoning of the court's decision in B&B Enterprises, the lesson learned is one about preservation of rights at the earliest stage possible.  Know and understand your deadlines.

Image: husfse on Flickr

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As I stepped out of the shower this morning, something stuck to the bottom of my foot.  It was Florida.  Actually, it was the puzzle piece of Florida from my daughter's USA puzzle map. I chuckled because yesterday afternoon I found this map on various statutes of limitations and repose for the entire country (pdf).

What is a statute of repose?  A statute of repose provides a date upon which the legal action no longer exists . . . and here is the kicker . . . whether it has accrued by that date or not.  In other words, for a construction defect case, there may be an applicable statute of limitations that says the property damage claim is barred if not brought within three years of discovery of the injury.  If the defect is not discovered in the new building until seven years after completion, then the claim would not be barred by the statute of limitations.  However, the statute of repose for a particular jurisdiction may be five years and the the claim could not be brought after five years from completion of the project. 

What is the law statute of repose in Tennessee?  In Tennessee, claims regarding improvements to real property must be brought within four years of substantial completion of the project, regardless of the date of discovery.  There is an exception if the claim is discovered during the fourth year after completion. In this case, the claim must be brought within one year after discovery, or within five years after substantial completion of a project.

Statutes of repose are puzzling because the rules vary markedly from state to state.  As shown on the Construction Defects Statutes of Limitation and Repose map, each jurisdiction varies on the applicable limitations periods.  Some states like New Mexico have a ten-year statute of repose, while others have shorter periods.  Additionally, some allow for a discovery extension, while others do not. 

Here's a  tip! One of the most important things you can do when you find out you have a potential construction dispute is to review your contracts and applicable limitations periods to determine the timeliness of your claim.

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You’ve heard about Nashville’s historic flood almost six weeks ago and all the damage that it has caused to thousands of homes throughout Middle Tennessee. Just this morning, Nashville Metro government sent 305 buyout letters to homeowners whose homes were damaged within the floodway, the area where water flows most swiftly during a flood. Today’s post is about a decision released yesterday by the Court of Appeals of Tennessee regarding what may occur when a restoration contractor fails to remediate toxic mold following significant water damage. 

In Victoria Dutton v. Farmers Group, the Plaintiffs’ home was flooded and incurred severe water and mold damage when the hot water tank burst. The Plaintiffs began to experience various illnesses after moving back into the home. Despite assurances from ServePro (the remediation contractor) and the Plaintiffs’ insurance carrier that the home was safe, the Plaintiffs discovered that their home was contaminated with toxic mold almost three years after moving back into the home. The Plaintiffs filed suit against various defendants alleging distinct causes of action.

The trial court held that the Plaintiffs’ claims were barred by the applicable statute of limitations. The Court of Appeals reversed, holding that the discovery rule tolled the applicable statute of limitations.  In Tennessee, the discovery rule provides that a cause of action accrues and the statute of limitation begins to run when the plaintiff knows or should have known that an injury has been sustained as a result of some wrongful or tortuous conduct by the defendant. 

In this case, the Plaintiffs did not connect their illnesses to the toxic mold exposure in the home until close to three years after they moved back in the home. The Court found that the defendants attempted to remediate the mold issues in 2002 and the Plaintiffs had a good faith belief that the problem was resolved. The Plaintiffs did not discover until 2005 that the flooring throughout the home was not removed as originally advised in the 2002 cleanup of the home. After testing, it was found that the linoleum flooring was severely contaminated with toxic mold spores. The Court reasoned:

Without the obvious signs of mold contamination in the home, Plaintiffs had no indicators that mold contamination caused their health problems. . . . Eventually, [the insurer] retested the home, which confirmed that Plaintiffs’ home was contaminated with toxic mold. Until a doctor mentioned a possible allergic reaction as to the cause of [Plaintiffs] injuries, Plaintiffs did not have sufficient facts to investigate their potential claims. Under these circumstances the discovery rule tolled the statute of limitations.

The Victoria Dutton case is a good example of how the courts will apply the discovery rule to personal and property damages cases involving residential construction.  Factually, the case also highlights the severity and seriousness of toxic mold exposure following a significant flooding event. Finally, the case demonstrates that there may be certain substantive defenses in your state that preclude you from recovering on a claim including, but not limited to, a statute of limitations, the discovery rule, and the tolling of the statute of limitations.

Image: Eric Hamiter

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