Statutes of Repose
August 29, 2023
In this Surety Today Blog post we will discuss Statutes of Repose. We will explore what they are, their history, and the differences between statutes of limitation and Statutes of Repose. A Statute of Repose can provide a defense to a surety in the right circumstances and in the right jurisdictions.
So, what is a Statute of Repose? A Statute of Repose is designed to bar actions after a specified period of time has run from the occurrence of a specified event, other than the injury which gives rise to the claim. Gray v. Daimler Chrysler Corp., 821 N.E.2d 431 (Ind. Ct. App 2005). Statutes of Repose have been described as “an unyielding and absolute barrier, . . . to limit potential liability.” Black v. Littlejohn, 325 S.E.2d 469, 475 (N.C. 1985). “A Statute of Repose constitutes a substantive definition of rights,” while a statute of limitations provides only “a procedural limitation.” Langley v. Pierce, 313 S.C. 401, 404, 438 S.E.2d 242, 243 (1993); Poly-Med, Inc. v. Novus Sci. Pte. Ltd., No. 2021-000027, 2022 WL 4231301, at *3 (S.C. Sept. 14, 2022). Importantly, “[t]he time of the occurrence or discovery of the plaintiff’s injury is not a factor in the operation of a Statute of Repose.” Bond v. Johnson & Johnson, No. 22-1127, 2022 WL 4594185, at *2 (3rd Cir. Sept. 30, 2022).
DIFFERENCE BETWEEN REPOSE AND LIMITATIONS
Statutes of limitations and Statutes of Repose both are mechanisms used to limit the temporal extent or duration of liability for various acts. Both types of statutes can operate to bar a plaintiff’s suit, and in each instance time is a critical factor. There is considerable common ground in the policies underlying the two types of statutes. But, the time periods specified are measured from different points, and the statutes seek to attain different purposes and objectives. Bennett v. United States, 44 F.4th 929, 935 (9th Cir. 2022). Specifically, a statute of limitation ordinarily creates a time limit for suing in a civil case, based on the date when the claim accrued. Id. A Statute of Repose, in contrast, puts an outer limit on the right to bring a civil action. That limit is not measured from the date on which the claim accrues. Id.
While statutes of limitation and Statutes of Repose both “encourage plaintiffs to bring actions in a timely manner, and for many of the same policy reasons,” the emphasis is different. Id. “Statutes of Repose effect a legislative judgment that a defendant should ‘be free from liability after the legislatively determined period of time.’” Id. A Statute of Repose “is not related to the accrual of any cause of action . . . Rather, it mandates that there shall be no cause of action beyond a certain point, even if no cause of action has yet accrued. Thus, a Statute of Repose can prohibit a cause of action from coming into existence.” Id.
As discussed, while there are some similarities between a statute of limitation and a Statute of Repose, there are many significant distinctions. Cambridge Townhomes, LLC v. Pac. Star Roofing, Inc., 166 Wash.2d 475, 484–85, 209 P.3d 863 (2009); Davis v. Baugh Indus. Contractors, Inc., 159 Wash.2d 413, 426 n. 2, 150 P.3d 545 (2007); 1000 Virginia Ltd. P’ship v. Vertecs Corp., 158 Wash.2d 566, 574–75, 146 P.3d 423 (2006). So, we will spend some time reviewing those distinctions. We will start by reviewing the nature of statutes of limitation and then look at the nature of Statutes of Repose and the differences between the two.
A. Statutes of Limitations
Statutes of limitations set a prescribed time in which a plaintiff must file a complaint after a cause of action accrues. If a plaintiff does not file a complaint within the time period, the complaint could be dismissed, regardless of the underlying merit of the suit. There are several policy reasons behind statutes of limitations. First, they serve to provide a sense of security in business and planning by assuring people that they will not be subject to liability after the applicable limitations period has expired. Second, limitations serve to protect defendants from stale claims and the disadvantage of the passage of time on a person’s ability to defend themselves. The more time that passes the more likely it will be that documents and evidence may go missing or witnesses may die, disappear or their memories may fade.
The third policy consideration behind limitations is to conserve valuable court time and increase judicial efficiency by protecting the courts from hearing stale claims when their time could be better spent on more recent disputes. There is an underlying assumption that “stale” claims are more likely to be groundless or inconsequential because of the passage of time.
Fourth, statutes of limitation can be justified as punishment to plaintiffs who “slept on their rights” for an unreasonable period of time. Thus, the plaintiff who delays a suit beyond a certain period deserves to be penalized for allowing their claim to go stale. A plaintiff’s delay in filing suit increases the chances that justice will be frustrated and prolongs the defendant’s fear of perpetual liability. As a result, the limitations period serves as an incentive to the dilatory plaintiff to file suit in a timely manner.
A statute of limitation is a procedural device that operates as a defense to limit the remedy available from an existing cause of action. First United Methodist Church of Hyattsville v. United States Gypsum Co., 882 F.2d 862 (4th Cir.1989); Davidson v. Hartsfield, 250 Ark. 1072, 468 S.W.2d 774 (1971). Limitations bars the remedy. Minn. Mining & Mfg. v. Baker, 337 Ark. 94, 989 S.W.2d 151 (1999). However, it does not extinguish the underlying obligation. Harris v. Mosley, 195 Ark. 62, 111 S.W.2d 563 (1937). “It does not determine the underlying merits of the claim, but merely cuts off the right to file suit on that claim.” Allie v. Ionata, 503 So. 2d 1237, 1240-41 (Fla. 1987). A good example of this issue can be found where a party may not be able to affirmatively sue on a claim because of limitations, but it could use the same basis for the suit as a setoff/recoupment to a claim against it. The underlying obligation still exists, it just cannot be affirmatively asserted for positive recovery.
Statutes of limitations are an affirmative defense that can be waived if they are not timely asserted. They may also be tolled under various circumstances. A statute of limitation is invoked after an injury has already occurred and a claim accrued, and sets a limit on how long a plaintiff has to seek a legal remedy for that claim. Centre Concrete Co. v. AGI, Inc., 522 Pa. 27, 559 A.2d 516 (1989); Levenson v. Souser, 384 Pa. Sup. Ct. 132, 557 A.2d 1081 (1989). The time limitation set for filing a claim is simply “a procedural device that operates as a defense to limit the remedy available from an existing cause of action.” See First United Methodist Church of Hyattsville, 882 F.2d at 865.
B. Statutes of Repose
Unlike limitations, which are procedural in nature, Statutes of Repose are substantive grants of immunity and create a substantive right. Langley, 313 S.C. at 404, 438 S.E.2d 242 (citing Bolick v. Am. Barmag Corp., 306 N.C. 364, 293 S.E.2d 415 (1982)). Indeed, Statutes of Repose can bar a plaintiff from bringing suit before the plaintiff is even injured or aware of their injury if the repose period has run. Curry v. Thornsberry, 354 Ark. 631, 128 S.W.3d 438, 441 (2003); Nw. Arkansas Conservation Auth. v. Crossland Heavy Contractors, Inc., 504 F. Supp. 3d 947, 951 (W.D. Ark. 2020). Recognizing the tension between protecting defendants and depriving a plaintiff of a cause of action regardless of when the injury is discovered, legislatures tend to make the time limitations contained in Statutes of Repose longer than statutes of limitations; most are typically between six and ten years.
Unlike limitations, which extinguish the remedy for enforcing a right, not the right itself, Frank v. Wareheim, 177 Md. 43, 58-59, 7 A.2d 186 (1939), a Statutes of Repose terminates the cause of action entirely. Cambridge Townhomes, 166 Wash.2d at 485; 1000 Virginia Ltd. Partnership, 158 Wash.2d at 574–75. The court in Ray & Sons Masonry Contractors, Inc. v. U.S. Fid. & Guar. Co., 353 Ark. 201, 218, 114 S.W.3d 189, 199–200 (2003) stated “[i]f the action is not brought within the specified period, the plaintiff literally has no cause of action. The harm that has been done is damnum absque injuria – a wrong for which the law affords no redress.” See Rosenberg v. Town of North Bergen, 61 N.J. 190, 199, 293 A.2d 662, 667 (1972). If the element of time within which the claim must be brought cannot be satisfied, the claim simply no longer exists. Hargett v. Holland, 337 N.C. 651, 447 S.E.2d 784 (1994).
The Fourth Circuit Court of Appeals in First United Methodist Church, supra, observed that:
Statutes of limitations are motivated by considerations of fairness to defendants and are intended to encourage prompt resolution of disputes by providing a simple procedural mechanism to dispose of stale claims. Statutes of repose are based on considerations of the economic best interests of the public as a whole and are substantive grants of immunity based on a legislative balance of the respective rights of potential plaintiffs and defendants struck by determining a time limit beyond which liability no longer exists. (citation omitted).
First Methodist Church, 882 F.2d at 866.
As noted earlier, statutes of limitation begin to run from the time of an injurious occurrence or discovery of the same, Centre Concrete Co. v. AGI, Inc., 522 Pa. 27, 559 A.2d 516 (1989); Levenson v. Souser, 384 Pa. Sup. Ct. 132, 557 A.2d 1081 (1989), whereas Statutes of Repose run for a statutorily determined period of time after a definitely established event, such as substantial completion, a trigger that is independent of an injurious occurrence or discovery of the same. Levenson; Fetterhoff v. Fetterhoff, 354 Pa. Sup. Ct. 438, 512 A.2d 30 (1986) and Mitchell v. United Elevator Co., 290 Pa. Sup. Ct. 476, 434 A.2d 1243 (1981).
Accordingly, the so called “discovery rule” prevalent in statute of limitations jurisprudence is not applicable to a Statute of Repose. Instead, as one court explained, the repose statute “shelter[s] legislatively designated groups from property and personal injury actions after a period of time has elapsed … and is unrelated to when an accident or discovery of damages occurs.” Carven v. Hickman, 135 Md. App. 645, 652–55, 763 A.2d 1207, 1211–13 (2000), aff’d sub nom. Hickman, ex rel. Hickman v. Carven, 366 Md. 362, 784 A.2d 31 (2001)
The well-recognized purpose of the Statutes of Repose, is to extinguish the prospect of liability and “protect [those] in the construction industry from being hauled into court by reason of latent defects that did not become manifest until years after completion of the construction.” Hagerstown Elderly Assocs. Ltd. P’ship v. Hagerstown Elderly Bldg. Assocs. Ltd. P’ship, 368 Md. 351, 793 A.2d 579, 585–86 (2002); Streeter v. SSOE Sys., 732 F. Supp. 2d 569, 572 (D. Md. 2010). Statutes of Repose are substantive in nature because they extinguish a cause of action and preclude its revival. Freezer Storage, Inc. v. Armstrong Cork Co., 476 Pa. 270, 382 A.2d 715 (1978). A plaintiff must typically satisfy the time limits of both the applicable statute of limitations and the Statutes of Repose in order to file suit. For example, if a cause of action arises in year three and the applicable limitations period is three years for that claim, the case must be filed before year 6, even though the Statutes of Repose is 10 years. Things can get interesting if the cause of action arises near the end of the repose period. For example, if the cause of action arises in year 9 and the repose period is 10 years, the claimant would only have 1 year in which to file its claim even if the limitations period were 3 years. In theory, a cause of action could accrue on the 364th day of year 9 and a claimant would have to immediately file suit within the 10 year repose period. Some Statutes of Repose specifically address this type of issue and grant additional time under certain circumstances.
HISTORY
Statutes of Repose were first employed in the context of architects, engineers, and contractors in the 1950’s. Such statutes exist in the vast majority of states and the District of Columbia. But, repose statutes are not limited to construction. They can be found in medical malpractice claims, asbestos, and products liability. Of course, our focus is on the repose statutes related to construction. The catalyst for enacting such statutes in many jurisdictions was the dramatic expansion in the liability of builders, contractors, architects, engineers, and developers resulting from three developments: (1) the elimination or erosion of the “privity of contract” doctrine as a defense in many jurisdictions; (2) the declining acceptability of “the completed and accepted rule;” and (3) the application of the “discovery rule” to state statutes of limitations. See Rose, 335 Md. at 362; Whiting–Turner, 304 Md. at 349; and Randall, supra, at 1001. Taken together these three legal developments meant that architects, engineers, contractors, and others involved in construction could potentially be held liable indefinitely for property damage and personal injury caused by their work. See Randall, supra, at 1001. Thus, “[a]rchitects and engineers, particularly concerned by these developments, turned to state legislatures for protection from this expanded liability.” Rose, 335 Md. at 362. The possibility that seemingly endless liability would deter such professionals from experimenting with new materials, designs, or procedures spurred the state legislatures into action. See Randall, supra, at 1000–02; Josephine Herring Hicks, The Constitutionality of Statutes of Repose: Federalism Reigns, 38 VAND. L.REV. 627, 633 (1985); Whiting–Turner, 304 Md. at 354 (agreeing with the Supreme Court of Michigan that legislation was needed to “reduce the potential liability” of professionals to “encourage experimentation”) (quoting O’Brien v. Hazelet & Erdal, 410 Mich. 1, 299 N.W.2d 336, 342 (1980)).
The Revisor’s Note to Maryland’s Statute of Repose indicates that the purpose of the statute was to impose a limit on the expansion of liability for professionals involved in making improvements to real property. The statute seeks to strike a balance between encouraging innovation in the construction industry and ensuring public safety. Carven, 135 Md. App. At 652–55.
CONSTITUTIONALITY OF REPOSE STATUTES
The question has been repeatedly raised as to whether statutes of repose are constitutional. Most courts have upheld such statutes. See Dinh v. Rust Int’l Corp., 974 F.2d 500 (4th Cir. 1992); Eaton v. Jarvis Prods. Corp., 965 F.2d 922 (10th Cir. 1992); Harris v. Black Clawson Co., 961 F.2d 547 (5th Cir. 1992); Love v. Whirlpool Corp., 449 S.E.2d 602 (Ga. 1994); Jones v. Five Star Eng’g, Inc., 717 S.W.2d 882 (Tenn. 1986); Cheswold Volunteer Fire Co. v. Lambertson Constr. Co., 489 A.2d 413 (Del. 1984); Dague v. Piper Aircraft Corp., 418 N.E.2d 207 (Ind. 1981). A handful of courts have struck down repose statutes on constitutional grounds based on various theories including due process, or equal protection clauses in their state constitutions. See Hazine v. Montgomery Elevator Co., 861 P.2d 625 (Ariz. 1993); Kennedy v. Cumberland Eng’g Co., 471 A.2d 195 (R.I. 1984); Berry v. Beech Aircraft Corp., 717 P.2d 670 (Utah 1985); Lankford v. Sullivan, Long & Haggerty, 416 So. 2d 996 (Ala. 1982); Hanson v. Williams County, 389 N.W.2d 319 (N.D. 1986); Heath v. Sears, Roebuck & Co., 464 A.2d 288 (N.H. 1983). These courts essentially rest their opinions on the idea that “the right to recover for personal injury is an important substantive right.” Thus, legislatures cannot deprive their citizens of the right to be heard in court on mere economic grounds. On the other hand, courts that uphold the constitutionality of Statues of Repose reason that since the legislature provides the causes of action, the legislature may take them away, stating that there “is no federal or state constitutional right to the continued existence of common law causes of action.” See Joseph Mack, Nullum Tempus: Governmental Immunity to Statutes of Limitation, Laches, and Statutes of Repose, 73 Def. Couns. J. 180, 183–85 (2006).
Statutes of Repose must be considered as a possible defense by the surety, particularly if significant time has passed since the project was substantially completed. In subsequent issues of the Surety Today Blog we will explore other issues relating to the Statute of Repose. If you have questions regarding the issues discussed in this post, please do not hesitate to contact Michael A. Stover, Esq. (410-659-1321 or mstover@wcslaw.com) or any member of the Surety and Fidelity Practice Group.
