No action, whether in contract, in tort, or otherwise, to recover damages for any deficiency in the design, planning, surveying, supervision or construction of an improvement to real property,…nor any action for contribution or indemnity for damages sustained on account 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 10 years after the performance or furnishing of such services and construction…
The hot water system was not separately “an improvement to real property” within the meaning of N.J.S.A. 2A:14-1.1a. It was a component of an improvement, similar to the steel framing of a building, its roof, any mechanical or electrical system, or other components of a construction project
1) Similar to the defendant in Messeka, Defendant interposed his construction professional, Miseo, as an expert intermediary between himself and Plaintiff. Therefore he was not a vulnerable consumer who needed the CFA’s protection;
2) Plaintiff disclosed the amended work and the rates charged for that work;
3) Defendant and Miseo were aware of those rates and Miseo approved them on behalf of the Defendant; and
4) Miseo recognized the rates as fair and reasonable within the industry.
Under certain circumstances, a contractor who defectively completed a construction project may protect himself from a lawsuit by alleging that the plaintiff spoiled evidence of that defect.
An example of this proposition is New Jersey Municipal Environment Risk Management v. Killam Associates Consulting Engineers, et. al., in which the Appellate Division of the Superior Court of New Jersey considered a spoilation of evidence claim with respect to a construction project. A spoilation claim arises when a party in a civil action has “hidden, destroyed or lost relevant evidence and thereby impaired another party’s ability to prosecute or defend the action.” Id. at 5. To avoid a spoilation claim, a prospective party who is aware of the probability of a law suit has an obligation to preserve evidence related to that claim. If a party was not diligent in seeking to prevent spoliation, he may be subject to sanctions. Id.
In Killam Associates, the Plaintiff hired a contractor (“Defendant”) to design and construct a piping system to transport fuel from an above-ground storage tank to a generator. After six years, the Plaintiff found a defect in the system. Id. at 1. Three years later, the New Jersey Department of Environmental Protection demanded that the Plaintiff provide compensation for the environmental damage caused by the system’s defective condition. In turn, Plaintiff filed the action against the Defendant for negligent installation and design to recover damages for the defects found in the piping system. Id. at 2.
Though the Plaintiff contemplated suing the Defendant when the defect was initially found, the Plaintiff instead proceeded with repairs to the piping system and did not inform the Defendant of any damage. Because the Plaintiff commenced repair, replacement, maintenance and/or disposal of the underground transfer pipes that proved defective and did not notify the defendants of its conduct, the Defendants alleged that Plaintiff wrongfully spoliated the evidence of what caused the leak. The Defendants alleged that the Plaintiff compounded this spoliation of evidence by not notifying the Defendants of the defect to provide them with an opportunity to inspect the faulty piping system before it was removed.
In assessing the Defendants’ Spoilation of Evidence claim, the Court found that the Plaintiff did violate its legal duty to preserve the lost evidence by its failure to:
1) alert the defendants and thereby deprive them of any opportunity to observe the conditions as they existed and take appropriate measures to avoid prejudicial loss of evidence and
2) direct their own agents to preserve the components of the dismantled pipeline.
Id. at 6.
However, the Court also noted that with respect to commercial construction projects, the parties may consider a “vast array of alternate sources of information that such projects generally provide.” Id. at 7. Therefore, the potential spoliation claim might be mitigated if the information were available from some other source. Id.
Ultimately, the Court held that the Plaintiff did violate its duty to preserve the evidence of the faulty piping material. However, the Court remanded the case to the trial court to rule on the Defendants’ spoliation of evidence claim only after a thorough review of other sources of relevant information regarding the piping system’s defect.
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The Statute of Repose is a law that provides a ten year bar for claims related to construction-related lawsuits for “any deficiency in the design, planning, survey, supervision or construction of an improvement to real property.” The ten years begins to run at the stage of “substantial completion”. For construction projects, the stage of “substantial completion,” occurs when most of the project is complete even if certain “punch list” tasks remain. However, the issue remaining is whether there can be different dates of completion for different contractors, based upon when their work was finished.
The issue was considered in a recent case considered by the Appellate Division of the State of New Jersey. New Jersey v. Perini Corp., 425 N.J. Super. 62 (App. Div. 2012). In that case, the State of New Jersey utilized Perini Corp. to construct the South Woods State Prison (“prison”) with a centralized underground hot water distribution system (“distribution system”). (Id. at 66) The State’s contract with Perini Corp. specified that the project would be completed in three phases, each with its own completion deadline. (Id. at 68) Perini Corp. subcontracted with several vendors that contributed in various capacities to the project. (Id.)
The Perma-Pipe Corporation was one such subcontractor, and it designed the layout of the distribution system and manufactured its materials. The distribution system exhibited defects from 2000, just a few years after construction of the prison. On April 28, 2008, the State sued five (5) companies responsible for the design, construction, and materials used in the distribution system. That date was ten (10) years after the prison began operating but three (3) days before ten (10) years from the date that the State issued the final certificates of substantial completion of the project. (Id.) The State admitted that the distribution system was completed and in operation by April, 27, 1998, when the prison was in operation. Id. at 67-71.
The relevant issues considered were:
Id. at 71.
The decision hinged on the interpretation of N.J.S.A. 2A:14-1.1a., which barred claims regarding an improvement to real property from being brought “‘more than 10 years after the performance or furnishing of such services and construction.’” Id. at 72 Particularly, the Court considered the statutory interpretation of the words, “‘improvement to real property.’” Id. at 75.
After reviewing various state precedents, the Court decided that, “the trigger date is the date of substantial completion, not completion of every last task…, [that] separate trigger dates apply to subcontractors that have substantially completed their work, even if improvement as a whole is not completed…and [that] the trigger date for any single contractor runs from completion of that contractor’s entire work on the ‘improvement,’ not from discrete tasks.” Id. at 74.
The Court stated that components of construction may be substantially completed before completion of the entire project and that subcontractors who work on those components with no further duties may expect the Statute of Repose to run when their work is completed. Id. at 77. However, for the Statute of Repose to run under those circumstances, components of a project must have been documented as distinguishable components in the contract for the construction work. Id. at 78. In this case, the Court decided that the water distribution system was a component of an improvement, not a separate improvement to real property. Id. at 76.
The distribution system was not identified in the State’s contract with Perini Corp., as a separate improvement that was substantially completed before the completion of the entire project. Id. at 79. Accordingly, the Statute of Repose did not run independently for substantial completion of the distribution system alone. Because the State filed its complaint three (3) days before ten (10) years of the official certification for substantial completion of the entire project, the Statute of Repose did not bar the claim.
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In Great Am. Restoration Services, Inc. v. Patricia Lenti, et al., 2012 NY Slip Op 03140 (N.Y.A.D. 2 Dept., April 24, 2012), the Supreme Court of New York, Appellate Division (Second Judicial Department), addressed whether, under New York City’s Administrative Code, a contractor is required to possess a license to perform work on a house.
The facts were straightforward. After a fire at the defendants’ house, they hired Plaintiff to temporarily “cover holes in the roof, remove water from the premises, remove both salvageable and unsalvageable personal property, store such property, and remove debris.” Id. at 2. One of the issues was whether the Plaintiff needed to be licensed under the NY Administrative Code.
In that case, the Supreme Court (Nassau County) had granted the Contractor’s (“Plaintiff”) motion for summary judgment on the issue of liability in an action to recover damages for breach of contract. The lower Court also denied defendants’ cross motion to dismiss the complaint pursuant to CPLR 3211(a)(7). The Plaintiff appealed.
The Appellate Division upheld the lower Court’s decision because the Appellate Division felt Plaintiff established its prima facie entitlement to judgment as a matter of law. Id. Plaintiff submitted the contract between the parties that laid out the work that Plaintiff was to perform. The contract clearly stated that defendants would be responsible for any charges not covered by the defendants’ insurance policy. Plaintiff also submitted proof that it satisfactorily completed the work and never got paid for that work pursuant to the contract. Id.
The Appellate Court stated that since the defendants failed to “raise a triable issue of fact in response [to the evidence Plaintiff submitted for review], the Supreme Court properly granted the plaintiff’s motion for summary judgment on the issue of liability.” Id. The Appellate Division also stated that the lower Court properly determined that the work Plaintiff performed on the defendants’ home did not constitute “home improvement” as defined in Administrative Code of City of New York (“Code”) § 20-386(2). Under § 20-386(2), “home improvement” is defined as
“The construction, repair, replacement, remodeling, alteration, conversion, rehabilitation, renovation, modernization, improvement, or addition to any land or building, or that portion thereof which is used or designed to be used as a residence or dwelling place and shall include but not be limited to the construction, erection, replacement, or improvement of driveways, swimming pools, terraces, patios, landscaping, fences, porches, garages, fallout shelters, basements and other improvements to structures or upon land which is adjacent to a dwelling house. “Home improvement” shall not include (i) the construction of a new home or building or work done by a contractor in compliance with a guarantee of completion of a new building project, (ii) the sale of goods or materials by a seller who neither arranges to perform no performs directly or indirectly any work or labor in connection with the installation of or application of the goods or materials, (iii) residences owned by or controlled by the state or any municipal subdivision thereof, or (iv) painting or decorating of a building, residence, home or apartment, when not incidental or related to home improvement work as herein defined. Without regard to the extent of affixation, “home improvement” shall also include the installation of central heating or air conditioning systems, central vacuum cleaning systems, storm windows, awnings or communication systems.”
Administrative Code of City of New York § 20-386 (2).
As determined by the lower Court, since Plaintiff did not perform work that rose to the level of that constituting home improvement, it was not required to possess a license pursuant to the Code § 20-387(a). Consequently, Plaintiff was not required to plead that it was duly licensed by the Department of Consumer Affairs of the City of New York as a home improvement contractor. This finding justified the lower Court’s denial of defendants’ cross motion to dismiss the complaint “pursuant to CPLR 3211 (a)(7) for failure to plead that it was so licensed.” Great Am. Restoration Services, Inc. v. Patricia Lenti, et al., 2012 NY Slip Op 03140 (N.Y.A.D. 2 Dept., April 24, 2012).
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In Frontier Ins. Co. v. Nat’l Signal Corp. et. al., Civ. Action No. 98-4265 (E.D. Penn. November 9, 1998), the Federal District Court for the Eastern District of Pennsylvania addressed the circumstances under which a party who is not domiciled in the forum state may overcome a motion to dismiss for lack of personal jurisdiction.
In that case, Frontier Ins. Co (“Plaintiff”) brought a diversity action seeking to recover monies paid and expended under the terms of a Performance and Payment Bond (“Bond”). It was filed after judgment was rendered against Plaintiff in a prior suit. The prior suit was filed against Plaintiff by a supplier of National Signal Corp. (“National”) seeking payment for equipment sold to National. National contracted with another company for “design, refurbishment, and construction work on several railroad grade crossing signals in Pennsylvania” Id. at 1, and Plaintiff issued a Bond as security for that work. Plaintiff had a General Agreement of Indemnity (“Agreement”) with National, Joseph S. Banasiak and Kimberly A. Banasiak (collectively “Defendants,” individually “Defendant”). The Defendants were the owners, officers, and directors of National. The Agreement held National and the Defendants liable for indemnifying Plaintiff from any claims, payments or judgments that Plaintiff may incur because of the Bond. Id. at 2. As a result, Plaintiff initiated a lawsuit and Defendants filed a motion to dismiss, for among other things, lack of personal jurisdiction.
The motion was denied for the following reasons. The Court noted that when a defendant raises the defense of the court’s lack of personal jurisdiction, the plaintiff bears the burden of showing that there are sufficient contacts between the defendants and the forum to justify proper jurisdiction. See id. at 3. Under Pennsylvania law, “a court exercises jurisdiction to the fullest extent permitted by the Due Process Clause of the Fourteenth Amendment to the Constitution of the United States.” Id. at 3; 42 Pa. Con. Stat. Ann. § 5322(b). Pursuant to the Due Process Clause, the Defendants were responsible for establishing minimum contacts with Pennsylvania, the forum state, to establish that allowing the suit to continue forward in Pennsylvania would not “offend traditional notions of fair play and substantial justice.” Id. at 3.
To do this, the Defendants needed to first show that they acted in Pennsylvania thereby purposefully availing themselves of the benefits and protections of Pennsylvania law. See id. The Court mentioned that establishment of minimum contacts came when the connection and conduct within the forum state was such that the Defendants could reasonably anticipate being brought into court there. The court found that the Defendants had minimum contacts with Pennsylvania because the Defendants entered into the Agreement in their individual capacities thereby “stepp[ing] into [Plaintiff’s] shoes and themselves guaranteed the Pennsylvania construction work performed by National. Serving as a guarantor may amount to minimum contacts where, as in the instant case, the guarantor has a financial interest in the business or person whose obligation it guarantees.” Id. at 5. The Court noted that “[t]he Agreement itself is a contact by both of [the Defendants] individually with the construction work and therefore with Pennsylvania, and is sufficient to establish specific jurisdiction on a lawsuit arising out of the Agreement.” Id. at 6. Further, because performance of the Agreement was centered in Pennsylvania, the very purpose of the Agreement focused on Pennsylvania, and the Bond that was issued to support the transaction between National and the other construction company came as a result of that transaction being for work to be performed in Pennsylvania, the Court found that it was reasonable for the Defendants to have anticipated being haled into court in Pennsylvania in a “dispute over the indemnity Agreement.” Id. at 7.
Once minimum contacts were established, the Court needed to address whether assertion of personal jurisdiction comported with “fair play and substantial justice.” Id. at 7. To do this, the Court evaluated the “burden on the defendants, the forum’s interest in adjudicating the dispute, the plaintiff’s interest in obtaining convenient and effective relief, the interstate judicial system’s interest in obtaining the most efficient resolution of controversies, and the shared interest of the states in furthering fundamental substantive social policies.” Id. at 7. The burden was on the Defendants to evince that rendering jurisdiction in the forum state would be unreasonable. It was found that the Defendants did not carry their burden and did not offer any reason why being subjected to jurisdiction in Pennsylvania would be “so burdensome or so offensive to the interstate judicial system as to offend fair play and substantial justice.” Id. at 7. Ultimately, the Court concluded that Pennsylvania had personal jurisdiction over the Defendants and dismissed the motion on that ground.
The contacts a defendant establishes with a state in which a plaintiff seeks to file a complaint is important when assessing that states jurisdictional right over that defendant. If a defendant purposefully conducts business in a state and avails himself of the benefits of that state’s laws, he may have difficulty later contesting that state’s jurisdictional power.
© 2012 Nissenbaum Law Group, LLC
Recently, a Pennsylvania court was asked to determine the standard for finding personal liability against individuals under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”). Greg and Sandra, et al., v. A.T. Masterpiece Homes at Broadsprings, LLC, No. 1302 MDA 2011 (Pa. Super. Ct. 2012).
In that case, the court held that there would be personal liability because the jury found “misleading conduct.” The underlying facts involved a contractor who had constructed a home through his company. The assertion was that he had performed a substandard job which rose to the level of violation of the UTPCPL. The question was whether he would be personally liable for the acts of his company.
One of the bases for the Court’s ruling was that the individual principal of the contractor reassured the homeowners repeatedly that the work would be performed correctly and that he would take care of any of their concerns. This was critical to the determination that personal liability would be appropriate.
© 2012 Nissenbaum Law Group, LLC