Nexus Between Work Performed and Cause of Action is Required for Six-Year Statute of Limitations to Run From Termination of Services

Recently, Division II of the Washington Court of Appeals held that for the six-year time period specified in RCW 4.16.326(1)(g) to run from the termination of services, rather than substantial completion of construction, there must be some nexus between the construction work performed at the claimed termination of services date and the cause of action.

In Dania, Inc. v. Skanska USA Building Inc., Dania, Inc. (“Dania”) contracted with Skanska USA Building, Inc. (“Skanska”) for the construction of a distribution warehouse in DuPont, Washington.  185 Wn. App. 359, 340 P.3d 984 (Div. 2, December 30, 2014).  Skanska subcontracted with McDonald & Wetle, Inc. (“M&W”) for the construction of the complete roof system.  A temporary certificate of occupancy was issued on December 21, 2005.  In January 2006, Dania received permission from the City to use the full square footage of the warehouse.

A punch list was issued on February 14, 2006.  The list showed among the remaining work, installation of a final layer of roofing known as the “mineral cap sheet.”  M&W installed the mineral cap sheet component on June 21, 2006.

In November 2006, Dania noticed leaks in the building.

On April 4, 2012, Dania filed suit against Skanska and M&W.  Dania alleged that the roof was leaking because the roofing materials were not properly installed, and claimed damages of almost $400,000.

Skanska moved for summary judgment, arguing that Dania’s lawsuit was untimely because it was filed more than six years after January 2006, the project’s substantial completion date.  Skanska also argued that the June 2006 cap sheet work did not postpone the running of the statute of limitations, because the work was unrelated to Dania’s lawsuit.

Deposition testimony from Skanska’s Project Manager indicated that the roof was watertight before installation of the mineral cap sheet.  He further testified that the mineral cap sheet was for UV protection and not water tightness.  During the trial court’s summary judgment proceedings, Skanska maintained that the limitation period could not start running when the mineral cap sheet was installed in June 2006 (the termination of services date), because the June work had nothing to do with the leaks.  Dania presented no evidence to the contrary.  The trial court agreed with Skanska that the only evidence on record was that the mineral cap sheet had nothing to do with the leaks.  Thus, the limitation period ran from the date of substantial completion, and that Dania’s action was time barred.  Dania appealed, and the Court of Appeals reversed.

The applicable statute was RCW 4.16.326(1)(g), which provides in pertinent part:

(1)   Persons engaged in any activity defined in RCW 4.16.300 may be excused, in whole or in part, from any obligation, damage, loss, or liability for those defined activities under the principles of comparative fault for the following affirmative defenses:

*  *  *

(g)        To the extent that a cause of action does not accrue within the statute of repose pursuant to RCW 4.16.310 or that an actionable cause as set forth in RCW 4.16.300 is not filed within the applicable statute of limitations.  In contract actions the applicable contract statute of limitations expires, regardless of discovery, six years after substantial completion of construction, or during the period within six years after the termination of the services enumerated in RCW 4.16.300, whichever is later.

As noted, RCW 4.16.326(1)(g) terminates any construction contract claim six years after substantial completion or termination of services enumerated in RCW 4.16.300, whichever is later.

The Court stated that substantial completion occurs when the entire improvement, not just a component part, may be used for its intended purpose.  The fact that additional contract work remains, including punch list work, does not affect the conclusion that a project is substantially complete if it is otherwise fit for occupancy.  Dania conceded that the warehouse was substantially complete when it was ready for use in January 2006.  Relying upon Parkridge Associates, Ltd. v. Ledcor Industries, Inc., 113 Wn. App. 592, 599-600, 54 P.3d 225 (2002), the Court agreed with Skanska that the language contained in RCW 4.16.300, describing actions or claims “arising from” various services shows that there must be a nexus between the service performed after the date of substantial completion and the cause of action in order for the termination of services date to extend the limitations period.  The Court stated that this requirement protects those who perform earlier services from remaining exposed to liability until all services are completed by all contractors.

After presenting evidence that the roof was water tight upon substantial completion and before installation of the cap sheet, Skanska argued that the nexus requirement is satisfied only with rebuttal evidence of a causal link between the final services of installing the cap sheet and the cause of action.  Because Dania did not respond with any such evidence, Skanska maintained that dismissal was appropriate.  Dania, on the other hand, maintained that there was an issue of fact concerning the nexus requirement without the evidence of causation that Skanska required.

The Court found that the required connection was arguably satisfied in this instance by the location and timing of the June 2006 roof work and the November 2006 leaking.  The Court found that “the fact that the roof was watertight in January did not show, in and of itself, that the subsequent cap installation did not affect the roof’s ability to withstand moisture.”  The Court did not require Dania to present additional evidence of a causal link to withstand summary judgment.  The Court declined to interpret the nexus requirement to impose the burden Skanska sought to impose on Dania.  Viewing the evidence in the light most favorable to Dania, the non-moving party, a genuine issue of material fact was raised as to whether a connection existed between installation of the cap sheet in June 2006 and the leaking that followed in November 2006.

A concurring opinion was filed by Judge Maxa.  He agreed with the majority opinion that the trial court’s grant of summary judgment in favor of Skanska should be reversed.  He concurred because he believes that under RCW 4.16.326(1)(g), the statute of limitations begins to run at termination of the defendant’s construction services, even if those services do not relate to the plaintiff’s claim, rather than at substantial completion, assuming that the date of termination of services is later than the date of substantial completion.

Comment:  Skanska successfully obtained a published decision that holds that there must be a nexus between the service performed after substantial completion and the cause if action in order for the termination of services date to extend the suit limitation period.  Unfortnately, the Court thought Skanska tried to argue that Dania had the burden to prove a nexus to defeat summary judgment.  Skanska actually argued that it presented evidence that the roof was watertight and that the cap sheet was not related to any leaks, and the burden shifted to Dania to prove otherwise.  Skanska was simply arguing the rules of summary judgment and shifting of the burden of evidence.  Dania presented no evidence to the contrary and simply relied on the fact that the roof leaked in November 2006.  Interestingly, the Court stated that Skanska did not rule out “moisture.”  Yet, those arguments and that alleged fact were never raised by Dania.

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