The Repose Statute: A Misnomer?

In 1967, the New Jersey Legislature passed a statute designed to generate "repose" for contractors, architects and engineers from all claims arising out of construction/design defects of a hazardous nature ten (10) years from project completion. N.J.S.A. 2A:14-1.1. Over the years, the statute's protected class enjoyed the benefit of this repose and the courts reinforced that sense of tranquility by: (a) refusing to extend the ten-year period based upon any "discovery rule" or the infancy of an injured plaintiff (concepts applicable to statutes of limitations and which lead to an endless exposure to claims); and (b) uniformly and quite matter-of-factly reasoning that the repose statute applied to claims of government agencies.

Two recent appellate decisions radically changed the rules of the game so as to eviscerate the repose statute's promised tranquility. The statute's immunity was held not to extend to claims by government agencies. See Rutgers v. Grad Partnership, 269 N.J. Super. 142 (App. Div. 1993), certif. denied, 135 N.J. 470 (1994); Cruz Construction Co. v. State of New Jersey, 279 N.J. Super. 241 (App. Div. 1995).

The Rutgers case held that the doctrine of nullum tempus occurrit regi (no time runs against the sovereign) insulated government claims from the immunity granted by the repose statute. This concept is a common law doctrine historically designed to protect the government from lackadaisical or over-worked public officials who inadvertently fail to timely file suit on behalf of the government. Prior to the Rutgers, this doctrine had been viewed as applying only to typical statutes of limitations, whose time limits were triggered by the date a claim "accrued;" no reported case, during that time period, had suggested the nullum tempus trumped the immunization of the repose statute, as to which claim accrual was an irrelevancy and, as to which, even the utmost diligence in claim prosecution might not preserve the claim. Rutgers' impact was to leave all who were previously believed to be fully protected by the repose statute suddenly at risk of being subjected to substantial claims on all completed projects, no matter how long ago they were completed.

The "good news" was that nullum tempus was abrogated as a result of a 1991 decision by the Supreme Court of New Jersey. Newark Beth Israel v. Gruzen, 124 N.J. 357 (1991). (The Rutgers case was filed prior to the doctrine's abrogation, but decided thereafter.) Stripped of the "shield" of nullum tempus, government claims would clearly be exposed to the repose statute. However, the "bad news" is that, in the Cruz case handled by Connell Foley LLP and, decided in February of this year, the Appellate Division ruled that a new ten-year statute of limitations, N.J.S.A. 2A:14-1.2, strictly applicable to government claims and precipitated by nullum tempus' abrogation, served as a substitute government shield against the repose statute.

As a result of the rulings in Rutgers and Cruz, it can be said that the repose statute does not apply, and has never applied, to government claims. Government contractors, architects and engineers are, therefore, forever at risk of being sued by public agencies with regard to construction defects of a hazardous nature. Such suits can take the form of an affirmative claim for relief or a claim for contribution or indemnification. Where the claim is an affirmative claim for replacement or major repairs due to a hazardous defect yet to cause damage to person or property, contractors are peculiarly vulnerable in that they may well not have insurance coverage for such "poor workmanship" liability and, if, as in Cruz, the public agency also elects to sue under the contractor's performance bond, the ramifications of the Rutgers and Cruz decisions extend beyond the corporate contractors to their principals and their families by virtue of the usual personal guarantees serving as a predicate for issuance of the performance bond. Given the potential enormity of such government claims (e.g., the Cruz suit is for $31 million ), the consequences of pro-government verdicts can be quite devastating.

The Supreme Court of New Jersey has yet to address the issue of the relationship to the repose statute of either nullum tempus or N.J.S.A. 2:14-1.2. It had an opportunity to review the Rutgers case, but opted not to do so and had a second chance to examine these issues when Connell Foley LLP filed an unsuccessful motion in Cruz for leave to appeal from the Appellate Division's decision. As the law currently stands, the "repose" promised by the repose statute is clearly an illusion. Inconsistently, private claimants will continue to face the potential bar of both an accrual-based statute of limitations and the immunity afforded by the repose statute, while, on the other hand, public-agency claimants will simply be confronted with an accrual statute, generally N.J.S.A. 2A:14-1.2. Given the Supreme Court of New Jersey's reluctance to examine these issues, the most expeditious solution to Rutgers and Cruz may be legislative action.

For further information about this subject, please contact John F. Neary directly, who represented Cruz Construction Co. in the Cruz case discussed in this article.