Preti Attorneys Secure Significant Win for NH Construction Industry – NH Superior Court Rejects Bid to Expand Scope of Nullum Tempus

In City of Rochester v. Marcel A. Payeur, Inc. et al., the City of Rochester sued multiple parties after a water tower that it had built in 1985 sprung a leak.  New Hampshire has adopted the doctrine of Nullum Tempus, which means that statutes of limitations do not apply against the State.  The question for this case was whether cities and towns are immune from statutes of limitation.  Preti Flaherty attorneys Ken Rubinstein and Nathan Fennessy represented an ENR 50 Contractor who was named as a defendant in the litigation.

Although the NH Supreme Court has previously held that Nullum Tempus applies to claims brought by the State, the Superior Court soundly criticized the doctrine, and refused to allow municipalities to exercise the same rights.  This decision should help to limit the scope of liability for design professionals, contractors and subcontractors working on municipal projects, by allowing the statute of limitations to establish an outside date within which claims can be presented.

Maine Legislature Considers a Bill that Would Limit Indemnification Provisions in Construction Contracts

The Maine legislature is considering a bill that, if passed, would have a significant impact on Maine contractors and subcontractors.  LD-587 would make void and unenforceable any provision in a construction contract requiring the parties or their sureties or insurers to indemnify a promisee against liability arising from the negligence or willful misconduct of the promisee.  The bill has been referred to the Committee on Labor, Commerce, Research and Economic Development.

If passed, neither contractors nor subcontractors could be held liable for the actions of other parties to their contracts.  While there are currently some limits to what passes as an acceptable indemnity agreement in Maine, this law would significantly alter the risks of liability in many construction contracts, since owners frequently contract for broad indemnity agreements with their contractors.

The bill was introduced by Assistant Senate Majority Leader, Senator Andre Cushing (R-Hampden) at the request of the Associated Builders and Contractors of Maine.  While it is somewhat unusual for ABC Maine to support a bill limiting contractors’ rights to contract for indemnity from their subcontractors, ABC Maine states that it supports this bill because it holds parties responsible for their own actions, regardless of their leverage in contract negotiations. 

 A public hearing on the bill was held on March 17, 2015.  In oral testimony and written submissions, representatives of Maine contractors and subcontractors explained that they support this bill because they are frequently compelled to submit to onerous contract requirements given Maine’s competitive construction industry.  Opponents argued that the bill is vague, unnecessary, shifts risk from contractors to owners, and puts undue constraints on the free market.  They further argued that contractors should assume responsibility for workplace injuries since they should have primary control over the worksite and procure insurance for accepting that responsibility.

The bill currently remains pending in committee.  Similar bills have been brought before the Maine legislature several times in the past 20 years and have failed to pass. 

NH Supreme Court Limits Applicability of Consumer Protection Act to Construction Defect Cases

The New Hampshire Supreme Court confirmed in Murray v. McNamara, No. 2013-630 (N.H. March 20, 2015) that contractors are exempt from liability under New Hampshire’s Consumer Protection Act (RSA 358-A) for transactions occurring more than three years prior to the plaintiff learning of the alleged violation of the statute (though they may still have liability under other causes of action).  This issue arose in the context of a construct defect claim based on defendants’ purported breach of the implied warranty of workmanlike quality.  The defendants, owners of a construction business, constructed the house for the original owner in 2004.  Four years later, the plaintiffs purchased the home. After living in the house for several months, the plaintiffs discovered mold in in the house that was so widespread it forced them to vacate the property while they attempted to remedy the problem. 

The Defendants argued that the transaction was exempt from liability under the CPA because it was brought more than three years after construction was completed.  RSA 358-A:3, IV-a provides that “[t]ransactions entered into more than 3 years prior to the time the plaintiff knew, or reasonably should have known, of the conduct alleged to be in violation of [the CPA]” are exempt from the CPA.”  The federal courts in New Hampshire had interpreted this provision as being different from a statute of limitation because it “focuses on the plaintiff’s knowledge of the defendant’s wrongful conduct” to determine whether a transaction is exempt from the CPA rather than “the plaintiff’s knowledge of his injury and its [causal] relationship to the defendants’ conduct.”  The NH Supreme Court had not yet considered the issue since the provision was amended in 1996, but concluded in Murray that it agreed with the federal court’s interpretation finding that

To determine whether a claim is exempt from the CPA, we look back from the time that the plaintiffs “knew or reasonably should have known” of the alleged violation. If the transaction at issue occurred more than three years before that time, then it is exempt. The person claiming the exemption bears the burden of proving that the transaction is exempt. See RSA 358-A:3, V (2009).

The Court found there was no dispute that the transaction at issue - defendants’ alleged construction of the house with latent structural defects -  was completed in 2004 and that plaintiffs purchased the home four years later.  Because the allegedly wrongful transaction occurred more than three years before the plaintiffs “knew or reasonably should have known” of it, the construction of the house was an exempt transaction pursuant to RSA 358-A:3, IV-a.  The Court therefore reversed the trial court’s ruling on the CPA  claim, but left in place the jury award on the warranty claim against the contractor.

 

CPA claims are regularly included in complaints by plaintiffs against contractors because they provide an opportunity to recover attorneys’ fees and double or treble damages.  This decision should help limit the potential exposure of contractors for past construction defect claims by removing the plaintiffs’ ability to recover damages under the CPA for projects completed more than three years before the plaintiff knew of the conduct giving rise to the claim.  Contractors, however, will continue to have potential exposure to liability under other causes of action such as breach of warranty or breach of contract.