In a recent unreported decision, the Appellate Division declined to reinstate a contract suit filed by the Passaic Valley Water Commission claiming that the renovations performed to its water treatment facility were defective. The Court in Passaic Valley Water Commission v. Prismatic Development Corp. 2013 WL 5508055, ruled that the Commission could not pursue Prismatic, its subcontractor, ITT Water & Wastewater, Leopold, Inc., or its insurer US Fidelity & Guaranty Co., for a breach of contract suit resulting from work on a water treatment plant in Little Falls, NJ because the action was not timely filed.
According to the Complaint, the Commission contracted with Prismatic and Leopold in 2001 to perform plant renovations, including the renovation of twenty-four large water filters at the site. The contracted work was completed in May 2004, and in August 2005 a single filter failed. The Commission investigated the issue, and determined that possible construction deficiencies existed. In October 2005, the Commission began to experience repeated failures, and Prismatic and Leopold were enlisted to develop a plan for repairs, which were performed during the following five years.
In January 2011, the Commission informed Prismatic and Leopold that if they failed to timely address the repair issues at the plant, the work would be put out for public bidding, and the Commission would seek to recover costs from Prismatic and Leopold. In October 2011, new contractors were retained by the Commission. Concurrently, the Commission filed the underlying contract suit in the Superior Court of New Jersey, Passaic County.
Defendants sought Summary Judgement, arguing that the six-year Statute of Limitations began to run in August 2005, when the first failure was discovered, thus requiring the Commission to file suit by August 2011. The Defendants argued that the Commission’s October 2011 Complaint was approximately 2 months late, a fatal flaw that the Commission could not overcome under the New Jersey Statute of Limitations law. The Trial Court agreed, and the action was dismissed. The Commission thereafter appealed.
On Appeal, the Court rejected the Commission’s argument that, due to the complexity of the system at issue, the Commission could not have been put on notice of construction deficiencies alleged until the entire system failed in October 2005. The Commission noted that the failure of a single filter in August 2005, was not sufficient to put the Commission on notice of the cause of action, due to other factors which could have been responsible for the failure.
The Appellate Division disagreed, and held that the first failure in August 2005 triggered the running of the Statute of Limitations, irrespective of the size or complexity of the system at issue. The Court reasoned that pursuant to the longstanding discovery rule, the Statute of Limitations begins to run when the “plaintiff is aware of facts that would alert a reasonable person to the possibility of an actionable claim [and] legal certainty is not required.” The Court held that it was “of no moment that the Commission did not learn of the extent of the injury until subsequent failures occurred… [n]or is it significant that the Commission did not allegedly learn with certainty the cause and responsible party until it conducted a thorough investigation. Discovery under the rule occurred in 2005, [at which point] the Commission had six more years to file suit.”
With its decision, the Appellate Division demonstrates the Court’s unwillingness to expand or alter the otherwise well-grounded statute of limitations principals. Here, the Court was faced with a multi-functional complex system which underwent systemic failure over the course of several years. Nonetheless, the Court did not give any credence to Plaintiff’s claim that the full nature of the issues was not discoverable until the entire system failed, but rather placed the onus of discovery and timely filing on the Owner. As such, the long-standing and heavily relied upon tenets of the Statute of Limitations have not been disturbed, and same remains a viable defense in matters where the facts allow its invocation.
By Russ M. Patane, Esq.