Doing business with government entities in Arizona has improved for real estate and infrastructure developers, thanks to a recent Arizona Supreme Court decision. The state and its political subdivisions are now subject to Arizona’s eight-year statute of repose, giving the government a deadline to file legal actions based on contracts for the design, development and construction of real property improvements. The new Arizona Supreme Court decision reduces the liability exposure for this line of government business.
In City of Phoenix v. Glenayre Electronics, Inc., 393 P.3d 919 (Ariz. 2017), the plaintiff sued the City of Phoenix for mesothelioma that he alleged resulted from long-term exposure to asbestos while installing and repairing water piping for water infrastructure projects. The City then sued eight contractors and 82 developers associated with the water infrastructure projects on which the plaintiff had worked, asserting the contractors and developers owed the City indemnity.
The projects the plaintiff cited as having exposed him to asbestos were completed more than eight years before the City’s third-party indemnity actions. Arizona’s statute of repose (Ariz. Rev. Stat. § 12-552) precludes starting or maintaining contract-based legal actions against people who design, construct or develop improvements to real property more than eight years after the project’s substantial completion. But the City asserted it was exempt from the repose statute by an ancient legal doctrine called nullum tempus occurrit regi, which means “time does not run against the king.” This doctrine, which has been enacted into statute in most states, exempts the government from time limitations that otherwise bar causes of action. As a result, contractors and business owners who did work for the state or its political subdivisions were on the hook indefinitely for lawsuits based on contracts.
The Arizona Supreme Court held that the statute of repose overrides nullum tempus occurrit regi. The Court affirmed the dismissal of the City’s claims against the contractors, finding them to be “based in contract” and, therefore, precluded by the statute of repose. The court, however, reversed the dismissal of the city’s indemnity claims against the developers, finding that these claims were based on a city code provision and not based in contract.
In Glenayre, the Arizona Supreme Court decided that the statute of repose trumps nullum tempus occurrit regi. Those who contract with Arizona governmental entities to design, construct or develop real property improvements now have the defense of the statute of repose’s eight-year time limit for contract-based claims.
Six steps to reducing the risk of litigation
The Glenayre decision increases the importance of what constitutes the substantial completion of each project and documenting when that occurs. The clock on the statute starts ticking when the project is substantially completed as defined in the statute. Other important steps to decreasing your risk of litigation include:
- Build as much protection as possible into your contract and understand exactly what it includes and does not include. Hiring an experienced construction attorney to help you negotiate and understand the contract can save you from substantial costs of litigation later.
- Establish a reliable record-keeping system to track all correspondence related to the project. This includes permits, change orders and anything related to the completion of your portion of the project.
- Create a job log to collect the notes and track the progress of the project. Even handwritten notes can help you if disputes arise.
- Photograph all phases of the project. Make sure to label and date each photograph. Create backups of your digital photos and store the backups in a separate digital location.
- Plan for contingencies in the project’s schedule and budget. Build in buffers to reduce the chance that you miss the deadlines contained in your contracts.
- Know your recourses when disputes arise. With most projects, it’s best to include the specific dispute resolution method and process in the contract.
Denise J. Wachholz has been a trial attorney in Arizona since 1987 and chairs the Construction Practice Group at Renaud Cook Drury Mesaros, PA. Please note: This article is not intended to provide and may not be relied on for legal advice.