In Ambrosia Land Investments, LLC, v. Peabody Coal Company
(7th Circ., Doc. No. 07-1945) the Seventh Circuit tackled the
fascinating question of whether or not the Illinois Construction Statute of
Repose applied to a coal mine. While we
may not think this would be interesting to everyone, the construction statute of
repose is actually a fun topic, and the 7th Circuit did a great job
of covering the topic.
The plaintiffs brought an action in 2002 and later amended their complaint in 2005 alleging negligence in the design, construction, operation and maintenance of the sewer system, that the backup was a temporary nuisance, and also brought an action in trespass against the city. The city responded in a motion for summary judgment that the claims were barred under the statue of repose (735 ILCS 5/13-214), that the tort immunity act applied (745 ILCS 10/2-201) to protect the city from suit, and that it was not liable because the backup occurred during an extraordinary rainstorm.
In adjudicating the repose claim, the court said that the statute of repose applied only to the construction and improvements of real property. Because the plaintiff had alleged that the design installation and construction of the sewer station was at fault, the court found that these allegations were barred by the statute of repose when the design, construction and installation had occurred more than ten years prior to the filing of the lawsuit.
The court went on to find that the statute did not protect the city from the claims that the maintenance and operation of the sewer system and the lift stations that occurred after their installation and within the ten year period were negligent.
The court cited a previous case, Prochnow v. Elpaso Golf Clib, Inc., 253 Ill. App. 3d 387, finding that while those claims that involved the design, construction, supervision, observation or management of the construction were exempt if the acts were outside of the ten year period, the persons responsible for possession or control and suppliers of the materials used in the maintenance and operation were subject to liability for reason of construction defects.
The court then went on to address the city's claim of immunity. Holding that the statute protects only those acts of a municipality that are shown to be both an exercise of discretion and a policy determination, the court stated that acts which are ministerial are not protected. After a discussion of the differences between policy determinations, acts of discretion, and ministerial acts, the court found that because the city's operation of the sewage system was subject to statutory and regulatory guidelines the actions were ministerial, and that there were material issues of fact concerning whether or not the city complied with those guidelines. "Once a municipality decides to perform pubic work, the municipality must perform the public work with reasonable care and in a nonnegligent manner" (Slip Op. at 13).
The court also found that the determination of what might amount to an extraordinary sum of rainfall was not before the court and presented a question of fact for the jury.
The appellate court reversed the trial court's grant of summary judgment to the extent it was inconsistent with the appellate opinion.
Of note to design professionals and construction companies is the application of the ten year statute of repose. Getting done with the work and getting out will start the clock running on the ten year period. However, if follow up maintainance work is performed, that work is still potentially the subject of litigation. More importantly for many claimants is the willingness of the court to interpret the immunity statute and discern between policy, discretion, and ministerial acts. It should not be overlooked that too often courts are willing to apply the immunity statute without adherence to the guidelines or undertaking the analysis to determine the exact nature of the act, perhaps inspections, construction, and maintenance can all be pled correctly to make certain the municipality has to explain its actions rather than simply pleading immunity.
Here's a reminder from the Northern District of Illinois Bankruptcy Court. In Vancil v. Tres Amigos (docket #06-71254) the owner of a property, Tres Amigos, was looking to extinguish liens filed by two subcontractors of Vancil. Tres Amigos brought the action to extinguish the liens where the two subs had not properly served Tres Amigos with their 90 day notices under the Illinois Mechanic's Lien Act.
A problem arose when the Court noted the Tres Amigos had never made one of the subs a party to the action and that it failed to assert a claim against the other sub, which was a co-defendant. The Court pointed out the Tres Amigos would likely have prevailed on its claim, had it not failed to properly plead actions for which relief could be granted against the subcontractors.
We haven't seen as much discussion as would seem to be merited by the provisions of the Illinois Contractor Prompt Payment Act (815 ILCS 603/1 et seq.). This act has written itself into every construction contract in the State of Illinois (excepting public works, single family homes and buildings with fewer than 12 family units, of course). This lack of constructive commenting is likely because the Act didn't become law until August 31, 2007. However, from the comments and criticisms we have seen, there's an extremely important and sure to be contested issue that needs to be addressed: Is it possible to "opt" out of the provisions of the Act?
The original version of the House Bill (HB 0743) that introduced what later became the Act included language at the beginning of Section 10 which read:
- "Construction contracts. All construction contracts shall be deemed to provide the following unless they expressly exclude the provisions of this Act"
This provision was the sole subject of Senate Committee Amendment No. 1, which was adopted by the Senate and the House and incorporated into the Act and struck the "unless they expressly exclude the provisions of this Act" language from the Act.
This creates a strong argument for anyone wishing to claim that it was the express intent of the legislature to not allow parties to "opt" out of the act. Combine this with the ideas that the public policy of the act was to ensure prompt payment to contractors and subs as defined by the Mechanic's Lien act; to allow contractors and subs an additional recourse should payments not be forthcoming; to shorten the time it takes for payment and approval of work, and we end up with a decent case that parties could end up contracting around the act for naught.
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