Category Archives: Washington

Not So Fast: Washington Court Finds the One-Year Limitations Period in a Residential Construction Contract Is Unenforceable


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In Tadych v. Noble Ridge Constr., Inc., No. 100049-9, 2022 Wash. LEXIS 545, the Supreme Court of Washington (Supreme Court) considered whether the lower court erred in enforcing a one-year accelerated limitations period clause in a construction contract. The Supreme Court considered the extent to which the provision hindered the plaintiffs’ statutory rights – as set forth in Wash. Rev. Code § 4.16.310 – which provides homeowners with a six-year repose period for construction defect claims.  The court found that the contractual provision’s shortening of the time period from six years to one year was a gross deprivation of the plaintiffs’ statutory rights and was unfairly one-sided in favor of the defendant.  As such, the court held that the provision was substantively unconscionable and, thus, unenforceable.

The plaintiffs, Gregory and Sue Tadych, hired the defendant, Noble Ridge Construction, Inc. (Noble Ridge), to build a custom home.  Noble Ridge provided its standard contract, which included a warranty provision.  The provision stated that “any claim or cause of action arising under this Agreement, including under this warranty, must be filed in a court of competent jurisdiction within one year (or any longer period stated in any written warranty provided by the Contractor) from the date of Owner’s first occupancy of the Project or the date of completion. . . .”  The provision also stated that “any claim or cause of action not so filed within this period [was] conclusively considered waived.”

The plaintiffs occupied their new home in April 2014.  In April 2017, the plaintiffs hired construction experts who confirmed several construction defects in the home, including poor structural ventilation, water intrusion and code violations.  Shortly thereafter, roughly three years after the plaintiffs first occupied the home, they sued Noble Ridge.  Noble Ridge filed a motion for summary judgment based on the one-year limitations period in the contract.  The trial court agreed that the one-year limitation period in the contract barred the plaintiffs’ claims and dismissed the case.  The Court of Appeals for the State of Washington (Court of Appeals) affirmed.

As noted by the Supreme Court, the question of whether a contract is unconscionable is a question of law to be reviewed de novo.  Washington recognizes two categories of unconscionability: substantive or procedural, either one of which is sufficient to void a contract.    The court defined substantive unconscionability simply as “unfairness of the terms or results,” and focused its analysis on the effect the contractual provision had on existing statutory rights available to the plaintiffs.

Discussing Wash. Rev. Code § 4.16.310, the court noted that it provides homeowners a six-year statute of repose period to seek damages for construction defects, which begins to run at substantial completion or termination of construction services.  The court also noted that the public policy underlying the statute is to allow sufficient time to investigate a claim while protecting against defending stale claims.  The legislature balanced these two possible harms when it established the six-year statutory repose period.  Thus, the court found that the one-year limitations provision effectively abolished the plaintiffs’ statutory rights under § 4.16.310.  As stated by the court, the shortening of the limitations period from six years to one year was one-sided in favor of the defendant that the provision was unconscionable, and thus enforceable. Since the plaintiffs’ lawsuit was timely under the statute, the court reversed the Court of Appeal’s decision and reinstated the plaintiffs’ case.

The Noble Ridge case reminds us that Washington provides protections against unconscionable contract provisions, particularly those that significantly hinder a claimant’s statutory rights.  As such, subrogation professionals practicing in Washington should consider this decision when reviewing accelerated limitation provisions as there may be legitimate challenges to substantively unfair terms.

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Gavel

Washington Court Finds that Statute of Repose Fraud Exception Argument Lacks Energy


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Statutes of repose are generally meant to be absolutes, providing clarity to potential defendants such as contractors. However, in limited scenarios, some states have allowed for exceptions to the defense. For instance, fraud is one potential exception that has been recognized in several jurisdictions and is often raised by parties on the basis of public policy. In Puget Sound Energy, Inc. v. Pilchuck Contractors, Inc., No. 80162-7-1, 2020 Wash. App. LEXIS 2862 (unpublished), the Court of Appeals of Washington determined whether it would allow a fraud exception to its statute of repose for construction activity. The court upheld the trial court’s holding that the statute of repose barred the appellant’s claims, declining to entertain a fraud exception. Continue reading

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Signing Agreement

What Did the Contract Say Again? Preventing Application of a Prime Contract Based Solely on Generic Incorporating Language in the Subcontract


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In Edifice Constr. Co., Inc. v. Arrow Insulation, Inc., No. 79407-8-1, 2020 Wash App. LEXIS 359, the Court of Appeals of Washington considered whether subcontractors could be bound by the arbitration clause in a contract between an owner and a general contractor. In determining that the subcontractors were not bound by the arbitration clause in the prime contract, the court found that the general contractor failed to meet its burden of showing that the subcontractors were on notice of the specific terms of the prime contract. Continue reading

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Time

Washington Court Tunnels Deeper Into the Discovery Rule


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Often times, properly analyzing when a statute of limitations begins to run – not just how long it runs – is crucial to timely pleading. In Dep’t of Transp. v. Seattle Tunnel Partners, 2019 Wash.App. LEXIS 281 (Was. Ct. App. Feb. 5, 2019), Division Two of the Court of Appeals of Washington addressed when the discovery rule starts the statute of limitations clock on a negligence cause of action. The court held that the statute of limitations begins to run when the plaintiff knows that the factual elements of the claim against the defendant exist. The clock starts to run even if the plaintiff wants to investigate the possibility of other contributing factors or the defendant identifies opposing viewpoints on the theory of the claim. Continue reading

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Application Of The Economic Loss Rule In Construction Cases In Washington Is A Fact Intensive Inquiry


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By: Edward A. Jaeger, Jr. and William L. Doerler

In Donatelli v. D.R. Strong Consulting Engineers, Inc., 312 P.3d 620 (Wash. 2013), the Supreme Court of Washington, in a 5-4 decision, addressed the application of the economic loss rule – more properly considered the independent duty doctrine – in a case where the plaintiffs alleged that the defendant committed professional malpractice. Although the court concluded that the plaintiffs’ negligence and negligent misrepresentation claims were not barred by the economic loss rule, the analysis adopted by the Supreme Court requires trial courts to engage in an analysis of the applicable contract’s terms before analyzing whether the defendant-design professional owed the plaintiff or plaintiffs duties arising independent of the contract.

In Donatelli, the plaintiffs, Karen and Steve Donatelli, hired defendant D.R. Strong Consulting Engineers, Inc. (D.R. Strong) to assist them with developing their real property into two short plats. According to the Donatellis, D.R. Strong orally agreed to, among other things, prepare drainage and soil erosion plans, prepare necessary reports and County permit applications, and take all other actions necessary to get the plats recorded. D.R. Strong represented that it would be able to finish the project within one and one-half years at a cost of approximately $50,000. In October of 2002, D.R. Strong secured preliminary approval of the plats from the County. The approval was valid for a period of 60 months. After D.R. Strong secured the preliminary approval, it sent the Donatellis a “revised” proposal for engineering services. In the revised proposal, D.R. Strong agreed to perform six phases of engineering services for an estimated fee of $33,150. Mr. Donatelli signed the proposal. After Mr. Donatelli signed the revised proposal, D.R. Strong purportedly assumed a managerial role over the project and worked closely with other contractors, builders and vendors involved with the project. Ultimately, D.R. Strong charged the Donatellis a fee of approximately $120,000 for its services.

In October of 2007, the preliminary approval for the plats expired and the project was still not complete. Before D.R. Strong could obtain a new preliminary approval, however, the Donatellis suffered substantial financial losses and, eventually, lost the property in foreclosure. Consequently, the Donatellis sued D.R. Strong, claiming damages in excess of the sum of $1.5 million. In their complaint, the Donatellis asserted, among other things, negligence and negligent misrepresentation claims. D.R. Strong moved for partial summary judgment on the Donatellis’ negligence and negligent misrepresentation claims, arguing that these claims were barred by the economic loss rule. The trial court denied the motion and the Court of Appeals affirmed the trial court’s decision, holding, based on the independent duty doctrine, that because professional engineers owe duties to their clients independent of any contractual duty, the Donatellis’ negligence and negligent misrepresentation claims were not barred. The Supreme Court granted D.R. Strong’s petition for review.

To address D.R. Strong’s claims, the Supreme Court set forth a brief history of Washington’s application of the economic loss rule. As noted by the court, the state, historically, applied the rule to bar a plaintiff from recovering in tort when the defendant’s duty to the plaintiff was governed by contract and the plaintiff’s only damages were economic damages. In construction cases, however, the economic loss rule is considered a misnomer as the phrase “independent duty doctrine” more accurately describes how Washington courts determine whether a contracting party in a construction case can seek tort remedies from another party to the contract.

Pursuant to Washington’s independent duty doctrine, “an injury is remediable in tort if it traces back to the breach of a tort duty arising independent of the terms of the contract.” For example, a design professional may be sued in tort because, in addition to contractual duties, design professionals owe duties to their clients and to the public to act with reasonable care. However, in order to determine whether a design professional’s duties arise independent of his or her contractual duties, a court must first determine what terms the parties have agreed to, contractually, because, in some cases, a contract may address the professional’s common law duty to act with reasonable care. In addition, although design professionals generally have written contracts setting forth their obligations, engineers may assume additional professional obligations by their affirmative conduct. Thus, regardless of whether a plaintiff’s claims are framed in contract or in tort, the first step in analyzing a plaintiff’s professional malpractice claim is to determine the scope of the professional’s obligations.

Applying this analysis to the Donatellis’ negligence claim, the court held that questions of fact remained as to the scope of what D.R. Strong agreed to do contractually and what obligations it assumed by its affirmative conduct. Thus, it was impossible to determine, as a matter of law, what professional obligations D.R. Strong owed to the Donatellis, contractually or otherwise. Because the court could not determine the scope of D.R. Strong’s contractual obligations, it could not determine, as a matter of law, if any of D.R. Strong’s duties arose independent of the contract. Consequently, the court held that the trial court properly denied summary judgment in D.R. Strong’s favor with respect to the Donatellis’ negligence claim.

With respect to the Donatellis’ negligent misrepresentation claim, the court, applying an independent duty doctrine analysis, stated that a plaintiff seeking solely economic damages can pursue a negligent misrepresentation claim so long as the duty not to commit negligent misrepresentation is independent of the contract. The court found that D.R. Strong’s duty to avoid misrepresentations that induced the Donatellis to enter into a contract arose independent of the contract and that the Donatellis did not, in their subsequent contract, assume D.R. Strong’s duty to avoid misrepresentations. Thus, the court held that the Donatellis’ negligent misrepresentation claim was not barred by the independent duty doctrine.

In light of the foregoing, a defendant in a construction-related professional negligence action who seeks to preclude a plaintiff from pursuing tort claims based on the independent duty doctrine (formerly referred to as the economic loss rule) will need to, preliminarily, establish the terms of any contractual agreement between the parties. If the court cannot determine a contract’s terms as a matter of law, a defendant sued in the State of Washington should not be entitled to judgment as a matter of law with respect to a defense based on the independent duty doctrine.

For more information regarding this alert, please contact Ed Jaeger (215.864.6322 / jaegere@whiteandwilliams.com) or Bill Doerler (215.864.6383 / doerlerw@whiteandwilliams.com).

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