How to Benefit From a Shorter Statute of Limitations
For design professionals there are legal advantages to doing business in Michigan. One of them is that if a claim for professional negligence is made, Michigan law allows the professional to demand that the court allocate negligence among all responsible parties, whether or not the others have been sued. MCL 600.6304. This eases some of the nightmarish risk of defending against a meritless claim by guaranteeing that the design professional cannot be held responsible for others’ negligence without prior agreement. Most states do not have this rule.
One area in which Michigan lags behind some other states, however, is in its statutes of limitations applicable to design professionals. The current rules rely upon hair splitting distinctions which, without any apparent logic, can subject design professionals to vastly different results. Since a statute of limitations defense can provide the fastest way to get a case dismissed, this article suggests some ways a design professional might get the best treatment.1
In a lawsuit, the first line of defense is whether the plaintiff has brought suit in time, that is, whether he complied with his legal obligation to bring suit within the time period prescribed by the applicable statute of limitations. If not, the court will be obliged to dismiss the case unless there is an established exception. If the plaintiff has failed to file his case timely, it may be possible to get it dismissed early in the court process, without having to defend the case on its merits.
Michigan’s statutes of limitations cover design professionals in two basic ways. One set of statutes, MCL 600.5838(2) and 600.5805(6), taken together require a lawsuit against “a member of a state licensed profession” to be filed within two years from the professional’s discontinuance of work on the project, or within six months of discovery of the problem, whichever is later (the “General Rule”). Unfortunately, the General Rule is subject to an exception found in another statute applicable specifically to “state licensed architect[s] or professional engineer[s].” MCL 600.5839(1) allows at least six years to bring certain lawsuits (the “Exception”). The difficulty of defending against a six year old problem is immense and many cases are settled simply because of those difficulties. Yet, there may be ways to improve the chances that the shorter limitation period of the General Rule will apply. Design professionals and their counsel should evaluate each claim with an eye toward the distinctions.
The Exception applies to the following classes of cases only:
- “[D]amages for any injury to property, real or personal, or for bodily injury or wrongful death,”
- “[A]rising out of the defective and unsafe condition of an improvement to real property,”
- “[A]gainst any state licensed architect or professional engineer performing or furnishing the design or supervision of construction of the improvement…”
The italicized terms may present opportunities for a design professional to avoid the Exception’s longer limitations period. For example, what constitutes “injury to property,” “wrongful death” or “bodily injury” has been litigated in Michigan over the years and the case at hand may not fit. Similarly, is the plaintiff alleging both a “defective” and an “unsafe” condition of the particular “improvement”? Is the “improvement” to real property or to personal property? Is it an “improvement” at all? Finally, did the design professional either “perform” supervision of construction or furnish the designs? If any of the above elements are not met, then the Exception should not apply and the shorter two year General Rule may allow for dismissal.
Importantly, a court may be willing to invest more time than usual in these arguments at an early stage if the court knows that a stale claim can be removed from its docket. Judges are rightfully leery of trying cases involving old claims, which by their nature have documentary gaps, missing key witnesses and flawed memories. If a plaintiff’s complaint has been filed more than two years after the project was completed and lacks sufficient allegations to either extend the General Rule or prove the Exception, a motion to dismiss under the General Rule is good strategy.
In order to enhance their arguments, design professionals should also put language in their contracts to help define away some of the Exception’s key elements to give a court something direct and persuasive upon which to rely in ruling on a dismissal motion. Some of them are obvious. For example, if the professional is not expected to provide plans, then the contractual documents should exclude that possibility. If the professional is not supervising construction, then language saying that should be included. At the end of this article, we suggest some contract language that a design professional might use, oriented toward avoiding the Exception’s six year limitation period.
Contract vs. Negligence in Michigan’s Statutes of Limitations
If a design professional is successful in getting a court to apply the General Rule’s two year limitation period, then a plaintiff may try to evade dismissal by adding a breach of contract claim. Under Michigan law, a breach of contract claim is timely if filed within six years. MCL 600.5807. If a plaintiff is confident that the Exception’s six years will apply, then he will have no need to get creative this way. Still, plaintiffs attempt this, particularly if the shorter period of the General Rule may result in a dismissal. They argue that since they had a contract for the design professional’s work, a failure to perform that work adequately is a breach of the contract, in addition to negligence.
Michigan’s courts have ruled that a breach of contract claim against a design professional is governed by the General Rule’s two year limitation rather than the six year breach of contract limitation if the crux of the dispute is the design professional’s alleged failure to perform in accordance with customarily accepted good professional practices. Reasoning that a plaintiff should not be able to do an end run around the deliberately more stringent limitation period for professionals, the courts have upheld dismissal of time barred claims under General Rule even when coupled with contract claims. There are exceptions, of course, for contract claims that arise from contracts not related to professional services. For example, if a design professional fails to pay the office rent or the photocopying charges, he or she may still be sued in contract and the longer limitation period will apply.
How Does This Work in Real Life?
KOM recently defended a design professional in circumstances where these issues came into focus. In 2002 our client provided professional services in Michigan for a solid waste facility. In 2006 a problem surfaced and the solid waste facility assigned its rights to the contractor for the 2002 project, who then sued our client in Texas state court in early 2007. We removed the case to federal court and won a dismissal of the Texas case due the fact that jurisdiction was improper. The plaintiff then sued our client in Arizona state court. We again removed the case to federal court and won another dismissal due to improper jurisdiction. We hoped that the dispute would die after four courts in two states.
Unfortunately, the plaintiff re-filed the lawsuit in federal court in Michigan in late 2007. Careful evaluation of the statute of limitations revealed that under the General Rule, the lawsuit was too late. The plaintiff’s forum shopping in Texas and Arizona had resulted in so much passage of time that the clock had run out. On the other hand, if the Exception applied or if a breach of contract theory was given any life, the lawsuit was timely. Our task, then, was to evaluate the case carefully against the Exception’s elements and convince the court that our client’s professional services fell within the General Rule and outside the Exception. Second, we had to show that the contract claims were derivative of the professional negligence claims and subject to the General Rule. Our resulting motion to dismiss was granted on both points and the case was dismissed, the court writing a lengthy opinion holding that the General Rule applied, the Exception did not and the contract theories did not extend the limitation period.
This experience shows the importance of taking advantage of all of the procedural defenses that are available in good faith, from contesting jurisdiction to relying upon the statute of limitations. Looking forward, it also shows the importance of making sure that contract documents exclude the possibility of longer limitation periods, as much as possible.
Suggested Contract Language to Avoid Stale Claims
The following contractual language may help a design professional avoid Michigan’s longer statutes of limitations under the Exception and attempted contract theories:
Client agrees that any claim under this Agreement shall be brought within the time period set forth in MCL 600.5838(2) and MCL 600.5805(6), governing claims against state licensed professionals for failure to perform in accordance with the applicable standard of care. Client agrees that Consultant’s work under this Agreement is not performed pursuant to a special agreement under Michigan law.
Client agrees that Consultant is not performing or furnishing designs or supervision of construction of any improvements to real property under this Agreement.
1.This article is prepared for the purpose of general information and is not intended to provide legal advice regarding any specific legal matter. Readers should seek legal counsel regarding any specific legal matters.