In Gaston County Board of Education v. Shelco, LLC, 2022 WL 3363819 (N.C. App. Aug. 16, 2022), a North Carolina appellate court held that when a construction project involves multiple contractors, the statute of repose begins to run as to each contractor when its work is completed, rather than when the entire project is completed, but still refused to dismiss the claim because the date of completion was not clear from pleadings.
In 2009, Plaintiff Gaston County Board of Education entered into a contract with defendants Shelco, LLC (“Contractor”), S&ME, Inc. (“Engineer”), and Boomerang Designs, P.A. (“Architect”). Architect subcontracted with Campco Engineering, Inc. (“Subcontractor”), for work related to reinforced slopes and retaining walls around an athletic complex. Construction of this portion of the Project was completed in 2011 and Plaintiff discovered cracks in the retaining walls in 2012.
On May 15, 2013, Plaintiff, Contractor, and Architect signed a Certificate of Substantial Completion for the Project as a whole, representing the entire project was completed. Engineer and Subcontractor did not sign the certificate. Plaintiff, Contractor, Engineer, Architect and Subcontractor executed a tolling agreement that was effective from March 1, 2019 until September 15, 2020.
In November 2020, Plaintiff sued Contractor, Engineer, Architect, and Subcontractor, alleging the constructed retaining walls were defective. Each defendant moved to dismiss arguing the six-year statute of repose barred Plaintiff’s claims.
The North Carolina statute of repose states: “[n]o action to recover damages based upon or arising out of the defective or unsafe condition of an improvement to real property shall be brought more than six years from the later of [1] the specific last act or omission of the defendant giving rise to the cause of action or [2] substantial completion of the improvement . . . or specified area or portion thereof.
The trial court granted the motion to dismiss as to the claims against the Engineer and the Subcontractor. The Trial Court held that because the Engineer and Subcontractor did not sign the Certificate of Substantial Completion, simply filing the lawsuit within six (6) years of the Certificate was not sufficient to prove the statute of repose was met.
Plaintiff appealed the dismissal of the claims against the Engineer and the Subcontractor. The appellate court reversed the trial court’s dismissal. The Court emphasized that Plaintiff has the burden of proving that a statute of repose does not defeat a claim, but does not, however, have the burden of pleading that a claim was filed within the statute of repose. Therefore, a Rule 12(b)(6) motion to dismiss based on the statute of repose requires the complaint to allege facts conclusively establishing the claim was not filed within the statute of repose. Because Plaintiff did not allege the date of the “specific last act” and the “substantial completion of the improvement,” the claims could not be barred on the face of the complaint.
The plain language of the statute and case law still establishes that when a contractor completes its part of the project, the project is substantially complete as to that contractor. The issue here is how this defense must be raised. If the Complaint establishes the date of completion, a Motion to Dismiss may be an option, but a savvy Plaintiff will simply not plead the specific date to avoid the Motion. Defendants should carefully review the pleadings and documents incorporated into it to attempt to argue the date of completion can be discerned from the Complaint.