In State v. Perini Corp., the state of New Jersey brought suit against Perini (the design-build general contractor), the architect, the principal contractor for HVAC, and a pipe manufacturer. New Jersey contracted with Perini to design and build South Woods State Prison, a 3,176-bed medium- and minimum-security correctional facility, in Bridgeton at a cost of approximately $203 million. The project was to be executed in three phases, and after each phase, inmates would occupy the respective completed facility. Phase I was completed on May 16, 1997, and inmates began to utilize those facilities soon thereafter. The certificate of substantial completion for the project, however, was not issued until May 1, 1998.
In relevant part, the design called for hot water to flow through a series of underground pipes, heated by boilers and heat exchangers, that would service the entire project through one unified system. This system, referred to as the HTHW system, ultimately began to fail. A separate certificate of substantial completion was not issued for the HTHW system.
On April 28, 2008, the state filed a complaint alleging that the HTHW system failed in 2000 and on several subsequent occasions. The state alleged that since the first failure in March 2000, there were 10 HTHW carrier pipe failures, including failures involving both supply and return lines as well as the valves.
The defendants moved for summary judgment, arguing that the project was substantially completed well before April 28, 1998, and therefore the 10-year statute of repose under New Jersey law barred the state’s action. The trial court granted summary judgment in favor of all defendants but one, finding that because inmates began occupying the facility on or before April 28, 1998, the HTHW system was substantially complete before April 28, 1998. The court, however, denied summary judgment for the pipe manufacturer, holding that because it was a manufacturer of goods, the statute of repose did not apply to it.
The appellate division reversed, finding that although the statute of repose can have separate trigger dates, unless the components of a project qualify as discrete “improvements to real property,” the court will interpret the trigger date to be the date of substantial completion for the entire project.
The New Jersey Supreme Court affirmed the decision of the appellate division. Notably, the court held that because the defendants were involved in the overall project following the completion of Phase I, and because the defendants had ongoing responsibilities for the entire project, a separate trigger date for the HTHW system was not supported. Additionally, the court explained that because the HTHW system was designed to support the entire project, it could only be said to be completed once it was connected to every building it was designed to serve.
As a practical matter, if the state law allows for separate trigger dates for the statute of repose, parties should contemplate contractually specifying whether each phase qualifies as a separate improvement for purposes of the statute of repose. Owners obviously have a strong disincentive to this approach as it could become unwieldy and cumbersome to have multiple statutory deadlines. Depending on the complexity of the project and sophistication of the parties, however, it may be a valid topic of negotiation for subcontractors and tradesmen looking to reduce exposure and liability for portions of a project that were completed outside the traditional statute of repose timeframe.
State v. Perini Corp., 113 A.3d 1199, 221 N.J. 412 (2015)