In State v. Perini Corp., et. al. (2015 N.J. LEXIS 388)(N.J. April 30, 2015), the New Jersey Supreme Court interpreted the state’s ten year statute of repose (N.J.S.A. 2A:14-1.1(a)) with respect to a multi-phase prison construction project involving twenty-six buildings which were to be constructed in three uninterrupted phases. At issue was a high temperature, hot water system (“System”) which would provide heat and hot water to all of the buildings. The pertinent question was whether the statute of repose began to run on the System after each phase was complete, thus creating multiple dates, or after all buildings were complete and hooked up to the System.
The State of New Jersey (“State”) hired Perini Corporation (“Perini”) for construction and design of the South Woods State Prison (the “Project”). Perini hired Robert Kimball & Associates (“Kimball”) to perform engineering and consulting services, including design of the System. Perini also hired Natkin & Company (“Natkin”) as the HVAC contractor responsible for installation of the System and Jacobs Facilities, Inc. (“Jacobs”) to provide construction oversight services.
Phase I of the Project was completed on May 16, 1997, with the parties executing certificates of substantial completion. Inmates moved into the facility shortly thereafter. Phase IIA was completed between July 15, 1997 and October 27, 1998, with certificates of substantial completion executed. Phase II was completed on May 1, 1998. The buildings were all hooked up to the System as they were completed, and there was no separate certificate of substantial completion for the System. The State claimed the System first failed in March of 2000 and several times thereafter.
A Complaint was filed by the State on April 28, 2008 against all contractors for breach of contract and negligence. The defendants moved for summary judgment under the statute of repose, claiming that inmates occupied the prison on or before April 28, 1998, and that the System was substantially complete before that date. The trial court granted the defendants’ motion. The State appealed. The New Jersey Appellate Division reversed the trial court, holding that the statute of repose was triggered when the defendants substantially completed all of their work, which was no later than May 1, 1998. The defendants appealed.
The New Jersey Supreme Court noted the statute of repose only applied to “improvements to real property,” and that the System was in fact an improvement. The Court found itself in a unique position since it typically determined the statute of repose trigger date by the issuance of the certificate of substantial completion, and one was not issued for different phases. This in fact turned out to be a vital consideration for the Court. Although the Project was broken into three phases, the State argued it should be considered one Project for purposes of the statute of repose because the construction was uninterrupted and the defendants were involved in all aspects from the beginning until the end. The defendants argued the statute of repose should be triggered from the completion date of each phase.
The Supreme Court agreed with the State. Ultimately, the Court noted it would not apply the statute of repose in a fashion which would create separate trigger dates as phases were completed. The Court also found the fact that no separate certificate of substantial completion existed for each of the phases supported the position that neither party believed the System should be considered complete in a piecemeal fashion. The ten year statute of repose therefore began to run the day after the parties executed certificates of substantial completion for the final buildings served by the System- May 1, 1998, thus making the State’s claim timely.