Yesterday, the Oregon Supreme Court issued very favorable opinions in two cases presented by the Ball Janik construction law team, both of which provide needed clarification to existing Oregon law. The opinions in PIH Beaverton , LLC v. Super One, Inc. and Sunset Presbyterian Church v. Brockamp & Jaeger, Inc. resolved open questions regarding the definition of “substantial completion” in different contexts: the AIA accrual clause and the statute of ultimate repose in ORS 12.135. Both opinions provide much-needed guidance to the bar and the public at large about lawsuit timelines in Oregon, which is always appreciated by those often forced to navigate legal gray areas.
In PIH, the Supreme Court ruled Oregon’s statute of ultimate repose begins to run either when the owner confirms substantial completion in writing or when the owner accepts final completion by other means. This case involved a hotel that suffered from construction defects, and the defendants argued that the case was barred by Oregon’s statute of ultimate repose, ORS 12.135, which requires claims to be commenced within 10 years of substantial completion. Although the term “substantial completion” does not have a single universally-recognized definition, the legislature defined that term within ORS 12.135 as either “the date when the contractee accepts in writing [that] the construction…may be used or occupied for its intended purpose,” or without a writing “the date of acceptance of the completed construction…of such improvement.”
The lawsuit commencement date was more than 10 years after the first owner had obtained temporary occupancy, posted a lien “notice of completion,” and opened the hotel; but still less than 10 years after final completion and final occupancy. These facts required the Supreme Court to analyze both parts of the definition of substantial completion. Defendant first argued that the notice of completion qualified as written acceptance that the hotel can be used for its intended purpose. The Supreme Court disagreed with defendants, instead agreeing with Ball Janik’s argument: that the purposes and definitions behind the notice are not geared towards establishing acceptance by the owner that the construction can be used for its intended purpose.
Defendant then argued the owner’s conduct itself in opening the hotel constituted “acceptance of the completed construction,” and also argued that the word “completed” must mean something akin to substantially complete. The Supreme Court again rejected defendant’s argument in favor of Ball Janik’s argument, holding that the term “completed” in this context means “the date on which the construction was fully complete, not the date on which is was sufficiently complete for its intended use or occupancy.” The case was remanded back to the trial court for further proceedings.
In Sunset, the Supreme Court held that a general contractor may not rely upon the AIA accrual clause when the general contractor failed to obtain a formal certificate of substantial completion from the architect. The Sunset case also arose from construction defects, and the Supreme Court addressed the definition of “substantial completion” found within AIA form documents. The defendants argued that the case was time barred because of the accrual clause found within Section 13.7.1 of AIA A201 (1997). That clause states “any applicable statute of limitations shall commence to run [at] Substantial Completion.” However, Substantial Completion carries a very specific meaning AIA A201, somewhat circuitously defined as “the date certified by the architect,” to be determined by the date when “the Owner can occupy or utilize the Work for its intended purpose.”
Under the facts in Sunset, enforcement of the accrual clause would have foreclosed all claims against the general contractor. However, the architect apparently never certified the date of Substantial Completion, or at the very least, no such certification has been located. Lacking that document, the general contractor argued that Substantial Completion took place more than six years earlier regardless of the lack of a formal certificate. The Supreme Court rejected that argument but agreed with Ball Janik’s argument that that the architect certification is necessary to establish the formal date of Substantial Completion, which is a predicate to application of the accrual clause.
Thus, the Supreme Court held that without the necessary certificate, the claims in the Sunset case would be governed by all applicable Oregon statutes of limitation and ultimate repose, but would not be altered by the accrual clause. The subcontractors in Sunset made similar arguments to those discussed in PIH, and the Supreme Court made a similar holding. The case was remanded back to the trial court for further proceedings.