AVOIDING THE STATUTE OF REPOSE COZEN AND O'CONNOR Atlanta, GA Charlotte, NC Cherry Hill, NJ Chicago, IL Dallas, TX Denver, CO Las Vegas, NV London, England Los Angeles, CA New York, NY Newark, NJ Philadelphia, PA San Diego, CA San Francisco, CA Seattle, WA Trenton, NJ Washington, D.C. W. Conshohocken, PA Wilmington, DE Wichita, KS The views expressed herein are those of the author and do not necessarily represent the views or opinions of any current or former client of Cozen and O'Connor. These materials are not intended to provide legal advice. Readers should not act or rely on this material without seeking specific legal advice on matters which concern them. Copyright (c) 1999 Cozen and O'Connor ALL RIGHTS RESERVED I. Introduction Beginning in the 1950’s, in response to increased numbers of civil actions filed to recover damages for personal injuries, the builders’ and architects’ lobby and insurance carriers mounted a successful campaign throughout the United States to have state legislatures adopt statutes of repose. These statutes prevent persons from bringing actions for injuries caused by improvements to real property after a certain period of time has passed from the date of construction of the improvement. More recently, in conjunction with the “tort reform” movement, an increasing number of states (24 to date) have adopted statues of repose for products liability and cases. The purpose of this presentation is to focus on the issues presented in cases where a statute of repose may apply for the purpose of determining whether a statute of repose can be avoided in a particular case or jurisdiction. II. Statute of Repose For Improvements To Real Property A. Determining Whether the Product is “Improvement to Real Property” As a general rule, the standard for determining whether a particular defective article is a “fixture” or “improvement to real property” is similar from state to state and is driven by the facts. In Pennsylvania, a four-part test is set forth in Noll v. Harrisburg Area YMCA, 643 A.2d 81 (Pa. 1994). In Noll, the issue was whether a manufacturer of diving blocks which were attached to the edge of a pool was protected by the statute of repose. Initially, the court noted that the determination of whether an item is a fixture depends upon the “objective intent of the parties” to permanently attach the product to the realestate and not the “subjective intent” of the party at the time that the product is installed. 2 The factors which must be considered in determining whether an article is a fixture include the following: 1) the manner in which the object is attached to the real property; 2) how long the object has been attached to the real property; 3) whether the object is essential to the use of the real property; and 4) whether the conduct of the parties involved evidenced an intent to permanently attach the article. Id at p. 88. In Noll , the Pennsylvania Supreme Court determined that the diving blocks did not constitute an improvement to real property because they could easily be screwed and unscrewed without the use of any tools, removing the blocks was often done by persons who used the pool, the blocks were advertised as easily removable, and removing the starting blocks did not cause any damage to the pool. In contrast to the holding in Noll, in New Jersey, a diving block which was not moved by the owner after it was attached was determined to be an “improvement to real property” and was subject to the statute of repose for improvements to real property. Lewis v. Hopewell Valley Racquet Club, 269 N.J. Super 71, 634 A. 2d 568 (A.D. 1993). Obviously, the analysis of whether a particular article is an improvement to real property is extremely fact intensive and it is the job of the attorneys to develop those facts in the case which relate to the factors set for above and which tend to show that the article is not a fixture or improvement to real property. The most recent Pennsylvania Supreme Court decision on the issue of whether a particular article is an improvement to real property is Vargo v. Koppers Company, Inc., 552 Pa. 371, 715 A. 2d 423. In Vargo, the machine at issue was a door machine which operated alongside a series of coke ovens at a steel plant. The function of the machine was to run along a 3 rail system in front of the coke ovens and to remove and replace coke oven doors, each of which weighed five tons. The door machines were 30 feet long, 15 to 16 feet high, and 7 to 8 feet wide. The equipment was installed at the plant in the 1950’s. On September 14, 1988, an accident occurred which resulted in the death of an employee who was operating the machine. In determining whether this machine was a fixture, the Superior Court focused on the sheer size of the machine, the fact that the rails upon which the machine was run were bolted to the ground, and that the function of the machine was essential to the operation of the plant. However, the Supreme Court reversed the decision of this Superior Court. In its opinion, the court noted that the door machine was one of several at the plant that moved around on the rail system and that a spare door machine was maintained in case one of the operational door machines had to be removed for service or maintenance. Thus, the court concluded that while some minimal number of door machines were essential to the operation of the plant, any individual door machine could be removed without disrupting the use of the real property. Based upon these facts, the Supreme Court concluded that the door machine did not constitute an improvement to real property. For a similar case in New Jersey, see McCalla v. Harnischfeger Corp., 215 N.J. Super. 160, 521 A.2d 851 (A.D. 1987) (An overhead crane installed in a building which could conceivably be removed and put to other uses was not an improvement to real property.) The Vargo case demonstrates that size is not dispositive on the issue of whether an item is a fixture, and that the statute of repose may be avoided if the plaintiff can focus on a particular movable or interchangeable part of a machine or system. B. Potential Defendants Who Are Not Protected by the Statute of Repose. Where a particular defective article is an improvement to real property, the next step is to look back to the statue to see if there is some defendant who is not protected by the statute. In 4 some states, the owner of the property at the time of the construction is explicitly not protected by the statute. Also, in many states, including Pennsylvania, manufacturers of articles who do not directly participate in the design or construction on the property are not protected by the Statute of repose. The leading case in Pennsylvania on whether a manufacturer is protected by the statute of repose is McConnaughey v. Building Components, Inc., 637 A. 2d. 1331 (Pa. 1994). McConnaughey involves a roof collapse in a barn causing substantial property damage including the death of 37 cows. The accident occurred in 1986 and the barn was constructed in 1970. The plaintiff sued two defendants, the manufacturer of prefabricated wooden roof trusses, as well as the manufacturer of metal gusset plates which were used to connect the individual wooden beams at the stress points of the trusses. Because the accident occurred 16 years after the date of construction, each of these defendants filed motions for summary judgment claiming that they were protected by Pennsylvania’s statute of repose. Motions were granted by the trial court as to each defendant and affirmed by the Superior Court. However, the Supreme Court reversed this decision, holding that manufacturers and suppliers of component parts who are not involved in the design, planning, supervision, construction, supervision or observation of the construction are not protected by the Statute of repose: “We find that the clear an unambiguous language of the statute of repose establishes that a manufacturer who does nothing other than supply a defective product which later is incorporated into an improvement to real property by others is not within the purview of the statute. While roof trusses may be considered improvements to real property according to the definition of fixtures, the statute only protects the acts of those persons involved in the design, planning, supervision, construction, or observation of the construction of an improvement to real property itself. When a manufacturer does nothing more than supply the component products for an improvement to real property, the manufacturer is not protected by the statute. The fact that a manufacturer designs 5 and plans the component products which later are incorporated into an improvement to real property is irrelevant under the statute. The Pennsylvania statute of repose was not intended to apply to manufacturers and suppliers of products but only to the kinds of economic actors who perform acts of “individual expertise” akin to those commonly thought to be performed by builders. Id. at 1334. Based upon this holding, the manufacturer of the prefabricated roof trusses and the manufacture of the metal plates incorporated in the trusses, were not protected by the statute of repose. Consistent with the court’s opinion in McConnaughey, in Ferricks v. Ryan Homes, 578 A. 2d. 441 (Pa. Super. 1990), the Pennsylvania Superior Court held that a supplier of allegedly defective plywood to a construction project was not protected by the statute of repose.