A new Florida law will prevent developers and contractors from being left holding the bag when they face construction defect lawsuits filed shortly before the 10-year deadline for such claims.
On March 27, 2018, Gov. Rick Scott signed into law House Bill 875, which provides parties faced with a construction or design defect lawsuit up to one year to file pass-through claims (counterclaims, cross-claim or third-party claims) regardless of the application of the statute of repose that would otherwise serve as an absolute bar to presenting the pass-through claim. The legislation will apply to actions commenced after July 1. For lawsuits already in existence, the legislation would require any counterclaim, cross-claim or third-party to be filed before July 1, 2019.
The new law, which amends Section 95.11(3)(c) of the Florida Statutes, will likely have far-reaching implications in construction defects litigation, which can involve numerous parties. For instance, a property owner may sue its general contractor for alleged defects in a structure. Often, the general contractor will have delegated specific fields of work (such as plumbing, electricity or roofing) to its subcontractors, and those subcontractors, in turn, will also have delegated specific items of work to their sub-subcontractors. As a result, after the property owner sues its general contractor, the general contractor may serve third-party claims on its subcontractors; the subcontractors may serve third-party claims against their sub-subcontractors, material suppliers or product manufacturers; and any one of these parties could serve cross-claims or counterclaims against any of the other parties if appropriate.
A similar situation often takes place between developers, general contractors and design professionals. However, the need for such claims may not become readily apparent until well after the litigation is under way and extensive discovery has been obtained from numerous sources. The Florida Rules of Civil Procedure liberally grant litigants the permission to bring such claims, but subject to the time limitations set forth by Florida’s statute of repose.
The 10-year statute of repose is intended to serve as a firm deadline for parties to file suit, unlike Florida’s four-year statute of limitations for construction defect claims that generally begins to run when a party knew or should have known about an alleged defect (in the case of condominium projects, it does not begin to run until the date of turnover to unit owners). The 10-year deadline begins to run from the latest of the following: the date an owner takes actual possession; the issuance of a certificate of occupancy; the date construction is abandoned; or the date when a contract between an engineer, architect, or contractor and its employer is completed. Florida courts often reject arguments that the statute of repose can be tolled, including when general contractors argue that they had insufficient time to investigate a claim to identify subcontractors who actually performed the work a plaintiff claims is defective.
This change in the law is of particular importance in South Florida given the number of projects that were completed in 2008. Under the existing law, if a property owner now files suit against a developer or general contractor for defects in a 2008 building, the developer or general contractor would have only a few months, if not less, to identify all relevant design parties, subcontractors, suppliers and manufacturers that are directly responsible for the alleged defects and sue them before their claims are time barred. Once the new law goes into effect, the same developer or general contractor faced with a new lawsuit on a 2008 building would have an entire year to identify all relevant parties and file pass-through claims. Likewise, a subcontractor that receives one of those new pass-through claims would have a year of its own pass-through claims against its sub-subcontractors, suppliers or product manufacturers.
The practical effect of this change could be that construction defect lawsuits will be extended in length because there will no longer be a 10-year absolute bar to bringing claims against new parties. It is possible that courts will enact their own procedures to prevent lawsuits from continuing indefinitely while new parties are brought into the case and to control the procedural aspects of these cases. It is also possible that pass-through claim defendants would argue that the new statute requires all such pass-through claims to be filed within one year of the pleading giving rise to the pass-through claim. However, pass-through claim plaintiffs could respond that the new statute’s use of the word “may” instead of “shall” before the one-year time period means that the statute is not intended to serve as a limitation on the time to file pass-through claims.
Ultimately, this new law poses an interesting question as to whether the Legislature has the ability to enact a law that will impact the timeframes for cases to be litigated to conclusion. These matters are generally considered procedural and therefore within the Supreme Court of Florida’s exclusive rule-making authority. The new law may ultimately generate more litigation, but perhaps not of the type envisioned by the Legislature.
Spencer Mallard and Miguel J. Chamorro are partners at Lydecker Diaz in Miami. Mallard is chair of the construction group, and Chamorro focused on litigation and transactional work.