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Contractor’s Lawsuit Against Subcontractor Barred by Tennessee Statute of Repose

In Tennessee, there are two types of statutes that might bar an otherwise meritorious claim: (1) statutes of limitation; and (2) statutes of repose. A construction defect case may be filed within the statute of limitation, but, nevertheless, be barred by the statute of repose which establishes an outer limit for the filing of construction defect cases.

In a recent Tennessee construction defect and warranty case, The Counts Company v. Praters, Inc., which was decided by the Court of Appeals of Tennessee, a contractor’s lawsuit against a subcontractor, which installed the wood flooring on the project, was dismissed based on the statute of repose.

The Tennessee statute of repose which applies to claims arising from the construction of an improvement bars any lawsuit to recover damages for a construction defect which is not brought within four years of substantial completion of the improvement. If a defendant purposefully engages in conduct intended to conceal the plaintiff’s injury, often referred to as “fraudulent concealment,” then the statute of repose is tolled (meaning its length is extended).

In the case at hand, the plaintiff contractor hired the defendant subcontractor to install hardwood flooring in the Chattanooga Yacht Club. The subcontractor finished its work on May 28, 2006. Not long after the flooring was installed, it began to cup and warp. The subcontractor told the contractor that it should wait a year for the floors to complete a heating and cooling cycle, and, that, if the problem was not corrected, it would resurface the floors. After a year, the subcontractor resurfaced the floors, but the floors warped and cupped again.

The Yacht Club brought a breach of warranty case against the contractor. The jury awarded the Yacht Club $35,000. After the jury found for the Yacht Club, and over four years after the subcontractor finished its work, the contractor brought a breach of warranty and breach of contract case against the subcontractor on March 21, 2011. The trial court dismissed the contractor’s case based on the Tennessee four year statute of repose.

The contractor appealed to the Court of Appeals of Tennessee, which affirmed the trial court. On appeal, the contractor argued that the date of substantial completion, which triggers the running of the four year statute of repose, was not when the subcontractor initially finished its work on May 28, 2006. The contractor argued that the subcontractor’s work was not substantially completed until after the subcontractor resurfaced the floors.

The Court of Appeals rejected the argument that the subcontractor’s work was not substantially completed on May 28, 2006 because that was the date that the floor was installed and ready to be used by the Yacht Club. Under Tennessee law, substantial completion occurs when an improvement can be used for its intended purpose even if it has some defects.

In Tennessee, it is often risky for a party to delay the filing of a lawsuit whether it is a breach of contract case for construction defects, or any other kind of case. This case is a good example of how what well might otherwise have been a valuable breach of warranty and breach of contract claim was stillborn because of a delay in filing a lawsuit. It is always prudent to consult with an experienced and knowledgeable breach of contract lawyer or construction lawyer as soon as you suspect that you may have a claim because of construction defects.