Navigating Business Laws Post UConn Law Library Decision

1. Doing Business with the State of Connecticut in the Wake of the UConn Law Library DecisionApril 24, 2013Connecticut Building Congress Donald W. Doeg Gary F. Sheldon Updike, Kelly & Spellacy, P.C McElroy, Deutsch, Mulvaney & Carpenter, LLP Hartford, CT Hartford, CT 860-548-2638 860-241-2623 ddoeg@uks.com gsheldon@mdmc-law.com

2. Overview Background of the case and court’s ruling Three critical issues raised by case Who is impacted by decision? What are ramifications of the case? What is being done to remedy the decision?

3. Background UConn law school library date of substantial completion 1996. Alleged problems with water intrusion arose immediately. UConn files suit in 2008, 12 years later, eventually 29 defendants are brought in. All defendants move for summary judgment or to strike based upon various statutes of limitation/repose or contractual limitation periods.

4. Background Conn. Gen. Stat. § 52-584a: No action . . . whether in contract, in tort, or otherwise . . . for any deficiency in the design, planning . . . [or] observation of construction . . . in connection with, an improvement to real property . . . shall be brought against any architect, professional engineer or land surveyor . . . more than seven years after substantial completion. State argues that the doctrine of nullum tempus occurrit regi (“no time runs against the king”) is applicable and it need not abide by statutes of limitation or repose.

5. Background In February, 2009, the trial court grants summary judgment on behalf of multiple defendants: contractors and design professionals, and construction manager whose contract contained a provision applying the 7-year repose period. “Excepting the state from adherence to statutes of repose …would be an exception that could not have been intended by the legislature in its aim to alleviate the difficulties and implications of litigating stale claims. The purpose of the status of repose was to allow defendants at some point to become free from liability, absent some unclean or fraudulent conduct. The logical conclusion is that the legislature intended the state to abide by the statutes of repose.”

6. Supreme Court of Connecticut Decision In November 2012, the Supreme Court reverses trial court in every respect, for statutes of limitation, statutes of repose and contractual provision invoking statute of repose. Cites numerous cases in which statutes of limitation have been held inapplicable to the State and draws little distinction between statutes of limitation and statutes of repose. “In order for statutory language to give rise to a necessary implication that the state has waived its sovereign immunity, [t]he probability ... must be apparent, and not a mere matter of conjecture; but ...In other words, in order for a court to conclude that a statute waives sovereign immunity by force of necessary implication, it is not sufficient that the claimed waiver reasonably may be implied from the statutory language.”

7. Supreme Court of Connecticut Decision “Our determination that [statutes of repose] do not apply to the state is reinforced by the principle of statutory interpretation that requires us to presume that the legislature is cognizant of our interpretation of a statute, and that its subsequent failure to enact corrective legislation is evidence of its agreement with that interpretation.” Court never interpreted “pure” statute of repose applicable to design professionals prior to this decision.

8. 3 Critical Issues/Questions Arising from the Decision The Statutes of Limitation do not apply to claims made by the State Do Statutes of Limitation apply to municipalities? How valid are State contracts and the provisions therein?

9. No Statute of Limitations No statutes of limitations No statutes of repose One sided Ramifications

10. Does the Decision Apply to Municipalities? Vaguely written language in Decision The holding cites previous case law which states in part: “. . . The Connecticut Supreme Court has repeatedly stated that, as respects public rights, a subdivision of the state, acting within its delegated governmental capacity, is not impliedly bound by the ordinary statute of limitations . . .” There have been a number of cases that have distinguished public or governmental rights from private or proprietary rights. Courts have held that “[A] public right is one with statewide implications affecting all of the people of the state, as opposed to one in which only the inhabitants of a particular political subdivision are interested.” Civitello v. New Haven, 6, Conn. AP. 212, 220 (1986). Three decisions where towns attempt to avoid effect of statute. Failed each time.

11. Contracting with the State Decision speaks of “universal principle that ‘only those with specific authority can bind the government contractually; even those persons may do so only to the extent that their authority permits. [Thus], a party who seeks to contract with the government bears the burden of making sure that the person who purportedly represents the government actually has that authority.” Court held that because nullum tempus is an element of sovereign immunity, the legislature needed to specifically grant authority to the commissioner to waive sovereign immunity or nullum tempus. “To the extent that the commissioner purported to contractually waive the state's immunity from the repose period of § 52–584a he lacked the authority to do so, and, consequently, the provision is a nullity.”

12. Contacting with the State (cont’d) What else do the state’s agents lack authority to do? Is signing a release on behalf of the state also considered “waiving an element of sovereign immunity?” Contractual notice periods Limitation of liability Waiver of consequential damages Adjusted warranty periods State will argue: Anything that impinges upon the state’s sovereign immunity cannot be negotiated away

13. Other Neighboring States Other states in the region have enacted statutes to impose statutes of limitation and repose on the State Massachusetts: same as private parties New Jersey: generally a 10 year statute of limitations New York: same as private parties

14. Ramifications of the Decision:In General • Who is impacted by the Decision? • Anyone that does business with the State (lawyers, accountants, suppliers, consultants . . . ) • Bonding/Insurance Issues • Document Retention • UConn Code Audits • State has unfair leverage to make unreasonable demands and threats of legal action

15. Document Retention • Do we have to keep our documents forever? • Implications regarding electronic documents • Establishing office policies

16. Insurance and Bonding Issues Can the required insurance be obtained? If not, can you sign the state’s contracts? What happens if you change firms?

17. What Can Be Done to Address the Decision? • Must be done through the legislature • Current Status of Legislative Efforts

18. What Can You Do? Do you want to work for the State? Job Selection Contract Review Insurance Be careful who you merge with, acquire or employ Personal wealth preservation strategies Pass along your experiences with this issue. State claims that it does not know/understand the impact

19. QUESTIONS?