Last month, the Oregon Supreme Court issued a decision with important implications for construction litigation. Ball Janik attorneys were heavily involved in the appeal to the Supreme Court.

In Shell v. The Schollander Companies, Inc., 358 Or 552 (2016), the court held that where a home is constructed without a contractual relationship between its builder and its first owner, the applicable statute of repose for negligent construction claims is ten years “from the date of the act or omission complained of.”

The fact that two statutes of repose are potentially applicable to Oregon construction defect litigation has for some time created uncertainty. ORS 12.115(1) says that “In no event shall any action for negligent injury to person or property of another be commenced more than 10 years from the date of the act or omission complained of.” ORS 12.135, by contrast, says that “An action … whether in contract, tort or otherwise, arising from the person having performed the construction, alteration or repair of any improvement to real property … must be commenced … [t]en years after substantial completion or abandonment of the construction, alteration or repair.”

While ORS 12.135 is a much more thorough and specific statute, and is narrowly addressed to the construction context (ORS 12.115, in its two terse paragraphs, does not use the word “construction”), the court determined that its text and legislative history require the conclusion that it applies only to construction completed with some contractual relationship between the builder and the first owner already in place. The court paid particular attention to the use of the word “contractee” in ORS 12.135’s definition of “substantial completion,” which is when that statute begins to run. ORS 12.135(4)(b) defines “substantial completion” as “the date when the contractee accepts in writing the construction, alteration or repair of the improvement to real property or any designated portion thereof as having reached that state of completion when it may be used or occupied for its intended purpose.” The court reasoned that because ORS 12.135 turns on “the date [the contractee accepts] the completed construction, alteration or repair,” or the “substantial completion” date, the statute assumes the existence of a contract that precedes or is coterminous with construction, and thus only applies in such contexts. Where construction proceeds with no contract in place between the builder and the first owner, and the builder sells the home after construction is finished, then ORS 12.115, the general statute of repose for negligence claims, applies.

Shell will likely add complexity to construction cases governed by ORS 12.115. Because that statute turns on “the date of the act or omission complained of,” and because construction projects often involve many parties and thus many “acts” and “omissions,” litigation that is subject to ORS 12.115 will require that litigants battle over the precise dates during construction on which each allegedly negligent “act” or “omission” occurred.