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Salt Lake City Corp. v. Sekisui SPR Americas, LLC

United States District Court, D. Utah

September 26, 2019

SALT LAKE CITY CORPORATION; Plaintiff;
v.
SEKISUI SPR AMERICAS, LLC; SEKISUI RIB LOC AUSTRALIA PTY LTD.; SOUTHWEST PIPELINE AND TRENCHLESS CORP.; SAFECO INSURANCE COMPANY OF AMERICA, INC.; HYDRATECH ENGINEERED PRODUCTS, LLC; and DOES 1–10; Defendants.

          MEMORANDUM DECISION AND ORDER GRANTING IN PART AND DENYING IN PART MOTIONS TO DISMISS AND DENYING MOTIONS TO CERTIFY QUESTIONS TO THE UTAH SUPREME COURT

          JILL N. PARRISH DISTRICT JUDGE

         Salt Lake City Corporation hired Southwest Pipeline and Trenchless Corporation (Southwest) to rehabilitate a sewer line. Southwest used components supplied by Sekisui Rib Loc Australia Pty Ltd. (Sekisui Australia), Sekisui SPR Americas, LLC (Sekisui Americas), and HydraTech Engineered Products, LLC (HydraTech) to complete the project. Salt Lake City subsequently sued Southwest, Sekisui Australia, Sekisui Americas, and HydraTech, alleging that the rehabilitated sewer line was leaking. Southwest filed crossclaims against Sekisui Australia, Sekisui Americas, and HydraTech for breach of contract, apportionment of fault, and indemnification.

         Before the court are motions to dismiss Salt Lake City’s amended complaint filed by Sekisui Australia, Sekisui Americas, and HydraTech, [Docket 79, 80, 84], and a motion to dismiss Southwest’s amended crosscomplaint filed by Sekisui Australia and Sekisui Americas, [Docket 105]. Salt Lake City and Southwest also filed motions to certify statute of limitations questions to the Utah Supreme Court. [Docket 93, 121].

         The court GRANTS Sekisui Australia’s, Sekisui Americas’, and HydraTech’s motions to dismiss Salt Lake City’s causes of action against them. The court GRANTS IN PART and DENIES IN PART Sekisui Australia’s and Sekisui Americas’ motion to dismiss Southwest’s crossclaims against them. Finally, the court DENIES Salt Lake City’s and Southwest’s motion to certify questions to the Utah Supreme Court.

         BACKGROUND

         Salt Lake City requested bids to rehabilitate a sewer line by installing a liner within the existing pipe. This “trenchless” method of rehabilitating the sewer line avoids the need to dig up and replace the pipe. Southwest won the bid. Sekisui Australia and Sekisui Americas sold their proprietary liner product to Southwest for use in the project. HydraTech supplied joints that were used to connect and seal the sections of pipe liner used in the project.

         Sometime in late 2012, Southwest finished the sewer line rehabilitation project and Salt Lake City began to use the rehabilitated line to transport sewage to a treatment plant. On December 17, 2012, the city sent a letter to Southwest. The letter stated that on November 29, 2012, Salt Lake City had tested the rehabilitated section of sewer line and had discovered “a significant defect and leak in the liner.” The letter stated that the defect was “allowing 1.0 to 1.5 million gallons per day . . . groundwater infiltration with extremely high total dissolved solids . . . into the pipeline.” The letter demanded that Southwest “correct the defective work” by February 28, 2013. Over the next two and a half years, Southwest and the city formulated a number of plans to fix the leaks and Southwest made one unsuccessful attempt to repair the sewer line. On June 22, 2015, Southwest declined to make any further plans to repair the sewer line.

         On May 10, 2017, Salt Lake City sued Sekisui Australia and Sekisui Americas. On November 8, 2017, the city amended its complaint to add claims against Southwest and HydraTech. This amended complaint asserted claims for (1) breach of warranty, (2) products liability, (3) negligence, and (4) negligent failure to warn against Sekisui Australia, Sekisui Americas, and HydraTech. Meanwhile, Southwest sued Sekisui Australia and Sekisui Americas on October 2, 2017. That lawsuit was consolidated with crossclaims that Southwest had asserted in this lawsuit. The crossclaims asserted by Southwest included claims for breach of contract, breach of warranty, and indemnification against Sekisui Australia and Sekisui Americas and an apportionment of fault claim against Sekisui Australia, Sekisui Americas, and HydraTech.

         The court dismissed all of Salt Lake City’s claims against Sekisui Australia, Sekisui Americas, and HydraTech on statute of limitations grounds. The court granted the city leave to amend its complaint to plead “the time and manner of its discovery of its causes of action against the[se] defendants, as well as facts showing an inability to discover the causes of action sooner through the exercise of reasonable diligence.” The court also dismissed Southwest’s crossclaim for breach of contract against Sekisui Australia and Sekisui Americas on statute of limitations grounds and dismissed the breach of warranty crossclaim against these two defendants because Southwest failed to adequately plead this claim. The court granted Southwest leave to amend its crosscomplaint to remedy these defects if it could.

         Salt Lake City filed a second amended complaint, pleading additional facts related to its assertion that the statute of limitations on the claims against Sekisui Australia, Sekisui Americas, and HydraTech had been tolled by the discovery rule. Southwest also filed an amended crosscomplaint. Southwest abandoned its breach of warranty crossclaim, but pleaded additional facts related to its breach of contract crossclaim against Sekisui Australia and Sekisui Americas. Southwest also added a new crossclaim against HydraTech for breach of contract.

         Sekisui Australia, Sekisui Americas, and HydraTech moved to dismiss the claims asserted against them in Salt Lake City’s Second Amended Complaint. Sekisui Australia and Sekisui Americas also filed a motion to dismiss the claims asserted against them in Southwest’s amended crosscomplaint. Finally, Salt Lake City and Southwest filed motions to certify to the Utah Supreme Court questions about the proper statute of limitations to apply to the claims in this case.

         ANALYSIS

         I. MOTIONS TO DISMISS SALT LAKE CITY’S COMPLAINT

         A. Personal Jurisdiction

         Sekisui Australia renewed its argument that this court lacks personal jurisdiction to hear Salt Lake City’s claims against it. But it did not assert new jurisdictional facts or provide new arguments. Instead, Sekisui Australia “incorporate[d] by reference the personal jurisdiction arguments made in its Motion to Dismiss filed on December 8, 2017.” The court, therefore, adopts the analysis of this issue set forth in its September 28, 2018 Order. The court concludes that it has specific personal jurisdiction over Sekisui Australia and denies the motion to dismiss the claims against it.

         B. Statute of Limitations

         Sekisui Australia, Sekisui Americas, and HydraTech (collectively, the defendants) argue that all of the causes of action asserted against them should be dismissed because the allegations of the complaint establish that these claims are barred by the applicable statutes of limitations. In order to determine whether the defendants’ statute of limitations arguments have merit, the court must answer three questions: (1) What are the applicable limitation periods for each cause of action? (2) When did each limitations period begin to run? and (3) Do the allegations of the complaint indicate that any of the statutes of limitations may have been tolled by the discovery rule? The court addresses each of these questions in turn.

         1) Applicable Limitations Periods

         a) Utah Code section 78B-2-225

         The court explained in its September 28, 2018 Order that it must look first to Utah Code section 78B-2-225, which provides limitations periods for actions arising out of improvements to real property (improvements to real property statute). The parties concede that this statute applies to Salt Lake City’s claims and that it is the starting point for the statute of limitations analysis.

         The improvements to real property statute provides:

(3)(a) An action by or against a provider [any legal entity contributing to the construction of an improvement] based in contract or warranty shall be commenced within six years of the date of completion of the improvement or abandonment of construction. Where an express contract or warranty establishes a different period of limitations, the action shall be initiated within that limitations period.
(b) All other actions by or against a provider shall be commenced within two years from the earlier of the date of discovery of a cause of action or the date upon which a cause of action should have been discovered through reasonable diligence. If the cause of action is discovered or discoverable before completion of the improvement or abandonment of construction, the two-year period begins to run upon completion or abandonment.
(4) Notwithstanding Subsection (3)(b), an action may not be commenced against a provider more than nine years after completion of the improvement or abandonment of construction. In the event the cause of action is discovered or discoverable in the eighth or ninth year of the nine-year period, the injured person shall have two additional years from that date to commence an action.

Utah Code § 78B-2-225(3)–(4). Subsections (3)(b) and (4) set the applicable statute of limitations and statute of repose for all the non-warranty claims brought against the defendants-i.e., products liability, negligence, and negligent failure to warn. Indeed, Salt Lake City concedes that subsection (3)(b) applies. These claims, therefore, must be brought within two years of when the causes of action were discovered or should have been discovered through the exercise of reasonable diligence or the completion or abandonment of the project. These causes of action must also be brought within a nine-year statute of repose.

         Subsection (3)(a) establishes a limitations period for the warranty claims against the defendants. A warranty action related to an improvement to real property “shall be commenced within six years of the date of completion of the improvement or abandonment of construction.” The parties dispute the meaning of this subsection. Salt Lake City argues that subsection (3)(a) is a statute of limitations. Under this theory, the city would have six years from the completion or abandonment of the sewer line project to assert a warranty claim. No. other limitation on the time to bring an action would apply. The defendants, on the other hand, argue that subsection (3)(a) is a statute of repose and that a statute of limitations must also be applied to the warranty claims.

         In its previous Order, the court disagreed with Salt Lake City’s assertion that subsection (3)(a) is a statute of limitations. “A statute of limitations requires a lawsuit to be filed within a specified period of time after a legal right has been violated or the remedy for the wrong committed is deemed waived. A statute of repose bars all actions after a specified period of time has run from the occurrence of some event other than the occurrence of an injury that gives rise to a cause of action.” Berry ex rel. Berry v. Beech Aircraft Corp., 717 P.2d 670, 672 (Utah 1985). Generally, a statute of repose period may not be extended, “regardless of usual reasons for ‘tolling’ the statute.” Perry v. Pioneer Wholesale Supply Co., 681 P.2d 214, 219 (Utah 1984) (quoting Restatement (Second) of Torts § 899 cmt. g (1979)). Because subsection (3)(a) ties its six-year limitations period to something other than the violation of a legal right and because it may not be tolled, it “is therefore a statute of repose.” Willis v. DeWitt, 350 P.3d 250, 253 (Utah Ct. App. 2015).

         Salt Lake City argues that both this court and the Utah Court of Appeals in Willis erred by categorizing subsection 3(a) as a statute of repose. The city relies upon Brigham Young University v. Paulsen Construction Co., 744 P.2d 1370, 1373 (Utah 1987), which states: “In construction contract cases, an owner’s claim of defective construction against a general contractor is generally considered to accrue on the date that construction is completed.” Salt Lake City contends that because the accrual date for a warranty claim against a contractor is generally the same as the completion date of the project at issue, subsection 3(a), which is tied to the completion or abandonment of a project, is effectively a statute of limitations.

         The court disagrees. Although the date that a legal right has been violated is often the same as the completion date of a project, these two dates do not invariably coincide. Subsection 3(b) recognizes as much. This subsection provides that a non-warranty claim accrues either when it was or should have been discovered or on the completion date of the project, whichever occurs later. Because the limitations period in subsection 3(a) is tied to an event other than the occurrence of the injury, it is a statute of repose. Indeed, when the Utah Supreme Court interpreted the predecessor to Utah Code section 78B-2-225, it held that limitations periods of six years and twelve years “after completion of the improvement or abandonment of construction” were statutes of repose: “Because these periods start to run on the date of completion or abandonment of the improvement without regard to the ‘occurrence of an injury that gives rise to a cause of action, ’ they are statutes of repose.” Craftsman Builder’s Supply, Inc. v. Butler Mfg. Co., 974 P.2d 1194, 1202 (Utah 1999) (quoting Berry, 717 P.2d at 672); see also Gables & Villas at River Oaks Homeowners Ass’n v. Castlewood Builders, LLC, 422 P.3d 826, 828 (Utah 2018) (referring to Utah Code section 78B-2-225(3)(a) as a statute of repose). Therefore, identical language found in the current version of this statute marks subsection 3(a) as a statute of repose.

         As a statute of repose, subsection 3(a) does not supplant the applicable statute of limitations for Salt Lake City’s breach of warranty claims against the defendants. Subsection (9) of the statute states: “This section does not extend the period of limitation or repose otherwise prescribed by law or a valid and enforceable contract.” Uta h Code § 78B-2-225(9). Thus, a statute of limitations “otherwise prescribed by law” must also be applied to warranty claims that are related to an improvement to real property.

         b) Statute of Limitations for the Warranty Claims

         The court, therefore, must determine the appropriate statute of limitations for the warranty claims. Salt Lake City argues that the six-year statute of limitations for written contracts is the relevant limitations period. See Utah Code § 78B-2-309(2). Sekisui Australia and Sekisui Americas, on the other hand, contend that the two-year statute of limitations found in the Utah Product Liability Act (UPLA) should be applied to the warranty claims. See Utah Code § 78B-6-706. The court concludes, however, that the four-year statute of limitations under the Utah Uniform Commercial Code (UCC) applies to the breach of warranty claims. See Utah Code § 70A-2-725(1).

         First, the UCC statute of limitations controls over the statute of limitations for an action on a written obligation. The UCC establishes a four-year statute of limitations for warranties related to a contract for the sale for goods, i.e., items that are movable at the time of identification to the contract for sale. Utah Code § 70A-2-725(1) (“An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued.”); see also id. § 70A-2-106(1) (defining “contract for sale” as the sale of goods); id. § 70A-2-105(1) (defining “goods” to mean “all things . . . which are movable at the time of identification to the contract for sale”). “[W]here the Uniform Commercial Code sets forth a limitation period for a specific type of action, this limitation controls over an older, more general statute of limitations.” Perry, 681 P.2d at 216. Thus, an action on a written warranty for the sale of goods is controlled by the UCC four-year statute of limitations rather than the general six-year statute of limitations for an action on a written obligation. Id. Because the liner sections and the joint seals supplied by the defendants were movable at the time they were sold, any warranties associated with the sale are governed by the statute of limitations found in the UCC.

         Salt Lake City argues, however, that the UCC statute of limitations does not apply because there was no contract for sale between the city and any of the defendants. The city entered into a contract with Southwest to install a liner system within an existing sewer line. Salt Lake City eventually agreed to pay Southwest $3, 950, 107 for materials and labor to perform the work. Southwest then purchased the liner sections from either Sekisui Australia or Sekisui Americas and installed them in the city’s sewer line. Salt Lake City contends that because Southwest acted as an intermediary between the seller of the goods and the city, which ultimately took title to the goods, there is not a valid contract for sale between the city and the Sekisui defendants that would trigger the UCC statute of limitations.

         The court disagrees. The Utah Supreme Court has indicated that the existence of a middleman does not negate the UCC statute of limitations for a breach of warranty action against the original supplier of a good. In Perry v. Pioneer Wholesale Supply Co., a subcontractor ordered doors from a wholesaler, which then obtained the doors from a manufacturer. 681 P.2d 214, 216 (Utah 1984). The subcontractor sued both the wholesaler and the manufacturer for breach of warranty, alleging that the doors were defective. Id. Despite the fact that the subcontractor did not purchase the doors directly from the manufacturer, the Utah Supreme Court held that the four-year UCC statute of limitations applied to the warranty claim against both the wholesaler and the manufacturer. Id. Similarly, the breach of warranty claim against the Sekisui defendants is governed by the UCC statute of limitations even though Salt Lake City purchased the liner sections through an intermediary.

         The court also rejects the Sekisui defendants’ argument that the two-year statute of limitations under the UPLA should be applied to the warranty claims. As noted above, the UCC provides for a four-year statute of limitations for an “action for breach of any contract for sale.” Utah Code § 70A-2-725(1). The Utah Supreme Court has held that this statute of limitations applies to a breach of warranty claim to the extent that the plaintiff seeks “economic or breach of contract damages.” Davidson Lumber Sales, Inc. v. Bonneville Inv., Inc., 794 P.2d 11, 16 (Utah 1990). But if the breach of warranty claim is for “personal injury damages or tortious injury, ” the UCC statute of limitations does not apply. Id. at 18; accord Utah Local Gov’t Tr. v. Wheeler Mach. Co., 199 P.3d 949, 955–56 (Utah 2008). Instead, in an “action for damages for personal injury, death, or property damage allegedly caused by a defect in a product” the two-year UPLA statute of limitations should be applied. Utah Code §§ 78B-6-703(1), -706.

         Under its breach of warranty claim, Salt Lake City seeks compensation for the cost to repair or remove and replace the allegedly faulty liner sections sold by the Sekisui defendants. In other words, the city seeks contractual expectation damages-or to be placed in the position it would have occupied had the Sekisui defendants performed their promise to provide liner sections that did not leak. See Trans-W. Petroleum, Inc. v. United States Gypsum Co., 379 P.3d 1200, 1206 (Utah 2016) (defining expectation damages for breach of a contract). These consequential damages for the alleged breach of the warranty are properly categorized as contract damages governed by the four-year statute of limitations found in the UCC.[1]

         c) Conclusion

         The breach of warranty claims against the defendants are subject to the four-year statute of limitations found in the UCC, Utah Code § 70A-2-725(1), and the six-year statute of repose dictated by the improvements to real property statute, Utah Code § 78B-2-225(3)(a). The products liability, negligence, and negligent failure to warn claims are governed by the two-year statute of limitations and nine-year statute of repose found in the improvements to real property statute. Utah Code § 78B-2-225(3)(b)–(4).

         2) The Accrual Date of the Non-Warranty Claims

         Utah Code section 78B-2-225(3)(b) provides that a non-warranty claim may accrue either upon discovery of the cause of action or upon the completion or abandonment of the improvement at issue, whichever occurs last:

All [non-warranty] actions by or against a provider shall be commenced within two years from the earlier of the date of discovery of a cause of action or the date upon which a cause of action should have been discovered through reasonable diligence. If the cause of action is discovered or discoverable before completion of the improvement or abandonment of construction, the two-year period begins to run upon completion or abandonment.

         Salt Lake City argues that construction work on the sewer line was never completed. The city alleges in its complaint that it discovered leaks in the rehabilitated sewer line on November 29, 2012. In a letter dated December 17, 2012, Salt Lake City notified Southwest of the leaks and demanded that Southwest remedy the leaks. Over the next two and a half years, Southwest and the city formulated a number of plans to fix the leaks and Southwest made one unsuccessful attempt to repair the sewer line. On June 22, 2015, Southwest declined to make any further plans to repair the sewer line. Salt Lake City alleges that because of the leaks in the sewer pipe liner, Southwest never achieved “Substantial Completion” of the project under the terms of the contract between the city and Southwest. Salt Lake City argues that because Southwest never completed the project, it abandoned it one year after it declined to perform any additional design or construction work on the sewer line project. See Utah Code § 78B-2-225(1)(a) (“‘Abandonment’ means that there has been no design or construction activity on the improvement for a continuous period of one year.”).

         The city asserts, therefore, that regardless of when it discovered its non-warranty causes of action against the defendants, these claims did not accrue until ...


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