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Litigation costs drive dispute resolution for all litigants, including contractors. If a case is expensive to litigate, the parties鈥� negotiation positions will be affected by who bears the burden of proof on critical issues. One such critical issue common in construction is whether the plaintiff filed its claim in a timely manner. The well-established ground for this battle is the statute of limitations.

In the world of defending construction-defect claims, the statute of limitations issue presents a challenge because most owners will take advantage of a discovery rule that provides the owner additional time to file a claim if the owner did not 鈥渄iscover鈥� the claim quickly. An untested theory of laches may be a useful approach to turn the tables on a plaintiff who makes such an argument.

The statute of limitations for negligent construction work is two years from date of discovery. Accordingly, claims can survive much longer than two years if a plaintiff claims that it did not realize there was a construction defect.

Contractors can use tools to prevent potential plaintiffs from asserting that they did not discover negligence. First, contractors can insist on contractual terms that limit the time period to bring claims based on construction work (this option works only for those that sign the agreement). Second, contractors can maintain documentation of critical steps in the construction process, such as substantial completion. That is because the Legislature and courts are willing to limit the time in which a plaintiff can bring a claim if the contractor obtains a valid certificate of substantial completion.

Those tools are not always utilized effectively. A pre-contractual negotiation to limit litigation remedies may not be practical from a business perspective. Human error can result in failure to obtain or maintain the certificate of substantial completion. An owner can sell the property on which work was performed, thereby potentially undermining any prior contractual time limitations. Even the best planning cannot perfect the legal defenses to subsequent litigation. And the difficulty of establishing a statute of limitations defense directly affects the parties鈥� resolution positions and the related cost of a litigated resolution.

A statute of limitations defense may be hampered because of a property sale, human error or some other reason, but the little-used defense of laches may provide help. Courts apply the doctrine of laches to reject a plaintiff鈥檚 claims when the plaintiff has unreasonably delayed asserting a claim, thereby causing prejudice to the defendant.

It may be time for contractors to start testing the extent to which laches can turn the tables. That is because the contractor-defendant bears the burden of proving the statute of limitations defense. In contrast, if the plaintiff brings a claim outside of the statute of limitations period in reliance on the discovery rule, the contractor-defendant may be able to persuade a court that laches should preclude the claim. That is because a contractor that is 鈥減rejudiced鈥� (harmed because of the delay as a result of lost evidence due to the passage of time) might not be found to bear the burden of proving laches of stale claims. Instead, the plaintiff would bear the burden of disproving laches.

The shifting burden of proof may be enough to tip the scale on a timing issue. The theory is untested. And in that light, the theory can provide a contractor with a stronger negotiating position with a plaintiff who does not want to be on the wrong side of a novel theory. Moreover, the theory could work in the right circumstances, thereby providing a complete legal defense to the contractor. Laches may provide comfort to a contractor whose statute of limitations defense is hampered by a technical or practical barrier.

David Anderson is an associate attorney with Schwabe, Williamson & Wyatt. He focuses his practice on real estate and construction. Contact him at 503-796-2456 or at [email protected].