November was a relatively light month for the Illinois Supreme Court on the civil docket, with only one civil case on for argument. Today, we report on the oral argument in Gillespie Community Unit School Dist. No. 7 v. Wight & Co. In Gillespie, most of the Justices seemed somewhat skeptical of plaintiff's claim that no statute of limitations governed its fraud-based claims against an architecture firm arising from a school construction project.
Gillespie begins in 1998, when the school district decided it needed a new elementary school. The problem was that the district encompassed an area of Macoupin County that was coal mined more or less continuously from the early 1900s into the 1950s. So everyone was concerned about the possibility of ground subsidence resulting from the underground mines.
The plaintiff entered into an agreement with the defendant to perform various services in connection with the building project. One was to determine just how much mining had been done in the area – and more importantly, where – and assess the likelihood that subsidence might wind up seriously damaging the school if it was built. The defendant hired an engineering firm to take on the mining and subsidence issues.
The building was completed in the fall of 2002. In the spring of 2009, a coal mine subsided beneath the building, causing extensive damage; the building was subsequently condemned, a total loss. When the plaintiff school district sued the defendant architects, the defendant moved for summary judgment on grounds that the action was time barred. The Circuit Court agreed, and the Fourth District affirmed.
Gillespie turns on the intersection of two statutes. First, we have 735 ILCS 5/13-214, a comprehensive statute of limitations and repose for actions arising from the “design, planning, supervision, observation or management of construction, or construction of an improvement to real property.” Section 13-214 provides that any such action must be brought within 4 years of “the time the person bringing an action . . . knew or should reasonably have known of such act or omission,” as well as providing a 10 year statute of repose. But, the statute provides in subsection (e) that the “limitations of this Section shall not apply to causes of action arising out of fraudulent misrepresentations or to fraudulent concealment of causes of action.”
And from there, we turn to 735 ILCS 5/13-205, which provides that “actions or unwritten contracts . . . or to recover damages for an injury done to property . . . and all civil actions not otherwise provided for, shall be commenced within 5 years next after the cause of action accrued.”
By the time Gillespie reached the Supreme Court, the only issue left revolved around the plaintiff’s claim for fraudulent misrepresentation of concealed facts. The fraud claim arose from an engineer’s report which the defendant might – or might not – have received from the subcontractor predicting a “relatively high risk of subsidence” in the construction area, and then failed to pass along to the school. It seems the fraud-based claim wouldn’t fall under 735 ILCS 5/13-214; it would be excluded by Section 214(e). So does that mean it falls under Section 205 as a “civil action[ ] not otherwise provided for”? The appellant school district said no, since the five year statute would have been fatal to its claim. The defendant said yes.
The plaintiff school district began the arguments, insisting that the case presented a “clear and narrow” question of statutory construction. After counsel described the initial engineer’s report which the defendant might or might not have received from the engineers (it was actually produced by the subcontractor, not by the defendant), counsel referred to a second, subsequent report. Justice Theis asked what the second report said, and counsel explained that the second report disclosed that the proposed site had been mined, but concluded that it was difficult to estimate what the chances of subsidence were. Justice Thomas asked counsel whether the plaintiff’s position was that although section 214(e) exempted fraud claims from the general statute of limitation and repose for construction, section 205 was not triggered, meaning that there was no statute of limitations at all for such claims? Counsel agreed that it was. Justice Thomas asked whether counsel was aware of any causes of action, with the exception of a limited number of criminal charges, that carried no limitations? Counsel argued that the legislature had made the determination that there should be no statute of limitation with respect to fraud-based claims arising from construction. Justice Thomas asked whether the words in subsection 214(e) “of this section” have any meaning. Counsel responded that the language showed that such claims were not subject to section 205 as actions “not otherwise provided for.” They were provided for by the statute, and then exempted. Chief Justice Garman asked counsel why the legislature would give special treatment to construction-based fraud claims over other types of fraud claims? Counsel argued that the legislature was aware of cases providing that contract provisions accelerating statutes of limitations were enforceable, and the statutory scheme was its response. Justice Thomas suggested that fraud actions are “not otherwise provided for” once they are carved out of subsection 214(e). Counsel responded that although section 205 might have applied before section 214 was adopted in 1979, but that changed when the legislature adopted a comprehensive scheme for managing actions arising from construction projects. Counsel argued that his construction – the view that the legislature’s scheme “provided for” fraud claims, making section 205 inapplicable – was logical, while the alternative was not. Justice Thomas asked why it was illogical that the legislature would provide for an extra year for claims sounding in fraud, and counsel responded that there was no reason for the extra year. Counsel claimed that the defendant’s construction would also lead to unfair results by letting wrongdoers enter into construction contracts, intending fraud, knowing that they will be absolved from liability in five years. Justice Freeman asked counsel to address his argument that defendants would have laches available, even in the absence of a statute of limitations. Counsel responded that where a hypothetical plaintiff sat on its rights and triggered real prejudice to the defendant’s ability to defend itself, laches would be a viable defense, but that the defense had not raised the defense here. Counsel concluded by pointing out that under the construction of the statute adopted by the Circuit Court and affirmed by the Appellate Court, the plaintiff’s action had been barred before it was discovered, even though it had been filed five months after the incident.
Counsel for the defendant began by addressing the second report. Counsel argued that its only obligation was to share information with the Capital Development Board, and there was no allegation that the defendant had failed to do that. The second report had concluded that the risk of subsidence was unquantifiable due to multiple unknown variables. Counsel argued that the court was being asked to hold that in 1979, when the legislature provided a comprehensive system of limitations and repose for construction-related claims, it intended to remove the pre-existing statute of limitations for claims sounding in fraud. Counsel claimed that there were two reasons for applying section 205 and its five-year statute to fraud-based actions: first, actions sounding in fraud were not subject to any statute of repose, and second, as the Supreme Court held in Rozny v. Marnul in 1969, “civil actions not otherwise provided for” encompassed actions for fraud and deceit. Justice Burke pointed out that Rozny predated Section 214 by ten years, but counsel responded that Rozny had set the stage for the new statute. Chief Justice Garman concluded by asking whether the case included any public policy considerations, and counsel argued that there were not, beyond the general principle that the heavily negotiated contract between the parties – which specifically provided when causes of action arising out of the project accrued – should be enforced.
In rebuttal, counsel for the plaintiff argued that it was undisputed at the trial court that if the school district had had the first engineering report, it would have proceeded differently. Counsel insisted that the interpretation of the statute suggested by the defendant was inconsistent with its language.We expect Gillespie to be decided in approximately three to four months.