Illinois Supreme Court Holds Five-Year Statute Applies to Fraud Claims Against Architects

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On Friday afternoon, in an opinion by Justice Robert R. Thomas, a unanimous Illinois Supreme Court held that fraud-based claims against architects are subject to a five-year statute of limitations. In Gillespie Community Unit School District No. 7 v. Wight & Company, the Court rejected the plaintiff school district's argument that such claims were subject to no statute of limitations at all. Our detailed summary of the facts and lower court decisions in Gillespie is here. Our report on the oral argument is here. You can watch the video of the argument here.

Gillespie arose from the plaintiff's construction of a new elementary school. In 1998, the plaintiff entered into a contract with the defendant to perform certain services prior to actually designing and building the new school. Everyone knew that the area had been extensively mined during the first half of the twentieth century, so one of those preliminary services was assessing the likelihood that the ground under a new building site might subside as a result of a long-ago underground coal mining operation.

The defendant retained an engineering firm. In early 1999, the engineers sent the defendant a letter recording various subsidence events and concluding that although "[n]o one can predict" subsidence, it could be "intuitively concluded" that there was a "relatively high risk of subsidence" in the area where the school district was considering building. The engineers followed up with a Foundation Engineering Report a month later which commented that there had been incidents of subsidence in the area, but didn't include the conclusion that there was a "relatively high risk of subsidence" at the proposed building site. The defendant forwarded the report to the plaintiff, but not the earlier letter.

The school district decided to go ahead, and retained the defendant as architect. The parties' agreement provided that the statute of limitations on any actions arising out of the project should begin running on the date of substantial completion for acts or omissions before that date, or the date of issuance of the final certificate of payment for later acts. The completed school was occupied in 2002. In early 2009, a coal mine subsided beneath the building, causing extensive damage. The building was condemned.

The school district sued the defendant, among others, alleging professional negligence, breach of implied warranty and - pursuant to an amended complaint - fraudulent misrepresentation by concealment of a material fact: the 1999 engineer's letter. The defendant architects moved to dismiss, arguing that all claims were time-barred, but the motion was denied. But they repeated the same arguments in a later motion for summary judgment, and this time, the motion was granted. The Appellate Court affirmed.

The plaintiff chose to bring only one issue before the Supreme Court: its challenge to the Appellate Court's holding that its fraudulent misrepresentation claim was subject to a five-year statute of limitations.

Before the Supreme Court, the case revolved around two statutes. First, we have 735 ILCS 5/13-214, the general statute of limitations and repose governing claims arising from construction projects. Section 13-214 provides that nearly all such claims are subject to a four-year statute of limitations and a ten-year statute of repose. But in subsection (e), the statute says:

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.

Then we have the catch-all statute, 735 ILCS 5/13-205, which provides that "all civil actions not otherwise provided for" are subject to a five-year statute.

The Supreme Court had held long ago in Rozny v. Marnul that Section 5/13-205 applied to actions for fraud and deceit, as well as tortious misrepresentation. But the plaintiff argued that Rozny was before Section 5/13-214 was enacted.  The plaintiff's theory was that the words "shall not apply" in Section 5/13-214(e) meant that claims for fraudulent misrepresentation and fraudulent concealment were subject to no statute of limitations at all, meaning that section 5/13-205 didn't apply any more. The Appellate Court disagreed, and on Friday morning, so did the Supreme Court.

The problem, the Court said, was the words "the limitations of this Section" in subsection (e). "This section" was section 5/13-214 - meaning that the four year statute of limitations and the ten-year statute of repose didn't apply. It didn't mean that no statute at all applied. Because section 5/13-214 didn't apply to the plaintiff's fraudulent concealment claim, section 5/13-205 did, and the claim was barred under Rozny.

The Court pointed out that the legislature was well aware, when it wanted to provide that no statute of limitations applied to an action, of how to accomplish that, citing criminal statutes providing that certain claims may be brought "at any time." But section 5/13-214 contained no such language.

Perhaps the most interesting part of the Gillespie decision is the final two pages. The Court emphasized the fact that the plaintiff was not challenging the application of the accrual clause in the parties' contract to its fraudulent concealment claim, although it had challenged accrual before the trial court. Thus, the Court said, it was "expressing no opinion concerning the extent to which accrual provisions" such as the one found in the contract "may or may not be enforceable with regard to fraud-based claims." 

Topics:  Architects, Fraud, Statute of Limitations

Published In: Business Torts Updates, Civil Procedure Updates, General Business Updates, Construction Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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