New Jersey Judiciary Narrows Applicability of Statute of Repose to Manufacturers of Products That Are Utilized in Improvements to Real Property

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[author: Timothy Freeman]

Product Liability Advisory

New Jersey’s Appellate Division clarified the role of the New Jersey Statute of Repose, N.J.S.A. 2A:14-1.1 (the Statute of Repose), as it pertains to manufacturers of products that are utilized in improvements to real property.  The Statute of Repose was enacted in order to “limit the expanding liability of contractors, builders, planners, and designers” in connection with improvements to real property. Horosz v. Alps Estates, Inc., 136 N.J. 124, 128 (1994).  Traditionally, the Statute of Repose has not been applied to protect manufacturers of products that are used in the construction process. State v. Perini Corp., 425 N.J. Super. 62, 80 (App. Div. 2012).  The applicability of the Statute of Repose to manufacturers becomes nebulous, however, when the manufacturer designs a particular product for use in a specific development, or where it plays an active role in the installation process.  The recent Perini decision by the New Jersey Appellate Division clarifies the extent to which the Statute of Repose can protect manufacturers that engage in design and installation activities in addition to manufacturing. 

In Perini, the court affirmed the denial of summary judgment to Perma-Pipe, Inc., the manufacturer of steel pipes that were incorporated into a hot water distribution system in a multi-phase, complex construction project, finding that manufacturers are not covered under the New Jersey Statute of Repose.  The Perini court, however, left the door open for Perma-Pipe to seek protection under the Statute of Repose to the extent that it could establish that it “designed the pipes to contract specifications and provided technical support during installation.” Id.  Thus, while manufacturers that solely ship products to distributors and retail outlets will not receive the benefit of the Statute of Repose, those that get actively involved in installation or design a product according to contract specifications will want to assert the Statute of Repose as an affirmative defense in actions filed in New Jersey courts.

 

In the Perini matter, Perma-Pipe maintained that it was entitled to summary judgment because the Statute of Repose applied to its role as the designer of an improvement in the construction project. Id. at 79-80.  More specifically, Perma-Pipe designed the layout of the underground piping in accordance with contract specifications and “provided a certified technician during critical stages of installation and performed stress analysis on the system.” Id. at 68.  Perma-Pipe argued that its assistance in the installation process and its design of the piping in accordance with customized specifications entitled it to protection under the Statute of Repose. Id. at 71.

 

The Perini court ultimately determined that “[s]imply ‘designing’ a ‘standardized’ product that is installed at a construction project does not constitute activity that is covered by the statute of repose.” Id. at 80.  There is a critical distinction under New Jersey law, however, between “defendants that sold, designed, or manufactured standardized products and those that also installed the products as part of an improvement to real property.” Id. at 80-81.  Thus, when a defendant wears “two hats” and the injury is attributable to both functions, “the responsibility should be allocated between the two” roles. Id. at 81 (quoting Dziewiecki v. Bakula, 180 N.J. 528, 533 (2004)).

 

A manufacturer’s role in the installation process must be more significant than an appearance at the construction site, however, in order for the Statute of Repose to apply. Id. at 81.  Accordingly, Perma-Pipe’s presence at the construction site and pressure testing of the system, by itself, was not sufficient to bring it within the purview of the Statute of Repose. Id. at 81.  Nevertheless, the Perini court determined that Perma-Pipe could present a defense that it acted “as a designer of an improvement to real property,” and to the extent that it did so, it would be protected under the Statute of Repose. Id.

 

The Perini decision is an unfortunate development for manufacturers of products utilized in the construction of improvements to real property because it narrows the extent to which they may receive protection under the Statute of Repose.  More specifically, manufacturers should be aware that they are not protected by the New Jersey Statute of Repose unless they played a significant role in the installation process or designed a customized product in accordance with contract specifications.  Further, even if a manufacturer is actively involved in the installation or design process, it will only receive protection under the Statute of Repose to the extent that the harm complained of can be allocated to its actions that are outside the scope of manufacturing.  Thus, for most manufacturers of building components and other products used in the construction of improvements to real property, the New Jersey Statute of Repose will not be an effective defense to a product liability action.  On the other hand, for those manufacturers that are involved in the installation process, or that custom-design a product for a particular development, the Statute of Repose should continue to be considered as a potential defense.

 

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Published In: Civil Procedure Updates, General Business Updates, Construction Updates, Products Liability Updates, Residential Real Estate 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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