Monday, May 5, 2014

Construction Law: Relation-Back Is ... Back

By J. Derek Kantaskas and Elizabeth Lester

Florida attorneys kept in limbo by conflicting appellate opinions concerning the application of the relation-back doctrine have received new guidance. In Caduceus Properties v. Graney, the Florida Supreme Court held that naming a party who had previously been a third-party defendant as a party defendant in an amended complaint relates back to the filing of the third-party complaint for statute of limitations purposes. The Supreme Court was reviewing Graney v. Caduceus, LLC, 91 So. 3d 220 (Fla. 1st DCA 2012), where an owner had filed direct construction defect claims against an engineering firm (KTD) and the engineering firm’s principal (Graney) over a defective HVAC system. The complaint came four years after KTD and Graney had third-party complaints filed against them by the architect of the HVAC system in the same matter and five years after the owner initially discovered the HVAC issue. KTD and Graney alleged that the five-year gap between the discovery of the HVAC issue and the direct complaint against KTD and Graney violated a four-year statute of limitations.

The Supreme Court made its ruling after weighing the decisions made in two conflicting Florida appellate opinions. In Graney, the First District Court of Appeals held that direct claims brought against an existing third-party defendant after the expiration of the statute of limitations did not relate back to the filing of the original complaint. This holding was in direct conflict with a previous decision by the Fifth District Court of Appeals in Gatins v. Sebastian Inlet Tax Dist., 453 So. 2d 871 (Fla. 5th DCA 1984), where a third-party claim was not barred by the statute of limitations because the third-party defendant was in the lawsuit before the statute of limitations expired and the plaintiff’s claim related to the same issues raised in the third-party complaint.

The Supreme Court’s decision, authored by Justice Barbara J. Pariente and heavily influenced by the dissent in Graney written by Judge William A. Van Nortwick Jr., adopted the rationale of the Fifth District, stating that allowing third-party claims to relate back for purposes of timeliness was more in line with the intent of the relation-back doctrine in Fla. R. Civ. P.1.190(c). Justice Pariente wrote, “Permitting relation back in this context is also consistent with Florida case law holding that rule 1.190(c) is to be liberally construed and applied,” and she added the main concern of the relation-back doctrine is providing “fair notice” to parties who may be blindsided or prejudiced by unexpected claims.

The court went on to state that the key inquiry now for lower courts shall be (1) whether the third-party complaint was filed before the statute of limitations expired, and (2) whether the plaintiff’s claims in the amended complaint relate to the same “conduct transaction, or occurrence,” set forth in the previous third-party complaint. This inquiry, the court explained, is preferable over the Graney rationale, which was “inconsistent with … the policy underlying the Florida Rules of Civil Procedure that cases should be resolved on the merits whenever possible.”

The effects of this decision will assuredly have an impact on parties in complex and protracted multi-party litigation, some of whom may find themselves facing claims they previously believed long expired.