Summary of a Recent
Judicial Development in
Water Law

Water District's Claims against Engineering Firm Barred
by Statute of Limitations

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Tin Cup County Water and/or Sewer District v. Garden City Plumbing and Heating, Inc., 200 P.3d 60 (Mont. 2008), the Montana Supreme Court held that a water district's claims against an engineering firm were based in tort rather than contract, and were thus barred by the three-year statute of limitations for tort actions.

Background

Tin Cup, a water district which operated and maintained a dam under the terms of a special use permit issued by the United States Forest Service, contracted with DJA, an engineering firm, to work on the dam's repairs. Id. at 63. The Forest Service issued a 90-day special use permit that allowed Tin Cup to access the dam and replace a pipeline. Id. The permit placed sole responsibility for the dam's safety on Tin Cup and required that Tin Cup be liable for up to $1 million for any damage to property or life. Id. at 64. The project was delayed due to Tin Cup's rejection of all of the bids for the work and because environmental groups filed a lawsuit to prohibit the use of helicopters and mechanized equipment in the wilderness area. Id. Eventually, Tin Cup separately contracted with Garden City for the construction, installation, and completion of the first phase of the project. Id. DJA prepared the contract between Tin Cup and Garden City, but was not a party to the agreement. Id.

Because the dam's condition was worse than expected, Garden City ran out of grout and did not grout the final eight to ten feet of the conduit, but DJA subsequently performed a grout inspection and determined that Garden City had accomplished its objectives, and DJA reported the successful completion of Phase I to Tin Cup. Id. Tin Cup officials later observed seepage adjacent to the newly inserted outlet pipe, and the Forest Service hired Garden City to repair the dam again. Id. Garden City partially breached the dam, widened the spillway, and replaced and excavated a portion of the outlet system, which reduced the reservoir's storage capacity. Id. The Forest Service paid Garden City $500,000 for the remedial work, and then billed Tin Cup $1,000,000 for the cost of removing the threat of dam failure. Id. at 3. Tin Cup sued DJA and Garden City, alleging breach of contract, bad faith arising out of a special relationship with DJA, negligence, negligent misrepresentation, estoppel/equitable partnership, alter ego/pierce of corporate veil/successor liability, and indemnification. Id. at 65. Tin Cup submitted two supplemental expert disclosures after oral argument on the defendants' pending motions to dismiss, which the district court dismissed as untimely. Id. The court then granted DJA's motion for summary judgment based on statute of limitations and granted Garden City's motion for summary judgment based on Tin Cup's failure to prove causation, and Tin Cup appealed. Id.

Arguments

Tin Cup argued that its claims sounded in contract and that the eight-year statute of limitations for contracts should apply rather than the three-year statute of limitations for torts. Id.

Analysis and Holdings

The court explained that the contract statute of limitations applies only if the alleged breach of a specific provision in a contract provides the basis of a plaintiff's claims, while the tort statute of limitations applies if a plaintiff claims breach of a legal duty imposed by law that arises during the performance of the contract. Id. at 66. Regarding the claims against DJA, the court noted that Tin Cup's general claims were that DJA poorly supervised Garden City's construction, which was based in part on provisions of the contract between Tin Cup and Garden City, to which DJA was not a party. Id. The court further noted that Tin Cup did not allege that DJA breached a specific provision of its own contract by failing entirely to supervise, coordinate, or inspect, and therefore Tin Cup's claims against DJA sounded in tort and were barred by the three-year statute of limitations. Id. at 68. The court also found no error in the district court's exclusion of expert testimony, noting that the district court had provided a detailed rationale for its decision to exclude or limit the testimony; therefore, the court affirmed the dismissal of the claims against Garden City as well. Id. at 70.

The case was decided on December 16, 2008.