• How Long Do Ohio Contractors Have to Sue the State?
  • December 17, 2009 | Author: Stephen Withee
  • Law Firm: Frost Brown Todd LLC - Office
  • A common element of construction contracts is a mandatory dispute resolution procedure that must be completed before a lawsuit can be filed. On state funded construction projects in Ohio contractors must engage in the “Article 8” dispute resolution process before it can bring an action against the state. A contractor must bring a lawsuit within two years of the “exhaustion” of this process. Thus, it is vital for contractors to understand when it has completed this process. While this standard is seemingly straightforward, it is not uncommon for the decision makers in this process to miss deadlines, give incomplete decisions or simply ask for more information - sometimes all in the same “decision”. A recent appellate court opinion, clarifies when the claim is “exhausted” and, therefore, when the statute of limitations clock begins to tick.

    Ohio State University contracted to construct a new heart hospital. The prime contractor responsible for the installation of wall coverings and painting claimed that it incurred additional costs due to Ohio State’s design changes, failure to maintain the schedule and work outside its original scope of work. It invoked the Article 8 process. Under this process, the claim must first be submitted to the project administrator. The contractor can then appeal the decision to the State Architect. The State Architect must schedule a meeting to discuss the appeal within thirty days of receiving the appeal, unless the parties agree to an extension. After the meeting, the State Architect must issue a decision within sixty days. Only after this process is completed may a contractor file suit against the state in the Court of Claims.

    On January 27, 2005, the contractor submitted a claim, as required, to the project administrator. Upon the project administrator’s denial, the contractor appealed to the State Architect on August 23, 2005. The parties met to discuss the appeal on November 30, 2005. On January 6, 2006, the State Architect sent a letter to the contractor. This was within the sixty day timeframe. The letter informed the contractor generally that the State Architect had insufficient information on all aspects of the claim to justify additional compensation. The letter then reviewed each claim individually and reserved final judgment until it received additional information. While the contractor asserted it attempted to set up a follow up meeting to provide this additional information, no such meeting was scheduled and the contractor provided no additional information. Over a year and a half later, on October 3, 2007 the State Architect issued a letter indicating that its January 2006 letter constituted its final decision.

    On July 29, 2008 the contractor filed suit against the state in the Court of Claims. The state moved to dismiss claiming that the contractor’s suit was outside the two year statute of limitations. The Revised Code mandates that any claim under a public works contract shall be resolved within 120 days. The state, therefore, argued that the statute of limitations began to run 120 days after the contractor appealed to the State Architect on August 23, 2005. According to the state, therefore, the statue would begin running before the State Architect issued its January 6, 2006 letter.

    Both the trial court and appellate court agreed with the state and dismissed the contractor’s lawsuit as untimely. The appellate court reasoned that the statute at issue controlled over any contractual language obligating the contractor to complete the Article 8 process (including the receipt of final decision from the State Architect). The contractor asserted, however, that another statute specifically required the exhaustion of any contractual remedies before suit could be filed. In the contractor’s view, this process could not be completed until the State Architect issued an “actual, final decision.” The court rejected this argument claiming that this would lead to parties unnecessarily delaying the issuance of a “final” decision and, thereby, unnecessarily prolong the dispute process.

    This decision establishes clear rules for contractors on public projects in Ohio - their two year statute of limitations begins to run 120 days from the date they file their appeal with the State Architect. This clock will continue to run even if the State Architect (a) fails to issue a decision within the contractual timeframes, (b) seeks further information and/or (c) never issues a final decision on a claim. This ruling may also leave open the more aggressive option of allowing contractors to file suit before the State Architect has issued a decision since the administrative process is “exhausted” by statute after 120 days. In either case, contractors should clearly mark their calendars to avoid the result experienced by the contractor in this case.