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In Bailey v. Smart Papers LLC, 2009 U.S. Dist. LEXIS 27619
(S.D. Ohio 2009), the United States District Court for the
Southern District of Ohio, Western Division, considered a motion
to dismiss filed by a contractor and engineering firm seeking
to dismiss a claim of negligence on the theory that the Ohio
statute of repose barred such action. Most states have enacted
statutes of repose which limit the liability of design professionals
and contractors for the design, engineering and construction
of improvements to real property. A statute of repose establishes
a maximum time period in which lawsuits premised on
defects in improvements to real property can be brought. The
rationale for such a limitation is that improvements to real
property are generally utilized for a number of years, during
which ownership, tenants, and use of such property often
change. Therefore, due to the likelihood that the availability of
evidence will diminish over time and the fact that the maintenance
and use of the real property can vary, a set period of time
to bring a lawsuit protects those engaged in the construction
industry from vexatious litigation.
In Bailey, an unfortunate incident at a paper mill lead to the
demise of one Bill Bailey who had been working near the “take
up” reel of the paper machine. Mr. Bailey’s widow brought suit
against numerous parties, including an engineering firm and
contractor who had, sixteen years earlier, redesigned and rebuilt
the paper machine. It was the widow’s contention that the
redesign and rebuild of the paper machine had been
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performed negligently and that such negligence contributed to the death
of Mr. Bailey. The engineering firm and contractor asserted
Ohio’s statute of repose, Ohio Revised Code § 2305.131, as a
defense to the widow’s claims, arguing that the statute of repose
barred claims arising out of an incident concerning real
property which happened more than ten years after completion
of an improvement to real property. The widow argued
that the Ohio statute of repose did not apply to the work performed
on the paper machine because it did not constitute an
improvement to real property, but rather was merely a replacement
of worn parts. The court was not persuaded by the
widow’s argument.
In finding for the engineering firm and contractor, the court
applied a fourfactor
test to determine whether there was an
improvement to real property for the purpose of determining
the applicability of the Ohio statute of repose. The elements of
the test are as follows: (1) the level of permanence of the improvement,
(2) whether it became an integral part of the system,
(3) whether it enhances the value of the property, and (4)
whether it enhances the use of the property. In Bailey, the
court found that the work performed on the paper machine
was an improvement to real property. Specifically, the court
first determined that the equipment in question was a permanent
part of the mill; therefore, it satisfied the requirement of
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