Thomas H. Segars

Most of our readers are well aware of the four-year statute of limitations that applies to section 75-1.1 claims. But what happens if the parties agree that a shorter limitations period should govern their potential claims against one another? Can they change this period by contract?

In today’s post, we examine Warren v. Cielo Ventures, a case that addresses just this situation. As discussed below, the Warren court held that such an agreement is unenforceable as against public policy. Notwithstanding the parties’ agreement, the four-year statute of limitations applies.

Time Waits For No One

When the Warrens discovered that a broken water heater had leaked water throughout their home, they wasted no time. They contacted their insurance company, which in turn contacted Servpro, a water damage remediation company. Servpro told the Warrens that the water damage was extensive and promised to “bring in the calvary” and “start work immediately.” The Warrens moved into a hotel.

To authorize Servpro to get started, the Warrens signed an agreement. That agreement provided:

NO ACTION, REGARDLESS OF FORM, RELATING TO THE SUBJECT MATTER OF THIS CONTRACT MAY BE BROUGHT MORE THAN ONE (1) YEAR AFTER THE CLAIMING PARTY KNEW OR SHOULD HAVE KNOWN OF THE CAUSE OF ACTION.

According to the Warrens, when they came back to the home ten days later, they found that Servpro “had completed minimal or no remediation work at all.” Worse still, because of the passage of time, mold had begun to grow in the home. Unfortunately, an industrial hygienist inspected the home and concluded that the time for remediating the home had come and gone. The Warrens’ home needed to be demolished and rebuilt, no doubt at great cost to the Warrens. (After all, time is money.)

Biding Their Time

One day shy of four years after signing their contract with Servpro, the Warrens sued. They alleged that Servpro had committed an unfair and deceptive trade practice against them by promising to remediate their home “immediately,” but failing to deliver.

Servpro moved for summary judgment, arguing that the Warrens’ section 75-1.1 claim was untimely under their contract because it was not brought within a year of the Warrens’ discovery of the claim. 

The trial court agreed with Servpro, and the Warrens appealed.

If I Could Save Time In a Bottle

The parties offered competing caselaw in the Court of Appeals. The Warrens argued that Holley v. Coggin Pontiac controlled and provided for a four-year statute of limitations. Servpro argued that Steele v. Safeco Insurance controlled and held that a one-year contractual limitations clause for a section 75-1.1 claim was reasonable. 

But neither of these cases persuaded the Court of Appeals. Holley, the court reasoned, addressed the narrow question of whether a three-year or four-year limitations period would govern section 75-1.1 claims that arose from 1969 to 1979, the decade before the General Assembly enacted the four-year limitations period. The court noted that, because Steele was an unpublished table case, its discussion of the relevant point was “nonbinding dictum.”

Unpersuaded by these cases, the Court of Appeals took the time to do its own research. It looked to the unfair and deceptive trade practices act’s “statutory text, legislative purpose, and specific creation of a private right of action” where “common law remedies had proved often ineffective.” The court acknowledged that prior appellate cases have acknowledged the right of parties to contractually shorten a limitations period in some cases and for some claims. As for section 75-1.1 claims, however, the court concluded that it “must pay deference to the legislative purpose” of the act:

To provide civil legal means to maintain ethical standards of dealings between persons engaged in business and . . . the consuming public within this State, to the end that good faith and dealings between buyers and sellers at all levels of commerce be had in this State.

Statutes of limitations, the court explained, are “blunt instruments,” but also “public policy choices” that weigh competing considerations in an effort to achieve fairness. Where, as in the unfair and deceptive trade practices act, the General Assembly has prescribed a particular limitations period, the court will not enforce a private agreement to shorten that period.

Time’s Up

Warren’s most obvious takeaway is that parties should not rely on contractual provisions that purport to shorten the period within which a section 75-1.1 claim can be brought. Such provisions will not be enforced. 

Beneath that surface holding, Warren offers insight into how to balance two competing priorities: private parties’ freedom to contract and the General Assembly’s prerogative to set public policy. In the final analysis, studying the case’s reasoning is time well spent.