The phrase, "The king can do no wrong," may sound quaint today. It means a citizen cannot sue the sovereign, even if the king is wrong. This is called sovereign immunity. In American legal parlance, the sovereign is the government.
When the government starts acting like a business, the courts have had problems with this powerful remnant of regal immunity. Aside from passing laws, state legislatures engage in a variety of construction ventures. They build schools, clear and maintain playgrounds, build roads, and fund power installations. Most, if not all, electrical contractors will, at some time, have one of these projects.
In order to induce contractors to perform state-funded work, the government will waive its immunity and allow itself to be sued within prescribed boundaries. For this purpose, many state and county governments have contract disputes statutes and even dispute-review boards. However, sovereign immunity continues to exist unless it is explicitly waived by statute.
One application of sovereign immunity that may come as a surprise concerns statutes of limitation. With these statutes, after a fixed period of time, a party no longer may pursue its rights in court. Each state has its own time limits. Depending on whether the claim is for breach of contract or a tort (negligence), the statute of limitations may be one, two, six or more years. Regardless, there will come a time when you no longer need to be concerned about being sued. The “sovereign” is not necessarily subject to this constraint. It may be immune to general limitation laws.
Why do the Seattle Mariners matter?
The Washington State Major League Baseball Stadium Public Facilities District (PFD) is the owner of Safeco Field in Seattle. Through arrangements with the Baseball Club of Seattle LP (the Seattle Mariners), the PFD developed the field. It employed a joint venture of two large contractors for the work. After three years of construction, the project was substantially complete.
Seven years later, there was a catastrophic failure of the fire-protection coating system of the exposed steel beams. PFD sued the contractor for breach of contract. However, because of a six-year statute of limitations on breach of contract claims in Washington, the case was dismissed. The Supreme Court reversed the decision and reinstated the lawsuit.
At the heart of the legal question of time limits was the Washington statute, which stated, in part, that “there shall be no limitation to actions brought in the name or for the benefit of the state.” On its face, this law allows the state to bring a breach of contract action at any time in the future. Realize also that this statute is not limited to contract actions. An earlier case allowed a school district to bring a tort claim for design and construction defects 20 years after completion of a school.
This decision, exempting the state from statutes of limitation, is not unique to Washington but generally is true across the country. The effects of a late lawsuit on a contractor’s insurances, and on the liabilities of lower tier subcontractors and suppliers, are not clear.
Sovereign acts versus commercial ventures
The Latin phrase “nullum tempus occurrit regi,” means “no time runs against the king.” These days, however, state governments get into ventures far removed from traditional governing functions. In some instances, the courts have found that the government is not acting in its sovereign capacity and so is not immune from the law. The line between sovereign or proprietary is not easily defined.
State-owned and maintained commercial ballparks are within the sovereign acts protection. These facilities have been held to fall within the scope of a sovereign function in Illinois, Maryland and Wisconsin, even though the heart of these ventures is a professional ball club, and entry to the park is not free.
On the other hand, it has been held that an electrical supply system, owned and operated by the state, is not a sovereign function. In Washington Public Power Supply System v. General Electric Co., there is “no indication in the Washington Constitution [...] that the development, production, or sale of electrical energy [...] is a sovereign duty of the state.”
According to the case law, “The mere fact that a government project serves a public purpose or grants an economic benefit does not elevate it to the level of a sovereign act. [...] Public health and safety are not the basis [sic] for distinguishing between governmental and proprietary functions of a municipality.”
How can you know?
Courts in Arizona, Massachusetts, Michigan and North Carolina have held that, when substantial admission fees are charged, a state or municipal ballpark is not exempt from the statutes of limitation. In Virginia and Pennsylvania, some state projects have been deemed to be “proprietary” because state law did not require them to be built, but they were allowed to be built under enabling legislation. As such, statutory time limits apply.
There have been efforts by the American Bar Association and others to develop a uniform procurement code that would clarify and, in some instances, eliminate, this residual, antique concept of sovereign immunity. Where the concept persists in state law, the effects can take a contractor by surprise and indefinitely extend one’s potential liability.