Affholder, Inc. v. Preston Carroll Company, Inc. Cfw Construction Company, Inc., and Third-Party Louisville and Jefferson County Metropolitan Sewer District, Third-Party H.C. Nutting Company Hubbard E. Rudy Consulting Engineers James Winstead & Associates, Inc. Presnell Associates, Inc., E. Lionel Pavlo, Consulting Engineer, D.M.J.M., Inc., Successor in Name to Vollmer Associates, Inc., D/B/A Vollmer-Presnell-Pavlo Joint Venture, Third-Party

Citation: 27 F.3d 232Docket: 92-5166

Court: Court of Appeals for the Third Circuit; August 24, 1994; Federal Appellate Court

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In the case Affholder, Inc. v. Preston Carroll Company, Inc., the United States Court of Appeals for the Sixth Circuit addressed several novel questions of Kentucky state law. The court, having sought clarification from the Supreme Court of Kentucky, reversed the district court's judgment and remanded the case for further proceedings consistent with the Kentucky Supreme Court's certification opinion.

The Kentucky Supreme Court was asked to clarify whether a general contractor can claim indemnity from engineers for providing deficient plans when the contractor has been found liable or acknowledged liability to subcontractors for resulting delay costs. Additionally, the court was requested to determine the applicable statute of limitations for a third-party indemnity claim against engineers for inadequate engineering services.

The appellate court also noted pending motions for party and counsel substitutions filed by the appellees and appellants, respectively, which were denied without prejudice due to the remand. The background of the case involves a long-standing legal dispute regarding a wastewater treatment project initiated by the Louisville and Jefferson County Metropolitan Sewer District in 1974, which has led to multiple unresolved federal lawsuits since 1982.

The statute of limitations for a general contractor's indemnity claim against engineers for substandard engineering services begins to run under specific circumstances. Key points of consideration include whether the limitations period starts when the written agreement is executed, when the contractor is sued on the subcontractor's claim, when judgment is entered against the contractor, or when payment is made. In a case involving Metropolitan Sewer District of Louisville (MSD) and various engineering firms, the general contractor, H.C. Nutting Co., faced issues due to alleged design errors and soil conditions, leading to a 'pass through' agreement with the subcontractor, Affholder, which limited the contractor's payment obligation based on the success of its indemnity claim. Affholder filed suit against the construction companies, who then filed a third-party complaint against MSD and the engineers. The Sixth Circuit Court of Appeals is reviewing the case to clarify the applicable Kentucky statute of limitations for the indemnity claim, noting that such claims must be brought within five years under KRS 413.120. Indemnity is established when one party incurs liability due to another party's actions, specifically when the general contractor acknowledges liability to a subcontractor due to deficiencies attributed to the engineers.

KRS 413.245 establishes a one-year statute of limitations for actions related to professional services. This statute has been applied to various professionals, including doctors, attorneys, and engineers. However, being licensed does not automatically categorize a service as "professional." The current case centers on indemnity rather than professional status, indicating that the five-year statute of limitations under KRS 413.120 is applicable. 

The statute of limitations begins when a party is aware or should reasonably be aware of the cause of action, which in this case pertains to potential liability claimed by Affholder against construction companies. Prior discussions about cost overruns did not constitute sufficient notice; liability became apparent only upon the filing of Affholder's action on March 23, 1982. Thus, the five-year statute of limitations for the construction companies' indemnity claim against the engineering firms commenced at that time.

In a dissenting opinion, Judge Leibson argued that the limitation period should have started on January 7, 1982, the date of a 'pass through' agreement acknowledging liability. The court denied a petition for rehearing regarding this case without making a determination on whether subsequent events influenced the indemnity claim.