Waterpark resort’s breach of contract
claims barred by statute of limitations
Appeals court clarifies statute of limitations for contract damages,
rejects claim that economic loss doctrine does not apply to bar tort
claims for “professional” services.
By org jforward wisbar Joe Forward, Legal Writer,
State Bar of Wisconsin
27, 2012 – A corporation that paid a $26.2 million for the design
and construction of the Kalahari Resort and Conference Center in
Wisconsin Dells was too late in filing claims that defective designs
caused water damage at a significant cost.
Iconica Inc. finished the Kalahari Resort project in early May 2000.
Nearly 10 years later, Kalahari Development LLC asserted breach of
contract and professional negligence claims.
Kalahari Development incurred significant costs to inspect and repair
walls for damage caused by moisture, it alleged, arguing Iconica
defectively designed or installed vapor barriers.
But in Kalahari
Devlopment LLC v. Iconica Inc., 2011AP643 (Feb. 23, 2012), the
District IV Wisconsin Court of Appeals barred the claims, rejecting the
argument that Wisconsin’s 10-year statute of repose for
substantial improvements to real estate applied.
Wis. Stat. section 893.89
provides that a person involved in the improvement of real estate
can’t be sued after 10 years from the date of substantial
completion of the project. But the appeals court explained that the
limitations period for breach of contract claims is shorter.
“[W]hen an action is one for contract damages, Wis. Stat. §
893.89(3)(a) directs that its ten-year time limit be compared with the
time limit applicable to contract actions to see which is shorter, and
that the shorter limit applies,” wrote Presiding Judge Paul
Instead, Wis. Stat. 893.43’s
six-year statute of limitations applied, the court concluded. It also
rejected Kalahari’s argument that section 893.89(3)(b) bars
application of the shorter limitations period, because the damage
occurred more than seven years after completion.
Section 893.89(3)(b) extends the limitations period for damages
occurring in the last three years of the 10-year limitations period.
“As applied to the facts before us, subsection (3)(b) is not, in
any logical sense, an exception to subsection (3)(a),” Judge
The appeals court also denied Kalahari’s professional negligence
claim as barred by the economic loss doctrine, which generally prevents
a party from recovering economic losses in tort when a contract is
predominantly for a “product,” not services.
Kalahari primarily contracted for a water park and convention center,
the court explained, not the services generally involved in completing
construction projects. It noted that architectural and engineering
services were a small fraction of the contract price, about four
Finally, the court rejected Kalahari’s argument that
“professional” negligence claims are categorically exempted
from the economic loss doctrine and thus a tort claim could stand.
Under Insurance Co. of North America v. Cease Electric Inc.,
2004 WI 139, 276 Wis. 2d 361, 688 N.W. 2d 462, the court explained, it
does not matter if services are professional or nonprofessional if the
contract is predominantly for a product.