On November 22, 2010, the Georgia Supreme Court reversed a decision of the Georgia Court of Appeals regarding the proper statute of limitation to apply to claims for professional malpractice. The case of Newell Recycling of Atlanta, Inc. v. Jordan Jones & Goulding, Inc., Case No. S09G1974 (November 22, 2010) began as a malpractice claim against an engineering firm that provided design services for a new automobile shredding facility. The engineer, Jordan Jones & Goulding (JJ&G), prepared a proposal for the project entitled, “Draft Scope of Work” and sent it to the owner, Newell Recycling, in 1997. JJ&G followed up the draft with a letter with a cost estimate. The parties verbally agreed upon the work, and the project constructed with JJ&G’s plans was completed by the fall of 1999.
The concrete paving around the shredder began to crack in May 2000, but Newell Recycling did not file the action for professional malpractice until August 2004, more than four years later. Relying on several of its prior decisions, the Court of Appeals held, as a matter of law, that the malpractice claim was barred by the four-year statute of limitation upon all actions on any implied promise or undertaking. The court rejected the argument that the six-year statute of limitation for actions upon contracts in writing (O.C.G.A. § 9-3-24), should decide the issue. The court ruled that even assuming, without deciding, that JJ&G’s “draft” scope of work and letter constituted an enforceable written contract, professional malpractice claims, even when based in whole or in part upon a written contract, are governed by the four-year statute of limitation.
The Georgia Supreme Court granted a writ of certiorari, or discretionary review, of the decision of the Georgia Court of Appeals, and reversed the holding of the court of appeals. Specifically, the Supreme Court held that where a professional malpractice claim is based upon a written contract, the applicable statute of limitations is the six-year statute of limitation of O.C.G.A. § 9-3-24. The Court reasoned that by its terms, the four-year statute of limitation (O.C.G.A. § 9-3-25), applies to claims upon an oral or implied promise or undertaking. Under the proper analysis, one must “determine whether a written agreement actually exists between the parties such that any implied duties sued upon would have grown directly out of the existence of the written contract itself.” Where a written agreement exists, the breach of any expressed or implied duties in the agreement is subject to a six-year statute of limitation, rather than the four years applicable to purely oral or implied agreements.
The Supreme Court’s decision is significant for two reasons. First, it reversed a long line of court of appeals decisions holding that any malpractice case, whether based upon a written contract or not, including claims against lawyers, accountants, exterminators, as well as design professionals, is subject to a four-year statute of limitation. Professionals and their insurers need to be aware of the longer exposure for potential liability. Second, the court found that the relationship was based upon a written agreement where there was marginal factual support for the existence of a written contract. Neither the courts of appeals’ nor the Supreme Court’s opinions offer details about the agreement other than that the engineer sent a written “draft” of a scope of work and letters to the owner. It was uncertain whether the scope of work was signed by the two parties as an integrated, written agreement.