Delon Hampton & Associates, Chartered v. Washington Metropolitan Area Transit Authority

• Decision Date: 06 August 1991
• Docket Number: No. 90-2047,90-2047
• Parties: DELON HAMPTON & ASSOCIATES, CHARTERED; Envirodyne Engineers, Incorporated, Plaintiffs-Appellees, v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 355

943 F.2d 355

DELON HAMPTON & ASSOCIATES, CHARTERED; Envirodyne Engineers, Incorporated, Plaintiffs-Appellees, v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Defendant-Appellant.

No. 90-2047.

United States Court of Appeals Fourth Circuit.

Argued Oct. 30, 1990.

Decided Aug. 6, 1991.

Gerard J. Stief, Associate Gen. Counsel, Washington Metropolitan Area Transit Authority, Washington, D.C., argued (Thomas B. Dorrier, Associate Gen. Counsel, Arnold I. Melnick, Deputy Gen. Counsel, Robert L. Polk, Gen. Counsel, Francis R. Filiatreau, Linda Lazarus, Colin M. Dunham, Washington Metropolitan Area Transit Authority, Washington, D.C., on brief) for defendant-appellant.

Bruce Earl Titus, Venable, Baetjer & Howard, McLean, Va., argued (Lindsay B. Meyer, McLean, Va., on brief for plaintiff-appellee Delon Hampton & Associates; Barry L. Kroll, Williams & Montgomery, Ltd., Chicago, Ill., on brief for plaintiff-appellee Envirodyne Engineers), for plaintiffs-appellees.

Mary Sue Terry, Atty. Gen. of Va., H. Lane Kneedler, Chief Deputy Atty. Gen., Gail Starling Marshall, Deputy Atty. Gen., Guy W. Horsley, Jr., Senior Asst. Atty. Gen., Richmond, Va., for amicus curiae.

Before SPROUSE and WILKINSON, Circuit Judges, and HOUCK, District Judge for the District of South Carolina, sitting by designation.

OPINION

SPROUSE, Circuit Judge:

The question we decide is whether the district court correctly determined that the Washington Metropolitan Area Transit Authority's ("WMATA") claim against an architectural and engineering firm was barred by Virginia's statute of limitations and statute of repose. Holding that the statutes did not bar WMATA's claim, we reverse.

Delon Hampton & Associates and Envirodyne Engineers, Inc., ¹ formed a joint venture (DHWN, but for simplicity, hereafter called "Hampton"), to provide architectural and engineering services to build the Alexandria Service and Inspection facility ("Alexandria facility"), a part of the Metrorail system of WMATA. WMATA claims that Hampton, which was awarded the contract to perform the services, committed numerous design errors. WMATA attempted, by invoking a contractual dispute resolution mechanism, to recover sums it had expended to correct the errors. While WMATA pursued the contractually-based administrative remedy, however, Hampton initiated this litigation in district court, suing WMATA for declaratory and injunctive relief. Specifically, Hampton asked for a declaration that the claim was not subject to compulsory administrative resolution and that any claim by WMATA for damages resulting from design defects was barred by the Virginia statute of limitations, Va.Code Ann. § 8.01-246(2) (1984), and the Virginia statute of repose, Va.Code Ann. § 8.01-250 (1984). WMATA filed a counterclaim, seeking the damages it originally attempted to recover under the administrative dispute resolution mechanism. The district court held that the dispute was not subject to compulsory administrative resolution under the Dispute Clause of the contract and that both the Virginia statute of limitations and statute of repose barred WMATA's claims. ²

I. Factual Background

WMATA was established by an interstate compact among Virginia, Maryland and the District of Columbia to provide a regional system of transportation for the Washington, D.C., metropolitan area ("WMATA Compact"). Congress consented to the WMATA Compact and adopted it for the District of Columbia. See The Act of November 6, 1966, Pub.L. No. 89-774, 80 Stat. 1324 (1967). The Virginia and Maryland legislatures separately adopted the WMATA Compact. See Va.Code Ann. § 56-530 (1986); Md. Transportation Code Ann. § 10-204 (1977).

As part of its functions, WMATA constructed and now operates the rapid rail system known as Metrorail. In March 1974, WMATA awarded Hampton the contract to design and furnish engineering services for the Alexandria facility. In February 1979, Hampton submitted design drawings to WMATA and the latter made them available to contractors for bids. ³

In August 1979, WMATA awarded the construction contract to build the Alexandria facility to Blake Construction Company ("Blake"). Blake started work in September 1979 and substantially completed construction in April 1982. During the course of construction, the Resident Engineer for Blake informed WMATA of numerous "design-related discrepancies" in Hampton's plans. At WMATA's request, Blake corrected the design defects and WMATA attempted to recover the resulting expenditures from Hampton. ⁴ In April 1987, WMATA's Contracting Officer contacted Hampton and requested that negotiations commence concerning payment for the costs. He submitted a draft Findings of Fact to Hampton for comment and Hampton responded by letter, disputing the proposed findings. In October 1989, the Contracting Officer issued his Final Decision, determining that Hampton owed WMATA $1,071,397 for costs incurred as a result of the alleged design deficiencies.

On November 21, 1989, Hampton filed suit in United States District Court asking for a declaration that WMATA's claim did not fall under the Dispute Clause of the contract and that the claim was barred both by Virginia's statute of limitations and statute of repose. In December 1989, WMATA filed its answer and counterclaim, seeking damages for the design defects.

On February 9, 1990, following oral argument, the district court granted Hampton's motion for summary judgment, holding that "the claim of the defendant for defective design drawings and cost changes needed to rectify design errors or omissions ... is barred by the five year statute of limitations." In an amended Order, the district court added that the claim was also barred by the "five year statute of repose." Hampton subsequently moved for Judgment on the Pleadings, asking for a definitive order that WMATA's claim was not subject to the Dispute Clause of the contract. In its Final Order, the district court granted Hampton declaratory and injunctive relief on both the timeliness and forum issues. It, of course, did not reach the merits of WMATA's claim for damages. WMATA appeals only the timeliness issue.

II. The Virginia Statute of Limitations

Section 8.01-246 of the Virginia Code places a five-year limitation on any action brought pursuant to a written contract. Specifically, it states:

Subject to the provisions of § 8.01-243 regarding injuries to person and property and of § 8.01-245 regarding the application of limitations to fiduciaries, and their bonds, actions founded upon a contract, other than actions on a judgment or decree, shall be brought within the following number of years next after the cause of action shall have accrued:

. . . . .

2. In actions on any contract which is not otherwise specified and which is in writing and signed by the party to be charged thereby, or by his agent, within five years whether such writing be under seal or not[.]

However, § 8.01-231 of the Virginia Code provides that the Commonwealth of Virginia is not subject to a statute of limitations unless the limitation expressly applies to the Commonwealth. ⁵ Specifically, it states:

Commonwealth not within statute of limitations.--No statute of limitations which shall not in express terms apply to the Commonwealth shall be deemed a bar to any proceeding by or on behalf of the same.

Va.Code Ann. § 8.01-231 (Supp.1990).

WMATA concedes that the Virginia statute of limitations requires a claim based on a written contract to be brought within five years after the cause of action has accrued. It contends, however, that as an agency and instrumentality of Virginia it has sovereign immunity that shields it from the limitations bar. It also seems to argue, albeit somewhat confusingly, that it has federal sovereign immunity. We need not decide, however, whether WMATA has federal sovereign immunity and whether that alone protects it from application of the statute of limitations because we conclude that as an agency and instrumentality of the Commonwealth of Virginia, WMATA is exempt from application of the statute of limitations.

As a general proposition, an agency of the state shares the same privileges as that of the state, including sovereign immunity. See Beatty v. WMATA, 860 F.2d 1117, 1126 (D.C.Cir.1988). There is no doubt that WMATA is an agency and instrumentality of the Commonwealth of Virginia. Sections 2 and 4 of the Compact provide that WMATA is an interstate agency and instrumentality of each of the signatories to the Compact. See also WMATA v. One Parcel of Land, 706 F.2d 1312, 1314 (4th Cir.) ("Section 4 of the Compact created WMATA as an instrumentality and agency of each of the signatory parties"), cert. denied, 464 U.S. 893, 104 S.Ct. 238, 78 L.Ed.2d 229 (1983); Pepco v. State Corp. Comm'n, 221 Va. 632, 634-35, 272 S.E.2d 214, 215-16 (1980). ⁶

Hampton contends, however, and the district court agreed that WMATA did not enjoy sovereign immunity from application of the statute of limitations in the instant case because § 8.01-231 exempts only the Commonwealth from application of the statute of limitations, not its agencies or instrumentalities. The district court based that determination on its interpretation of the Virginia Supreme Court decision in Burns v. Board of Supervisors of Stafford County, 227 Va. 354, 315 S.E.2d 856 (1984). There, the Virginia Supreme Court considered the issue of whether an agency of a Virginia county was included within the exemption of the predecessor statute to § 8.01-231. At that time, the section read:

No statute of limitations which shall not in express terms apply to the Commonwealth shall be deemed a bar to any proceeding by or on behalf of the same. This section shall not, however, apply to agencies of the Commonwealth incorporated for charitable or educational purposes.

The first sentence was identical to that of the current statute. The second sentence, however, contained a qualification that state agencies incorporated for...