Recent Developments in Minnesota Construction Law 

By Steve Lindemann and Nicholas Loyal

Rulings by the Minnesota Supreme Court and bills passed by the state legislature continue to shift the legal framework of construction practice in the state of Minnesota. Outlined below is a review of some of these new developments in Minnesota construction law.

Supreme Court Overturns Bid Protest That Was Grounded on Appearance of Bias

The Rochester City Lines cases have spawned six decisions from Minnesota courts over the last several years. On June 20, 2018, the Supreme Court released its most recent opinion in Rochester City Lines. Co. v. City of Rochester, et al. and First Transit, Inc., partially reversing a ruling of the Court of Appeals and promising additional litigation.

This iteration of the dispute involved a pre-bid protest by Rochester City Lines (RCL) relating to public transit services in the city of Rochester, Minnesota. After RCL had lost its long-held contract for bus service within the city to First Transit during the city's 2012 competitive bidding process (which itself gave rise to extensive litigation), RCL bid again for those services in 2016. However, before bids were opened, RCL filed a pre-bid protest, claiming that the bid process was improper because the bid evaluation committee was biased due to the presence of members on the 2016 committee who had also been involved in deciding not to award the contract to RCL during the 2012 bid process. The Minnesota Court of Appeals agreed and voided the contract.

The Minnesota Supreme Court reversed this ruling, finding that RCL had not properly made an appearance of bias claim. The Supreme Court held that RCL had failed to raise an appearance of bias claim with sufficient specificity before the Court of Appeals, as the arguments initially presented by RCL only related to actual bias. The appearance of bias claim was not presented until RCL filed a reply brief before the Court of Appeals and therefore could not be considered. The Supreme Court's opinion leaves the door open for bid challenges by future disappointed bidders who may believe that they are prejudiced by an appearance of bias. The Supreme Court made clear that any such challenge must be made before the bid is submitted, and the challenge must specifically distinguish between actual bias and the appearance of bias.

In addition, the Supreme Court did not completely dispose of RCL's claims. Because RCL's original bid protest contained four other arguments supporting its claim that the bid and contract should be rejected, and because the Court of Appeals did not address those arguments in its original opinion, the Supreme Court remanded the case for reconsideration. Stay tuned for at least one more chapter before the Rochester City Lines saga is finally resolved.

Governor Dayton Signs Law Modifying Statute of Limitations for Injuries to Property During Construction

On May 8, 2018, Governor Mark Dayton signed HF No. 2743, which modified Minnesota Statute §541.051 to delay the accrual of the statute of limitations for claims relating to injuries to property until "substantial completion, termination or abandonment of the construction or the improvement to real property." This change in the law effectively reversed the holding in 328 Barry Avenue, LLC v. Nolan Properties Group, LLC, which had allowed for accrual of a construction defect claim to occur before substantial completion had been achieved. That change went into effect on May 9, 2018, and applies to any cause of action accruing from that day forward.

Under this change, Minnesota's two-year statute of limitations for property damage suffered as a result of defective construction will not begin to run, at the earliest, until the project in question has reached substantial completion. After substantial completion, the statute starts to run once the claimant learns of its injury, or reasonably should be aware of its injury. There is no need for the claimant to know what is causing the injury or who is responsible for it; knowledge of the injury alone is sufficient to trigger the statute of limitations. As a result of the new change to the law, parties will now have an opportunity to correct any issues during the course of a project, without worrying about starting a lawsuit right away. Most owners and contractors assumed that was the case before the 328 Barry Avenue decision was issued. Now they can rest assured that their belief is supported by the law.

For more information on recent developments in Minnesota construction law, please contact Steve Lindemann, Nicholas Loyal or the Stinson Leonard Street contact with whom you regularly work.

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