PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

HARTFORD INSURANCE

COMPANY OF THE MIDWEST,

Plaintiff-Appellant,

v. No. 98-2701

AMERICAN AUTOMATIC SPRINKLER

SYSTEMS, INCORPORATED,

Defendant-Appellee.

Appeal from the United States District Court

for the District of Maryland, at Baltimore.

Andre M. Davis, District Judge.

(CA-97-976-AMD)

Argued: October 26, 1999

Decided: January 18, 2000

Before NIEMEYER, WILLIAMS, and MICHAEL, Circuit Judges.

_________________________________________________________________

Affirmed by published opinion. Judge Niemeyer wrote the opinion,

in which Judge Williams and Judge Michael joined.

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COUNSEL

ARGUED: Jeffrey Allan Wothers, NILES, BARTON & WILMER,

Baltimore, Maryland, for Appellant. Kevin Bock Karpinski, ALLEN,

JOHNSON, ALEXANDER & KARP, Baltimore, Maryland, for

Appellee. ON BRIEF: Jason C. Brino, NILES, BARTON & WILMER, Baltimore, Maryland, for Appellant. Daniel Karp, ALLEN,
JOHNSON, ALEXANDER & KARP, Baltimore, Maryland, for

Appellee.

_________________________________________________________________

OPINION

NIEMEYER, Circuit Judge:

We are presented with the question of whether "contractor," as

used in Maryland's 10-year statute of repose granting immunity from

suits arising from improvements to real property, includes subcontractors. See Md. Code Ann., Cts. & Jud. Proc.§ 5-108(b). We hold that

it does and therefore affirm the district court's entry of summary

judgment in favor of a sprinkler-system subcontractor for claims arising from work it performed in 1982. We also affirm the district

court's judgment that claims arising out of more recent renovation

work done by the subcontractor were not supported by any evidence.

I

On February 7, 1996, at the Holiday Inn in Timonium, Maryland,

a cap and a coupling on a sprinkler-system standpipe located in the

stairwell of the hotel broke, causing extensive flooding which damaged the hotel's stairwell, halls, guest rooms, atrium, and exterior

facade. The hotel's building engineer, Paul Seekford, shut off the

water main and immediately began a general cleanup. He also

retained American Automatic Sprinkler Systems, Inc. ("American

Sprinkler") to make repairs to the standpipe. Two American Sprinkler

employees arrived at the hotel and noticed that the cap on the top of

the standpipe had blown off and that the fire hose valve, located halfway down the standpipe, had cracked. They concluded that the pipe

had frozen.* They replaced the damaged section of the standpipe and

the other damaged parts, and presented Seekford with a work order,

_________________________________________________________________

*During the period before the flooding incident, Timonium had experienced unusually cold winter temperatures, and there was evidence that

in the stairwell area where the standpipes were located, 1/8-inch standard

single-pane glass had been installed in lieu of the 5/8-inch insulated glass

that had been called for by the Holiday Inn's construction drawings.

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which he signed. The work order described the repairs and stated that

the cause of the standpipe cap's separation from the standpipe was

"extreme cold and inadequate heat in stairs." When the American

Sprinkler employees left, they took with them the damaged parts.

Shortly after the American Sprinkler employees left, an adjuster for

Hartford Insurance Company of the Midwest ("Hartford"), the hotel's

insurance company, instructed Seekford to retrieve the damaged parts

from American Sprinkler. Although Hartford claims that American

Sprinkler gave repeated assurances that the damaged parts would be

returned to Holiday Inn, a claim that American Sprinkler disputes,

American Sprinkler later informed Hartford that the damaged parts

were no longer in its possession because it had thrown them into a

trash dumpster in the ordinary course of business.

Hartford brought this subrogation action against American Sprinkler seeking to recover $1.6 million in damages resulting from the

February 7 flooding incident. Hartford alleged that the flooding was

caused either by American Sprinkler's faulty construction and installation of the standpipe and sprinkler system in 1982, when the Holiday Inn was originally constructed, or by American Sprinkler's

negligent renovation of the sprinkler system, completed a couple of

weeks before the flooding incident. The complaint, based on diversity

jurisdiction, relied on theories of negligence, strict liability, and

breach of contract under Maryland law.

On cross-motions for summary judgment, the district court entered

judgment in favor of American Sprinkler and against Hartford. See

Hartford Ins. Co. of the Midwest v. American Automatic Sprinkler

Systems, Inc., 23 F. Supp. 2d 623, 630 (D. Md. 1998). It ruled that

any claims arising out of American Sprinkler's installation of the

sprinkler system in 1982 were barred by Maryland's statute of repose,

Md. Code Ann., Cts. & Jud. Proc. § 5-108(b). It rejected Hartford's

claim that American Sprinkler's disposal of the damaged standpipe

parts warranted, under the doctrine of spoliation, judgment as a matter

of law or an inference adverse to American Sprinkler. Finally, it concluded that Hartford failed to present any evidence that American

Sprinkler was negligent or breached its contract in performing the

1996 repairs to the sprinkler system.

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This appeal followed.

II

Hartford's principal argument on appeal is that the district court

improperly defined "contractor," as used in Maryland's statute of

repose, to include subcontractors. It argues that because the term

"contractor" is not understood in the construction industry to describe

subcontractors, the district court erred by creating a fourth class of

persons immune under the statute -- subcontractors-- when the statute provides for only three: architects, engineers, and contractors.

Hartford urges us to interpret the term "contractor" in accordance with

the usage of the American Institute of Architects ("AIA") in its recommended contract forms, which define a contractor as "the person

or entity identified as such in the Agreement and . . . referred to

throughout the Contract Documents as if singular in number." American Institute of Architects, General Conditions of the Contract for

Construction, art. 3.1.1 (1997). Hartford also notes that Maryland's

mechanic's lien statute, which distinguishes between contractors and

subcontractors, demonstrates that the terms have distinct meanings

under Maryland law. That statute defines a contractor as "a person

who has a contract with an owner," and defines a"subcontractor" as

"a person who has a contract with anyone except the owner or his

agent." Md. Code Ann., Real Prop. § 9-101. Finally, Hartford points

to a similar distinction made by the Maryland Court of Appeals in

Roland v. Lloyd E. Mitchell, Inc., 155 A.2d 691, 693-96 (Md. 1959).

Accordingly, it argues that the Maryland General Assembly's intent

in passing the statute of repose was to provide a shorter period of

exposure to liability for those persons in direct privity with the owner

of real property than for "subcontractors."

In rejecting these arguments, the district court interpreted the plain

meaning of the term "contractor" to include as a subset any "subcontractor." It noted that this definition of "contractor" was consistent

with the intent of the statute "to shield those connected to the design

and construction of an `improvement to real property.'" 23 F. Supp.

2d at 629.

Reviewing this issue of statutory construction de novo, see

Scrimgeour v. Internal Revenue Serv., 149 F.3d 318, 326 (4th Cir.

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1998), we must determine whether subcontractors enjoy the heightened protection from liability that Maryland's statute of repose confers on "any architect, professional engineer, or contractor," Md. Code

Ann., Cts. & Jud. Proc. § 5-108(b). The Maryland courts have not

decided this precise issue. As with the interpretation of any legislative

enactment, our analysis must begin with the language of the statute.

If the statute conclusively reveals the intent of the Maryland General

Assembly, our analysis ends. See Rose v. Fox Pool Corp., 643 A.2d

906, 909-10 (Md. 1994).

The Maryland statute of repose grants immunity from suit based on

alleged defects in improvements to real property by providing for

repose after a 20-year period for all persons. The statute affords

heightened protections to a defined class -- architects, professional

engineers, and contractors -- by providing for repose after 10 years.

The statute states in relevant part:

 (a) Injury occurring more than 20 years later. --

Except as provided by this section, no cause of action for

damages accrues and a person may not seek contribution or

indemnity for damages incurred when wrongful death, personal injury, or injury to real or personal property resulting

from the defective and unsafe condition of an improvement

to real property occurs more than 20 years after the date the

entire improvement first becomes available for its intended

use.

 (b) Action against architect, professional engineer, or

contractor. -- Except as provided by this section, a cause

of action for damages does not accrue and a person may not

seek contribution or indemnity from any architect, professional engineer, or contractor for damages incurred when

wrongful death, personal injury, or injury to real or personal

property, resulting from the defective and unsafe condition

of an improvement to real property, occurs more than 10

years after the date the entire improvement first became

available for its intended use.

Md. Code Ann., Cts. & Jud. Proc. § 5-108(a), (b).

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We agree with the district court that the plain meaning of the statutory term "contractor" encompasses subcontractors. This conclusion

is confirmed by reference to any dictionary. For example, "contractor"

is defined by one dictionary as "one that contracts, a party to a bargain, one that formally undertakes to do so something for another,"

or as "one who contracts on predetermined terms to provide labor and

materials and to be responsible for the performance of a construction

job in accordance with established specifications or plans." Webster's

Third International New Dictionary 495 (1961). Similarly, Black's

Law Dictionary describes the term "contractor" as

strictly applicable to any person who enters into a contract,

but . . . commonly reserved to designate one who, for a fixed

price, undertakes to procure the performance of works or

services on a large scale . . . generally classified as general

contractors (responsible for entire job) and subcontractors

(responsible for only a portion of job; e.g., plumber, carpenter).

Black's Law Dictionary 295 (5th ed. 1979).

An inclusive definition of "contractor" is consistent with the apparent purpose of § 5-108(b) to insulate from liability for latent defects

those parties responsible for the design and construction of improvements to real property. The original version of the statute, passed in

1970 and providing for repose after a 20-year period, was "an attempt

to relieve builders, contractors, landlords, and realtors of the risk of

latent defects in design, construction, or maintenance of an improvement to realty." Allentown Plaza Assocs. v. Suburban Propane Gas

Corp., 405 A.2d 326, 330 (Md. Ct. Spec. App. 1979) (quoting Revisor's Note to Md. Code Ann., Cts. & Jud. Proc. § 5-108 (1974)). The

Maryland General Assembly passed the original version of the statute,

declining to include proposed language that would have limited the

statute's protections to "`persons performing or furnishing the design,

planning, supervision of construction or construction' of an improvement." Rose, 643 A.2d at 913 (quoting identical language contained

in four Senate Bills and one House Bill proposed in 1967, 1968, and

1969). In 1979, the General Assembly amended § 5-108 to confer

heightened protection on architects and engineers in the form of a 10-

year repose period, "[i]n apparent response" to complaints from archi-

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tects and engineers that the existing 20-year repose period provided

them insufficient protection from liability. Id . And in 1980, the General Assembly added contractors to the list of parties afforded heightened protection under § 5-108(b). See id .

As the Maryland Court of Appeals explained in Rose, "two developments in the law -- the elimination of the `privity of contract' doctrine as a defense and the application of the `discovery rule' [when

applying a statute of limitations] -- provided the impetus behind the

enactment of [the statute of repose]." Id. at 911 (footnote omitted).

These changes in tort law had the effect of dramatically expanding the

liability of persons designing or constructing improvements to real

property. See id. Hartford's argument that the heightened protection

of § 5-108(b) was meant to apply only to those in privity of contract

with the owner of realty is at odds with the legislative motivation

behind the statute, as characterized by the Maryland Court of

Appeals. The impetus behind the legislation appears to have come

from a concern about legal developments that expanded liability to

those not in privity with the owners of real property. Consistent with

this concern, § 5-108(b) explicitly granted heightened protections to

"any architect, professional engineer, or contractor," without reference to whether the owner of real property had directly contracted

with the party performing the improvement or not. Md. Code Ann.,

Cts. & Jud. Proc. § 5-108(b) (emphasis added).

Hartford's argument, that we should read § 5-108(b) to import distinctions made in the construction industry between contractors and

subcontractors, is unpersuasive. In each of the sources to which Hartford points -- AIA contracts, the mechanic's lien laws, and related

court decisions -- the contract or statute involved focuses on the distinction between a general contractor and a subcontractor in furtherance of the regulation of the relationship between the two. The AIA

recommends a different contract form for each participant in a construction project, including the architect, general contractor, construction manager, and subcontractor, reflecting the distinct role each

performs. Similarly, the thrust of the mechanic's lien law is to provide

protection to contractors and specified subcontractors who are in privity with the construction project but not with its owner. The purpose

of the statute of repose, in contrast, would not be fulfilled by observing a distinction between general contractors and subcontractors. On

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the contrary, because it was meant to address the problem of

increased liability arising from construction projects, particularly for

subcontractors who were not in privity with owners but who no longer could raise lack of privity as a defense, the statute of repose

should be construed to provide protection for all contractors.

Moreover, it would make little sense to provide protection to a general contractor who provided a specific improvement to real property,

such as landscaping, but to withhold the same protection from another

person hired by the general contractor to perform the same task.

Every indicator suggests that the Maryland General Assembly did not

intend to distinguish between a contractor and a subcontractor when

it enacted the statute of repose. On the contrary, by using the allinclusive phrase "any contractor," it afforded protection to all contractors, including subcontractors.

Because American Sprinkler contracted to provide improvements

to real property at the Holiday Inn -- by installing the sprinkler system in 1982 -- it is a "contractor" that became immune from suit ten

years after the entire hotel first became available for its intended use.

See Md. Code Ann., Cts. & Jud. Proc. § 5-108(b).

III

Our ruling -- that claims relating to alleged improper installation

of the sprinkler system in 1982 are barred by Maryland's statute of

repose -- does not dispose of Hartford's claims arising from the

repairs American Sprinkler completed in January 1996, less than two

weeks before the cap and coupling on the standpipe broke and caused

the flooding of the Holiday Inn. Hartford contends that in reviewing

these claims, the district court did not consider the facts in the light

most favorable to Hartford and improperly failed to draw inferences

adverse to American Sprinkler because of its spoliation of evidence.

In mid-January 1996, American Sprinkler began renovations of the

automatic sprinkler system at the Holiday Inn, completing them on

January 26, 1996. Holiday Inn had to perform several upgrades to its

facility, including the renovation of its sprinkler system, to obtain

"Holiday Inn Select" status. The hotel contracted with American

Sprinkler to perform the sprinkler-system renovations, which required

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replacement of the escutcheon plates underneath the sprinkler heads.

The sprinkler system was designed to be drained zone-by-zone, without disturbing the entire sprinkler system, and the renovation required

American Sprinkler employees to drain the areas of the system where

they worked. The renovations did not involve work on the standpipe

risers, however, and did not require employees to work in the stairwells where the standpipe risers were located.

Hartford advances a theory that American Sprinkler drained and

repressurized the entire sprinkler system each day when performing

the renovations, and that this activity somehow weakened the standpipe cap and coupling that ultimately broke on February 7, causing

the flooding. But Hartford offers no evidence either that daily draining and repressurization occurred or that a properly constructed standpipe would break or separate as a result of such draining and

repressurization. At most, Hartford's evidence -- the testimony of the

hotel's building engineer that American Sprinkler employees asked

him on one occasion to open a water valve under the stairwell --

demonstrates that the entire system may have been drained and

repressurized on one occasion. But Hartford presented no evidence

that this draining and repressurization would overtax a properly

designed and installed sprinkler system, causing the standpipe cap and

coupling to separate and fail. It has thus failed to make out a prima

facie case of negligence or breach of contract with respect to the 1996

renovations of the sprinkler system.

Hartford argues that it is entitled to judgment as a matter of law

against American Sprinkler or, at least, an adverse inference as a

sanction against American Sprinkler because it did not preserve the

damaged parts from the standpipe despite Hartford's request.

We conclude that the district court did not abuse its discretion in

declining to impose the drastic sanction of awarding judgment on the

merits as a matter of law when it had concluded that Hartford failed

to produce evidence probative of willful or bad-faith conduct on the

part of American Sprinkler. Cf. Cole v. Keller Indus., Inc., 132 F.3d

1044, 1047 (4th Cir. 1998) (finding abuse of discretion in district

court's dismissal of claim as sanction for spoliation of evidence where

bad faith was not shown); Vodusek v. Bayliner Marine Corp., 71 F.3d

148, 156 (4th Cir. 1995) (stating that an adverse inference about a

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party's consciousness of the weakness of its case"requires a showing

that the party knew the evidence was relevant to some issue at trial

and that his willful conduct resulted in its loss or destruction").

Moreover, the adverse inference requested by Hartford as an alternative sanction would not help it survive summary judgment on its

claims regarding the 1996 renovations of the sprinkler system. Without evidence that draining and repressurization of a sprinkler system

could cause the end cap and coupling of the standpipe in a properly

designed and installed sprinkler system to separate, any adverse inference under the doctrine of spoliation would be irrelevant to Hartford's

claims that American Sprinkler performed its 1996 renovations negligently or in breach of contract. Any adverse inference would, at most,

create a presumption that the standpipe parts were defective -- a fact

that would relate only to the 1982 installation of the sprinkler system,

not the 1996 renovation. Since we have already ruled that Maryland's

statute of repose shields American Sprinkler from claims based on the

1982 installation work, Hartford's requested inference could not

advance its case.

For the foregoing reasons, we affirm the judgment of the district

court.

AFFIRMED

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