On August 25, 2008, a California appellate court held that compliance with the claims procedures set forth in a public works contract relieves a contractor from the requirement to file a government tort claim prior to filing a lawsuit, unless the contract expressly mandates that a government tort claim also be filed. (Arntz Builders v. City of Berkeley (2008) 166 Cal.App.4th 276.)

The case involved a construction contract between Arntz Builders (Arntz) and the City of Berkeley (City) for the renovation of the Berkeley Central Library. The contract set forth specific claim procedures to resolve disputes arising under the contract, as required by Public Contract Code sections 20104-20104.6. Disputes arose and Arntz filed a complaint against the City for breach of contract after satisfying all contractual claim procedures. The trial court ruled that the complaint was barred because Arntz failed to present a claim pursuant to Government Code section 910 in addition to complying with the claims procedures required by the contract.

On appeal, the appellate court held that the contractual claims procedures were the exclusive claim procedures which the contractor had to satisfy. Unless a public works contract expressly requires compliance with the government tort claim procedures under Government Code section 910, the contractor’s compliance with claims procedures set forth in the contract is sufficient to pursue a lawsuit against the public agency.

The Arntz case clarifies an issue which has been the subject of confusion for some time. Public Contract Code section 20104-20104.6 requires that public works contracts include claims procedures for all contracts under $375,000 in value. Similarly, the Tort Claims Act claim filing requirements under Government Code section 910 apply to claims for money or damages arising from contractual liabilities of public entities or public employees. However, the relationship between the two statutory provisions was not clear. In reviewing the history and language of the Tort Claims Act, the Arntz court concluded that the legislation was designed to authorize local agencies to develop their own claims procedures for contractual disputes as an alternative to the statutory claims procedure. Government Code section 930.2 specifically authorizes a public agency to enter into a written agreement establishing claim procedures that supersede statutory claims requirements. Section 930.4 provides that a claim procedure established by agreement made pursuant to section 930.2, “exclusively governs the claims to which it relates.” Together, the Arntz court held, these statutes authorize local agencies to include specific claims procedures in a contract that will exclusively govern claims arising under that contract.

However, the Arntz case also left open the possibility that a public works contract may expressly require that a government tort claim also be filed after the contractual claims procedures are satisfied, as a prerequisite to a lawsuit. Requiring a claimant to present a government tort claim in addition to satisfying contract claim procedures could provide an additional affirmative defense for a public agency being sued, and also reduces the applicable statute of limitations from 4 years to 2 years. However, the public agency should consider the claim procedure it creates carefully as the additional requirement could also be procedurally burdensome and unnecessarily protract the claims process.