In Shaw Construction, LLC v. United Builder Services, Inc. and MB Roofing, Inc., 11 CA 2351 (Colo. App. Feb. 2, 2012), the Colorado Court of Appeals held that a “discrete component” of a larger construction project can be “substantially completed” for purposes of the running of the construction defect statute of repose.

Left expressly undecided by the court of appeals was whether the work of a given building trade could be considered as a separate “improvement to real property,” to which the statute of repose might apply.  Treating each subcontractor’s work as a separate improvement might have a profound effect on their defense, and an issue the construction defect lawyers at Markusson Green & Jarvis will remain acutely aware of in the future.  That is particularly true with respect to certain building trades, such as excavators, who may be among the first contractors to start work on a large construction project, and the first to leave. 

While sympathetic to arguments by United Builder Services and MB Roofing that their work should be analyzed independently under the statute of repose, the court of appeals declined to address that issue in this case.  The fate of individual construction trades in a statute of repose analysis remains highly controversial and may continue to be the subject of vigorous debate for some time yet to come.

The case involved Roslyn Court, a condominium community in Denver consisting of 80 residential units in 33 separate residential buildings, plus 15 detached garage structures, and additional elements such as sidewalks, alleys, benches, courtyards and landscaping.  The project was built in three phases, and certificates of occupancy were issued for each building.  The last certificate of occupancy for the last building issued on March 10, 2004.  About 12 weeks later, on June 8, the project architect certified that the entire project had been completed.

The Roslyn Court homeowners association initiated a construction defect lawsuit on January 21, 2009.  Just over a year later, on January 28, 2010, the homeowners association joined the general contractor, Shaw Construction, as another Defendant.  Two months later, on March 29, Shaw Construction filed a Third-Party Complaint against a number of building trade subcontractors, including United Builder Services and MB Roofing.

United Builder Services and MB Roofing moved for summary judgment, arguing that the Third-Party Complaint had not been filed until after the applicable six-year statute of repose for construction defect claims had run.  The statute of repose bars any claims against a construction professional brought more than six years following “substantial completion” of the real property forming the subject matter of the claim.  No definitions of the terms “substantial completion” and “improvement to real property” are  found in the statute.  The trial court granted the Motions, and dismissed the Third-Party claims.

On Appeal, Shaw Construction argued that the Third-Party Complaint had been filed within the six-year statute of repose because the controlling date was June 8, 2004, when the project architect had certified the entire project complete, not the date when a certificate of occupancy for a particular building had issued.  The court of appeals disagreed, and affirmed the judgments.  The ruling turned on its definitions of the critical terms “improvement to real property” and “substantial completion.” 

The Court of Appeals rejected Shaw Construction’s position that the improvement to real property was the entire project.  It held that “an improvement may be a discrete component of an entire project, such as the last of multiple residential buildings.”  It also disagreed with Shaw that “substantial completion” in this project only occurred when the project architect certified the construction. Instead, it held that the buildings were each substantially complete when the certificates of occupancy had issued, which demonstrated that they were habitable.  Based on that analysis, the court of appeals determined that each and every improvement at Roslyn Court had been substantially completed more than six years before the Third-Party Complaint was filed, and concluded that Shaw’s action against the subcontractors was therefore time-barred under the statute of repose.

Two decisions this fall by divisions of the Colorado Court of Appeals applied rules adopted this year and last governing interlocutory appeals in civil cases.  Both times, the court of appeals rejected the application and declined to decide the appeal.

These recent rule changes in Colorado have clarified the grounds upon which litigants may seek interlocutory review of issues arising in ongoing lawsuits.  But interpretive case law has shown that the court of appeals will not exercise its discretionary authority to hear such appeals without good grounds to do so.  While interlocutory appeals may serve a useful purpose in civil litigation, the availability of such relief will likely be highly selective and limited.

Normally, matters decided by a trial court are not ripe for appeal until final judgment has been entered in the case.  But under special circumstances, Colorado law permits issues that arise in the course of an ongoing lawsuit to be decided by an appellate court.  Such intermediate decisions are called “interlocutory appeals.” 

In the summer of 2010, the Colorado General Assembly enacted sec. 13-4-102.1, which set forth standards for the Colorado Court of Appeals to conduct discretionary review of interlocutory appeals.  The same standards were subsequently adopted by the Colorado Supreme Court in January 2011, when it promulgated Appellate Rule 4.2.

Interlocutory appeals may be presented to the court of appeals either when the appeal is certified by the trial court, or by stipulation of the parties.  There are three necessary grounds for certifying and allowing an interlocutory appeal.  They are (1) that disposition of the issue might “promote a more orderly disposition or establish a final disposition of the litigation; (2) the issue involves a “controlling question of law;” and (3) the question of law is unresolved.  An unresolved question of law is defined as “a question that has not been resolved by the Colorado Supreme Court or determined in a published decision of the Colorado Court of Appeals, or a question of federal law that not been resolved by the United States Supreme Court.”

In Adams, et al. v. Corrections Corporation of America, 11 CA 1505 (Sept. 15, 2011), the court of appeals held that the issue presented was not appropriate for decision by interlocutory appeal because it did not involve a controlling question of law.  Suit was brought by 201 present and former inmates of the Crowley County Correctional Facility, which was operated by the Corrections Corporation of America (CCA).  The plaintiffs alleged that CCA had negligently failed to prevent a control a prison riot in which the complaining inmates had not been involved. 

CCA deposed 118 of the plaintiffs and indicated its intention to depose the remainder.  The plaintiffs reserved their rights to review the deposition transcripts, but asserted that they were indigent and unable to purchase the transcripts.  The trial court certified for interlocutory appeal the question of whether the plaintiffs were entitled to obtain copies of the deposition transcripts at no cost.

In reviewing the standards for allowing interlocutory appeals, the court of appeals found that the first required ground, that the district court’s order involved an unresolved question of law regarding the interplay of two different procedural rules, one allowing a deposed party to review their transcript, and another requiring the court report to provide a transcript to any party willing to pay for it.  But the court of appeals went on to hold that although the legal question was unresolved, it was not “controlling.”  It reasoned that the issue presented by the inmates was not of “widespread public interest,” it did not implicate any parallel litigation that would be impacted by an appellate ruling, and it did not involve any “extraordinary facts.”  Because the issue presented was not controlling, the court of appeals dismissed the appeal.

About a month later, the question of interlocutory appeals was revisited in Tomar Development v. Bent Tree, LLC, 11 CA 1847 (Oct. 27, 2011).  The case involved a complex series of financial transactions, a subordination agreement entered into between two lienholders, and an attempt by one of the lienholders to foreclose on a deed of trust.  At issue in the case was the relative priority of the various lienholders following execution of the subordination agreement.  Among other things, the parties disputed whether Colorado should follow the “partial” or “complete” subordination approach to realigning lien priorities.  The district court dismissed the plaintiffs’ request for declaratory relief, holding that Colorado appellate courts would most likely adopt the partial subordination approach, which would favor the result urged by the defendants.  The petition for interlocutory appeal followed.

The court of appeals denied the plaintiffs’ petition upon determining that the grounds for allowing the interlocutory appeal were not satisfied.  It gave two reasons. 

First, the court of appeals noted that the litigation involved numerous claims, counterclaims, cross-claims and third-party claims, including ones that would not be affected by the issues concerning the choice of subordination approach.  As a result, the court of appeals ruled that the first required ground, that resolution of the interlocutory appeal would promote a more orderly disposition of the litigation, was not met.

Second, the court of appeals found that the district court, in denying the plaintiffs’ application for declaratory relief, indicated that it would grant them leave to amend their complaint to assert other theories in support of their claim for lien priority.  Moreover, the district court had denied a motion by the defendants to dismiss claims brought by the plaintiffs on equitable grounds.  “Regardless of what we might decide,” the court of appeals reasoned, it would not dispose of the dispute because the plaintiffs could still seek the relief they wanted under other legal theories.

On November 7, 2011 the Colorado Supreme Court made its ruling in the matter of Averyt v. Wal-Mart Stores, Inc., 2011 WL 5325525 (full citation not yet available). This is an important case in Colorado as it dealt with two litigation issues present in most cases, including construction defect matters. Specifically, the Averyt Court reviewed the trial Court’s order granting Wal-Mart a new trial based on an alleged untimely disclosure, and also the jury verdict itself, which was purportedly not supported by the evidence. The Court found that the trial court abused its discretion in granting a new trial, and that the jury verdict was supported by the evidence. The Supreme Court’s analysis of the disclosure issue is germane to almost every construction defect case, and is discussed further below. 

Undoubtedly, the Greystone decision is not the last word on the issue, but it reiterates the importance of pleading and establishing evidence of consequential property damage to increase the odds of finding coverage in construction defect claims. 

In Colorado, court approval of a settlement agreement involving a minor is not required. However, the enforceability of that settlement agreement would be difficult if not impossible without such approval. For example, major issues that could arise with an unapproved agreement with a minor include the fact that a minor lacks the contractual capacity to consent to settlement, the tolling of the statute of limitations on the minor’s claims, and lack of fiduciary authority. Consequently, court approval for all settlement agreements involving the claims of a minor provides the protection needed for such agreements to be enforceable.

Colorado Rule of Probate Procedure (C.R.P.P.) 16 sets out a detailed and specific framework for petitioning the court for approval of a personal injury settlement on behalf of a minor. As stated above, C.R.P.P. 16 does not explicitly require court approval of such a settlement. The court has also published a detailed set of instructions for seeking approval of such an agreement. These instructions focus on C.R.P.P. 16 and C.R.S. §15-14-101 (The Colorado Uniform Guardianship and Protective Proceedings Act), which relate entirely to protective proceedings for minors and incapacitated persons. The court instructions are helpful in that they detail what is required from the parties, whether a conservator will need to be appointed (only required in cases where the agreement amount is over $10,000.00), how to file the petition itself, and how funds should be distributed. Finally, the instructions also state that “The court does not require approval of any settlement and does not go out to seek these cases.” 

However, an agreement with a minor that has not been approved by the court may not be enforceable at all. Possible issues to an unapproved settlement include the following:

Statute of Limitations

A minor’s statute of limitations for a personal injury claim does not begin to accrue until his or her eighteenth birthday, or until the court appoints a legal guardian. C.R.S. §13–81–101(3) defines “person under disability” as “any person who is a minor under eighteen years of age, a mental incompetent, or a person under other legal disability and who does not have a legal guardian.” A person under disability, for whom the court has not appointed a legal representative, is protected by the statute of limitations' tolling provisions. See C.R.S. §13–81–103(1)(c). The statute of limitations begins to run when the minor reaches the age of eighteen or when, if it does, a court appoints a legal representative for the minor. Court appointment of the legal representative averts the minor's legal disability for purposes of litigating the minor's rights, thereby rendering inapplicable the tolling provisions. See C.R.S. §13–81–103(1)(a). The statute defines a “legal representative” as “a guardian, conservator, personal representative, executor, or administrator duly appointed by a court having jurisdiction of any person under disability or his estate.” C.R.S. §13–81–101(2).

It is important to note that a parent is not considered a legal representative appointed by the court. The definition of “legal representative” does not include natural parents or next friends acting on behalf of a minor. Elgin v. Bartlett, 994 P.2d 411, 414 (Colo. 1999). 

Given the above, it must be taken into consideration that although an unapproved agreement may have been reached regarding a minor’s personal injury claim, the statute of limitations for that underlying claim will be tolled until the minor’s eighteenth birthday unless the court appoints a legal representative, which is highly unlikely in the context of an unapproved agreement.

Ability to Contract

A contract or agreement entered into with a minor or infant may be voided upon the his or her eighteenth birthday. As matter of public policy, courts have protected minors from improvident and imprudent contractual commitments by declaring that contract of minor is voidable at election of minor after he attains his majority. Jones v. Dressel, 623 P.2d 370 (Colo. 1981). Minor may disaffirm contract made during his minority within reasonable time after attaining his majority or he may, after becoming of legal age, by acts recognizing contract, ratify it. C.R.S. §13-22-101(1)(a). An infant lacks capacity (except for those contracts authorized by statute) to make a firm and binding contract; in all such contracts lies the inherent weakness and condition that the infant may disaffirm the contract during his minority or within a reasonable time after reaching his majority. Doenges-Long Motors, Inc. v. Gillen, 138 Colo. 31, 35, 328 P.2d 1077, 1079-80 (1958).

Given Colorado’s stance on a contract with a minor, it is entirely possible that the unapproved settlement agreement may be disaffirmed and void upon the minor’s eighteenth birthday.

Fiduciaries Without Proper Authority  

Another issue that may arise out of an unapproved minor settlement could be that that the fiduciary for the minor, whether a next friend or conservator, doesn’t have the proper authority from a court to consent on behalf of the minor. The General Assembly has not vested discretion in parents to remove or waive a minor child's legal disability, which tolls the otherwise applicable statute of limitations in favor of minor child who does not have a court-appointed legal representative, by instituting a next friends suit. Elgin at 415. A parent has no responsibility or discretion to institute a next friend lawsuit that removes or waives the child's legal disability or has the effect of attributing the parent's knowledge and mistakes to the minor. Id.

If there is no court approved conservator or other fiduciary for the minor, issues may arise if a parent or other unapproved fiduciary attempts to release the minor’s rights to his or her claim. Therefore, despite an agreement signed by a parent on behalf of the minor, the minor’s claims may have survived.

In conclusion, Colorado does not mandate court approval for a minor’s agreement to resolve his or her personal injury claim. However, an unapproved agreement does not void the tolling of the statute of limitations for the minor’s claims, and does not contractually bind the minor to the agreement upon his or her reaching eighteen. Further, the agreement may also be voided due to the unbinding actions of the unapproved fiduciary, which could be the minor’s parents. Consequently, an unapproved settlement agreement with a minor has little if any binding effect. Therefore, seeking court approval for settlement agreements involving the claims of a minor provides the legitimacy and enforceability needed.  

In a much-needed effort to assure disclosure of individual claim submissions to asbestos trust settlements created from corporate bankruptcies, Congress is considering action.  For any company sued for asbestos disease claims, it would seem a matter of fundamental fair play that the plaintiff be required to disclose the information contained in any claim filed with an asbestos settlement trust.  And yet plaintiff lawyers resist disclosing such information.  Are the allegations in a pending lawsuit consistent with representations made to one or more trusts with respect to date of diagnosis, products involved, and the nature of any alleged exposure?  All these basic facts should be consistent.  But if they are not and there are inconsistencies, perhaps someone is playing fast and loose with the truth.  

Obtaining this information from the trusts is very difficult and the information is rarely voluntarily produced by plaintiff lawyers.  One can but wonder why.  Plaintiff lawyers oppose such disclosure proposals, citing defendants’ intent to delay and frustrate pending cases.  Our experience is that trust data has no impact on how fast cases move through the court system.

Dennis H. Markusson has been selected to the 2012 list of The Best Lawyers in America® for his Product Liability Litigation - Defendants.  

Markusson, an asbestos litigation lawyer and asbestos expert witness serves as national counsel defending a publically held corporation in asbestos litigation matters.  He also works as an asbestos expert witness and works with clients on asbestos issues including insurance coverage and reinsurance.  Go here to learn more about Dennis Markusson.  

If an offer of settlement either excludes costs or is silent on the question, the offer is compared to the final judgment, without costs, according to the Colorado Supreme Court  in Ferrelgas, Inc. v. Yeiser, 247 P.3d 1022, 1029-30 Colo. 2011).  This situation creates an inevitable tension in making offers, between excluding costs to keep the amount offered as low as possible, and including costs to make it more attractive to the plaintiff.  The decision we make as defense counsel in conjunction with claims managers whether to include or exclude costs in a statutory offer of settlement is a matter of strategy that must be considered on a case by case basis.

In Colorado, the prevailing party in a civil lawsuit has long been entitled to an award of reasonable costs, excluding attorney fees, §13-16-104 and §105, C.R.S.; C.R.C.P. 54(d).  A non-exclusive list of allowable costs includes docket fees, court reporting fees, fact and expert witness fees, expenses for service of process, reproduction costs and mileage charges, §13-16-122, C.R.S.

The parties may avoid the risk of cost awards by settling before trial.  One means of settling is through the statutory settlement offer process.  Either a plaintiff or a defendant may make a written statutory settlement offer, at any time up to 14 days before trial, §13-17-202(1)(a)(II) and (II), C.R.S.   An offer that is accepted shall constitute a “binding settlement agreement,” enforceable by the court, §13-17-202(1)(a)(IV).

An offer of settlement made by a defendant can have certain cost-shifting consequences.  When a plaintiff rejects a settlement offer made by a defendant, and the plaintiff fails to achieve a final verdict greater than the amount of the offer, then even if the plaintiff prevailed at trial, it must still pay the defendant its costs incurred from the date the offer was made, §13-17-202(1)(a)(II), C.R.S.

The purpose of the statutory settlement offer system is to “make the legal system more effective and efficient by discouraging the filing of unnecessary litigation, by encouraging settlement, and by encouraging timely resolution of disputes,” Hale v. Erickson, 23 P.3d 1255, 1257 (Colo. App. 2001).  The cost-shifting provision is intended to penalize a non-settling plaintiff.  Id.

The statutory settlement offer statute has been amended several times since its original enactment in 1990.  It was most recently amended in 2008, when the General Assembly approved a significant change in the cost-shifting provisions.  Colorado courts previously had held that when a plaintiff rejected a settlement offer and failed to achieve a better result in the final judgment, then the plaintff was not entitled to recover any costs at all, even if it were still the prevailing party at trial.  Rubio v. Farris, 51 P.3d 992, 994 (Colo. App. 2002); Bennett v. Hickman, 992 P.2d 670, 672-73 (Colo. App. 1999).  But in 2008, the General Assembly changed the law to permit a prevailing plaintiff to recover its costs accrued before the offer of settlement was made, regardless whether it had rejected the offer and thereby triggered the cost-shifting provisions.  As a result of this amendment, the pressure on plaintiffs to accept statutory settlement offers has been reduced.  The longer a lawsuit continues, the ratio of pre-offer to post-offer costs progressively grows in favor of the plaintiff, thereby weakening the net cost-shifting effect and reducing the incentive for a plaintiff to settle.

In making statutory settlement offers, defendants must choose whether or not to include in their offer the plaintiff’s costs.  Including or not including costs in the offer has no effect on the operation of the fee-shifting provision.  But whether costs are included in the offer does affect the comparison between the offer and the final judgment.  For purposes of the settlement statute, “the final judgment and offer must be considered in a like manner,”  Rubio v. Farris, 51 P.3d 992, 994 (Colo. App. 2002).   This means that if an offer of settlement is made “inclusive of costs,” then the offer is compared to the final judgment, inclusive of costs, also.  If, on the other hand, the offer of settlement either excludes costs or is silent on the question, then the offer is compared to the final judgment, without costs under the latest ruling, Ferrelgas, Inc. v. Yeiser, 247 P.3d 1022, 1029-30 Colo. 2011).

With the 2008 amendment to the offer of settlement law, statutory offers of settlement no longer impose the same degree of pressure on plaintiffs that they once did to encourage settlement.  But they still offer some value to the defendant as a means to encourage early resolution of lawsuits. The option to make such offers ought to be given serious consideration by defendants in every case.

Contact one of our experienced  defense attorneys if you have questions or need legal help.

Recently the Colorado Supreme Court upheld an $18 million jury award in exemplary damages against Qwest Services Corp. for the company’s “willful and wanton” failure to implement a periodic pole inspection program. 

“In this decision, the court spoke to the requirements of the statute,” said insurance defense lawyer, Dennis Markusson, “just because punitive damage awards are large, appellate courts may well be loathe to interfere with the jury’s judgment as long as the PD criteria is facially met.  The court is saying take punitive damage claims seriously and objectively and don’t count on an appellate court bailing you out as to the amount,” he said. 

A jury determined Qwest was 100 percent at fault for Blood’s injuries.  In the case, Qwest was found negligent for failing to maintain a utility pole that collapsed while a lineman, Andrew Blood, was climbing it as part of his job.  Blood was awarded $9,917,600 for economic damages, $10 million for physical impairment and disfigurement, $1 million for non-economic damages and $750,000 for loss of consortium.  Further, the jury awarded $18 million in exemplary damages after finding Qwest acted willfully and wantonly in failing to maintain the pole and periodic inspection program. 

“We conclude that Qwest’s failure to implement a periodic pole inspection program was sufficiently reprehensible to justify an exemplary damages award slightly less than compensatory damages,” said the Court in its majority opinion written by Justice Alex Martinez.