January 19, 2017

Colorado Court of Appeals: Attorney’s Prelitigation Statements Must Be Made in Good Faith to Qualify as Privileged

The Colorado Court of Appeals issued its opinion in Begley v. Ireson on Thursday, January 12, 2017.

Belinda Begley and Robert Hirsch, and their joint revocable trust (collectively, plaintiffs), purchased a property in Denver with the intent of demolishing the existing house and building a new house. Their architect’s plans were approved by the City & County of Denver, and plaintiffs contracted with a builder to begin demolition in anticipation of construction. The builder demolished the old house and began the shoring work for the new house. The neighbors, Ireson and Hoeckele, along with their attorney, Gibbs (collectively, defendants), made several threatening statements to the builder, which caused him to cease work and breach his contract with plaintiffs.

Plaintiffs filed a complaint against defendants, alleging intentional interference with a contract and intentional interference with prospective contractual relations. Several days later, defendants filed suit against plaintiffs, and moved to dismiss plaintiffs’ complaint under C.R.C.P. 12(b)(5) for failure to state a claim, arguing that their allegedly tortious statements were made in anticipation of litigation and were therefore protected. The district court apparently took judicial notice of defendants’ suit and granted their C.R.C.P. 12(b)(5) motion. Plaintiffs appealed.

The Colorado Court of Appeals first noted that motions to dismiss under C.R.C.P. 12(b)(5) are viewed with disfavor. The district court had ruled that the plaintiffs’ complaint failed to state a claim because there was no allegation that the statements by Hoeckele, Ireson, and Gibbs caused the builder to breach his contract. The court of appeals found this was error. The complaint alleged with specificity several incidents in which Ireson, Hoeckele, and Gibbs interfered with the construction contract, and the court held that nothing more was required to survive the motion to dismiss. The court reversed the district court’s grant of defendants’ motion.

The district court next ruled that because Gibbs’ statements and communications to the builder were made while he was representing Ireson and Hoeckele and were “in anticipation and in furtherance of litigation,” they were absolutely privileged against the torts that plaintiffs alleged. The court of appeals again found that this ruling was in error. The court analyzed several state appellate court decisions, as well as section 586 of the Restatement (Second) of Torts, and determined that prelitigation statements must be made in good faith to be privileged. Because the district court made no finding as to whether Gibbs’ statements were made in good faith, the court of appeals reversed and remanded.

The court of appeals reversed the district court’s rulings and remanded for further proceedings.

Top Ten Programs and Homestudies of 2016: The Best of the Rest

The year is drawing to a close, which means that the compliance period is ending for a third of Colorado’s attorneys. Still missing some credits? Don’t worry, CBA-CLE has got you covered.

Today on Legal Connection we are featuring the Best of the Rest: the top programs and homestudies in the areas of law not previously covered, including construction law, disability law, agricultural law, water law, natural resources law, immigration law, and marijuana law. Although these practice areas are varied, the homestudies and programs featured below are top-notch. For practitioners in these areas of law, visit cle.cobar.org/Practice-Area to find more programs and homestudies in your area of practice, and visit cle.cobar.org/Books to search our selection of books.

Construction Law — Residential Construction Defect Law 2016: Intermediate to Advanced Class
The program will highlight significant construction defect liability, damages and insurance developments occurring over the past two years and described in the Fifth Edition of Residential Construction Law in Colorado (CLE in Colo., 2015) written by Ronald M. Sandgrund, Scott F. Sullan and Leslie A. Tuft. A copy of the book is included as part of the course materials. No written materials other than a list of cases and statutes discussed will be supplied. This program is an advance program and is not intended to provide a general overview of construction defect law or practice. Each Homestudy includes a PDF copy of the CLE book, Residential Construction Law in Colorado, 5th Edition. Order the Video OnDemand here, the CD homestudy here, and the MP3 here. Available for 3 general credits.

Immigration Law — Immigration Law 2016
Attend this program and you will receive practical training for representing individuals in immigration proceedings, including juveniles and survivors seeking asylum and other humanitarian relief. Topics covered include: Immigration Law 101, Special Immigrant Juvenile Status, U Visas, T Visas, and VAWA, Cancellation of Removal and Trial Advocacy Skills in Immigration Court, Asylum Law, and Model Asylum Hearing. Order the Video OnDemand here, the CD homestudy here, and the MP3 here. Available for 7 general credits.

Water Law — Water Law 101 in 2016
This is the eighth in a series of courses related to Colorado water law and administration. This particular course will introduce you to the basic legal framework governing Colorado water law, rights, and administration as of 2016. You will become familiar with court cases, matters and issues critical to your understanding of water and water law in Colorado. You will learn about Colorado’s different types of water rights, how they are administered, the role of the State and Division Engineers, and what is required for changes of water rights. Order the Video OnDemand here, the CD homestudy here, and the MP3 here. Available for 7 general credits.

Environmental Law — Colorado’s Future Energy Economy: Legal Landscape
Attend this program and hear perspectives of officials and leaders at national and state and federal government levels on the direction of Colorado’s energy industry. Plus, gain invaluable insights on such from environmentalists, the energy industry, academia, and private firm practitioners. Take advantage of this unique opportunity to learn about the latest developments in the legal landscape behind Colorado’s energy and natural resources industries. Attend this program and personally unravel the issues with the experts. AND, at the same time, you will sharpen your practice skills and expand your knowledge to better serve your clients! Order the Video OnDemand here, the CD homestudy here, and the MP3 here. Available for 7 general credits, including 1 ethics credit.

Natural Resources Law — Oil, Gas, and Mining: Current Legal Issues
This Oil, Gas and Mining Law program is the one to attend to get up to speed on energy issues currently affecting Colorado and the West. You will leave this seminar with a better understanding of the latest regarding pertinent litigation, regulations and solutions for quieting title, financing, and distressed companies. Taught by experts, this program will provide you with an opportunity to network with colleagues and experts, and to catch up on hot topics in the energy law arena. Order the Video OnDemand here, the CD homestudy here, and the MP3 here. Available for 9 general credits, including 1 ethics credit.

Disability Law — Social Security Disability: Advanced Practice
Your distinguished panel of Judges, ODAR and Colorado Disability Determination Services Officials, a vocational expert, and seasoned private firm SSDI practitioners will provide you with the latest information on: Changes, Statistics, and Findings of the Colorado Disability Determination Services Office, What’s Happening in Region 8 and at Headquarters – Office of Disability Adjudication and Review?, State of the Denver Regional Office of Disability Adjudication and Review, Attorney Fee Agreements and Fee Petitions, How-to’s of Vocational Expert Examination, Perspectives of the Appeals Council, Appeals Council and Federal District Court Arguments, Case Law and Rulings, and How to File in Federal Court and Win! Order the Video OnDemand here, the CD homestudy here, and the MP3 here. Available for 8 general credits.

Agricultural Law — Rural Land Transactions: Contract Issues
Whether you represent the buyer or seller of ranch land, cattle, timber or recreational ranches, farms or other rural lands, this program is for you! Attend and your faculty of seasoned real estate attorneys and brokers will guide you through the nuances of rural land transactions, and help you avoid mistakes and potential pitfalls. You will receive straightforward guidance on Buyer Entity Pros and Cons, Federal Grazing Permits, Water, Mineral and Wind Rights, Growing Crops, and much more. Order the Video OnDemand here, the CD homestudy here, and the MP3 here. Available for 4 general credits.

Marijuana Law — Enforcing Cannabis Contracts, Including the Use of Arbitration in the Cannabis Industry
A key fear in the cannabis industry is the extent to which cannabis-related contracts are enforceable. This goes beyond contracts for the sale of cannabis itself and may include any number of legal instruments that touch a cannabis business. Although a number of recent court decisions in the Colorado state and federal courts indicate a trend toward the enforcement of cannabis-related contracts, and these cases will be discussed, many doubts remain regarding the enforceability of cannabis-related contracts. Arbitration provides a unique forum for the resolution of cannabis-related disputes that may provide greater legal certainty and enforceability. This CLE presentation covers the nuts and bolts of arbitration law relevant to the enforcement of purportedly illegal contracts, and goes beyond to identify techniques counsel should consider when drafting arbitration clauses for cannabis businesses and their partners. Order the Video OnDemand here, the CD homestudy here, and the MP3 here. Available for 3 general credits.

Colorado Court of Appeals: Insurer Required to Pay Portion of Costs Regardless of Whether Coverage Existed

The Colorado Court of Appeals issued its opinion in Mt. Hawley Insurance Co. v. Casson Duncan Construction, Inc. on Thursday, November 3, 2016.

Insurance—Partial Summary Judgment.

A homeowners association (HOA) sued developer Mountain View Homes III (MVH III) and general contractor Casson Duncan Construction Inc. (Casson Duncan) on defective construction claims. In arbitration, MVH III’s insurer, Mt. Hawley Insurance Co. (Mt. Hawley), defended under a reservation of rights. The arbitration resulted in awards of damages and taxable costs to the HOA. Casson Duncan paid the costs award, for which it and MVH III were jointly liable, and thereafter sought contribution from MVH III and Mt. Hawley.

Mt. Hawley initiated this action against MVH III, the HOA, and Casson Duncan, requesting a declaration that there was no coverage under its commercial general liability policies with MVH III for either the costs or damages awarded in the arbitration. Casson Duncan filed a counterclaim for declaratory and monetary relief against Mt. Hawley for payment of MVH III’s portion of the costs award. The parties filed cross-motions for summary judgment on coverage issues. The district court denied summary judgment on all but one issue: it determined that Mt. Hawley was, as a matter of law, responsible for paying MVH III’s portion of the cost award, regardless of whether it was also responsible for paying its portion of the damages award. This partial summary judgment ruling was certified as “final” for purposes of permitting appellate review.

On appeal, Mt. Hawley argued that the district court erred in granting partial summary judgment because Mt. Hawley’s responsibility for paying costs was inextricably linked to the question of whether the policies provided MVH III with coverage for the HOA’s claims, and because the coverage issues had not been determined, the costs issues could not be determined either. The court of appeals interpreted the policies to decide the issue. The insurance policies had standard “coverages” and “exclusions” sections and provided that the insurance company would pay “[a]ll costs taxed against the insured in the ‘suit,’” where “suit” clearly covered the arbitration proceeding. The obligation to pay costs was not linked to coverage but simply to the defense of the case. Because Mt. Hawley conducted MVH III’s defense in the arbitration proceedings, it was obligated to pay MVH III’s portion of taxable costs.

Mt. Hawley also argued that its reservation of rights letter superseded the policies’ costs provisions. A reservation of rights does not destroy the insured’s rights or create new rights in the insurer. The Colorado case law exception to this principle applies to defense costs, and defense costs are different from costs taxed against an insured.

Lastly, Mt. Hawley asserted that the court’s interpretation of the policies leads to absurd results. Mt. Hawley agreed in its policies to pay all costs taxed against MVH III in suits in which it defended MVH III. If Mt. Hawley wanted to avoid the result here, it could have changed the language in its policy regarding coverage of such costs.

The judgment was affirmed.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Construction Defect Claims Filed Against Subcontractors were Time-Barred

The Colorado Court of Appeals issued its opinion in Sopris Lodging, LLC v. Schofeld Excavation, Inc. on Thursday, October 20, 2016.

Construction Defect—Summary Judgment—Time Bar.

TDC was the general contractor for construction of a hotel owned by Sopris Lodging (Sopris). On March 11, 2011, Sopris sent TDC a notice of claim regarding alleged construction defects at the hotel. On May 24, 2013, Sopris filed a complaint in district court asserting construction defect claims against one of the subcontractors of the hotel and against TDC’s individual principals, who had guaranteed TDC’s performance. On the same date, Sopris and TDC entered into an agreement to toll the statute of limitations for Sopris’s claims against TDC.

In 2014, TDC filed third-party claims against several subcontractors including Schofield and CEC for breach of contract, negligence, contribution, and indemnification. CEC and Schofield moved for summary judgment, asserting the claims were barred by the two-year statute of limitations in C.R.S. § 13-80-102. TDC did not dispute that the claims accrued on or before March 11, 2011 but argued C.R.S. § 13-80-104(1)(b)(II) tolled the statute of limitations for a defendant’s third-party clams until 90 days after a settlement or final judgment on the plaintiff’s claims against the defendant. The district court entered summary judgment in favor of CEC and Schofield.

On appeal, Sopris (standing in the shoes of TDC following a settlement and assignment of the third-party claims) argued it was error to find the claims time-barred. C.R.S. § 13-80-104(1)(b)(II) gives a contractor the option to bring indemnity or contribution claims against subcontractors in a separate lawsuit after the underlying claims are resolved and tolls the statute of limitations for such claims. But because TDC asserted third-party claims in the original construction defect litigation, the tolling section does not apply. Thus TDC’s third-party claims were time barred.

The judgment was affirmed.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Claim Preclusion Bars Relitigation of Attorney Fee Issue in CDARA Case

The Colorado Court of Appeals issued its opinion in Layton Construction Co., Inc. v. Shaw Contract Flooring Services, Inc. on Thursday, October 20, 2016.

Summary Judgment—Claim Preclusion.

Layton Construction Co., Inc. (Layton) hired Shaw Contract Flooring Services, Inc. (Shaw) to perform work on a project for BCRE, the property owner. BCRE subsequently terminated its contract with Layton and gave Layton notice of numerous construction defects, a few of which related to Shaw’s work. Layton sued BCRE, alleging BCRE had failed to pay for work and seeking damages. BCRE counterclaimed for defective workmanship. Layton then added claims against various subcontractors, including Shaw.

Pursuant to a clause in the subcontract, Layton sought indemnification from Shaw for all damages and costs arising from any liability it might have to BCRE, including Shaw’s failure to provide a defense or pay Layton’s costs. Later, after BCRE specifically identified Shaw’s allegedly defective work, Layton moved to dismiss its indemnification claim against Shaw with prejudice. Layton’s motion stated the dismissal would include “those claims that have been or could have been asserted in this lawsuit.” The district court dismissed Layton’s claims with prejudice.

After a subsequent bench trial, the court entered an award for Layton on its claims against BCRE. The subcontractors remaining in the case were found liable to Layton under the indemnification provisions in their subcontracts.

Layton then filed this case against Shaw and other subcontractors, asserting claims for contractual and common law indemnity and declaratory judgment seeking an award of attorney fees, costs, and expenses it had incurred in defending BCRE’s claims in the prior case. Layton asserted the indemnification claim against Shaw under C.R.S. § 13-80-104 of the Construction Defect Action Reform Act (CDARA). Shaw moved for summary judgment, arguing Layton’s indemnification claims were barred by claim preclusion because they had been dismissed with prejudice. The district court granted the motion.

On appeal, the Court of Appeals noted that for a judicial proceeding to be precluded by a previous judgment, there must exist finality of the first judgment, identity of subject matter, identity of claims for relief, and identity or privity between parties to the actions.

Layton argued that its claims were not identical to those asserted against Shaw in the prior case. Because Layton could have asserted an indemnity claim for attorney fees and costs in the prior case there is identity of claims.

Layton also argued that CDARA modifies the doctrine of claim preclusion in the construction defect context by requiring splitting of indemnification claims. The Court found nothing in CDARA that abrogates the doctrine of claim preclusion in this case.

Layton further argued that various exceptions to the claim preclusion doctrine applied. The Court found that the exceptions to the doctrine of claim preclusion do not apply to this case.

Shaw requested attorney fees incurred on appeal, arguing that Layton’s appeal was substantially frivolous and vexatious. The Court agreed that the appeal was substantially frivolous and found that Layton’s assertion that it raised “novel” issues was “nothing more than a reflection of their futility.”

The judgment was affirmed and the case was remanded for the district court to determine the reasonable amount of Shaw’s attorney fees incurred on appeal.

Summary provided courtesy of The Colorado Lawyer.

Colorado Supreme Court: Purported Annexation Failed to Comply with Colorado Common Interest Ownership Act

The Colorado Supreme Court issued its opinion in Ryan Ranch Community Association, Inc. v. Kelley on Monday, September 26, 2016.

Colorado Common Interest Ownership Act—Creation, Alteration, and Termination of Common Interest Communities.

The Colorado Supreme Court considered whether a developer annexed several lots into a common interest community such that the lot owners would owe assessments to the community’s homeowners association. The court concluded that the lots were not annexed because the purported annexation failed to comply with the Colorado Common Interest Ownership Act, C.R.S. §§ 38-33.3-101 to -402. The lot owners therefore were not liable for the association’s assessments.

Summary provided courtesy of The Colorado Lawyer.

Colorado Supreme Court: Developer’s Recordation of Covenants and Plat Did Not Create Common Interest Community

The Colorado Supreme Court issued its opinion in Pulte Home Corp. v. Countryside Community Association, Inc. on Monday, September 28, 2016.

Colorado Common Interest Ownership Act—Creation, Alteration, and Termination of Common Interest Communities—Management of the Common Interest Community.

The Supreme Court addressed when and how common interest communities are 16 formed under the Colorado Common Interest Ownership Act, CRS §§ 38-33.3-101 to -402. In particular, the Court analyzed whether the declarant developer was liable for past-due assessments for maintenance of the developer’s unsold properties and related common elements. The Court concluded that, on the facts presented, the developer’s recordation of the covenants and plat did not create a common interest community. Rather, the community was created when the developer first subjected property to the covenants, and the remaining property could not become part of the community until the developer added it in accordance with certain prescribed steps. The developer’s property was therefore not part of the community and was not subject to assessments. The Court also concluded that the homeowners association had no remedy for unjust enrichment because its covenants fully allocated responsibility for assessment costs.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Statute of Repose Acts as Absolute Bar to Bringing Suit After its Expiration

The Colorado Court of Appeals issued its opinion in Sierra Pacific Industries, Inc. v. Bradbury on Thursday, September 8, 2016.

Construction Defect Action Reform Act—Summary Judgment—Statute of Repose.

Sierra Pacific Industries, Inc. hired Bradbury to install windows and doors on a condominium construction project. Bradbury began and completed this work in 2002.Sierra Pacific attended to leaks and water damage between 2004 and 2011, including two substantial retrofit repairs in 2005 and 2011. Bradbury did some repair work in 2004. Construction defect litigation resulted over the cost of the repairs.

In 2014 Sierra Pacific filed this indemnification action against Bradbury to recover losses incurred in the settlement of the defective construction case and damages for related contractual breaches. Bradbury filed for summary judgment under C.R.C.P. 56(b), asserting that the claims, brought nearly 10 years after Bradbury ceased repair efforts, were time barred by the six-year statute of limitation in Colorado’s Construction Defect Action Reform Act. The trial court granted Bradbury’s motion for summary judgment.

On appeal, Sierra Pacific argued it was error to find that its claims were barred by the six-year statute of repose because under C.R.S. § 13-80-104(1)(b), it was allowed to file claims against Bradbury within 90 days of settling the underlying case in 2014, notwithstanding the statute of repose. This exact argument was previously rejected by a division of the court of appeals and the court here rejected it for the same reasons. The court concluded that the settlement in the underlying case did not impact the application of the statue of repose.

Sierra Pacific also contended that summary judgment was inappropriate because there remains a dispute of material fact as to when the statute of repose expired. Sierra Pacific argued that even if the statute of repose was not tolled by the settlement, the period of repose did not commence until the improvements to the property were completed in 2011. C.R.S. §§ 13-80-104(1)(a) and (2) provide a statute of repose that expires six years after substantial completion of improvements to real property, unless it is extended two years because the underlying cause of action arose during the fifth or sixth year after such substantial completion. Sierra Pacific argued that “substantial completion” did not occur until the repairs were finished in 2011. The court reasoned that a subcontractor has substantially completed its role in the improvement at issue when it finishes working on the improvement, and the statute of repose commences upon substantial completion. Here, the project was substantially completed in 2002, or in no event later than 2004, when the last repairs by Bradbury were completed. Moreover, there is no tolling of the statute of repose based on another’s efforts to repair work.

Under the applicable statute of repose, Sierra Pacific’s claims against Bradbury were time barred, and the district court properly granted Bradbury’s motion for summary judgment. The judgment was affirmed.

Summary provided courtesy of The Colorado Lawyer.

Should We Get Involved In the Government Marketplace?

Editor’s Note: This article is reprinted with permission courtesy of Richard F. Busch, II,  www.rbuschlaw.com. All rights reserved.

By Richard F. Busch, II, Esq.

The federal government spends trillions of dollars annually for a wide range of goods and services to meet mission needs. Current events indicate that one potential factor in the recovering economy will include stable or increasing government procurement budgets. Construction and construction related activity is a very large part of the government’s budget and recovery plans, including here in Colorado. In addition, along with the current depletion of the spare parts inventory for the military, technology advancements require up-to-date development programs and a consistent focus on maintaining our lead in state of the art equipment. Finally, the government must/has become increasingly reliant on industry and the commercial markets to provide the technical expertise to advance the infrastructure and the required solutions for mission success.

While many of the largest defense companies and government contractors have an operational presence in Colorado, the majority of existing defense/government construction projects, contracting, and research/development opportunities remain untapped by Colorado businesses. The doors are opening, particularly in the areas of construction project, remodeling, and refurbishment. High technology practice areas in Colorado include but are not limited to energy and construction, nanotechnology, space, and software development. Colorado businesses, as well as the state legislature, are realizing the vast potential in the government marketplace and the unique position Colorado has in becoming a primary state to provide the government marketplace with the supplies and services needed to successfully accomplish its mission.

Doing business in the federal or state marketplace has changed over the years. Past difficulties have been eliminated with the new focus on the commercial contractor and smaller businesses. Please consider the following FAQs to better understand the current opportunities:

Q: If a business entity was considering entering the government marketplace and you could give them just one piece of advice, what would it be?

A: Do it right! The concept is simple, but the execution can be complex if a company attempts to perform in the government marketplace without the experience or advice necessary to succeed. Unique skills are needed because the government marketplace is a different forum than the commercial market. A company must recognize, understand, and prepare for the differences. In order to take advantage of the many opportunities when dealing with the government, the company must be prepared to understand there are differences, those differences can be “handled,” and the potential is worth the focus. In that regard, it is crucial to have experienced, qualified professionals advising you about those unique requirements when dealing with the government—contract administrators, accountants, quality and marketing experts, and legal professionals. It’s not always necessary to hire people experienced in these areas, but a company should have such advisors available as needed. A government contract is not “just” a contract. It is important to look to organizations like the Small Business Administration and the Department of Defense’s Procurement Technical Assistance Centers for help and guidance on the proper proactive approach to government contracting.

Q: Once a company wins a government contract or is awarded an order, what focus should they have in completing their obligation?

A: It’s important to remember that a company’s “past performance” is not just a concept, but rather an important element of success. While there is no such thing as a perfect contract, careful administration, timely performance, quality work, and accurate accounting are essential to securing an outstanding performance evaluation. The manner in which a company performs and how its contracts are administered is a primary factor the government considers when awarding new opportunities. Exercising sound business judgment, even on those occasions when the company must seek an equitable adjustment or relief from the contracting officer, is important in avoiding and/or resolving disputes over the performance of the contract. Remember, the government has responsibilities under the contract as well and must be held accountable. If approached in a business-like manner and supported by the guiding principles in the regulations, executive orders, and statutes, the government generally appreciates an attempt to resolve issues at the lowest level and in the quickest amount of time.

Q: Is it important to understand the commercial-item procurement initiative when dealing with the government?

A: Federal Acquisition Regulation Part 12 provides guidelines for the purchase of “commercial” supplies and services. Briefly, the regulation states a preference for the acquisition of commercial items and that commercial items shall be acquired to meet the needs of the agency whenever they are available. In addition, the regulation requires prime contractors and subcontractors at all tiers to incorporate, to the maximum extent practicable, commercial items as components of items supplied to the government agency. This initiative is very important for any business participating in or considering entering the government marketplace. Having a product or service designated as “commercial” affects intellectual property rights, accounting audits, quality programs, socioeconomic requirements, and the imposition of most of the normally required terms and conditions.

Q: Obviously contract terms and conditions are important, but how closely should contracts be reviewed?

A: As with all legal documents, it is important to understand the terms you are committing to and your responsibilities under the contract. The government has responsibilities also. Over-incorporation of clauses only creates opportunity for increased spending and a forum for failure. In one situation, our client, a small subcontractor on a major program, was given flow-down terms and conditions from the large prime contractor. We were requested to review these flow-down clauses and comment on the applicability of the requirements. Although the subcontractor was on the prime’s proposal team, the prime flowed down more than 115 contract provisions. Upon review, we found only a limited number of clauses that were mandatory due to the unique status of dealing with the government and 14 clauses that would be acceptable if appropriately modified to support the prime contractor’s responsibilities to the government. The rest of the clauses did not apply or were not appropriate. Always review the clauses and negotiate the final contract as much as possible. Balance your review by recognizing acceptable risks, managing those risks, and keeping in mind your goals in acquiring and performing the contract.

Q: What are some important considerations when establishing the Prime-Subcontractor relationships?

A: A company’s approach to entering the realm of government contracts should include various relationships with prime contractors. Those contractual relationships could include not only the traditional subcontract, but also teaming arrangements, joint ventures, and mentor-protégé programs. Be thorough and proactive in the development of such relationships. Ensure that there is an understanding in terms of the focus and goals to be achieved and the responsibilities assigned to each party. Understand billing, risk allocation, intellectual property issues, marketing, and quality issues between the contract parties. Most important, clearly identify the roles and goals of the parties. Finally, understand and limit the terms and conditions necessary to successfully perform the contract.

Q: How should the contractor handle a dispute with the government or prime over contract award or performance?

A: There are different approaches to resolving disputes with the government or prime over a contract award or performance. In my opinion, it is most important not to be arbitrary and to understand that there is a certain cost to performing any business obligation. Management must balance the rights supplied under the contract with the importance of the company’s relationship with its customer. Generally, my experience has been that the government understands that parties to a contract may have a dispute—there is no perfect contract. While there are no guarantees, most government officials understand that it is “just business” as long as the issues are presented in a business-like approach. A professional approach goes a long way toward resolving issues and maintaining a high past performance rating.

Whatever the level of the dispute, the contractor must ensure that the claim is drafted well and fully supported. While there are times that demand a more formal resolution technique, I am a firm believer in trying to resolve issues through unassisted negotiation or formal mediation. There are a number of government directives that encourage alternative dispute resolutions between parties; take advantage of those directives as much as possible. It’s just good customer relations.

© Busch Law Firm LLC (2016)

Richard Busch, II, is a solo practitioner at The Busch Law Firm, which is a boutique government contract practice firm. His practice involves all aspects of government contracts, commercial contracts, conflict management systems design, ADR, and white collar crime. More specifically, his practice focuses on the formation and administration of contract relationships through the utilization of a proactive approach of addressing the objectives of the relationship, requirements for successful performance, and the resolution of disputes. Mr. Busch has extensive experience in negotiating complex business issues involving high technology and major weapons system contracts, contract compliance issues, and resolving both internal and external disputes involving the business organization. Richard has reviewed and negotiated multimillion dollar solicitations, proposals, equitable adjustments, terminations, and other related government acquisition and commercial-based contract matters with a number of government agencies and subcontractor/vendors. He concentrates on the legal issues facing a corporation doing business with the government or its prime contractors in the areas of construction, high technology, major weapons systems, and information⁄communication technology. Mr. Busch has worked with corporations, the DoD, and other government agencies in the highly structured areas of classified contracts. As a result, he has gained a wealth of experience in dealing with classified authorities pertaining to these agencies. Prior to entering private practice, Mr. Busch held positions as General Counsel of a multi-billion dollar product area with a Fortune 50 defense contractor and a legal advisor to the Director of Contracts at the National Security Agency (NSA).  Mr. Busch earned an L.L.M. (Government Contract Designation) from George Washington University National Law Center, a J.D. from the Hamline University School of Law, and a B.A. from Westminster College, Fulton, Missouri.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

 

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CLE Program: Finding Federal Contract Work — Meet the Attorneys, Veterans, the SBA and Bankers Your Clients Need

This CLE presentation will occur on September 16, 2016, at the CBA-CLE offices (1900 Grant Street, Third Floor), from 9 a.m. to 4:10 p.m. Register for the live program here or register for the webcast here. You may also call (303) 860-0608 to register.

Can’t make the live program? Order the homestudy here: CD • MP3Video OnDemand.

Colorado Supreme Court: Workers’ Compensation Insurer Not Required to Provide Notice of Cancellation to Certificate Holder

The Colorado Supreme Court issued its opinion in Pinnacol Assurance v. Hoff on Monday, June 27, 2016.

Workers’ Compensation Insurance—Promissory Estoppel—Certificates of Insurance—Notice of Cancellation.

The Supreme Court considered whether an insurer had a contractual or statutory obligation to notify a non-insured holder of a certificate of insurance when the insurance policy evidenced by the certificate was cancelled. Because the certificate said notice of cancellation “will be delivered in accordance with the policy provisions” and the insurance policy did not promise notice to certificate holders, the Court concluded that the insurer had no contractual obligation to provide notice of cancellation to the certificate holder. The Court further concluded that no provision or public policy contained in the Workers’ Compensation Act required the insurer to provide such notice. Therefore, the Court reversed the judgment of the Court of Appeals.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Landowner Cannot Be Held Vicariously Liable Under PLA and Common Law

The Colorado Court of Appeals issued its opinion in Reid v. Berkowitz on Thursday, February 25, 2016.

Default Judgment—Premises Liability Act—Negligence—Exclusivity of Remedies.

Reid sustained injuries after falling through an unsecured guardrail at a construction site where Berkowitz was the general contractor. There were also subcontractors at the site. Reid sued Berkowitz, a landowner as defined by the Colorado Premises Liability Act (PLA). Berkowitz answered, made a jury demand, and designated the subcontractors as nonparties at fault. Reid amended his complaint to add claims of negligence against the subcontractors and named them as defendants.

The district court entered defaults against the subcontractors after they failed to answer and, after a damages hearing, the court entered judgments against them. The court made no findings on whether Berkowitz was vicariously liable for the judgments against the subcontractors.

The PLA claim against Berkowitz proceeded under a different judge to a jury trial at which the default judgments were not mentioned to the jurors. The jury awarded Reid damages, but despite Berkowitz’s request, was not instructed to apportion fault to the subcontractors nor to evaluate Reid’s comparative negligence.

On a prior appeal of the jury verdict, the Court of Appeals agreed that refusing the apportionment instruction was error but concluded the error was harmless because the subcontractors fault was imputable to Berkowitz, who had a nondelegable duty of care to Reid. The Court ordered a retrial solely on the issue of Reid’s comparative negligence, and a second jury allocated the fault 90% to Berkowitz and 10% to Reid. Berkowitz paid the amount awarded.

Reid then moved for declaratory relief, requesting that the district court find Berkowitz liable for 90% of the default judgments entered against the subcontractors, plus simple interest. After a hearing, the court held Berkowitz liable for the entirety of the default judgments with compound interest.

On appeal, Berkowitz argued multiple theories in support of his assertion that the court erred in finding him liable for the amount of the default judgments entered against the subcontractors. The sole argument the Court addressed was whether Berkowitz could be simultaneously liable for damages as a landowner under the PLA and vicariously liable for a default judgment under negligence theories against his subcontractors. Based on the unambiguous language of the statute, the Court held that the PLA is an exclusive remedy against a landowner for injuries that occur as a result of conditions, activities, or circumstances on his property.

The judgment and orders were reversed and the case was remanded to vacate the judgments against Berkowitz.

Summary and full case available here, courtesy of The Colorado Lawyer.

HB 16-1005: Allowing Residential Use of Rain Barrels for Collection of Precipitation

On January 13, 2016, Rep. Esgar and Danielson and Sen. Merrifield introduced HB 16-1005Concerning the Use of Rain Barrels to Collect Precipitation from A Residential Rooftop for Nonpotable Outdoor Uses. The bill was assigned to the House Agriculture, Livestock, and Natural Resources Committee.

This bill allows residences to collect precipitation and reuse it on their residential property but only for outdoor purposes. A rain barrel is categorized as a storage container with a sealable lid that is used for collecting precipitation from a downspout of a rooftop. The bill specifies that the rain barrel must be located above ground outside of the residential home.

The bill says that precipitation from a rooftop may be collected if:

  • No more than two rain barrels are used, both having a combined storage capacity of one hundred ten gallons;
  • The precipitation collected comes from the rooftop of a building primarily used as a single-family residence or a multi-family residence with four or less units;
  • The collected precipitation must be used for outdoor purposes only, such as watering lawns or gardens; and
  • The precipitation collected is used only on the residential property from which it was collected.

The bill prohibits using the collected precipitation for drinking water or indoor household purposes.

The State Engineer is required by the bill to provide information on its website regarding the allowances and limitations of the use of rain barrels to collect precipitation. Additionally, in the event that the Department of Public Health and Environment develops best practices in accordance with C.R.S. § 25-1.5-210 the State Engineer is required to post a link on its website to the Department’s best practices list.

C.R.S. § 25-1.5-210 lays out the circumstances where the Department must develop best practices. The Department has to develop best practices for

  • Nonpotable usage of the collected precipitation, and
  • Disease and pest vector control.

If best practices are developed regarding the nonpotable usage of the collected precipitation, the Department must first post the best practices on its website, and second, inform the State Engineer that best practices have been posted so that the State Engineer may post a link on its website.

Mark Proust is a 2016 J.D. candidate at the University of Denver Sturm College of Law.