September 27, 2016

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.

Top Ten Programs and Homestudies for Construction, Environmental, Water, and Oil and Gas Law

As 2015 winds to a close, we continue our review of the Top Ten Programs and Homestudies in various practice areas. In case you missed it, we previously reviewed the Top Ten Programs and Homestudies in ethics, family law, trust and estate law, real estate law, litigation, business law, employment law, and criminal law. Today, we have consolidated several related practice areas, because there is often a great deal of overlap in the programs for these practice areas. And now, here are the Top Ten Programs and Homestudies for Construction, Environmental, Water, and Oil and Gas Law.

10. Mechanics’ Liens: Advanced Issues. Mechanics’ liens are the stuff of nightmares for homeowners. This program tackles some of the tough issues with mechanics’ liens, including oil and gas liens, priority following a public trustee sale, and the impact of a bankruptcy filing on a mechanics’ lien. Three general credits; available as CD homestudy, MP3 audio download, and Video OnDemand.

9. Oil and Gas Law Nuts and Bolts. This Oil and Gas Law Nuts and Bolts program is for attorneys who are new to the oil and gas arena or want to expand their practice. It is also for attorneys who have been practicing in the area and want to refresh their knowledge, get up-to-date on recent developments, or simply want essential information on oil and gas law. Eight general credits, including one ethics credit; available as CD homestudy, MP3 audio download, and Video OnDemand.

8. Agricultural, Environmental, and Water Law Symposium 2014: The Great Drought and What It Means To You. From agriculture to tourism, real estate, and oil and gas development, the lack of water is affecting many segments of our economy and communities across the state. This program brings together some of the top public officials, academics, and attorneys to address the great western drought and how you can help your clients respond to it. Four general credits; available as CD homestudy, MP3 audio download, and Video OnDemand.

7. Oil and Gas Law Advanced Topics 2015. Power up your oil and gas practice and knowledge as you learn about the legal framework for oil and gas in the Rocky Mountain West region, emerging title issues, ethics, master limited partnerships, and federal access issues. Eight general credits, including one ethics credit; available as CD homestudy, MP3 audio download, and Video OnDemand.

6. Colorado’s River Basins: A Comprehensive UpdateThis program provides insights on basins in 6 of Colorado’s 7 water divisions. Topics discussed include water administration related to marijuana cultivation, alternative transfer methods, surface water irrigation improvement rules implementation, water rights versus property rights in storm water management, new/proposed groundwater rules, and more. Seven general credits; available as CD homestudy, MP3 audio download, and Video OnDemand.

5. Oil and Gas Development in Colorado: Balancing Energy and the Environment. Striking the balance: energy production and use is desirable, but not without challenges and risks. Environmental regulation is effective and positive, but not without costs. Learn how hot button energy and environmental interests are being balanced by state and local governments, the energy industry, environmental and technical professionals, and practitioners. Eight general credits; available as CD homestudy, MP3 audio download, and Video OnDemand.

4. Mechanics’ Liens: Getting Paid for Accomplished Work. When a homeowner does not pay for work that has been done on his or her property, the construction workers can assert a lien on the subject property. Whether you represent the homeowner or the construction worker, there is much to learn about this area of the law! Although mechanics’ liens are effective tools, there are numerous pitfalls in meeting the deadlines for recording a mechanics’ lien, for accurately drafting the lien, and for correctly serving the lien. Learn about the nuances of mechanics’ liens in this program. Four general credits; available as CD homestudy, MP3 audio download, and Video OnDemand.

3. Water, Oil, and Gas: Nuts and Bolts of Oil and Gas Leases, Surface Use Agreements, and Water Rights for Non-Oil and Gas Attorneys. This program focuses on critical water, oil and gas issues in Colorado. This program provides those who don’t practice in the area with essential information regarding oil and leases, surface use agreements, government’s role in authorizing locations for oil and gas development; the ins and outs of nontributary and produced nontributary ground water and nontributary ground water as a landowner asset. Six general credits; available as CD homestudy, MP3 audio download, and Video OnDemand.

2. Residential Construction Defect Law Update 2014. The program will highlight recent liability, damages and insurance developments as discussed in the 2013 Fourth Edition of Residential Construction Law in Colorado (CLE) authored by Ronald M. Sandgrund, Scott F. Sullan and Leslie A. Tuft. A PDF copy of the book is included as part of the course materials, along with a summary list of significant, recent cases. Three general credits; available as CD homestudy, MP3 audio download, and Video OnDemand.

1. Basics of Mechanics’ Liens and Verified Claims. The ins and outs of mechanics’ liens are addressed in this program, including who can claim a lien, what may be liened, commercial and residential property, what pleadings are needed to assert a lien, lien waivers, and more. A PDF copy of the CLE book, Colorado Liens and Claims Handbook, is included as part of the course materials. Five general credits; available as CD homestudy, MP3 audio download, and Video OnDemand.

Colorado Court of Appeals: Jury Instructions on Implied Warranty of Suitability Insufficient

The Colorado Court of Appeals issued its consolidated opinion in Rogers v. Forest City Stapleton, Inc. and Rogers v. Forest City Stapleton, Inc. on Thursday, November 19, 2015.

Implied Warranty of Suitability—Developer—Homeowner—Vacant Lot—Nuisance—Sanctions—Discovery Violation.

Defendants (collectively, Forest City) served as the master developer for the redevelopment of the old Stapleton International Airport. Forest City sold the vacant residential lot at issue here to a homebuilder, with which plaintiff Rogers contracted to build a home. Rogers paid the builder an extra fee to include a basement that could later be finished. After learning that his lot was not suitable for a home with a basement that could be finished, Rogers brought claims for breach of implied warranty, nuisance, and negligent misrepresentation.

On appeal, Forest City argued that the trial court erred by instructing the jury that it could find that an implied warranty runs from a developer to a homeowner under the circumstances of this case. An implied warranty of suitability exists between a developer of a vacant lot and the owner of a home on that lot who is not the first purchaser if (1) the developer improves the lot for a particular purpose, and (2) all subsequent purchasers rely on the developer’s skill or expertise in improving the lot for that particular purpose. Here, the trial court did not adequately instruct the jury on this law. Consequently, the judgment was reversed and the case was remanded for a new trial on the implied warranty claim.

Forest City also argued that the trial court erred in denying its motion for judgment notwithstanding the verdict on Rogers’s nuisance claim, arguing that there was insufficient evidence to support the nuisance verdict as a matter of law. Because the jury was instructed that Forest City placing RABC in the roads was a necessary element of the nuisance claim, and the record reveals no evidence that Forest City placed RABC, or anything else, in the roads in Stapleton, the evidence was insufficient to support the jury’s nuisance verdict. The trial court therefore erred by denying Forest City judgment notwithstanding the verdict on that claim pursuant to CRCP 59(e)(1).

Rogers argued that the trial court erred in the amount of sanctions awarded to Rogers and against Forest City’s counsel for the late disclosure of discovery documents. Because the trial court found that (1) the late disclosed documents were of “slight use” to Rogers, (2) Forest City’s counsel acted with “candor and professionalism,” and (3) the violation was an unintentional “oversight,” the trial court acted within its broad discretion by awarding only $10,000 of the $90,000 that Rogers requested.

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

Business Use of Unmanned Aircraft Systems (Drones) Expanding Exponentially

DroneDrones, also known as Unmanned Aircraft Systems (UAS) or Unmanned Aircraft Vehicles (UAV), are not just for hobbyists anymore. Drones are devices that are used for flight in the air without an onboard pilot. Drones can be small and simple, such as remote-controlled aircraft popularized by hobbyists, or large and complex, like the surveillance aircraft used by the military in hostile areas. The military has been using drones for many years to conduct surveillance and deliver weapons in dangerous war zones. However, in the last several years, civilian and business use of drones has increased dramatically.

Non-military drone use is categorized into public aircraft operations and civil operations. Public aircraft operations are uses by public agencies or organizations of a particular aircraft for a particular purpose in a particular area. Public operation uses can include law enforcement, firefighting, border patrol, disaster relief, search and rescue, and military training. Civil operations are any operations that do not meet the statutory criteria for public aircraft operations, including business uses such as for agricultural purposes, construction, security, TV and movie industry uses, environmental monitoring, insurance, aerial photography, news media, and much more.

Because they utilize airspace for their operations, drones are regulated by the FAA. In 2013, the FAA issued a comprehensive plan for the safe integration of civil unmanned aircraft systems into the country’s airspace. In early 2015, the FAA issued a Notice of Proposed Rulemaking for small UAS. The goal of the proposed rules is to provide a framework of regulations to allow routine use of certain small UAS while maintaining flexibility to accommodate future changes in technology. The public comment period for the proposed rules ended April 24, 2015.

Businesses wishing to utilize drones must obtain a Section 333 Exemption from the FAA. Petitions for Section 333 Exemption must be filed with and approved by the FAA before the drone may be used for business purposes. The FAA can also grant businesses the right to use airspace via Special Airworthiness Certificates. Special Airworthiness Certificates are available for research and development or experimental aircraft.

Attorney Thomas Dougherty, II, head of Lewis Roca Rothgerber’s Unmanned Aircraft Systems Industry Team, will discuss drone law at CLE on July 28, 2015. Topics to be explored include potential drone uses, FAA regulations covering drones, required information for petitions for Section 333 Exemption, Certificates of Waiver or Authorization, the FAA’s enforcement authority, and legal issues arising out of state and local laws for the use of drones. Register now by clicking the links below or calling (303) 860-0608.

CLE Program: Drones for Lawyers: The Do’s and Don’ts for Clients

This CLE presentation will take place Tuesday, July 28, 2015 at the CLE offices. Click here to register for the live program or click here to register for the webcast.

Can’t make the live program? Order the homestudy here – Video OnDemand – MP3

 

Colorado Court of Appeals: Proof of “Case Within a Case” Not Required in All Legal Malpractice Actions

The Colorado Court of Appeals issued its opinion in Boulders at Escalante LLC v. Otten Johnson Robinson Neff & Ragonetti PC on Thursday, June 18, 2015.

Legal Malpractice—Negligence—Statute of Limitations —Legal or Proximate Causation—Case Within a Case.

Plaintiff is a real estate development company formed to develop townhomes in a subdivision in Durango. Defendant is a law firm that was hired to represent plaintiff in a lawsuit against it by its general contractor to foreclose the contractor’s mechanic’s lien. Defendant filed several compulsory counterclaims on behalf of plaintiff for breach of contract and negligence. Plaintiff was concerned the contractor would not be able to pay a judgment if plaintiff succeeded on the counterclaims and asked defendant to review the insurance policies it had obtained for the project to determine whether the policies would pay a judgment against the contractor.

In 2006, defendant told plaintiff there was $2 to $4 million of coverage to pay a judgment against the contractor. In 2009, after plaintiff had obtained new representation, plaintiff learned that the policies contained an exclusion precluding payment to plaintiff if it succeeded on its claims against the contractor. Plaintiff and the contractor eventually settled, dismissing the claims against each other with prejudice. No payments were made by either party.

In 2011, plaintiff filed this action, asserting defendant was negligent in incorrectly advising regarding the insurance coverage, leading to extensive losses, including legal fees and expenses in continuing the litigation. The jury found defendant was negligent and its negligence caused 82.5% of the damages suffered by plaintiff. Judgment entered for approximately $2.7 million, plus pre- and post-judgment interest.

On appeal, defendant argued the claim was barred by the two-year statute of limitations set forth in CRS § 13-80-102. Defendant argued that plaintiff’s claim accrued no later than February 2009, when plaintiff learned defendant’s advice regarding insurance coverage might be wrong, and the action wasn’t filed until April 1, 2011. The Court of Appeals disagreed. A cause of action for negligence accrues on the date both the injury and its cause are known or should have been known to the plaintiff by the exercise of reasonable diligence. Under the circumstances here, the question of when plaintiff knew or should have known that the advice was incorrect and that it was injured by that advice was properly a question resolved by the jury.

Defendant argued that in a legal malpractice action based on negligence, the plaintiff must prove a case within a case; namely, that the claim underlying the malpractice action would have been successful but for the attorney’s negligence. The Court disagreed. Here, the claimed injury does not relate to the outcome of the underlying matter, and therefore plaintiff did not need to prove a case within a case.

Defendant challenged whether its negligence caused plaintiff’s damages. The Court determined that the evidence was sufficient to establish that plaintiff proved its malpractice claim for damages based on the legal expenses it incurred because of defendant’s incorrect advice. But for this advice, plaintiff would not have continued incurring legal expenses in an attempt to prove its counterclaims. However, plaintiff should not have recovered damages based on the business losses it sustained. As a matter of law, defendant’s advice regarding the insurance coverage was not the legal, or proximate, cause of plaintiff’s claimed business losses. Although defendant could have reasonably foreseen that plaintiff would make business decisions based on defendant’s advice, the actual harm plaintiff suffered because of those business decisions was not within the scope of the risk created by defendant’s negligence. The case was remanded for a new trial, limited to determining the amount of damages plaintiff incurred in continuing to pursue its counterclaims against the contractor after receiving incorrect advice from plaintiff.

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

Colorado Court of Appeals: Partial Subordination Approach to Lien Priority Best Reflects Colorado Law

The Colorado Court of Appeals issued its opinion in Tomar Development, Inc. v. Friend on Thursday, June 4, 2015.

Lien—Subordination Agreement—Partial Subordination Approach.

The Friend family sold its ranch to Friend Ranch Investors Group (FRIG) to develop it into a resort-style golf course community. In 2010, FRIG conveyed the property to Mulligan, LLC, and at that time, the relevant order of priority was (1) Colorado Capital Bank’s (CCB) senior lien; (2) Tomar Development (Tomar); (3) the Damyanoviches; (4) the Friends; and (5) CCB’s junior lien. Bent Tree, Mulligan, and CCB then entered into a subordination agreement whereby CCB’s senior lien became subordinate to CCB’s junior lien. Neither Tomar, the Damyanoviches, nor the Friends was involved in or an intended beneficiary of the subordination agreement. CCB’s senior lien was never released. Bent Tree then foreclosed on CCB’s senior lien and, in November 2010, Bent Tree bought the property at a public trustee’s foreclosure sale for approximately $11,800. Tomar, the Friends, and the Damyanoviches filed claims, each of which sought declaratory judgments as to the priority of their interests, which were dismissed by the trial court under CRCP 12(b)(5).

On appeal, Tomar, the Friends, and the Damyanoviches argued that the trial court erred in applying the partial subordination approach to the subordination of liens. The partial subordination approach applies when the most senior lienholder (A) agrees to subordinate his interest to the most junior lienholder (C) without consulting the intermediary lienholders (B). Under this approach, when A subordinates to C, C becomes the most senior lienholder, but only to the extent of A’s original lien. Under this partial subordination approach, B is not affected by the agreement between A and C, to which it was not privy. Colorado adopts the partial subordination approach, and it was properly applied in this case. Accordingly, the trial court did not err in dismissing Tomar’s, the Damyanoviches’, and the Friends’ claims seeking a declaratory judgment that each of their interests was senior to all other interests.

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

Bills Regarding Community Association Manager Licensure, Peace Officer Transparency, and More Signed

On Wednesday, May 20, 2015, Governor Hickenlooper signed 14 bills into law. To date, he has signed 241 bills into law this legislative session. The bills signed Wednesday are summarized here.

  • HB 15-1323 – Concerning Assessments in Public Schools, and, in Connection Therewith, Codifying the Consensus Recommendations of the Standards and Assessments Task Force Created in House Bill 14-1202, and Reducing an Appropriation, by Reps. John Buckner & Jim Wilson and Sens. Chris Holbert & Andy Kerr. The bill modifies the system of statewide assessments in English language arts.
  • SB 15-056 – Concerning Reducing the Frequency of Administering the Statewide Assessment in Social Studies and, in Connection Therewith, Making an Appropriation, by Sen. Andy Kerr and Rep. Tracy Kraft-Tharp. The bill eliminates the requirement that each public school administer an assessment in social studies and instead allows school districts to administer the test in a representative sampling of schools.
  • HB 15-1317 – Concerning Pay for Success Contracts, by Reps. Alec Garnett & Bob Rankin and Sens. Michael Johnston & Beth Martinez Humenik. The bill creates “pay for success” contracts, into which the Office of State Planning and Budgeting can enter to increase economic opportunity and improve living conditions.
  • HB 15-1129 – Concerning Disaster Prediction and Decision Support Systems by the Department of Public Safety, and, in Connection Therewith, Making an Appropriation, by Rep. Tracy Kraft-Tharp and Sen. Ellen Roberts. The bill requires the Division of Fire Prevention and Control to develop systems to predict disasters, specifically wildfires.
  • HB 15-1344 – Concerning the Financing of State Capital Construction Projects that are Included in the National Western Center or Capitol Complex Master Plans, and, in Connection Therewith, Authorizing the State to Enter Into Lease-Purchase Agreements to Finance Facilities for Colorado State University that are Included in the National Western Master Plan, Creating the National Western Center Trust Fund, and Creating a Capitol Complex Master Plan Implementation Fund as a Funding Source for Projects that are Included in the Capitol Complex Master Plan, by Reps. Crisanta Duran & Jon Becker and Sens. Jerry Sonnenberg & Pat Steadman. The bill authorizes the state treasurer to enter into lease-purchase agreements with CSU to construct facilities at the National Western Complex and CSU’s main campus.
  • HB 15-1285 – Concerning Use of Body-Worn Cameras by Law Enforcement Officers and, in Connection Therewith, Establishing a Grant Program and a Study Group to Recommend Policies on the Use of Body-Worn Cameras and Making an Appropriation, by Reps. Daniel Kagan & Angela Williams and Sens. John Cooke & Jessie Ulibarri. The bill creates the body-worn camera fund to purchase body-worn cameras and train officers in their use, as well as study best practices.
  • HB 15-1287 – Concerning Measures to Improve Peace Officer Training, by Rep. Angela Williams and Sen. John Cooke. The bill expands the scope of the Peace Officers Standards and Training Board in the Department of Law.
  • HB 15-1290 – Concerning Prohibiting a Peace Officer from Interfering with a Person Lawfully Recording a Peace Officer-Involved Incident, by Reps. Joseph Salazar & Daneya Esgar and Sens. Lucia Guzman & David Balmer. The bill specifies that people have the lawful right to record officer-involved incidents.
  • HB 15-1303 – Concerning Eliminating the Application of Certain Sentencing Provisions to Certain Persons who are Convicted of Assault in the Second Degree, by Rep. Jovan Melton and Sen. Kevin Lundberg. The bill removes mandatory crime of violence sentencing for assault against first responders.
  • SB 15-217 – Concerning Data Collection Related to Peace Officer-Involved Shootings of a Person, and, in Connection Therewith, Making an Appropriation, by Sens. Ellen Roberts & John Cooke and Rep. Angela Williams. The bill creates a process for public reporting of specified data concerning officer-involved shootings.
  • SB 15-218 – Concerning Requiring a Law Enforcement Agency to Disclose Whether a Peace Officer has Made a Knowing Misrepresentation in Certain Settings, by Sens. Ellen Roberts & John Cooke and Rep. Angela Williams. The bill requires a law enforcement agency to report any knowing instance of misrepresentation by a peace officer to the district attorney.
  • SB 15-219 – Concerning Measures to Provide Additional Transparency to Peace Officer-Involved Shootings, by Sens. John Cooke & Ellen Roberts and Rep. Joseph Salazar. The bill requires local law enforcement agencies to make public its protocols regarding contacting other agencies following officer-involved shootings.
  • HB 15-1262 – Concerning Separate Legal Entities Established by a Contract Between Two or More Political Subdivisions of the State, and, in Connection Therewith, Clarifying the Legal Status and Scope of Powers of Such an Entity, by Rep. Paul Rosenthal and Sen. David Balmer. The bill specifies the legal status and powers of an entity formed by two or more governments to provide public improvements.
  • HB 15-1343 – Concerning a Streamlined Process to Simplify the Licensure of Persons who Manage the Affairs of Common Interest Communities Under the “Colorado Common Interest Ownership Act”, and, in Connection Therewith, Making an Appropriation, by Reps. Angela Williams & Dan Thurlow and Sens. Nancy Todd & David Balmer. The bill makes several changes to the community association manager licensure program.

For a complete list of Governor Hickenlooper’s 2015 legislative decisions, click here.

Colorado Court of Appeals: Homeowners’ Association’s Removal of Arbitration Provision Invalid Against Builders

The Colorado Court of Appeals issued its opinion in Vallagio at Inverness Residential Condominium Association, Inc. v. Metropolitan Homes, Inc. on Thursday, May 7, 2015.

Motion to Compel Arbitration—Construction Defect Action.

Plaintiff association (Vallagio) brought this action against defendants, alleging construction defects in the Vallagio residential development project (Project). The Project was organized as a common interest community under the Colorado Common Interest Ownership Act (CCIOA). Defendant Metro Inverness, LLC (Metro) was the Project’s developer and declarant. Defendant Metropolitan Homes, Inc. was Metro’s manager and the Project’s general contractor. Defendants Krause and Kudla were declarant-appointed members of Vallagio’s board before control of the Vallagio was transferred to unit owners.

The declaration contained a general provision allowing unit owners to amend the declaration by a 67% vote and a consenting vote of the declarant. The right of declarant consent expired after the last unit was sold to an owner other than declarant. There was a mandatory arbitration provision specifically for construction defect claims, which provided that it could never be amended without the written consent of declarant, without regard to whether declarant owned any portion of the Project at the time of the amendment.

In September 2013, after the declarant had turned over control of Vallagio and no longer owned any units, at least 67% of the unit owners voted to amend the declaration to remove the arbitration provision in its entirety. Metro’s consent was not obtained.

Vallagio then filed suit against defendants. Defendants moved to compel arbitration, relying on the original declaration provision, arguing that the amendment removing it was invalid because declarant had not consented. The district court denied the motion to compel arbitration, finding that the declaration had been effectively amended to remove the arbitration provision. This interlocutory appeal followed.

Defendants first argued that it was error to conclude that the declaration’s amendment provisions were ambiguous and to construe that ambiguity against declarant. The Court of Appeals agreed. Based on the plain language of the declaration, the Court held that amendments to the arbitration provision required Metro’s consent. Because that consent was not obtained, the motion to compel arbitration as to Metro should have been granted. The Court also agreed that it was error to conclude that the declarant consent requirement for amendments of the arbitration agreement violated CCIOA and was void and unenforceable.

The district court had found that CCIOA § 38-33.3-302(2) prohibited the consent requirement. This section prohibits restrictions on an association’s power that are “unique to the declarant.” Under this declaration, the unit owners have the power to amend the declaration, and under this section of CCIOA the declarant consent requirement does not impose any limitation on the “power of the association.”

The district court had also found that the declarant consent requirement violated CCIOA § 38-33.3-217 because it effectively required more than a 67% vote of unit owners to amend the declaration. The Court disagreed, finding nothing in that statutory provision prohibiting declarant consent for an amendment, but merely requirements for unit owners’ voting percentages. The Court also found that the consent requirement did not allow control of unit owners’ votes, because 67% of the unit owners had to vote favorably to amend the declaration and that requirement was not altered by the declarant consent provision. The Court also rejected Vallagio’s argument that the consent requirement violated CCIOA § 38-33.3-303(5) by allowing Metro Inverness to control Vallagio after the declarant control period expired. CCIOA provisions regarding declarant consent to an association’s actions were not relevant to the issue here presented.

Vallagio argued that even if Metro could enforce the arbitration provision, the other defendants lacked standing to do so because they were not parties to the declaration. The district court did not address this argument, so the Court remanded for resolution of these issues, in particular, whether the other defendants were third-party beneficiaries to the declaration’s arbitration provision.

Defendants argued that they could rely on the arbitration provisions in individual unit owners’ purchase agreements. Because this issue might arise on remand if the district court finds that the other defendants lack standing to enforce the declaration’s arbitration provision, the Court addressed it. The Court agreed with the ruling that Vallagio was not bound by those individual purchase agreements.

The Court rejected Vallagio’s claims that its Colorado Consumer Protection Act (CCPA) claims are non-arbitrable. The right to a civil action under CCPA § 6-1-113 was not made non-waivable under the statute.

The order was reversed in part and affirmed in part. The case was remanded for an order compelling arbitration of Vallagio’s claims against Metro, and for further proceedings to determine whether the claims against the other defendants must be arbitrated.

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