Wednesday, February 15, 2012

Colorado Court of Appeals Clarifies When the Statute of Repose is Triggered in Multi-Phase Construction Projects.

On February 2, 2012, the Colorado Court of Appeals answered two questions of first impression under the Construction Defect Action Reform Act (“CDARA”) in Shaw Construction, LLC v. United Builders Services, Inc., 2012 WL 311665 (Colo. App.).

Shaw Construction, LLC (“Shaw”), was the general contractor for a large residential project located in Stapleton. Shaw hired subcontractors to perform the construction work, including United Builders Services and MB Roofing (collectively “Subcontractors”). The project was completed in phases, and the last certificate of occupancy (“CO”) was issued on March 10, 2004. However, the project’s architect did not certify completion of all architectural construction until June 8, 2004.

The community homeowners association brought suit against Shaw on January 28, 2010 for alleged construction defects. Shaw filed its answer and third-party complaint against the Subcontractors on March 29, 2010. No CDARA Notice of Claim was sent to the Subcontractors at the time Shaw’s third-party complaint was filed.[1] The Subcontractors moved for summary judgment on the basis that the six-year statute of repose had expired prior to Shaw filing its third-party complaint. The trial court ruled in the Subcontractors’ favor and Shaw’s interlocutory appeal ensued.

The first question Shaw asked on appeal was a whether a notice of claim to a single construction professional tolls the statute of repose to every construction professional that worked on the project. The second question, was when the statute of repose begins to run in a multi-phase construction project.

The Colorado Court of Appeals rejected Shaw’s first argument that a notice of claim to Shaw would toll the statute of repose for all construction professionals that worked at the project. In making its ruling, the court analyzed the plain language of the statute and went through the legislative history of CDARA. The court found several reasons why this argument lacked merit, including that CDARA’s purpose was to streamline litigation and avoid a general contractor from “needlessly adding claims and parties.” If Shaw’s argument in this regard was accepted, it would not effectuate the changes sought by CDARA.

Next, the court was asked to decide when the statute of repose was triggered in a multi-phase construction defect action. The court's analysis turned on the definition of improvement, an undefined term used in Colorado's statute of repose, which would trigger the six-year limit on claims against construction professionals.[2] See C.R.S. § 13-80-104. Shaw argued that an improvement, for the purposes of triggering the statute of repose in a multi-stage construction project, means the date when the entire project is certified as completed by the architect of record. The Subcontractors argued that an improvement occurs either when each subcontractor’s respective work at the project was completed, or at the latest, when the last CO was issued.

The Court of Appeals held for the Subcontractors and affirmed the trial court's summary judgment ruling. Unfortunately, the court punted when it came to determining which of the subcontractors arguments would be the future of interpreting repose triggers in Colorado. Instead, the court found it unnecessary to determine if an improvement can be determined on a trade-by-trade basis, because the date the last CO was issued on March 10, 2004, and Shaw’s claims filed March 29, 2010 against the Subcontractors were properly dismissed using the latter repose trigger date. Id. at *8.

However, even with a lack of a definitive ruling on when exactly repose is triggered in this matter, the court's opinion cited several cases and provided statutory interpretation that may be insightful in determining a repose trigger date in other matters.  The court noted that “[o]ne quality of an improvement is permanence.” Anderson v. M.W. Kellogg Co., 766 P.2d 637, 641 (Colo. 1988). This is true, “even if the improvement can be removed.” Enright v. City of Colo. Springs, 716 P.2d 148, 150 (Colo. App. 1985). The Court also analyzed the “improvement” language from the statute of repose to be read that “a construction professional could be involved in only one component of a larger product, which would be the focus of 'substantial completion.'” Id. at *9. Finally, the court held, at least in this case, that “substantial completion” had occurred when the last building received a CO.[3] Id. Combined with the court's previous discussion of CDARA intent, this portion of the opinion indicates the court would have held the statute of repose trigger is the last CO date, or the CO date for certain buildings/phases, if it had been appropriate to make such a distinction. 

While maybe not providing the black-letter law construction professionals and attorneys were seeking, this case has begun to clarify when the statute of repose begins to run in Colorado construction defect matters.

The attorney who drafted this entry is no longer with the firm. For additional information regarding Colorado construction litigation, please contact David M. McLain at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.


[1] If a proper CDARA Notice of Claim had been sent to the Subcontractors before the statute of limitations and repose had expired, the statute of limitations and repose would have been automatically tolled for a period of no less than 60 days. See C.R.S. § 13-20-805.
[2] Presumably, the trial court held that Shaw could not take advantage of C.R.S. § 13-80-104(2), which lengthens the statute of repose if the claim arises in the 5th or 6th year after substantial completion, because Shaw had received a CDARA Notice of Claim on May 15, 2007, and filed its claims more than two years later.
[3] The court hedged its holding here by stating that Shaw failed to provide evidence or argument that the subcontractors continued to work after the last certificate of occupancy was issued. See Shaw at *9-10.

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The information contained in this blog is provided for informational purposes only. It is not legal advice and should not be construed as providing legal advice on any subject matter.