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Colorado’s Construction Industry Faces Expanded Risk from Controversial Consumer Protection Bill

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Colorado’s construction sector grapples with heightened risk due to a contentious consumer protection legislation

By Gabe Pinilla and Chris Yost

A controversial bill making its way through the Colorado state legislature threatens to unleash a flood of litigation that could have far-reaching consequences for the construction industry.

House Bill 24-1014 aims to remove the longstanding requirement for plaintiffs to prove that a deceptive trade practice has a “significant public impact” to prevail on a claim under the Colorado Consumer Protection Act (CCPA).

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By eliminating the “significant public impact” requirement, plaintiffs can categorize their allegations of purely private harms as deceptive trade practices, which, if proven, would entitle them to treble damages and their attorney’s fees and costs. Therefore, the bill would provide a significant financial incentive for claimants to aggressively pursue garden-variety breach of contract and negligence claims, which would likely fail under the current law because they do not impact members of the public generally.

The bill has passed in the House unamended and is now with the Senate Committee on the Judiciary. There is no indication at this time of when the bill will be up for a vote again, but we will monitor the bill through the legislature.

Overturning a 26-year-old judicial limitation

It’s important to understand the context behind this bill, which aims to overturn a 26-year-old judicial limitation on the CCPA established by the Colorado Supreme Court.

The CCPA was originally based on the Revised Uniform Deceptive Trade Practices Act, but the General Assembly made several significant changes to the Uniform Act, including by giving private plaintiffs the ability to recover treble damages and attorney’s fees, where the Uniform Act only authorized injunctive relief.

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Recognizing that the purpose of the CCPA was to prevent deceptive trade practices that “may prove injurious, offensive or dangerous to the public,” the Colorado Supreme Court adopted the standard imposed on plaintiffs today, which requires proof of a significant public impact to sustain a claim under the CCPA. 

In Hall v. Walter, the Court expanded the class of individuals protected by the CCPA to third-party non-consumers as long as they could prove:

  1. the defendant engaged in an unfair or deceptive trade practice;
  2. the challenged practice occurred in the course of defendant’s business, vocation or occupation;
  3. it significantly impacts the public as actual or potential consumers of the defendant’s goods, services or property;
  4. the plaintiff suffered injury in fact to a legally protected interest; and
  5. the challenged practice caused the plaintiff’s injury.

The five-part test established by the Colorado Supreme Court has protected Colorado businesses and consumers alike for the past 26 years by striking a balance between the need to protect against consumer fraud with the principle of freedom of contract that enables parties to bargain for and allocate risks involved in a transaction.  

An outsized effect on the construction industry

By removing the significant public impact element of a CCPA claim, the General Assembly would disrupt that delicate balance and put plaintiffs in an advantageous position in litigation. Plaintiffs would have an avenue to recover treble damages and attorney’s fees even if the contract allegedly breached limits the company’s liability and does not permit the plaintiff to recover attorney’s fees.

Importantly, this would have a disparate impact on the construction industry based on one provision of the Homeowner Protection Act of 2007 (HPA). Section 13-20-806(7) of the HPA holds that any contractual provision that purports to waive or limit a homeowner’s legal rights and remedies under the CCPA or the Construction Defect Action Reform Act is void as against public policy. As a result, contractors entering into private agreements with residential property owners would need to incorporate the increased risk of such lawsuits into their bargaining process.

Substantively, removing the public impact requirement would constitute a fundamental departure from the CCPA’s original orientation as being “clearly enacted to control various deceptive trade practices in dealing with the public.” 

The practical implications will also likely be consequential and could include a significant increase in litigation filings, exponentially greater exposure for defendants (due to the treble damages component) and an overall increase in the cost and risk of doing business across multiple sectors. Construction companies need to be aware of this bill and all of the impacts it could have on the industry.

Authors

  • Gabe Pinilla

    Gabe Pinilla, partner in charge of the Adams and Reese Denver office, is a construction law and commercial litigation attorney focusing his practice on a broad range of business sectors and disciplines. His practice encompasses state and federal court litigation from pre-trial through the appeals process as well as serving clients with strategic planning, negotiation and transactional needs. Gabe also handles business tort matters, including fiduciary breaches by former officers or employees, and related claims, unfair competition and restrictive covenant enforcement matters, and a variety of strategic planning matters. Gabe is admitted in Florida, Colorado, Texas and Maryland, and he represents clients before federal district courts in several states and the United States Court of Appeals for the Eleventh Circuit. Gabe is a fluent Spanish speaker.

  • Chris Yost

    Chris Yost is a member of the Adams and Reese construction team and commercial litigation practice group. He is licensed to practice in state and federal courts throughout Colorado. Chris also represents clients in a wide range of industries throughout all stages of litigation and assists companies, directors and shareholders in derivative actions, member disputes and corporate governance matters. Chris is a Colorado native with a B.A. from the University of Colorado and a J.D. from the George Washington University Law School.

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