As it pertains to litigation, the 2019 legislative session was fairly quiet, according to David McLain of Higgins Hopkins McLain & Roswell.
“Given the election last year, where the Democrats essentially took control of both houses of the legislature … and all four statewide constitutional offices,” McLain said, he had some “doomsday predictions” for the type of legislation that would come out of the most recent session that, thankfully, haven’t surfaced.
For example, McLain said at a Lunch and Learn event hosted by Construction Resource Group that he had expected to see efforts to require builders to cover plaintiffs’ attorney fees in construction defect cases; to remove the cap on damages arising from Colorado Consumer Protection Act claims; and to bring back prejudgment interest on construction defect cases.
“For some reason I can’t fathom, none of that came to pass,” he said.
McLain shared what did happen in the most recent session that affects home builders in some way.
Colorado Consumer Protection Act
New attorney general Phil Weiser supported a bill (HB19-1289) that expanded the scope of the CCPA by increasing the penalty for violations from $2,000 to $20,000 per violation and $10,000 to $50,000 for violations against elderly people.
The bill also reduced the standard for violation. Previously, builders had to “knowingly” deceive homebuyers to be sued for violations; the new standard only requires that they act “recklessly.”
“Either you knew, or you should have known, that it was false,” McLain explained. “It’s a little bit easier now to prove the Consumer Protection Act claims.”
Clauses that could have had a “detrimental effect” on builders but were lobbied out of the bill, McLain said, include contract clauses that would have set limits on where dispute resolution forums could be held; delays in resolution of 60 days or more from filing a claim; prohibition of damage caps; and prohibition of arbitration.
“All in all, that was one bill that was out there that could have had an impact, and we dodged a bullet,” McLain said.
McLain said that juries tend to award plaintiffs three times the damages that an arbitrator will, especially if the arbitrator is familiar with the building industry. Juries also tend to award larger portions of what plaintiffs ask for in damages. In cases that McLain’s firm has tracked, juries will award as much as 95% of damages, compared to 58% that arbitrators tend to award.
“We’ve got to have a different discussion about what to do if you can’t get your case in arbitration,” he said.
He suggested that the day may come when builders would be wise to remove arbitration clauses from their contracts and add a provision that takes any dispute to a bench trial rather than a jury trial. That would give builders and homeowners the right to settle a dispute with a judge acting as the arbitrator.
“We’re not there yet, but that day may be coming, and may be coming sooner than anybody thinks,” McLain said, adding that arbitration is binding and doesn’t always end in builders’ favor.
“I think if you end up waiving juries and asking for a bench trial in your contracts, then you get that appellate right back,” he said.
Some bills regarding affordable housing that passed the session include:
- HB19-1228 increased the cap on tax credits that could be allocated by Colorado Housing and Finance Authority.
- HB19-1319 would require government landowners to annually list undeveloped land that would be suitable for affordable housing development. McLain noted that the act doesn’t include any direction on what landowners or developers can actually do with that inventory. “There’s no discussion of how you contact these people. Do they have to sell it?” McLain said.
- HB19-1322 redistributed money between the Unclaimed Property Fund and the Housing Development Grant Fund to develop affordable housing. The bill allows up to $30 million to be transferred “assuming the state is meeting certain other financial metrics and can’t find another use for it.” McLain noted that the bill also allows that funding to be spent on weatherizing existing houses, “which seems at odds with affordable housing.”
Some other bills that affect the building industry more generally include:
- HB19-1274 allows county commissioners to delegate certain steps in the subdivision process to their staffs instead of requiring commissioners to make all decisions at their monthly meetings, McLain said. “Anything that could speed up approval process to the government and try to get it done faster would behoove everybody,” he said.
- HB19-1231 sets energy standards for appliances sold for new construction in Colorado, McLain said.
- SB19-107 gives broadband providers access to electric easements to install and maintain broadband facilities after giving notice to property owners.“I assume this will end up in court at some point on constitutional grounds on takings,” McLain said. “I don’t know what the consideration is for some property owner to have to give up easements to broadband providers just because they’re broadband providers.”
- SB19-188 requires the Department of Labor and Employment to create a task force to develop a plan for a family and medical leave insurance programs, and to conduct an actuarial study of the final plan. The original draft of the bill called for employers to provide up to 16 weeks of paid leave, McLain said.”We’re not going to mandate it now,” he said.
- HB19-1210 allows local jurisdictions to set their own minimum wages.”It’ll be interesting to see how that works when you have companies or employees working in different jurisdictions through the state,” McLain said.
- HB19-1025 prohibits businesses with 11 or more employees from advertising in job descriptions that candidates can’t have a criminal record or asking during an initial interview about criminal history.The act doesn’t stop builders from pulling an applicant’s publicly available background check. Builders who participate in rehabilitation or return-to-work programs that seek out applicants with criminal histories are exempt from the regulation. “It seems like they want to get everybody by the initial application process before you can ask that question. That shouldn’t be the dealbreaker,” McLain suggested.
- SB19-085 requires that wage discrimination claims based on a worker’s gender now be fought in court rather than through the Colorado Department of Labor and Employment. The act states that differences in pay that are based on seniority, merit, geography, education or experience, and travel that is “regular and necessary” to work are legitimate.