CITY OF ASPEN, a municipal corporation, Petitioner/Cross-Respondent, v. BURLINGAME RANCH II CONDOMINIUM OWNERS ASSOCIATION, INC., a nonprofit corporation, Respondent/Cross-Petitioner.
Supreme Court Case No. 22SC293
Supreme Court of Colorado
June 17, 2024
Rehearing Denied July 22, 2024
551 P.3d 655 | 2024 CO 46
Certiorari to the Colorado Court of Appeals, Court of Appeals Case No. 20CA2088
Attorneys for Respondent/Cross-Petitioner: Griffiths Law PC, Christopher J. Griffiths, Duncan Griffiths, Kimberly Newton, Lone Tree, Colorado
Attorney for Amicus Curiae Colorado Defense Lawyers Association: Andrew M. La-Fontaine, Westminster, Colorado
Attorneys for Amicus Curiae Colorado Municipal League: Robert D. Sheesley Rachel Bender, Denver, Colorado
Attorneys for Amicus Curiae Colorado Trial Lawyers Association: Burg Simpson Eldredge Hersh Jardine P.C., Ronald M. Sandgrund, Craig S. Nuss, Englewood, Colorado, The Paul Wilkinson Law Firm LLC, Nelson Boyle, Denver, Colorado
Attorneys for Amicus Curiae Community Associations Institute: Kerrane Storz, P.C., Jeffrey P. Kerrane, Andrew T. Mossman, Broomfield, Colorado
JUSTICE SAMOUR delivered the Opinion of the Court, in which CHIEF JUSTICE BOATRIGHT, JUSTICE MARQUEZ, JUSTICE HOOD, JUSTICE GABRIEL, JUSTICE HART, and JUSTICE BERKENKOTTER joined.
JUSTICE SAMOUR delivered the Opinion of the Court.
¶1 “Oh, East is East, and West is West, and never the twain shall meet . . . .” Rudyard Kipling, The Ballad of East and West (1889). This aphorism should describe the fate of the two unrelated legal doctrines before us today: the
¶2 Despite the merger forced by the division below, the
¶3 On the one hand, the
¶4 On the other hand, this court adopted the economic loss rule nearly three decades after the legislature enacted the
¶5 The doctrines, therefore, are separated by dint of their respective geneses and aims. But that‘s not all. They also demand incongruous analyses. Under the
¶6 Yet, they have been thrust together by a perceived legal quandary. To wit, what‘s a court to do when a plaintiff sues a public entity and both tort and contract are implicated by the nature of the injury and the relief requested? We spotlighted this challenging question some sixteen years ago. See Robinson v. Colo. State Lottery Div., 179 P.3d 998, 1004 (Colo. 2008) (remarking, in the
¶7 Divisions of the court of appeals have wrestled with overlapping tort and contract claims. Some divisions have used the economic loss rule to determine whether the
¶8 Indeed, the division below endorsed that amalgam in this construction defect case. City of Aspen v. Burlingame Ranch II Condo. Owners Ass‘n, No. 20CA2088, ¶¶ 19-26, 2022 WL 870988 (Mar. 17, 2022). The division observed that the plaintiff framed its claims in terms of contractual duties by arguing that Aspen breached express and implied warranties. Id. at ¶ 25. And so, reasoned the division, after additional factual findings on remand, if the record reveals that the plaintiff suffered only economic harm, the economic loss rule would extinguish any attendant tort claims, thereby displacing Aspen from the
¶9 This potential outcome demonstrates why these unrelated doctrines are such uncomfortable bedfellows. The division‘s analysis curtailed governmental immunity for claims that “lie in tort or could lie in tort,” as we have construed this statutory language, by incorporating the economic loss rule into the jurisdictional question presented by the
¶10 Today, we clarify that our jurisprudence lays out a freestanding, self-sufficient framework for determining whether an action brought against a public entity is barred by the
¶11 Where, as here, the sole question is whether the
I. Facts and Procedural History
¶12 Aspen oversaw the development of an affordable housing project known as Burlingame Ranch II Condominiums (the “Project“). Through a declaration (the “Declara-
¶13 In August 2017, Aspen transferred full control over the Project to the Association. Around the time of the transfer, the Association complained that there were several construction defects on the property. In pertinent part, it alleged that some of the Project‘s structural elements—beams, columns, and stringers (collectively “glulams“)—had been deficiently installed. In December 2017, the Association sent Aspen an Amended Re-Notice of Claim, asserting that “[t]he Association ha[d] suffered damages, and [would] suffer further damages . . . as a result of [Aspen‘s] breaches of warranty, breaches of contract, and negligence, related to the defective construction of [the Project].” (Emphasis added.) Aspen‘s own expert later confirmed that “[w]eather exposed glulams on the project were required to be preservative treated” but “likely . . . [were] not.”
¶14 After the parties unsuccessfully pursued mediation, the Association filed a demand for arbitration. The arbitration demand contained two claims stemming from the alleged construction defects: (1) breach of contract and express warranty for “deficient conditions” and (2) breach of implied warranties for the same conditions. In advancing these claims, the Association took the position that the Declaration and Form Contracts were the operative instruments from which Aspen‘s duties arose.
¶15 Aspen responded by seeking a declaratory judgment in district court, asserting that the
¶16 A week before the hearing, the Association opposed Aspen‘s immunity claim in a brief that was forty-two pages long and accompanied by 2,000 pages of exhibits. Concerned that the Association‘s brief would impermissibly expand the scope of the upcoming Trinity hearing, Aspen asked the court to limit the hearing to the threshold jurisdictional issue—namely, whether the
¶17 Following the conference, the court vacated the Trinity hearing. It subsequently ordered further briefing and decided the governmental immunity issue based on its review of the pleadings.
¶18 In a written order, the court agreed with Aspen that the Association‘s claims sounded in tort, or could sound in tort, and were thus barred by the
¶19 The Association appealed, and a division of the court of appeals reversed. Burlingame Ranch, ¶ 29. In doing so, the division relied heavily on Casey, ¶ 30, 310 P.3d at 203-04, where a previous division leaned on the economic loss rule to conclude that claims pled as breaches of contract but premised on the violation of a tort duty are not necessarily barred by the
¶20 Using the Casey template, the division perceived that the Association‘s claims for breach of express and implied warranties ”could, depending on the specifics, only sound in contract.” Id. at ¶ 25. “Such specifics,” the division continued, may reveal that the Association‘s claims are subject to the economic loss rule, which would mean that any tort claim would be effectively extinguished and Aspen would lose any entitlement to immunity under the
¶21 The division ultimately remanded the case for a Trinity hearing. Id. at ¶ 29. In effect, its instructions would permit the district court on remand to consider the economic loss rule in determining whether Aspen is entitled to immunity under the
¶22 Aspen petitioned this court for certiorari review. We agreed to consider the following issue:
[REFRAMED] Whether the court of appeals erred by applying the Economic Loss Rule . . . in its determination of whether a claim “could lie in tort” under the [CGIA],
§ 24-10-106, C.R.S. (2022) .
II. Standard of Review
¶23 Governmental immunity under the
III. Analysis
¶24 The parties advance diametric contentions on the sole issue for our review. On one side of the divide, the Association asserts that courts must consider the economic loss rule when determining whether an action brought against a public entity is barred by the
¶25 On the opposite side of the divide, Aspen contends that the economic loss rule is simply irrelevant in the
¶26 We side with Aspen and hold that the economic loss rule has no bearing on whether an action brought against a public entity is barred by the
¶27 After considering the origin and purposes of the
A. Governmental Immunity Under the CGIA
¶28 In 1971, the General Assembly enacted the
323, sec. 1,
[9] ¶29 A central legislative purpose of the CGIA is to limit the potential liability of public entities, for compensatory damages in tort. See Conners, 993 P.2d at 1172 (citing
[10, 11] ¶30 Significantly, the immunity blanket provided by the CGIA does not cover “actions grounded in contract.” Robinson, 179 P.3d at 1003 (citing Berg, 919 P.2d at 258). The form of the complaint is not determinative of whether a claim is grounded in contract or whether it lies in tort or could lie in tort. Id. That s why we said in Robinson that “the CGIA is less concerned with what the plaintiff is arguing and more concerned with what the plaintiff could argue.” Id. at 1005 (emphases added). Whether a particular claim lies in tort or could lie in tort within the meaning of the CGIA depends on the factual basis underlying the claim. Id. at 1007-08.
[12] ¶31 Accordingly, we have held that “court[s] must consider the nature of the injury and the relief sought.” Id. at 1003 (citing Conners, 993 P.2d at 1175-76). Although the relief requested isn t dispositive, it informs our understanding of the nature of the injury and the duty allegedly breached. Id. When the injury arises either out of conduct that is tortious in nature or out of
[13] ¶32 So far, so good. But as we previously remarked, “where the nature of the injury and the relief requested implicate both tort and contract,” things can get a bit dicey. Id. at 1004. This overlap is seen most clearly in the case of common law tort claims that are expressly intended to remedy economic loss. Such claims can exist independently or in conjunction with a contractual claim. See id. (citing Town of Alma, 10 P.3d at 1263, which listed “professional negligence, fraud, and breach of fiduciary duty” as examples of torts designed to address purely economic loss). For purposes of the CGIA, “these economic-loss claims sound in tort” even if a contract is implicated. Id. Indeed, where there is such overlap, claims that could arise in both tort and contract are barred by the CGIA. Id. Only claims that arise ”solely in contract” are not subject to the immunity provision of the CGIA. Id. (emphasis added).
¶33 To determine whether overlapping claims arise solely in contract—i.e., whether they are truly “grounded in contract,” Id. at 1003—our recent CGIA cases have hearkened back to their predecessors. See Bd. of Cnty. Comm rs v. DeLozier, 917 P.2d 714, 716-17 (Colo. 1996) (addressing whether a contract claim for promissory estoppel was actually based on the tort theory of equitable estoppel, and holding that because the “essence” of the claim was breach of a promise that was detrimentally relied on, not alleged misrepresentations of fact, the claim did not and could not lie in tort for purposes of the CGIA); Berg, 919 P.2d at 259 (same). In Robinson, we ultimately discerned that “these cases apply our general rule that courts must assess the nature of the injury underlying the claim to determine whether the injury arose out of tortious conduct or the breach of a duty arising in tort and thus whether the claim could lie in tort.” Id. at 1005. This, therefore, is our freestanding, self-sufficient framework for determining whether the CGIA bars a claim against a public entity and divests the trial court of subject matter jurisdiction.
¶34 But even as we outlined the contours of CGIA immunity in Robinson, we weren t oblivious of the economic loss rule. See Casey, ¶ 64, 310 P.3d at 209 (Hawthorne, J., concurring in part and dissenting in part) (“In Robinson ..., the court expressly acknowledged its seminal economic loss rule case, Town of Alma ..., and nonetheless held that in areas where there is overlap, claims that could arise in both tort and contract are barred by the CGIA. ” (quoting Robinson, 179 P.3d at 1004)). Yet, we made no bones about casting that doctrine aside in the CGIA context.
¶35 Under Robinson and its forebears, then, the economic loss rule and the CGIA remain in their respective lanes. Sure enough, we have never applied the economic loss rule in determining whether a claim lies in tort or could lie in tort under the CGIA. And for good reason. A closer look at the economic loss rule demonstrates that it pairs with our CGIA framework like peanuts go together with chewing gum.
B. The Economic Loss Rule and Its Inapplicability When Determining Jurisdiction Under Our CGIA Framework
[14] ¶36 We adopted the economic loss rule in 2000, nearly three decades after the CGIA went into effect. See Town of Alma, 10 P.3d at 1264. Unlike the CGIA the economic loss rule does not implicate a jurisdictional question. See id.
¶37 This judge-made doctrine initially emerged as a response to the growing application of tort law to products liability cases in mid-century American jurisprudence. Id. at 1260. To prevent tort law from “swallowing” the law of contracts in that context, the California Supreme Court fashioned the economic loss rule and articulated it thusly: “Even in actions for negligence, a manufacturer s liability is limited to damages for physical injuries and there is no recovery for economic loss alone.” Id. (quoting Seely v. White Motor Co., 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145, 151 (1965)).
[15, 16] ¶38 Although its genesis lies in products liability, the economic loss rule is much broader nowadays, as demonstrated by its current aims: (1) maintaining the boundary between tort and contract; (2) protecting parties expectations in bargaining; (3) encouraging parties to build cost considerations into their contracts; and (4) simplifying litigation. Bermel v. BlueRadios, Inc., 2019 CO 31, ¶ 36, 440 P.3d 1150, 1157 (citing Town of Alma, 10 P.3d at 1262-63). In furtherance of these policy goals, Colorado s economic loss rule provides that “a party suffering only economic loss from the breach of an express or implied contractual duty may not assert a tort claim for such a breach absent an independent duty of care under tort law.” Town of Alma, 10 P.3d at 1264. “Economic loss is defined generally as damages other than physical harm to persons or property.” Id.
[17, 18] ¶39 The polestar in any analysis conducted under the economic loss rule is “the source of the duties alleged to have been breached.” Grynberg v. Agri Tech, Inc., 10 P.3d 1267, 1269 (Colo. 2000); see also Town of Alma, 10 P.3d at 1262. While contractual duties arise from the promises that contracting parties make to each other, tort duties are generally created by law and are designed to protect all citizens from the risk of physical harm to their persons or property. Town of Alma, 10 P.3d at 1262.
[19] ¶40 Unlike our CGIA jurisprudence, our economic loss rule cases “require courts to focus first on the contractual context among and between the parties to see whether there was a contractual relationship that established the duty of care alleged to have been breached.” BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66, 74 (Colo. 2004). In other words, at the outset, courts must determine whether the breached duty derives from the parties contract or, more generally, from the common law of tort. We have recognized three factors (”BRW factors“) that aid courts in administering this source-of-the-duty test: (1) whether the relief sought in tort is the same relief sought for breach of contract; (2) whether there is an established common law duty of care in tort; and (3) whether the duty of care in tort differs in any way from the contractual duty. Id. (citing Grynberg, 10 P.3d at 1269-70).
[20, 21] ¶41 It follows that “[a] breach of a duty which arises under the provisions of a contract between the parties must be redressed under contract“; in such a scenario, “a tort action will not lie.” Town of Alma, 10 P.3d at 1262 (quoting Tommy L. Griffin Plumbing & Heating Co. v. Jordan, Jones & Goulding, Inc., 320 S.C. 49, 463 S.E.2d 85, 88 (1995)). But the “breach of a duty arising independently of any contract duties between the parties ... may support a tort action.” Id. (quoting Tommy L. Griffin, 463 S.E.2d at 88). Thus, “the economic loss rule has no application where a plaintiff s tort claim is based on an independent duty of care.” A.C. Excavating v. Yacht Club II Homeowners Ass n, 114 P.3d 862, 867 (Colo. 2005).
¶42 To be sure, on several occasions we have permitted tort actions to proceed despite the existence of a contractual relationship between the parties. See, e.g., Lembke Plumbing & Heating v. Hayutin, 366 P.2d 673, 675 (Colo. 1961); Metro. Gas Repair Serv., Inc. v. Kulik, 621 P.2d 313, 318 (Colo. 1980); Cosmopolitan Homes, 663 P.2d at 1042; see also Town of Alma, 10 P.3d at 1265-66 (discussing Lembke, Metropolitan Gas, and Cosmopolitan Homes at length). We determined that those cases fell outside the scope of the economic loss rule because the duties of care underlying the tort claims in question arose independently of the contracts. See Town of Alma, 10 P.3d at 1263, 1265-66.
[22] ¶43 Notably, though, if the answers to the three BRW factors outlined above establish that a duty of care is “memorialized” in the parties contract—i.e., the duty is contained within, or imposed under, the contract—it necessarily follows that the plaintiff has failed to show any duty independent of the contract. BRW, 99 P.3d at 74. In other words, if a tort claim is based on duties that are contained within the relevant contract, the economic loss rule will douse the tort claim and hold the parties to the terms of their contract. Id.
[23] ¶44 And herein lies the chief difference between the economic loss rule s source-of-the-duty test and the CGIA s “could lie in tort” inquiry. The economic loss rule eschews the very overlap that the CGIA embraces and accommodates. Whereas the economic loss rule serves to enforce the boundary between tort and contract law, the CGIA confers immunity to public entities even “where there is such overlap.” Robinson, 179 P.3d at 1004. Thus, incorporating the economic loss rule into the jurisdictional analysis under the CGIA improperly curbs the scope of the immunity afforded by the statute.
[24] ¶45 Make no mistake, “claims that could arise in both tort and contract are barred by the CGIA.” Id. And the economic loss rule has no say in the matter; it cannot act as a lifeline to a CGIA-barred claim. Indeed, to consider the economic loss rule in determining jurisdiction under the CGIA is to place the cart before the horse. The question of jurisdiction under the CGIA must be resolved before the economic loss rule may enter the picture. If there is no subject matter jurisdiction under the CGIA because the defendant is entitled to governmental immunity, the economic loss rule is irrelevant and the claim must be dismissed—without the horse, the cart goes nowhere.
C. Application
¶46 In applying the foregoing principles to the instant matter, it becomes clear that permitting the doctrinal mismatch endorsed by the division to play out would lead to results that contravene our jurisprudence and the very purposes of the CGIA itself. But before parsing the division s opinion below, we first examine its jurisprudential forerunner—the majority opinion in Casey. After all, the division tethered its holding to Casey. We end by disavowing that case and its progeny, thereby disentangling the economic loss rule from our CGIA jurisprudence.
1. The Majority Opinion in Casey
¶47 The majority opinion in Casey constitutes the first time our court of appeals explicitly applied the economic loss rule to save an otherwise CGIA-barred tort claim. See Casey, ¶¶ 22-30, 310 P.3d at 202-04. But cf. Hamon Contractors, Inc. v. Carter & Burgess, Inc., 229 P.3d 282, 289 (Colo. App. 2009) (applying the economic loss rule in the CGIA context without analyzing whether it is an appropriate doctrine to consider in determining the issue of immunity).
¶48 In Casey, the parties negotiated trust agreements whereby employees of several public colleges contributed to a trust that was designed to provide long-term disability benefits. ¶ 2, 310 P.3d at 199. One of the participating colleges withdrew from the trust agreements and requested the return of the funds its employees had paid into a trust reserve fund. Id. at ¶ 5, 310 P.3d at 200. After the request was denied, the employees of the withdrawing college filed a class action suit against certain colleges and trustees. Id. at ¶¶ 5-7, 310 P.3d at 200. The employees alleged that the colleges and trustees had breached “contractually imposed fiduciary duties.” Id. at ¶ 8, 310 P.3d at 200.
¶49 The colleges and trustees moved to dismiss the case, arguing, in part, that the probate court didn t have subject matter jurisdiction because the CGIA barred the employees claim. Id. at ¶ 11, 310 P.3d at 200. More specifically, the colleges and trustees contended that the breach-of-contract claim—which contained an allegation that tort-based fiduciary duties had been breached—lay, or could have lain, in tort. Id. at ¶ 18, 310 P.3d at 201. The probate court denied the motion to dismiss without holding a Trinity hearing, and the colleges and trustees appealed. Id.
¶50 Faced with this tort/contract overlapping claim, a majority
of a division of the court of appeals applied the economic loss rule to determine which side of the tort-/contract-law boundary the claim belonged on. Id. at ¶ 23, 310 P.3d at 202. It reached different conclusions for the respective defendants.¶51 As it pertained to the colleges, the majority agreed that the claim lay in tort and was thus barred by the
¶52 The Casey majority, however, decided that the economic loss rule demanded the opposite result for the trustees. Id. at ¶¶ 22, 30, 310 P.3d at 202, 203. After applying the three BRW factors, the majority determined that “the trustees’ duty of care [was] ‘memorialized’ in the trust agreements.” Id. at ¶ 30, 310 P.3d at 203. While the majority acknowledged that “[a]n established common law tort duty of care attaches to fiduciary relationships between trustees and beneficiaries,” it made two countervailing observations: (1) the employees’ complaint referenced “the specific contractual duties found in the trust agreements“; and (2) the trustees’ “tort duty [was] not appreciably different from the contractual duty“—that is, the duty imposed by tort law was “nearly identical” to the fiduciary duty that the language of the trust agreements imposed. Id.
¶53 Based on these considerations, the majority concluded that there was “no common law tort duty independent of [the contract] upon which a tort action for breach of fiduciary duty could be based.” Id. (emphasis added). In the majority‘s view, then, the employees’ claim was “grounded in contract.” Id. at ¶ 30, 310 P.3d at 204. Thus, it held that the economic loss rule extinguished any potential tort claim for breach of fiduciary duty, which, in its view, meant there was no governmental immunity for the trustees under the
¶54 Mindful of the matrix laid out by the Casey majority, we now delve into the division‘s opinion below.
2. The Division‘s Opinion Perpetuates Casey‘s Misstep
¶55 The division began its
¶56 Taking its cue from the Casey majority, the division‘s analysis was informed by how the Association pled its claims, rather than by how it could have pled them. See Burlingame Ranch, ¶ 25; see also Casey, ¶ 30, 310 P.3d at 203 (“[T]he reference in the complaint to the specific contractual duties found in the trust agreements establishes that the claim lies in contract ....“) (emphasis added)); cf. Robinson, 179 P.3d at 1005 (“However, the
¶57 The division copycatted Casey by ”focus[ing] first on the contractual context among and between the parties to see whether there was a contractual relationship that established the duty of care alleged to have been breached.” BRW, 99 P.3d at 74 (emphasis added) (citing Grynberg, 10 P.3d at 1269). Mirroring the Casey majority again, the division then suggested that the inquiry turned on whether the tort “duty of care is memorialized in the contract” or whether it arose
Here, the Association argues its injuries are contractual in nature—or, more precisely, based on the breach of express and implied warranties. These claims could, depending on the specifics, only sound in contract. The economic loss rule, for instance, generally provides that a contracting party who suffers only economic harm may only recover in contract, and that an attendant tort claim is effectively extinguished. See, e.g., Casey, ¶ 30.
This example highlights why additional factfinding is necessary. Such specifics may reveal, for example, that the Association‘s claims are subject to the economic loss rule. The upshot is that the court, without a more developed record, could not conclude that all of the Association‘s claims involving construction defects are barred by the
CGIA since the underlying facts are essential to those legal determinations.
¶58 The division concluded that “the alleged duty, injury, and relief sought all arise from contract,” Id. at ¶ 27, Yet, the division observed that “there remain unresolved factual disputes—such as whether [Aspen] owes implied warranties or provided express warranties to the homeowners—that are critical to the threshold jurisdictional determination” under the
3. Disentangling the Doctrines: Disavowing Casey and Its Progeny
¶59 The Casey majority and the division below stumbled at the same hurdle in their
¶60 First, we have demonstrated that our
¶61 Judge Hawthorne‘s well-reasoned partial dissent in Casey highlights this point. See Casey, ¶¶ 58–66, 310 P.3d at 208-10 (Hawthorne, J., concurring in part and dissenting in part). Unlike the majority, Judge Hawthorne believed that the economic loss rule had no bearing on whether the
¶62 Turning to the core focus of the
[25] ¶63 We wholeheartedly agree with this part of Judge Hawthorne‘s opinion. The economic loss rule is not an arrow in the quiver of courts engaged in determining whether the
[26] ¶64 Second, applying the economic loss rule to determine whether the
¶65 In sum, we disavow Casey and its progeny to the extent those opinions stand for the proposition that courts may apply the economic loss rule to determine whether a claim lies in tort or could lie in tort for purposes of the
IV. Conclusion
¶66 For the foregoing reasons, we clarify that our jurisprudence lays out a freestanding, self-sufficient framework for determining whether an action brought against a public
[27] ¶67 Where, as here, the sole question is whether the
¶68 Accordingly, we reverse the division‘s judgment and remand the case to be returned to the district court for further proceedings consistent with this opinion. On remand, the district court should hold a Trinity hearing. After determining what contracts, if any, are implicated in this case, it must decide, consistent with the principles discussed in this opinion, whether the Association‘s construction defect claims against Aspen could nonetheless lie in tort such that they are barred by the