LB Rose Ranch, LLC v. Hansen Construction, Inc., – clarification of effect of settlements on contribution claims

Settlement agreements are often meant to stop litigation and resolve outstanding claims. However, a recent Colorado Court of Appeals decision held that a settlement agreement does not relieve one settling party from a contribution claim made by a non-settling party under the joint tortfeasor pro-rata liability statute when the settlement did not cover common liabilities and the non-settling party had satisfied all common liabilities prior to the settlement.

In LB Rose Ranch, LLC v. Hansen Construction, Inc., 2019COA141, LB Rose Ranch and Hansen Construction were each found liable for construction defects in a multi-lot development project. The lot owners claimed LB Rose Ranch and Hansen Construction acted in concert and were jointly and severally liable for the construction defects. Claims against Hansen Construction were decided through arbitration. The arbitrator determined damages to each lot and Hansen Construction paid the arbitration award in full. Claims against LB Rose Ranch were decided at a jury trial. The jury also determined damages to each lot. LB Rose Ranch then entered into a settlement agreement with the lot owners for a lesser amount.

Both the jury and arbitrator apportioned a percentage of fault to each LB Rose Ranch and Hansen Construction. The trial court reviewed both the jury and arbitration awards for each lot and determined the amount of common liability between Hansen Construction and LB Rose Ranch. The trial court determined LB Rose Ranch was only liable for that portion of damages that was not already paid by Hansen Construction. Thus, Hansen Construction’s payment of the arbitration award satisfied LB Rose Ranch’s judgment on many of the lots and LB Rose Ranch was left to pay only a fraction of the total jury award.

Hansen Construction then brought a contribution claim against LB Rose Ranch for the amount of common liability to the lot owners that Hansen Construction had satisfied. The right of contribution exists when a party pays more than his pro rata share of the common liability. C.R.S. § 13-50.5-102(2). LB Rose Ranch argued its settlement and release with the lot owners discharged LB Rose Ranch from contribution liability to Hansen Construction under C.R.S. § 13-50.5-105(1)(b), which discharges a released tortfeasor from liability for contribution to other tortfeasors for the same injury.

The Court of Appeals rejected this argument because Hansen Construction was not a party to the jury trial and could not be bound by the jury’s determination of damages apportioned to LB Rose Ranch. The trial court determined that the amount settled between LB Rose Ranch and the lot owners was not common liability between LB Rose Ranch and Hansen Construction, but was the amount for which LB Rose Ranch was individually liable to the lot owners. Hansen Construction extinguished the shared common liability amount before LB Rose Ranch entered into the settlement agreement with the lot owners. The remaining amount due by LB Rose Ranch under the jury award were not caused by Hansen Construction as determined in the arbitration and could not be considered joint liability for the same injury. Thus, the settlement agreement applied to damages caused individually by LB Rose Ranch and not common damages between LB Rose Ranch and Hansen Construction.

Ultimately, the Court of Appeals determined Hansen Construction no longer had common liability with the lot owners at the time of settlement because it had satisfied the arbitration award in full that included the common liabilities between Hansen Construction and LB Rose Ranch. Therefore, the LB Rose Ranch’s settlement and release applied to damages LB Rose Ranch was individually responsible, and LB Rose Ranch was not relieved of its contribution to Hansen Construction for Hansen Construction’s satisfaction of judgment for the parties’ joint liabilities.

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