Your Right to Contribution in the Event Another Party Settles

The right of contribution exists when a party pays more than its share of a common liability. C.R.S. § 13-50.5-102(2). While a settlement agreement generally resolves all claims between the parties to the settlement agreement, it does not necessarily relieve one settling party from the right of contribution to a non-settling party. This is distinctly true when the non-settling party makes a contribution claim and all common liabilities between the settling party and non-settling party have not been resolved.

In the Colorado Court of Appeals case, LB Rose Ranch, LLC v. Hansen Construction, Inc., this situation played out. 2019COA141. Defendant LB Rose Ranch and Hansen Construction were both sued by the Plaintiff for construction defects in a multi-lot development project. Plaintiff alleged that LB Rose Ranch and Hansen Construction were jointly and severally liable for the construction defects. Plaintiff’s claims against Hansen Construction proceeded in arbitration, while Plaintiff’s claims against LB Rose Ranch proceeded in a jury trial.

In the arbitration against Hansen Construction, damages were awarded to Plaintiff. Hansen Construction then paid Plaintiff’s full arbitration award of over $9 million.

In the court case, the jury similarly awarded damages of over $6.6 million against LB Rose Ranch. However, the Court determined that LB Rose Ranch was only liable for the portion of damages Hansen Construction had not already paid. Since Hansen Construction’s arbitration payment covered a significant part of LB Rose Ranch’s court judgment, LB Rose Ranch was only required to pay $698,548.93 of the jury award. LB Rose Ranch subsequently settled with Plaintiff out of court.

After learning of this outcome, Hansen Construction brought a contribution claim against LB Rose Ranch to recover the common liability Hansen Construction had already paid in arbitration. LB Rose Ranch countered that its settlement and release with Plaintiff discharged LB Rose Ranch from any contribution liability to Hansen Construction. LB Rose Ranch argued that under C.R.S. § 13-50.5-105(1)(b), its settlement and release discharged it from liability for contribution to Hansen Construction for the same injury.

The Court of Appeals rejected this argument. The Court of Appeals found that since Hansen Construction was not a party to the jury trial it could not be bound by the jury’s determination of damages apportioned to LB Rose Ranch. The Court of Appeals then determined that since Hansen Construction had satisfied the arbitration award in full, including the common liabilities between Hansen Construction and LB Rose Ranch, LB Rose Ranch’s settlement and release applied only to damages LB Rose Ranch was individually responsible for. LB Rose Ranch was not relieved of its contribution to Hansen Construction for Hansen Construction’s satisfaction of judgment for the parties’ joint liabilities. Ultimately, LB Rose Ranch was ordered to pay Hansen Construction over $1.7 million in contribution.

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