Application of the Pro Rata Liability Statute to "Tort Claims in a Contractual Wrapper", 0616 COBJ, Vol. 45 No. 6 Pg. 37

AuthorMichael Ley

45 Colo.Law. 37

Application of the Pro Rata Liability Statute to "Tort Claims in a Contractual Wrapper"

Vol. 45 No. 6 [Page 37]

The Colorado Lawyer

June, 2016

Michael Ley

The Civil Litigator

The Civil Litigator articles address issues of importance and interest to litigators and trial lawyers practicing in Colorado courts. The Civil Litigator is published six times a year.

Coordinating Editor

Timothy Reynolds, Boulder, of Bryan Cave HRO—(303) 417-8510, timothy.reynolds@bryancave.com

About the Author

Michael Ley is an associate with Brosseau Bartlett Seserman LLC—(303) 515-2485, mley@bbs-legal. He practices commercial litigation, primarily in the fields of suretyship, construction, agribusiness, and employment.

This article discusses the applicability of Colorado's pro rata liability statute to certain claims that are facially contractual. Colorado state and federal cases provide that the pro rata liability statute applies to the far boundaries of tort law. They also provide that the statute does not apply to "normal" contract claims. At present, however, it is not clear how to classify a contract claim that requires a tort-like analysis of an alleged breach. A line of federal cases holds that the pro rata liability statute applies to these cases—so-called "tort claims in a contractual wrapper. " Resolution of this question will affect a defendant's total exposure in a case and the recoverability of damages for a plaintiff.

As part of a tort reform package in 1986, the Colorado legislature passed the "pro rata liability" statute (pro rata statute),1which provides in relevant part:

(1) In an action brought as a result of a death or an injury to person or property, no defendant shall be liable for an amount greater than that represented by the degree or percentage of the negligence or fault attributable to such defendant that produced the claimed injury, death, damage, or loss, except as provided in subsection (4) of this section. . . .

(4) Joint liability shall be imposed on two or more persons who consciously conspire and deliberately pursue a common plan or design to commit a tortious act. Any person held jointly liable under this subsection (4) shall have a right of contribution from his fellow defendants acting in concert. A defendant shall be held responsible under this subsection (4) only for the degree or percentage of fault assessed to those persons who are held jointly liable pursuant to this subsection (4).

The statute provides that the jury or judge must make special findings regarding the percentage of "negligence or fault" attributable to each of the parties and certain nonparties. The plaintiff can recover from each defendant no more than each defendant's proportionate liability. There is no dispute that the pro rata statute applies to the far boundaries of tort claims. Courts have also determined that this statute does not apply to normal contract claims.2 However, it is unclear whether the statute applies in cases where a tort-like analysis is needed to determine whether a party breached a contract.

Depending on particular contract language, a tort-like analysis may be required for an alleged breach of any contract for services. In these situations, reference to a professional standard of care is often necessary, which involves application of a tort-like analysis to the breach of contract claim.

Application of the Pro Rata Statute

The question "to what claim does the pro rata statute apply?" is especially important when multiple breaches cause a single injury. This situation arises often in construction litigation. A plaintiff may allege that multiple (sometimes numerous) design and construction professionals breached their contractual obligations, leading to a single injury such as foundation movement, a leaking roof, failure to meet a performance standard (such as LEED certification), and so on. Alternatively, one defendant may have breached a contract while the other defendant(s) committed torts. In either circumstance, is the alleged breaching party entitled to have the plaintiffs damages allocated among all the defendants, such that each defendant is only liable for its proportionate share of fault?

Under the general rule of contract law, the answer is no. Professor Corbin describes the rule as follows:

The plaintiffs total injury may have been the result of many factors in addition to the defendant's tort or breach of contract. In such a case must the defendant pay damages equivalent to the total harm suffered? Generally the answer is, Yes, even though there were contributing factors other than the defendant's own conduct. . . . Must the plaintiff show the proportionate part played by the defendant's breach of contract among all the contributing f actors causing the injury, and must the loss be segregated proportionately? To these questions the answer is generally, No. In order to establish liability the plaintiff must show that the defendant's breach was "a substantial factor" in causing the injury.3

Stated another way

Where A and B owe contract duties to C under separate contracts, and each breaches independently, and it is not reasonably possible to make a division of the damage caused by the separate breaches closely related in point of time, the breaching parties, even though they acted independently, are jointly and severally liable

In contrast, if the pro rata statute applies, the at-fault party is responsible for only its proportionate share of the plaintiffs damages. Whether the pro rata statute applies to a claim can be the difference between proportionate responsibility and joint and several liability.[4]

History of Apportionment of Fault Statutes in Colorado

Prior to 1986, the General Assembly had already enacted two measures addressing the apportionment of responsibility in tort actions. The first of these, adopted in 1971, was a comparative negligence statute.5 The comparative negligence statute provides that in a "negligence" action, a plaintiffs own negligence proportionately reduces the plaintiffs recovery unless the plaintiff is 50% or more at fault, at which point the statute bars the plaintiffs recovery. Before 1971, the contributory negligence rule provided that any negligence of the plaintiff contributing to the cause of plaintiff s injury barred the plaintiffs recovery. However, the comparative negligence statute did not address the apportionment of damages among joint tortfeasors, who remained jointly and severally liable to the plaintiff until passage of the pro rata statute.

The second measure addressing the apportionment of responsibility in tort actions, passed in 1977, was a contribution statute (Contribution Act).6 The Contribution Act provides that where two or more persons become jointly or severally liable "in tort," a tortfeasor who has paid more than that tortfeasor's proportionate share of liability has a claim for contribution against the other joint tortfeasors for their proportionate share of liability. Prior to 1977, there was no recourse for the tortfeasor who paid the plaintiff more than that tortfeasor's proportionate share of liability. But the Contribution Act still allowed a plaintiff to recover 100% of its tort damages from any one of multiple tortfeasors. The pro rata statute changed that default rule in 1986.

All three statutes address how responsibility is allocated in tort actions. But, as noted in the quoted language, there are differences. The comparative negligence statute applies to "negligence" actions. The Contribution Act addresses liability "in tort." And the pro rata statute provides for liability no greater than proportionate "negligence or fault." But it is unclear what the phrase "or fault" means. Specifically, does inclusion of the word "fault" mean the pro rata statute applies to tort and contract-claims?

As explained below, courts wrestled with this question until the Colorado Court of Appeals in Core-Mark Midcontinent, Inc. v. Sonitrol Corp. held that a breach of contract "does not fall within the meaning of 'fault' as used in subsections (1) and (3)."7 The question then became how to classify contract claims that require a tort-like analysis to determine whether a party breached the contract.

The Road to Core-Mark

In Huffman v. Caterpillar Tractor Co., the Tenth Circuit determined that "fault" was "a general term encompassing a broad range of culpable behavior, including, but not limited to, negligence."8 Likewise, in O'Quinn v. Wedco Technology, Inc., U.S. District Court Judge Carrigan reasoned that "[t]he legislature did not limit the statute's applicability to negligence cases."9 These examples of broadly worded dicta led one author (in this publication) to conclude that "[t]here appears to be no reason to limit the statute to causes involving culpability, or even to tort cases. . . . More appropriately, the philosophy of the Statute seems equally applicable when one defendant's negligence and one defendant's breach of contract or other type of 'wrong' are both a 'cause' of the plaintiffs injuries."10

The U.S. District Court in Colorado construed the pro rata statute in Loughridge v. Goodyear Tire & Rubber Co.11 In Loughridge, the court considered whether the pro rata statute applied to the plaintiffs' product liability claims. The plaintiffs argued that their claims sounded in contract, and therefore the pro rata statute did not apply. The court noted that "Colorado courts have generally referred to this statute as one applying to tort actions," but that "courts have not addressed whether the terms of the statute apply to product liability claims."12 The court concluded that it needed to construe the pro rata statute.13

Loughridge began by noting the use of the word "action" in...

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