Is the Doctrine of Laches Still Alive in Colorado?

• Jurisdiction: Colorado,United States
• Pages: 26
• Citation: Vol. 52 No. 5 Pg. 26
• Publication year: 2023

Is the Doctrine of Laches Still Alive in Colorado? Vol. 52, No. 5 [Page 26] Colorado Lawyer June, 2023

THE CIVIL LITIGATOR

Laches is one of the most commonly pleaded affirmative defenses. But in Colorado, the law that governs this doctrine is surprisingly unsettled. A somewhat recent string of Colorado Court oof Appeals decisions has suggested that laches is close to a dead letter, and that courts instead should apply the most analogous statute of limitations when adjudicating a laches defense. This article examines recent caselaw and offers some practical tips about how lawyers can navigate this difficult legal terrain.

Laches—a defense asserting that the plaintiff's unreasonable delay bars the claim—is an exceedingly common affirmative defense. This legal doctrine has been referenced at least 8,000 times in the last 40 years by litigants across the state.^[1] But is laches still a viable doctrine in Colorado? That's something of an open question. On the one hand, for over 130 years the Colorado Supreme Court has applied the "traditional rule" and held that laches requires three elements: full knowledge of the facts, unreasonable delay, and prejudice.^[2] On the other hand, at least three published Colorado Court of Appeals decisions have adopted the "Interbank rule" and held that, barring extraordinary circumstances, trial courts should ignore those elements and instead apply the most analogous statute of limitations.^[3]What's more, there doesn't appear to be any case where a court found that any such "extraordinary circumstances" existed. As a result, state and federal courts have inconsistently applied the law concerning laches in Colorado for years, with some applying the traditional rule and others adopting the Interbank rule and effectively reading laches out of state law entirely. Even the court of appeals has toggled back and forth on this question. Until the Supreme Court steps in to provide some clarity, trial and appellate courts will likely continue to apply the law inconsistently to cases that come before them. This article reviews the critical cases on laches and offers some practical guidance about how lawyers can litigate this complex issue.

The Traditional Rule

For more than 130 years, the Colorado Supreme Court has applied the traditional rule and held that laches requires proof of three elements: full knowledge of the facts, unreasonable delay, and prejudice. This principle was arguably first articulated in 1885 in Yates v. Hurd, where the Colorado Supreme Court noted that "[whenever the rights of other parties have intervened by reason of a man's conduct or acquiescence . . ., and his conduct or acquiescence, or even laches, was based upon a knowledge of the facts, he will be deemed to have made an effectual election, and will not be permitted to disturb the state of things "^[4] Over the intervening 13 decades, the Court affirmed the traditional rule in at least seven separate opinions.^[5] In a 2016 case, Johnson v. Johnson, the Supreme Court declined the opportunity to modify the traditional rule.^[6] In Johnson, the Court took up the question of whether a parent may raise laches to defend against the other parent's claim for interest on a child support debt.^[7] Answering in the affirmative, the Court confirmed that in adjudicating the laches defense at issue, "the courts below should apply the [traditional] three-pronged test for laches "^[8] The Court noted that an amicus party "urge[d] us to modify this test," but it rejected that proposal, concluding that "the long-established elements of laches, which require unconscionable delay and pre judice, can be readily applied, without modification, here."^[9]

The Interbank Rule

Despite this long string of Supreme Court precedent, the court of appeals has held in at least three published decisions that rather than apply the traditional rule, courts should instead apply the most analogous statute of limitations when ruling on a laches defense.

The court of appeals first articulated this new rule in Interbank Investments, L.L.C. v. Vail Valley Consolidated Water District.^[10] In that case, the plaintiff raised an unjust enrichment claim, which the district court dismissed on statute-of-limitations grounds.^[11] The plaintiff appealed, and the Interbank court began its analysis by noting that "plaintiff's unjust enrichment claims, being equitable in nature, are technically subject to an equitable laches rather than a legal statute of limitations analysis."^[12]The court nevertheless held that "[a]bsent extraordinary circumstances, [] a court "˜will usually grant or withhold relief in analogy to the statute of limitations relating to actions at law of like character.'"^[13] The court determined that the three-year period applicable to contract claims is the most analogous statute of limitations to an unjust enrichment claim, and it then applied that three-year limitations period.^[14] The court did not consider whether the defendant had proven full knowledge of the facts, unreasonable delay, or prejudice.

Notably, the Interbank court didn't explain why it deviated from Supreme Court precedent or why it determined this new rule is preferable to the old one. The only authority the appellate court cited in support of its view was a federal district court case, Brooks v. Bank oof Boulder.^[15]But the Brooks court didn't go as far as the Interbank rule: Brooks did say that "[u]nder ordinary circumstances, a suit in equity . . . will be stayed after[] the time fixed by the analogous statute" of limitations.^[16] But in the very next paragraph the court noted that "[l]apse of time alone, however, in the absence of resulting injury, prejudice or disadvantage . . . does not constitute laches."^[17] Moreover, the court then denied summary judgment after finding that the defendant did not establish prejudice—an element under the traditional rule.^[18]

One other point warrants mention—this article's authors have not been able to find a single case where a court applying the Interbank rule found that any "extraordinary circumstances" were present. As a result, and without guidance on what circumstances might qualify as "extraordinary," application of the Interbank rule may functionally abolish laches altogether, substituting the most...