Rocky Mountain Festivals, Inc. v. Parsons Corp.

• Decision Date: 13 December 2010
• Docket Number: No. 09SC451.,09SC451.
• Citation: 242 P.3d 1067
• Parties: ROCKY MOUNTAIN FESTIVALS, INC., d/b/a Colorado Renaissance Festivals, Inc., Petitioner, v. PARSONS CORPORATION and James Miller, Respondents.
• Court: Colorado Supreme Court

242 P.3d 1067

ROCKY MOUNTAIN FESTIVALS, INC., d/b/a Colorado Renaissance Festivals, Inc., Petitioner,

v.PARSONS CORPORATION and James Miller, Respondents.

No. 09SC451.

Supreme Court of Colorado, En Banc.

Nov. 8, 2010.

As Modified Dec. 13, 2010.

Rice LLC, T.R. Rice, Greenwood Village, Colorado, Attorneys for Petitioner.

Davis Graham & Stubbs LLP, R. Kirk Mueller, Damian J. Arguello, Denver, Colorado, Attorneys for Respondents.

Justice MARTINEZ delivered the Opinion of the Court.

I. Introduction

This dispute arises out of a prior action between the Town of Larkspur, Colorado (the "town") and Rocky Mountain Festivals, Inc. (the "festival") concerning allegedly unpaid water and wastewater tap fees. The town had based its demand for roughly $1.6 million in unpaid tap fees on a report prepared by Parsons Corporation and Jim Miller (collectively "Parsons"). In that prior action the trial court determined that Parsons' report had been substantially flawed, and that the festival in fact owed only a small fraction of the demanded fees. Subsequently, the festival brought the present action against Parsons, arguing that Parsons' wrongful conduct caused it to incur unnecessary litigation costs and attorneys' fees, which should be compensable as damages under the so-called "wrong-of-another doctrine." The trial court granted Parsons' motion for summary judgment, and the court of appeals affirmed that decision in an unpublished opinion, Rocky Mountain Festivals, Inc. v. Parsons Corp., No. 08CA349, 2009 WL 712335 (Colo.App. Mar. 19, 2009). Both courts reasoned that the festival's partial liability in the underlying dispute precluded it from pursuing attorneys' fees under the wrong-of-another doctrine and therefore from proving damages. Because this issue arose in the limited context of summary judgment, neither court otherwise addressed the viability of the festival's negligence claim.

Due the limited scope of the trial court and court of appeals' decisions, we granted certiorari to address the narrow issue of whether litigation costs and attorneys' fees should be recoverable under the wrong-of-another doctrine where a plaintiff has not been entirely successful on all its claims in the underlying litigation.¹ We conclude that a plaintiff can seek damages under the doctrine for a subset of the claims litigated against another party where the trial court, in its discretion, determines that the claims for which litigation costs are sought were premised on different facts and pursued under different legal theories than those comprising the remainder of the underlying dispute.

Having concluded that the festival is not barred from its pursuit of fees as a matter of law, we reverse the court of appeals' judgment.

II. Facts and Procedure

The festival operates a renaissance fair on summer weekends in the town. The town has a year-round population of around 250 people, while the festival attracts roughly 10,000 people per day when open. As such, the festival is a prominent figure in the town's tax revenues and its water systems.

In 2003, the town hired Parsons to diagnose and resolve problems with its water and wastewater systems. After assessing the festival's water and wastewater services usage, Parsons concluded that the festival had been using substantially more of both than it had been paying for. Parsons' analysis was apparently substantially flawed. Based on Parsons' analysis, however, the town issued a letter to the festival demanding roughly $1.6 million in tap fees to defray the cost of the festival's alleged increases in water and wastewater usage. Of that, roughly $1 million was related to the festival's wastewater use, while the remaining $600,000 was for water usage. At the conclusion of the letter, the town informed the festival that, if it had not received payment on this special billing within 45 days, water service to the property might be disconnected.

In response, the festival sought injunctive relief from having to pay the tap fees in an action separate from the one at issue here, Rocky Mtn. Festivals, Inc. v. Town of Larkspur, No. 03CV393, slip op. (Colo.Dist.Ct., Mar. 14, 2006). Among other things, the festival argued that the tap fees assessed by Parsons for the town were contrary to certain town ordinances, and that the festival was being asked to fund maintenance and improvements to the town's water infrastructure that would benefit the town at large. The town cross-claimed seeking to recover the full amount set out in the letter. The trial court concluded that it was "without significant dispute" that the festival owed at least some unpaid water tap fees, though it ultimately ordered the festival to pay only $100,000 of the town's $600,000 bill for water usage. As to the wastewater claim, however, the trial court concluded that Parsons' analysis had been deficient on numerous points. The trial court determined that Parsons' wastewater assessment relied on faulty assumptions, used "incredible" data, and stated that its inaccuracy was made "abundantly clear by other evidence introduced." The court concluded that the festival had, if anything, overpaid the town for wastewater usage and so granted the festival an injunction against that portion of the town's billing. Concluding its order, the trial court in that case noted that, because both parties had prevailed to some extent on their claims, an award of attorneys' fees would be inappropriate.

The festival subsequently sought an amendment to that order, arguing that the town's claim to $1 million in wastewater tap fees was substantially frivolous because the underlying report by Parsons was without believable evidentiary support and the town had not attempted to verify the information contained in the report. After reviewing briefing on that issue, the trial court issued a minute order denying the motion.

Following that prior case, the festival brought suit against Parsons directly under several legal theories of contract and tort, essentially arguing that Parsons' faulty advice to the town had caused the festival to incur litigation costs and attorneys' fees in the prior case that they should be entitled to recover. Among the legal theories advanced by the festival that survives for our review is whether the element of damages essential to its negligence claim may be proved by attorneys' fees based on the wrong-of-another doctrine.

Parsons moved for summary judgment. The trial court concluded that, although Parsons owed a legal duty of care to the festival, the festival was barred from its pursuit of attorneys' fees as damages because it had been partially at fault in the underlying litigation, as evidenced by the order directing it to pay $100,000 for water tap fees. The court of appeals affirmed the trial court's order relying on essentially the same reasoning. Specifically, the court of appeals concluded that because the festival owed the town almost $100,000, it was at fault in the prior case and therefore barred from relying on the wrong-of-another doctrine to pursue attorney fees as damages. The court of appeals affirmed the trial court's decision to grant the motion for summary judgment on these narrow grounds.

The festival timely petitioned for certiorari, arguing that its partial liability on some claims in the prior litigation should not preclude its recovery for expenses incurred in litigating other claims on which it was wholly successful. We granted certiorari to resolve this narrow issue and agree with the festival that a claim-by-claim assessment of damages is appropriate in some circumstances. Accordingly, we reverse the court of appeals.

III. Analysis

We begin by clarifying the operation of the wrong-of-another doctrine and discussing those circumstances in which an injured party may seek litigation costs and attorneys' fees as a measure of damages. We then turn to the issues presented here, where the summary-judgment posture of the case entitles the festival to the benefit of all favorable inferences reasonably drawn from the undisputed facts. See In re Tonko, 154 P.3d 397, 402 (Colo.2007).

A. The Wrong of Another Doctrine

Colorado-like many states ²-has long-recognized that litigation expenses and attorneys' fees incurred by a party in one case may, in certain circumstances, be an appropriate measure of damages against a third party in a subsequent action. See Elijah v. Fender, 674 P.2d 946, 951 (Colo.1984); see also Bernhard v. Farmers Ins. Exchange, 915 P.2d 1285, 1288 n. 3 (Colo.1996) (discussing the broad range of applications of the wrong-of-another doctrine in Colorado); Publix Cab Co. v. Colo. Nat. Bank of Denver, 139 Colo. 205, 230, 338 P.2d 702, 715 (1959) (recognizing the wrong-of-another doctrine in principle); Sun Indem. Co. of N.Y. v. Landis, 119 Colo. 191, 194, 201 P.2d 602, 603 (1948) (same). As this court noted in Elijah, " '[w]hen the natural and probable consequence of a wrongful act has been to involve [a] plaintiff in litigation with others, the general rule is that the reasonable expenses of the litigation may be recovered from the wrongdoer.' " 674 P.2d 946, 951 (Colo.1984) (quoting Int'l St. Bank of Trinidad v. Trinidad Bean & Elevator Co., 79 Colo. 286, 287, 245 P. 489, 489 (1926) and approving McNeill v. Allen, 35 Colo.App. 317, 534 P.2d 813, 819 (Colo.App.1975)). Of course, this is not to say that the wrongful act must be the sole cause of the prior litigation. See Stevens v. Moore & Co. Realtor, 874 P.2d 495, 496-97 (Colo.App.1994). Nor must the plaintiff have been a defendant in the prior litigation in order to avail himself of this wrong-of-another doctrine. Elijah, 674 P.2d at 951. Instead, he could have been "placed in a position of having to bring suit as plaintiff to defend his rights." Id.; see also Kimmel v. Iowa Realty Co., 339 N.W.2d 374, 380 (Iowa 1983) ("[A] person who, through the tort of another, has been required to act in the protection of his interests by bringing or defending an action against a...