Factual Background:
Ralph L. Wadsworth Construction Company, LLC (Wadsworth) sued Regional Rail Partners (Regional Rail) and others alleging contract claims stemming from the design and construction of a transit rail line.
Regional Rail was hired by Regional Transportation District (RTD) to design and construct the North Metro Rail Line. Wadsworth was Regional Rail’s subcontractor. The contract value was approximately $60 million. The project experienced numerous delays. Wadsworth alleged Regional Rail caused the delays, resulting in significant additional costs. Regional Rail counterclaimed alleging delay damages.
Wadsworth filed a $15.7 million verified statement of claim (later amended to $12.7M) under the Colorado Public Works Act alleging unpaid amounts for labor, materials, and other supplies. Wadsworth also asserted claims for breach of contract. Regional Rail contested the claim and bonded around the lien. Regional Rail filed a counterclaim alleging Wadsworth’s lien was excessive and sought liquidated damages due to project delays.
The trial court awarded Wadsworth $5.7M in damages and found that the verified statement of claim was not excessive. Regional Rail was awarded $514,666.64 for liquidated damages and back charges due to delays on its counterclaims. Both sides appealed.
Holding:
The Colorado Court of Appeals found that Wadsworth’s claim included amounts for lost profits, overhead costs, unapproved change orders, and disputed delay damages and that such damages did not fit within the scope of what can be claimed under the statute. These damages were considered “unliquidated,” meaning they are not fixed or agreed upon at the time of filing. This rendered the claim excessive under C.R.S. § 38-26-110 and resulted in forfeiture of the entire claim, even the $5.7M of the claim that was proven at trial. The Court remanded the case to the trial court for an award of attorney fees and costs to Regional Rail. Under C.R.S. § 38-26-110, a contractor who prevails in showing an excessive claim is entitled to attorney fees.
The Court made a specific point to distinguish the Colorado Public Works Act and the Colorado Mechanic’s Lien Act:
The difference between [the Colorado Public Works Act and the Colorado Mechanic’s Lien Act] is significant. Generally, regardless of the status of a lien [under the Mechanic’s Lien Act], a claimant retains the right to pursue other remedies to obtain a money judgment. Thus, if a claimant forfeits the lien, it loses the protections that a lien provides (such as priority in line), but the claimant does not forfeit the ability to seek the judgment through other means.
But statutory language that provides for forfeiture of “the amount claimed” [under the Public Works Act] must mean something different. (“We presume that the legislature did not use language idly. Rather, the use of different terms signals the General Assembly’s intent to afford those terms different meanings.”). In our view, the language of section 38-26-110 [Public Works Act] is unambiguous: the claimant forfeits the right to pursue any remedy for that amount. While this sanction may seem drastic, it is the only reasonable reading the statutory language can bear.
Ralph L. Wadsworth Construction Co., LLC v. Regional Rail Partners et al., 2024COA78, ¶¶30-31(Cleaned Up). Emphasis added.
Key Take Away:
Subcontractors should exercise caution when asserting verified statements of claim on public works projects. An excessive claim under C.R.S. §38-26-110 results in total forfeiture of the entire claim – even if part of the claim is valid – and attorney fees and costs may further be awarded to the opposing party. Here, the Court deemed that Wadsworth also forfeited its contractual claims because the verified statement of claim was excessive.