Colorado Business Litigation Lawyer Blog

Denver station KUSA-TV reported January 11, 2010 that Krahl Construction has
halted work on a $1.5 million project at the main branch of the Denver Public Library as
the apparent result of a January 5 FBI search of Krahl's Chicago headquarters. Krahl also
has an office in Centennial, Colorado.

Krahl notified employees on January 8 that the company would be shutting down
the project. Neither the FBI nor Krahl disclosed why the raid took place, but an FBI
official said the search was part of an ongoing investigation and that the FBI was
"looking for evidence of a crime." No arrests were reported.

Krahl has been paid $430,000 for work already completed, but has been paid
nothing for unfinished work. New bids can be solicited after 10 days according to city
rules.

The company has an "A+" rating from the Chicago Better Business Bureau, and
reportedly does around $100 million a year in commercial construction work. It was
recently working as general contractor on an $81 million project at Riverside Medical
Center in Kankakee, IL, but hospital officials immediately hired another company to
finish the project.

When a business based in Colorado enters into a contract with a business based in another state, it is common for the contract to include a “venue provision,” stating in which state’s courts any controversy arising out of the contract will be tried. In general, the venue provision will be enforced by Colorado courts in the following three circumstances:

(1)Where the provision is not contrary to an established public policy of Colorado, whether the policy arises by statute or judicial decision, such as, for example, where a Colorado statute upon which the claim is at least partially based specifically mandates where venue must lie.

(2) Where the forum selection clause is not unfair or unreasonable or the result of overreaching by one party. The clause may be deemed unreasonable where, for example, the party seeking to escape the provision can show that trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court. Mere inconvenience or additional expense is not the test of unreasonableness.

(3) Where the venue clause can contain “boilerplate” or standard language used in similar contracts, where the venue clause is in standard size font in an easily readable contract of, for example, only a couple of pages.

The fact that the contract is the result of an arm’s length transaction between parties having business experience tends to negate any claim of overreaching by the party seeking to enforce the venue provision.

The bottom line is that the inclusion of a venue provision can be construed by the courts as a reasonable effort by the parties to bring certainty to the transaction in advance.

This article is for general informational purpose only. Nothing in this article should be considered as legal advice to any reader or other person, nor shall it be deemed to establish an attorney-client relationship with any person or legal entity.

[Source: Adams Reload, Inc. v. International Profit Associates, Inc., 143 P.3d 1056, (Colo.Ct.App. 2005), cert. denied, 2006 WL 2796636 (Colo. 2006)]

In Denny Const., Inc. v. City and County of Denver ex rel. Bd. of Water Com'rs. (1/09), a case of vital importance to contractors, the Colorado Supreme Court speaks to the issue of whether or not damages for impaired bonding capacity are recoverable, and by what standard such damages may be proved.

Denny Construction, Inc., (Contractor) was the successful bidder and was awarded a contract by the Denver Board of Water Commissioners (“Board”) to build a new headquarters building for the Board. During the course of construction, the contractor asked for extensions of time to complete the contract due to bad weather. The Board denied the extensions and ultimately declared the Contractor in default of the contract. As a result of the claimed default, Contractor’s surety reduced Contractor’s bonding capacity and later refused to underwrite bonds for the Contractor at all. Further, Contractor could not obtain bonds from another surety, which prevented Contractor from bidding on future public works projects-- about one-half of Contractor’s business.

In a suit brought by a subcontractor against Contractor and the Board, seeking payment for work performed on the project, Contractor filed a cross-claim against the Board requesting damages for breach of contract and other legal theories. After the subcontractor settled its case, the jury found in favor of Contractor and against the Board on Contractor’s breach of contract claims, and awarded damages of $845,000 for lost profits. On appeal, the Colorado Court of Appeals reversed the verdict, holding that lost profits because of impaired bonding capacity are “speculative as a matter of law,” and that in any event damages for impaired bonding ability “were not reasonably foreseeable” because there was no evidence that the Board actually knew that Contractor would lose profits if its bonding capacity were impaired.

The Colorado Supreme Court agreed to hear the case and reversed the court of appeals, holding (1) that lost profits due to impaired bonding capacity, like all claims for lost profits, are not speculative as a matter of law, but need only be proved with reasonable certainty, and (2) in order to prove lost profits, the plaintiff/contractor need not prove that the owner/defendant subjectively knew that the contractor would suffer lost profits due to impaired bonding capacity, but whether the owner/defendant knew or should have known that such loss would probably occur.