Colorado Homebuilders May Face Increased Claims Under the Colorado Consumer Protection Act - New Legislation Seeks to Eliminate “Significant Public Impact” Requirement

Snell & Wilmer

Snell & Wilmer

A new proposed bill has the potential to significantly impact the viability of consumer protection claims brought against Colorado homebuilders. Consumer protection claims brought by homebuyers against homebuilders in Colorado have historically been premised on contractual waivers of implied warranties as well as the terms contained within express contractual warranties. These claims have largely been unsuccessful against homebuilders based on the failure to meet all five factors set forth by statute and judicial precedent.

However, the stage is set for change as a new bill aims to remove arguably the most prohibitive requirement for establishing these claims, and if passed, may result in additional exposure to homebuilders, including the threat of punitive damages, treble damages, costs and/or attorney’s fees for successful consumer protection claims.

The Colorado Consumer Protection Act (“CCPA”), codified as Colorado Revised Statutes § 6-1-101, et seq., is a statutory scheme adopted by the legislature providing for both public and private rights of action to deter and punish businesses that engage in unfair or deceptive trade practices with the public. Currently, an individual or entity asserting a CCPA claim must show that: (1) the defendant engaged in a deceptive or unfair trade practice; (2) the deceptive or unfair trade practice occurred in the course of the defendant’s business, vocation, or occupation; (3) the deceptive or unfair trade practice significantly impacts the public as actual or potential consumers of the defendant’s goods, services, or property; (4) the plaintiff suffered an injury in fact to a legally protected interest; and (5) the deceptive or unfair trade practice caused actual damages or losses to the plaintiff. Hall v. Walter, 969 P.2d 224, 234 (Colo. 1998).

However, new legislation proposed on January 10, 2024 aims to broaden the scope of conduct covered by the CCPA by altering one of the foregoing requirements, and if passed, will take Colorado from having one of the more restrictive consumer protection acts to one much more liberal in application. The proposed bill, HB24-1014, seeks to eliminate the judicially created requirement in the seminal case of Hall v. Walter that an individual or business establish that the deceptive or unfair trade practice “significantly impacts the public” before remedies may be available under the CCPA. Noting that this requirement is nowhere in the text of the CCPA, the bill proposes that evidence that a person has engaged in an unfair or deceptive trade practice in and of itself constitutes a significant impact to the public. The bill aims to eliminate the decades old judicially created limitation and would have Colorado join most other states that do not impose such a limitation with the purpose of better protecting consumers by discouraging unfair competition. To that end, HB24-1014 proposes a revision to CCPA § 6-1-105 as follows:

''Unfair or deceptive trade practices. (2) Evidence that a person has engaged in an unfair or a deceptive trade practice: (a) is prima facie evidence of intent to injure competitors and to destroy or substantially lessen competition; and (b) is sufficient to establish a significant impact to the public.''

Notably, if passed in its current form, HB24-1014 will create opportunity for more aggressive enforcement by government officials as well as significantly more private litigation under the CCPA against homebuilders. This amendment will likely impact Colorado homebuilders across the state in the form of additional construction defect lawsuits involving CCPA claims that carry heightened exposure for homebuilders. Moreover, it may discourage companies from building homes in Colorado.

Although the impact of HB24-1014 remains to be seen, Colorado businesses should continue to watch for developments with the proposed legislation. An initial hearing to discuss this bill before the House Judiciary Committee is currently scheduled for Wednesday, February 7, 2024. In the meantime, there may be revisions companies can make to their contract documents that may help to better safeguard them against potential CCPA claims.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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