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June 2020

Colorado’s Consumer Protection Act Claims in Construction Defect Actions

Over the past twenty (20) years, plaintiff attorneys in Colorado have routinely asserted Colorado Consumer Protection Act (“CCPA”) claims in addition to the “standard” construction defect claims that are the foundation of CD lawsuits. This article sets forth the elements a plaintiff must establish under Colorado law to prevail on a CCPA claim and, in particular, focuses on the “Public Impact” requirement for CCPA claims in the context of a construction defect action.

OVERVIEW OF CCPA CLAIMS

When assessing the viability of a CCPA claim, it is important to understand the reason and purpose behind why the statute was enacted. The CCPA was enacted to prevent and, where appropriate, punish corporate businesses who commit deceptive practices in their dealing with the general public by providing remedies against business who commit consumer fraud. People ex rel. Dunbar v. Gym of America, Inc., 177 Colo. 97, 112, 493 P.2d 660, 667 (1972); Rhino Linings USA, Inc. v. Rocky Mountain Rhino Lining, Inc., 62 P.3d 142, 146 (Colo. 2003). In sum, the CCPA was enacted to protect the public at large from businesses who use deceptive practices in the course of their business dealings with existing or potential consumers.

To prove a private cause of action under the CCPA, a plaintiff must show: (1) that the defendant engaged in an unfair or deceptive trade practice; (2) that the challenged practice occurred in the course of the defendant’s business, vocation or occupation; (3) that it significantly impacts the public as actual or potential consumers of the defendant’s goods, services, or property; (4) that the plaintiff suffered injury in fact to a legally protected interest; and (5) that the challenged practice caused the plaintiff’s injury. Rhino Linings USA, 62 P.3d at 146-47 (citing Hall v. Walter, 969 P.2d 224 (Colo. 1998)). To establish the public impact element of a CCPA claim, a claimant must prove, among other things, that the alleged deceptive trade practice “significantly impact[s] the public as actual or potential consumers.” Hildebrand v. New Vista Homes II, LLC, 252 P.3d 1159, 1169 (Colo. App. 2010) (citing Hall v. Walter, 969 P.2d at 234) (emphasis added). Thus, even if a deceptive trade practice is established, if the defendant’s wrongdoing does not affect the public, a claim is not actionable under the CCPA. Rhino Linings USA, 62 P.3d at 149. When assessing whether a challenged practice significantly impacts the public within the context of a CCPA claim under Colorado law, the following three (3) factors are considered: (1) the number of consumers directly affected by the challenged practice; (2) the relative sophistication and bargaining power of the consumers affected by the challenged practice; and (3) evidence that the challenged practice has previously impacted other consumers or has the significant potential to do so in the future. Id. at 149 (emphasis added).

SINGLE FAMILY OWNERS VERSUS HOMEOWNER ASSOCIATION ACTIONS

The plaintiffs in Hildebrand were single-family homeowners and the Colorado Court of Appeals dismissed their CCPA claim for failing to establish any evidence that the defendants’ alleged deceptive trade practices impacted the public. On its face, it could be argued (and has been argued) that a single-family homeowner does not “represent the public at large,” and thus cannot prove that the alleged deceptive trade practice significantly impacted the public. However, while the plaintiff (single-family homeowner or homeowner association) must be able to prove the elements of public impact to prevail on a CCPA claim, the determination of public impact focuses on the actions of the defendant who allegedly committed the deceptive trade practice.

Given the nature of residential construction defect actions, and how residential homes and communities are marketed and sold, plaintiffs typically have a tall burden in trying to prove that the defendant’s alleged actions had a significant impact on the public at large. That said, CCPA claims are inherently factual and case specific, and the success or failure of these claims will turn on the particular facts of each case. For example, if the defendant is a national homebuilder who advertises its services nationally, it is far more likely that a plaintiff can prove public impact. Absent “broad scale” marketing efforts to the general public, plaintiffs will continue to have a difficult time establishing significant public impact and prevailing on CCPA claims in construction defect actions in Colorado.

Construction

Adam B. Linton



Construction