No Second Chance: Colorado Court of Appeals Bars Indemnity Claim Under Doctrine of Claim Preclusion

A cautionary tale for contractors and their counsel: if you dismiss an indemnity claim with prejudice, do not expect a do-over.  In Layton Construction Co. v. Shaw Contract Flooring Services, Inc., 409 P.3d 602 (Colo. App. 2016), the Colorado Court of Appeals reaffirmed the reach of claim preclusion in construction disputes, holding that a contractor could not revive a previously dismissed indemnity claim, even after prevailing against other subcontractors on similar issues.

Layton Construction served as the general contractor for a hotel project in Vail and subcontracted with Shaw Contract Flooring.  When the owner terminated the contract, Layton sued for nonpayment.  The owner countersued for alleged construction defects, including defects tied to Shaw’s scope of work.  Layton responded with indemnity and contribution claims against several subcontractors, Shaw included.  But at a certain point in the litigation, Layton voluntarily dismissed its indemnity claim against Shaw with prejudice, while continuing to pursue claims against the others.

After prevailing at trial, Layton filed a second lawsuit against Shaw, this time seeking indemnity for attorneys’ fees and defense costs incurred in the original litigation.  The Court of Appeals was not persuaded.  Because Layton had already asserted the indemnity claim and dismissed it with prejudice, it could not bring the same claim again.  The court held that the claim was barred by the doctrine of claim preclusion.

Layton attempted to argue that CDARA’s indemnity statute, C.R.S. § 13-80-104(1)(b)(II), created an exception.  The court rejected that argument, clarifying that the provision operates solely as a tolling mechanism, it does not override established preclusion principles.

Layton also pointed to qualifying language in its motion to dismiss that purported to preserve “new or future claims” under the indemnity provision.  However, the district court did not adopt that language or incorporate it into its dismissal order.  Instead, it issued a standard dismissal with prejudice.  That was enough, according to the appellate court, to preclude any future claims based on the same subcontract and operative facts, even if the full extent of damages was unknown at the time of dismissal.

The court went one step further, deeming Layton’s second lawsuit “substantially frivolous” and affirming an award of attorneys’ fees in favor of Shaw under C.R.S. § 13-17-102.

The takeaway is clear: indemnity claims must be asserted, preserved, or resolved in the original action.  If a party intends to dismiss such a claim but hopes to preserve it for the future, that intention must be reflected in an agreed stipulation or a court order.  Otherwise, the door may close permanently.