On July 9, 2026, the Colorado Court of Appeals issued its opinion in Elk Creek Ranch Owners Association v. Elk Creek Ranch Development, Inc. and YZ Ranch, LLC, 2026 COA 58, addressing three issues: (1) when a postjudgment order denying one party’s attorney fee request becomes final and appealable in a multi-party case where other fee requests remain pending; (2) whether a breach of the implied duty of good faith and fair dealing constitutes a “default” triggering an attorney’s fees clause in a commercial lease; and (3) the proper methodology for calculating attorney fee awards under the lodestar method. The division reversed the district court’s denial of the Association’s fee request against YZ Ranch, reversed the fee award to ECRD, and remanded with directions.
Background
This case arises from a dispute concerning Elk Creek Ranch, a residential development in Rio Blanco County, Colorado. Elk Creek Ranch Development, Inc. (“ECRD”) developed the property and created its homeowners’ association, Elk Creek Ranch Owners Association (the “Association”). ECRD also formed a separate entity, ECO, to serve as the Association management company. Meanwhile, YZ Ranch, LLC, the owner of property adjacent to Elk Creek, entered a lease (the “Lease”) with ECO as tenant that granted fishing access along Elk Creek to the Association’s members.
The Association brought suit against YZ Ranch for breaching the implied duty of good faith and fair dealing under the Lease, against ECO for breaching its management agreement with the Association (the “Management Agreement”), and against ERCD for violating the protective covenants that govern the development (the “Covenants”). At the close of evidence, the court dismissed the Associations claims against ERCD on statute of limitations grounds. The remaining claims went to trial, where the jury found in the Association’s favor against YZ Ranch and ECO.
Following trial, the parties filed multiple requests for postjudgment attorney fees. The Association sought fees from YZ Ranch under the Lease and from ECO under the Management Agreement; as for ECRD, it sought fees from the Association under the Covenants. On August 20, 2024, the district court denied the Association’s fee request against YZ Ranch—concluding that under the plain language of the Lease, YZ Ranch, as landlord, could never trigger the fee-shifting clause—while simultaneously granting the Association’s fee request against ECO and granting ECRD’s fee request against the Association. The granted fee requests were not reduced to sums certain until a subsequent order entered on April 4, 2025. The Association filed its notice of appeal on May 21, 2025.
The Division’s Analysis
Appellate Jurisdiction and Finality. As a threshold matter, the division addressed whether the Association’s notice of appeal was timely under C.A.R. 4(a), given that it was filed more than 49 days after the August 20, 2024 order denying its fee request against YZ Ranch. The division applied the two-part finality test from Luster v. Brinkman, 250 P.3d 664 (Colo. App. 2010), asking (1) whether the order completely resolved the rights of the parties as to the particular part of the action in which it was entered, and (2) whether the order was more than merely ministerial. The division concluded that because other parties’ fee requests remained pending and had not yet been reduced to sums certain, the August 2024 order did not finally resolve all fee-related matters. Relying on persuasive federal authority—Mayer v. Wall Street Equity Group, Inc., 672 F.3d 1222 (11th Cir. 2012), and In re Syngenta AG MIR 162 Corn Litigation, 61 F.4th 1126 (10th Cir. 2023)—the division held that piecemeal appeals of fee orders should be avoided when other fee requests in the same action remain outstanding. Accordingly, the final appealable order was the April 4, 2025 order reducing the granted fee awards to sums certain, making the Association’s May 21, 2025 notice of appeal timely under C.A.R. 4(a).
Fee-Shifting Under the Terms of the Lease. On the merits, the division reversed the district court’s denial of the Association’s attorney fee request against YZ Ranch. Section 11.15 of the Lease provided for attorney’s fees upon “a default on the part of either party in the performance of any of the terms and conditions of this Lease.” The district court had read the undefined, lowercase term “default” as coextensive with the defined term “Default” in Section 8.1—which referred only to a “Default by Tenant” (e.g., failure to pay rent)—and thus concluded that YZ Ranch, as landlord, could never trigger the fee clause.
The division disagreed, holding instead that an undefined term in a contract must be given its plain and ordinary meaning and is not interchangeable with terms that the same instrument defines elsewhere. Applying the plain-meaning definition of “default,” the division held that any breach of contract constitutes a “default” under Section 11.15. The division further held that because a breach of the implied duty of good faith and fair dealing is itself a breach of contract—not a separate tort or independent cause of action—the jury’s finding that YZ Ranch breached the implied duty of good faith and fair dealing under the Lease entitled the Association to reasonable attorney’s fees and costs from YZ Ranch under Section 11.15.
Attorney Fee Award Methodology. Finally, the division reversed the district court’s award of $1,261,649.10 in attorneys’ fees to ECRD under the Covenants. The district court found, and the division affirmed, that ERCD’s fee request was unreasonable because the matter was overstaffed and ERCD failed to isolate the fees it actually incurred from those incurred by YZ Ranch and ECO, parties that shared the same counsel. But rather than excluding these unreasonable hours before calculating the lodestar, the district court calculated the full lodestar first and then applied a flat twenty-five percent reduction.
The division held this was backwards under Payan v. Nash Finch Co., 2012 COA 135M. Under Payan and Hensley v. Eckerhart, 461 U.S. 424 (1983), the US Supreme Court instructed that to calculate the lodestar, courts must first determine the “reasonable number of hours expended by counsel” on the case by excluding the “excessive, redundant, or otherwise unnecessary” hours and then multiply these reasonable hours by the reasonable hourly rate. Applying Payan, the division reasoned thatan across-the-board percentage reduction after calculating the lodestar, like the district court applied here, inverts the proper methodology and constitutes reversible error.
Significance
This opinion offers several practical takeaways for Colorado practitioners. First, on appellate jurisdiction, the division’s holding establishes that in cases with requests for postjudgment attorney fees from multiple parties, a denial of one request is not final and appealable until all requests have been resolved and reduced to sums certain. Second, the decision underscores the importance of precise drafting in fee-shifting clauses. The division’s distinction between the undefined, lowercase term “default” and the specifically defined, capitalized term “Default” reinforces that courts will not conflate defined and undefined terms. Third, the division’s holding clarifies that a successful good-faith-and-fair-dealing breach can independently support an attorney fee award depending on the plain language of the contract’s fee-shifting clause. Fourth, the division’s treatment of the lodestar methodology reaffirms that courts must exclude unreasonable, excessive, and redundant hours before calculating the lodestar, not after. Courts may not shortcut the analysis by applying a blanket percentage reduction to a lodestar calculated from unfiltered hours.
For questions about this legal alert, please contact a member of the Davis Graham Appellate Group.