First Transit v. Colorado Springs

• Court: Colorado Court of Appeals
• Decided: October 21, 2021
• Docket: 20CA0346
• Status: Unknown

Opinion

20CA0346 First Transit v Colorado Springs 10-21-2021

COLORADO COURT OF APPEALS

Court of Appeals No. 20CA0346

El Paso County District Court No. 12CV81

Honorable Eric Bentley, Judge

First Transit, Inc.,

Third Party Plaintiff-Appellant and Cross-Appellee,

v.

City of Colorado Springs, Colorado,

Third Party Defendant-Appellee and Cross-Appellant.

JUDGMENT AFFIRMED

Division III

Opinion by JUDGE BROWN

Furman and Lipinsky, JJ., concur

NOT PUBLISHED PURSUANT TO C.A.R. 35(e)

Announced October 21, 2021

Littler Mendelson, P.C., Darren E. Nadel, Stephen E. Baumann II, David

Gartenberg, Denver, Colorado, for Third Party Plaintiff-Appellant and Cross-

Appellee

Wynetta P. Massey, City Attorney, Ryan D. Doherty, Assistant City Attorney,

Colorado Springs, Colorado; Sparks Willson, P.C., Eric V. Hall, Colorado

Springs, Colorado, for Third Party Defendant-Appellee and Cross-Appellant

1

¶ 1

In this contract dispute, third-party plaintiff, First Transit, Inc.

(First Transit), appeals the district court’s order entering summary

judgment in favor of third-party defendant, City of Colorado Springs

(City). The City cross-appeals the court’s order denying summary

judgment in its favor on an alternative ground. We agree with the

City that it was entitled to summary judgment on the alternative

ground, which obviates the need to resolve First Transit’s

contentions. Thus, we affirm the entry of summary judgment in

favor of the City.

I. Background

A. The UMTA

¶ 2

In 1964, Congress enacted the Urban Mass Transportation Act

(UMTA), 49 U.S.C. § 5333, to allow governmental entities to seek

federal funds to improve or acquire public mass-transit systems.

City of Colorado Springs v. Solis, 589 F.3d 1121, 1124 (10th Cir.

2009). In response to concerns that the provision of federal funds

would be used to destroy the collective-bargaining rights of

unionized transit workers, Congress included section 13(c) in the

UMTA, which “sets forth minimal standards that a [governmental]

transit authority must satisfy before it may receive federal funding.”

2

Id. at 1125 (quoting Burke v. Utah Transit Auth., 462 F.3d 1253,

1258 (10th Cir. 2006)); see also § 5333(b).

¶ 3

To that end, section 13(c) of the UMTA makes the protection of

employees’ interests under “protective arrangements” a condition of

financial assistance. § 5333(b)(1). Among other things, the

protective arrangements must include provisions necessary for “the

protection of individual employees against a worsening of their

positions related to employment.” § 5333(b)(2)(C). Agreements

entered into between governmental bodies and unions to satisfy

section 13(c) are commonly called “13(c) agreements.” Solis, 589

F.3d at 1125.

B. The 13(c) Agreement

¶ 4

In 1981, the City applied for federal funds under the UMTA to

assist in purchasing assets for its mass transit system. To facilitate

its receipt of federal funds, and as required by section 13(c) of the

UMTA, the City entered into a section 13(c) agreement (the 13(c)

Agreement) with Amalgamated Transit Union, Local 19 (ATU).

¶ 5

As relevant here, paragraph seven of the 13(c) Agreement

required the City to pay a “dismissal allowance” to “any employee

3

laid off or otherwise deprived of employment as a result of the

Project.”

¶ 6

The “Project” is defined in the first recital and in paragraph

one of the 13(c) Agreement. The first recital states that the City

filed an application under the UMTA “for capital assistance to assist

in the purchase of buses and other transit related facilities, as more

fully described in the project application (‘Project’).”

¶ 7

Paragraph one of the 13(c) Agreement states that “[t]he term

‘Project’ as used in this agreement shall not be limited to the

particular facility, service, or operation assisted by federal funds,

but shall include any changes, whether organizational, operational,

technological, or otherwise, which are a result of the assistance

provided.” Paragraph one also states:

The phrase “as a result of the Project” shall,

when used in this agreement, include events

occurring in anticipation of, during, and

subsequent to the Project and any program of

efficiencies or economies related thereto;

provided, however, that volume rises and falls

of business, or changes in volume and

character of employment brought about by

causes other than the Project (including any

economies or efficiencies unrelated to the

Project) are not within the purview of this

agreement.

4

C. South Services Contract

¶ 8

For decades, the City operated a mass transit system, which

included the Mountain Metro Transit system (commonly known as

the South Facility) and the Pikes Peak Regional Transit Authority

system (commonly known as the North Facility). Since at least

1981, the City received federal funds for the acquisition of assets for

and operation of both the South Facility and the North Facility.

¶ 9

In 2006, the City awarded First Transit1 a contract to operate

a fixed route bus service out of the South Facility (the South

Services Contract). The 13(c) Agreement (and a model 13(c)

agreement with identical terms) were attached to and specifically

incorporated into the South Services Contract when it was

executed. The 13(c) Agreement provided that any entity

undertaking the management or operation of the mass transit

system “shall agree to be bound by the terms of this agreement and

accept the responsibility for full performance of these conditions.”

1 The original contract was entered between Laidlaw Transit

Services, Inc., and the City. In 2009, Laidlaw merged into First

Transit and dissolved. First Transit succeeded to the rights and

interests of Laidlaw under the South Services Contract.

5

¶ 10

Section 7.29 of the South Services Contract, titled “13(c)

Requirements,” provides as follows:

1. Federal projects funded through Federal

Transit Administration grants are subject

to 13(c) (49 U.S.C. Section 5333(b))

employee protective arrangements. The

current City 13(c) agreements are

attached to this Contract and the terms

and conditions of the agreements flow

down to [First Transit] and are included

in the scope of the Contract. [First

Transit] agrees to be bound by and to

perform the obligations of the City’s

March 1981 13(c) Agreement and the

Model 13(c) Agreement. These obligations

include, but are not limited to, the

13(c)(1) and 13(c)(2) requirements to

preserve collective bargaining rights in

accordance with applicable law. The City

and [First Transit] agree that the

obligations required under this section

7.29 are limited to the performance of

[First Transit’s] obligations under this

Contract for the term of this Contract.

2. The City shall be responsible for any 13(c)

costs, claims, losses and/or liability

resulting from any City actions, including

any changes requested, mandated or

otherwise approved in writing by City.

[First Transit] shall be responsible for any

13(c) costs, claims, losses and/or liability

resulting from any [First Transit] actions

during the term of this Agreement that

are not requested, mandated or otherwise

approved in writing by City.

6

3. [First Transit] shall not negotiate or agree

to any labor agreement which extends

beyond the term of this Contract. [First

Transit] agrees not to accept or enter into

any labor agreement under this Contract

without prior written approval of the

terms and conditions of any such

agreement. Any labor benefits negotiated

between [First Transit] and [First

Transit’s] employees or [First Transit]

employee representatives which result in

costs in excess of the City’s appropriated

funds shall be the sole responsibility of

[First Transit].

D. Cessation of South Facility Operations

¶ 11

In 2009, the City notified First Transit “of the cessation of the

Operation of General Fund Fixed Route Services on December 31,

2009.” The notice explained that, “[d]ue to significant sales tax

funding shortfalls projected for 2010, the City of Colorado Springs

is unable to provide funding for the [South Services] [C]ontract.”

The City terminated the South Services Contract effective December

31, 2009, and directed First Transit “to plan the cessation of your

operations accordingly.”

¶ 12

First Transit ceased its operations under the South Services

Contract after December 31, 2009, and terminated the employment

of all South Facility employees effective January 1, 2010.

7

Seventy-four bus drivers, mechanics, and other employees — all of

whom were members of ATU — lost their jobs when First Transit

ceased South Facility operations.

II. Procedural History

¶ 13

In January 2010, ATU sent First Transit a letter asserting that

its members whose employment was terminated because of the

South Services Contract cancellation “are entitled to dismissal

allowances pursuant to Paragraph (7) of the [13(c)] Agreement.” In

July 2010, ATU filed a complaint against First Transit seeking an

order to compel arbitration of “claims made by ATU against First

Transit arising under the 13(c) Agreement.” The court ordered ATU

and First Transit to arbitrate ATU’s claims.2

¶ 14

In September 2010, First Transit filed a third-party complaint

against the City. First Transit asserted a single claim for

“Enforcement of Contract For Indemnification.” It alleged that

ATU’s claims were “the direct and necessary result of the City’s

2 Paragraph 15(a) of the 13(c) Agreement provided that, “in the

event of any labor dispute involving [First Transit] and the

employees covered by this agreement which cannot be settled

within thirty (30) days . . . such dispute may be submitted at the

written request of either [ATU] or [First Transit] to a board of

arbitration . . . .”

8

action . . . terminating the South Services Contract and mandating

the closure of the South Facility and termination of the South

Facility employees.” And it alleged that the City was “contractually

obligated to assume sole responsibility, indemnify and compensate

First Transit[] for any and all costs and liability resulting from the

ATU’s claims raised pursuant to the Section 13(c) Agreement.”

¶ 15

In May 2013, First Transit and the City filed a stipulated

motion to stay proceedings on the third-party claim “until the

claims between First Transit and ATU are resolved.” In support of

the motion, the parties explained that “the ATU must still establish

First Transit’s liability under the Section 13(c) Agreement in

arbitration. Accordingly, First Transit’s claim for indemnity is

anticipatory, in that its own liability must first be established before

its interest in seeking declaration of an indemnity obligation

ripens.” The court granted the motion and stayed proceedings on

the third-party complaint.

¶ 16

ATU and First Transit never arbitrated ATU’s claim. Instead,

they settled in December 2017. ATU agreed to release its claims

and First Transit agreed to pay ATU $1 million.

9

¶ 17

In February 2019, the district court lifted the stay and

permitted First Transit to amend its third-party complaint against

the City to assert an alternative claim for subrogation. It alleged

that “the City is primarily liable to ATU under the Section 13(c)

Agreement and the South Services Contract,” so “First Transit’s

payment to ATU is solely that of a subrogee that steps into the

shoes of the City for purposes of the City’s debt to ATU.”

¶ 18

In November 2019, the City and First Transit cross-moved for

summary judgment. First Transit argued that (1) the City was

contractually obligated to indemnify it for its costs and liability

resulting from ATU’s claim; (2) the City was obligated to subrogate

First Transit for its costs, liability, and expenses resulting from

ATU’s claim; and (3) it was entitled to summary judgment on the

amount of liability because the ATU settlement was reasonable.

¶ 19

The City argued, among other things, that (1) its obligation to

indemnify First Transit under section 7.29(2) of the South Services

Contract was never triggered because the termination of the

employment of ATU’s members was not “as a result of the Project”;

and (2) even if its indemnity obligation had been triggered, section

7.5 of the South Services Contract, which subjects the City’s

10

obligations under the South Services Contract to annual

appropriation, would bar recovery.

¶ 20

The district court held a hearing on the motions in January

2020. After the hearing, the district court granted the City’s motion

and denied First Transit’s.

¶ 21

The court rejected the City’s argument that its obligation

under section 7.29(2) was never triggered. The court explained that

“ATU brought a ‘13(c) claim’ — that is, a claim under the Section

13(c) Agreement — against First Transit in response to the layoffs of

its members at the South Facility.” It noted that it had previously

concluded that First Transit was bound by the 13(c) Agreement

when it compelled First Transit to arbitrate ATU’s claim under the

13(c) Agreement. And it explained that there was “substantial

evidence that First Transit incurred ‘losses’ and ‘liability’ as a result

of ATU’s 13(c) claim: it was forced to defend ATU’s lawsuit, and

ultimately settled the lawsuit for $1 million.” Accordingly, the court

denied summary judgment “on the City’s contention that [section

7.29 of the South Services Contract] was never triggered.”

11

¶ 22

However, the court still entered summary judgment in the

City’s favor based on section 7.5(a) of the South Services Contract,

which provides, in relevant part:

In accord with the Colorado Constitution and

City Charter, performance of the City’s

obligations under this Contract is expressly

subject to appropriation of funds by the City

Council. Further, in the event that funds are

not appropriated in whole or in part sufficient

for performance of the City’s obligations under

this Contract . . . then the City may terminate

this Contract without compensation to the

Contractor.

¶ 23

The court explained that section 7.5(a) incorporates the

Taxpayer Bill of Rights (TABOR), which requires voter approval

before creation of any “multiple-fiscal year direct or indirect district

debt or other financial obligation whatsoever without adequate

present cash reserves pledged irrevocably and held for payments in

all future fiscal years.” Colo. Const. art. X, § 20(4)(b). In light of

TABOR, the court concluded that section 7.5(a) “means the City

must be free in any given year to elect not to renew the Contract,

and it must be free to do so without a financial consequence of the

sort prohibited by TABOR.” Holding the City liable under section

7.29(2), the court reasoned, would run counter to section 7.5(a) and

12

TABOR because it would (1) make section 7.29(2) legally enforceable

against the City in future years and (2) require the City to

appropriate money and pay the obligation in future years.

III. Analysis

¶ 24

On appeal, First Transit contends that the district court erred

by concluding that (1) the City’s purported failure to allocate funds

for the South Services Contract “nullified” section 7.29(2) and

(2) TABOR “invalidates” section 7.29(2) of the South Services

Contract. On cross-appeal, the City argues that the district court

properly entered summary judgment on the ground that section

7.5(a) of the South Services Contract foreclosed First Transit’s

indemnification claim, but it contends the court erred by denying

summary judgment on the ground that its obligation to indemnify

First Transit under section 7.29(2) was never triggered.

¶ 25

Because First Transit’s appellate arguments are premised on it

being entitled to indemnity (or subrogation) under section 7.29(2) in

the first instance, we resolve the City’s cross-appeal first. We

conclude that the City had no obligation under section 7.29(2) to

indemnify or subrogate First Transit for the liability it incurred in

connection with ATU’s claim. Consequently, we need not reach the

13

issues First Transit raises regarding whether another provision of

the contract or TABOR relieved City of that obligation.

A. Standard of Review

¶ 26

We review both the grant of summary judgment and questions

of contract interpretation de novo. Ad Two, Inc. v. City & Cnty. of

Denver, 9 P.3d 373, 376 (Colo. 2000) (contract interpretation);

Montoya v. Connolly’s Towing, Inc., 216 P.3d 98, 103 (Colo. App.

2008) (summary judgment order).

¶ 27

Summary judgment is appropriate when the pleadings,

affidavits, depositions, and admissions establish that there is no

genuine issue of material fact and that the moving party is entitled

to judgment as a matter of law. C.R.C.P. 56(c); BA Mortg., LLC v.

Quail Creek Condo. Ass’n, 192 P.3d 447, 450 (Colo. App. 2008). We

afford all favorable inferences that may be drawn from the

undisputed facts to the nonmoving party, and we resolve all doubts

as to the existence of a triable issue of fact against the moving

party. Cotter Corp. v. Am. Empire Surplus Lines Ins. Co., 90 P.3d

814, 819 (Colo. 2004).

¶ 28

The party moving for summary judgment bears the initial

burden of demonstrating that there is no genuine issue of material

14

fact. Cont’l Air Lines, Inc. v. Keenan, 731 P.2d 708, 712 (Colo.

1987). Once the moving party has met this initial burden, the

burden shifts to the nonmoving party to establish a genuine issue

of material fact. Id. If the nonmoving party cannot produce

sufficient evidence to make out a triable issue of fact, a trial would

be useless, and the moving party is entitled to summary judgment

as a matter of law. Id. at 713.

B. Principles of Contract Interpretation

¶ 29

We construe an indemnity agreement in accordance with the

same principles that govern the interpretation of contracts

generally. Lafarge N. Am., Inc. v. K.E.C.I. Colo., Inc., 250 P.3d 682,

685 (Colo. App. 2010).

¶ 30

The primary goal of contract interpretation is to determine and

give effect to the intent of the parties. Ad Two, 9 P.3d at 376. In

determining the parties’ intent, we look primarily to the language of

the instrument itself. Id. And when several documents or contracts

are “part of a single transaction, they should be read together as a

whole, not in isolation, to determine the parties’ intent.” Bledsoe

Land Co. LLLP v. Forest Oil Corp., 277 P.3d 838, 842 (Colo. App.

2011).

15

C. Under the Plain Language of the Parties’ Agreement, the City

Does Not Have an Obligation to Indemnify First Transit for the

Amount it Paid ATU to Settle ATU’s Claim

¶ 31

Section 7.29(2) of the South Services Contract is titled “13(c)

Requirements” and provides that the City “shall be responsible for

any 13(c) costs, claims, losses and/or liability resulting from any

City actions, including any changes requested, mandated or

otherwise approved in writing by the City.” Throughout the

litigation, the parties appeared to agree that the phrase “[t]he City

shall be responsible for” means the City agreed to indemnify First

Transit.3 Under the plain language of the provision, however, the

City is only obligated to indemnify First Transit if (1) there is a 13(c)

cost, claim, loss, or liability, (2) resulting from any City actions.

¶ 32

The undisputed evidence presented on summary judgment is

that First Transit laid off members of ATU because the City

terminated the South Services Contract. The layoffs caused ATU to

3 In response to a question at oral arguments, counsel for First

Transit indicated that section 7.29(2) was not an indemnity

provision but instead created an obligation that the City subrogate

First Transit for amounts First Transit paid ATU, which is why First

Transit amended its third-party complaint against the City to

include a claim for subrogation. We address First Transit’s

subrogation claim in Part III.E.

16

assert a claim against First Transit for “dismissal allowances” under

the 13(c) Agreement. First Transit paid ATU $1 million in

settlement of ATU’s claim. Thus, it is undisputed that, if a 13(c)

cost, claim, loss, or liability exists, it resulted from a City action.

¶ 33

But the parties dispute whether First Transit’s claim for

reimbursement of the $1 million it paid to ATU in settlement of

ATU’s claim (and any associated litigation costs or attorney fees)

constitutes a 13(c) cost, claim, loss, or liability. To resolve this

dispute, we look to the plain language of the parties’ agreement. Ad

Two, 9 P.3d at 376.

¶ 34

Section 7.29(1) of the South Services Contract expressly

references the 13(c) Agreement, notes that the 13(c) Agreement is

attached, explains that “the terms and conditions of the [13(c)

Agreement] flow down to [First Transit] and are included in the

scope of the [South Services] Contract,” and provides that First

Transit “agrees to be bound by and to perform the obligations of the

[13(c) Agreement] and the Model 13(c) Agreement.” Indeed, both the

13(c) Agreement and an identically worded model 13(c) agreement

are attached to the South Services Contract. Because the South

Services Contract unambiguously incorporates the 13(c) Agreement,

17

we read these documents together to determine the intent of the

parties. Id.

¶ 35

We also note that “13(c)” is an adjective that modifies each of

the following successive nouns: “costs, claims, losses and/or

liability.” See People v. Lovato, 2014 COA 113, ¶ 24 (“[T]he first

adjective in a series of nouns or phrases modifies each noun or

phrase in the following series unless another adjective appears.”).

So, we read section 7.29(2) as making the City “responsible for”

13(c) costs, 13(c) claims, 13(c) losses, or 13(c) liabilities.

¶ 36

Given the express incorporation of the 13(c) Agreement into

section 7.29 of the South Services Contract, and based on the plain

language of section 7.29(2), it is clear the parties intended the

phrase “13(c) costs, claims, losses and/or liability” to mean any

costs, claims, losses, or liabilities owed under the 13(c) Agreement.

¶ 37

In its claim against First Transit, ATU asserted that its

members were entitled to “dismissal allowances” under the 13(c)

Agreement. Under the 13(c) Agreement, however, an employee is

only entitled to a dismissal allowance if they are “deprived of

employment as a result of the Project.” (Emphasis added.) The 13(c)

Agreement defines the Project as the City’s request “for capital

18

assistance to assist in the purchase of buses and other transit

related facilities, as more fully described in the project application,”

and is not “limited to the particular facility, service, or operation

assisted by federal funds, but shall include any changes, whether

organizational, operational, technological, or otherwise, which are a

result of the assistance provided.” (Emphasis added.) Further, the

phrase “as a result of the Project” includes “events occurring in

anticipation of, during, and subsequent to the Project and any

program of efficiencies or economies related thereto” but expressly

excludes “volume rises and falls of business, or changes in volume

and character of employment brought about by causes other than

the Project (including any economies or efficiencies unrelated to the

Project).”

¶ 38

The undisputed evidence presented on summary judgment

showed that the City’s termination of the South Services Contract

was due to an economic downturn and resulting budget crisis, not

due to its expenditure of federal funds. In other words, it is

undisputed that ATU’s members were not laid off “as a result of the

Project” and, therefore, were not entitled to dismissal allowances

under the 13(c) Agreement. Because ATU’s members were not

19

entitled to dismissal allowances under the 13(c) Agreement, First

Transit’s settlement payment to ATU does not constitute a 13(c)

cost, claim, loss, or liability for which the City is “responsible”

under section 7.29(2) of the South Services Contract.

D. First Transit’s Characterization of its Claim as a “13(c) Claim”

Does Not Alter the City’s Indemnification Obligation

¶ 39

First Transit does not appear to dispute that ATU’s members

were not, in fact, entitled to dismissal allowances under the 13(c)

Agreement. Instead, it contends that, because ATU asserted a

claim arising under the 13(c) Agreement, it does not have to

establish it actually owed ATU’s members dismissal allowances

under the 13(c) Agreement. In other words, First Transit contends

that the City has the obligation to indemnify it for the $1 million

settlement payment merely because ATU asserted a “13(c) claim”; it

does not matter whether the claim was valid or whether First

Transit had any legal liability to ATU under the 13(c) Agreement.

First Transit’s argument, however, ignores the distinction under

Colorado law between a duty to indemnify and a duty to defend.

¶ 40

The duty to defend is separate and distinct from the duty to

indemnify. Cyprus Amax Mins. Co. v. Lexington Ins. Co., 74 P.3d

20

294, 299 (Colo. 2003). The duty to defend pertains to an

indemnitor’s duty to affirmatively defend against pending claims.

See Const. Assoc. v. N.H. Ins. Co., 930 P.2d 556, 563 (Colo. 1996).

In contrast, the duty to indemnify relates to the indemnitor’s duty

to satisfy a judgment entered against the indemnitee. See id.

¶ 41

“[T]he duty to defend arises where the alleged facts even

potentially fall within the scope of coverage, but the duty to

indemnify does not arise unless the [contract] actually covers the

alleged harm.” Id. Thus, the determination of whether indemnity is

ultimately required “is a question of fact” that “typically cannot be

determined until the resolution of the underlying claims.” Cyprus,

74 P.3d at 301. Indeed, “the trigger for the duty to indemnify must

normally await a determination of actual liability” because

“indemnity flows from the nature of the ultimate verdict, judgment

or settlement.” Id.

¶ 42

In resolving indemnity disputes, a trial court should look to

how the underlying claims are stated, but “that cannot be the end

of the inquiry.” Id. Rather, the trial court must “look to the facts as

they developed at trial and the ultimate judgment.” Id. When the

“claims do not proceed through the crucible of trial, and instead are

21

settled by the parties, the analysis becomes more difficult” and the

court may look to extrinsic evidence to determine “whether and to

what extent actual liability, as represented by a verdict or

settlement, is covered” by an indemnity agreement. Id. at 301-02.

¶ 43

Here, although First Transit and ATU settled their dispute, the

underlying undisputed facts make clear that the actual liability

First Transit incurred was not covered by the indemnity agreement

reflected in section 7.29(2). The City terminated the South Services

Contract because of an economic downturn, so the ATU members

who were laid off did not lose their jobs “as a result of the Project.”

If ATU’s members did not lose their jobs “as a result of the Project,”

they were not entitled to dismissal allowances under the 13(c)

Agreement. If ATU’s members were not entitled to dismissal

allowances under the 13(c) Agreement, the amount First Transit

paid ATU to settle its claim is not a liability for which the City is

responsible.

¶ 44

If the City had a duty to defend First Transit under section

7.29(2) of the South Services Contract, our analysis would be

different. Then, the mere fact that ATU asserted a “13(c) claim”

against First Transit may have triggered the City’s duty to defend.

22

But First Transit does not contend that the City has a duty to

defend under section 7.29(2) of the South Services Contract, nor did

it demand the City defend it against ATU’s claims.

¶ 45

In support of its argument that its actual liability to ATU

under the 13(c) Agreement is irrelevant, First Transit primarily

relies on Missouri Pacific Railroad Co. v. Kansas Gas & Electric Co.,

862 F.2d 796 (10th Cir. 1988), and Burlington Northern Railroad Co.

v. Stone Container Corp., 934 P.2d 902 (Colo. App. 1997). Both

cases are distinguishable.

¶ 46

In Missouri Pacific, a utility company agreed to maintain safe

working conditions along railroad tracks running into a

construction site, including clearing the tracks of any obstruction,

in return for the furnishing of rail service to the premises. 862 F.2d

at 797. The agreement stated that the utility company shall

assume “full responsibility for, and shall defend, indemnify and

save harmless” the railroad company from “any and all” liability,

suits, claims, damages, and losses caused by a breach of the utility

company. Id. (emphasis added).

¶ 47

It was undisputed that the utility company obstructed the rail

track and caused injury to a railroad employee. Id. at 798. The

23

employee sued the railroad company under the Federal Employer’s

Liability Act (FELA), which provides that a railroad has the

nondelegable duty to provide its employees with a safe place to work

even when they are required to go onto the premises of a third party

over which the railroad has no control. Id. at 797. The railroad

demanded the utility company participate in negotiations to resolve

the employee’s claim. Id. at 798.

¶ 48

The utility company denied liability and refused to assume the

defense of the employee’s claim. Id. The railroad settled with its

employee and sought indemnity from the utility company. Id. The

utility company sought to avoid liability by claiming that the

railroad’s settlement with the employee was not reasonable. Id. at

800. In rejecting the utility company’s position, the Tenth Circuit

explained that, “[w]here an indemnitor denies liability and refuses to

assume the defense of a claim under a contract of indemnity, the

indemnitee, without waiving its rights, may enter into a good faith,

reasonable and prudent settlement with the claimant.” Id.

(emphasis added). It further explained that “[p]roof of absolute legal

liability or the actual amount of damages is not necessary in a

subsequent action for recovery against the indemnitor.” Id.

24

¶ 49

In Burlington, a landowner purchased industrial property

serviced by a railroad and was obligated not to place any material or

obstruction within a certain distance of the train track. 934 P.2d at

903. The landowner agreed to “indemnify [the railroad] and save it

harmless from and against any and all claims, demands, expenses,

costs and judgments arising or growing out of . . . injury . . .

occurring directly or indirectly by reason of any breach” of that

obligation. Id. at 905. It was undisputed that a railroad employee

was injured when he tripped over a board within the prohibited

area. Id. at 904. The employee sued the railroad under the FELA

and invited the landowner to participate in settlement negotiations.

Id. The landowner refused to participate, and the employee and

railroad company settled. Id.

¶ 50

Citing Missouri Pacific, the division in Burlington explained the

“process for determining the liability of an indemnitor when a single

claim against the indemnitee has been settled.” Id. at 906. It used

similar language as the Tenth Circuit, rejecting the contention that

the indemnitee must “prove absolute legal liability, the actual

amount of damages, or even the specific amount of a reasonable

settlement.” Id. Rather, like the Tenth Circuit, the division

25

concluded that “the indemnitee need only prove that it was

potentially liable to the claimant and that the settlement amount

was reasonably related to the liability exposure and the employee’s

injuries.” Id. Thus, it reasoned, “to encourage indemnitors to

honor their contractual obligations, as well as to encourage the

settlement of claims covered by the indemnity agreements, an

indemnitee need only prove that the underlying claim was settled

with the third party in good faith and reasonably.” Id. at 907.

¶ 51

First Transit relies on Missouri Pacific and Burlington to argue

that it need not prove its “absolute legal liability” to ATU in order to

be indemnified by the City; instead, it need only prove its “potential

liability” and that the settlement amount is reasonably related to

the 13(c) Agreement. See Burlington, 934 P.2d at 907. But Missouri

Pacific and Burlington are distinguishable in at least three important

ways.

¶ 52

First, when the Tenth Circuit in Missouri Pacific discussed the

railroad’s need to prove only its “potential liability,” the discussion

was clearly in the context of the FELA, which unquestionably does

not apply in this case. Mo. Pac., 862 F.2d at 800. The Tenth

Circuit explained that “the indemnitee ‘need only prove its potential

26

liability, a relatively simple showing under the strict FELA standards,

and that the settlement amount was reasonably related to its

employee’s injuries.” Id. (first emphasis added). Burlington also

involved a FELA claim. 934 P.2d at 904.

¶ 53

Second, the events triggering the indemnity obligations in

Missouri Pacific and Burlington indisputably occurred. In Missouri

Pacific, the utility company “constructed a temporary crossing over

the rail with dirt and rock in violation of” its agreement with the

railroad. 862 F.2d at 798. In Burlington, the employee was injured

after tripping over a board within a certain distance of the tracks,

which the landowner was obligated to keep clear. 934 P.2d at

903-04. Here, in contrast, the event triggering indemnity — a

payment due under the 13(c) Agreement — indisputably did not

occur. As a division of this court explained in Lafarge, nothing in

Burlington “indicates that the indemnitee need not prove that the

act of the indemnitor triggering the indemnitor’s liability occurred if,

as here, such an act is indeed required.” 250 P.3d at 688.

¶ 54

Third, and most important, the indemnitors in Missouri Pacific

and Burlington were subject to very broad indemnity agreements,

which included a duty to defend the railroad. Mo. Pac., 862 F.2d at

27

797 (utility company “shall defend, indemnify and save harmless”

the railroad); Burlington, 934 P.2d at 906 (“If the indemnitor denies

liability and refuses to assume the defense of the claim,” the

indemnitee “may enter into a good faith, reasonable settlement with

the claimant.”) (emphasis added). As explained above, the duty to

defend is much broader than the duty to indemnify and is triggered

by the nature of the claim itself without regard to the ultimate

liability. Here, the City had only the duty to indemnify. Thus, First

Transit had to prove that its actual liability fell within the scope of

the indemnity agreement. Cyprus, 74 P.3d at 301-02. It failed to

do so.

¶ 55

Thus, we reject First Transit’s argument that it need only show

its “potential liability” to ATU to be entitled to indemnity under

section 7.29(2) of the South Services Contract.

E. First Transit’s Claim for Subrogation Fails

¶ 56

Finally, First Transit contends the City was obligated to

subrogate First Transit for its costs, liability, and expenses resulting

from ATU’s claim. Although it is unclear to us whether the district

court resolved this claim, we nonetheless conclude that First

Transit did not assert a valid subrogation claim.

28

¶ 57

Subrogation is “the substitution of another person in the place

of a creditor, so that the person in whose favor it is exercised

succeeds to the rights of the creditor in relation to the debt.” Cotter

Corp., 90 P.3d at 833 (quoting Behlen Mfg. Co. v. First Nat’l Bank of

Englewood, 28 Colo. App. 300, 309, 472 P.2d 703, 707 (1970)).

Subrogation therefore allows a party who discharges another’s debt

to “stand in the shoes” of the subrogor. Id. at 834.

¶ 58

But First Transit has not discharged the debt of another and

does not seek payment from a liable third party. For First Transit

(the subrogee) to have a subrogation claim against the City (the

third party), ATU (the subrogor) must have had a claim against the

City that First Transit discharged. But ATU asserted its claim

against First Transit, which is the party responsible under the 13(c)

Agreement and the South Services Contract for addressing

employee claims under the 13(c) Agreement. And by paying ATU

$1 million, First Transit discharged its own obligation, not the

City’s.

¶ 59

First Transit’s claim against the City seeks reimbursement

from the City, from whom it has a direct contractual right of

repayment. Id. A claim for reimbursement is distinct from a claim

29

for subrogation; subrogation does not provide a remedy to a party

seeking to recover its own expenses. Id. Under the circumstances,

First Transit has no claim for subrogation.

¶ 60

In the end, we conclude that the district court erred by

denying the City summary judgment on the ground that the City

did not have the obligation to indemnify or subrogate First Transit

for its settlement payment to ATU under section 7.29(2) of the

South Services Contract, so we affirm the entry of summary

judgment on this alternative ground. See W. Colo. Cong. v. Umetco

Mins. Corp., 919 P.2d 887, 892 (Colo. App. 1996) (appellate courts

may affirm on grounds different from those of the trial court).

Because of our disposition, we need not address whether TABOR or

section 7.5 of the South Services Contract relieved the City of any

liability it had under section 7.29(2).

IV. Conclusion

¶ 61

We affirm the district court’s entry of judgment in favor of the

City.

JUDGE FURMAN and JUDGE LIPINSKY concur.