24CA0463, 24CA0995 & 24CA1400 MG Dyess v MarkWest 07-03-2025
COLORADO COURT OF APPEALS
Court of Appeals Nos. 24CA0463, 24CA0995 & 24CA1400 City and County of Denver District Court No. 23CV30585 Honorable Mark T. Bailey, Judge
M.G. Dyess, Inc., and M.G. Dyess LLC,
Plaintiffs-Appellees,
v.
MarkWest Liberty Midstream & Resources, L.L.C.,
Defendant-Appellant.
JUDGMENT AFFIRMED
Division II Opinion by JUDGE FOX Harris and Schutz, JJ., concur
NOT PUBLISHED PURSUANT TO C.A.R. 35(e) Announced July 3, 2025
Wheeler Trigg O’Donnell LLP, Meghan Frei Berglind, Denver, Colorado; Kilpatrick Townsend & Stockton LLP, Adam H. Charnes, Dallas, Texas; Kilpatrick Townsend & Stockton LLP, R. Lee Mann III, Atlanta, Georgia, for Plaintiff-Appellee
Snell & Wilmer L.L.P., James D. Kilroy, Ellie Lockwood, Denver, Colorado, for Defendant-Appellant ¶1 Defendant, MarkWest Liberty Midstream & Resources, L.L.C.
(MarkWest), appeals the district court’s judgment entered in favor of
plaintiffs, M.G. Dyess, Inc. and its successor-in-interest M.G. Dyess
LLC (collectively, Dyess), on their breach of contract claim.
MarkWest contends that the district court erred by excluding
certain evidence and giving an adverse inference jury instruction at
trial. We affirm.
I. Background
¶2 In August 2017 Dyess contracted with MarkWest to build
three lengths, or “spreads,” of natural gas pipelines, spreads 1A,
1B, and 2, in West Virginia (the contracts). Relevant for this
appeal, each contract specified that in exchange for building each
spread, MarkWest would pay Dyess allocated portions of a lump
sum once Dyess reached “satisfactory completion of a payment
milestone,” including 30% of the lump sum once Dyess reached
“Mobilization,” 40% at “Work Welded Out,” and the remaining 30%
at “Mechanical Completion.”
¶3 However, MarkWest could withhold 10% of the lump sum
(retainage), which would then be due “within forty five (45) days
after Project Completion and Work Acceptance.” “Work Acceptance”
1 was defined as when Dyess “submitted a Notice of Project
Completion,” and MarkWest accepted it, in writing, agreeing that
the work was complete. If MarkWest believed the work was not
complete, it had to issue a “Completion Rework Notice” to Dyess
advising “in writing of any deficiencies or defects in the Work” for
Dyess to remedy and achieve Work Acceptance. MarkWest agreed
to pay $41,249,100.45 for Dyess’s work under all three of the
contracts; 10% of this in retainage amounted to $4,124,910.05.
¶4 Each contract specified that if Dyess failed “to achieve
Mechanical Completion by the Mechanical Completion Date,” it
would pay MarkWest liquidated damages, to a maximum of
$4,500,000 (the late completion payments). If Dyess did not make
the required late completion payments, MarkWest had “the right to
offset such Late Completion Payments against any payments still
due under this Contract including but not limited to the final
payment and Retainage.”
¶5 Conflict arose between the parties as the project progressed,
however. In 2018 Dyess sued MarkWest, and MarkWest asserted
counterclaims in M.G. Dyess, Inc. v. MarkWest Liberty Midstream &
Res., L.L.C., No. 18CV34745 (City & Cnty. of Denver Dist. Ct.)
2 (Dyess I). On February 14, 2020, a jury awarded Dyess
$26,039,641 in quantum meruit damages for an unjust enrichment
claim, awarded MarkWest $4,500,000 in late completion payments
pursuant to MarkWest’s breach of contract counterclaim, and
rejected the parties’ other claims. M.G. Dyess, Inc. v. MarkWest
Liberty Midstream & Res., L.L.C., 2022 COA 108, ¶ 6. The district
court in Dyess I determined that the quantum meruit claim was an
equitable claim, accepted the jury’s verdict as advisory only, and
reduced Dyess’s damages to $934,436. Id. at ¶ 8. The district
court entered judgment on July 8, 2020.
¶6 A division of this court later reversed the Dyess I district
court’s decision to treat the jury verdict as advisory, concluding
that the quantum meruit claim was legal and not equitable. Id. at
¶¶ 19-21. The division remanded the case to reinstate the award
subject to the parties’ posttrial motions and to award both parties
pre- and post-judgment interest. Id. at ¶¶ 24, 37-38.
¶7 Because the division had affirmed the jury’s quantum meruit
liability finding, the Dyess I remand court simply offset MarkWest’s
$4,500,000 breach of contract judgment from Dyess’s $26,039,641
quantum meruit judgment, arriving at a net award of $21,539,641
3 (plus pre- and post-judgment interest) in favor of Dyess. The new
judgment was entered on December 27, 2023. MarkWest
challenged the remand court’s decision in a separate appeal, and
another division of this court affirmed the judgment as entered by
the remand court. M.G. Dyess v. MarkWest Liberty Midstream &
Res., LLC, slip op. at ¶¶ 12, 58 (Colo. App. No. 24CA0585, May 22,
2025) (not published pursuant to C.A.R. 35(e)).
¶8 While the Dyess I case was progressing, however, Dyess and
MarkWest began disputing whether MarkWest had to pay Dyess the
retainage, which led to a second case and this appeal. On January
20, 2020, shortly before trial commenced in Dyess I, Dyess sent
project completion notices for all three spreads and requested
payment. Dyess requested $4,081,182.83 in retainage (accounting
for a $43,727.22 partial payment MarkWest had made to Dyess).
¶9 On February 19, 2020, MarkWest responded by sending a
“Nonacceptance of Projection Completion and Completion Rework
Notice” (the nonacceptance notice). According to MarkWest, Dyess
had “not performed all Services required under the Contracts nor
ha[d] it fulfilled its outstanding obligations under the Contracts to
MarkWest’s satisfaction.” MarkWest specifically contended that
4 Dyess failed to “complete restoration of Number 2 Ridge Road” (the
Ridge Road restoration work), despite requests to do so, and failed
to compensate MarkWest for the cost of hiring another contractor to
complete this work. MarkWest also alleged that Dyess still owed
$4,500,000 in late completion payments and had submitted
insufficiently detailed project completion notices. As a result,
MarkWest refused to pay Dyess the retainage.
¶ 10 Dyess sued MarkWest on February 23, 2023, asserting a
breach of contract claim based on MarkWest’s failure to pay the
retainage. M.G. Dyess, Inc. v. MarkWest Liberty Midstream & Res.,
L.L.C., No. 23CV30585 (City & Cnty. of Denver Dist. Ct.) (Dyess II).
MarkWest asserted several affirmative defenses and a counterclaim
for breach of contract. As relevant here, MarkWest alleged that
Dyess’s request for retainage was barred by the contracts, which
allowed MarkWest to offset late completion payments against the
retainage. On November 16, 2023, after a four-day trial, the jury
awarded Dyess $4,451,182.84 in damages (several hundred
thousand dollars more than Dyess’s demand).
¶ 11 On December 7, 2023, MarkWest moved pursuant to C.R.C.P.
59 for a new trial or, alternatively, remittitur. The district court
5 declined the request for a new trial but agreed to reduce the jury’s
award to $4,081,182.83, the amount of Dyess’s demand. The
court’s February 7, 2024, judgment awarded Dyess $4,081,182.83
in damages with $1,441,924.06 in prejudgment interest, for a total
of $5,523,106.89.1 This appeal followed.
II. Issues on Appeal
¶ 12 MarkWest raises two issues on appeal. First, MarkWest
argues that the district court erred by excluding evidence that as of
February 2020, when MarkWest issued the nonacceptance notice,
Dyess owed $4,500,000 in late completion payments, which meant
it was in breach of the contracts. Second, MarkWest argues that
the district court erred by instructing the jury that it could presume
that spoliated evidence was adverse to MarkWest.
¶ 13 MarkWest posits that both errors require a new trial. We
conclude that the district court did not err in either instance, so we
affirm the district court.
1 The district court also later awarded Dyess attorney fees and costs
after finding that “MarkWest made claims and defenses in this action that lacked substantial justification under [section 13-17- 102, C.R.S. 2024].”
6 A. Evidence of the Jury’s Determination in Dyess I
1. Additional Background
¶ 14 Before trial in Dyess II, Dyess filed a motion in limine to
exclude any evidence of the Dyess I verdict awarding MarkWest
$4,500,000 in late completion payments. The Dyess I remand court
had not yet entered its December 27, 2023, judgment awarding
Dyess the netted quantum meruit damages, but MarkWest’s late
completion payment award was not in dispute.
¶ 15 Dyess argued that MarkWest was effectively seeking a double
recovery by trying to deny Dyess’s claim for the retained funds
based on the late completion payments in Dyess II while also using
this award to reduce Dyess’s quantum meruit damages in Dyess I.
Dyess contended that the issues in Dyess I had no bearing on the
retainage issue in Dyess II and would be irrelevant and prejudicial.
Instead, the only issue the jury had to decide was whether
MarkWest was entitled to any retainage reduction because of the
Ridge Road restoration work that MarkWest alleged Dyess failed to
complete.
¶ 16 Dyess further argued that once judgment in Dyess I was
entered, MarkWest was precluded under the doctrine of merger
7 from bringing a counterclaim on the grounds that the late
completion payments offset the retainage. Dyess thus requested
that any issue related to the Dyess I judgment be handled by the
court after trial.
¶ 17 MarkWest responded that it was seeking to use the Dyess I
judgment only to offset any retainage judgment. It explicitly agreed
that its “declaratory judgment claim and its affirmative defense of
offset or set-off should be decided by the Court and not the jury” to
avoid confusing the jury. MarkWest also reiterated that it did not
“dispute that its original claim for contract damages ‘merged into’ a
$4,500,000 judgment” and that it was not seeking to relitigate the
issue.
¶ 18 Notably, before MarkWest responded to Dyess’s motion in
limine, MarkWest also moved to preclude any evidence of Dyess’s
quantum meruit judgment and extracontractual work Dyess
performed, arguing it would be confusing and prejudicial.
¶ 19 Dyess argued that a jury instruction should be tendered
explaining that there was prior litigation between the parties but
that the jury’s verdicts in Dyess I were irrelevant. It also argued
that it would be improper to inform the jury of the late completion
8 payments award but not the quantum meruit award. But Dyess
opposed the request to exclude all evidence of extracontractual
work Dyess performed because evidence relating to the Ridge Road
restoration work was disputed in Dyess II.
¶ 20 The court ruled on both motions in limine, finding that the
jury verdicts in Dyess I had “little if any relevance,” and any
marginal relevance would be “substantially outweighed” by risks of
prejudice, confusion, or misleading the jury. The court agreed that
any question of whether to offset the retainage award with the late
completion payments judgment would be addressed after trial.
Finally, evidence of extracontractual work related to the quantum
meruit claim in Dyess I would be tentatively admissible, subject to
contemporaneous objections and the limitation that evidence or
discussion of the Dyess I jury’s verdicts was inadmissible.2
¶ 21 MarkWest and Dyess later submitted a joint stipulation before
trial. The parties agreed that the late completion payments offset
2 After trial, the Dyess II court declined to use the $4,500,000
judgment to offset any of Dyess’s retainage damages because once the Dyess I remand court used this judgment to offset Dyess’s quantum meruit damages, the judgment was not available to offset the retainage damages.
9 issue would be decided by the court after trial and agreed that the
court would tender the following jury instruction:
There has been a prior jury trial between these same parties involving this same construction project. That case is pending before another Judge in this courthouse and there are post- trial motions to still decide in that first case. I instruct you, as a juror in this case, as follows regarding the prior case between these parties:
a) the monetary claims in the prior jury trial are not before you;
b) the recovery, if any, by either party to the prior jury trial is not before you;
c) you should address and issue your decision solely on the claims at issue in this action;
d) You are not to perform any investigation or research on the Internet or in any other way, or take any other actions of any type to learn about the prior action or the outcome of it.
The parties also agreed “not to introduce evidence or make
arguments inconsistent with this instruction.” The court accepted
the joint stipulation, and the instruction was read to the jury at the
start of trial. It was also included in the written jury instructions.
¶ 22 At trial, the late completion payments issue arose during
MarkWest’s counsel’s cross-examination of Marshall Grant Dyess,
Dyess’s president. MarkWest’s counsel was inquiring about the
10 retainage and “project completion” portions of the contracts and
asked Mr. Dyess to confirm that to receive retainage Dyess had to
comply with all other contractual obligations, which Mr. Dyess
confirmed was correct. MarkWest’s counsel then began to ask, “So
let’s look at one of the obligations in the contract. On Page 5, . . .
late completion payments.” Dyess’s counsel asked to approach the
bench before Mr. Dyess could answer.
¶ 23 Dyess’s counsel argued that MarkWest was attempting to
introduce evidence of the late completion payments, but MarkWest
no longer had a claim on these grounds after the judgment in Dyess
I merged with MarkWest’s contractual right. MarkWest’s counsel
argued the questioning had “nothing to do with” offsetting damages
and the court’s motion in limine rulings on this point; instead,
counsel was seeking to explain that the late completion payments
were a “condition precedent” to retainage under the contracts.
MarkWest’s counsel contended that it was therefore proper to
explain that MarkWest’s refusal to pay retainage was based on the
missing late completion payments and that “as a matter of fact, a
jury decided that [Dyess] [was] liable for those late payments.”
MarkWest’s counsel added that “maybe we should have brought it
11 up earlier, but it’s undisputed that there is a finding that they
breached the late payment provision, and that is our whole case.”
¶ 24 Because it was late in the afternoon, the court dismissed the
jury and agreed to hear the issue further the next day. The next
day, Dyess’s counsel argued that MarkWest had never raised a
specific condition precedent argument in the pleadings in violation
of C.R.C.P. 9(c), and MarkWest could not raise the issue for the first
time during trial. Dyess also reiterated that after the judgment in
Dyess I there was no reason to discuss the late completion
payments with the jury now that the judgment had merged with
and extinguished any late payment contract claim. Dyess added
that Michael Hoy, a “designated corporate representative for
MarkWest,” testified in a deposition that the only reason for failing
to pay the retainage was Dyess’s alleged “[f]ailure to complete the
required scope of work as detailed in the original contract and scope
of work.”
¶ 25 MarkWest responded that C.R.C.P. 9(c) did not bar
MarkWest’s condition precedent argument and that it was
necessary to explain why MarkWest refused to pay the retainage by
referencing the late completion payments — and that “as a matter
12 of fact, it has been determined that there was a breach” of the
contracts in Dyess I. The court responded by asking, “So then are
we going to give [Dyess] . . . a chance to talk about all the money
that Dyess thought they were owed by MarkWest, and then that’s
why they didn’t pay?” MarkWest’s counsel argued this would be
irrelevant because Dyess’s quantum meruit claim was irrelevant to
Dyess II.
¶ 26 After a recess, the court denied Dyess’s request to completely
exclude discussion of the late completion payments, finding that
“this was central to what the parties were talking about during the
time of the alleged breach,” and declined to redact exhibits that
mentioned the late completion payments. But the court also
maintained that “neither party will be permitted to refer [to] or offer
evidence about the jury verdicts; i.e., who won and the amount of
damages in the prior case.” Dyess’s counsel reiterated its objection,
and MarkWest’s counsel asked to make an offer of proof later in the
afternoon.
¶ 27 When Mr. Dyess’s cross-examination resumed, MarkWest’s
counsel asked about the late completion payments. Mr. Dyess
agreed that Dyess could be forced to pay up to $4,500,000 if it
13 failed to achieve timely mechanical completion for all three spreads,
and he confirmed that mechanical completion occurred after the
contracts’ specified deadlines. Mr. Dyess also acknowledged that
the contracts allowed MarkWest to offset late completion payments
against any retainage owed and that “[n]o checks were written” to
make any late completion payments. On redirect, Dyess’s counsel
elicited testimony from Mr. Dyess that he believed MarkWest had
granted an extension for mechanical completion and that Dyess had
completed the spreads by this extended deadline. MarkWest’s
counsel did not object to these questions.
¶ 28 MarkWest’s counsel made the offer of proof later in the
afternoon, explaining that he would have elicited testimony showing
that (1) the Dyess I lawsuit began in December 2018, and the Dyess
II lawsuit began after Dyess submitted its project completion notices
in January 2020; (2) “during the trial of [Dyess I], the jury issued a
verdict finding that MarkWest did not breach the contract on any
level” but that “Dyess did breach the contract, and particularly [the
section] dealing with failure to make late completion payments,”
and that the verdict was affirmed on appeal; and (3) Dyess obtained
a quantum meruit verdict after MarkWest’s nonacceptance notice.
14 ¶ 29 MarkWest’s counsel added that Mr. Dyess’s redirect testimony
that Dyess had met the extended mechanical completion deadline
had “opened the door” to its proposed inquiry. MarkWest’s counsel
said it was now necessary to explain to the jury that the extension
argument and Dyess’s breach of contract claim were rejected in
Dyess I.
¶ 30 Dyess’s counsel then responded that Dyess had not opened
the door. MarkWest sought to introduce exhibits and testimony
about the late completion payments and the Dyess I verdict without
allowing Dyess to explain its position on the matter.
¶ 31 The court noted that it was concerned that MarkWest had
violated C.R.C.P. 9(c) by failing to plead what appeared to be its new
“condition precedent” defense: that Dyess’s failure to make the late
completion payments relieved MarkWest of its obligation to pay the
retainage. After reviewing deposition testimony, interrogatories,
and MarkWest’s answer, the court found that “MarkWest did not
plead this matter specifically and with particularity,” and it did not
allow the theory to go to the jury.
¶ 32 The court also denied MarkWest’s defense on the merits. The
court reasoned that after MarkWest’s $4,500,000 breach of contract
15 judgment in Dyess I was entered, Dyess no longer had a contractual
obligation to make the late completion payments because they had
merged with MarkWest’s judgment in Dyess I.
2. Analysis
¶ 33 MarkWest argues that the district court abused its discretion
by excluding evidence of the facts underlying the jury’s verdict in
Dyess I. MarkWest contends that its primary defense against
Dyess’s claim for retainage was that, at the time it sent the notice of
nonacceptance in February 2020, Dyess was in breach of the
contracts based on its failure to make the late completion
payments. It acknowledges that Dyess’s contractual obligation
regarding the late completion payments no longer existed once
judgment entered in Dyess I, but it points out that judgment had
not entered as of February 2020.
¶ 34 MarkWest argues it was prevented from telling the jury about
this evidence even after Dyess opened the door, thereby misleading
the jury into thinking that Dyess had met its contractual
obligations. It argues that if the jury had heard this evidence, it
“very well may have concluded that Dyess was not owed anything.”
16 ¶ 35 Dyess counters that the court did not err. It says that
MarkWest waived this argument and, even if it did not, the court
properly excluded the evidence because the court (1) acted
consistently with the joint stipulation; (2) correctly found that
MarkWest failed to sufficiently plead the matter in accordance with
C.R.C.P. 9(c); and (3) properly rejected the defense on the merits
because once the judgment in Dyess I was entered Dyess no longer
had any contractual obligation to pay the late completion damages.
Finally, Dyess argues that even if an error occurred it was
harmless.
¶ 36 As we explain below, the court did not err.
a. Standard of Review and Applicable Law
¶ 37 MarkWest preserved this issue for appeal through its offers of
proof, numerous discussions with the district court, and objections.
See Gebert v. Sears, Roebuck & Co., 2023 COA 107, ¶ 25.
¶ 38 “In general, all relevant evidence is admissible, and the
Colorado Rules of Evidence strongly favor admission of material
evidence.” Bly v. Story, 241 P.3d 529, 535 (Colo. 2010) (citations
omitted). But a district court may exclude relevant evidence “if its
probative value is substantially outweighed by the danger of unfair
17 prejudice, confusion of the issues, or misleading the jury, or by
considerations of undue delay, waste of time, or needless
presentation of cumulative evidence.” CRE 403.
¶ 39 “[T]rial courts have broad discretion to determine the
admissibility of evidence,” CORE Elec. Coop. v. Freund Invs., LLC,
2022 COA 63, ¶ 28, so we review “evidentiary rulings for abuse of
discretion,” Ronquillo v. EcoClean Home Servs., Inc., 2021 CO 82,
¶ 12. “A district court abuses its discretion when its decision is
‘manifestly arbitrary, unreasonable, or unfair, or based on an
erroneous understanding or application of the law.’” Gebert, ¶ 29
(citation omitted).
b. Application
¶ 40 The district court did not abuse its discretion when it refused
to allow the jury to hear MarkWest’s evidence relating to the late
completion payments. True, MarkWest’s answer alleged that
MarkWest could offset the late completion payments against a
retainage award and, generically, that “Dyess failed to satisfy
conditions precedent under the contracts.” But both parties agreed
the offset argument would be addressed by the court after trial.
18 ¶ 41 Despite its contentions otherwise, MarkWest — not Dyess —
opened the door to the testimony it now contends it needed to
respond to. During Mr. Dyess’s cross-examination, MarkWest’s
counsel brought up the issue of the late completion payments and
their connection to retainage. In response to MarkWest’s allegation
that it did not have to pay retainage because Dyess breached the
contract, Dyess argued that, at the time, it believed the deadline
had been extended. See Itin v. Ungar, 17 P.3d 129, 132 n.4 (Colo.
2000) (‘“[O]pening the door’ . . . often occurs when one party
introduces evidence that causes another party to introduce
counterproof that would otherwise be inadmissible but for the first
party’s introduction of the subject matter.”). MarkWest cannot
complain that Dyess was able to elicit this limited testimony when
MarkWest first raised the issue.
¶ 42 MarkWest insists that the Dyess II jury needed to hear that
the Dyess I jury found that Dyess breached the contract. But
MarkWest conceded at trial, and here on appeal, that once
MarkWest obtained its breach of contract judgment for the late
completion payments in Dyess I, any contractual right it may have
been able to maintain based on the late completion payments
19 merged into this judgment. See Restatement (Second) of
Judgments § 18(1) (Am. L. Inst. 1982) (“When a valid and final
personal judgment is rendered in favor of the plaintiff: (1) The
plaintiff cannot thereafter maintain an action on the original claim
or any part thereof . . . .”); see also id. § 18 cmt. a (Under the
doctrine of merger, “[w]hen the plaintiff recovers a valid and final
personal judgment, his original claim is extinguished and rights
upon the judgment are substituted for it. The plaintiff’s original
claim is said to be ‘merged’ in the judgment.”); id. § 21(1); id. § 21
cmt. a (“A defendant who interposes a counterclaim is, in
substance, a plaintiff as far as the counterclaim is concerned.”); cf.
Mortg. Invs. Corp. v. Battle Mountain Corp., 70 P.3d 1176, 1185
(Colo. 2003) (“When a creditor elects to sue on a promissory note
after a debtor defaults and the creditor obtains a judgment, the
note loses its identity and merges into the judgment.”).
¶ 43 Because Dyess’s obligation to pay late completion payments
merged into MarkWest’s breach of contract judgment, whether
Dyess breached the contract in this respect became irrelevant for
the Dyess II jury. We understand MarkWest’s argument that it
originally refused to pay the retainage because of the unpaid late
20 completion payments, but at the time of trial in Dyess II this was no
longer a valid basis for refusing to pay the retainage. And because
the jury could no longer use this theory as a basis to find that
MarkWest could refuse to pay retainage, it had no reason to hear
evidence on this argument. See Restatement (Second) of
Judgments § 18(1); see also Genova v. Longs Peak Emergency
Physicians, P.C., 72 P.3d 454, 459 (Colo. App. 2003) (“Under CRE
401, proffered evidence must relate to a fact ‘that is of consequence
to the determination of the action.’ . . . [T]he evidence must be
legally material to some factual issue in the case.”) (citation
omitted).
¶ 44 Indeed, had the jury ruled in MarkWest’s favor on these
grounds, it would have been improper because this would have
constituted a double recovery for MarkWest. See Lexton-Ancira Real
Est. Fund, 1972 v. Heller, 826 P.2d 819, 823 (Colo. 1992)
(“Generally, a plaintiff may not receive a double recovery for the
same wrong.”); see also Quist v. Specialties Supply Co., 12 P.3d 863,
866 (Colo. App. 2000) (The double recovery prohibition “applies in
cases involving multiple defendants as well as in cases involving
multiple claims against a single defendant.”). Had MarkWest’s
21 argument been successful, it could have allowed MarkWest to avoid
Dyess’s request for $4,081,182.83 in retainage in Dyess II, while at
the same time recovering $4,500,000 in late completion payments
through its judgment in Dyess I. Such an outcome would have
allowed MarkWest to use the breach of contract claim to benefit
twice.
¶ 45 Accordingly, admitting this evidence given its legal irrelevance
— coupled with a high risk of prejudice — would have been error.
Thus, the district court properly excluded it.
B. The Spoliation Instruction
¶ 46 Before trial, Dyess sought information and documents related
to MarkWest’s bidding process and efforts to hire another
contractor for the Ridge Road restoration work. Dyess contended
that MarkWest failed to preserve much of the documentation amid
active litigation in Dyess I despite knowing this issue would be
relevant for Dyess II. So Dyess requested a permissive adverse
inference instruction to remedy the spoliation. MarkWest opposed
the request, arguing it was untimely and Dyess had not shown that
MarkWest spoliated evidence or that Dyess was prejudiced.
22 ¶ 47 During trial, Dyess’s counsel cross-examined Michael Hoy
about the Ridge Road restoration work, discussing MarkWest’s file
management software system. Dyess’s counsel asked about
MarkWest’s efforts to solicit bids for the Ridge Road restoration
work, and Hoy eventually confirmed that MarkWest had been
unable to provide Dyess with “the bidding documents and
communications with the bidders for . . . Ridge Road.”
¶ 48 Dyess introduced an undated proposal that Hoy prepared after
MarkWest began seeking bids for the restoration work that outlined
the scope and requirements of the Ridge Road restoration work.
But Hoy confirmed that he could not locate any other
documentation concerning (1) what MarkWest sent to bidders;
(2) when he sent the proposal; (3) information bidders sent to
MarkWest; (4) the timeframe MarkWest provided for bids; and
(5) internally referenced exhibits in the proposal — or anything else
related to the bidding. Hoy agreed that Dyess had requested these
documents and that MarkWest had notice of the need to retain
them, but MarkWest had not preserved them. Hoy attributed their
disappearance to transitioning to a new file management software
system. Dyess contended this documentation was important
23 because it could have shown that MarkWest had sent the proposal
soliciting bids for the restoration work before it told Dyess it was
hiring another contractor. Dyess contended this could have shown
that MarkWest had planned to hire a cheaper contractor and use
Dyess’s reluctance to begin the restoration work without payment
assurances as a pretext to bill Dyess for the contractor’s work.
¶ 49 At a hearing (after the jury left), Dyess renewed its request for
a permissive adverse inference instruction after Hoy’s testimony,
and the court granted the request. The court noted that the
documentation, which was lost in the midst of active litigation, was
“highly relevant” to the credibility of witnesses and MarkWest’s
argument that it was entitled to offset portions of the retainage —
namely, its claim that it could offset the costs of the Ridge Road
restoration work (approximating $700,000). The court added that
an adverse inference instruction would serve remedial and punitive
purposes given the importance of the documents and noted that
MarkWest “did a really, really, really bad job of preserving the
documents when there was a case going on.”
¶ 50 MarkWest’s counsel requested that the instruction specify that
the jury could presume an adverse inference as to MarkWest’s
24 offsetting counterclaim against Dyess but not Dyess’s breach of
contract claim against MarkWest. But the court noted that the
current instruction already did this, detailing that the instruction
then read, “You’re instructed that you may infer, by reason of
MarkWest’s failure to preserve and produce its documents related
to the bidding and contracting work for the work at issue and its
counterclaim, that the evidence contained in such documents was
unfavorable to MarkWest.”
¶ 51 The next day MarkWest’s counsel notified the court that
MarkWest had decided “to withdraw the breach of contract
counterclaim.” But MarkWest’s counsel clarified that “we are
preserving our [declaratory judgment] offset counterclaim that [the
court] will decide if necessary post-trial.” MarkWest’s counsel then
moved to dismiss the counterclaim with prejudice, again noting that
it was dismissing “the breach of [contract] counterclaim, not the
offset counterclaim,” which the court granted.
¶ 52 MarkWest agreed this would require altering the jury
instructions. But, during the jury instruction conference, Dyess’s
counsel argued the instruction needed to cover more than just the
counterclaim because the spoliation of the Ridge Road documents
25 directly related to MarkWest’s defense that it did not have to pay
the retainage because of Dyess’s alleged failure to complete the
Ridge Road restoration work. MarkWest represented that it was not
seeking to offset any retainage with the Ridge Road restoration work
costs; rather, “[w]e are arguing they are not entitled to retainage; in
other words, they didn’t substantially perform the project.”
¶ 53 The instruction tendered to the jury, Instruction 12, was
tailored specifically to the Ridge Road restoration work, and it read,
It is the duty of a party not to take action that will cause the destruction or loss of relevant evidence, hindering the other side from making its own examination and investigation of all potentially relevant evidence. You are instructed that you may infer, by reason of MarkWest’s failure to preserve and produce documents relating to the RFQ for the No. 2 Ridge Road slip repair and remediation work in July or August of 2019, that the evidence contained in such documents was unfavorable to MarkWest.
¶ 54 MarkWest argues that the district court erred by instructing
the jury it could presume the evidence MarkWest spoliated was
unfavorable to its case. MarkWest argues that the evidence it lost
only related to its counterclaim, which it voluntarily dismissed, and
26 therefore the instruction was irrelevant to the issues before the
jury. As a result, MarkWest asserts, the instruction “only served to
paint MarkWest in a negative light,” “was highly prejudicial,” and
warrants a new trial.
¶ 55 Dyess counters that MarkWest forfeited this issue “by
submitting a conclusory opening brief” that fails to adequately cite
record support for its contentions. If the issue is reviewable, Dyess
argues that (1) it is undisputed that MarkWest spoliated evidence
that the court found MarkWest should have known to preserve, and
(2) the evidence was related to MarkWest’s contention that Dyess
was not entitled to retainage because Dyess failed to complete the
Ridge Road restoration work. Dyess argues that while MarkWest
used Dyess’s alleged failure to restore the road to justify its refusal
to pay retainage, the missing evidence could have shown that
MarkWest never wanted Dyess to complete this work and had been
trying to obtain other contractors to complete the work at a price
lower than its contract with Dyess. Finally, Dyess argues that any
alleged error was harmless.
27 a. Standard of Review and Applicable Law
¶ 56 MarkWest’s objections to the instruction preserved this issue
for appeal. See Gebert, ¶ 25.
¶ 57 “The ability to provide the jury with an adverse inference
instruction as a sanction for spoliation of evidence derives from the
trial court’s inherent powers. A trial court has broad discretion to
permit the jury to draw an adverse inference from the loss or
destruction of evidence.” Aloi v. Union Pac. R.R. Corp., 129 P.3d
999, 1002 (Colo. 2006) (citation omitted). We review a court’s
decision for an abuse of discretion, and “we will not overturn the
trial court’s imposition of an adverse inference unless the sanction
is manifestly arbitrary, unreasonable, or unfair. In determining
whether the trial court abused its discretion, we must examine
whether the rationales underlying the adverse inference supported
giving the instruction as a sanction for spoliation.” Id. (citation
¶ 58 To this end, “adverse inference instructions serve both a
punitive and a remedial purpose.” Id. The punitive purpose “serves
to deter parties from destroying evidence in order to prevent its
introduction at trial,” while the remedial purpose “serves to restore
28 the putative prejudiced party to the position it would have held”
absent spoliation. Id.
¶ 59 As for the culpable party’s state of mind, our supreme court
held in Aloi that there was “no useful distinction between destroying
evidence in bad faith and destroying evidence willfully.” Id. at 1003.
Therefore, it is not necessary for a district court to find that the
culpable party acted in bad faith to merit an adverse inference —
willfulness will suffice where it appears the evidence would have
been relevant to an issue at trial. Id. at 1002-04 (when a defendant
had notice of an impending lawsuit but failed to preserve
documents relevant to the litigation, this was sufficient for a finding
of willfulness justifying an adverse inference).
¶ 60 Further, the district court’s “inherent power to impose a
punitive sanction is not limited to intentional spoliation of
evidence.” Pfantz v. Kmart Corp., 85 P.3d 564, 568-69 (Colo. App.
2003). Negligence may justify an adverse inference “to remediate
harm when the inference is ‘reasonably likely to have been
contained in the destroyed evidence.’” Id. at 569 (quoting Rodriguez
v. Schutt, 896 P.2d 881, 884 (Colo. App. 1994)).
29 b. Application
¶ 61 The district court did not abuse its discretion by issuing a
permissive adverse inference instruction. To start, MarkWest does
not dispute that it spoliated evidence. And the negative inference
Dyess sought to introduce — namely, that MarkWest may have
already been soliciting bids for the Ridge Road restoration work
before it construed Dyess’s request for a commitment for payment
as a “refusal” — could have been substantiated by the missing
materials. See Pfantz, 85 P.3d at 569. Therefore, MarkWest’s
spoliation merited an adverse inference instruction to remedy its
conduct that was, at the very least, negligent. See Aloi, 129 P.3d at
1002-04; Pfantz, 85 P.3d at 568-69.
¶ 62 Further, the punitive and remedial purposes of an adverse
inference instruction were served here. The instruction served a
punitive purpose by punishing MarkWest for failing to preserve
relevant documents, preventing their introduction at trial. See Aloi,
129 P.3d at 1002. And the instruction served a remedial purpose
because Dyess would have been prejudiced by the materials’ loss
without an instruction allowing the jury to infer that they could
30 have been adverse to MarkWest. See id. As a result, the district
court did not abuse its discretion.
¶ 63 Furthermore, MarkWest’s argument that the documents only
related to its counterclaim lacks merit. MarkWest defended Dyess’s
breach of contract claim in part on a theory that Dyess had failed to
complete the Ridge Road restoration work. Indeed, MarkWest’s
nonacceptance notice explicitly refused Dyess’s request for
retainage on this ground. And MarkWest repeatedly emphasized
this argument during trial. Even after MarkWest withdrew its
counterclaim, it still maintained that Dyess was not entitled to
retainage because Dyess failed to complete the Ridge Road
restoration work. During closing arguments, for example,
MarkWest’s counsel argued that a Dyess witness
told us that he simply chose . . . to intentionally not complete restoration of No. 2 Ridge Road, . . . even though doing so was certainly within the contract scope of work. He acknowledged that. And there is no question that Dyess failed to restore No. 2 Ridge Road right-of-way in any fashion, and therefore failed to complete this project.
31 MarkWest’s counsel’s continuation of this argument takes up nearly
six pages of the transcript, and it was mentioned several more times
even after this.
¶ 64 Collectively, because MarkWest failed to preserve documents
directly relevant to Dyess’s breach of contract claim, and because
the permissive adverse inference instruction was appropriate and
served proper punitive and remedial purposes, the district court did
not abuse its discretion by giving the challenged instruction.
III. Disposition
¶ 65 We affirm the judgment of the district court.
JUDGE HARRIS and JUDGE SCHUTZ concur.