Veolia Water v. Antero

2024 COA 126, 564 P.3d 1089

• Court: Colorado Court of Appeals
• Decided: December 19, 2024
• Docket: 23CA0897
• Status: Published

Opinion

The summaries of the Colorado Court of Appeals published opinions constitute no part of the opinion of the division but have been prepared by the division for the convenience of the reader. The summaries may not be cited or relied upon as they are not the official language of the division. Any discrepancy between the language in the summary and in the opinion should be resolved in favor of the language in the opinion.

SUMMARY December 19, 2024

2024COA126

No. 23CA0897, Veolia Water v. Antero — Contracts — Breach of Contract — Terms — Incorporation by Reference; Torts — Economic Loss Doctrine — Intentional Fraud

A division of the court of appeals holds that in a contract

dispute over the construction of a hydraulic fracturing wastewater

treatment plant the district court did not err in finding that Veolia

Water Technologies, Inc. breached the contract and committed

fraud. The division also holds that the district court did not err in

considering representations made by Veolia via email and

incorporated into the contract via change order when rejecting

Veolia’s claim that Antero Resources Corporation instead breached

the contract. The division also affirms the district court’s damages

award. Finally, adding to the evolving application of the economic

loss rule in Colorado, the division holds that that the rule does not

bar Antero’s intentional tort fraud claims against Veolia because, here, Veolia’s common law tort duties are independent of its

contractual duties and of the implied duty of good faith and fair

dealing that exists in every contract. COLORADO COURT OF APPEALS 2024COA126

Court of Appeals No. 23CA0897 City and County of Denver District Court Nos. 20CV31008 & 20CV31009 Honorable Eric M. Johnson, Judge Honorable Marie Avery Moses, Judge Honorable Martin F. Egelhoff, Judge

Veolia Water Technologies, Inc.,

Plaintiff-Appellant and Cross-Appellee,

v.

Antero Treatment LLC, Antero Resources Corporation, Antero Midstream Partners LP, and Antero Midstream Corporation,

Defendants-Appellees and Cross-Appellants.

JUDGMENT AFFIRMED AND CASE REMANDED WITH DIRECTIONS

Division II Opinion by JUDGE FOX Johnson and Schock, JJ., concur

Announced December 19, 2024

Fox Rothschild LLP, Marsha M. Piccone, Risa B. Brown, Denver, Colorado; Mayer Brown LLP, Nicole A. Saharsky, Minh Nguyen-Dang, Washington, D.C.; Troutman Pepper Hamilton Sanders LLP, Misha Tseytlin, Chicago, Illinois; Troutman Pepper Hamilton Sanders LLP, Ralph A. Finizio, Robert A. Gallagher, Pittsburgh, Pennsylvania, for Plaintiff-Appellant and Cross-Appellee

Lewis Roca Rothgerber Christie LLP, Kenneth R. Rossman, IV, Kendra N. Beckwith, Denver, Colorado; Davis Graham & Stubbs LLP, James R. Henderson, Denver, Colorado; Vinson & Elkins, LLP, Marie R. Yeates, James D. Thompson, III, Stephanie L. Noble, Matthew C. Hoffman, Garrett T. Meisman, Houston, Texas, for Defendants-Appellees and Cross-Appellants Hall & Evans, LLC, Nicholas J. Deaver, Denver, Colorado, for Amici Curiae Colorado Defense Lawyers Association, DRI Center for Law and Public Policy, and the Colorado Civil Justice League

Berg Hill Greenleaf Ruscitti LLP, Geoffrey C. Klingsporn, Boulder, Colorado, for Amicus Curiae Gregory Klass ¶1 Veolia Water Technologies, Inc. (Veolia), appeals the district

court’s judgment in favor of Antero Resources Corporation and its

subsidiaries Antero Midstream Corporation, Antero Midstream

Partners LP, and Antero Treatment LLC (collectively, Antero), and

its attorney fees and costs award.

¶2 We hold that the economic loss rule does not bar Antero’s

intentional tort fraud claims against Veolia because, here, Veolia’s

common law tort duties are independent of its contractual duties

and of the implied duty of good faith and fair dealing that exists in

every contract.1 Accordingly, we affirm the district court’s judgment

and damages award and remand the case so the district court may

calculate reasonable appellate attorney fees and costs to Antero.

I. Background

¶3 This appeal concerns a dispute over a facility designed to treat

wastewater from natural gas hydraulic fracturing (fracking)

operations located in Pennsboro, West Virginia (Clearwater or the

1 Two amici have filed helpful briefs in this case — one in favor of

Antero and the other in favor of Veolia — urging different applications of the economic loss rule to claims for intentional torts like fraud.

1 facility).2 Antero primarily relied on “deep well injection” to discard

fracking wastewater in disposal wells, but, as this posed economic,

technological, and environmental challenges, it sought an

alternative solution. Antero approached Veolia to design and build

Clearwater to separate and crystallize the solids within fracking

wastewater to create waste salt to be landfilled, leaving water clean

enough to reuse or release into surface waterways.

¶4 On October 31, 2014, Veolia provided Antero with a “Bench

Scale Proposal” (the Proposal) for conducting preliminary

experiments to test Veolia’s processes and inform the potential

construction of a treatment facility. Antero authorized the work

reflected in the Proposal on November 26, 2014, and paid Veolia

$355,000 for this preliminary testing and analysis. Antero later

twice authorized interim “Limited Notice to Proceed” (LNTP)

agreements with Veolia, thus allowing Veolia to continue its

2 Veolia and Antero contractually agreed to litigate any suits related

to the facility in federal court in Denver, Colorado. But the federal court lacked jurisdiction as diversity does not exist between the two companies. As a result, the parties litigated the case in Colorado state court.

2 preliminary testing and improve its design before reaching a final

agreement. Antero paid Veolia $750,000 for each LNTP.

¶5 On August 18, 2015, Antero and Veolia entered into the

“Design/Build Agreement” (DBA), the principal contract governing

Clearwater’s construction. The DBA also explicitly provided that

the DBA, the Proposal, and the two LNTPs “set[] forth the entire

agreement between the Parties” unless the DBA was later modified

via written “Change Orders” executed by both parties. The DBA

specified that Veolia would be responsible for Clearwater’s design

and construction as a “turnkey facility.” Antero agreed to pay

Veolia $255,765,2533 (plus or minus additions or deductions

identified in the DBA) once Clearwater was completed. A Veolia

subsidiary, Veolia Water North America Operating Services, LLC

(VNA), would then operate the facility within specified guidelines.

¶6 As relevant here, the DBA contained two key requirements for

Clearwater, one relating to the characteristics of the waste salt and

the other relating to the facility’s power consumption. First, adding

to the Proposal’s representation that Veolia’s proprietary CoLD

3 The DBA’s original contract price was $239.8 million, but the

contract price was modified by a later executed change order.

3 process would provide a “zero liquid waste process” that could treat

wastewater to leave “a stable, non-hazardous solid for disposal

and/or re-use,” the DBA provided that the waste salt’s “Free

Liquids” requirement was “Pass, No free liquids.” The waste salt’s

“Total Solids” requirement was “no limit, must pass paint filter

test.” Second, the DBA restricted Clearwater’s power consumption

from exceeding 505,500 kWh/day with its “chillers” on or 340,000

kWh/day with its chillers off. Both requirements later proved

problematic.

A. Waste Salts

¶7 To treat wastewater influent using Veolia’s CoLD process, the

facility required lower temperatures than other treatment methods

and used three main stages. First, a “pretreatment” stage

separated grit and solids from the influent. Then, a thermal

“crystallizer train” treatment heated the influent to evaporate and

concentrate the wastewater before centrifuges separated the waste

salt from the water. The final “post treatment” phase sanitized the

separated water and removed any remaining contaminants.

¶8 The second stage of this process used four sequential

chambers, or “effects,” where wastewater was heated and

4 crystallized waste salt was separated. In Veolia’s original design for

Clearwater, the fourth effect used a single chamber, but on August

26, 2015 (after the DBA was executed), Veolia proposed a design

alteration, later designated as “Change Order 1” (CO-1).

¶9 As a cost-saving measure, Veolia proposed that it be allowed to

“split” the fourth effect into two separate chambers, chambers 4A

and 4B — each producing different waste salts — to decrease power

usage by reducing the need for the power-demanding “chillers.”

¶ 10 Antero was concerned about this change, however, as it

wanted to ensure that the waste salt Clearwater produced would be

dry because Antero planned to dispose of it in a landfill near

Clearwater. In the Proposal — expressly incorporated into the DBA

— Veolia promised to produce a stable and nonhazardous solid

waste salt. Relatedly, Antero’s landfill application, prepared in

October 2016 and February 2017 with its landfill contractor,

advised regulators that Antero anticipated the waste salt would be a

“fine[-]grained” “sand material” that could be sufficiently compacted

5 by bulldozers and earthmoving equipment driving over it without

the need for additional processing or solidification.4

¶ 11 Consistent with what Veolia promised in the Proposal it could

deliver to Antero, Veolia’s meeting minutes (of weekly Antero/Veolia

calls) dated September 22, 2015, noted that the waste salt would

“teepee” (i.e., pile up in a conical shape) in the truck in which the

salt was being loaded, requiring the truck to move periodically.

Again, in a September 29, 2015, email, Veolia employees explained

that one of 4B salt’s characteristics would be an “angle of repose”

(the salt teepee’s angle) of “41.5° +/- 3.5°” — consistent with

generating solid salt.

¶ 12 In a September 1, 2015, email, attached as an exhibit to CO-1,

Veolia’s Project Director, Michael Pietropaoli, represented that

splitting the fourth effect into two chambers would not change the

waste salt’s quality. But, unbeknownst to Antero, Veolia was aware

4 Because of the waste salt’s propensity to absorb water from the

air, to prevent liquification over time Antero planned to mix native soil into the salt or cover it with soil or tarps to avoid absorption, but did not plan to use additives to “solidify” the waste salt. In a “risk register” Veolia provided to Antero two months before CO-1 was signed, the risk of waste salt leaving the 4B effect as a liquid was not included — though the document did highlight that salt “[m]aterial can turn to mush if exposed for too long.”

6 that splitting the fourth effect risked causing the 4B waste salt to be

too unstable for Antero’s landfill plans. VNA (which would later

operate Clearwater) warned Veolia on August 26, 2015 (the same

day Veolia sent Antero the request to split the fourth effect) of

concerns with the 4B salt, noting, “How will a truck from [4B]

behave after sitting and/or after handling? While technically we

need to meet paint-filter at the centrifuge, we will all be in trouble if

[4B] material melts anywhere between the centrifuge and the

landfill.” Yet Veolia did not communicate these risks to Antero

before the DBA and CO-1 were executed.5

¶ 13 Having been assured of the stability of the waste salt leaving

the 4B effect, Antero approved splitting the fourth effect, thus

modifying the DBA per CO-1 on December 16, 2015.6

¶ 14 Clearwater began treating wastewater and producing waste

salt in 2017. While the 4A waste salt was solid as anticipated, the

5 Well after the August 2015 DBA and the December 2015 CO-1, a

Veolia employee told an Antero employee in a March 2016 email that the 4B salt would “not be granular” and would “carry more moisture.” 6 Antero’s signature on CO-1 is dated “12/16/18,” while Veolia

signed it on “1/8/16.” Testimony at trial indicated that the 12/16/18 date was a typo, as “Change Order 2” was signed in June 2016.

7 4B waste salt was consistently “soupy.” Because the 4B salt was so

wet and unstable, Antero was unable to landfill waste salt from the

4B effect without mixing in significant and expensive amounts of

“fly ash” (a fine powder residue produced from burning coal), which

Antero’s initial landfill permit prohibited.

¶ 15 Antero’s expert, Dr. Hubert Fleming, testified that the soupy

salt was likely the result of the split fourth effect, which caused the

4B effect to have a higher ratio of calcium chloride to sodium

chloride than anticipated because most of the sodium chloride was

removed in the 4A effect. This prevented sodium chloride from

producing a “stabilizing” effect on the calcium chloride that could

have occurred had they been treated within a single fourth effect.

The 4B salt issue was never resolved and Antero canceled the DBA

on September 12, 2019, after Veolia informed Antero that the salt

issue would not be resolved and disclaimed responsibility. Antero

subsequently halted operations at Clearwater, “mothballing” the

facility.

B. Power Consumption

¶ 16 Veolia split the fourth effect to meet the DBA’s power

consumption guarantee for Clearwater. Power consumption directly

8 affected Clearwater’s economic viability. The power consumption

guarantee changed several times as the DBA was negotiated and as

the plan to split the fourth effect took shape.

¶ 17 On May 20, 2015, Veolia calculated that Clearwater’s total

expected power usage would be 395,759.4 kWh/day (with chillers

on) to treat 60,000 barrels of wastewater per day. This estimate

assumed that Clearwater would require seven chillers (six active

chillers with one nonactive backup chiller) running twenty-four

hours a day for 105 days per year. Brad Biagini, a former senior

process engineer with Veolia, testified that the chillers represented

a significant portion of the facility’s power needs, “on the order of

40[%] of the overall power demand.”

¶ 18 In a draft power consumption guarantee Veolia sent to Antero

on August 6, 2015, shortly before the DBA was executed on August

18, Veolia proposed an increased power guarantee of 450,615

kWh/day with chillers on and 278,615 kWh/day with chillers off.

But internal Veolia emails dated August 10 and 11, 2015, indicated

that Veolia had underestimated its chiller needs and feared it might

surpass its most recent, increased power guarantee limits. Mark

Wozniak, Veolia’s senior engineering advisor, informed managers

9 that, based on his calculations, two more chillers (totaling nine

active chillers) would be required — a significant power increase

that would exceed the then-current power guarantees. When Lnsp

Nagghappan, VNA’s vice president of business development, learned

of this, he responded to Veolia: “Why this increase at the last

minute. We changed power multiple times. We had a tough time 2

weeks ago when we increased power demand by 20%. Now another

increase. Can we optimize the design to avoid this increase.” Jim

Rieke, Veolia’s director of process design, noted, “This is extremely

upsetting. We knew that this interface point was important to get

right and still somehow dropped the ball. Now we might not have

an option but to split the 4th effect.”

¶ 19 Veolia’s internal meeting minutes from an August 11, 2015,

team meeting indicate that the change to split the fourth effect was

to address this increase in power demand. The header read,

“Chiller Power — There is an issue with the current design — it

exceeds power requirements and we are investigating a work

around by splitting the 4th Effect in half.” The meeting notes

further documented, “If we split the 4th Effect, there is an

opportunity to save $1mm . . . for the redesign. If we do nothing,

10 we need to put in 2 more chillers and are over our power

requirements.” The minutes recommended, “Downplay the splitting

change, no warranties would change and the benefits of less power

consumption . . . . No more than 4 chillers are needed, if we

proceed with the 4A/4B option.”

¶ 20 On August 13, 2015, Veolia proposed to Antero the later

finalized power guarantee in the DBA of 505,500 kWh/day with

chillers on and 340,000 kWh/day with chillers off. Later that day,

Biagini sent Veolia employees an updated power usage projection,

assuming ten chillers (with one nonactive backup) would be

running twenty hours a day for 105 days per year and including a

10% “safety factor” to account for unanticipated power needs, now

totaling 498,020 kWh/day (or 452,745 kWh/day without the safety

factor).

¶ 21 Wozniak’s reply noted that, according to his calculations, the

power rate could be nearly 20,000 kWh/day higher than Biagini

estimated before applying the 10% safety factor. Or — assuming

the absolute maximum power rate that the chillers could run (as

the manufacturer represented) — the rate could be 34,511

11 kWh/day higher (though Biagini argued that the 10% safety factor

would not be added to the maximum power rate).

¶ 22 While Biagini agreed with Wozniak’s calculations, he noted

that a difference between their analyses was that Biagini looked at

predicted power rates that assumed Clearwater’s “final completion

performance test” (FCPT) would be conducted in cooler months

(November to February). Thus, Biagini’s predictions were based on

a lower energy demand, so his “chillers on” analysis was more

conservative (hence the twenty-hour-a-day run time), while Wozniak

was looking at energy use in summer months with a higher energy

demand. None of the information contained in Veolia’s internal

meeting notes or emails was shared with Antero before the

execution of CO-1.

¶ 23 Despite ongoing power concern conversations and the risk

identified in the emails that the chillers would exceed Veolia’s power

consumption guarantee, the DBA was executed days later on

August 18, 2015, and included a power guarantee of 505,500

kWh/day with chillers on or 340,000 kWh/day with chillers off.

But when CO-1 was implemented, Veolia proceeded with the new

12 split fourth effect design, significantly reducing the number of

chillers required.

C. Mechanical Failures and Contractual Delays

¶ 24 In operation, Clearwater faced repeated mechanical failures

that led to outages, prevented Clearwater from reaching its full

operating capacity, and caused frequent shutdowns. Antero’s

director of water operations, Conrad Baston, testified to several

problems the facility faced, including, for example, the following:

• “[B]elt presses” meant to last “months or a year” tore and

broke within days, causing sludge from the pretreatment

stage to build up and overflow into the thermal train.

• “[S]tructural steel” design repairs to “prevent collapse”

caused a month-long shutdown.

• Repairs to “thermal oxidizers” were required to prevent

volatile organic compounds from escaping into the

atmosphere.

• The facility produced treated effluent that surpassed

“chronic toxicity” testing limits and thus could not be

discharged into the surface water.

13 • “[S]olid contact clarifier” (SCC) rakes seized multiple

times due to overly dense sludge, causing immediate

shutdowns so sludge could be vacuumed out of the

pretreatment chambers, an issue that continued through

March 2019, just two weeks before Veolia’s first

“substantial completion performance test” (SCPT)

attempt.

¶ 25 According to Fleming, Antero’s expert, the “design basis” for

Clearwater was not based on the water samples that Antero

provided. Instead, it employed a “midpoint design basis” that tried

to calculate the expected average constituents in Antero’s

wastewater rather than testing the provided water samples to

determine the actual minimum and maximum ranges of

constituents. Fleming testified that the midpoint design basis did

not conform to prudent industry standards because the facility

would not be appropriately designed to treat wastewater with low or

high ranges of contaminants; instead, the facility would only

function at the assumed single average contaminant level.

¶ 26 VNA and an external third-party report (commissioned by

Veolia) detailed ways to help fix the problems at Clearwater, but

14 Veolia passed on implementing the recommended mitigation

measures.

¶ 27 Between the 4B waste salt problems and mechanical and

design failures, Clearwater never met some of the DBA’s crucial

contractual “milestones.” Most importantly, by September 23,

2017, Clearwater had to pass a SCPT, and by December 12, 2017,

it had to pass a FCPT.

¶ 28 Veolia attempted two SCPTs, the first in March 2019 and the

second in August 2019, and argued Clearwater had passed. Antero

disagreed and, regardless, contended that Veolia had not completed

the required “Work” under the DBA or met the SCPT process

requirements.

¶ 29 The DBA defined Veolia’s required “Work” as “the design,

project management, supervision, procurement, construction,

testing, commissioning, startup, and, during the Interim Operations

Period, operation and maintenance . . . described in this Agreement

for the turnkey supply by Veolia to Antero of the Facility in

accordance with the Scope of Work hereunder.”

¶ 30 Regarding the waste salt specifically, the parties contested

whether the waste salt met the paint filter test and the DBA’s

15 requirements. Veolia informed Antero on August 29, 2019, that it

wished to proceed with a FCPT on September 16, 2019. Protesting

that Veolia’s Work had not been completed and that Clearwater had

not passed a SCPT, Antero terminated the DBA on September 12,

2019.

II. The District Court’s Findings

¶ 31 Veolia and Antero separately sued each other in March 2020,

and the cases were consolidated. As relevant here, Antero brought

claims for breach of contract and fraud. After a lengthy bench trial,

the district court issued detailed findings of fact and conclusions of

law.

¶ 32 The district court found that Veolia breached the DBA by

failing to meet the DBA’s SCPT and FCPT deadlines. It found that,

even if Veolia had completed a SCPT, it never completed a FCPT.

As a result, the district court found that, per DBA article 16.4.2,

even if Veolia had passed the SCPT in March 2019, delay liquidated

damages (DLDs) began to accrue and hit the DLD cap (10% of the

DBA’s value) in June 2019, causing Veolia to default.

¶ 33 The district court also found that Veolia breached the DBA

and CO-1 by failing to provide compliant 4B waste salt. The district

16 court found that CO-1 created specific salt requirements when it

incorporated by reference Pietropaoli’s September 1 email (Exhibit 1

to CO-1). The soupy salt leaving the 4B centrifuge could not be

placed in a landfill without solidification, thus violating the terms of

the DBA (and CO-1).

¶ 34 The district court further found that Veolia failed to construct

Clearwater in accordance with “[p]rudent [i]ndustry [p]ractices” as

defined by the DBA, failed to deliver to Antero a turnkey facility,

and did not complete the Work required by the DBA. This, along

with Clearwater’s failure to produce compliant waste salt, meant

that Veolia had breached the DBA (and CO-1).

¶ 35 As for Antero’s fraud claims, the district court first found that

Veolia fraudulently induced Antero to sign the DBA by failing to

disclose that Clearwater could not meet the power consumption

guarantee while misrepresenting otherwise and by failing to disclose

why it was redesigning Clearwater to split the fourth effect. The

district court also found that Veolia fraudulently induced Antero

into signing CO-1 because it failed to disclose the risks of splitting

the fourth effect while “fraudulently representing it would deliver

stable, solid salt waste.”

17 III. The District Court’s Damages Award

¶ 36 The district court found that the “economic loss rule” did not

bar Antero’s recovery of damages for fraud. It reasoned that the

economic loss rule did not apply because, at the time of Veolia’s

misrepresentations, there was no contract with Antero because the

Proposal and the LNTPs did not form a “network of interrelated

agreements.”

¶ 37 In determining the amount of damages, the district court first

found that a “benefit-of-the-bargain” approach was the proper

measure of damages for both Antero’s breach of contract and fraud

claims. The court generally credited the damages calculation from

Dr. Stephen Becker, Antero’s damages expert, totaling

$253,309,102, but it applied a “discount rate” in the range

suggested by Michael Emmert, Veolia’s damages expert, to reduce

that amount to $144,105,246. The district court also rejected the

argument that this benefit-of-the-bargain approach was actually a

form of lost profits damages, or “consequential damages,” which the

DBA barred.

¶ 38 The district court next awarded Antero its incremental out-of-

pocket costs — costs Antero would not have incurred had

18 Clearwater been designed and delivered in accordance with the

DBA. Becker testified that these costs amounted to $88,657,845.

The district court agreed for the most part and found that Antero

had proved these costs by a preponderance of the evidence, less

$16,646,795 in expenses incurred after December 2017 for

“trucking, pit and commissioning expenses,” resulting in

incremental out-of-pocket damages of $72,011,50.

¶ 39 Turning to Antero’s unpaid DLDs, the court found that Veolia

failed to prove that the delays were attributable to Antero, and

because it was undisputed that Veolia failed to meet the DBA’s

critical milestones, the court determined that Antero was entitled to

$25,576,525 in unpaid DLDs. The court also found that Antero

was entitled to attorney fees.

¶ 40 The district court then moved to the DBA’s limitation on

damages in article 25.2, providing that “in no event shall Veolia be

liable, alone or in the aggregate, to Antero for any Losses in excess

of an amount equal to sixty (60%) of the Contract Sum”

($153,459,152.35), except for, as relevant here, any liability arising

from “gross negligence, fraud or willful misconduct.” The district

court found that Veolia had fraudulently induced Antero to execute

19 the DBA and CO-1 and that Veolia’s design and operations of

Clearwater, the facility’s mechanical failures and salt issues, and

Veolia’s failure to implement any recommended changes constituted

gross negligence and willful misconduct. It thus concluded that the

DBA’s liability limitation did not apply.

¶ 41 The district court therefore ordered that Veolia pay the (1)

benefit-of-the-bargain damages; (2) incremental out-of-pocket

damages; and (3) DLDs. In sum, the district court awarded the

following damages to Antero:

Damages Category Amount Benefit-of-the-Bargain Damages $144.1 million Incremental Out-Of-Pocket $72.0 million Costs Delay Liquidated Damages $25.6 million Subtotal $241.7 million

¶ 42 When Veolia later pointed out that Antero owed an unpaid

balance of $26.6 million under the DBA, the district court reduced

Antero’s damages by that amount for a final subtotal of $215.2

million (before pre- or post-judgment interest).

20 IV. Issues on Appeal

¶ 43 On appeal, Veolia raises five main contentions: (1) the district

court erred by creating a new waste salt requirement when it

incorporated the emails included as exhibits to CO-1 into the DBA;

(2) the district court erred by finding that Antero did not breach the

DBA by providing influent with “abnormal substances”; (3) the

economic loss rule barred Antero’s fraud claims, and, regardless,

the DBA’s damages cap could not have been reached, so the court

did not need to reach Antero’s fraud claims; (4) Veolia never

fraudulently induced Antero into signing the DBA or CO-1; and

(5) the district court erred by using a benefit-of-the-bargain

approach, instead of a cost-of-repair approach, in calculating

Antero’s damages.

¶ 44 Veolia also argues, in the alternative, that the district court’s

approach to determining Clearwater’s market value applied the

wrong legal standards. Veolia also requests appellate attorney fees

per the DBA.

¶ 45 Antero, in turn, disputes each contention and urges us to

affirm the district court. Antero’s “conditional” cross-appeal argues

that if we conclude that the district court’s benefit-of-the-bargain

21 damages approach (which incorporated future income

considerations) is a form of lost profits or consequential damages

otherwise barred by the DBA, then the DBA’s article 25 damages

limitation exception should apply. Antero also requests appellate

attorney fees.

V. Waste Salt Breach of Contract

¶ 46 Veolia contends that the district court erred by finding that

Veolia breached the DBA by producing 4B waste salt that did not

meet the DBA’s requirements. Focusing on the waste salt’s

chemical composition, Veolia argues that that the DBA’s “Table 2”

clearly identified the required waste salt composition; and the only

moisture requirement was that the salt not contain “free liquids.”7

Veolia further argues that free liquids are tested with the paint filter

test, which it contends was consistently met.

¶ 47 Yet the district court found that Veolia breached the DBA

because it never satisfied the requirements in Pietropaoli’s

September 1, 2015, email (Exhibit 1 to CO-1). Because the email

7 Veolia also contends that Table 2’s “Total Solids – no limit, must

pass paint filter test” requirement means that the paint filter test is the only liquid/solid waste salt specification.

22 was incorporated into the DBA, it imposed express requirements,

and the court found that “the Parties’ indisputable intent was to

include the . . . September 1, 2015 email, and the other emails and

documents attached as Exhibit 1, as part of the terms of [CO-1].”

Because the 4B waste salt never met the salt’s physical state

requirement, the district court found that Veolia breached the DBA.

A. Standard of Review

¶ 48 “The interpretation of a contract is a question of law that we

review de novo. Whether contract terms have been incorporated by

reference into a contract is also a question of law subject to de novo

review.” French v. Centura Health Corp., 2022 CO 20, ¶ 24 (citation

omitted). We defer to the district court’s factual findings “unless

they are clearly erroneous.” Id.

¶ 49 When “interpreting a contract, our primary goal is to give effect

to the parties’ intent.” Id. at ¶ 25. And “it has long been settled

that contracting parties may incorporate contract terms by

reference to another document. In Colorado, for an incorporation

by reference to be effective, ‘it must be clear that the parties to the

agreement had knowledge of and assented to the incorporated

terms.’” Id. at ¶ 29 (citations omitted).

23 ¶ 50 So, for extrinsic terms to be incorporated into a contract by

reference “the terms to be incorporated generally must be clearly

and expressly identified,” while “[g]eneral or oblique references to a

document to be incorporated, in contrast, are usually insufficient to

support a finding that the document was incorporated by

reference.” Id. at ¶¶ 30-31.

B. Analysis

¶ 51 We conclude that the terms detailed in Pietropaoli’s September

1 email were added to the DBA as part of CO-1 and created specific

requirements for the waste salt consistent with Veolia’s obligations.

The record supports the district court’s finding that Veolia breached

the DBA by failing to meet these physical property requirements.

¶ 52 CO-1 first mentioned the emails to be incorporated in its

introductory recitals, which provided, in part, as follows:

(1) Veolia identified and presented to Antero the following design optimizations and associated changes to . . . material of construction optimization, as described under Section “Corrosion Risk Reduction Discussion” of Veolia’s letter dated August 26, 2015 and subsequent email by Veolia dated September 1, 2015 Included in Exhibit 1 . . . .

(2) Antero and Veolia . . . reviewed and agreed to the proposed design optimizations, per

24 Veolia . . . and Antero’s emails dated September, 3, 2015 Included in Exhibit 1 . . . .

Pursuant to Section 5.1 of the Agreement, Veolia and Antero hereby agree to the following changes to the Agreement.

The exhibits attached to CO-1 detailed specific changes to the DBA.

¶ 53 Exhibit 1 contained the September 3, 2015, emails from Mark

Kachmar, Antero’s manager of completions and water, and John

Brinker, VNA’s vice president of major projects. Kachmar’s email

explained, regarding the fourth effect split, that “Antero approves

the described design changes as proposed in the 8/26/15 technical

memo and supported by the emails below describing that no cost or

schedule impacts to either the [Veolia] or VNA contract will occur

due to these changes.” (Emphasis added.) Brinker’s email stated,

“VNA confirms the design change is acceptable with no changes to

our contractual obligations, performance guarantee or price

required.”

¶ 54 Pietropaoli’s September 1 email, included below these

statements, made several representations about the fourth effect

split redesign, “confirming,” for example, that “the design change

can be implemented with no additional cost over the contracted

25 value” and “that the design change does not [compromise] Antero’s

ability to recover byproducts in the future when compared to the

originally contracted scope.”

¶ 55 Most importantly, it provided,

Veolia confirms that the salt quality from 4B will be suitable stable for the envisaged landfill strategy. This is based on previous test work at similar ratios of NaCl to CaCl2‐2H2O (1:1 ratio) that were likely to occur with separate removal of an NaCl byproduct salt. This test work showed 4 hours plus stability at worst case temperature/humidity before visible signs of liquefaction began to occur.

¶ 56 Pietropaoli unambiguously confirmed that the 4B waste salt

would be “suitable stable” so that it could be landfilled. And

Pietropaoli added that this confirmation was based on previous

testing. Antero and Veolia knew the terms Pietropaoli referenced

and understood that Veolia’s representations would bind it. See

French, ¶ 29. Indeed, Kachmar specifically noted that Antero

approved the design change “supported by the emails below.”

¶ 57 These are not general or vague references to unknown or

unidentified documents or terms; the documents were explicitly

named in CO-1’s recitals and were included as an exhibit to CO-1.

Cf. id. at ¶¶ 32-35 (“chargemaster” document not incorporated by

26 reference when one party had no knowledge of its existence or

terms). CO-1 evidences the parties’ intent to add these

representations to the DBA, consistent with what Veolia

understood, and Antero expected. See id. at ¶ 25. Indeed, in the

Proposal, incorporated into the DBA, Veolia represented that its

CoLD process could produce a “stable, non-hazardous solid for

disposal and/or re-use.”

¶ 58 Veolia argues, however, that the introductory recitals cannot

extend contractual obligations and that only the changes on page

two of CO-1 — detailing the “description of change” information and

referencing the exhibits — can be considered explicit changes, and

page two does not mention waste salts. But this restrictive reading

of CO-1 is not supported by the plain language of its second page.

¶ 59 The second page provides that “[t]he preliminary Drawings &

Lists Included in Appendix A to Exhibit D of the Agreement will be

updated to reflect the aforementioned design optimizations.” These

optimizations include the ones “Antero and Veolia . . . reviewed and

agreed to” in the “emails dated September 3, 2015 included in

Exhibit 1.” More specifically, the optimizations included the

“implementation of a flow scheme and resulting equipment

27 changes, as described in Veolia’s letter dated August 26, 2015

included in Exhibit 1” and “material of construction optimization, as

described under Section ‘Corrosion Risk Reduction Discussion’ of

Veolia’s letter dated August 26, 2015 and subsequent email by

Veolia dated September 1, 2015 Included In Exhibit 1.” (First and

third emphases added.) Pietropaoli’s September 1 email says that

“Veolia confirms our technical preference for the use of carbon steel

materials for the recirculation ducts of all vessels except 4B in order

to reduce corrosion risks.” The incorporation of the exhibits, which

reference waste salt, into the recitals and express changes detailed

in CO-1 indicate that Veolia’s rigid interpretation does not reflect

the parties’ intent.

¶ 60 Veolia also argues that, in context and when read as a whole

in accordance with the DBA, the “suitable stable” language from the

September 1 email did not add new salt requirements; it merely

reaffirmed existing requirements in the DBA (i.e., passing the paint

filer test), and the email was too vague to impose a new

requirement. But the suitable stable language clarified a specific

requirement — that the salt be stable and landfillable — consistent

with what Veolia’s Proposal promised — that was incorporated into

28 the DBA. The September 1 email detailed Veolia’s previous testing,

which showed that the waste salt would remain stable for at least

four hours in the worst temperature and humidity conditions.

¶ 61 The September 1 email reiterated a specific requirement for

the 4B waste salt that was clearly and expressly detailed in CO-1 —

incorporating this requirement effectuates the intent of the parties.

See id. at ¶¶ 30-31. Thus, because Veolia violated this requirement

by producing soupy salt that was not suitable and stable to be

landfilled, it breached the DBA.8 The district court did not err by

finding that Veolia breached the DBA by producing 4B waste salt

that failed to meet DBA requirements.

VI. Other Contractual Breaches

¶ 62 Veolia next argues that the district court erred by finding that

Veolia breached the DBA by failing to build Clearwater in

accordance with “[p]rudent [i]ndustry [p]ractices,” failing to meet its

contractual milestone deadlines, failing to deliver to Antero a

turnkey facility, and failing to complete the Work required by the

8 We consequently need not reach Antero’s alternative contention

that, regardless of whether the terms were incorporated by reference, the soupy salt nevertheless violated the DBA’s “no free liquids” requirement for waste salt.

29 DBA. Veolia also argues that the $26.5 million DLD cap would

have applied regardless.

¶ 63 Veolia argues that the district court clearly erred in its factual

findings and that Antero failed to present any proof of damages

because it failed to present cost-of-repair calculations (which we

address infra Part IX.B). Veolia also argues that its failure to meet

Clearwater’s contractual milestones was due to delays Antero

caused by providing wastewater with abnormal substances.

¶ 64 “[W]e review the trial court’s factual findings for clear error,

‘meaning that we won’t disturb such findings if there is any

evidence in the record supporting them.’” Heights Healthcare Co. v.

BCER Eng’g, Inc., 2023 COA 44, ¶ 39 (citation omitted). “Evaluation

of the credibility of witnesses, including expert witnesses, is a

matter solely within the fact finding province of the trial court, and

we will not reweigh testimony or reevaluate evidence on appeal.” In

re Estate of Romero, 126 P.3d 228, 231 (Colo. App. 2005).

¶ 65 Veolia repeatedly asks that we apply “heightened scrutiny” to

the district court’s factual findings as the court’s order used large

portions of Antero’s proposed findings of fact and conclusions of law

30 verbatim. See Trask v. Nozisko, 134 P.3d 544, 548-49 (Colo. App.

2006). But while the district court’s order extensively relied on

portions of Antero’s proposed findings of fact and conclusions of

law, it did not simply adopt Antero’s proposal without careful

scrutiny. Comparing the district court’s order and Antero’s

proposed order reveals that the district court fine-tuned the final

order, added its own analysis and assessments of witnesses’

credibility, and came to its own conclusions about Antero’s

damages. Therefore, when the record supports the district court’s

conclusions and indicates the basis for its decisions, we cannot

overturn its factual findings. Heights Healthcare, ¶ 39.

¶ 66 To support its finding that Veolia failed to conform to prudent

industry practices when building Clearwater, failed to provide a

turnkey facility, failed to complete the required Work, and failed to

meet the contractual milestones in the DBA, the district court

looked to several overlapping pieces of evidence. The court found

that prudent industry practices meant

(1) ensuring that the Facility’s design basis adequately reflected the Facility’s purpose; (2) aligning the process and equipment

31 validated in bench and pilot testing with the Facility ultimately constructed; (3) installing appropriate materials, machinery, and instrumentation for the Facility; and (4) ensuring that the Facility was a safe place to work.

Trial testimony and exhibits support this finding.

¶ 67 As evidence of Veolia’s failure to adhere to prudent industry

standards, the district court pointed to, among other things, the

limitations in Clearwater’s “midpoint design basis” (that is,

assuming an average constituent level for the influent to be

treated); mechanical problems (including structural steel repairs

necessary to prevent structural collapse); frequent shutdowns from

problems such as the SCC rake seizures; and Clearwater’s failure to

produce compliant waste salt from effect 4B. Tellingly, Robert

Cook, VNA’s senior vice president of engineering and technology

development, described the situation as a “fiasco.” The record

supports all of these findings.

¶ 68 Veolia asks us to second-guess the district court’s factual

findings on these issues. But we must defer to the district court’s

factual findings as they have record support, and we may not

32 reweigh conflicting evidence. See Heights Healthcare, ¶ 39; Romero,

126 P.3d at 231.

¶ 69 Veolia also argues there is no basis for the district court’s

findings that it breached the DBA by failing to deliver a turnkey

facility and by failing to complete the required Work, as the court’s

findings regarding these breaches were “lumped” together with its

findings related to the prudent industry practices breach. But the

record evidence supporting the failure to adhere to prudent

industry practices also supports the district court’s findings that

Veolia never delivered a turnkey facility and, thus, had not

completed its Work under the DBA.

¶ 70 While the DBA does not define “turnkey,” Black’s Law

Dictionary defines it as a product “provided in a state of readiness

for immediate use.” Black’s Law Dictionary 1833 (12th ed. 2024).

The facility Veolia provided, which could not produce contractually

compliant waste salt, suffered frequent mechanical issues requiring

immediate shutdowns, and was not designed to treat the full range

of influent wastewater, was not ready for immediate use. And

because Veolia’s Work under the DBA required it to provide a

turnkey facility, both of the district court’s breach findings are

33 supported. We must therefore affirm the district court’s factual

findings on these contract breaches as well. See Heights

Healthcare, ¶ 39; Romero, 126 P.3d at 231.

VII. Veolia’s Abnormal Substances Claim

¶ 71 The district court also rejected Veolia’s argument that Antero

breached the DBA, and caused the disruptions to Clearwater’s

operations, by providing influent containing “abnormal

substances” — specifically guar gum, scale inhibitors, and biocides.

¶ 72 Clearwater was designed to treat “Compliant Influent”

wastewater, defined as wastewater that met the DBA’s influent

specifications and did not contain “abnormal substances.”

Abnormal substances are defined, in part, as any “substances or

materials” in the influent not identified “in Table 1 of Appendix A of

this Exhibit B” of the DBA, if Veolia could demonstrate “with

reasonable supporting evidence” the unidentified substance (1) was

material; (2) did not result from Veolia’s actions; and (3) materially

disrupted Clearwater’s operations.

¶ 73 The district court rejected Veolia’s arguments for six reasons.

It found that Veolia, first, failed to prove that the influent was

noncompliant and, second, failed to show that the influent caused a

34 material impact on Clearwater’s operations. It noted that it

interpreted Table 1 to be a list of “constituents of elemental water

chemistry,” not a list of specific products, and Veolia failed to show

the existence of noncompliant elemental constituents in the

influent. It also found that the substances Veolia alleged may have

been disrupting Clearwater were captured in the “Total Organic

Carbon” (TOC) parameter in Table 1. The district court also noted

that Veolia failed to show that any of these chemicals had

materially affected Clearwater’s operation. And, finally, the district

court found that Veolia failed to prove that any material disruptions

did not result from its own actions. Alternatively, the district court

found that Veolia failed to seek a CO (which it had done many times

for other reasons) to modify the DBA or the project schedule after it

alleged that abnormal substances affected Clearwater’s operations,

and therefore Veolia had waived the contention.

¶ 74 Veolia argues that it proved that Antero caused the presence of

guar gum, biocides, and scale inhibitors and that these substances

materially impacted Clearwater’s operation. But the district court

highlighted conflicting evidence in the record on these points. It

noted, for example, that Veolia itself added chemicals to the influent

35 similar to the alleged abnormal substances that could have caused

the claimed disruptions. And Clearwater’s design caused even

small amounts of these chemicals to become further concentrated

as water was recycled and reused throughout different portions of

the plant. These findings enjoy record support, and we may not

reweigh conflicting evidence; thus, the district court did not err.

See Heights Healthcare, ¶ 39; Romero, 126 P.3d at 231.

¶ 75 Veolia also objects to the district court’s interpretation of

Table 1 and the “abnormal substances” not identified in Table 1.

Veolia contends that the district court erred by concluding that

Table 1 lists “constituents of elemental water chemistry” rather

than specific categories of chemical products or specific chemical

products and by finding that the alleged abnormal substances were

part of TOCs listed in Table 1.

¶ 76 We agree with the district court’s interpretations. See French,

¶ 24. As for the “constituents of elemental water chemistry” point,

testimony at trial supported framing Table 1 as a list of

“constituents.” Indeed, TOCs are listed under the broader

subheading of “other constituents.” More importantly, Table 1 does

not list specific chemical products — it lists acceptable ranges of

36 broader types of chemicals or elements, and testimony at trial

supports the district court’s finding that guar gum, scale inhibitors,

and biocides fall under TOCs, not abnormal substances.

¶ 77 Dr. Jennifer Hornemann, Antero’s vice president of

production, testified explicitly that biocides, guar gum, and scale

inhibitors are captured in Table 1 under the TOC category, a

position supported by academic research presented to the district

court. See David N. Harry et al., Method for Estimating and

Analyzing for TOC of Hydraulic Fracturing Fluids 1-6, 9 (2017),

https://perma.cc/8TGL-TDTJ. Thus, because the substances

Veolia highlights are included in Table 1,9 they are not abnormal

substances. And, again, we may not reweigh competing evidence

on this point. See Heights Healthcare, ¶ 39; Romero, 126 P.3d at

231.

¶ 78 Because Veolia’s abnormal substances claim fails on the

merits, we need not address Veolia’s alternative contention that the

district court erred by finding that Veolia waived this claim by

failing to seek a change order.

9 Testimony at trial also showed that the TOC levels in the influent

never surpassed the maximum range specified in Table 1.

37 VIII. Fraud

¶ 79 Veolia next contends that the district court erred by finding

that the economic loss rule did not bar Antero’s fraud claims and

contends that the court need not have reached the fraud claims at

all because the damages would not have exceeded the DBA’s

damages cap regardless.

A. The Economic Loss Rule

¶ 80 “‘Whether the economic loss rule precludes a particular claim

raises a legal issue subject to de novo appellate review.’ ‘The

existence and scope of a tort duty is a question of law to be

determined by the court.’” In re Estate of Gattis, 2013 COA 145,

¶ 10 (citations omitted).

¶ 81 In Town of Alma v. AZCO Construction, Inc., the supreme court

held that “a party suffering only economic loss from the breach of

an express or implied contractual duty may not assert a tort claim

for such a breach absent an independent duty of care under tort

law.” 10 P.3d 1256, 1264 (Colo. 2000). The supreme court,

explaining the origins of the economic loss rule, noted that it “is

intended to maintain the boundary between contract law and tort

law.” Id. at 1259. The rule “serves to ensure predictability in

38 commercial transactions. The key to determining the availability of

a contract or tort action lies in determining the source of the duty

that forms the basis of the action.” Id. at 1262. On this point, the

supreme court was careful to note that the focus of an economic

loss rule inquiry is not the type of damages suffered by the

aggrieved party, cautioning that while this may be relevant, “the

relationship between the type of damages suffered and the

availability of a tort action is inexact at best.” Id. at 1262-63.

¶ 82 In BRW, Inc. v. Dufficy & Sons, Inc., the supreme court

recognized that the economic loss rule can apply when the parties

are bound by a single two-party contract but can also come into

play when the parties “rely on a network of contracts to allocate

their risks, duties, and remedies.” 99 P.3d 66, 72 (Colo. 2004). The

supreme court explained that this outcome was supported by three

overarching policy considerations behind the economic loss rule:

(1) to maintain a distinction between contract and tort law; (2) to enforce expectancy interests of the parties so that they can reliably allocate risks and costs during their bargaining; and (3) to encourage the parties to build the cost considerations into the contract because they will not be able to recover economic damages in tort.

39 Id.

¶ 83 In determining whether a duty in tort is independent of a

contractual duty, the court should look to three factors: “(1)

whether the relief sought in [tort] is the same as the contractual

relief; (2) whether there is a recognized common law duty of care in

[tort]; and (3) whether the [tort] duty differs in any way from the

contractual duty.” Id. (citing Grynberg v. Agri Tech, Inc., 10 P.3d

1267, 1269 (Colo. 2000)). This analysis becomes murky, however,

when the question is whether the economic loss rule applies to

intentional torts like fraud.

¶ 84 As relevant here, in Van Rees v. Unleaded Software, Inc., the

supreme court held that “pre-contractual misrepresentations are

distinct from the contract itself, and may form the basis of an

independent tort claim.” 2016 CO 51, ¶ 3. The supreme court

explained that “[t]here is an important distinction between failure to

perform the contract itself, and promises that induce a party to

enter into a contract in the first place,” and when “tort claims are

based on misrepresentations made prior to the formation of the

contract[],” these are not barred by the economic loss rule. Id. at

¶¶ 13, 15. The supreme court added that while the economic loss

40 rule helps ensure that tort law does not swallow contract law, “we

also must be cautious of the corollary potential for contract law to

swallow tort law.” Id. at ¶ 19.

¶ 85 In Bermel v. BlueRadios, Inc., the supreme court cautioned,

To the extent the economic loss rule treats parties’ assumption of contractual duties as disclaimers of their existing obligations in tort, it should be applied with some of the circumspection with which we have approached other exculpatory agreements. And just as we have held that “[u]nder no circumstances will an exculpatory agreement be permitted to shield against a claim of willful and wanton negligence,” we note that the economic loss rule generally should not be available to shield intentional tortfeasors from liability for misconduct that happens also to breach a contractual obligation.

2019 CO 31, ¶ 20 n.6 (alteration in original) (citations omitted). The

supreme court also noted that it has only applied the economic loss

rule to “to bar common law tort claims of negligence or negligent

misrepresentation.” Id. at ¶ 21.

¶ 86 Since Bermel, divisions of this court have split on the question

of whether the economic loss rule bars intentional tort claims based

on breaches of duties that may also arise under a contract.

Compare McWhinney Centerra Lifestyle Ctr. LLC v. Poag & McEwen

41 Lifestyle Centers-Centerra LLC, 2021 COA 2, ¶¶ 73-75, 77, 80

(holding that intentional tort claims stemmed from tort law duties

independent of the contract and the economic loss rule did not

apply, adding “generally, the economic loss rule does not bar

common law intentional tort claims”), with Dream Finders Homes

LLC v. Weyerhaeuser NR Co., 2021 COA 143, ¶¶ 63-67.

¶ 87 Veolia chiefly relies on Dream Finders; there, the division held

that a series of interrelated documents between a lumber product

distributor and homebuilder/contractor arranging for the sale of a

product constituted a single agreement. Id. at ¶¶ 45-48. The

division concluded that because the alleged misrepresentations

(about lumber products off-gassing formaldehyde) were made after

the contract was formed, Van Rees’ carve-out for precontractual

misrepresentations did not apply. Id. at ¶¶ 49-52. Finally, the

division held that to the extent a party had a “duty to not make

misrepresentations or engage in fraud after they entered into the

contract, such duty was subsumed within the contract through the

implied duty of good faith and fair dealing.” Id. at ¶¶ 65-67.

¶ 88 The division noted that because the lumber supplier had “the

discretion to modify the design and construction” of their products

42 without the buyer’s consent, the “contract incorporated the implied

duty of good faith and fair dealing.” Id. at ¶ 67. Therefore, the

supplier had “concurrent contractual and tort duties not to engage

in fraud or to misrepresent the condition and safety” of its products,

and the economic loss rule applied to its fraud and negligence

claims. Id. at ¶¶ 65-74.

¶ 89 The Dream Finders division declined to conclude that the

economic loss rule was inapplicable to intentional tort claims like

fraud, noting that, despite the language in McWhinney and Bermel,

“no Colorado case has held that the economic loss rule can never

apply to claims for fraud or other intentional torts.” Id. at ¶ 63. It

also noted as distinguishing factors that the aggrieved parties in

Dream Finders had “received the full benefit of their bargain

documented in the contract” and also sought “to recover through

their tort claims the very type of damages expressly excluded under

the warranty they received” from the supplier, adding that

“sophisticated commercial entities . . . may not circumvent the

43 exclusion of damages in their contracts by cloaking their claims in

tort theories.”10 Id. at ¶¶ 64, 80, 82.

¶ 90 The interplay of these cases presents us with two questions we

must resolve. First, are the contracts at issue here — namely, the

Proposal, LNTPs, DBA, and CO-1 — an “interrelated network” of

contracts to the point they become a single contract? If so, then

any misrepresentation Veolia made after the beginning of the

parties’ contractual relationship would not meet the black and

white precontractual exception from Van Rees. See Van Rees,

¶¶ 13, 15. Second, looking to the duties involved in Antero’s fraud

and breach of contract claims, are the duties associated with fraud

in the inducement independent of the contractual duties and,

therefore, not barred by the economic loss rule?

10 The special concurrence in Dream Finders Homes LLC v.

Weyerhaeuser NR Co., stressed that its holding should be interpreted narrowly and expressed concern that it could be misused to permit parties “to engage in fraudulent conduct during the course of a contractual relationship and then hide behind the economic loss rule to avoid economic damages caused by the fraud simply by arguing that fraudulent conduct necessarily breaches the duty of good faith and fair dealing implied in every contract.” 2021 COA 143, ¶¶ 132-134 (Brown, J., specially concurring).

44 1. Interrelated Agreements

¶ 91 The first agreement between Veolia and Antero was the

November 2014 Proposal. The Proposal provided that (1) Veolia

agreed to test water samples to ensure its treatment methods would

be viable for Antero; (2) Veolia would provide information on its

methods and objectives to Antero; and (3) Veolia would provide

Antero a report on the preliminary testing, all in exchange for

$355,000. The Proposal also included an appendix of “terms and

conditions” applicable to the contract and warranted, in part, that

Veolia’s “services will be free from defects in material and

workmanship” for one year after Antero executed the contract.

¶ 92 While the Proposal included a liability limitation clause

providing that neither Veolia nor Antero would be liable for any

indirect damages (“any consequential, incidental, special, [or]

punitive damages”), the limitation was made expressly inapplicable

to “gross negligence, fraud, or willful misconduct by Veolia.” And

the liability limitation applied whether the liability was based in

“contract, tort, strict liability, or any other theory.”

¶ 93 The Proposal did not require Antero and Veolia to engage in

any further business or contracts. While an implied duty of good

45 faith and fair dealing exists in every contract, see, e.g., Hamon

Contractors, Inc. v. Carter & Burgess, Inc., 229 P.3d 282, 292 (Colo.

App. 2009), nothing in the Proposal created contractual duties

mandating the eventual construction of (or payment for) Clearwater.

¶ 94 However, Veolia made several representations in the Proposal

(subsequently incorporated into the DBA) that would later become

important — including that Veolia’s CoLD process could treat

wastewater to produce “a stable, non-hazardous solid for disposal

and/or re-use.” So, while the Proposal is not quite as extensive as

the contracts in Dream Finders, representations made in the

Proposal were relevant to the DBA and CO-1. See Dream Finders,

¶¶ 45-52.

¶ 95 Therefore, we conclude that the Proposal, the LNTPs, and the

DBA were part of an interrelated network of contracts — meaning

that all of Veolia’s misrepresentations were made after the contracts

were executed. To the extent the district court found that the

economic loss rule did not bar Antero’s fraud claims because they

were made before the DBA was signed, we conclude this was error.

But this conclusion does not mean that the economic loss rule bars

Antero’s fraud claims.

46 2. Does the Economic Loss Rule Apply?

¶ 96 We must now determine whether (1) the relief Antero sought

via fraudulent concealment is the same as the relief it sought via its

breach of contract claims; (2) there is a recognized common law

duty of care to avoid fraudulently concealing or misrepresenting

material facts; and (3) the duty in tort is independent of Veolia’s

contractual duties, including the implied duty of good faith and fair

dealing. See BRW, 99 P.3d at 72.

¶ 97 To the first issue, Antero sought the same economic relief from

its breach of contract and fraud claims: benefit-of-the-bargain

damages and incremental out-of-pocket costs.11 See Dream

Finders, ¶ 54; Top Rail Ranch Ests., LLC v. Walker, 2014 COA 9,

¶ 33. Second, there is “a recognized common law duty in tort to

refrain from deliberate concealment or misrepresentation of

material facts.” Top Rail, ¶ 36.

¶ 98 The remaining question is whether the common law tort duty

to refrain from deliberate concealment or misrepresentation of

material facts is independent of the implied duty of good faith and

11 Antero’s request for DLDs relief was purely contractual through

its breach of contract claims and was not part of its fraud claims.

47 fair dealing and Veolia’s express contractual obligations. We

conclude that Veolia’s duty to refrain from fraudulently concealing

or misrepresenting material facts is independent of Veolia’s

contractual obligations, including the implied duty of good faith and

fair dealing. See McWhinney, ¶ 77 (“[G]enerally, the economic loss

rule does not bar common law intentional tort claims.”).

¶ 99 “The covenant of good faith and fair dealing exists in every

contract to enforce the reasonable expectations of the parties.”

Amoco Oil Co. v. Ervin, 908 P.2d 493, 499 (Colo. 1995). The duty

specifically applies “when one party has discretionary authority to

determine certain terms of the contract, such as quantity, price, or

time.” Id. at 498. “A party breaches the implied duty of good faith

and fair dealing by using the ‘discretion conferred by the contract to

act dishonestly or to act outside of accepted commercial practices to

deprive the other party of the benefit of the contract.’” Dream

Finders, ¶ 66 (citation omitted). “Discretion in performance occurs

‘when the parties, at formation [of the contract], defer a decision

regarding performance terms of the contract’ leaving one party with

the power to set or control the terms of performance after

formation.” McDonald v. Zions First Nat’l Bank, N.A., 2015 COA 29,

48 ¶ 67 (alteration in original) (quoting City of Golden v. Parker, 138

P.3d 285, 292 (Colo. 2006)).

¶ 100 Here, unlike the contracts in Dream Finders, Veolia had no

discretion to modify Clearwater’s core requirements under the

DBA — such as its effluent quality requirements or process

guarantees — without Antero’s written consent. See Dream

Finders, ¶¶ 67-69 (noting that contracts gave the company

unrestricted discretion to modify products without the other party’s

knowledge or consent).

¶ 101 Veolia contends in its opening brief that “[t]he DBA does not

require any particular design but instead specifies operational

criteria that the facility must meet.” And before the many pages of

two-dimensional technical diagrams in the DBA’s Appendix A, the

DBA provides, “The constructed Facility may differ from what is

depicted.” We agree Veolia had some degree of discretion in how it

designed Clearwater (though the limits of its discretion are evident

from the fact that it had to seek a CO to split the fourth effect).

This discretion, in turn, gave rise to an implied duty of good faith

and fair dealing in Veolia’s exercise of its discretion. But the

challenged misrepresentations concerned the waste salt and power

49 consumption guarantees — Veolia had no discretion to change

either. So, there is not such a direct overlap between Veolia’s

common law tort duty and its implied contractual duty as was the

case in Dream Finders.

¶ 102 Moreover, unlike in Dream Finders, Antero’s fraud claims were

not asserted to “recover under a tort theory damages expressly

excluded under the contract.” Id. at ¶ 75. To the contrary, the DBA

specifically contemplates increased damages in the case of fraud.

¶ 103 The DBA’s overall damages limitation provides that “[i]n no

event shall Veolia be liable, alone or in the aggregate, to Antero for

any Losses in excess of an amount equal to sixty (60%) of the

Contract Sum” — with one of the few exceptions being that the

limitation does not apply to damages resulting from “either party’s

gross negligence, fraud or willful misconduct.” To hold that the

economic loss rule prohibits Antero’s fraud claims because the

implied duty of good faith encompasses them would render

meaningless the explicit exception to the damages cap for damages

resulting from fraud — despite the parties’ clear intent to allow for

greater damages in the event of fraud. Such an outcome would

50 bring to life the special concurrence’s concern in Dream Finders. Id.

at ¶ 133.

¶ 104 We therefore hold that the economic loss rule does not bar

Antero’s fraud claims because (1) the fraud concerned aspects of

Veolia’s performance over which Veolia had no discretion, thus

undermining the implied duty of fair dealing’s application;

(2) Antero is not using tort claims to pursue damages explicitly

prohibited by the DBA; and (3) the DBA explicitly permitted

additional damages in the event of fraud — an intentional decision

bargained for by two sophisticated commercial parties that would

be greatly undermined if all fraud claims were barred. See Dream

Finders, ¶¶ 67-69, 75.

¶ 105 We also note that this outcome better effectuates the supreme

court’s evolving guidance on application of the economic loss rule,

as explained in Bermel, that “the economic loss rule generally

should not be available to shield intentional tortfeasors from

liability for misconduct that happens also to breach a contractual

obligation.” Bermel, ¶ 20 n.6; see also McWhinney, ¶ 77.

¶ 106 A rigid application of the economic loss rule to intentional

torts like fraudulent concealment based on the implied duty of good

51 faith (which exists in all contracts) would effectively insulate a party

to a contract from their own fraudulent actions and would

effectively allow contract law to swallow valid tort law fraud claims.

See Bermel, ¶ 20 n.6.

¶ 107 Thus, we conclude that, while the Proposal, LNTPs, and DBA

formed an interrelated network of contracts, the economic loss rule

does not bar Antero’s fraud claims because the DBA excepted such

claims, and Veolia’s challenged common law duties are independent

of its contractual ones. See Bermel, ¶ 20 n.6; McWhinney, ¶ 77; see

also Deutsche Bank Tr. Co. Ams. v. Samora, 2013 COA 81, ¶ 38 (“An

appellate court may affirm the trial court’s ruling based on any

grounds that are supported by the record.”).

B. Remaining Fraud Contentions

¶ 108 Having determined that the economic loss rule does not bar

Antero’s fraud claims, we move to Veolia’s arguments that it did not

fraudulently induce Antero into entering into the DBA and CO-1

and that the district court need not have addressed fraud at all

because the DBA’s damages cap could not have been reached.

¶ 109 The district court found that Veolia fraudulently induced

Antero to enter into the DBA by failing to disclose that it (1) could

52 not meet the DBA’s power consumption guarantee under the

original design and (2) was actively planning to redesign Clearwater

to satisfy those concerns. Veolia argues that, as a matter of law,

Antero could not have established that fraud occurred because

Veolia disclosed the fourth effect split plan and Antero ratified the

change. It also argues that the district court clearly erred by

finding that Clearwater could not meet the power consumption

guarantees without a redesign.

¶ 110 As for CO-1, the district court found that Veolia

misrepresented the risks associated with splitting the fourth effect

and misrepresented that the 4B effect would produce stable waste

salt. Veolia argues that it disclosed the risks of the fourth effect

split, Antero ratified the change, and Pietropaoli’s September 1

email was too vague to constitute fraud.

1. Applicable Law

¶ 111 A fraudulent concealment claim has five elements:

(1) the concealment of a material existing fact that in equity and good conscience should be disclosed; (2) knowledge on the part of the party against whom the claim is asserted that such a fact is being concealed; (3) ignorance of that fact on the part of the one from whom the fact is concealed; (4) the intention that the

53 concealment be acted upon; and (5) action on the concealment resulting in damages.

BP Am. Prod. Co. v. Patterson, 263 P.3d 103, 109 (Colo. 2011)

(citation omitted).

¶ 112 “A fact is material if a reasonable person under the

circumstances would attach importance to it in determining his or

her course of action,” but “[a] party’s reliance on a purported

misrepresentation is not justified when the party is aware of or on

inquiry notice of the falsity of the representation.” Rocky Mountain

Expl., Inc. v. Davis Graham & Stubbs LLP, 2018 CO 54, ¶ 53. Thus,

a defrauded party may ratify a contract entered into via fraud, and

waive any fraud claims, but only if the party “with full knowledge of

the truth respecting the false representations, elected to continue to

carry out the agreement.” Elk River Assocs. v. Huskin, 691 P.2d

1148, 1153 (Colo. App. 1984). Whether a party ratified a contract

entered into via fraud is a question of fact for the fact finder. Id.

2. Fraudulent Inducement and the DBA

¶ 113 For the power consumption guarantee, the district court

highlighted that the guarantee was a “material term.” This finding

is supported by the record. The guarantee was the subject of

54 extensive negotiation and was a key part of the DBA. And the

district court pointed to Veolia employee emails from August 14,

2015, indicating that Veolia’s most recent power consumption

figures showed that Clearwater’s power needs could be higher than

the guarantee ultimately included in the DBA.

¶ 114 Veolia contests this finding as clear error, but the evidence the

district court highlighted enjoys record support. See Romero, 126

P.3d at 231; Heights Healthcare, ¶ 39. The district court also

highlighted, with record support, that Veolia represented to Antero

that it could meet the power consumption guarantee when it knew

it could not without splitting the fourth effect and that Veolia knew

of the associated risks the redesign entailed, yet allowed Antero to

execute the DBA despite this knowledge.

¶ 115 For Clearwater’s redesign, the district court stressed that

Veolia employee emails indicated that Veolia concealed its plan to

split the fourth effect, and the risks this plan posed, until after the

DBA was signed in an effort to secure the DBA. The record

supports this finding.

¶ 116 Veolia counters that it disclosed the plan to split the fourth

effect because it included a “preliminary” reference to splitting the

55 fourth effect in the DBA’s technical diagrams. In the DBA’s initial

design specifications for Clearwater, Veolia added two text boxes

labeled with “4A” and “4B” on a diagram of the fourth effect, with

another text box nearby with the words “PRELIMINARY –

SPLITTING THE CRYSTALLIZER.”

¶ 117 The district court found that the diagram was “ambiguous at

best” and, thus, did not provide Antero with adequate notice of the

plan to split the fourth effect or the implications of this change. We

agree. See Rocky Mountain, ¶ 53; Huskin, 691 P.2d at 1153.

¶ 118 Even assuming the diagram put Antero on notice that Veolia

might split the fourth effect, the diagram told Antero nothing about

the potential risks for Clearwater’s waste salt production or power

consumption created by implementing the split-effect design. Nor

does the diagram disclose that this design might be required for

Clearwater to meet its power guarantees or that Veolia had been

planning to implement it before the DBA was signed. The record

supports the district court’s finding that Veolia failed to disclose

these crucial details to Antero.

56 3. Fraudulent Inducement and CO-1

¶ 119 Next, Veolia argues that the district court erred by finding that

Veolia fraudulently induced Antero to enter into CO-1. The district

court found that Veolia fraudulently induced Antero into executing

CO-1 through representations in Pietropaoli’s September 1 email

regarding the quality of the 4B waste salt, while Veolia failed to

disclose known risks about the waste salt’s stability and that the

waste salt might leave the centrifuge as a liquid. Veolia argues that

Pietropaoli’s email was too vague to constitute fraud. See Rocky

Mountain, ¶ 48 (“Whether circumstances, conduct, or words are the

means allegedly used to deceive, however, the means used must be

of a ‘definite and specific character’ because a party has no right to

rely on circumstances, conduct, or words that are equivocal . . . .”)

(citation omitted). But, as discussed, the email created definite and

specific representations about the quality of the 4B waste salt, and

the record supports the district court’s finding that, when Veolia

made these representations, it failed to disclose the known risks to

the waste salt’s quality created by splitting the fourth effect.

¶ 120 Veolia also argues that it disclosed the salt moisture risk to

Antero when it provided the risk register before CO-1 was signed,

57 warning that “[m]aterial can turn to mush if exposed for too long.”

But this was, in essence, a less specific representation than the one

made in Pietropaoli’s email that the salt could become unstable if

exposed to moisture for too long. It did not warn Antero that

splitting the fourth effect could mean that the 4B salt would leave

the centrifuge as an unstable liquid and would never be stable.

4. Ratification

¶ 121 Finally, Veolia argues that Antero ratified Veolia’s fraud when

it executed both the DBA and CO-1.

¶ 122 Veolia first argues that Antero ratified Veolia’s concealment of

the risks associated with splitting the fourth effect ahead of the

DBA when Antero entered into CO-1, which disclosed the redesign.

But to ratify a contract entered into via fraud the aggrieved party

must decide to carry out the agreement “with full knowledge of the

truth respecting the false representations.” Huskin, 691 P.2d at

1153. Even if one could ratify a fraudulent contract with full

knowledge of the fraud by later entering into another agreement

resulting from continued fraud, Antero still did not have full

knowledge of Veolia’s misrepresentations when it entered into CO-1.

Veolia revealed the plan to split the fourth effect by presenting it as

58 a “design optimization” that would reduce power costs — not as a

design necessary to meet Veolia’s power consumption guarantee

that risked producing waste that could leave the 4B centrifuge as a

liquid.

¶ 123 Veolia next argues that Antero ratified the fraud related to

CO-1 by continuing to accept the 4B waste salt after a Veolia

employee’s email mentioned that the 4B waste salt would not be

“granular” in March 2016 — notably, after CO-1 was signed in

December 2015. But ratification is a question of fact, see id., and

the district court explicitly noted that, while the email said that the

“4B salt would not be granular,” it did not provide notice that the

“4B salt would be soupy or that it would need to be mixed with fly

ash so that it would solidify.”

¶ 124 Further, Antero’s conduct following this email can hardly be

described as an “acceptance” of 4B’s soupy waste salt. The

noncompliant waste salt became a problem for the entire operation

of Clearwater that was never resolved, and eventually led Antero to

cancel the DBA. That Antero hoped that the waste salt issue could

be fixed does not mean that it agreed to carry out the DBA

59 regardless of Veolia’s fraud. Indeed, Antero terminated the DBA

when Veolia revealed that the salt issue would never be fixed.

¶ 125 The elements of fraud were met for both the DBA and CO-1.

Veolia’s plan to redesign Clearwater to split the fourth effect, the

risks this posed for the 4B waste salt’s stability, and Clearwater’s

inability to meet the power consumption guarantee without the

redesign are material issues Veolia should have disclosed. See

Rocky Mountain, ¶ 53; see also Patterson, 263 P.3d at 109. Further,

Veolia knew of these issues while Antero did not, and the record

supports the district court’s findings that Veolia concealed this

information to induce Antero to enter into the DBA and CO-1,

which caused Antero damages. See Patterson, 263 P.3d at 109.

The district court did not err.

5. The Damages Cap

¶ 126 Veolia argues that because it did not violate the DBA’s waste

salt requirements, the damages cap could not have been reached,

and thus, the finding of fraud was immaterial. But we have

affirmed the district court’s finding that Veolia breached the DBA’s

waste salt requirements, so the cap would otherwise have applied —

necessitating the district court’s fraud analysis to award damages

60 in excess of that cap. Veolia also argues that the district court’s

benefit-of-the-bargain damages award should be reversed, and thus

the cap would not be implicated. For the reasons explained below,

we disagree.

IX. Damages

¶ 127 Antero asked the court to award it out-of-pocket costs totaling

$451,003,827, but the district court declined to award damages for

out-of-pocket costs, noting that such damages are not recognized

by Colorado law. But Antero also offered the district court two

alternative damages calculations if the court found Veolia liable for

breach of contract or fraud, as shown in the table below:

Damages Model Fraud Contract Benefit-of-the- $253,309,102 $253,309,102 Bargain Damages Incremental Out-of- $88,567,845 $88,657,845 Pocket Costs Delay Liquidated $0 $28,269,765 Damages Subtotal (without $341,966,947 $370,936,713 fees and costs)

¶ 128 As previously noted, after applying a discount rate to the

benefit-of-the-bargain damages category and finding Veolia liable

61 for fraud and breach of contract, the court awarded Antero the

following damages:

Damages Category Amount Benefit-of-the-Bargain Damages $144.1 million Incremental Out-of-Pocket $72 million Costs Delay Liquidated Damages $25.6 million Subtotal $241.7 million

¶ 129 The district court later reduced Antero’s damages by the $26.6

million balance due under the DBA, for a subtotal of $215.2 million

(before pre- or post-judgment interest). Having concluded that

Veolia engaged in gross negligence, fraud, or willful misconduct, the

district court had no reason to apply the DBA’s damages cap.

¶ 130 According to Veolia, the district court erred (1) by basing its

benefit-of-the-bargain award on a diminution of market value

instead of the cost of repair; (2) because even if market value was

the correct approach, the court only considered the potential

income Clearwater could have produced and thus violated the

DBA’s consequential damages limitation; and (3) alternatively, by

relying on “income from the business that Antero intended to

62 conduct from Clearwater, rather than the income generated from

Clearwater itself.”

¶ 131 We review the district’s court’s assessment of the amount of

damages for clear error, but “[i]t is within the district court’s

discretion to determine the appropriate measure of damages.” Sos

v. Roaring Fork Transp. Auth., 2017 COA 142, ¶¶ 35-36. We review

de novo whether “the district court misapplied the law when

determining the measure of damages.” Id. at ¶ 37.

B. Cost of Repair Versus Market Value

¶ 132 The parties first contest whether the district court’s alleged

error in choosing the market value damages measure was preserved

and which party bore the burden of proof.

¶ 133 Antero argues that Veolia’s cost-of-repair argument is a “back-

door attempt to resurrect an affirmative defense that the [district]

court rejected as waived for lack of timely pleading.” Antero argues

that Veolia raised its cost-of-repair argument in a motion to amend

its answer to add an affirmative defense to limit damages under

Colorado’s Construction Defect Action Reform Act (CDARA) in June

63 2021.12 §§ 13-20-801 to -808, C.R.S. 2024. The district court

denied the motion because (1) Veolia’s request to amend its answer

was untimely, not justified by good cause, and would cause undue

delay; and (2) the court was unconvinced that the CDARA limit

applied to the case, which concerned a commercial facility in West

Virginia that was governed by the “extensively negotiated” DBA;

thus, an amendment could have been “futile.”

¶ 134 Antero contends that in Hildebrand v. New Vista Homes II,

LLC, a division of this court held that claims to limit damages under

CDARA were an affirmative defense, and the party asserting the

affirmative defense bore the burden of proving the mitigating

circumstances per C.R.C.P. 8. Hildebrand, 252 P.3d 1159, 1171

(Colo. App. 2010).

¶ 135 Veolia counters that the default measure of damages in a

defective construction case is cost of repair. On this point, Gold

Rush Investments, Inc. v. G.E. Johnson Construction Co. provides

that “[d]amages for defective construction are to be measured by the

12 The statute limits damages in civil claims against “construction

professional[s]” (engineers, developers, architects, and builders, etc.) for construction defects to actual damages. § 13-20-802.5(1), (4), C.R.S. 2024; § 13-20-806(1), C.R.S. 2024.

64 cost to place the defective structure in its intended condition,

unless to do so would cause unreasonable economic waste.” 807

P.2d 1169, 1174 (Colo. App. 1990). Therefore, because the cost of

repair is the presumed measure of damages, Veolia argues that

Antero bore the burden of proving that repairing Clearwater would

constitute economic waste.

¶ 136 Veolia preserved this issue for appeal via its proposed findings

of fact and conclusions of law. See Cuevas v. Pub. Serv. Co. of Colo.,

2023 COA 64M, ¶ 35 n.3 (cert. granted July 1, 2024). And we

conclude that Veolia’s argument does not concern mitigation that

must be affirmatively pleaded. CDARA’s damages cap acts as a

specific means to limit a damages award, but Veolia argues that

Antero failed to prove the applicable measure of damages — and “[a]

plaintiff bears the burden of proof on both the fact and the amount

of damages.” Buckley Powder Co. v. State, 70 P.3d 547, 563 (Colo.

App. 2002).

¶ 137 Ultimately, however, it is within the district court’s discretion

to determine which measure of damages is appropriate. See Sos,

¶ 36. The district court did not abuse its discretion in selecting

market value as the appropriate measure of damages because

65 Antero provided sufficient evidence that repairing the facility would

constitute economic waste. See Streu v. City of Colorado Springs ex

rel. Colo. Springs Utils., 239 P.3d 1264, 1268 (Colo. 2010) (The

district court’s decision “simply must not ‘exceed[] the bounds of

the rationally available choices.’” (quoting Big Sky Network Can.,

Ltd. v. Sichuan Provincial Gov’t, 533 F.3d 1183, 1186 (10th Cir.

2008))) (alteration in original).

¶ 138 The district court highlighted that Veolia spent over $59

million in efforts to resolve the issues with Clearwater and ensure it

could meet its contractual demands, without success.13 The district

court also noted that Veolia told Antero that the waste salt issue

would never be resolved. And the court added that VNA and the

external expert report Veolia commissioned recommended

numerous design changes to address Clearwater’s issues — but

Veolia never implemented the changes. Based on “Veolia’s decision

not to attempt these repairs,” the district court concluded that

“making these repairs was not economically feasible.”14

13 Veolia argues that this figure is even higher at $81 million. 14 Alvyn Schopp, Antero’s regional senior vice president, also

testified that Antero believed “trying to repair the plant in its current condition would . . . not be economically viable.”

66 ¶ 139 Recall that without splitting the fourth effect, Veolia could not

meet its power consumption guarantee, but splitting the fourth

effect compromised the stability of the 4B waste salt. Veolia

unsuccessfully spent millions of dollars and years of work

attempting to resolve this problem. The record thus supports the

district court’s decision to use the market value measure of

damages. See Sos, ¶ 36.

C. The Income Approach to Calculate Market Value

¶ 140 Veolia next contends that the district court’s benefit-of-the-

bargain measure of damages approach to calculate market value

erroneously considered only Clearwater’s potential income (a

prohibited form of “lost profits” damages).

¶ 141 The income approach is one of several methods available to

calculate the fair market value of a property as a measure of

damages, and it “values the property based on projections of the

‘net income generated by the property during the remainder of its

productive life.’” Bd. of Cnty. Comm’rs v. DPG Farms, LLC, 2017

COA 83, ¶¶ 25, 27 (quoting Denver Urb. Renewal Auth. v. Berglund-

Cherne Co., 568 P.2d 478, 480 (Colo. 1977)).

67 ¶ 142 “An income approach uses potential income from the property,

along with all other factors that would be considered by a buyer, as

evidence of the fair market value of the property in its current

condition.” Id. at ¶ 39 (emphases omitted). But, importantly, “it is

merely one factor to be considered by the jury in conjunction with

all other material evidence of fair market value.” Id.

¶ 143 The district court credited much of the testimony of Antero’s

damages expert, Becker, in determining the damages Antero

suffered under a benefit-of-the-bargain approach. Becker testified

that Antero suffered $253.3 million in damages. This was derived

from the value of Clearwater if constructed in accordance with the

DBA and CO-1 (but-for value) minus Clearwater’s value as of

September 2019 (actual value), when the DBA was terminated.

¶ 144 To calculate Clearwater’s but-for value, Becker used the

income valuation approach, what he also called a “discounted cash

flow analysis,” and evaluated Clearwater’s value as a potential

income producing asset. Becker estimated that Clearwater’s but-for

value, if completed in compliance with the DBA, was $258,409,102.

In performing this calculation, Becker applied a six-time “terminal

value” multiplier — a multiplier Becker used to calculate the

68 present value of Clearwater as an income-producing asset through

2028 — to Clearwater’s estimated annual income and applied a

10% “discount rate” for the present value of future cash flow after

accounting for the cost of capital. Becker then compared this but-

for value to Clearwater’s net actual value in September 2019 —

$5.1 million based on Antero’s internal accounting reports.

¶ 145 The court probed the residual $5.1 million net actual value at

trial, and Becker testified that it was his understanding that this

figure did not derive from an income approach, it was instead

Antero’s calculation of Clearwater as an “idle asset.” The $5.1

million net value figure was Antero’s internal assessment of

Clearwater’s actual value that accounted for the “marketable

potential of the land, of the land the facility sits on, the salvage

value of the parts of the facility minus whatever [Antero] thought

were the costs that they would incur to” sell it. It was a calculation

of actual value for a facility that had an “income of zero” and

essentially represented its salvage value, though Becker noted that

he had not conducted an independent salvage value analysis.

69 ¶ 146 Subtracting the net actual value of Clearwater from its but-for

value (derived using the income approach), Becker opined that

Antero’s damages were $253,309,102.

¶ 147 Veolia’s rebuttal damages expert, Emmert, testified that he

believed a higher discount rate would be more appropriate because

there were greater risks to Clearwater’s future cash flow that

needed to be accounted for. The risks included that Antero had no

prior experience managing a facility like Clearwater, Clearwater was

specifically designed for only one purpose, Clearwater risked not

receiving sufficient influent, and Clearwater was a “start-up”

business.

¶ 148 Finding that these risks justified a higher discount rate than

Becker used, the court applied a higher discount rate to Becker’s

but-for valuation of Clearwater. This brought the valuation of the

property to $149,205,246, from which the court subtracted the net

actual value of $5.1 million, resulting in the court’s finding that

Antero suffered $144,105,246 in benefit-of-the-bargain damages.

¶ 149 All of this is to say that the record shows that Becker’s and the

district court’s benefit-of-the-bargain damage calculations did not

rely exclusively on Clearwater’s income to determine its fair market

70 value — it was but one factor considered. See id. at ¶ 25. Becker

did not “simply compute[] prospective income from the property.”

Id. at ¶ 39. Instead, he used estimates of prospective income to

determine the but-for fair market value of the facility as a

potentially income-producing asset. And he compared this value to

Clearwater’s actual value according to Antero’s internal estimations

when looking at Clearwater as a salvage asset that could produce

no income at all.

¶ 150 Furthermore, the district court’s determination also accounted

for other factors, albeit admittedly related to income, to significantly

reduce the final damages award, including that Antero’s income

analysis did not properly account for the greater risks raised by

Veolia. As a result, we conclude that the district court’s benefit-of-

the-bargain damages calculation did not rest solely on Clearwater’s

potential income and has record support. Therefore, its damages

award must stand. See Sos, ¶¶ 36, 37.

¶ 151 This also means that we reject Veolia’s contention that

Becker’s analysis constituted a “lost profits” form of consequential

damages prohibited by the DBA. See Lawry v. Palm, 192 P.3d 550,

561 (Colo. App. 2008) (“Consequential damages may be awarded, in

71 some cases, for profits lost as a result of a breach of contract.”).

Consequently, we need not address Antero’s conditional cross-

appeal on this point concerning whether the DBA’s overall liability

limitation exception for gross negligence, fraud, or willful

misconduct applied to the DBA’s prohibition on consequential

damages.

D. Income as a Facility and Not a Business

¶ 152 Next, Veolia contends that Becker mistakenly accounted for

Antero’s value as a business rather than solely Clearwater’s value

as a facility. Veolia relies chiefly on Western Cities Broadcasting,

Inc. v. Schueller, which held that “in computing the value of real

property, the value of the realty must be separated from the value of

the business.” 849 P.2d 44, 48 (Colo. 1993). There, the plaintiff

presented evidence of the value a hypothetical radio station could

have produced for a radio business on a leasehold property but

failed to prove the actual value of the leasehold itself and failed to

prove that the radio business’s value “had any bearing on the value

of the leasehold.” Id. at 48-49.

¶ 153 That is not the case here. Clearwater is an existing asset, and

Becker’s analysis relied on concrete data about Clearwater’s

72 expected operations. And the different valuations presented by

Antero’s and Veolia’s respective damages experts considered the

impact Antero’s management might have had on Clearwater’s value

through the discount rate calculation. Becker also explicitly

testified that his calculations considered only Clearwater’s value as

a facility and excluded the value of any of Antero’s other revenue

streams.

¶ 154 Because the district court did not erroneously conflate

Antero’s value as a business with Clearwater’s value as a facility, its

damages award stands. See Sos, ¶¶ 36, 37.

X. Appellate Attorney Fees

¶ 155 As a final matter, both parties request appellate attorney fees

and costs under C.A.R. 39 and 39.1. The DBA provides that the

“prevailing party” as determined by the court “shall be reimbursed

by the other Party for all costs, expenses and charges, including,

without limitation, reasonable attorneys’ fees.” When a contract

contains a fee-shifting provision and the prevailing party requests

appellate attorney fees and explains the legal and factual basis for

the award, we may award appellate attorney fees. See Saturn Sys.,

Inc. v. Militare, 252 P.3d 516, 530 (Colo. App. 2011).

73 ¶ 156 C.A.R. 39(a)(2) details that “if a judgment is affirmed, costs are

taxed against the appellant.” We have affirmed the district court’s

judgment on every claim Veolia raised; thus, costs must be taxed

against Veolia. And because we conclude that Antero is the

prevailing party on appeal, under the DBA and in accordance with

C.A.R. 39.1, we award Antero its reasonable appellate attorney fees

and costs incurred in this appeal. We exercise our discretion under

C.A.R. 39.1 to remand the case to the district court to determine

Antero’s reasonable appellate attorney fees and costs in addition to

its damages award and attorney fees incurred at trial.

XI. Disposition

¶ 157 We affirm the district court’s judgment and remand the case to

the district court to calculate Antero’s reasonable appellate attorney

fees and costs. And because we affirm the district court’s

judgment, we also decline Veolia’s request to reverse the district

court’s award of attorney fees and costs.

JUDGE JOHNSON and JUDGE SCHOCK concur.