Colorado’s Special Districts are quasi-governmental entities created by statute for the purpose of providing services such as drinking water, fire protection, or parks and recreation (among others) for a defined service area pursuant to a service plan. Special Districts are governed internally by a board of directors and employ officers and other employees to generally perform the District’s responsibilities for the benefit of those residing or conducting business within the District’s service area.
In practice, the creation, management, and funding of Special Districts is a specialty legal field in of itself, with Special Districts often advised by general counsel. As with the corporate setting, the Special District’s general counsel will often seek outside counsel to assist the Special District in resolving disputes with third-parties.
Special District disputes comprise of any number of different areas of law, from employment to land use. Since many Special Districts are project-driven entities, disputes concerning the construction or improvement of land and facilities are perhaps the most common instances where Special Districts seek the assistance of outside litigation counsel.
Understanding the following unique characteristics of Special Districts will assist outside litigation counsel in helping Special Districts effectively navigate such disputes to their ultimate resolution.
Internal Functions of Special Districts
Outside counsel should take the time to understand the Special District’s internal functions and governance at the outset of the representation to ensure effective and efficient communication and decision-making regarding the dispute. For instance, the Special District’s board of directors will be required to review and approve nearly all material determinations regarding the dispute, including budget and costs. Outside counsel’s knowledge of when the board meets each month and which representative of the Special District will be reporting to the board regarding the dispute is essential to effective representation.
The same is true for the Special District’s internal hierarchy as it is equally important for outside counsel to understand the role of each officer, project manager, and employee involved in the dispute to ensure efficient factual investigation and communications regarding the underlying dispute.
Unique Pre-Litigation & Litigation Issues common in Disputes Involving Special Districts
Several somewhat unique issues of law and procedure are more commonplace in disputes involving Special Districts, particularly in disputes involving Special District construction projects. These areas include the public project bidding process and law related to the underlying contract documents associated with the project, surety law and application of bond rights, the enforceability of liquidated damages provisions, and preservation of the work product privilege internally and with consulting experts, among others. A firm grasp on these areas is key to providing the Special District and its general counsel with the information and legal analysis they need to conduct informed risk assessment and to make determinations in negotiation or litigation.
Understanding the Special District’s Purpose and Goals related to the Dispute
While Special Districts vary in the subject matter of the services they provide, certain common purposes and goals exist across Special Districts. Outside counsel’s identification of these common goals and purposes can go a long way towards providing effective legal representation to a Special District mired in a dispute with a third-party.
Special Districts employ skilled professionals (engineers, GIS technicians, hydrologists) who take very seriously the public health, safety, or welfare subject matter of the projects on which they work. Where the outcome of a private business dispute might affect only the entities involved in the dispute, Special District disputes almost always involve ongoing or potential adverse effects on those whom the Special District serves.
At the most basic level, many Special District projects are taxpayer funded. When a dispute arises in this context, the Special District must mindful of the budget allotted in determining the course they take towards resolving the dispute.
Special Districts have ongoing relationships with other governmental entities (towns, administrative agencies, other special districts) and the Special District’s ongoing relationship and reputation with these entities are vital to its long-term success. A scorched earth approach by outside counsel focused solely on diverting liability to similarly situated entities may result in short-term legal success at the expense of the long-term goodwill with such entities which is vital to the long-term success of Special Districts.
Special Districts also develop important reputations with private entities, like contractors. A Special District’s development of a reputation of fortitude when it comes to disputes with contractors over issues like unsupportable delay or defective workmanship can significantly benefit the District in dealing with or avoiding entirely such disputes in the future. Outside counsel should assess this factor with the Special District’s general counsel at the outset of any such dispute.
Finally, Special Districts nearly always have multiple ongoing projects in different stages as well as consistent ongoing internal operations which must be maintained during the pendency of any dispute. Providing the Special District with realistic and regularly updated estimations of the cost, time, and resources required to effectively pursue resolution of the dispute will allow the Special District to adequately plan internally and evaluate its determinations regarding the dispute within the entirety of its ongoing activities.
Successfully representing Special Districts in disputes requires an understanding of the District’s internal functions as well as those relatively unique areas of law and procedure which are commonplace in Special District disputes. A practice group aimed at representing Special Districts in these types of disputes should develop strong relationships with Special District general counsel and take the time to consider each District’s important health, safety, and welfare role within its community.