Jump To

Top Caption Trial Court Document The text of this document was obtained by analyzing a scanned document and may have typos.

Support FLP

CourtListener is a project of Free
Law Project, a federally-recognized 501(c)(3) non-profit. Members help support our work and get special access to features.

Please become a member today.

Join Free.law Now

March 5, 2026 Get Citation Alerts Download PDF Add Note

HPM, INC. v. M.C. DEAN, INC.

District Court, D. Colorado

• Citations: None known
• Docket Number: 1:24-cv-01692

• Precedential Status: Unknown Status

• Opinion

• Authorities (17)

• Cited By (0)

• Summaries (0)

• Similar Cases (19.4K)

• PDF

Trial Court Document

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

Judge Nina Y. Wang

Civil Action No. 24-cv-01692-NYW-SBP

HPM, INC.,

Plaintiff,

v.

M.C. DEAN, INC.,

Defendant.

ORDER ON MOTION TO DISMISS THIRD AMENDED COMPLAINT

This matter comes before the Court on Defendant M.C. Dean, Inc.’s Motion to
Dismiss (“Motion to Dismiss” or “Motion”). [Doc. 49, filed April 14, 2025]. Defendant M.C.
Dean, Inc. (“Defendant” or “MCD”) brings the Motion pursuant to Federal Rule of Civil
Procedure 12(b)(6). [Id. at 1]. Plaintiff HPM, Inc. (“Plaintiff” or “HPM”) opposed the Motion
to Dismiss, [Doc. 50], and MCD replied, [Doc. 51]. The Court finds that oral argument
would not materially assist in the disposition of the Motion to Dismiss. Upon review of the
Parties’ briefing, the entire docket, and the applicable case law, the Motion to Dismiss is
respectfully GRANTED in part and DENIED in part.

BACKGROUND

The following facts are drawn from the operative Third Amended Complaint
(“TAC”), [Doc. 47], and the Court accepts them as true for purposes of the Motion. In
2021, MCD was awarded a contract (the “Prime Contract”) with the U.S. Army Corps of
Engineers (the “Government”) to perform construction services for the Buckley Air / Space
Force Base located in Colorado (the “Project”). [Id. at ¶¶ 2, 9–10]. MCD then sub-
contracted much of the non-electrical construction work required for the Project to HPM,
pursuant to a Firm Fixed Price Completion Subcontract (the “Subcontract”). [Id. at ¶¶ 1,
11; Doc. 47-1]. After the Subcontract was executed, MCD and the Government modified
the design of certain electrical equipment that needed to be installed for the Project, which

in turn resulted in changes to the design for underground utilities and related
improvements that HPM was building. [Doc. 47 at ¶¶ 22–25]. These design changes
increased HPM’s expenses and caused a significant delay in HPM’s work on the Project.

[Id. at ¶ 26]. Accordingly, on January 30, 2023, HPM submitted to MCD a proposed
change order (the “R10 Proposal”) seeking $5,493,861 of additional compensation and
331 additional days of compensable time. [Id. at ¶ 27].

In or around April 2023, representatives from each of the Parties and the
Government met to discuss the R10 Proposal in person. [Id. at ¶ 28]. HPM alleges that
after that meeting, MCD engaged in further negotiations with the Government regarding
the R10 Proposal without HPM, proposing a reduced amount of compensation and time

for the design changes. [Id. at ¶¶ 29–30, 32]. HPM was not informed about the results
of these negotiations until about May 9, 2023. [Id. at ¶ 35]. This is when HPM learned
that the Government granted a fraction of what HPM requested in the R10 Proposal,
agreeing to only $1,264,099 in compensation, 65 days of compensable delay, and 131
days of non-compensable delay. [Id. at ¶¶ 33–34]. MCD did not explain to HPM why it
engaged in negotiations with the Government without HPM’s involvement or why it made
unauthorized reductions and changes to the R10 Proposal. [Id. at ¶ 35].

The proposal that the Government authorized was memorialized in a “Subcontract
Agreement Modification” (the “Modification”), which MCD electronically submitted to HPM
via MCD’s web-based portal. [Id. at ¶ 36; Doc. 47-2]. MCD’s portal did not provide any
way for HPM to edit the Modification. [Doc. 47 at ¶ 37]. HPM took issue with the
Modification and voiced its objections to MCD. [Id. at ¶ 39]. But MCD refused to pay
even the reduced amount that the Government authorized unless and until HPM

approved the Modification via MCD’s portal. [Id.].

At this time, HPM was experiencing financial hardship “due to the significant costs
and delays caused by MCD on the Project, MCD’s refusal to remit payment, and HPM’s
limited resources as a small business.” [Id. at ¶ 40]. HPM needed to receive at least
some additional payment from MCD to continue its work on the Project. [Id. at ¶ 41]. So,
on May 19, 2023, HPM sent MCD a protest letter stating that it would “execute the RFP
10 / part two change order under protest, subject to a reservation of all rights to seek
additional time and compensation for costs and delays related to RFP10 not approved by
the government.” [Id. at ¶¶ 41–44; Doc. 47-3]. The letter also explained that HPM’s
objection is to “the value of the proposed modification and the revision to the contract

period of performance resulting from [MCD]’s ‘negotiations’” and that “[t]o the extent the
government is not responsible for [the additional] costs and delays, HPM intends to look
to [MCD] for compensation.” [Doc. 47 at ¶ 43; Doc. 47-3 at 3].

HPM then signed the Modification, as submitted by MCD on its portal, on June 15,
2023. [Doc. 47 at ¶ 45; Doc. 47-2 at 15]. MCD countersigned on June 16, 2023. [Doc.
47-2 at 15]. The Modification is a 14-page document containing a description of the
changes, a Statement of Work, a “description of work” with line-item breakdowns of the
new costs, a list of contracts between the Parties (the Subcontract and five modifications),
an attachment with unfilled fields called “Release of Liens,” an attachment with unfilled
fields called “Schedule of Subcontractors and Suppliers,” additional terms and conditions,
and a signature page. See generally [Doc. 47-2; Doc. 47 at ¶ 36].

HPM originally brought this suit in June of 2024, see [Doc. 1], and has amended
its Complaint three times, mostly recently in March of 2025, see [Doc. 6; Doc. 35; Doc.

47]. In the TAC, HPM alleges that “MCD has failed and refused to pay HPM for the added
costs, proposed change orders, insurance claims, and increased subcontractor costs
HPM has incurred or will incur related to the Project.” [Doc. 47 at ¶ 63]. HPM further
alleges that this refusal to pay “constitutes a material breach of the parties’ Subcontract”
and has resulted in HPM “incurr[ing] millions of dollars in damages.” [Id. at ¶¶ 64–65].

HPM brings two claims for relief: (1) breach of contract, which includes allegations of four
separate breaches of the Subcontract (“Count I”), and (2) breach of the covenant of good
faith and fair dealing, for improperly denying HPM’s proposed changed orders (“Count
II”). [Id. at ¶¶ 66–80].

MCD’s Motion seeks dismissal of all claims. [Doc. 49 at 2]. MCD first asserts that

the entire TAC should be dismissed with prejudice “because HPM released any claims it
possessed against MCD arising from the subcontract.” [Id.]. Alternatively, MCD argues
that the breach of contract claim should be dismissed in part “because the provisions
cited and the facts alleged do not adequately plead breach of the Subcontract.” [Id.].

MCD also argues that the breach of the covenant of good faith and fair dealing claim
should be dismissed with prejudice for “not adequately alleg[ing] that MCD’s denial of the
change order was dishonest or outside the scope of commercially accepted practices.”

[Id.].

LEGAL STANDARD

Under Rule 12(b)(6), a court may dismiss a complaint for “failure to state a claim
upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). In deciding a motion under
Rule 12(b)(6), the Court must “accept as true all well-pleaded factual allegations . . . and
view these allegations in the light most favorable to the plaintiff.” Casanova v. Ulibarri, 595 F.3d 1120, 1124 (10th Cir. 2010) (quoting Smith v. United States, 561 F.3d 1090,
1098 (10th Cir. 2009)). “Exhibits attached to a complaint are properly treated as part of
the pleadings for purposes of ruling on a motion to dismiss,” Barnett v. Surefire Med., Inc., 342 F. Supp. 3d 1167, 1169 n.2 (D. Colo. 2018) (quoting Tal v. Hogan, 453 F.3d 1244,
1264 n.24 (10th Cir. 2006)), and any “[f]actual allegations that contradict a properly
considered document are not well-pleaded facts that the court must accept as true,”
Farrell-Cooper Min. Co. v. U.S. Dep’t of the Interior, 728. F.3d 1229, 1237 n.6 (10th Cir.
2013) (cleaned up).

A plaintiff may not rely on mere labels or conclusions, “and a formulaic recitation

of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007). Rather, “a complaint must contain sufficient factual matter, accepted as
true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quotation omitted). The Court must ultimately “determine whether the
complaint sufficiently alleges facts supporting all the elements necessary to establish an
entitlement to relief under the legal theory proposed.” Forest Guardians v. Forsgren, 478
F.3d 1149, 1160 (10th Cir. 2007).

ANALYSIS

I. Waiver

“[O]n occasion it is proper to dismiss a claim on the pleadings based on an
affirmative defense.” Fernandez v. Clean House, LLC, 883 F.3d 1296, 1299 (10th Cir.
2018). “But that is only when the complaint itself admits all the elements of the affirmative

defense by alleging the factual basis for those elements.” Id. (citing Miller v. Shell Oil Co., 345 F.2d 891, 893 (10th Cir. 1965) (“If the defense appears plainly on the face of the
complaint itself, the motion [to dismiss for failure to state a claim] may be disposed of
under [Rule 12(b)].”)).

MCD argues that the TAC alleges the elements of the affirmative defense of
waiver. [Doc. 49 at 4–5]. Specifically, MCD contends that HPM’s allegations that
(1) there was a Modification which contained a “Release of Liens” form and (2) HPM
signed the Modification “admit[] all the elements of the affirmative defense of waiver.” [Id.
at 5 (citing Doc. 47 at ¶¶ 38, 45)]. According to MCD, by signing the Modification, HPM

released “any claims HPM possessed against MCD arising from the Subcontract.” [Id. at
4]. Because “HPM alleges nothing to contradict this release,” MCD contends that the
TAC should be dismissed in full. [Id.].

The language that MCD refers to is found in the Attachment to the Modification
called “Release of Liens,” and it states the following in relevant part:

Waiver and Releases. Effective upon receipt and bank clearance of the payment
described above, the undersigned hereby waives and releases in favor of M.C.
DEAN, Inc. and its sureties, the higher tier contractor, if any, the owner of the
Project and its lenders and guarantors, the, and their successors and assigns (the
“Released Parties”), all rights that presently exist by reason of construction work
performed for the Project through the Effective Date, . . . (ii) to assert or bring any
causes of action, claims, suits and demands for payment for work performed
through the Effective Date, including, but not limited to, claims for payment under
municipal, State or Federal laws . . . .

[Doc. 47-2 at 12]; see also [Doc. 49 at 4].

The Parties make various arguments regarding the enforceability of this release,
including whether it is incorporated into the Modification, whether HPM actually and
intentionally released its claims against MCD, and whether HPM signed the Modification
under economic duress. See [Doc. 49 at 5–8; Doc. 50 at 5–8; Doc. 47 at ¶¶ 45–47, 70].

The Court does not need to reach these arguments because even if the release was a
part of the Modification and knowingly agreed to by the Parties, it does not bar HPM’s
claims. The release states, at most, that HPM “waives and releases . . . all rights that

presently exist by reason of construction work performed for the Project through the
Effective Date . . . to assert or bring any causes of action, claims, suits and demands for
payment for work performed through the Effective Date.” [Doc. 47-2 at 12 (emphasis
added)].

The Effective Date of the Modification is June 16, 2023. [Id. at 4, 15]. The TAC
does not allege that all the work covered by the Modification was performed by June 16,
2023, and MCD does not argue that it does. Indeed, the TAC alleges the opposite—that
MCD’s design changes “delayed HPM’s ability” to work on the Project, and that HPM
needed to sign the Modification and receive at least some payment “to continue its work
on the Project.” [Doc. 47 at ¶¶ 24, 41]; see also [Doc. 49 at 12 (MCD acknowledging that

the Modification “provided increased budget and time to finish the Project” (emphasis
added))]. And HPM estimated that the design changes would cause a 331-day delay in
completion of the Project, see [Doc. 47 at ¶ 27; Doc. 47-2 at 9], but the time between
MCD finalizing the design changes and directing HPM to “proceed with field layout and
excavation” and the Modification’s Effective Date was less than five months, see [Doc. 47
at ¶ 25]. The face of the TAC contradicts the proposition that the work covered by the
Modification—and at issue in the case—was complete by June 16, 2023.

Without any allegations regarding which portion of HPM’s work, if any, was
completed prior to the Modification going into effect, the Court is not persuaded that

“[HPM]’s allegations, taken as true, plainly demonstrate the preclusive effect of waiver as
a matter of law.” See Statebridge Co. v. Martin-Powell, LLC, No. 18-cv-02279-KLM, 2019
WL 2866692, at *9 (D. Colo. July 3, 2019). Accordingly, the Motion is respectfully
DENIED to the extent that it seeks dismissal with prejudice of HPM’s TAC based on the
affirmative defense of waiver.

II. Count I: Breach of Contract

A claim for breach of contract under Colorado law1 requires proof of the following
elements: (1) the existence of a contract, (2) the performance by the plaintiff or some
justification for nonperformance, (3) failure to perform the contract by the defendant, and
(4) resulting damages to the plaintiff. W. Distrib. Co. v. Diodosio, 841 P.2d 1053, 1058 (Colo. 1992).

HPM asserts four theories of breach of contract in its TAC: that MCD breached its
duties under the Subcontract when it failed to (a) compensate HPM for additional
expenses incurred as a result of design changes, in violation of Subcontract §§ 6.6, 6.7,
and 22.0; (b) compensate HPM for $100,000 of HPM’s builder’s risk insurance claim, in

1 The Parties agree that Colorado law applies to claims pursuant to the Subcontract. See
generally [Doc. 49 (applying Colorado law); Doc. 50 (applying Colorado law)]; see also
[Doc. 47-1 at § 6.9 (“This Subcontract shall be governed by and construed in accordance
with the laws of the state in which the Project is located.”)]. Because the Parties agree
that Colorado law applies, the Court proceeds accordingly. See Grynberg v. Total S.A., 538 F.3d 1336, 1346 (10th Cir. 2008) (“Because the parties’ arguments assume that
Colorado law applies, we will proceed under the same assumption.”).

violation of Subcontract § 7.0; (c) include HPM in direct discussions with the Government
related to the Modification, in violation of Subcontract § 1.0; and (d) approve HPM’s
change orders / requests for equitable adjustment, in violation of Subcontract §§ 6.6, 6.7,
22.0. [Doc. 47 at ¶ 69]. MCD moves to dismiss HPM’s breach of contract claim related

to theories (a), (b), and (d), arguing that HPM fails to allege the “failure to perform”
element of the claim. [Doc. 49 at 9]. The Court addresses each theory in turn.
A. (a) and (d): Compensation for Additional Expenses.

HPM alleges that MCD breached its contract obligations pursuant to Subcontract
§§ 6.6, 6.7, and 22.0 when it failed to compensate HPM for additional expenses it incurred
as a result of MCD’s design changes and failed to approve HPM’s requests for equitable
adjustment. [Doc. 47 at ¶ 69(a), (d)]. Section 6.6 of the Subcontract requires that if MCD
makes any design change that “causes a material increase or decrease in the estimated
cost of, or the time required for the performance of any part of the work under this
Subcontract, MCD shall make an equitable adjustment in the estimated cost, delivery

schedule, or amount of any fixed fee and shall modify the Subcontract.” [Doc. 47-1 at
§ 6.6]. Section 22.0 of the Subcontract states that “[i]n the event Subcontractor’s
performance of the Work is delayed by the acts or omissions of MCD or those for whom
MCD is responsible[.] Subcontractor may request a Change Order equitably adjusting
the Subcontract term and the Firm Fixed Price.” [Id. at § 22.0]. In the case that there is
a dispute as to the equitable adjustment pursuant to either Section 6.6 or 22.0, the
Subcontract refers the Parties to Section 6.7. [Id.; id. at § 6.6]. Under Section 6.7, “[t]he
Parties agree to negotiate to resolve any dispute arising out of the performance of this
Subcontract” and “agree to negotiate in good faith to reach a mutually agreeable
settlement within a reasonable amount of time.” [Id. at § 6.7].

MCD makes two arguments for why HPM’s claim of breach of contract under
Sections 6.6, 6.7, and 22.0 must be dismissed. First, MCD argues that the Subcontract

did not require MCD to compensate HPM for additional expenses or approve the change
orders presented by HPM. [Doc. 49 at 9–11]. Instead, the Subcontract’s only requirement
is that “MCD . . . make an equitable adjustment in certain instances,” and the TAC “pleads
no facts illustrating that MCD failed to make an equitable adjustment.” [Id.]. Second,
MCD argues that while the TAC alleges repeatedly that MCD acted “unreasonably” in
denying HPM’s proposed change orders, the TAC does not explain how MCD did so and
“is devoid of any facts illustrating that MCD engaged in bad faith negotiations.” [Id. at 11–
12].

“Equitable adjustment.” In its opposition, HPM cites Black’s Law Dictionary’s
definition of the term “equitable”—“[j]ust; conformable to principles of justice and right”—

and argues that under such a definition, “there is nothing ‘equitable’ at all about the
adjustment [MCD] forced upon HPM.” [Doc. 50 at 10]. As support for this argument,
HPM refers to the TAC’s allegation that MCD paid HPM only 23% of its requested costs
and a bit more than one third of its requested additional time. [Id. (citing Doc. 47 at ¶ 34)].

This single allegation is plainly insufficient. By HPM’s own argument, the TAC
simply alleges the existence of a gap between what HPM demanded in the R10 Proposal
and what MCD proposed in the Modification. Yet, HPM asks the Court to infer from this
gap alone that the Modification was inequitable—without any additional allegations in the
TAC to support this inference. The TAC does not explain, for instance, why the amounts
requested by HPM in the R10 Proposal are themselves reasonable, or that the
Modification excluded legitimate costs that are typically reimbursed in the subcontractor
context. Nor does the TAC allege any standard against which the Court can evaluate
whether the Modification’s reduction was equitable or not.

The language of the Subcontract further supports the Court’s conclusion. Section
6.6 of the Subcontract only states that if a design change “causes a material increase . . .
in the estimated cost of, or the time required for the performance of any part of the work
under this Subcontract, MCD shall make an equitable adjustment . . . and shall modify
the Subcontract.” [Doc. 47-1 at § 6.6]. It does not require MCD to adopt, without revision,
HPM’s change orders. Indeed, Section 6.6 itself anticipates that the Parties may not be
aligned as to what the adjustment should be. See [id. (“Failure to agree to any adjustment
shall be a dispute under the Disputes clause of this Subcontract.”)]. To read Section 6.6
as requiring MCD to make an “equitable adjustment” equal to HPM’s requested
adjustment would render most of this section superfluous, an interpretation that “should

be avoided.” See In re Est. of Gattis, 318 P.3d 549, 558 (Colo. App. 2013) (“When
interpreting a contract, any construction that would render any clause or provision
unnecessary, contradictory, or insignificant should be avoided.” (cleaned up)).

Good faith negotiation. In response to MCD’s argument that the TAC “is devoid
of any facts illustrating that MCD engaged in bad faith negotiations,” [Doc. 49 at 11–12],
HPM points to numerous allegations in the TAC on that point, such as MCD excluding
HPM from discussions with the Government regarding the R10 Proposal and MCD
refusing to explain the significant adjustments that it made to the R10 Proposal, [Doc. 50
at 10–11 (citing Doc. 47 at ¶¶ 35, 37, 39, 48)]. MCD replies that HPM’s briefing
contradicts its allegations and does not change the fact that the TAC does not allege how
MCD negotiated in bad faith in violation of Subcontract § 6.7. [Id. at 6].
The Court respectfully disagrees with MCD and finds that the TAC’s allegations
are sufficient at this stage to state a claim for breach of the agreement to negotiate in

good faith pursuant to Subcontract § 6.7. Section 6.7 requires that the Parties “negotiate
in good faith to reach a mutually agreeable settlement within a reasonable amount of
time.” [Doc. 47-1 at § 6.7]. The TAC alleges that MCD acted contrary to this provision—
threatening HPM that it would not receive even the reduced compensation authorized by
the Government “unless and until HPM approved the Modification via the Portal,” which
by design could not be modified by HPM. See [Doc. 47 at ¶¶ 37, 39]. And there is nothing
in the TAC to suggest that MCD entertained any of HPM’s arguments regarding
increasing the Modification compensation or that MCD proposed any settlements.

Between these allegations and the allegation that MCD has continued to refuse to explain
its reasoning in unilaterally reducing and changing HPM’s R10 Proposal, [id. at ¶¶ 35,

48], the Court finds that the TAC adequately pleads that MCD negotiated the dispute
regarding the R10 Proposal in bad faith.

Accordingly, the Court respectfully GRANTS the Motion to Dismiss as to the
breach of contract claim insofar as it is based on the theory that MCD was required and
failed to approve HPM’s change orders / requests for equitable adjustment. And the Court
respectfully DENIES the Motion to Dismiss insofar as it is based on the theory that MCD
engaged in bad faith negotiations, in violation of Subcontract §§ 6.6, 6.7, and 22.0.
B. (b): Builder’s Risk Insurance Deductible.

Pursuant to Section 7 of the Subcontract, titled “Required Insurance,” HPM agreed
to purchase specific insurance coverage for the Project. [Doc. 47-1 at § 7.0]. That same
provision of the Subcontract also states that “MCD will have a builders risk policy for [the

Prime Contract].” [Id.]. This builder’s risk policy was purchased entirely by MCD, and
HPM had no knowledge of its policy terms. [Doc. 47 at ¶¶ 51–52, 54]. This policy includes
a $100,000 per occurrence deductible, and HPM alleges in its TAC that “MCD is
responsible for paying any deductibles incurred under the builder’s risk policy.” [Id. at ¶¶
55–56]. Thus, when an area of the Project site flooded in April of 2023, and HPM was
forced to perform repairs at significant expense, HPM expected to recover its repair costs
in full. See [id. at ¶¶ 57–62]. But that is not what happened. HPM submitted a claim
under the builder’s risk insurance policy held by MCD, and the insurer paid HPM’s claim
in full less the $100,000 deductible. [Id. at ¶¶ 59, 61]. HPM then “repeated[ly]
demand[ed]” that MCD pay the remaining $100,000 of HPM’s claim, but MCD has

refused. [Id. at ¶ 62].

MCD claims that Section 7.0 of the Subcontract is “clear that MCD has no
obligation to HPM on any of the insurance policies required under the Section, including
its own builder’s risk policy.” [Doc. 49 at 12]. Section 7.0 states in relevant part that “[a]ny
self-insured retentions, deductibles and exclusions in coverage in the policies required
under this Section shall be assumed by, for the account of, and at the sole risk of
Subcontractor.” [Doc. 47-1 at § 7.0]. MCD argues that because its builders risk policy
“was a ‘policy required under’ and directly referenced in Section 7.0,” its deductible is
assumed solely by HPM. See [Doc. 49 at 12; Doc. 51 at 7]. HPM disagrees, arguing that
MCD’s builders risk insurance policy is not one of the “polic[ies] required” under Section
7.0. [Doc. 50 at 11–12].

The Court respectfully agrees with HPM and finds that MCD’s builders risk
insurance policy is not a “polic[y] required” under Section 7.0. Reading and viewing this

Subcontract section as a whole leads to the Court’s conclusion. Section 7.0 starts out by
requiring that HPM “provide MCD with a Certificate of Insurance evidencing proof of
insurance for the following types of coverage and limits of liability.” [Doc. 47-1 at § 7.0
(emphasis added)]. Immediately following this paragraph are four indented bullet points,
and each bullet point is a separate policy: (1) a Commercial General Liability policy, (2) a
Business Auto Liability policy, (3) a Commercial Umbrella policy, and (4) a Workers
Compensation and Employers Liability policy. [Id.]. The sentence after those four bullet
points returns to standard paragraph structure and imposes additional obligations on
HPM regarding “[t]he required insurance coverages above.” [Id. (emphasis added)]. The
sentence after that explains that any deductibles “in coverage in the policies required

under this Section shall be assumed by, for the account of, and at the sole risk of
Subcontractor.” [Id.]. The subsequent paragraph again imposes additional terms
regarding “the insurance coverage required above.” [Id. (emphasis added)]. After that
sentence, there is a paragraph break that is larger than any other spacing in this Section.

[Id.]. This spacing is followed by one single sentence that “MCD will have a builders risk
policy for [the Prime Contract] for phase 1 and 2.” [Id.]. This is the first and only time that
Section 7.0 refers to the builder’s risk policy.

The Court is unconvinced by MCD’s reading that simply because the builder’s risk
policy is “directly referenced” in Section 7.0, it qualifies as a “polic[y] required under this
Section.” [Doc. 49 at 12; Doc. 51 at 7]. There is a clear difference in how Section 7.0
deals with the builder’s risk insurance policy versus the other four policies. The four
policies are introduced with mandatory language, i.e. that HPM “shall” provide proof of
insurance for those policies, in an indented bullet-point list and are followed by numerous

obligations referencing the policies required “above.” Meanwhile, the sole reference to a
builders risk insurance policy is disconnected from that discussion. It is in a single
sentence at the end of the Section, set apart by a large paragraph break. And it only
states that MCD “will” have such a policy, rather than setting out specific requirements
that HPM must fulfill like with the other four policies. Indeed, there is no requirement
under Section 7.0 that HPM obtain a builder’s risk policy at all. See [Doc. 50 at 12]. The
Court thus finds that the phrase “policies required under this Section” refers to the four
bullet-pointed policies that HPM is required to obtain and excludes MCD’s builder’s risk
policy.

MCD makes no other arguments explaining why HPM would be responsible for

paying the insurance deductibles of MCD’s own insurance policy. The Court therefore
finds that the TAC plausibly alleges that HPM was not responsible for the deductible of
the builders risk policy and that MCD breached the Subcontract when it refused to
compensate HPM for $100,000 of its repair costs. The Court respectfully DENIES the
Motion to Dismiss HPM’s breach of contract claim under this theory.

III. Count II: Breach of the Covenant of Good Faith and Fair Dealing

“A covenant of good faith and fair dealing is implied in every contract.” First Am.
Mortg., Inc. v. First Home Builders of Fla., No. 10-cv-00824-RBJ-MEH, 2011 WL
4963924, at *7 (D. Colo. Oct. 14, 2011) (citing Amoco Oil Co. v. Ervin, 908 P.2d 493, 499 (Colo. 1995)). This covenant applies when one party to the contract “has discretionary
authority with respect to an express term of the contract,” and dictates that “[t]he discretion
cannot be exercised in a manner that defeats the reasonable expectations of the parties
to the contract.” Id. (citing Amoco Oil, 908 P.2d at 498–99); see also City of Golden v.

Parker, 138 P.3d 285, 292 (Colo. 2006) (“The good faith performance doctrine attaches
to contracts ‘to effectuate the intentions of the parties or to honor their reasonable
expectations.’” (quoting Amoco Oil, 908 P.2d at 498)). The covenant is breached “when
a party uses 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.”

ADT Sec. Servs., Inc. v. Premier Home Prot., Inc., 181 P.3d 288, 293 (Colo. App. 2007).
HPM alleges that MCD’s denial of proposed change orders without justification
“breached the implied covenant of good faith and fair dealing and constitutes a material
breach of the Subcontract.” [Doc. 47 at ¶ 79]. MCD moves to dismiss this claim because
the TAC does not allege that MCD “act[ed] dishonestly or . . . outside the scope of

accepted commercial practices to deprive the other party of the benefit of the contract.”

[Doc. 49 at 13–14 (quoting O’Reilly v. Physicians Mut. Ins. Co., 992 P.2d 644, 646 (Colo.
1999))]. MCD does not argue the question of whether it has discretionary authority
regarding Subcontract modifications.

HPM agrees with MCD as to the proper pleading standard but counters that HPM
is not required “to recite the elements of a claim based on case law drummed up by
[MCD]’s counsel.” [Doc. 50 at 12–13]. HPM further argues that MCD “ignores the vast
majority of the facts pled in the [TAC]”; according to HPM, its allegations that MCD
breached specific provisions of the Subcontract, namely the “express good faith
requirements” and the requirement “to include HPM in discussions with the Government
related to changes to HPM’s Subcontract,” are sufficient to allege that MCD acted
“dishonestly or outside the accepted commercial practices.” [Id. at 12–14].

In its Reply, MCD acknowledges that the TAC “alleges a laundry list of grievances”

but contends that “HPM fails to connect the dots to show that MCD’s actions deviated
from commercially accepted practices.” [Doc. 51 at 7]. MCD argues that “the TAC is
devoid of any allegations regarding commercially accepted practices,” and any efforts by
HPM’s opposition brief to identify those cannot fix the TAC’s facial deficiency. [Id. at 8].

MCD does not make any specific arguments as to whether the TAC alleges that MCD
acted “dishonestly.”

The Court respectfully agrees with HPM that the TAC states a plausible claim for
breach of the implied covenant of good faith and fair dealing. The implied covenant
required MCD to “effectuate the intentions of the parties or to honor their reasonable
expectations.” Amoco Oil, 908 P.2d at 498. The Parties explicitly contracted that they

would negotiate in good faith, that MCD would include HPM in direct discussion with the
Government regarding any change order disputes, and that MCD will make “equitable
adjustment[s]” to the Subcontract if any design changes caused a material increase in
HPM’s estimated costs. [Doc. 47 at ¶¶ 16–20, 75–76; Doc. 47-1 at §§ 1.0, 6.6, 6.7].

Accordingly, HPM had a “reasonable expectation[]” that MCD would act in accordance
with those contractual provisions. MCD did not. Instead, HPM alleges that MCD met with
the Government to discuss HPM’s change order without HPM’s knowledge; prepared a
Modification significantly less than HPM’s proposal; refused to explain the reduction to
HPM; and threatened to not pay HPM any of the money that the Government had
approved unless HPM signed the Modification as prepared by MCD. See [Doc. 47 at
¶¶ 32, 37–39; Doc. 47-3 at 2–3]. Drawing all inferences in favor of HPM, these allegations
plausibly state that MCD acted dishonestly and did not honor HPM’s reasonable
expectations. The Court thus finds that HPM has sufficiently stated a claim for breach of

the implied covenant, and respectfully DENIES the Motion to the extent it seeks to dismiss
this claim.

IV. Leave to Amend

At the end of its opposition to the Motion to Dismiss, HPM requests leave to amend
“[i]n the event the Court identifies a factual deficiency” with the TAC. [Doc. 50 at 14].2

Whether to permit amendment is within the Court’s discretion. Openwater Safety IV, LLC
v. Great Lakes Ins. SE, 435 F. Supp. 3d 1142, 1151 (D. Colo. 2020). “A court may deny
leave to amend in the absence of a formal motion requesting leave to amend, because a
‘bare request to amend in response to a motion to dismiss’ does not alert the court or
opposing party of the request to amend or the basis for it.” Ubel v. Progressive Direct

Ins. Co., No. 20-cv-00204-RM-NYW, 2020 WL 9432929, at *23 (D. Colo. Oct. 22, 2020)
(quoting Johnson v. Spencer, 950 F.3d 680, 721 (10th Cir. 2020)), recommendation
adopted, 2020 WL 6701102 (D. Colo. Nov. 13, 2020). Here, HPM’s request for leave to
amend is hypothetical and does not articulate any specific proposed amendments. Thus,
any request by HPM to amend the TAC should be made by formal motion, in compliance
with D.C.COLO.LCivR 15.1, and after conferring with MCD.

2 MCD opposes this request based on its waiver argument, see [Doc. 51 at 8], which the
Court respectfully rejected in this Order.

CONCLUSION
For the foregoing reasons, it is ORDERED that:
(1) Defendant M.C. Dean, Inc.’s Motion to Dismiss [Doc. 49] is GRANTED in
part and DENIED in part;
(2) Count | is DISMISSED without prejudice insofar as it is predicated on
MCD’s alleged failure to approve various proposed change orders /
requests for equitable adjustment submitted by HPM, in violation of the
Subcontract §§ 6.6, 6.7, and 22.0;
(3) | Count | SURVIVES insofar as it is predicated on MCD’s failure to negotiate
the dispute related to the R10 Proposal in good faith, in violation of the
Subcontract §§ 6.6, 6.7, and 22.0;
(4) Count | SURVIVES insofar as it is predicated on MCD’s failure to include
HPM in direct discussion with the Government related to the R10 Proposal,
in violation of the Subcontract § 1.0; and
(5) Count II SURVIVES.

DATED: March 5, 2026 BY THE COURT:

                                 United States District Judge 

                             19