Colorado’s second-highest court agreed on Thursday that the contractor responsible for building and operating the recent expansion of the Regional Transportation District’s rail network cannot recover more than $100 million from RTD for the extended period in which grade crossing systems malfunctioned.

Denver Transit Partners and RTD engaged in a public-private partnership to construct a $2.2 billion, taxpayer-funded commuter rail network connecting Union Station to the suburbs and to Denver International Airport. However, federal and state regulators were concerned that the wireless system used to trigger the warning equipment at more than two dozen grade crossings was not operating correctly.

Consequently, between 2016 and 2019, Denver Transit Partners had to provide attendants at all grade crossings at all times while its vendors devised a software solution. The associated costs were $111.5 million, which Denver Transit Partners sought to recover from RTD through a breach-of-contract suit.

Last year, a Denver judge sided against Denver Transit Partners. The company then turned to the Court of Appeals, arguing that regulators’ directives to fix the prolonged activation of the grade crossing equipment effectively imposed a “maximum warning time” for oncoming trains. Because Denver Transit Partners had to meet this new regulation mid-project, it claimed it should not bear the costs.

But that is not what happened, countered Judge Stephanie Dunn in the three-judge panel’s May 9 opinion. Federal regulations require a minimum warning time for trains approaching grade crossings, and also that the warning systems activate “in accordance with the design.”

“That regulatory language remained unchanged,” she wrote. “And while the regulators were concerned with Denver Transit’s longer-than-designed warning times, it was because they exceeded Denver Transit’s own design warning times by an unacceptable margin.”

During a 19-day trial, District Court Judge Andrew P. McCallin heard extensive evidence about the malfunctioning grade crossing systems on the A Line to the airport and on the B and G Lines:

• There were three incidents on March 1, 2016 where the gates did not properly close at grade crossings, resulting in a near collision between a train and a vehicle

• Although the A Line’s grade crossings were designed to provide a warning time between 29 and 42 seconds, some gates and lights activated for as long as three minutes, on average

• In an October 2016 email, Denver Transit Partners informed its software vendor that “Clearly the proposed (warning system) is not functioning as intended”

Eventually, the vendor devised a patch that accounted for a missing factor. The Federal Railroad Administration approved a proposal from Denver Transit Partners allowing a 20-second deviation from designed warning times.

McCallin, in a 2023 order finding in favor of RTD, concluded the FRA never changed its regulatory standard. Instead, the focus was always on whether the warning system functioned as designed, which it did not.

“A system that has long gate down time and gates that fail to descend reliably is not activating in accordance with its design,” he wrote. “The actual experiences of the traveling public show that the system was not operating properly or as designed.”

Denver Transit Partners appealed, insisting the regulators’ problem with excessive activation times of the grade crossing equipment forced the company to address a “maximum warning time,” which was never a requirement in the first place.

During oral arguments before the appellate panel, Judge Neeti V. Pawar observed the regulators’ problem was actually with the grade crossing equipment’s deviation from its design.

“I guess I want to clarify that when you’re talking about a maximum warning time, you’re talking about the significant difference between what the plan or the design indicated versus how it was running,” she said. “Is your client’s position that the system has always — always — been functioning in accordance with its design?”

Since the commuter lines entered revenue service, “it has always provided the minimum warning times supplied by the regulation,” responded Denver Transit Partners’ attorney, Sean Connelly.

RTD pointed out that the regulations and the project contract did not simply require 20-second minimum activation of the warning system, but for the system to function correctly as a whole.

Based on Denver Transit Partners’ argument, “the gates could stay down in an urban environment for 20 minutes, an hour, two hours. Yet, according to DTP, the system would be activating in accordance with its design,” said attorney Steven J. Wells.

The appellate panel sided against Denver Transit Partners, agreeing regulators were concerned with the functionality of the system as designed, not on a new “maximum warning time” metric.

“Because the evidence supports these findings, we reject Denver Transit’s arguments that the district court erred,” wrote Dunn.

“The decision issued by the Colorado Court of Appeals affirms the Regional Transportation District’s longstanding conviction that Denver Transit Partners is responsible for the costs associated with its initial failure to deliver a system consistent with federal and state standards, as promised,” RTD said in a statement.

Through its attorneys, Denver Transit Partners declined to comment.

The case is Denver Transit Partners, LLC v. Regional Transportation District.