COLORADO LAW UPDATEThe Times They Are A Changin’Changes are afoot which promise to cause problems for those set in their ways. First, as youshould know, the Civil Pilot program starts on January 1, 2012. Be sure and get familiar with thatprogram, as the Judiciary strives to find ways to streamline and reduce the cost of litigation. Onthe plus side… we hope to try more cases!In addition, the way to calculate time has changed [for most rules as of January 1, 2012]. Again,check Lexis, the Supreme Court website or order a new book to find out the changes. Note, sincethe rule was only adopted in mid-December, paper books are likely to be in error and needsupplementing.******Thanks to the Jurisdiction and Venue Clarification Act of 2011, changes to federal court practiceare coming. The Act contains significant changes to the removal statute, 28 U.S.C. § 1441, andwill affect nearly every new case filed or removed next year invoking the courts’ diversityjurisdiction. By clarifying the rules affecting the timing of removal in cases with multipledefendants, determinations of amount in controversy, and venue, Congress hoped to simplifiedremoval and venue rules for both plaintiffs and defendants in federal court.The new law provides that each defendant will have 30 days from his or her own date of serviceto seek removal. Earlier-served defendants would also be allowed to join in or consent toremoval by another defendant. To avoid further confusion, the law also codifies the “rule ofunanimity,” set forth over a century ago by the Supreme Court, requiring all defendants toconsent to removal. To our benefit, where there is no clear indication of amount in controversy inthe Complaint, defendants may still remove, even after the 30-day period expires, if they receivediscovery from the plaintiff indicating that the jurisdictional amount is met. Cases still can’t beremoved more than one year after commencement unless the court finds that the plaintiff hasacted in bad faith in order to prevent a defendant from removing the case.Congress also adopted the majority standard that residency is a natural person’s state ofdomicile, the same standard used in the determination of citizenship for diversity jurisdiction.And beginning in 2012, Congress has provided that litigants may stipulate to the transfer ofvenue to a district where the lawsuit may otherwise have not originally been brought “for theconvenience of the parties and witnesses and in the interest of justice.” This abrogates theSupreme Court’s decision in Hoffman v. Blaski, 363 U.S. 335 (1960).Finally, the statute states that, upon removal, district courts must now sever and remand claimsnot within the original or supplemental jurisdiction of the district court (or which arenonremovable by statute).The Act will go into effect January 8, 2012.
**********Last, the Colorado Supreme Court has adopted a new way for legal practitioners and parties torefer to its and the Colorado Court of Appeals’ published opinions in legal briefs and otherdocuments. It is called the public domain citation format, and “…is to make it easier forpractitioners and self-represented parties who lack the resources to access an electronic researchdatabase or the printed volumes of the Pacific Reporter to locate Colorado case law and to cite tothat case law…” according to Chief Justice Bender.A citation to an appellate opinion in the Pacific Reporter could look like this: Smith v. Jones, 45P.3d 1237, 1254 (Colo. 2012). Under the new format, a citation to a Supreme Court opinionwould look like this: Smith v. Jones, 2012 CO 22, ¶¶ 44-45, while a citation to a Court ofAppeals opinion would look like this: Jones v. Smith, 2012 COA 35, ¶¶ 44-45. (These are notreal cases, only examples.) “CO” means Supreme Court and “COA” means Court of Appeals.The “22” in the first example and the “35” in the second example mean those opinions are,respectively, the 22nd and the 35th issued by each court in 2012. Both citations point to theopinion’s 44th and 45th paragraphs. Upon announcement, each opinion selected for publicationwill be assigned a public domain citation and internal paragraph numbers.Practitioners and parties will be permitted to use the public domain citation format or to cite tothe Pacific Reporter, and they will not have to provide parallel citations in either format.CASE LAW UPDATECOLORADO SUPREME COURTVickery v. Evans – Supreme Court determines that amount of punitive damages that can beawarded includes interest on the underlying judgment (SC 12/12/11). Monica Vickery soughtreview of the reduction of exemplary damages in her defamation suit against the mother andsister of her deceased husband. Both the district court and court of appeals had limited Vickery’sexemplary damages to an amount equal to the compensatory damages figure returned by thejury, before any adjustment for prejudgment interest. The Colorado Supreme Court reversed,finding that “the amount of the actual damages awarded,” to which exemplary damages arestatutorily limited, refers not to the jury’s assessment of total compensatory damages but to thetotal compensatory damages awarded against the defendant, which necessarily include statutorilymandated prejudgment interest.Cherokee Metro. Dist. v. Meridian Serv. Metro. Dist. & Cherokee Metro. Dist.v. UpperBlack Squirrel Creek Ground Water Mgmt. Dist. – Supreme Court finds intervention ruleshould be liberally applied, even in declaratory judgment action (SC 12/12/11). The SupremeCourt holds that where defendant Meridian had an interest, which could be impaired and no otherparty adequately represented its interests, Meridian had a right to intervene in a declaratoryjudgment proceeding.Condo v. Conners – Supreme Court upholds anti-assignment clause in LLC agreement (SC12/21/11). The Supreme Court held that an attempted assignment of a limited liability company
member’s right to receive distributions and effective transfer of voting rights was invalid becauseit was made without the consent of the other members of the LLC, in violation of the anti-assignment clause in the LLC’s operating agreement. The Court reasoned that because the anti-assignment clause applied to the assignment of “any portion” of a membership interest, theclause applied to attempted assignments of both rights and duties.COURT OF APPEALSBeaver Creek Property Owners Association, Inc. v. Bachelor Gulch Metropolitan Dist. –Court of Appeals confirms one award of attorney’s fees, reverses another in § 1988 action. (CA12/08/11). In April 2006, Bachelor Gulch enacted a road regulation that effectively bannedStrawberry Park subdivision construction traffic from its roads. Two groups of homeowners suedto overturn the regulation. They prevailed and were awarded attorney’s fees. On appeal,Bachelor Gulch argued that the district court erred in awarding Strawberry Park its attorney fees,because Strawberry Park’s constitutional claims were not sufficiently “substantial.” When aparty joins state law and constitutional claims but prevails only on the state law claims withoutdeciding the constitutional claims, a court still may award attorney fees under 42 U.S.C. § 1988if the constitutional claim was substantial and the state law claim arose from a common nucleusof operative facts. Here, Strawberry Park was required to establish that the traffic regulation atissue and the classification that it allegedly established lacked a rational relationship to alegitimate governmental purpose. There was a substantial evidentiary record in which both sidespresented evidence tending to support their respective positions. In light of this record, and fullyrecognizing that a plaintiff seeking to invalidate a regulation on rational basis grounds faces anuphill battle, it is not apparent that Strawberry Park’s constitutional claims were “obviouslywithout merit,” as Bachelor Gulch contended. Accordingly, Strawberry Park’s constitutionalclaims were sufficiently substantial to warrant an award of attorney fees under § 1988. BachelorGulch also contended that the district court erred in awarding attorney fees to Beaver Creekbecause Beaver Creek did not add its § 1983 claims until after the district court had grantedpartial summary judgment for plaintiffs. The Court of Appeals agreed, noting that the relationback doctrine may not be used to create a post hoc basis for an award of attorney fees under §1988.Kisselman v. American Family Mutual Ins. Co. – Court of Appeals issues pro-claimantinterpretation of ‘bad faith’ statute (CA 12/08/11). Kisselman was injured in a car accidentcaused by an underinsured driver. At the time of the accident, Kisselman was covered by anAmerican Family insurance policy that included uninsured/underinsured motorist and umbrellacoverage up to $1.1 million. Kisselman settled with the uninsured driver, filed a lawsuit againstAmerican Family to avoid having his legal claims barred by the statute of limitations, andproceeded to arbitration with American Family to determine Kisselman’s past and futuredamages stemming from the car accident. American Family subsequently paid the amountawarded by the arbitrator for these damages to Kisselman. In interpreting §10-3-1115 and -1116,the district court found them inapplicable to this action, and Kisselman appealed. [Those sectionscreate a cause of action for ‘first party claimants’ which entitle them to reasonable attorney fees,court costs, and “two times the covered benefit” damages in the event an insurer is found to haveunreasonably delayed or denied payment of a claim for benefits owed]. The Court of Appealsfound that the General Assembly intended the statutes to apply prospectively to all post-effective
date conduct of insurers, regardless of when the original claim for benefits was made. Therefore,CRS §§ 10-3-1115 and -1116 apply prospectively to alleged post-effective date acts ofunreasonable delay by an insurer, according to Judge Loeb.Reigel v. SavaSeniorCare L.L.C. – Court of Appeals makes far-reaching decision on wrongfuldeath case (CA 12/08/11). Dennis Reigel died shortly after being taken to a hospital emergencyroom from a nursing facility owned by Alpine. The Sava Defendants) contended that the districtcourt erred in denying their motion for directed verdicts on the negligence claim, asserting thatMs. Reigel did not establish that they owed a duty of care to Mr. Reigel because she did notpresent evidence to establish that Alpine employees’ actions could be imputed to the SavaDefendants. The Court of Appeals agreed, and reversed that portion of the judgment. In addition,Alpine contended that the evidence was insufficient to support a jury finding of causation inconnection with the negligence claim because the district court erred by giving the jurors anincorrect test for causation [the “increased risk” test instead of the “but-for” causation test]. TheCourt agreed, but found that while remand was necessary, Alpine was not entitled to a directedverdict on the negligence claim, as there was sufficient evidence would have been sufficient tosupport a verdict under the correct test. Therefore a new trial was appropriate under thecircumstances. Defendant Alpine also contended that the district court erred in denying theirmotion for directed verdicts on Ms. Reigel’s outrageous conduct claim. Though there is evidencethat Alpine’s employees were abrupt, irresponsible, lacking in sensitivity and inattentive toRiegel’s condition, the evidence was not sufficient to support an outrageous conduct claim and adirected verdict on this claim was appropriate. Defendants next contended that the district courterred in allowing Ms. Reigel to recover punitive damages because the court abused its discretionin permitting Ms. Reigel to amend her complaint to request punitive damages shortly before trial.The Court of Appeals disagreed, finding the trial court had not abused its discretion in allowingthe Reigels to amend their complaint. Finally, the decedent’s sons cross-appealed the districtcourt’s directed verdict in defendants’ favor on their wrongful death claim and its award of coststo defendants for that claim. The Court of Appeals held that a wrongful death action involves ashared injury among survivors such that there is no individualized recovery of damages, becauseall damages awarded are owned jointly and distributed through the statutes of descent anddistribution. Accordingly, the Court of Appeals found that the district court erred in dismissingthe sons from the case; that the award of costs against the sons premised on that dismissal shouldbe reversed; and that the sons will be entitled to participate as plaintiffs upon remand of thenegligence claim.Janicek v. Obsideo, LLC. – Court of Appeals defines equitable defenses and claims inforeclosure action (CA 12/08/11). In foreclosure action, Homeowners asserted that the equitabledoctrines of (1) equitable estoppel, (2) unclean hands, and (3) judicial estoppels barred lenderfrom receiving the excess proceeds in foreclosure sale. However, equitable estoppel and uncleanhands are equitable defenses and not offensive theories of recovery, and judicial estoppel doesnot apply because homeowners did not contend that lender took inconsistent positions in relatedcourt proceedings. Accordingly, none of the three doctrines affords homeowners a theory ofrecovery against Obsideo.Thyssenkrupp Safway, Inc. v. Hyland Hills Parks and Recreation District - Court ofAppeals interprets indemnity claim against public entity and CRS § 24-91-103.6(4) (CA
12/08/11). Hyland Hills is a Colorado Special District and owns a water park known as WaterWorld. In May 2006, the general manager of Water World authorized his assistant generalmanager, Gary Maurek, to locate a scaffolding company to assist in accessing a light fixture atopa tall pole that was misaligned. One of the companies contacted was Safway. Safway’s assistantconstruction manager visited the premises and was asked to provide a quote for the scaffoldingservices. A quote in the form of a proposed contract was faxed to Maurek later that day. Itincluded an indemnification provision. Maurek prepared a summary of the proposed cost andgave it to his general manager, who then passed it along to the executive director of HylandHills. The executive director approved the expenditure of approximately $1,800 but did not giveanyone authority to sign a contract. Maurek nonetheless signed Safway’s contract form as“assistant general manager.” During erection of the scaffolding, the light fixture fell onSafeway’s employee, causing him to fall and sustain serious injuries. Safway paid workers’compensation benefits and then commenced this action seeking indemnification from HylandHills. The trial court found that Safway had failed to prove Maurek had any authority to sign thecontract. It also held that the claim was barred by CRS § 29-1-110(1), which essentially voidsany contracts made by a local government that involve expenditures of money in excess ofappropriated amounts. On appeal, the Court of Appeals held that the contract at issue was apublic works contract and that the indemnity provision was a remedy-granting provision thatwould trigger the exception. However, the Court rejected Safway’s argument that the trialtestimony under oath by its director of risk management regarding the amounts Safway had paidto or on behalf of its injured employee met the requirement of a “statement sworn”. The plainlanguage of the statute requires the foregoing sworn statement be “submitted to the public entity”not the trial court and held that this must happen sometime before trial.Mid-Century Insurance Co. v. Robles – Court of Appeals discusses exclusion in auto policyfor regular use of insured vehicle (CA 12/08/11). On January 21, 2008, an automobile accidentoccurred between claimant and the tortfeasor. At the time, the tortfeasor was living with hisparents and driving his father’s Oldsmobile, which was insured by Farmers Insurance Exchange.The tortfeasor’s parents were the named insureds. The tortfeasor owned a Ford Explorer insuredby Mid-Century. Claimant sustained injuries in the accident and filed a lawsuit against thetortfeasor and received a partial settlement from Farmers. However, claimant also claimedentitlement to benefits under the liability coverage afforded tortfeasor under Mid-Century policy.Mid-Century instituted a declaratory action, and the trial court granted Mid-Century’s SJ motion,concluding that the Oldsmobile was not an “insured car” under the policy and that the “regularuse” or “drive other car” exclusion did not violate public policy. On appeal, claimant contendedthat the exclusion did not apply because the tortfeasor did not regularly use the Oldsmobile. TheCourt of Appeals disagreed, finding this to be a misinterpretation of the insurance contractlanguage, which clearly barred coverage by Mid-Century of the tortfeasor’s use of his father’svehicle. The Court noted that excluding coverage for a family member’s use of a car that anotherfamily member owns and is separately insured is not uncommon. The Court then consideredwhether the Oldsmobile qualified as an “insured car” under the Mid-Century policy. The onlyway it could so qualify was if it were a replacement vehicle. Because this term was not definedin the Mid-Century policy, the Court looked to the common meaning of “replacement” todetermine whether the Oldsmobile was a replacement vehicle for claimant’s Explorer. The Courtheld that it was not a replacement vehicle under this definition and, therefore, the Oldsmobilewas not insured by Mid-Century.
Wahrman v. Golden West Realty, Inc. – Court of Appeals issues first case interpreting CAR4.2 Interlocutory Review (CA 12/08/11). Defendants acted as Wahrman’s broker in leasing andmanaging her residential rental property. According to Wahrman, tenants significantly damagedthe property during and in connection with the termination of the tenancy. She allegeddefendants were liable due to various wrongful acts. On defendants’ Motion for Determination ofQuestion of Law, the trial court requested briefing on the economic loss rule and then held that itbarred the breach of fiduciary duty and negligence claims. It then granted Wahrman’s Motion forInterlocutory Appeal without making any findings as required by the rule. [C.A.R. 4.2 allows aninterlocutory appeal when (1) immediate review may promote a more orderly disposition orestablish a final disposition of the litigation; (2) the order from which an appeal is soughtinvolves a controlling question of law; and (3) the order from which an appeal is sought involvesan unresolved question of law]. The Court of Appeals found that whether the economic loss ruleapplies to claims regarding the duties a residential broker owes to a landlord appeared to be aquestion of first impression in Colorado and, therefore, assumed it was an unresolved question oflaw. However, the Court found nothing to suggest why the economic loss question is acontrolling question of law in this case and also found that the assertion that immediate reviewmay support more orderly disposition based on the specter of retrial and attendant additional costwas not a reason that would support interlocutory review. The petition was denied and the appealwas dismissed.Ferguson Enterprises, Inc. v. Keybuild Solutions, Inc. – Mechanic’s lien priority caseremanded for further proceedings (CA 12/20/11). In this mechanics’ lien foreclosure actioninvolving the priority of liens relative to a deed of trust, defendant Colorado Community Bank(CCB) appealed the summary judgment in favor of the following lien claimants. ZionDevelopment, LLC (Zion) borrowed money from FlatIron Bank and hired architects to prepare amaster plan. Zion later defaulted on the FlatIron loan and lost the property through a foreclosureaction. FlatIron then conveyed the property to Water Tower Builders, LLC (Water Tower),which financed the purchase of the property and construction activities through two loansobtained from CCB. Water Tower hired subcontractors to perform work on the property and laterdefaulted on the loan to CCB and lost the property to a foreclosure sale. The court granted thelien claimants’ motion, which claimed that its mechanics’ lien had priority over CCB’s deed oftrust because it was entitled to relate its lien back to the date when work performed by thearchitects for Zion was filed as a master plan. The Court of Appeals remanded, holding that itmust be determined whether the architects asserted a mechanics’ lien that was superior to theFlatIron deed of trust as to any improvements. It also held that any architects’ lien must havebeen preserved and pursued by appropriate compliance with time limitations for filing the lienand commencement of foreclosure proceedings.Hopkins v. Industrial Claim Appeals Office – Court of Appeals finds no reduction appropriatein unemployment benefit case (CA 12/20/11). Claimant worked for employer, the ColoradoDepartment of Labor and Employment, from June 1986 to July 31, 2001. Since August 1, 2001,claimant had been receiving a monthly pension payment of approximately $3,000. Claimantreturned to work for employer on April 6, 2009 through August 4, 2009. During this period ofemployment, employer did not contribute to claimant’s pension plan, nor did claimant (nor didshe have the right to). Claimant established an initial claim for unemployment benefits on
January 24, 2010, for a weekly benefit amount of $443, which was less than the weekly proratedamount of her pension. Claimant’s base period ran from October 1, 2008 through September 31,2009. The hearing officer concluded that because employer did not contribute to claimant’spension during her base period employment, no reduction of her unemployment benefits wasrequired under CRS § 8-73-110(3) (a) (I) (B). The Court of Appeals affirmed the hearing officer,holding that the Colorado Employment Security Act is a part of a cooperative federal–stateprogram administered under the Federal Unemployment Tax Act (FUTA). The offsetrequirements of CRS § 8-73-110(3) (a) (I) (B) are modeled on the analogous provisions ofFUTA. The legislative history indicated this was Congress’ response to a concern over “double-dipping” by retirees who actually had withdrawn from the labor force and were being paid bothunemployment and retirement benefits by the same employer. Here, although employer hadcontributed to the pension claimant was receiving; employer did not contribute to claimant’spension during the base period that is the subject of her current claim for unemployment benefits.Therefore, claimant would not be “double-dipping” because she would not be collecting bothunemployment and retirement benefits based on the same period of work. Therefore, noreduction in unemployment benefits was required under CRS § 8-73-110(3) (a) (I) (B).