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Colorado Court of Appeals Opinions
August 16, 2012

The Court of Appeals summaries are written for the Colorado Bar Association by licensed attorneys Teresa Wilkins (Denver) and Paul Sachs (Steamboat Springs). Please note that the summaries of Opinions of the Colorado Court of Appeals are provided as a service by the Colorado Bar Association and are not the official language of the Court. The Colorado Bar Association cannot guarantee the accuracy or completeness of the summaries.

2012 COA 132. No.08CA2637. People v. Garrison II.
Crim.P 24(g)—Juror Questions—Challenge for Cause—Extraneous Evidence.

Defendant appealed the judgments of conviction entered on a jury verdict finding him guilty of first-degree murder after deliberation, first-degree felony murder, conspiracy to commit first-degree murder with a crime of violence sentence enhancer, two counts of aggravated robbery, and conspiracy to commit aggravated robbery. The judgment was affirmed.

Defendant argued that the trial court erred in allowing jurors to submit hundreds of questions for witnesses over the course of the two-week trial. Crim.P. 24(g) provides that jurors are allowed to ask questions. Due to the length and complexity of the trial, the trial court did not abuse its discretion in declining to prohibit or limit the number of juror questions.

Defendant also contended that the trial court erred in not removing a juror who did not pay attention during the trial. However, the record indicates that the juror at issue submitted significantly more questions for witnesses than the other jurors, and there is not anything in the record to show that the juror was not paying attention. Accordingly, the trial court did not abuse its discretion in declining to remove the juror.

Defendant argued that the jury improperly viewed a cell phone admitted into evidence, and that the cell phone constituted extraneous prejudicial information. Two of the cell phones admitted, which both the prosecution and defense believed had dead batteries, were turned on by the jury. The jurors therefore had access to text messages on the girlfriend’s phone and photographs on one of the other phones. Because the cell phones were admitted without any qualifications or limitations, the text messages and other data discovered by the jurors during deliberations did not constitute extraneous evidence.

Defendant further argued that the trial court abused its discretion in denying his challenge for cause to potential Juror T. During voir dire, Juror T. indicated that he was biased in favor of law enforcement. However, he also confirmed that he could be fair to defendant. The record supports a determination that Juror T. would render a fair and impartial verdict based on the evidence and the jury instructions. Therefore, the trial court did not abuse its discretion in denying defendant’s challenge for cause as to this juror.

2012 COA 133. No.09CA2710. People v. McCarthy.
Restitution—Qualifications for Classifications as a Victim.

Defendant appealed the trial court’s order concluding that the Colorado Department of Health Care Policy and Financing (Department) is a victim for purposes of the criminal restitution statute and granting restitution to the Department for costs incurred as a result of defendant’s vehicular assault. The order was reversed and the case was remanded.

Defendant, while driving under the influence, ran a red light and struck another car, causing seriously bodily injury to two passengers in the other car. The trial court ordered that defendant pay $417,750 to the Department for Medicaid disability benefits paid to a rehabilitation hospital on behalf of one of the victims.

Defendant argued that the Department does not qualify as a “victim” for purposes of the restitution statute. Under the vehicular assault statute, a victim is a human being. Because the Department has not been expressly identified by the legislature as a victim in the restitution statute, and the particular nature of the crime does not establish a right to restitution, the Department cannot qualify as a victim under the restitution statute. Accordingly, the case was remanded to the trial court with directions to modify the order so that it excludes the grant of $417,750 in restitution to the Department.

2012 COA 134. No.10CA1188. Casey v. Colorado Higher Education Insurance Benefits Alliance Trust.
Trust—CRCP 12(b)—Subject Matter Jurisdiction—Colorado Governmental Immunity Act—Tort—Contract—Breach of Fiduciary Duty—Economic Loss Rule—Breach of Covenant of Good Faith and Fair Dealing—Mistake—Inverse Condemnation.

In this class action suit, defendants, the Colorado Higher Education Insurance Benefits Alliance (CHEIBA) Trust, the eight other colleges that participated in the original trust and that continue to participate in the new CHEIBA Trust, and the trustees of the CHEIBA Trust, appealed the court’s order denying their CRCP 12(b) motion to dismiss the claims of plaintiffs, a class of employees who participated in the trusts at issue in this case. The order was affirmed in part and reversed in part, and the case was remanded for further proceedings.

Beginning in 1992, employees of nine Colorado colleges, including Mesa State College, contributed to a trust designed to provide long-term disability benefits for them if they were to become disabled. The trust agreement required the employees and Mesa State to make these contributions. The original trust was succeeded in 2003 by the CHEIBA Trust. Mesa State withdrew from the CHEIBA Trust in 2005 and created a new disability trust. CHEIBA refused Mesa State’s request to release to its new disability trust approximately $1 million from the reserve fund that Mesa State and its employees had contributed to the original trust and to the CHEIBA Trust. This interlocutory appeal was limited to determine only issues of sovereign immunity.

On appeal, defendants contended that the probate court lacked subject matter jurisdiction because all of the employees’ claims are barred by the Colorado Governmental Immunity Act (CGIA). The CGIA bars any action against a public entity or its employees that lies in tort or could lie in tort regardless of the form of relief chosen by the claimant. The CGIA does not apply to contract actions. The trust agreements are the source of the trustees’ fiduciary duty described in the employees’ breach of contract claim. As a result, the economic loss rule bars the employees from any tort recovery from the trustees. Therefore, the employees’ breach of fiduciary duty and breach of the covenant of good faith and fair dealing claims arising from the trust agreement against the trustees is not barred by the CGIA. However, the allegation that the colleges breached any fiduciary duties they owed the employees did lie, or could have lied, in tort as the trust agreement did not place any fiduciary duties on the colleges. Therefore, this portion of the breach of contract claim against the colleges is barred by the CGIA. On the other hand, the claim that the colleges violated the implied covenant of good faith and fair dealing is not barred because it does not, and cannot, lie in tort.

Defendants also contended that the CGIA bars the employees’ inverse condemnation claim. Because an inverse condemnation claim could not lie in tort, it is not barred by the CGIA.

Defendants further asserted that language in the trust agreements bars the employees from obtaining the relief they seek. Specifically, both trust agreements explicitly provide that contributions are irrevocable unless a majority of the trustees votes to dissolve the trusts. Plaintiffs claim that their contributions to the CHEIBA trust are null and void because of either unilateral or mutual mistake. The doctrine of mistake allows the mistaken party to avoid the contract and lies or could lie in tort. Therefore, this part of the declaratory judgment claim is barred by the CGIA.

2012 COA 135. No.11CA0570. Payan v. Nash Finch Co.
Colorado Consumer Protection Act—Civil Theft—Fee Award—Lodestar Amount.

Plaintiffs appealed the trial court’s order awarding attorney fees in their favor against defendant Nash Finch Company, doing business as Avanza Supermarket (Nash Finch). The order was affirmed in part and reversed in part, and the case was remanded.

In June 2008, Nash Finch implemented a misleading pricing scheme in two of its Denver metro area supermarkets. Customers were led to believe they would receive an additional 10% savings compared to regular prices, when in fact, the cashier added 10% to the price at checkout. Plaintiffs were customers at these supermarkets who did not immediately realize they had paid more than the advertised price. Plaintiffs ultimately litigated their Colorado Consumer Protection Act (CCPA) and civil theft claims at trial. Three days before trial, Nash Finch filed an admission of liability and confession of judgment for the full amount of the statutory damages sought by plaintiffs—a total of $4,200. The trial court entered an order awarding plaintiffs attorney fees.

Plaintiffs asserted that the trial court’s fee award was in error in numerous respects. First, plaintiffs contended the trial court did not take the proper arithmetical steps in calculating the lodestar amount before it made subsequent adjustments to that amount. The trial court should have applied the percentage reductions to the total hours billed before applying the hourly rate multiplier. Therefore, the court’s calculation of the lodestar amount was in error, and that amount should be recalculated on remand.

Plaintiffs further contended that the trial court abused its discretion and committed legal error in making certain downward adjustments to counsel’s billed hours. A trial court retains discretion to reduce the hours billed based on block billing if the court is unable to determine whether the amount of time spent on various tasks was reasonable. Therefore, the court did not abuse its discretion in making such adjustments to counsel’s billed hours.

Plaintiffs next contended that the trial court abused its discretion by making a reduction for time spent on dismissed claims and the class action complaint. Plaintiffs failed to present any proof as to the number of hours actually spent on the dismissed claims. Therefore, the trial court’s decision was not disturbed on appeal.

Plaintiffs also argued that the trial court erred in making a reduction for lack of complexity. The trial court was in the best position to observe and determine the relative complexity of the issues and arguments presented to it. Therefore, the trial court’s reduction of 5% for lack of complexity was not an abuse of discretion.

Plaintiffs also contended that the trial court erred in determining reasonable hourly rates for plaintiffs’ counsel based on its view of appropriate staffing of the case. The trial court did not abuse its discretion in making such a determination.

Furthermore, the trial court correctly determined that (1) the rule of proportionality could not be applied; (2) the court’s 10% reduction in the lodestar amount for lack of public importance was not an abuse of discretion, because the record supports the conclusion that plaintiffs’ suit was not a factor in inducing Nash Finch to cease its improper conduct; and (3) the court did not abuse its discretion in denying plaintiffs’ motion for discovery of Nash Finch’s billing records, given that both experts were able to produce their reports without the aid of such discovery.

2012 COA 136. No.11CA1391. Neuromonitoring Assoc. v. Centura Health Corp.
Breach of Contract—Statute of Limitations—Equitable Tolling—Genuine Issues of Material Fact—Continuing Breach.

In this action for breach of an exclusivity clause in a professional services contract, plaintiff Neuromonitoring Associates appealed the district court’s summary judgment entered in favor of defendants Centura Health Corporation, Catholic Health Initiatives Colorado, and Portercare Adventist Health System. The judgment was affirmed in part and reversed in part, and the case was remanded.

On January 5, 2010, plaintiff commenced this action seeking to recover damages arising out of defendants’ alleged breaches of an Intraoperative Nerve Monitoring Agreement (agreement), which became effective on July 1, 2004 and was valid for a term of one year with automatic renewals for additional one-year terms, unless otherwise terminated with proper notice. Defendants moved for summary judgment, arguing that plaintiff’s claims were barred by the three-year limitations period because plaintiff became aware of the alleged breach in 2005. The court dismissed plaintiff’s claims.

Plaintiff contended the district court erred in applying the three-year limitations period in CRS § 13-80-101(1)(a) rather than the six-year limitations period in CRS § 13-80-103.5(1)(a). Because the amounts plaintiff sought were not ascertainable by reference to the agreement or by simple computation, they are not “liquidated or determinable” within the meaning of § 13-80-103.5(1)(a). Consequently, the three-year breach of contract limitations period applied to plaintiff’s action.

Plaintiff next contended that the district court erred in concluding that defendants’ conduct did not warrant equitable tolling of the limitations period. Plaintiff failed to present evidence indicating that defendants wrongfully impeded its ability to bring its claims, or that it was ignorant of relevant facts that prejudiced its decision whether to file the action. Consequently, the district court properly concluded that equitable tolling of the limitations period was unwarranted.

Plaintiff further contended that there were genuine issues of material fact concerning when its cause of action first accrued. The undisputed evidentiary materials establish that plaintiff was aware beginning in April 2005 that defendant was breaching the agreement’s exclusivity provision. Therefore, the district court properly concluded there was no genuine factual controversy that the three-year limitations period on plaintiff’s cause of action began accruing in April 2005.

Plaintiff alternatively contended that the “continuing nature” of defendants’ conduct resulted in “repeated, successive breaches” and that its breach of contract cause of action must be deemed timely at least as to any breaches occurring within the three years preceding the January 5, 2010 filing of the complaint. In circumstances where a contract contains this type of continuing duty to perform, generally a new claim accrues for each separate breach and the plaintiff may assert a claim for damages from the date of the first breach within the period of limitation. EHere, Each time defendants allowed another entity to perform services at one of the designated hospitals, a new alleged contract breach occurred. Insofar as plaintiff seeks recovery based on alleged breaches occurring in the three-year period before January 5, 2010, when it commenced this action, plaintiff’s action was timely and the district court erred in concluding otherwise. Consequently, the case was remanded for reinstatement of those claims. Defendants’ request for attorney fees and costs incurred in defending this appeal were denied.

2012 COA 137. No. 11CA1656. PFW, Inc. v. Residences at Little Nell Development, LLC.
Contract Rescission—Interstate Land Sales Full Disclosure Act—Arbitration Award.

PFW, Inc. (PFW) appealed the trial court’s judgment in favor of Residences at Little Nell Development, LLC (Little Nell) on its rescission claim arising under the Interstate Land Sales Full Disclosure Act (ILSFDA). PFW also appealed the trial court’s order denying its motion to vacate an arbitration award in favor of Little Nell on other non-ILSFDA claims. The judgment was affirmed.

In 2005, Little Nell began developing a private residential complex comprising eight hotel units, eight affordable housing units, three commercial units, and twenty-six condominium units at the base of Aspen Mountain. Little Nell sold one-eighth interests in the condominium units.

By December 2006, a one-eighth interest in a condominium unit sold for $3 million. Miller entered into a purchase agreement with Little Nell for such an interest at that price. He tendered $450,000 in escrow as earnest money. In May 2008, Miller assigned his rights under the purchase agreement to PFW, of which he is owner and president.

The construction completion deadline and closing date were in December 2008. The price had fallen due to the downturn in the economy. Before completion, PFW sent Little Nell a notice of its intent to rescind the agreement based on ILSFDA violations and contract breaches, and demanded release of its earnest money. PFW sued Little Nell, asserting eleven claims, including breach of ILSFDA and the Colorado Consumer Protection Act, breach of contract, and fraudulent inducement.

PFW alleged the same claims in arbitration pursuant to the arbitration clause of the agreement. The arbitrator found PFW in default under the agreement and entered interim and final awards in favor of Little Nell on all counts. PFW moved to vacate the award in May 2010; the motion was denied. Following a hearing, the trial court entered judgment in favor of Little Nell on the two ILSFDA claims in July 2011. PFW appealed.

PFW argued it was error to deny its statutory claim to rescind solely because the court held that Little Nell’s condominium project was exempt from ILSFDA’s registration and disclosure requirements. The Court of Appeals held that the fractional interests in the project’s twenty-six condominium units are not “lots” under the ILSFDA and therefore were exempt from registration and disclosure requirements. The Court looked to the ILFSDA and regulations promulgated by the U.S. Department of Housing and Urban Development (HUD) to determine whether an interest is a “lot.”

The ILFSDA’s registration and disclosure requirements do not apply to “the sale or lease of lots in a subdivision containing fewer than one hundred lots.” The term “lot” is not defined. HUD’s implementing regulations define “lot” as “any portion, piece, division, unit, or undivided interest in land located in any State or foreign country, if the interest includes the right to the exclusive use of a specific portion of the land.” HUD’s interpretive rules also provide further guidance.

The purchase agreement was for an “undivided [one-eighth] fee simple ownership interest as a tenant in common” in a four-bedroom “fractional ownership unit.” The Declaration further elaborated on the ownership interest. PFW argued that the twenty-six condominium units, each divided into eight fractional interests, constitute 208 “lots” under ILSFDA. The trial court disagreed, finding “no right of exclusive possession attaches to . . . ownership” of the fractional interests. Therefore, the development was exempt because it contained fewer than one hundred lots. PFW argued this was error because the fractional ownership interests in the Little Nell units are like ownership of traditional condominiums, which the Secretary of HUD has treated as lots.

The Court disagreed, noting that HUD’s regulations expressly require that an ownership interest “include[] the right to exclusive use of a specific portion of the land.” Here, the fractional ownership interest allowed for exclusive use of a designated unit type for four weeks every year, but not a specific unit. The owners do not obtain exclusive use of any portion of the project. It was not error for the trial court to deny PFW’s ILSFDA claims.

PFW then argued it was error not to vacate the arbitration award on the non-ILFSDA claims because the award was procured by fraud. The Court disagreed. PFW contended that Little Nell procured the arbitration award by fraudulently concealing that it had not properly registered with the Colorado Division of Real Estate (Division) when it executed the purchase agreement and therefore the agreement was “voidable by the purchaser and unenforceable by the developer.” The Court held that this was an issue for the arbitrator. Because it was not raised during the arbitration, it was not properly before the trial court. Therefore, the trial court correctly denied PFW’s motion to vacate the award.

2012 COA 138. No. 11CA1770. Denver Firefighters Local No. 858, IAFF, AFL-CIO v. City & County of Denver.
Preliminary Injunction—Collective Bargaining—Discipline as a Term and Condition of Employment.

Defendants, the City and County of Denver (City) and Alex J. Martinez, the Manager of Safety (Manager), appealed from the trial court’s order granting a preliminary injunction in favor of Denver Firefighters Local No. 858, IAFF, AFL-CIO (Firefighters). The judgment was affirmed.

Firefightersare City employees subject to the supervision and control of the Manager, who is appointed by the Mayor. In 1971, Denver voters passed an amendment to the City Charter granting Firefighters the right to collectively bargain with the City over certain working conditions. The parties have had a collective bargaining agreement every year since the amendment. The current agreement (Agreement) has been in effect since January 1, 2010 and expires on December 31, 2012.

The instant dispute arose from defendants’ proposed unilateral creation and implementation of a discipline matrix for Firefighters, which does not have such a matrix but does have a system for imposing discipline that has been in place for decades. The discipline matrix would change the current system. The issue presented was whether defendants may do so without first negotiating with Firefighters.

In October 2012, the Manager indicated a desire to form a Discipline Advisory Group (DAG) to create a discipline matrix. Firefighters responded that a discipline matrix is a mandatory subject of collective bargaining. The Manager did not reply.

In March 2011, the same sequence of events occurred. In May 2011, Firefighters learned that the DAG had been created and would start holding meetings. Firefighters attended the first meeting to assert that the matrix was a mandatory subject of collective bargaining. Defendants disagreed and continued with their process to create the matrix.

Firefighters then filed this action requesting the issuance of a preliminary injunction. The trial court granted the motion and issued an order enjoining defendants from implementing a disciplinary matrix without first negotiating with Firefighters. Defendants appealed.

The Court of Appeals agreed with the trial court’s conclusion that the proposed discipline matrix is a mandatory subject of collective bargaining. The parties had no previous negotiated provision on discipline, so the Court looked to the Charter. Under the Charter, discipline is a subject of management authority; however, the Charter also makes discipline, as a term and condition of employment, a subject of collective bargaining. Each side argued that the Charter provision upholding its position should control. The Court looked to numerous cases from other jurisdictions and chose to apply a balancing test that weighs the impact that mandated collective bargaining on the subject will have on each of the parties’ interests. If the balance falls in favor of the employees, the subject is a mandatory subject of collective bargaining; if the balance falls in favor of the employer, it is not.

Here, in weighing the impact on each party, the Court concluded that the balance falls in favor of the employee and that discipline thus is a mandatory subject of bargaining. Accordingly, the order for a preliminary injunction was affirmed.

2012 COA 139. No. 11CA1868. Rodriguez v. Industrial Claim Appeals Office.
Compensable Accidental Employment Injuries—Burden of Proof—Admission of Liability.

Helen M. Rodriguez appealed from an order issued by the Industrial Claim Appeals Office (Panel) in favor of the City of Brighton and its insurer, CIRSA (collectively, Brighton). The order was set aside and the case was remanded with directions.

Rodriguez works for the City of Brighton as a special events coordinator. One morning, she fell while descending the stairs to her office. She was taken to the emergency room, where she received a CT scan and an MRI. The tests revealed unruptured brain aneurysms.

Brighton initially admitted liability for Rodriguez’s disability and medical benefits. It later sought to withdraw its admission, arguing the injuries did not arise out of her employment.

An administrative law judge (ALJ) found that (1) because Brighton initially admitted liability, it bore the burden of proof under CRS § 8-43-201(1); (2) Rodriguez’s fall was not caused by her aneurysms but was “unexplained”; and (3) because her fall was unexplained, her injuries were not compensable. Brighton therefore sustained its burden of proving non-compensability and could withdraw its admission of liability. Rodriguez appealed to the Panel, which affirmed the ALJ’s order.

Rodriguez argued the ALJ erred in ruling her injury was not compensable. The Court of Appeals agreed. An employee may recover for accidental injuries “arising out of and in the course of the employee’s employment.” It was undisputed Rodriguez was injured in the course of her employment; the question was on the “arising out of” prong. Ordinarily, the plaintiff bears the burden of proving this element. Here, the burden was shifted to the employer because of Brighton’s initial admission of liability. Consequently, the finding that the fall was unexplained was a failure of proof on Brighton’s part. Because Brighton failed to sustain its burden of proof, the ALJ erred in allowing it to withdraw its admission of liability. The Panel’s order was set aside and the case was remanded to the ALJ with directions to reinstate Brighton’s general admission and to conduct further proceedings as necessary.

2012 COA 140. No. 11CA2248. Old Republic National Title Insurance Company v. Kornegay.
Prejudgment Attachment.

Roger Kornegay appealed three trial court orders sustaining a prejudgment attachment obtained by Old Republic National Title Insurance Company (Old Republic) in connection with its pending civil action against him. The orders were affirmed. 

Old Republic paid its insured $250,000 following the insured’s purchase of property from Kornegay that Kornegay did not own. Old Republic then sued Kornegay, alleging that its losses were the result of a fraud scheme he had perpetrated. Old Republic also filed an ex parte motion for a prejudgment writ of attachment pursuant to CRCP 102.

Old Republic’s investigator, Pollock, submitted a supporting affidavit and, on that basis, Old Republic alleged there was “a real threat that [Kornegay] or individuals he is close to will further transfer or hide his assets,” thereby rendering execution unavailable in the event of a judgment against him. The trial court granted the motion and issued the writ without requiring Old Republic to post a bond.

Old Republic served the writ, along with a writ of continuing garnishment in aid of attachment, on four banks, several Colorado county treasurers, and the clerk and recorder of El Paso County, where Kornegay owned real property. Kornegay, who was incarcerated in Nebraska, was served with copies.

Through counsel, Kornegay moved to dismiss and discharge the attachment and quash the garnishment. He also filed a traverse, a counterclaim for wrongful attachment, and a notice of a claimed homestead exemption. In three orders entered the same day, the trial court denied Kornegay’s motions and dismissed his counterclaim. Kornegay appealed.

Kornegay did not challenge the sufficiency of the Pollock affidavit to establish the grounds for attachment under CRCP 102. Rather, he argued that the attachment was wrongful because (1) Old Republic is not a Colorado resident and thus cannot avail itself of the remedy of prejudgment attachment; (2) the procedural requirements of CRCP 102 (d), (h), (i), and (n) were not met; (3) the trial court should not have sustained the attachment without addressing his homestead exemption claim; and (4) the trial court erred in dismissing his counterclaim for wrongful attachment. The Court of Appeals found no grounds for reversal.

Old Republic is registered to conduct business in Colorado and has three offices in the state, but its principal place of business is in Minnesota. Colorado courts have not addressed whether a foreign corporation authorized to conduct business in Colorado and having offices here may be considered a “resident of this state” for purposes of CRCP 102. The Court looked to cases from other jurisdictions for edification.

A corporation generally is considered to be domiciled in, and a citizen of, its place of incorporation, but it may for some purposes be considered a resident of more than one state. The Court found that Old Republic is a “resident of this state” for purposes of CRCP 102. It has a presence (three offices) and “no present intention of definite and early removal.” It therefore may avail itself of the remedy of prejudgment attachment.

As to Kornegay’s arguments regarding the other sections of CRCP 102, the Court held that use of a private process server to serve the writ on a defendant incarcerated in another state complied with the rule and that it wasn’t necessary for the sheriff to serve the writ. As to CRCP 102(h), the tax liens were security interests in real property, and serving writs of garnishment in aid of attachment on the treasurers of the counties where the property was located satisfied the requirements of the rule.

The failure to post a bond was not error because Old Republic offered to post a bond in a nominal amount if required to do so, and the trial court waived bond. Kornegay argued this was not waivable; Old Republic replied that the court effectively set the bond at zero. The Court found this an appropriate exercise of the court’s discretion, given the resources of Old Republic to satisfy any damages or costs Kornegay might incur if the attachment was wrongful.

Kornegay argued that CRCP 102(n) was not complied with because no hearing was held on his traverse. The Court found that Kornegay did not file an effective traverse, so no hearing was required. The traverse was ineffective because it was not supported by an affidavit.

The Court also found that Kornegay’s claimed homestead exemption was properly rejected because neither Kornegay nor his wife resided at the subject property. Accordingly, the orders were affirmed.

Colorado Court of Appeals Opinions

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