November 18, 2017

Archives for March 20, 2012

University of Colorado Law School Awards Dinner Honors Alumni and David Getches

The University of Colorado held its 31st Annual Law Alumni Awards Banquet last week at the Hyatt Regency Denver. The banquet was opened with remarks by CBA-CLE board member and Law Alumni Board Chair Kristin Rozansky. In addition to speeches by Dean Phil Weiser, the evening included recognition of this year’s honorees: Bill Johnson (William Lee Knous Award), Joe Blake (Distinguished Achievement in the Public Sector Award), Jane B. Korn (Distinguished Achievement in Education Award), and Joseph Neguse (Distinguished Recent Alumnus Award). For more about the nominees, click here.

The evening ended with a moving tribute to the late dean of the law school, David Getches. Dean Weiser began by noting that in the Jewish tradition of mourning for one year, he was dedicating the first year of his deanship to honoring Getches’s memory. Getches was remembered in a video that included testimonials from his widow, Ann Getches, members of the law school faculty, including Prof. Charles Wilkinson and Dean Weiser, and colleagues from his work with the Native American Rights Fund. On behalf of the Getches family, Getches’s son-in-law, Rudy Verner, thanked the CU Law community for its support, well wishes, and memories of Dean Getches.

Colorado Court of Appeals: Member of LLCs who Brought Derivative Action Against Founder of LLCs on Behalf of LLCs Not Necessarily Independent Person

The Colorado Court of Appeals issued its opinion in Young v. Bush on March 15, 2012.

Derivative Action—Dismissal—Independent—Inquiry—Direct Claim—Breach of Settlement.

Plaintiff Daniel E. Young, as an individual and on behalf of Cutthroat Ranch LLC, Quebec Plaza LLC, University Park Place, LLC, and Leetsdale Self Storage, LLC (the LLCs), appealed the trial court’s summary judgment dismissing his claims against defendants Eric Bush, Bush Development, Inc., and the LLCs. The judgment was affirmed in part and reversed in part, and the case was remanded for further proceedings.

Eric Bush is the founder and president of Bush Development. Bush also was the founder and sole manager of the LLCs, which were formed to acquire and develop real estate. The LLCs had between four and seven members each, including plaintiff. In 2008, plaintiff began questioning Bush’s management of the LLCs and subsequently filed an action against Bush, Bush Development, and the LLCs on behalf of himself and the other LLC members. The trial court entered summary judgment for defendants, dismissing the derivative action.

Plaintiff contended that the trial court erred in dismissing his derivative claims. CRS § 7-80-716 requires a court to dismiss a derivative action against an LLC if any of the individuals or entities described in subsection (2) has determined “in good faith, after conducting an inquiry upon which the determination is based,” that maintenance of the derivative action is not in the best interests of the LLC. The best interests determination must be made by independent members and based on an adequate inquiry producing facts sufficient to enable LLC members to make an informed and good-faith decision on whether maintenance of the derivative action is in the LLC’s best interests. The facts set forth in plaintiff’s affidavit showed business and family relationships sufficient to create a material question of fact as to the independence of the LLC members who made the best interests determination. The record did not indicate whether their inquiry was adequate. Because there was insufficient evidence in the record, the case was returned to the trial court to allow plaintiff to conduct discovery on the issues of independence and adequate inquiry, and to allow the court to assess whether the derivative claims should be dismissed under CRS § 7-80-716.

Plaintiff also contended that his third claim for relief (for breach of his settlement agreement with Eric Bush), twelfth claim (for access to records of Quebec Plaza LLC), and thirteenth claim (for an accounting with respect to Quebec Plaza) were direct claims, not derivative claims. He argued that he should have been allowed to pursue them notwithstanding the trial court’s dismissal of the derivative claims on defendants’ motion. Only plaintiff’s breach of settlement claim is a direct claim, because it alleged an injury separate and distinct from any injury suffered by the LLCs or the other LLC members and any relief would go to him personally rather than to the LLCs. Plaintiff did not allege that he was asserting claims twelve and thirteen solely in his individual capacity, nor did he provide further factual allegations suggesting that that was his intent. Therefore, the court did not err in dismissing those claims as direct claims.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on March 15, 2012, can be found here.

Colorado Court of Appeals: Interlocutory Review of Trial Court Proceedings in Order to Determine Whether All Necessary Parties were Participating in Trial Court Action

The Colorado Court of Appeals issued its opinion in Kowalchik v. Brohl, Executive Director, Colorado Department of Revenue on March 15, 2012.

Conservative Easement—Tax Credits—Transferees—Taxpayer—Tax Liability—Tax Matters Representative—Joinder of Parties—Due Process.

In this dispute involving conservation easement (CE) tax credits, defendant Barbara Brohl, Executive Director of the Colorado Department of Revenue (Department), petitioned for interlocutory review of the trial court’s orders in favor of plaintiffs. The orders were affirmed in part and reversed in part, and the case was remanded.

Plaintiffs donated CEs purportedly generating several million dollars of CE tax credits. They sold these credits to transferees, who claimed the credits on their state income tax returns or retained them for use against future tax liability. The Department disallowed all of the claimed tax credits. The trial court held that people who purchased CE tax credits from plaintiffs (1) are not within the statutory definition of “taxpayer” under CRS § 39-22-522(1); (2) have no tax liability for deficiencies, interest, and penalties for the improper claim of a tax credit; (3) need not be joined as necessary parties to this action under C.R.C.P. 19(a); and (4) may be given notice of this proceeding by mail rather than being personally served under C.R.C.P. 4.

The Department argued that the General Assembly intended to require transferees to be parties. The General Assembly added CRS § 39-22-522.5, which provided detailed court procedures as an alternative to administrative review, but did not require participation by transferees. Instead, the new section provided transferees with an absolute right to intervene. By acquiring a CE credit and claiming it as a deduction, a transferee agrees to be represented by its “tax matters representatives” (TMRs) under CRS § 39-22-522(7)(i). The sale of CE tax credits creates a sufficient alignment of interests between transferees and TMRs, who understand that they are acting in a representative capacity. Therefore, due process does not require joinder of transferees under C.R.C.P. 19(a) in litigation where the transferee is represented by its TMR. Further, mailing notice of this proceeding to all transferees and allowing this action to proceed without service of a summons and complaint on each transferee who chooses not to intervene satisfies due process. Finally, the court’s holding that a transferee is not a “taxpayer,” subject to deficiencies, interest, and penalties, was reversed.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on March 15, 2012, can be found here.

Colorado Court of Appeals: Arbitration Action Mischaracterized by Trial Court as Action to Recover Illiquid Debt

The Colorado Court of Appeals issued its opinion in Estate of Guido v. Exempla, Inc. on March 15, 2012.

Arbitration Award—Confirmation Proceedings—Statute of Limitations.

Plaintiff, the Estate of Salvadore Guido (estate), appealed the district court’s order denying its motion to confirm an arbitration award as time-barred. The order was reversed and the case was remanded.

Salvadore Guido brought a medical malpractice action against Lutheran Medical Center, which was a predecessor entity to defendant Exempla, Inc. (Exempla). The parties agreed to submit the claims to arbitration and, in June 1998, the arbitrator awarded Guido $20,000, plus interest and costs. Guido died in September 2009. In December 2010, the estate filed a motion to confirm the arbitrator’s award, alleging that the amounts awarded to Guido in the arbitration were never paid or satisfied.

The estate contended that the district court erred in denying its confirmation motion as time-barred under the six-year statute of limitations applicable to actions to recover a liquidated debt set forth in CRS § 13-80-103.5(1)(a). An application for confirmation is not a complaint that initiates a civil action in the district court. There is a clear statutory framework for the confirmation process under the Colorado Uniform Arbitration Act of 1975, which does not impose a deadline to file an application to confirm the award. Therefore, the district court mischaracterized the confirmation proceeding as an action to recover a liquidated debt pursuant to CRS § 13-80-103.5(1)(a). Accordingly, the order was reversed and the case was remanded to the district court with directions to reconsider the estate’s motion to confirm the arbitration award.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on March 15, 2012, can be found here.

Colorado Court of Appeals: Remand to Trial Court to Determine Whether Exclusion Proper Under Homeowners’ Insurance Policy

The Colorado Court of Appeals issued its opinion in National Farmers Union Property and Casualty Company v. Garfinkel on March 15, 2012.

Insurance—Property Damage—Injuries—Business Pursuits Exclusion—Owned Premises Exclusion.

Plaintiff National Farmers Union Property and Casualty Company (NFU) appealed the trial court’s summary judgment in favor of defendants Larry Garfinkel; Kane Real Estate & Development, LLLP; Daniel B. Willie; Dessa S. Willie; Moore P. Huffman, Jr.; General Property Mortgage, Inc.; Great Northern Insurance Company; and Ranch at Roaring Fork Homeowners Association, Inc. The judgment was affirmed in part and reversed in part, and the case was remanded for further proceedings.

In 2008, a wildfire in Garfield County injured Garfinkel and damaged the property of the other defendants. In two lawsuits (underlying lawsuits), defendants sued Larry Gerbaz and 100 Road Cattle Company LLC (the LLC), alleging that (1) Gerbaz was acting individually and as an agent of the LLC when he burned slash piles on the LLC’s property (farm property); (2) he was negligent in leaving the fires unattended; and (3) his negligence caused their losses. At the time of the fire, NFU had in effect a farm liability insurance policy covering the farm property where the slash-burning took place. The LLC was the named insured. NFU also had in effect a homeowners insurance policy insuring the residence of Gerbaz, which was adjacent to the farm property. Gerbaz was the named insured, and Molly Gerbaz, his wife, also qualified as an insured under the policy.

NFU contended that, because the farm property was being leased to third parties for haying and pasturing at the time of the April 2008 wildfire, coverage for defendants’ losses specifically was excluded by the business pursuits exclusion in the homeowners policy, and the trial court erred in ruling to the contrary. When an activity evinces “continuity” and “profit motive,” it is a business pursuit within the meaning of the business pursuits exclusion. Because issues of material fact remained as to whether the continuity and profit motive elements of the business pursuits test were present here, the case was remanded for these issues to be decided by the finder of fact.

NFU also contended that the trial court erred in finding that the owned premises exclusion does not preclude coverage in this case. This exclusion applies only where the insured is the title owner of the property. It does not apply to a situation where title to the property is held by an entity in which an insured has an interest, even a controlling interest. Here, it is undisputed that the LLC held title to the farm property where the slash burning occurred. Although Molly Gerbaz was an owner of the LLC, the LLC remained a separate legal entity. Therefore, the NFU policy exclusion barring coverage for injuries and damage arising out of uninsured premises owned by an insured does not apply.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on March 15, 2012, can be found here.

Colorado Court of Appeals: Grand Jury Report Did Not Identify Malfeasance and Therefore Was Appropriately Withheld from Public Release

The Colorado Court of Appeals issued its opinion in In re Denver County Grand Jury, and Concerning the Grand Jury Report Issued December 8, 2010 on March 15, 2012.

Grand Jury—Report—Public Document—Misfeasance.

This appeal involved the potential public release of a report, issued by a grand jury, that declined to return an indictment in an investigation involving alleged perjury. Special prosecutor Scott W. Storey, the First Judicial District Attorney, appealed the court’s order declining to release the report, contending that the report met the “public interest” criteria of CRS § 16-5-205.5. He also asserted that the court erroneously refused to extend the term of the grand jury so that it could consider whether to modify its report. The order was affirmed.

A Denver County grand jury convened in September 2010 to investigate allegations of perjury by a police officer. The grand jury did not return an indictment. It did, however, issue a report concerning its investigation, which identified purported deficiencies in policies and procedures relating primarily to the Denver Police Department. The grand jury sought to make the report public pursuant to CRS § 16-5-205.5. The trial court reviewed the report and declined to release it as a public document.

The special prosecutor asserted that the grand jury report contained allegations of government misfeasance within the meaning of CRS § 16-5-205.5(5) and, therefore, should have become a public document. Although CRS § 16-5-205.5 may provide for exposure of “government actions that fall short of criminal activity, but are nonetheless not good government,” misfeasance involves conduct that is not simply bad public policy, but an illegal, wrongful, or corrupt exercise of government power. The grand jury’s recommendations regarding public policy and other matters of judgment or discretion did not constitute allegations of government misfeasance under CRS § 16-5-205.5. The report does not sufficiently allege misfeasance and therefore does not qualify for public release.

The special prosecutor also contended that the court erroneously refused to extend the term of the grand jury so it could review and modify its report, or draft a new one, in light of the court’s order denying publication. The role of the district court is to review the report independently to determine whether, on its face, the report satisfies the requirement that it concern matters of public interest. The governing statutes cast the district court as an independent gatekeeper, not as an active partner in the publication of a report. Further, minor revisions or the use of different terminology would not change the fact that the grand jury report did not allege sufficient misconduct to permit publication under CRS § 16-5-205.5. The grand jury’s desire to revise its report for publication cannot override the court’s determination that the allegations in the report do not meet the public interest standard. Therefore, the trial court did not abuse its discretion by refusing to extend the grand jury’s term.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on March 15, 2012, can be found here.

Colorado Court of Appeals: Penalty for Violation of Colorado Employment Security Act Upheld but Restitution Penalty was Abuse of Discretion

The Colorado Court of Appeals issued its opinion in People v. Welliver on March 15, 2012.

Restitution—Unemployment—Penalty—Colorado Employment Security Act—Colorado Department of Labor and Employment—Due Process.

Defendant appealed the order for restitution, including a penalty imposed by the Colorado Employment Security Act (CESA). The order was affirmed in part and reversed in part, and the case was remanded with directions.

Defendant provided false information to the Colorado Department of Labor and Employment (CDLE) when he represented that he was unemployed and earned no income. Based on this conduct, defendant was charged with one count of felony theft, one count of computer crime, and one count of forgery. He was not criminally charged under the provisions of the CESA. Defendant entered into a plea agreement, and the trial court sentenced him to seven years’ probation and ordered him to pay $11,905 in restitution, including the CESA penalty.

Defendant contended that the restitution order violated his right to due process because the prosecution did not prove the amount of the alleged victim’s actual pecuniary loss by a preponderance of the evidence. Other than an objection to the penalty, defendant did not object to the amount of the CDLE’s pecuniary loss as documented in the attachments to the presentence report, which included the overpayments that were paid by the CDLE to defendant in the total amount of $7,830 and a 50% percent statutory penalty of $3,915. Accordingly, the court was justified in relying on the report to determine the amount of restitution.

Defendant also contended that the trial court erred when it included a 50% statutory penalty as restitution. The penalty authorized in CRS § 8-81-101(4)(a)(II) is to be paid into the unemployment revenue fund, which is a general fund used for such enforcement purposes, and the amount cannot be specifically attributed to defendant’s conduct. Thus, there is no evidence in the record that the amount of the penalty ($3,915) correlates in any way to the cost that the CDLE incurred to investigate and enforce the provisions of the CESA against defendant. Without such a correlation, there is no loss suffered by the CDLE that can be “reasonably calculated” under the restitution act. Accordingly, the 50% penalty was not properly included as restitution because it is not a “pecuniary loss that was suffered by” the CDLE as a “natural and probable sequence produced” by defendant’s conduct. Therefore, the trial court abused its discretion when it included the penalty as restitution.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on March 15, 2012, can be found here.

Colorado Court of Appeals: Physician’s Subpoena of Hospital Records Should Have Been Allowed in Private Hospital Review

The Colorado Court of Appeals issued its opinion in Crow, MD v. Penrose St. Francis Healthcare System on March 15, 2012.

Private Hospital Peer Review Process—Subpoena to Obtain Records—State Administrative Procedure Act—Colorado Professional Review Act—Exhaustion of Remedies—Burden of Proof.

Jimmie R. Crow, MD appealed the judgment of the district court affirming the decision of Penrose-St. Francis Healthcare System (Penrose) to terminate Crow’s hospital staff privileges and denying his request to subpoena records of the peer review committee. The judgment was affirmed in part and reversed in part, and the case was remanded for further proceedings.

In October 2004, Crow performed surgery on J.C., who died later that month. Penrose began a peer review process to address whether Crow failed to treat the patient properly and in a timely manner. The district court quashed Crow’s subpoena to obtain the peer review records, granted Penrose’s motion to dismiss several of the amended complaint claims, and affirmed Penrose’s decision to terminate Crow’s hospital staff privileges.

Crow contended that private hospital peer review is state administrative action subject to judicial review under the state Administrative Procedure Act (APA). Because Penrose’s peer review process to determine whether the private hospital will continue to extend hospital staff privileges to a physician is not state agency action, the APA does not govern Crow’s claims. Instead, judicial review of administrative actions by private hospitals must be conducted pursuant to C.R.C.P. 106(a)(4).

Crow also contended that the Colorado Professional Review Act (CPRA) authorized his subpoena of the records of Penrose’s peer review committee and board and granted him the right to those records. CRS § 12-36.5-104(10)(b) plainly provides that the records “shall be subject to subpoena and available for use in any appeal or de novo proceeding brought pursuant to this part 1” and “by a physician seeking judicial review.” Accordingly, the records Crow requested were subject to subpoena before the administrative review panel, and he is entitled to a new hearing before that body after the records are provided. Further, implicit in this language is the authority of the appellate review panel to issue the subpoenas.

Crow also claimed that he exhausted his administrative remedies regarding summary suspension because no summary suspension hearing right exists. Because Crow failed to avail himself of the proper administrative remedy, the district court did not have jurisdiction to review the summary suspension.

Crow further argued that the hearing panel applied the incorrect burden of proof. Even if the incorrect standard of proof was applied, the alternative finding makes it clear that the outcome would have been the same under either standard.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on March 15, 2012, can be found here.

Tenth Circuit: No Opinions, 3/19/12

On Monday, March 19, 2012, the Tenth Circuit Court of Appeals issued no opinions.

Spark the Discussion: Amendment 64 and Medical Marijuana

“Spark the Discussion” is a monthly Legal Connection column highlighting the hottest trends in the emerging field of medical marijuana law. This column is brought to you by Vicente Sederberg, LLC, a full-service, community-focused medical marijuana law firm.

It’s official.  Coloradoans will be voting this November on Amendment 64, the Regulate Marijuana Like Alcohol Act.  This landmark legislation raises many issues which will be widely debated (and discussed in this column) in upcoming months as Colorado considers becoming the first state in the nation—and the first geographic area in the world—to make the possession, use, and regulated production and distribution of marijuana legal for adults 21 and older.

How will this Constitutional amendment affect current medical marijuana users, medical marijuana businesses, and the lawyers that advise them?  Here are some quick bullet points which provide an overview of Amendment 64 and explore its relationship to Colorado’s existing medical marijuana laws.

Amendment 64 DOES:

  • Create legal marijuana retail stores that are authorized to sell to adults 21 and older.
  • License cultivation facilities, product manufacturing facilities, and testing facilities for this adult market with licenses expected to be issued in 2014.
  • Direct the Colorado Department of Revenue to regulate the cultivation, production (including infused products), and distribution of marijuana.
  • Allow local municipalities to ban or restrict these new business licenses at any time through a local governing body, but citizen-initiated bans can only go in front of voters in “even year” general elections.
  • Require the general assembly to enact an excise tax of up to 15 percent on the wholesale sale of non-medical marijuana applied at the point of transfer from the cultivation facility to a retail store or product manufacturer, with the first $40 million of revenue raised annually directed to the Public School Capital Construction Assistance Fund.
  • Allow for the cultivation, processing, and sale of industrial hemp.

Amendment 64 DOES NOT:

  • Change existing medical marijuana laws for patients, caregivers, and medical marijuana businesses.
  • Subject medical marijuana sales to the excise tax discussed above.
  • Change existing laws regarding driving under the influence of marijuana, or the ability of employers to maintain their current employment policies.

In summary, all medical marijuana laws—both statutory and Constitutional—will remain 100% intact if Amendment 64 passes.  Of course, the initiative does not change federal law, which has categorized marijuana—whether for medical use or not—as firmly illegal for decades.  Given this federal stance, combined with the fact that the federal government has allowed several hundred medical marijuana stores to thrive in Colorado, it is difficult to say how the federal government may react to Amendment 64’s passage.  Regardless, marijuana advocates have included a generous timeline in Amendment 64—no marijuana retail business licenses are required to be issued until 2014—which leaves ample time to “take the temperature” of the state and federal governments before anyone applies for these new licenses.

To read the full initiative see:  http://www.regulatemarijuana.org/about#Initiative

Brian Vicente, Esq., is a founding member of Vicente Consulting, LLC, a law firm providing legal solutions for the medical marijuana community. He also serves as executive director of Sensible Colorado, the state’s leading non-profit working for medical marijuana patients and providers. Brian is the chair of the Denver Mayor’s Marijuana Policy Review Panel, serves on the Colorado Department of Revenue Medical Marijuana Oversight Panel, and coordinates the Colorado Bar Association’s Drug Policy Project.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.