January 18, 2018

Colorado Court of Appeals: Claims in Lawsuit Immunized Under First Amendment from Conspiracy Allegations

The Colorado Court of Appeals issued its opinion in City of Aurora v. 1405 Hotel, LLC on Thursday, April 7, 2016.

Immunity from Suit Under the First Amendment—Denial of Discovery—Private versus Public Dispute—“Sham” Claims—Attorney Fees and Costs.

Eleven hotels (collectively, Hotels) petitioned the Colorado Economic Development Commission (CEDC), requesting that CEDC require the City of Aurora to submit a new application for an $81 million tax subsidy after the initial company that had been awarded the subsidy assigned its interest to RIDA Development Corporation (RIDA). The Attorney General (AG) denied the petition on behalf of the CEDC. The Hotels filed an action in the Denver District Court (Denver lawsuit). The district court and a division of the Colorado Court of Appeals affirmed the AG’s denial of the Hotels’ petition. However, alleging conspiracy to interfere with the financing and development of the project, plaintiffs, Aurora, the Aurora Urban Renewal Authority, and RIDA (collectively, Aurora parties), sued the Hotels. The district court found that the Hotels’ complaint in the Denver lawsuit was immunized under the First Amendment, based on Protect Our Mountain Environment, Inc. v. Dist. Ct., 677 P.2d 1361 (Colo. 1984) (POME), and dismissed the Aurora parties’ complaint. The Aurora parties appealed and the Hotels cross-appealed.

The Aurora parties first argued it was an abuse of discretion not to allow discovery and a hearing before granting the Hotels’ motion to dismiss. The Colorado Court of Appeals agreed with the district court that because the Aurora parties were unable to articulate any need for discovery on the first, objective prong of the POME test—whether the Hotels’ claims had a reasonable basis in law or fact—they were not entitled to discovery before the court ruled on the Hotels’ motion.

The Aurora parties then contended that POME did not apply because this was a purely private dispute. The court disagreed. The Hotels did not sue any private party, and the dispute arose from a petition to a state agency for judicial review of state agency action regarding an award of millions of dollars in taxpayer subsidies to a city to develop a project of “major public importance.”

Finally, the Aurora parties argued that three of the Hotels’ claims in the Denver lawsuit lacked reasonable factual support or a cognizable basis in law and were “sham” claims. The court disagreed. It also agreed with the Hotels that the one claim the district court found to be a “sham” was in fact not a sham because it had reasonable factual support and a cognizable basis in law.

The Hotels contended that the court erred in concluding their third claim was a sham and that the C.R.C.P. 12(b)(5) dismissal of RIDA’s claims should be affirmed. The court concluded their third claim was not a sham, and because the court affirmed the dismissal of the Aurora parties’ complaint, it did not reach the second argument.

The judgment was affirmed, and the court awarded the Hotels attorney fees and costs.

Summary and full case available here, courtesy of The Colorado Lawyer.

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