January 22, 2017

Archives for January 10, 2017

Colorado Court of Appeals: Posting Bond is Necessary but Insufficient Condition to Stay Dissolution Proceedings

The Colorado Court of Appeals issued its opinion in In re Marriage of Finn on Thursday, December 30, 2016.

Post-Dissolution Marriage Proceeding—Request for Stay—Romero v. City of Fountain.

Husband and wife had entered into a marital agreement. Wife later filed for dissolution of the marriage, and the trial court subsequently issued a detailed order directing husband to make certain payments to wife within 20 days. Husband filed a motion for post-trial relief pursuant to C.R.C.P. 59 and 60, which was denied. Husband appealed and also filed a motion for stay with the trial court and requested approval of his supersedeas bond; both requests were denied.

Pursuant to C.A.R. 8, husband sought a stay of the trial court’s orders requiring him to pay wife certain sums of money and to return her artwork and other personal property. Husband presented a redacted copy of a cashier’s check in the amount necessary for a supersedeas bond and represented that his counsel would deposit the check if his motion were granted.

Stays pending appeal are controlled by C.A.R. 8(a). Romero v. City of Fountain adopted a four-part test for determining whether a stay should be issued under CAR 8: (1) whether the moving party has made a strong showing that it is likely to prevail on the merits, (2) whether the moving party will suffer irreparable harm if a stay is not granted, (3) whether other interested parties would be harmed by granting the stay, and (4) whether the public interest will be harmed by granting the stay. Romero involved a motion to stay an order denying an injunction. Husband argued that Romero does not apply here.

A stay is an exercise of judicial discretion and not a matter of right. The Colorado Court of Appeals first concluded that posting a supersedeas bond alone is insufficient to mandate a stay in a family law case. As to both the monetary and nonmonetary orders, the court then determined that a court considering a stay of that part of a judgment involving marital and separate property must consider the first three Romero factors; the fourth factor, harm to the public interest, is ordinarily not relevant in the context of a dissolution of marriage. The court found that (1) husband had not made even a cursory showing as to why his appeal was likely to succeed on the merits; (2) husband’s contention that he faces “clear” irreparable harm if a stay is not granted was unpersuasive; and (3) wife would be harmed by the issuance of a stay, because she would be denied benefits she negotiated in the marital agreement.

The motion for stay was denied.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: “Newsletter Exclusion” Did Not Apply to Unlicensed Securities Advisor

The Colorado Court of Appeals issued its opinion in Mandel v. Rome on Thursday, December 30, 2016.

Colorado Securities Act—Licensure—Summary Judgment—Investment Adviser—First Amendment—Restitution—Permanent Injunction.

Defendants Mandel and Wall Street Radio, Inc. hosted a radio show devoted to security investments, Wall Street Radio (WSR). They also offered through a website a variety of investment related services under two plans. The Master Membership Plan, with a $500 annual fee, provided newsletters, seminars, and the opportunity to email or call defendant Mandel twice a week with questions about specific stocks (crystal ball readings). The Lead Trader Membership Plan, under which subscribers paid between $1000 and $2000 annually, provided the same services as Master Membership and also offered the opportunity to mimic Mandel’s own security trades through an investment vehicle known as auto-trading. In auto-trading, trades are automatically made that mimic the lead trader’s trades without the need for approval. Followers are often not aware of the trades until after they have occurred.

The auto-trading was done through a company called Ditto Trade, in which Mandel owned an interest. Ditto Trade requires its lead traders to attest that they are either registered investment advisers or exempt from registration. Neither Mandel nor WSR were licensed in Colorado as investment advisers or investment adviser representatives. In 2008, Mandel had applied for a license, but his application was denied in an administrative action. A stipulated consent order denying the application precluded him from reapplying for 10 years and barred him from acting as a solicitor or otherwise associating with any Colorado licensed investment adviser or “federally covered” adviser. Mandel attested to operating within an exemption.

This action was commenced by the Securities Commissioner of Colorado, Rome, against Mandel and WSR, alleging they had acted as unlicensed investment advisers or investment adviser representatives under the Colorado Securities Act (CSA). Defendants claimed that pursuant to the CRS § 11-51-201(9.5)(b)(III) “newsletter exclusion” they were exempt from licensure. The trial court granted summary judgment against defendants. It entered a permanent injunction and directed them to pay $80,000 in restitution ($1000 for each auto-trading subscriber).

On appeal, defendants argued that the trial court erroneously entered summary judgment because a genuine issue of material fact existed as to whether they acted as investment advisers or investment adviser representatives. The Colorado Court of Appeals found that the Commissioner presented undisputed facts sufficient to resolve the case. It therefore turned to whether judgment was appropriate as a matter of law.

There was no dispute to the evidence presented by the Commissioner that defendants met the basic definition of investment adviser or investment adviser representative. To avoid the licensing requirement, defendants had to meet the “newsletter exclusion” from the definition of investment adviser, which required their services to qualify as bona fide publications or newsletters with a regular circulation. The court found that the lead trader services were not “publications” generally disseminated to subscribers. It rejected defendants’ argument that because they disseminated a newsletter, all of their other activities fell within the exclusion. Also, the lead trader service was not bona fide because it did not consist of disinterested commentary or analysis; instead, each follower’s investment decision was directly linked to Mandel’s investment account. Thus Mandel could personally benefit from the trades. Finally, the service was not “regular.” It did not follow a routine schedule but occurred when Mandel decided to make trades. Similarly, the crystal ball readings were not regular and addressed specific investment situations. Because defendants provided both services for compensation without a license they violated the CSA.

Defendants further argued that the summary judgment was inappropriate because the Commissioner failed to controvert their affirmative defense that the First Amendment of the federal constitution and Colorado Constitution art. II, § 10 barred the enforcement action. Because the services provided were sufficiently personal to treat defendants as investment advisors or investment representatives, requiring them to obtain a license as a condition of providing these services is constitutional.

Defendants also argued that the trial court erred in imposing restitution, contending that only damages could be awarded under the CSA. The court did not need to address this argument because it held that the record and the law support the award under a common law restitution theory.

Lastly, defendants challenged both parts of the permanent injunction. Defendants argued that the first part of the injunction improperly enjoins them from engaging in lawful activity. Defendants contended that the court abused its discretion and exceeded its statutory authority by enjoining them from “associating in any capacity” with securities professionals engaged in business in Colorado. The court found that the trial court had statutory authority to enjoin defendants from associating with securities professionals to ensure compliance with the CSA. However, the court found that the first part of the injunction was overly broad and subject to different interpretations.

Defendants argued that the second part of the injunction is simply an edict to obey the law and is thus overly broad and vague. The court agreed.

The summary judgment and restitution orders were affirmed. The injunction was vacated in part and reversed in part, and the case was remanded to the trial court for further proceedings.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Trustee’s Loss in Recall Election Did Not Arise from Town’s Misconduct

The Colorado Court of Appeals issued its opinion in Jones v. Samora on Thursday, December 30, 2016.

Summary Judgment—Identity of Persons Casting Votes—Colo. Const. Art. VII, § 8—Standing—§ 1983 Claim—Law of the Case—Issue Preclusion.

Residents of the Town of Center (Town) organized a recall election to oust the trustees, including Jones, from their positions. Voters either turned in mail ballots or voted in person. All of the ballots had numbered stubs and, based on these stubs, the town clerk, Samora, had a list that showed which voter had received which ballot. He used the list to ensure that each voter had voted only once. To ensure voter secrecy, the stubs were removed before they were tallied. These procedures were used for all in-person ballots that were cast. But the procedures were not followed at all times for the mail-in ballots. At some point, the election judges realized that they had not removed the stubs from some ballots, but decided to continue tallying the ballots before removing the stubs. Because they could see the identifying numbers on the stubs when tallying the votes, the judges could have determined the identity of the voters by consulting the voter list.

Jones and Citizen Center, a nonprofit, filed this lawsuit including five state law claims and a § 1983 claim. The state law claims were severed from the § 1983 claim. A bench trial was held on the state law claims. The court found that the procedural errors were unintentional, that no voter identity had been disclosed when tallying the ballots, and that the election was fundamentally untainted by any substantive intentional error of procedure. However, the court concluded that tallying the mail-in ballots had violated Article VII, § 8 of the Colorado Constitution. Even though no voter identities had been revealed, the opportunity to discover them had been available and this violated Colorado’s constitutional and statutory guarantee of a secret ballot. The court voided the results of the recall election and ordered the Town to hold a new recall election within 30 to 90 days.

The Town appealed. The Colorado Supreme Court reversed the trial court’s decision and reinstated the recall election results, concluding that the stubs were on the ballots because a statute required them to be there; there was no violation of the Colorado Constitution; and the trial court erred in concluding that the election had been void.

The § 1983 claim was still at issue. Following the Supreme Court’s decision, both sides moved for summary judgment. The court granted the Town’s motion and denied plaintiffs’ motion.

On appeal, the Town asserted that plaintiffs did not have standing to file the case. As to the trustee, the Colorado Court of Appeals held that because the loss of the trustee’s position did not arise from the Town’s conduct, the trustee could not satisfy the injury requirement. In addition, because the trustee suffered no injury, he did not have third-party standing, and because he failed to allege his tax dollars were used in an unconstitutional manner, he did not have taxpayer standing.

Although the trustee lacked standing, the court found that Citizen Center had organizational standing because one or more of its members had voted in the recall election by mail-in ballot, and therefore their right to cast a secret ballot had allegedly been violated; the interests Citizen Center sought to protect were germane to its purpose; and the claim asserted and relief requested did not require that individual members of the organization participate in the case.

Regarding its summary judgment motion, the Town asserted that the law of the case barred Citizen Center’s claim. Here, the state law claims proceeding and the § 1983 proceeding were severed and were not the same case. In addition, the law of the case doctrine applies only to a court’s decisions of law, not to its resolution of factual questions. Whether the Town actually violated voter secrecy rights is a question of fact. Thus the law of the case doctrine does not apply.

The Town also asserted that issue preclusion barred Citizen Center’s claim. Issue preclusion bars relitigating factual matters that a court has previously litigated and decided. Here, the factual issue in the state proceeding was identical to the § 1983 factual issue: whether the mail-in voters’ secrecy rights were actually violated. Citizen Center was involved in the state claims case and that case ended in a final judgment. Citizen Center also had a full and fair opportunity to litigate the factual issue of whether the mail-in voters’ secrecy rights were violated. Therefore, issue preclusion barred Citizen Center from relitigating whether the mail-in voters’ secrecy rights were violated.

On the § 1983 claim, the court concluded that there was no genuine issue as to any material fact and the trial court properly granted the Town’s motion for summary judgment. Further, applying the issue preclusion doctrine, the election judges did not infringe on Citizen Center’s members rights, and the Town did not deprive those members of their constitutional rights.

The judgment was affirmed.

Summary provided courtesy of The Colorado Lawyer.

Tenth Circuit: Unpublished Opinions, 1/9/2017

On Monday, January 9, 2017, the Tenth Circuit Court of Appeals issued one published opinion and two unpublished opinions.

Johnston v. Mini Mart, Inc.

Bigham v. Allbaugh

Case summaries are not provided for unpublished opinions. However, some published opinions are summarized and provided by Legal Connection.