August 17, 2017

Tenth Circuit: District Court’s Application of Sentencing Enhancements Procedurally Reasonable

The Tenth Circuit Court of Appeals issued its opinion in United States v. Craig on Tuesday, December 22, 2015.

Christopher Craig participated in a conspiracy from January 2006 until December 2012 in Kansas City, Missouri, the general purpose of which was the distribution and sale of marijuana and cocaine. In August 2012, Craig orchestrated the armed robbery of a rival drug-dealer by recruiting his two cousins, DaRyan Pryor and Arterrius Pryor, to actually commit the robbery, while Craig remained in the driver’s seat of the get-away vehicle. During the course of the robbery, DaRyan Pryor was fatally shot by the rival drug-dealer. In November 2013, a grand jury charged Defendant Christopher Craig with three separate counts as part of a twenty-seven-count indictment containing nine other co-defendants. The first count charged Defendant with conspiring to manufacture and distribute cocaine and marijuana, and maintaining a drug-involved premises. The other two counts charged Defendant with using a communication facility to commit this conspiracy. The indictment, however, did not list either DaRyan or Arterrius as co-conspirators, and Defendant was not charged with the murder of DaRyan Pryor.

After Defendant pleaded guilty to the three charges against him, the Presentence Investigation Report (“PSR”), relying on the United States Sentencing Guidelines Manual (“Sentencing Guidelines”), suggested the district court should take DaRyan’s death into account when determining Defendant’s sentence by applying a murder cross-reference under the Sentencing Guidelines. Second, the PSR recommended the district court impose a leadership enhancement under the Sentencing Guidelines because Defendant organized the armed robbery of the rival drug-dealer that resulted in DaRyan’s death. Third, stemming from Defendant’s refusal to provide a court ordered voice exemplar, for which Defendant was held in contempt of court, the PSR moved the district court to apply the obstruction of justice enhancement under the Sentencing Guidelines.

The district court ultimately applied the murder cross-reference, the leadership enhancement, and the obstruction of justice enhancement, resulting in Defendant’s total offense level to be calculated as a level 43, the maximum level allowed under the Sentencing Guidelines. Combined with Defendant’s category III criminal history, this corresponded to a sentence of life imprisonment for the conspiracy count and 48 months’ imprisonment for the communication facility counts. Defendant appealed the sentencing order, arguing the district court erred in applying the murder, leadership, and obstruction of justice enhancements, as well as arguing the sentence of life imprisonment is substantively unreasonable.

The Tenth Circuit Court of Appeals upheld the district court’s sentencing order and application of the murder cross-reference, leadership enhancement, and obstruction of justice enhancement. With respect to the murder cross-reference, the Tenth Circuit concluded the preponderance of the evidence suggested DaRyan’s death was in furtherance of the overarching drug-trafficking conspiracy. As such, DaRyan’s death resulting from the attempted robbery was “relevant conduct” under the Sentencing Guidelines, and therefore, the Tenth Circuit concluded the district court did not err in applying the murder cross-reference.

After concluding the attempted robbery was relevant conduct to Defendant’s underlying conspiracy conviction, the court began its analysis of the leadership enhancement by noting that the leadership role need only be over “one or more participants” of a “criminal activity” of “five or more participants.” The Tenth Circuit concluded the district court did not err in applying the leadership enhancement, for the evidence presented at the sentencing hearing supports its finding that Defendant led one of the participants (DaRyan) of a criminal activity (the underlying conspiracy) that involved five or more participants (at least nine other participants).

With respect to the enhancement for obstruction of justice, Defendant argued his plea of guilty eliminated any obstruction of justice that may have occurred. The Tenth Circuit rejected this argument, reasoning Defendant attempted to make prosecution against him more difficult in refusing to provide a voice exemplar the Government had a legal right to possess because he knew it could be used to identify his voice in incriminating situations, and his subsequent guilty plea did not purge him of this refusal. Therefore, the Tenth Circuit held the district court did not error in applying the obstruction of justice enhancement.

Lastly, the Tenth Circuit held the district court did not abuse its discretion in imposing a sentence of life imprisonment on Defendant, as Defendant’s life sentence was not substantively unreasonable, considering the fact that Defendant organized an attempted robbery that resulted in the death of a man over whom he had a significant amount of control and influence.

Max Montag is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.

Tenth Circuit: Officer Had Probable Cause to Arrest Person Filming Security Checkpoint at Airport

The Tenth Circuit Court of Appeals issued its opinion in Mocek v. City of Albuquerque on Tuesday, December 22, 2015.

Phillip Mocek was arrested in a security checkpoint of the Albuquerque Sunport airport for concealing his identity after filming airport security procedures and being questioned on suspicion of disorderly conduct. Mocek was ultimately charged with disorderly conduct, concealing name or identity, resisting an officer’s lawful command, and criminal trespass. At trial, Mocek introduced the video footage taken prior to the arrest, and was acquitted on all counts. Mocek then brought this action in the district court alleging First and Fourth Amendment violations and seeking damages under 42 U.S.C § 1983, as well as declaratory relief. Mocek also sued the officers and City of Albuquerque for malicious abuse of process under New Mexico tort law. The district court granted the defendants’ Rule 12(b)(6) motions to dismiss for all claims, Mocek appealed, and the Tenth Circuit Court of Appeals affirmed the dismissal of all claims.

First, the Tenth Circuit affirmed the dismissal of the constitutional claims against the individual police officers (including the arresting officer, Officer Dilley) and TSA agents, holding the individual defendants are entitled to qualified immunity because their actions were reasonable and in compliance with the Fourth and First Amendments. With respect to the Fourth Amendment claims against the individual defendants, the Tenth Circuit reasoned Officer Dilley possessed reasonable suspicion that justified stopping Mocek and asking him to identify himself, considering the fact that an airport security checkpoint is a location where “order was paramount.” Further, it was reasonable for Officer Dilley to believe that an investigative stop for disorderly conduct at an airport security checkpoint required production of some physical proof of identity, and given Mocek’s continued refusal to show identification, it was reasonable for Officer Dilley to believe he had probable cause to arrest Mocek for violating a New Mexico criminal statute that prohibits the obstruction of a public officer’s legal performance of his duty. In short, Officer Dilley’s interpretation of the aforementioned New Mexico statute in establishing probable cause to arrest Mocek was reasonable, and therefore, Officer Dilley and the other individual defendants were entitled to qualified immunity on Mocek’s Fourth Amendment claims.

In rejecting Mocek’s claim that the individual defendants unconstitutionally retaliated against the exercise of his First Amendment right to film at the security checkpoint, the Tenth Circuit determined Mocek could not satisfy the third prong of a retaliation claim: that the government’s actions were substantially motivated in response to his protected speech. The Tenth Circuit reasoned when Mocek was arrested, it was not clearly established that Mocek could show the requisite motive where his arrest was arguably supported by probable cause, and therefore, the individual defendants were entitled to qualified immunity on Mocek’s First Amendment retaliation claim.

Second, with respect to Mocek’s claims for declaratory relief against the defendants in their official capacities, the Tenth Circuit affirmed the district court’s dismissal of the claim against the TSA defendants for lack of jurisdiction because Mocek’s pleadings never identified a federal waiver of sovereign immunity (which is required because a suit against a government agent is treated as a suit against the government, and the federal government may only be sued where it has waived sovereign immunity). As for the claim for declaratory relief against the police defendants in their official capacities, the Tenth Circuit affirmed the district courts dismissal, reasoning Mocek had not sufficiently alleged that his past injury resulted in continuing, present adverse effects, and because Mocek had not alleged any injury beyond a subjective chilling effect.

Third, in affirming the district court’s dismissal of Mocek’s claim that the City of Albuquerque is liable under § 1983 because it caused his injuries through unconstitutional policies and practices, the Tenth Circuit held the complaint, aside from conclusory statements, contained no allegations giving rise to an inference that the municipality itself established a deliberate policy or custom that caused Mocek’s injuries.

Fourth, considering Mocek’s claims that the arrest and subsequent filing of a criminal complaint against him constituted a malicious abuse of process, the Tenth Circuit first determined the claims were property before it through either diversity jurisdiction or through the district court’s unchallenged exercise of supplemental jurisdiction. With respect the merits of the claims, the Tenth Circuit upheld the district court’s dismal, finding Mocek was unable to satisfy either the absence of probable cause or the procedural impropriety theories of liability. Under the absence of probable cause theory, the Tenth Circuit found there was at least arguable probable cause to arrest him for concealing identity, and even if there was no probable cause for the other three charges, Mocek nowhere argues that they rendered the complaint as a whole obviously devoid of probable cause. Under the procedural impropriety theory, the Tenth Circuit found Mocek’s brief does not point to anything procedurally improper surrounding his arrest. Therefore, in determining Mocek failed to establish liability under either theory, the Tenth Circuit held Mocek had not established that the arrest and subsequent filing of a criminal complaint against him constituted a malicious abuse of process, thereby affirming the district court’s dismissal of said claims.

Max Montag is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.

Tenth Circuit: Class Certification Improper Where Parties Fail to Demonstrate Commonality

The Tenth Circuit Court of Appeals issued its opinion in Soseeah v. Sentry Insurance on Friday, December 18, 2015.

Mr. Soseeah, after being injured in a motor vehicle accident, made a claim for uninsured and underinsured motorist (“UM/UIM”) benefits under two policies of automobile insurance issued by Sentry Insurance. Additionally, Mr. Soseeah demanded that Sentry reform his two policies to provide UM/UIM coverage in accord with two recent New Mexico Supreme Court cases. According to the complaint, Mrs. Soseeah never executed a valid waiver of UM/UIM coverage under the two policies, or, alternatively, her waiver was legally insufficient under the New Mexico Supreme Court precedent. However, Sentry refused to reform the policies and rejected Mr. Soseeah’s claim for UM/UIM benefits.

Plaintiffs Delbert Soseeah, Maxine Soseeah and John Borrego then filed a class action against defendants Sentry Insurance, and a number of its related entities, claiming, in part, that Sentry failed to timely and properly notify them and other Sentry automobile insurance policyholders of the impact of two New Mexico Supreme Court decisions regarding the availability of UM/UIM coverage under their respective policies. In the first case, Progressive Northwestern Insurance Co. v. Weed Warrior Services, the New Mexico Supreme Court held that “the insurer may not exclude the maximum possible level of UM/UIM coverage in an auto liability policy unless it has offered it to the insured and the insured has exercised the right to reject the coverage through some positive act.” In the second case, Jordan v. Allstate Insurance Co., the New Mexico Supreme Court imposed upon insurers retroactive technical requirements for valid offers and rejections of UM/UIM coverage.

The proposed plaintiff class filed a number of amended complaints that contained various claims against Sentry, three of which were eventually addresses by the Tenth Circuit Court of Appeals. The complaint alleges Sentry’s failure to notify its New Mexico policyholders that UM/UIM coverage limits were reformed by Weed Warrior and Jordan, coupled with Sentry’s refusal to reform Mr. Soseeah’s policies and rejection of his claim for UM/UIM benefits, amounted to (1) a violation of New Mexico’s Unfair Practices Act (UPA), (2) a contractual breach of the insurance policies, and (3) a breach of the implied covenant of good faith and fair dealing. Further, the complain alleges three form letters sent by Sentry to its policyholders in an attempt to comply with the notice requirements of Weed Warrior and Jordan were in fact “misleading an inaccurate” in light of the two decisions. Lastly, the complaint defined a proposed class of Sentry policyholders, alleging all such insureds were entitled to policy reformation and proper notice.

The district court granted plaintiffs’ motion for class certification, thereby establishing a class of all insureds under policies issued in New Mexico by Sentry from May 20, 2004 to April 1, 2011 in which UM/UIM coverage was purportedly rejected, including as subclasses (1) insureds who received the first and second form letter, and (2) insureds who received the third form letter. Sentry subsequently sought and was granted permission to appeal the district court’s class certification ruling to the Tenth Circuit Court of Appeals.

First, the Tenth Circuit held the district court abused its discretion in concluding that the general class it certified satisfied Rule 23(a)(2)’s commonality requirement, which requires plaintiff to demonstrate that the class members have suffered the same injury that is capable of class wide resolution. In rejecting the claim of the plaintiff class under the UPA, the court found the UPA did not impose any duty on Sentry with respect to notifying existing policyholders of the impact of Weed Warrior and Jordan. Plaintiffs’ breach of contract claim cannot give rise to the common injury required for class certification, the court held, because plaintiffs have not identified a single contractual provision in any of the policies at issue, let alone one that is contained in all of the policies at issue, that would have imposed a duty on Sentry to inform the certified class of the impact of Weed Warrior and Jordan. Lastly, considering plaintiff’s bad faith claim, the court again concluded the class was unable to satisfy the common injury requirement necessary for class certification. Even assuming Sentry acted in bad faith with respect to the class by failing to inform them of the impact of Weed Warrior and Jordan, the Tenth Circuit failed to see how the purported lack of notice and information could have injured a policyholder in the absence of a viable claim against Sentry for UM/UIM benefits, considering a large percentage of the certified class members did not have any such claim at all. Therefore, the Tenth Circuit concluded the district court abused its discretion in certifying the general class.

Second, the Tenth Circuit remanded to the district court for further consideration of the certification of the two subclasses, as the Tenth Circuit did not have enough information to determine whether the district court abused its discretion is certifying said subclasses.

Max Montag is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.

Tenth Circuit: Mandamus Unavailable when Appeal in Normal Course will Supply Remedy

The Tenth Circuit Court of Appeals issued its opinion in Feinberg v. Commissioner of Internal Revenue on Friday, December 18, 2015.

Petitioners Neil Feinberg, Andrea Feinberg, and Kellie McDonald operate Total Health Concepts, or THC, an authorized Colorado marijuana dispensary. After the Internal Revenue Service (“IRS”) disallowed their business expense deductions and sent them a large bill, on the ground that their conduct violates federal criminal drug laws, the petitioners challenged that ruling in tax court. In the tax court proceedings, the IRS issued discovery requests asking the petitioners about the nature of their business in order to establish that petitioners are indeed trafficking in marijuana. The petitioners resisted these requests by asserting that their Fifth Amendment privilege against self-incrimination relieved them of the duty to respond. In response, the IRS filed with the tax court a motion to compel production of the discovery it sought, arguing because the Department of Justice’s memorandum on the legalization of marijuana by the states generally instruct federal prosecutors not to prosecute cases like this one, the petitioners should be forced to divulge the requested information. The tax court granted the motion to compel and ordered the petitioners to produce the requested discovery. In seeking to overturn this ruling, because the tax court proceedings were ongoing, the petitioners sought a writ of mandamus from the Tenth Circuit Court of Appeals.

The Tenth Circuit ultimately denied the petition for a writ of mandamus made by petitioners. The court based this denial on two independent grounds. First, the court invoked the rule that a writ of mandamus isn’t available when an appeal in the normal course would suffice to supply any necessary remedy, and more specifically, the rule established in Mid-America’s Process Service v Ellison, that any error in a court’s order compelling production of civil discovery that the petitioners believed protected the Fifth Amendment could be satisfactorily redressed in an appeal after final judgment. The court found the rule in Mid-America’s Process Service is controlling and dispositive of the issue.

Alternatively, the Tenth Circuit determined even if Mid-America’s Process Service didn’t control this case at bar, the petitioners offered no persuasive reason for thinking an appeal after final judgment would fail to remedy any wrong they might suffer. The court left open the possibility that a future party in this context may be able to put fourth a convincing argument as to why the immediate remedy of mandamus is necessary to prevent an irreparable injury. However, the petitioners here were unable to do so. And that by itself, the court reasoned, supplies an independent reason – beyond the controlling precedent of Mid-America’s Process Service – to withhold the extraordinary remedy of mandamus in this case.

Max Montag is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.

Tenth Circuit: Descendants of Sand Creek Massacre Victims Not Entitled to Reparations Accounting

The Tenth Circuit Court of Appeals issued its opinion in Flute v. United States on Tuesday, December 22, 2015.

As described by the Tenth Circuit, this case arose “out of an ignominious event in the history of this Nation.” In 1864, the United States Army conducted an unprovoked attack on a group of unarmed Indians of the Arapaho and Cheyenne Tribes, who had relocated to an area next to the Sand Creek River in the Territory of Colorado at the direction and under the protection of the Territorial Governor and Superintendent of Indian Affairs, John Evans. When what has become known as the Sand Creek Massacre was over, most of the Indians were dead, including many women and children.

After an investigation, the United States publicly acknowledged its role in the tragedy and agreed to pay reparations to certain survivors of the massacre. On October 14, 1865, the United States entered into the Treaty of Little Arkansas, which expresses the United States’ condemnation of “the gross and wanton outrages perpetrated against certain bands of Cheyenne and Arrapahoe Indians . . . at Sand Creek, Colorado Territory.” On July 26, 1866, the U.S. Congress appropriated funds to pay the reparations detailed in the Treaty of Little Arkansas.

According to Plaintiffs, the funds appropriated by Congress were insufficient to compensate all the victims of the massacre. Moreover, instead of paying reparations directly to the affected individuals as directed, the Secretary of the Interior paid some of the money directly to the Tribes. What funds were not distributed to the Tribes were returned to surplus on August 30, 1872. The United States has never provided an accounting of the reparations paid or attempted to identify the individuals to whom reparations were still owed.

Plaintiffs are descendants of the victims of the Sand Creek Massacre. They brought a class action on behalf of themselves and others similarly situated, alleging the United States acted in the capacity of a trustee over the funds appropriated under the Treaty of Little Arkansas and the 1866 Appropriations Act. Plaintiffs argue the Defendants are in breach of their trust obligations for failing to provide an accounting of the reparations funds held in trust for Plaintiffs’ ancestors. The district court dismissed Plaintiffs’ complaint under Rule 12(b)(1), finding it lacked jurisdiction because the United States had not waived sovereign immunity. This appeal followed.

The Tenth Circuit began its analysis with a discussion of sovereign immunity. The sovereign immunity enjoyed by the United States and its officers extends to injunctive relief, and therefore, it bars the relief sought by Plaintiffs here—an order directing the government to provide an accounting. Thus, to proceed against the government, the Plaintiffs must identify some statutory text that expressly and unequivocally waives sovereign immunity.

The Plaintiffs argued the United States’ waiver of sovereign immunity can be found in a series of statutes enacted by Congress appropriating funds to the Department of Interior (the most recent of which occurred in a 2009 appropriations act, hereinafter “2009 Act”), including some funds specifically appropriated for programs associated with Indian tribes (hereinafter collectively referred to as “the Appropriations Acts”). The Tenth Circuit held the 2009 Act, standing alone, does not waive sovereign immunity as the text of the 2009 Act never mentions sovereign immunity, nor does the 2009 Act relieve a plaintiff of the independent obligation to identify an express waiver of sovereign immunity in order to maintain an action against the government.

Second, despite the complete absence of an express waiver of sovereign immunity, Plaintiffs insisted that the 2009 Act constitutes a waiver of sovereign immunity, relying on the Federal Circuit Case Shoshone II. The court rejected Plaintiffs’ interpretation of Shoshone II, reasoning a plaintiff must satisfy two separate requirements to pursue a claim against the government: (1) identification of an express waiver of sovereign immunity, and (2) initiation of the suit before the statute of limitations for the plaintiff’s claim runs and effectively negates that waiver. Even if the 2009 Act were applicable here, the Tenth Circuit reasoned, Plaintiffs could meet only one of these requirements because the 2009 Act contains no express waiver of sovereign immunity.

Third, the Plaintiffs argued that the Treaty of Little Arkansas, in combination with the Appropriations Acts, created an enforceable trust relationship such that they are now entitled to an accounting from the Secretary of the Interior. The court rejected this argument, noting the Appropriations Acts are limited to claims for misappropriation of trust assets, and neither the Treaty of Little Arkansas nor the 1866 Appropriations Act imposes fiduciary trust obligations on the government. And in the absence of such a trust relationship, any purported waiver of immunity contained in the 2009 Act is inapplicable to Plaintiffs’ claims. As such, even if we agreed with Plaintiffs that the 2009 Act expressly waives the United States’ immunity, the court stated, it could not do so in this case. Accordingly, Plaintiffs were unable to identify a waiver of the United States’ sovereign immunity. Absent such a waiver, the courts lack the power to grant Plaintiffs relief, the Tenth Circuit held, thereby affirming the district court’s dismissal of the action for lack of subject matter jurisdiction.

Tenth Circuit: Bankruptcy Creditor Has Standing to Object to Potentially Fraudulent Conveyance of Real Property

The Tenth Circuit Court of Appeals issued its opinion in In re Lavenhar: Lavenhar v. First American Title Insurance Co. on Thursday, December 17, 2015.

On October 28, 2010, First American Title Insurance Company (“First American”) earned a judgment and damages award in its favor in the amount of $434,913.39, plus interest, in Colorado state court against Jeffrey Lavenhar. During the pendency of this litigation, Jeffrey and his then-wife Laurie initiated dissolution proceedings, resulting in the issuance of a divorce decree in November 2010, which incorporated a separation agreement dated October 26, 2010. The separation agreement required Jeffrey pay Laurie $4,400 per month in spousal maintenance, and also contained a provision stating the property located on Antelope Ridge Trial is and always has been the sole property of the Laurie H. Lavenhar Living Trust.

In seeking to collect its damages, First American filed suit against the Lavenhars and the Laurie H. Lavenhar Living Trust, asserting the transfer of Jeffrey’s interest in the Antelope Ridge Trail property to the Laurie H. Lavenhar Living Trust was a fraudulent conveyance. In addition to that independent lawsuit, First American sought to intervene in the Lavenhars’ divorce, seeking a declaration that the Lavenhars’ divorce proceeding was a fraud upon the court designed to hinder its ability to collect on the judgment against Jeffrey. The state divorce court granted First American’s motion to intervene.

Before the resolution of the various legal proceedings instituted by First American against the Lavenhars, Jeffrey filed a Chapter 7 bankruptcy petition. In response, First American filed a motion to lift the automatic stay as to the Antelope Ridge Trail property, asserting it should be able to litigate its state-court fraudulent conveyance action. The bankruptcy court denied the motion, concluding only the Chapter 7 Trustee had standing to bring such an action. Shortly thereafter, Laurie filed in the bankruptcy court a priority unsecured claim for domestic support obligations in the amount of $347,400. First American then filed a new motion to lift the automatic stay, seeking permission to litigate its complain in intervention of the Lavenhars’ divorce proceeding, which was granted in part by the bankruptcy court such that both First American and the Chapter 7 Trustee could litigate the complaint in intervention as to the single issue that would affect the validity of Laurie’s proof of claim, but not as to any other issues resolved in the divorce decree.

The district court affirmed the bankruptcy court’s partial lifting of the automatic stay, and Laurie appealed, asserting the bankruptcy and district courts erred in concluding First American has standing to litigate the validity of the component of the divorce decree addressing domestic support obligations via its state-court complaint in intervention.

On appeal, the Tenth Circuit Court of Appeals determined First American has standing to object to Laurie’s potentially fraudulent proof of claim for domestic support obligations. Next, the Tenth Circuit affirmed the order of the bankruptcy court partially lifting the automatic stay to allow the state divorce court to declare whether or not the Lavenhars’ divorce decree was obtained through fraud on the court. In so ruling, the Tenth Circuit reasoned there is no indication that the state divorce court cannot or will not comply with the limited scope of the bankruptcy court’s order lifting the stay. In rejecting Laurie’s argument that the validity of the property division is not separable from the validly of the spousal maintenance provision, both of which are contained in the separation agreement, the Tenth Circuit noted the Antelope Ride Trial property is and always has been the sole property of the Laurie H. Lavenhar Living Trust. Thus, the court reasoned it is simply not true that the issue the bankruptcy court allowed to proceed in the motion in intervention is inseparably intertwined with the property-transfer issues to be litigated by the Chapter 7 Trustee in the fraudulent conveyance action. Lastly, the court noted a ruling on First American’s behalf on the limited issue the bankruptcy court allowed to be litigated in the complaint in intervention would benefit all creditors equally, such that there exists no danger of intrusion on the exclusive prerogatives of the Chapter 7 Trustee.

Max Montag is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.

Tenth Circuit: Declaratory Judgment Action Moot where Business Interests Sold During Litigation

The Tenth Circuit Court of Appeals issued its opinion in Schell v. OXY USA, Inc. on Monday, December 14, 2015, and modified the opinion on February 9, 2016.

The plaintiff class (appellees and cross-appellants in the Tenth Circuit) consists of approximately 2200 surface owners of Kansas land burdened by oil and gas leases held or operated by OXY, the appellant and cross-appellee. The leases contained a “free gas” clause that, in substance, purported to grant the lessor access to free gas for domestic use. In August 2007, OXY sent letters warning free gas users that their gas may become unsafe to use, either because of high hydrogen sulfide content or low pressure at the wellhead, as a result of the well reaching the end of their productive life.

On August 31, 2007, leaseholders David Schell, Donna Schell, Howard Pickens, and Ron Oliver filed this action on behalf of themselves and others similarly situated, seeking a permanent injunction and a declaratory judgment based on alleged breaches of mineral leases entered into with OXY for failure to supply free usable gas. The district court certified a class of all surface owners of Kansas land burdened by oil and gas leases held or operated by OXY which contain a free gas clause. Plaintiffs and OXY then filed cross-motions for summary judgment. The district court denied OXY’s motion for summary judgment and granted the plaintiffs’ motion for summary judgment. The district court granted the plaintiffs declaratory relief requiring OXY to provide free useable gas under the contract; however, the district court denied the plaintiffs’ motion for a permanent injunction.

Because the district court found that the free gas clauses were ambiguous and interpreted them according to principles of Kansas law, OXY moved to vacate the judgment to permit it to discover extrinsic evidence of the clauses’ meaning. The district court agreed and vacated its judgment. The district court subsequently granted plaintiffs’ resubmitted motion for summary judgment. It also denied plaintiffs’ motion for attorneys’ fees, expenses, and incentive awards. OXY then filed this appeal, and the plaintiffs cross-appealed. After the appeal and cross-appeal were filed, OXY sold all of its interests in the Kansas leases to Merit Hugoton, L.P. (“Merit”). The plaintiff class filed a motion to dismiss the appeal as moot based on this sale. The Tenth Circuit Court of Appeals permitted the appeal to proceed to briefing and oral argument. One week after oral argument, Merit filed a motion to intervene as an appellant and cross-appellee, which was denied by the Tenth Circuit.

The Tenth Circuit concluded the appeal is moot, thereby granting the motion of the plaintiff class to dismiss the appeal, reasoning OXY’s sale of the leases to Merit leads to the conclusion that its conduct cannot be affected by a declaratory judgment concerning the same leases. The Tenth Circuit dismissed OXY’s argument that the leaseholders could sue OXY over its prior conduct during the time when it was operating the wells, considering the fact that allowing OXY to continue the present litigation in order to protect itself from hypothetical unfiled future litigation would render the instant declaratory judgment action a prohibited advisory opinion. Further, the court stated Merit’s request to intervene does not change the conclusion that the declaratory judgment action is moot, in that the record is devoid of any evidence suggesting that a judgment against OXY would bind Merit with respect to the plaintiff class.

Next, the Tenth Circuit determined it was appropriate to dismiss the appeal without vacating the district court’s granting of the plaintiff class’s declaratory judgment action. Although the general rule is to vacate the judgment below when the case becomes moot on appeal, the court found OXY’s intentional conduct (i.e., selling of the leases to Merit) caused the issue over the free gas clauses of the leases to be moot, and that no other entity was more responsible for mooting the controversy, thereby justifying the equitable resolution of leaving in place the district court’s judgment granting the plaintiffs declaratory relief. To act otherwise, the court noted, would permit OXY to benefit from its voluntary act by wiping away a loss.

Lastly, with respect to plaintiffs’ cross-appeal challenging the district court’s denial of their motion for attorneys’ fees, expenses, and an incentive award, the Tenth Circuit determined it had jurisdiction over the matter, as the issue of attorneys’ fees (and related issues) was not moot, despite the mootness of the merits of the appeal. The Tenth Circuit then affirmed the district court’s holding that the plaintiff class has not shown a legally sound basis for an award of attorneys’ fees and other related relief. In so holding, the court found that neither the common-benefit exception to the American Rule nor 28 U.S.C. § 2202 was applicable. Because OXY sold all of the leases to Merit, the common benefit exception does not apply, as an award of attorneys’ fees under the exception would be an impermissible penalty on OXY. The Tenth Circuit affirmed the district court’s statement that there is no independent statutory or contractual basis for attorneys’ fees under § 2202.

Max Montag is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.

SB 16-199: Amending Regulation of Programs of All-Inclusive Care for the Elderly

On April 22, 2016, Sens. Ray Scott & Pat Steadman and Reps. Brian DelGrosso & Joann Ginal introduced SB 16-199Concerning Programs of All-Inclusive Care for the Elderly. The bill was assigned to the Senate Health & Human Services Committee, where it was amended and referred to Appropriations. The bill was again amended in Appropriations and referred to the Senate floor for Second Reading. After being amended on Second Reading, the bill passed Third Reading with no amendments.

The bill makes a number changes with respect to the State Department’s interaction with and regulation of organizations and facilities providing a program of all-inclusive care for the elderly (“PACE”).

The bill requires that contracts between the Department of Health Care Policy and Financing (“Department”) and a PACE organization include the negotiated monthly capitated rate for services. The rate must be based upon a prospective monthly capitation payment to a PACE organization for a Medicaid participant enrolled in a PACE program that is less than what would otherwise have been paid under the state Medicaid plan if the participant were not enrolled in the PACE program.

The Department shall participate with Colorado PACE organizations to develop an actuarially sound upper payment limit methodology that complies with federal law, while addressing and employing information on the PACE population. The Department shall provide state long-term care options data, as well as relevant Medicare and Medicaid data, necessary for the computation of the upper payment limit. An actuary experienced in these methods shall assist with the computation. Until the upper payment limit methodology is developed and adopted in state board rules, the percentage of the upper payment limit used to calculate the monthly capitated rate shall not be less than the percentage negotiated for the 2016-2017 state fiscal year.

The bill creates the state PACE ombudsman (“ombudsman”) in the state long-term care ombudsman program. Each PACE program shall post at all PACE facilities a notice, prepared by the ombudsman, informing PACE participants of the existence of and contact information for the ombudsman. The ombudsman shall have immediate access to a PACE program or facility, and to PACE participants, for the purposes of carrying out the duties of the ombudsman.

The bill establishes the following duties of the ombudsman: (1) establish policies and procedures to identify, investigate, and resolve complaints made by or on behalf of a PACE participant related to any act or omission of any PACE organization; (2) provide training and technical assistance to PACE organizations and their employees; (3) establish procedures to analyze the development and implementation of federal, state, and local law and policies with respect to PACE services, programs, and facilities (and recommend changes to Colorado’s laws and policies); and (4) pursue administrative, legal, or other appropriate remedies on behalf of PACE participant.

The bill establishes a civil penalty for any person who takes any discriminatory, disciplinary, or retaliatory action against any PACE participant or any employee of a PACE organization for any communication with an ombudsman.

Max Montag is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.

SB 16-198: Extending Reporting Requirements to Workers’ Compensation Advisory and Ratings Organizations

On April 22, 2016, Sen. Chris Holbert and Rep. Tracy Kraft-Tharp introduced SB 16-198Concerning the Standards Applicable to Documents Used by Workers’ Compensation Insurance Carriers in Colorado. The bill was introduced into the Senate Business, Labor, & Technology Committee, where it was amended and referred to the Senate Committee of the Whole. The bill was again amended on Second Reading and passed Third Reading in the Senate with no further amendments. The bill was referred to the House, where it passed through unamended.

Under current law, every carrier providing workers’ compensation insurance is required to submit an annual report by July 1 of each year to the commissioner of insurance listing any policy forms, endorsements, riders, letters, notices, or other documents affecting an insurance policy or contract issued or delivered to any policyholder in Colorado. Insurance carriers are also required to submit to the commissioner of insurance a list of any new policy forms, endorsements, riders, letters, notices, or other documents at least 31 days before using said documents.

This bill imposes the aforementioned requirements upon advisory organizations and rating organizations. The bill also states if an advisory or rating organization certifies a form in compliance with the aforementioned requirements, a carrier who subsequently uses the form in its entirety is not required to list that form in its annual report or submit a certification for that form.

Max Montag is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.

SB 16-197: Allowing Liquor-License Drugstores to Open Five Additional Stores on Same License

On April 22, 2016, Sen. Pat Steadman introduced SB 16-197Concerning the Retail Sale of Alcohol Beverages. The bill was assigned to the Senate Business, Labor, & Technology Committee.

The bill establishes a number of requirements with respect to the licensing of alcohol retailers, as well as establishing requirements for the distribution and sale of alcohol by licensed wholesalers, retailers, and their employees.

First, on or after January 1, 2017 and before January 1, 2027, a liquor-licensed drugstore (“LLD”) seeking to obtain an additional LLD license must apply to the state and local licensing authorities, as part of a single application, for a transfer of ownership of two retail liquor stores, a change of location, and a merger and conversion of the two retail liquor stores. A LLD licensee may make said application only if: (1) the LLD pays a minimum purchase price of $350,000 per retail liquor store to acquire ownership of the two licensed retail liquor stores; (2) the two retail liquor stores are located within the same local licensing authority jurisdiction as the premises for which the applicant is seeking a LLD license; and (3) the premises for which the LLD license is sought is not located within 2,500 feet of another licensed premises.

Further, in making its determination on the application, the local licensing authority may consider the reasonable requirements of the neighborhood. A local licensing authority may conduct a hearing on the application for transfer of ownership after notifying the applicant of the hearing at least 10 days before the hearing by posting – or directing the license applicant to post – a notice of the hearing in a conspicuous location on the licensed premises for a least 10 consecutive days before the hearing. A LLD applying for a license merger and conversion is ineligible for a temporary permit, and a local licensing authority shall not issue a temporary permit to a LLD that has acquired ownership of licensed retail stores in accordance with this section of the bill.  The state licensing authority shall establish fees for a transfer or ownership, change of location, and license merger and conversion not to exceed $1000.

Second, a LLD on or after January 1, 2017 shall have a least one permitted manager conduct the LLD’s purchase of alcohol from a licensed wholesaler. The state licensing authority may issue a manager’s permit to an individual who is employed by a LLD and who will be in actual control of the alcohol beverage operations, as long as the individual demonstrates that he or she: (1) has not been convicted of a crime involving the sale or distribution of alcohol within 8 years of submission of the application; (2) has not been convicted of a felony within 5 years of submission of the application; (3) is at least 21 years of age; (4) has not had a manager’s permit or similar permit revoked by the issuing authority within 3 years of submission of the application; and (5) is certified as a responsible alcohol vender. It is unlawful for an individual with a manager’s permit to be directly or indirectly interested in a licensed wholesaler, a licensed manufactured, or any business that has had its license revoked by the state issuing authority within 8 years of submission of the application for a manager’s permit. For each manager’s permit, an annual fee of $100 shall be paid in advance to the Department of Revenue. The state licensing authority shall also establish fees for applications for manager’s permits.

Third, an employee of a LLD who is involved in selling alcohol must obtain and maintain a certification as a responsible alcohol vender. An employee of a LLD who is under 21 years of age shall not have any contact with malt, vinous, and spirituous liquors (“liquors” or “liquor”) offered for sale. A LLD shall not store alcohol off the licensed premises. A LLD shall not comingle the liquors it offers with any other products, and the LLD shall shelve and display the liquors separately from other nonalcoholic beverages.

Fourth, a person licensed to sell malt, vinous, and spirituous liquors (“liquors” or “liquor”) shall: (1) not sell liquors at a price below the cost to purchase the liquors; (2) not allow consumers to purchase liquors at a self-checkout; (3) require purchasers of liquors to present a valid, government-issued identification verifying the purchaser is 21 years of age; and (4) not sell clothing or accessories imprinted with advertising, logos, slogans, trademarks, or messages related to alcoholic beverages. A person licensed on or after January 1, 2017, shall not purchase liquors from a wholesaler on credit, and shall effect payment upon delivery of the liquors.

Fifth, a licensed wholesaler: (1) shall make all deliveries of alcohol to LLD in compliance with the bill; (2) shall take orders for alcohol only from a permitted manager of a LLD; (3) may unload alcohol at a LLD’s loading dock at any time that the location is open to the public; (4) shall make available to all licensed retailers in the state all liquors and brands of alcohol sold by the wholesaler; and (5) may establish purchase requirements, unless the requirements have the effect of excluding a majority of licensed retailers from purchasing a brand of alcohol.

Seventh, in addition to selling liquors, a retail liquor store may sell, without limitation: nonalcoholic beverages; liquor-filled candy; snack food items; kegs and growlers; beer/wine/spirit-making kits and supplies; lemons, limes, cherries, olives, and other food items used in preparing or garnishing alcoholic beverages; clothing or accessories imprinted with advertising, logos, slogans, trademarks, or messages related to alcoholic beverages; lottery tickets; tobacco products; and other merchandise not related to the consumption of alcohol, but only if the annual gross revenues from the sale of such other merchandise does not exceed 20% of the store’s total annual gross revenues. A retail liquor store shall not sell retail marijuana.

Eighth, an owner, part owner, shareholder, or person directly or indirectly interested in a LLD may have an interest in (1) up to five additional LLD licenses if obtained on or after January 1, 2017 and before January 1, 2027, and (2) an unlimited number of additional LLD licenses if obtained on or after January 1, 2027. An owner, part owner, shareholder, or person directly or indirectly interested in a retail liquor store may have an interest in up to five additional retail liquor store licenses.

Tenth, it is unlawful for any licensed retailer: (1) to sell fermented malt beverages to any person between the hours of midnight and 8:00 AM (previously, midnight to 5:00 AM); (2) to employ a person who is at least 18 years of age but under 21 years of age to sell or dispense liquor, unless the employee is supervised by another person who is on the licensed premises and is at least 21 years of age; (3) if licensed as a tavern, retail liquor store, or LLD, to permit an employee who is under 21 years of age to sell liquor; or (4) if licensed as a LLD, to permit an employee who is under 21 years of age to have any contact with liquors offered for sale, or sold and removed from, the licensed premises of the LLD. It is not unlawful for a retail licensee or his or her employee to sell liquor to a consumer who is or reasonably appears to be over the age of 50 and who failed to present identification.

Lastly, the bill removes the requirement that a “fermented malt beverage” be no more than three and two-tenths percent alcohol by weight or four percent alcohol by volume. With respect to “malt liquors,” the bill replaces the requirement that the malt liquor contain no more than three and two-tenths percent alcohol by weight or four percent alcohol by volume with the requirement that the malt liquor contain “not less than one-half of one percent alcohol by volume.”

Max Montag is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.

SB 16-191: Allowing Appropriations from Marijuana Cash Fund for Cannabis Research

On April 19, 2016, Sen. Pat Steadman and Rep. Bob Rankin introduced SB 16-191Concerning Marijuana Research Funded by the Marijuana Tax Cash Fund. The bill was assigned to the Senate Appropriations Committee, where it was amended and referred to the Senate Committee of the Whole. The bill passed Second Reading in the Senate with amendments and passed Third Reading with no further amendments. It was introduced in the House and assigned to the Appropriations Committee.

This bill allows the General Assembly to allocate revenues from the marijuana tax cash fund to CSU-Pueblo for marijuana research programs. While conducting the research, CSU- Pueblo is encouraged to consult with the scientific advisory council and the retail marijuana public health advisory council.

The bill extends the requirement that the division of criminal justice collect data and study law enforcement’s activity and costs related to the implementation of retail marijuana for each two-year period after January 1, 2014. For each two-year period, the division of criminal justice shall issue a report of each scientific study to the judiciary committees of the Senate and House, the joint budget committee, and the Department of Revenue.

The bill requires the governor’s office of marijuana coordination to include data sharing –and to address any data gaps – in its coordination of the executive branch response to the legalization of retail marijuana.

For the 2016-2017 state fiscal year, the bill makes the following appropriations: (1) from the marijuana tax cash fund, $1,109,625 to the office of the governor for use by the office of marijuana coordination; (2) from reappropriated funds from the office of marijuana coordination, $1,109,625 to the office of the governor for use by the office of information technology; (3) from the marijuana tax cash fund, $900,000 to the Department of Higher Education for use by the CSU system; and (4) from the marijuana tax cash fund, $79,992 to the Department of Public Safety for use by the division of criminal justice.

Max Montag is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.

SB 16-184: Eliminating Floor Rate for Post-judgment Interest

On April 11, 2016, Sens. Bill Cadman & Mark Scheffel and Rep. Yeulin Willett introduced SB 16-184Concerning Market-Based Rates for Interest on Judgments. The bill was introduced in the Senate and assigned to the Senate Judiciary Committee.

The current rate of post-judgment interest is 2 percent above the discount rate of the federal reserve bank of Kansas City, with a floor of 8 percent. This bill eliminates the floor. The current interest rate for judgments for personal injury damages caused by a tort is 9 percent. This bill ties this interest rate to the current rate of post-judgment interest.

Max Montag is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.