September 26, 2016

Colorado Supreme Court: Corporate Defendant Not “Essentially At Home” in Colorado, Therefore Jurisdiction Did Not Attach

The Colorado Supreme Court issued its opinion in Magill v. Ford Motor Co. on Monday, September 12, 2016.

Constitutional Law—Personal Jurisdiction—General Jurisdiction—Corporations and Business Organizations—Related or Affiliated Entities.

The Supreme Court issued a rule to show cause to review the trial court’s  conclusion that defendant Ford Motor Company (Ford) is subject to general personal  jurisdiction in Colorado and that venue was proper in Denver County. The Court  concluded that, under Daimler A.G. v. Bauman, 134 S. Ct. 746 (2014), the record does not support a finding that Ford is “essentially at home” in Colorado. Therefore, Ford is not subject to general personal jurisdiction in Colorado. Because the trial court did not  determine whether Ford was subject to specific jurisdiction, the Court did not reach that issue. The Court also held that maintaining a registered agent in the state does not convert a foreign corporation to a resident. Because none of the parties reside in Denver and the accident did not occur there, venue was not appropriate in Denver County.

Summary provided courtesy of The Colorado Lawyer.

Should We Get Involved In the Government Marketplace?

Editor’s Note: This article is reprinted with permission courtesy of Richard F. Busch, II,  www.rbuschlaw.com. All rights reserved.

By Richard F. Busch, II, Esq.

The federal government spends trillions of dollars annually for a wide range of goods and services to meet mission needs. Current events indicate that one potential factor in the recovering economy will include stable or increasing government procurement budgets. Construction and construction related activity is a very large part of the government’s budget and recovery plans, including here in Colorado. In addition, along with the current depletion of the spare parts inventory for the military, technology advancements require up-to-date development programs and a consistent focus on maintaining our lead in state of the art equipment. Finally, the government must/has become increasingly reliant on industry and the commercial markets to provide the technical expertise to advance the infrastructure and the required solutions for mission success.

While many of the largest defense companies and government contractors have an operational presence in Colorado, the majority of existing defense/government construction projects, contracting, and research/development opportunities remain untapped by Colorado businesses. The doors are opening, particularly in the areas of construction project, remodeling, and refurbishment. High technology practice areas in Colorado include but are not limited to energy and construction, nanotechnology, space, and software development. Colorado businesses, as well as the state legislature, are realizing the vast potential in the government marketplace and the unique position Colorado has in becoming a primary state to provide the government marketplace with the supplies and services needed to successfully accomplish its mission.

Doing business in the federal or state marketplace has changed over the years. Past difficulties have been eliminated with the new focus on the commercial contractor and smaller businesses. Please consider the following FAQs to better understand the current opportunities:

Q: If a business entity was considering entering the government marketplace and you could give them just one piece of advice, what would it be?

A: Do it right! The concept is simple, but the execution can be complex if a company attempts to perform in the government marketplace without the experience or advice necessary to succeed. Unique skills are needed because the government marketplace is a different forum than the commercial market. A company must recognize, understand, and prepare for the differences. In order to take advantage of the many opportunities when dealing with the government, the company must be prepared to understand there are differences, those differences can be “handled,” and the potential is worth the focus. In that regard, it is crucial to have experienced, qualified professionals advising you about those unique requirements when dealing with the government—contract administrators, accountants, quality and marketing experts, and legal professionals. It’s not always necessary to hire people experienced in these areas, but a company should have such advisors available as needed. A government contract is not “just” a contract. It is important to look to organizations like the Small Business Administration and the Department of Defense’s Procurement Technical Assistance Centers for help and guidance on the proper proactive approach to government contracting.

Q: Once a company wins a government contract or is awarded an order, what focus should they have in completing their obligation?

A: It’s important to remember that a company’s “past performance” is not just a concept, but rather an important element of success. While there is no such thing as a perfect contract, careful administration, timely performance, quality work, and accurate accounting are essential to securing an outstanding performance evaluation. The manner in which a company performs and how its contracts are administered is a primary factor the government considers when awarding new opportunities. Exercising sound business judgment, even on those occasions when the company must seek an equitable adjustment or relief from the contracting officer, is important in avoiding and/or resolving disputes over the performance of the contract. Remember, the government has responsibilities under the contract as well and must be held accountable. If approached in a business-like manner and supported by the guiding principles in the regulations, executive orders, and statutes, the government generally appreciates an attempt to resolve issues at the lowest level and in the quickest amount of time.

Q: Is it important to understand the commercial-item procurement initiative when dealing with the government?

A: Federal Acquisition Regulation Part 12 provides guidelines for the purchase of “commercial” supplies and services. Briefly, the regulation states a preference for the acquisition of commercial items and that commercial items shall be acquired to meet the needs of the agency whenever they are available. In addition, the regulation requires prime contractors and subcontractors at all tiers to incorporate, to the maximum extent practicable, commercial items as components of items supplied to the government agency. This initiative is very important for any business participating in or considering entering the government marketplace. Having a product or service designated as “commercial” affects intellectual property rights, accounting audits, quality programs, socioeconomic requirements, and the imposition of most of the normally required terms and conditions.

Q: Obviously contract terms and conditions are important, but how closely should contracts be reviewed?

A: As with all legal documents, it is important to understand the terms you are committing to and your responsibilities under the contract. The government has responsibilities also. Over-incorporation of clauses only creates opportunity for increased spending and a forum for failure. In one situation, our client, a small subcontractor on a major program, was given flow-down terms and conditions from the large prime contractor. We were requested to review these flow-down clauses and comment on the applicability of the requirements. Although the subcontractor was on the prime’s proposal team, the prime flowed down more than 115 contract provisions. Upon review, we found only a limited number of clauses that were mandatory due to the unique status of dealing with the government and 14 clauses that would be acceptable if appropriately modified to support the prime contractor’s responsibilities to the government. The rest of the clauses did not apply or were not appropriate. Always review the clauses and negotiate the final contract as much as possible. Balance your review by recognizing acceptable risks, managing those risks, and keeping in mind your goals in acquiring and performing the contract.

Q: What are some important considerations when establishing the Prime-Subcontractor relationships?

A: A company’s approach to entering the realm of government contracts should include various relationships with prime contractors. Those contractual relationships could include not only the traditional subcontract, but also teaming arrangements, joint ventures, and mentor-protégé programs. Be thorough and proactive in the development of such relationships. Ensure that there is an understanding in terms of the focus and goals to be achieved and the responsibilities assigned to each party. Understand billing, risk allocation, intellectual property issues, marketing, and quality issues between the contract parties. Most important, clearly identify the roles and goals of the parties. Finally, understand and limit the terms and conditions necessary to successfully perform the contract.

Q: How should the contractor handle a dispute with the government or prime over contract award or performance?

A: There are different approaches to resolving disputes with the government or prime over a contract award or performance. In my opinion, it is most important not to be arbitrary and to understand that there is a certain cost to performing any business obligation. Management must balance the rights supplied under the contract with the importance of the company’s relationship with its customer. Generally, my experience has been that the government understands that parties to a contract may have a dispute—there is no perfect contract. While there are no guarantees, most government officials understand that it is “just business” as long as the issues are presented in a business-like approach. A professional approach goes a long way toward resolving issues and maintaining a high past performance rating.

Whatever the level of the dispute, the contractor must ensure that the claim is drafted well and fully supported. While there are times that demand a more formal resolution technique, I am a firm believer in trying to resolve issues through unassisted negotiation or formal mediation. There are a number of government directives that encourage alternative dispute resolutions between parties; take advantage of those directives as much as possible. It’s just good customer relations.

© Busch Law Firm LLC (2016)

Richard Busch, II, is a solo practitioner at The Busch Law Firm, which is a boutique government contract practice firm. His practice involves all aspects of government contracts, commercial contracts, conflict management systems design, ADR, and white collar crime. More specifically, his practice focuses on the formation and administration of contract relationships through the utilization of a proactive approach of addressing the objectives of the relationship, requirements for successful performance, and the resolution of disputes. Mr. Busch has extensive experience in negotiating complex business issues involving high technology and major weapons system contracts, contract compliance issues, and resolving both internal and external disputes involving the business organization. Richard has reviewed and negotiated multimillion dollar solicitations, proposals, equitable adjustments, terminations, and other related government acquisition and commercial-based contract matters with a number of government agencies and subcontractor/vendors. He concentrates on the legal issues facing a corporation doing business with the government or its prime contractors in the areas of construction, high technology, major weapons systems, and information⁄communication technology. Mr. Busch has worked with corporations, the DoD, and other government agencies in the highly structured areas of classified contracts. As a result, he has gained a wealth of experience in dealing with classified authorities pertaining to these agencies. Prior to entering private practice, Mr. Busch held positions as General Counsel of a multi-billion dollar product area with a Fortune 50 defense contractor and a legal advisor to the Director of Contracts at the National Security Agency (NSA).  Mr. Busch earned an L.L.M. (Government Contract Designation) from George Washington University National Law Center, a J.D. from the Hamline University School of Law, and a B.A. from Westminster College, Fulton, Missouri.

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.

 

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CLE Program: Finding Federal Contract Work — Meet the Attorneys, Veterans, the SBA and Bankers Your Clients Need

This CLE presentation will occur on September 16, 2016, at the CBA-CLE offices (1900 Grant Street, Third Floor), from 9 a.m. to 4:10 p.m. Register for the live program here or register for the webcast here. You may also call (303) 860-0608 to register.

Can’t make the live program? Order the homestudy here: CD • MP3Video OnDemand.

Colorado Court of Appeals: Law Firm Breached Contract Not to Represent One Association Member Against Another

The Colorado Court of Appeals issued its opinion in Semler v. Hellerstein on Thursday, August 25, 2016.

Notice of Appeal—Timeliness—Amended Complaint—Jurisdiction—Motion to Dismiss—Fraud—Concealment—Misrepresentation—Civil Conspiracy—Breach of Fiduciary Duty—Breach of Contract—Third Party Beneficiary—Attorney Fees.

Plaintiff Semler and defendant Perfect Place are both members of the 1940 Blake Street Condominium Association (Association). Defendant Hellerstein owns and controls both Perfect Place and Bruce S. Hellerstein, CPA P.C. Hellerstein also served as treasurer of the Association. Defendant Bewley is an attorney employed by defendant law firm Berenbaum Weinshienk, P.C. At all relevant times, Bewley represented Hellerstein and his two corporate entities.

This case stems from a related quiet title action in which Perfect Place asked the court to determine that it was the rightful owner of parking spaces C, D, and E. The court presiding over the quiet title action determined that Semler owned parking spaces C and D, while Perfect Place owned parking space E. Semler then brought the current suit, claiming that Bewley and Hellerstein devised a scheme to gain title to Semler’s building parking spaces C and D. Semler’s first amended complaint alleged claims for breach of fiduciary duty against Hellerstein, aiding and abetting that breach against Bewley, and civil conspiracy against all defendants. The court granted defendants’ motions to dismiss. Semler then moved to amend his complaint for the second time, proposing to add claims for fraud, nondisclosure and concealment, negligent misrepresentation, negligent supervision, vicarious liability, and breach of contract. He also more clearly explained that he was seeking damages for the lost income opportunities he suffered as a result of having to defend against the quiet title action. The court denied Semler’s second motion to amend based on lack of standing and awarded attorney fees in favor of defendants.

On appeal, defendants asserted that Semler’s notice of appeal was untimely and, therefore, the Court of Appeals lacked jurisdiction to consider the appeal. The Court determined that Semler timely filed his notice of appeal.

Semler contended that the trial court erred by denying his motion for leave to amend his complaint a second time. The court, however, considered the claims in the second amended complaint when ruling on the motion to dismiss.

Semler argued that the trial court erred in granting defendants’ motions to dismiss. The Court reviewed the trial court’s dismissal of the action based on Semler’s second amended complaint. Semler’s fraud, concealment, and misrepresentation claims were all premised on conversations and transactions between a third party and defendants in which Semler was not involved. Semler lacked standing to bring these claims. Moreover, Semler’s claims for lost opportunity damages are too remote and unforeseeable to be recoverable under these claims. Therefore, these claims failed to state a claim upon which relief could be granted and should have been dismissed under C.R.C.P. 12(b)(5).

Semler also contended that defendants conspired with each other to obtain his parking spaces. He is not entitled to relief on a civil conspiracy claim because a director cannot conspire with the corporation which he serves, which is the premise of Semler’s argument. Semler’s claim for breach of fiduciary duty against Bewley failed to state a claim upon which relief can be granted. Additionally, because Hellerstein was not acting in his role as treasurer when he engaged in the allegedly fraudulent conduct, Semler’s breach of fiduciary duty claim against Hellerstein fails. Because these claims fail, Semler’s aiding and abetting breach of fiduciary duty claim against Bewley and negligent supervision and vicarious liability claims against Bewley’s law firm, Berenbaum Weinshienk, fail as well.

As to his breach of contract claim, although Semler was not a party to the contract between Berenbaum Weinshienk and the Association in which Berenbaum Weinshienk agreed that it would not represent one Association member against another, Semler sufficiently pleaded a third-party beneficiary breach of contract claim pursuant to this agreement. Therefore, the case was remanded to the trial court for further proceedings on this claim.

Semler also contended that if the dismissal order is reversed, the attorney fees award in favor of defendants must also be reversed. Only Semler’s breach of contract claim survived C.R.C.P. 12(b) dismissal. Thus, because that claim was not pleaded against the Perfect Place defendants, the attorney fees award to them remains undisturbed. The order awarding fees to Bewley and Berenbaum Weinshienk was reversed.

The orders were affirmed in part and reversed in part, and the case was remanded with directions.

Summary provided courtesy of The Colorado Lawyer.

John Moye and John McCabe Receive Cathy Stricklin Krendl Business Lawyer Lifetime Achievement Award

Moye-McCabeIn 2014, the Colorado Bar Association Business Law Section created the “Cathy Stricklin Krendl Business Lawyer Lifetime Achievement Award.” The award is named for the first recipient in 2014, Cathy Stricklin Krendl, and is intended to recognize and honor her contributions to Colorado business law, including intellectual and professional excellence in the practice Colorado business law; generosity of spirit as reflected in the advancement of Colorado business law; efforts to enhance the general quality of business law practice by Colorado lawyers; and devotion to the principles of legal professionalism, all manifested consistently over years of endeavor.

The CBA Business Law Executive Council chose two outstanding recipients for 2016—John Moye, founding partner at Moye White, and John McCabe, Senior Of Counsel, with Davis Graham and Stubbs LLP. The awards will be presented at the 2016 Business Law Institute at the reception on the first day, September 15 at 5 p.m.  We invite all members of the CBA Business Law Section to attend the awards ceremony and reception even if you are unable to attend the Institute.  The exemplary contributions that the recipients have made to the area of business law will be shared at the ceremony. We look forward to seeing everyone there to celebrate their achievements.

 

ET072616L

CLE Program: 2016 Business Law Institute

This CLE presentation will occur on September 15-16, 2016, at the Marriott City Center (1701 California Street, Denver). Register for the live program here. You may also call (303) 860-0608 to register.

Can’t make the live program? Order the homestudy here: CD • MP3Video OnDemand.

Tenth Circuit: No Error where District Court Granted Summary Judgment Prior to Rule 26(f) Meeting

The Tenth Circuit Court of Appeals issued its opinion in Trans-Western Petroleum, Inc. v. United States Gypsum Co. on Tuesday, July 26, 2016.

United States Gypsum (USG) owns the oil and gas underlying 1,700 acres of land in Utah. USG entered into an oil and gas lease in 1995 that was subsequently assigned to Wolverine Oil & Gas Corp. and extended through August 17, 2004. In 2004, Douglas Isern, the owner and sole officer of Trans-Western, called USG and expressed interest in leasing the oil and gas rights when the Wolverine lease expired. Trans-Western sent USG a proposed five-year lease beginning August 17, 2014, and a check for $32,680. USG executed the lease on September 15, 2004 but did not cash the check.

On October 1, 2004, Wolverine protested the recording of the lease, claiming its lease remained valid. USG then rescinded the Trans-Western lease both orally and in writing. Trans-Western brought suit against Wolverine in 2006, seeking a declaratory judgment that Wolverine’s lease had expired on August 17, 2004. The district court determined that the lease had expired and granted the parties’ joint motion for a Rule 54(b) certification and stay. The Tenth Circuit affirmed on appeal. Thereafter, USG and Trans-Western executed a Ratification and Lease Extension for a primary five-year term beginning December 11, 2009.

In 2010, Trans-Western filed a second amended complaint, seeking a declaratory judgment that its lease with USG was valid and damages for breach of contract and breach of the covenant of quiet enjoyment. Trans-Western moved for partial summary judgment, which USG opposed. The district court granted partial summary judgment but denied attorney fees due to disputed material facts on damages. At a bench trial on damages, Trans-Western contended it was entitled to expectation damages because USG deprived it of the opportunity to assign. The district court disagreed, finding Trans-Western was entitled to only nominal damages based on the contract’s value on the date of the breach. The parties appealed.

The Tenth Circuit certified a question to the Utah Supreme Court regarding how expectation damages should be measured for the breach of an oil and gas lease. The Utah Supreme Court responded that consequential damages are those that are reasonably foreseeable by the parties at the time the contract was made. The court also held that the trial court may exercise its discretion to allow for the use of post-breach evidence to help calculate expectation damages.

The Tenth Circuit first evaluated USG’s cross-appeal, in which it argued that the district court should have granted its Rule 56(d) motion and deferred ruling on its partial summary judgment motion so that USG could conduct discovery. The district court determined that USG had a correct understanding of certain facts and constructive notice of others, thereby allowing the case to be resolved as a matter of law. In the district court, USG argued that extra time would allow it to discover evidence that Trans-Western was aware that USG was under a mistaken impression. On appeal, USG argued that discovery would have shown there was no meeting of the minds due to a lack of consideration from Trans-Western. The Tenth Circuit found these arguments different, and ruled that USG waived its argument. The Tenth Circuit further noted, though, that even if it were to consider the argument, USG did not meet the requirements for Rule 56(d) deferral because its allegations were vague and non-specific.

USG also argued the district court violated a scheduling order by granting summary judgment prior to the Rule 26(f) meeting. The Tenth Circuit found no abuse of discretion, noting that nothing suggested that USG sought to enforce the scheduling order and the order did not preclude motions practice. USG next argued the district court erred by granting Trans-Western’s motion for partial summary judgment because the lease failed for want of mutuality and consideration. The Tenth Circuit again disagreed. Trans-Western issued a bank draft in 2004, and USG had the ability to negotiate the draft from the moment of its delivery. Because the parties exchanged promises with adequate consideration, the district court did not err in granting partial summary judgment.

The Tenth Circuit affirmed the district court but remanded for calculation of damages consistent with the Utah Supreme Court’s opinion.

Tenth Circuit: Lower-Rung Participant in RICO Association-in-Fact Enterprise Can Play Part in Carrying Out Affairs

The Tenth Circuit Court of Appeals issued its opinion in George v. Urban Settlement Services on Monday, August 15, 2016.

Plaintiffs Richard George, Steven Leavitt, Sandra Leavitt, and Darrell Dalton asserted claims under the Racketeer Influenced and Corrupt Organizations Act (RICO) against Bank of America (BOA) and Urban Settlement Services, along with a promissory estoppel claim against BOA, based on the defendants’ allegedly fraudulent administration of the Home Affordable Modification Program (HAMP). BOA was required to participate in HAMP and comply with the program guidelines because it received funds pursuant to the Emergency Economic Stabilization Act of 2008. BOA contracted with third parties, including Urban, to administer its HAMP program. Each of the four plaintiffs had a home mortgage through BOA and applied for home loan modifications through HAMP, interacting with BOA and Urban representatives during the application process. Despite various misleading representations from BOA and Urban, the plaintiffs were unable to obtain HAMP relief, depriving them of opportunities to sell their homes or pay off other debts.

Plaintiffs brought RICO claims against BOA and Urban, alleging defendants formed a RICO enterprise with the common goal of wrongfully denying HAMP loan modifications to qualified homeowners by developing a scheme to obstruct and delay borrowers’ HAMP loan modification requests. Plaintiffs also asserted promissory estoppel claims against BOA, alleging BOA made clear promises in Trial Period Plan (TPP) documents and on its website promising permanent loan modifications to qualified borrowers who completed TPPs. BOA and Urban filed Rule 12(b)(6) motions to dismiss. BOA argued the plaintiffs failed to sufficiently allege a RICO enterprise distinct from BOA, while Urban argued they failed to sufficiently allege Urban participated in the enterprise. Both defendants argued plaintiffs failed to sufficiently allege a pattern of racketeering activity. The district court granted both defendants’ motions and dismissed plaintiffs’ claims.

On appeal, plaintiffs argued the factual allegations in their amended complaint state facially plausible RICO claims against BOA and Urban and the district court erred in dismissing the claims. The plaintiffs argued that because they alleged an association-in-fact enterprise consisting of independently owned and operated companies, the alleged enterprise is sufficiently distinct from BOA. The Tenth Circuit agreed. The plaintiffs contend the enterprise’s common purpose was to extend as few HAMP modifications as possible while appearing to comply with program rules. The district court concluded that Urban employees were BOA’s agents, who did nothing more than follow BOA’s instructions, but the Tenth Circuit disagreed. The Tenth Circuit found that plaintiffs sufficiently showed that BOA and Urban formed an association-in-fact enterprise, and that by orchestrating and operating a scheme to deny HAMP modifications, BOA and Urban furthered the enterprise’s scheme to delay modifications.

The district court also concluded that plaintiffs failed to show Urban’s participation in the enterprise. The district court characterized Urban as an outside entity having no participation in BOA’s enterprise. The Tenth Circuit noted that this mischaracterization failed to appreciate that BOA was not the alleged enterprise. Plaintiffs alleged Urban was a lower-rung participant knowingly carrying out BOA’s orders, and the Tenth Circuit agreed, noting that even a bit part participant can play some part in carrying out the enterprise’s affairs.

Defendants alternatively argued that the Tenth Circuit could affirm the district court because plaintiffs failed to show a pattern of racketeering activity. Plaintiffs alleged several acts of mail and wire fraud, but defendants argued plaintiffs failed to show particularity. As to BOA, the Tenth Circuit disagreed, noting that plaintiffs had illustrated several conversations with various BOA employees about their HAMP modifications. As to Urban, the Tenth Circuit found it was a close call. Plaintiffs argued that they were unable to show particularity without further discovery, because Urban employees frequently held themselves out as BOA employees. The Tenth Circuit found this sufficient to survive a motion to dismiss. The Tenth Circuit reversed the district court’s dismissal of plaintiffs’ RICO claims and remanded for further proceedings.

Turning to the promissory estoppel claims against BOA, the Tenth Circuit again found the district court erred. Plaintiffs described BOA’s unambiguous promises to provide permanent HAMP modifications for borrowers who complied with their TPPs. The district court found that BOA made no promise, but the Tenth Circuit determined this to be in error. Screenshots of the BOA website and TPP documents unambiguously promised borrowers permanent modifications if they complied with their TPPs. The Tenth Circuit found this sufficient to satisfy the first step of the promissory estoppel analysis. Because the district court did not address the remaining factors, the Tenth Circuit remanded for further proceedings.

The Tenth Circuit reversed the district court’s dismissal of plaintiffs’ RICO and promissory estoppel claims, and remanded for further proceedings consistent with its opinion.

Two Law Legends and CBA-CLE Recognized by International CLE Organization for Legal Publication: Limited Liability Companies & Partnerships in Colorado

StarburstAwardsLogoThe Association for Continuing Legal Education (ACLEA), an international continuing legal education organization, awarded Colorado Bar Association CLE (CBA-CLE) with the Award of Outstanding Achievement in the publication category for its business law book Limited Liability Companies and Partnerships in Colorado.

Lidstone-SparkmanAttorneys Herrick Lidstone, Jr. and Allen Sparkman, two business law legends in Colorado, have taken a complex subject and written a clear, concise treatise on how to structure a business. The criteria for an ACLEA award include excellence in style, innovation, and content, in addition to the book’s appeal to a broad spectrum of the legal community. CBA-CLE Assistant Executive Director Dawn McKnight says, “We are extremely honored to win this award and grateful to have as authors two legends in the field, Herrick Lidstone and Allen Sparkman. Their vast experience, diligence, and thoroughness are evident throughout the book. They spent countless hours researching, writing, and revising this treatise to make it a comprehensive guide for practitioners.”

ABOUT THE BOOK:

Partnerships and other business entities have a fascinating history going back thousands of years.  Now in the twenty-first century, the variety of ways in which a new business may be formed and operated has made this a complex and especially important practice area.  Limited Liability Companies and Partnerships is a business law treatise for practitioners as they advise clients on issues from the time of a business’s formation to the time of dissolution. Topics include: choice of entity, formation and dissolution of the entity, creditor rights, securities and tax issues, as well as ethical considerations.

ABOUT THE AUTHORS:

Lidstone_HerrickHerrick Lidstone, Esq. is a shareholder and managing director of Burns Figa & Will, P.C. in Greenwood Village, Colorado. Mr. Lidstone practices in the areas of business transactions, including partnership, limited liability company, and corporate law, federal and state securities compliance, mergers and acquisitions, contract law, tax law, real estate law, and natural resources law. Mr. Lidstone’s work includes the preparation of securities disclosure documents for financing transactions, as well as agreements for business transactions,

limited liability companies, partnerships, lending transactions, real estate and mineral property acquisitions, mergers, and the exploration and development of mineral and oil and gas properties.

SparkmanAllenAllen Sparkman, Esq. practices law in Denver and Houston as a partner of Sparkman + Foote LLP. Mr. Sparkman’s practice includes the areas of business transactions, securities, tax, and professional responsibility. Mr. Sparkman’s work includes the preparation of securities disclosure documents for start-up companies in a variety of fields, including offshore oil and gas exploration, foreign mining operations, real estate, and comic book certification. He also regularly prepares LLC and partnership documents, and represents buyers and sellers of businesses, including preparing or reviewing all necessary legal documents.

ABOUT CBA-CLE:
Colorado Bar Association CLE (CBA-CLE) is the nonprofit educational arm of the Colorado Bar Association and the Denver Bar Association. We produce high-quality continuing legal education programs and legal publications for attorneys and legal professionals.

Tenth Circuit: ERISA Plan Consultant Did Not Act as ERISA Fiduciary When Calculating Benefits

The Tenth Circuit Court of Appeals issued its opinion in Lebahn v. National Farmers Union Uniform Pension Plan on Monday, July 11, 2016.

Trent Lebahn contacted a consultant hired by his company’s employee pension plan for information regarding his monthly distribution amount. The consultant told Mr. Lebahn that he would receive $8,444.18 per month and verified the amount when Mr. Lebahn asked her to double-check. He retired and began receiving the monthly payments, only to be informed a few months later that he had been being overpayed by nearly $5,000 per month. The plan’s attorney told Mr. Lebahn that he would need to return over $43,000 in overpayments. Unable to retire on the plan’s true monthly distribution, Mr. Lebahn tried to go back to work, but could not find a job. Mr. Lebahn and his wife sued under ERISA, arguing that the plan, the pension committee, and the consultant’s employer incurred liability under theories of breach of fiduciary duty and equitable estoppel. The defendants moved for dismissal based on failure to state a claim, which the district court granted, and the Lebahns appealed.

On appeal, the Tenth Circuit first addressed the Lebahns’ claims for breach of fiduciary duty. The district court dismissed the claims because the consultant had not acted as an ERISA fiduciary when calculating the pension benefits. The Tenth Circuit agreed, finding that because the consultant lacked discretionary authority in administering the pension plan, she was not a plan fiduciary and therefore the district court properly dismissed the claims.

The Tenth Circuit found that the district court also correctly dismissed the Lebahns’ equitable estoppel claims. The district court found that the Lebahns had failed to plead facts to satisfy two of the five prongs of equitable estoppel: awareness of the true facts and justifiable reliance. The Lebahns failed to adequately address justifiable reliance on appeal and therefore forfeited their argument.

The Tenth Circuit affirmed the district court’s dismissal of the Lebahns’ claims.

Commercial/Preference Owned Business in the Commercial Marketplace

Editor’s Note: This article is reprinted with permission courtesy of Richard F. Busch, II,  www.rbuschlaw.com. All rights reserved.

By Richard F. Busch, II, Esq.

Why should an otherwise commercial company consider entering the Government market place as a prime contractor, vendor, or subcontractor at any level, especially if you can qualify for a preferred status (Veterans, SDVOSB, or Women Owned Small Business? 

Due to the growth in technology, the Government has determined that the commercial business sector must be the primary force to develop and provide the products and services they need to achieve society’s goals. Consequently, the Federal Acquisition Regulation (“FAR”) and the individual agency supplements have been revised to become much more “commercial” friendly in most situations. If the potential contractor is a “commercial” business engaged in supplying commercial products or services, many of the complex requirements simply do not apply. Except for a very limited number of government unique provisions, most clauses are negotiable. In addition, there are award goals set by Federal statute that define prime contracting goals for small businesses, veteran owned small businesses, women-owned small business, Service Disable Veteran Owned Small Businesses, and more.

The following are some general points a commercial/preference business should consider:

  • Just over $573B DoD 2016 proposed spending plan and an additional $163 B for Veterans Affairs programs (total government budgets much bigger)
  • Limited government audit rights for commercial companies with commercial products
  • Terms and conditions more conducive to commercial application (subject to the unique mission of the government)
  • Over 11 Million commercial supplies (products) and services at volume discounts offered on GSA Schedule contracts
  • Favorable research and development terms if negotiated correctly
  • Commercial pricing based on the market—(Government does request the best commercial prices under like terms and conditions)
  • Electronic Payment with automatic interest on due and payable amounts for late payments
  • Joint venture, teaming arrangements, and subcontract opportunities in addition to prime status purchases

The government market sector has vast potential for a company that has the resources and products/services to benefit the goals of the government. If a company is considering doing business with the government, the effort must be based on one simple principle—DO IT RIGHT!

© Busch Law Firm LLC (2016)

Richard Busch, II, is a solo practitioner at The Busch Law Firm, which is a boutique government contract practice firm. His practice involves all aspects of government contracts, commercial contracts, conflict management systems design, ADR, and white collar crime. More specifically, his practice focuses on the formation and administration of contract relationships through the utilization of a proactive approach of addressing the objectives of the relationship, requirements for successful performance, and the resolution of disputes. Mr. Busch has extensive experience in negotiating complex business issues involving high technology and major weapons system contracts, contract compliance issues, and resolving both internal and external disputes involving the business organization. Richard has reviewed and negotiated multimillion dollar solicitations, proposals, equitable adjustments, terminations, and other related government acquisition and commercial-based contract matters with a number of government agencies and subcontractor/vendors. He concentrates on the legal issues facing a corporation doing business with the government or its prime contractors in the areas of construction, high technology, major weapons systems, and information⁄communication technology. Mr. Busch has worked with corporations, the DoD, and other government agencies in the highly structured areas of classified contracts. As a result, he has gained a wealth of experience in dealing with classified authorities pertaining to these agencies. Prior to entering private practice, Mr. Busch held positions as General Counsel of a multi-billion dollar product area with a Fortune 50 defense contractor and a legal advisor to the Director of Contracts at the National Security Agency (NSA).  Mr. Busch earned an L.L.M. (Government Contract Designation) from George Washington University National Law Center, a J.D. from the Hamline University School of Law, and a B.A. from Westminster College, Fulton, Missouri.

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.

 

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CLE Program: Finding Federal Contract Work — Meet the Attorneys, Veterans, the SBA and Bankers Your Clients Need

This CLE presentation will occur on September 16, 2016, at the CBA-CLE offices (1900 Grant Street, Third Floor), from 9 a.m. to 4:10 p.m. Register for the live program here or register for the webcast here. You may also call (303) 860-0608 to register.

Can’t make the live program? Order the homestudy here: CD • MP3Video OnDemand.

Colorado Court of Appeals: Notice-Prejudice Rule Applies Where Claim Filed with Insurance Company After Contractual Period

The Colorado Court of Appeals issued its opinion in MarkWest Energy Partners, L.P. v. Zurich American Insurance Co. on Thursday, July 14, 2016.

Insurance—Notice-Prejudice Rule—Occurrence Liability Policy.

MarkWest Energy Partners, L.P. (MarkWest), a natural gas company, procured from Zurich American Insurance Company (Zurich) a commercial general liability policy (the policy) with a limited pollution liability endorsement (the endorsement), covering “incidents” occurring between November 1, 2012, and November 1, 2013. On November 4, 2012, MarkWest was constructing a pipeline when a chemical used in the drilling process escaped the drilling area, thereby contaminating the surrounding area. MarkWest immediately reported the incident to local environmental officials, who approved a chemical cleanup protocol and confirmed that cleanup had been successfully completed in February 2013. On March 28, 2013, MarkWest notified Zurich of the contamination and filed an associated claim. Zurich denied the claim because MarkWest had failed to provide notice within 60 days of the incident, as required by the endorsement. MarkWest filed an action for damages, and the district court granted Zurich’s motion for summary judgment.

On appeal, MarkWest contended that the notice-prejudice rule applied and the district court erred in granting Zurich’s motion for summary judgment. Colorado’s notice-prejudice rule applies even where, as here, the notice requirement is a condition precedent to coverage under an occurrence liability policy. Therefore, unless Zurich can show that its ability to investigate the occurrence or defend against a claim was prejudiced by MarkWest’s late notice, the court cannot deny a claim based solely on a failure to strictly comply with the notice provision. Because the district court concluded otherwise, its decision was reversed and the case was remanded for further proceedings.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Proposed Development Plan Need Not Include Outdoor Gathering Space

The Colorado Court of Appeals issued its opinion in Rangeview, LLC v. City of Aurora on Thursday, July 14, 2016.

Rezoning of Property—Site Plan—Standards—Abuse of Discretion.

BFR’s application to rezone its parcel of property (the property) was granted. Rangeview LLC owns Rangeview Estates, which borders the property to the west, and Eades and Sellery each own property in the neighborhoods surrounding the property. Rangeview, Eades, and Sellery (collectively, Rangeview) filed the underlying action against the City of Aurora, claiming that the Aurora City Council exceeded its jurisdiction in granting BFR’s application to rezone the property. The district court affirmed the City Council’s decision.

On appeal, Rangeview argued that City Council abused its discretion by approving the site plan because the plan did not include an outdoor gathering space as mandated by the Aurora Municipal Code’s (Code) sustainable infill redevelopment (SIR) zoning district design standards. The Code defaults to the terms of the SIR handbook, which states that projects “should” provide a public space. Therefore, although a public space is desirable, it is not required. Because City Council’s approval was supported by competent evidence, it did not abuse its discretion.

Rangeview also argued that City Council abused its discretion in rezoning the property to an SIR district when the property does not meet the requirements of an “infill development parcel,” the proportions of which are defined in the Code. Because the Code language’s ordinary meaning does not reference any requirement related to the proportions of developed boundaries, the City Council did not abuse its discretion by approving the rezoning request even though the property would not meet the definition of an “infill development parcel.”

The judgment was affirmed.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Jury Properly Instructed on Elements of Theft

The Colorado Court of Appeals issued its opinion in People v. Stellabotte on Thursday, July 14, 2016.

John Arthur Stellabotte is the owner of J&J Towing. After several incidents where J&J towed cars without authorization and charged high fees for return of the vehicle, Stellabotte was charged with six counts of aggravated motor vehicle theft, four counts of theft, and five habitual criminal counts. He was convicted of one count of aggravated motor vehicle theft, two class 4 felony counts of theft, one class 2 misdemeanor count of theft. He was sentenced to 24 years on all felony theft counts and one year on the misdemeanor count, to run concurrently.

On appeal, Stellabotte raised two contentions related to jury instructions, argued that his sentence should be halved because of new legislation reducing the severity of the offenses, and argued the 24-year sentences were grossly disproportionate to the severity of the offenses. The court of appeals analyzed the jury instructions and found no error; the instructions correctly stated the law despite formatting differences. The court also disagreed with Stellabotte that the trial court erred in using the dictionary definition of “authorization.” The court of appeals found no abuse of discretion in the trial court’s definition. However, the court of appeals agreed with Stellabotte that he should receive the benefit of the legislative changes. Because the General Assembly reduced the theft offenses to class 5 felonies, Stellabotte should have been sentenced under the legislative scheme in effect at the time of sentencing.

The court vacated Stellabotte’s sentences and remanded for the court to resentence him in the correct presumptive range. The court emphasized that this decision did not affect the aggravated motor vehicle theft or misdemeanor counts, only the class 4 felony theft convictions. Finally, the court of appeals rejected Stellabotte’s argument that the sentences were disproportionate to the severity of his crimes.

Judge Dailey concurred in part and dissented in part; he would have affirmed the sentences on the theft counts since the incidents occurred when the old sentencing scheme was in effect.