November 29, 2015

CJD 11-02, Pilot Project Rules, Repealed and Reenacted by Colorado Supreme Court

On Monday, November 23, 2015, the Colorado Supreme Court issued repealed and amended Chief Justice Directive 11-02, “Adopting Pilot Rules for Certain District Court Civil Cases.” The amendments affect cases filed between January 1, 2012, and June 30, 2015. For all cases filed on or after July 1, 2015, the Colorado Rules of Civil Procedure have been amended to included provisions of the pilot project rules.

For the amended version of CJD 11-02, click here. For all of the Colorado Supreme Court’s Chief Justice Directives, click here.

Colorado Court of Appeals: No Requirement that Complaint be “Well Pleaded” Before Entry of Default

The Colorado Court of Appeals issued its consolidated opinion in Dickinson v. G4S Secure Solutions (USA) Inc. and Dickinson v. Lincoln Building Corporation on Thursday, November 19, 2015.

Premises Liability—Entry of Default—Comparative Negligence and Pro Rata Liability.

This is a consolidated appeal in a premises liability case brought by Charlene Dickinson against Lincoln Building Corporation (LBC); Wells Fargo Bank National Association (Wells Fargo); and G4S Secure Solutions (USA), Inc. (G4S). Dickinson sought damages for shoulder injuries sustained when she attempted to open a door leading to her workplace that allegedly was locked or malfunctioning.

LBC and Wells Fargo admitted they were served but failed to enter an appearance or file an answer. The district court entered default against them, and they filed a joint motion to set it aside, which the court denied. On appeal, LBC and Wells Fargo argued the default should have been set aside because it was entered in violation of their right to due process of the law and it was not well pleaded. The Court of Appeals disagreed. LBC and Wells Fargo were properly served with the complaint and summons, and they failed to enter an appearance or file an answer until almost a year later, well after the court had entered default. As to the argument that the trial court had to first find that the complaint was “well-pleaded,” the Court could find absolutely no support for any such requirement.

LBC and Wells Fargo also argued that they should have been permitted to present evidence of Dickenson’s comparative negligence and G4S’s pro rata liability at the damages hearing after entry of default. The Court disagreed, finding that the default constituted an admission of liability that precluded them from thereafter presenting evidence of others’ comparative fault. The damages hearing was only to determine the amount of damages owed and any discussion of liability underlying that award is prohibited.

Dickenson argued that the trial court erred in rejecting a tendered negligence per se instruction as to G4S. The Court affirmed, finding that the tendered instruction did not apply to G4S, a security company, but to the manufacturer of the door’s locking mechanism. Moreover, even if it did apply, no evidence was presented that the code section regarding the door’s locking mechanism was intended to protect against injuries stemming from attempting to open a locked exit door. The judgments and orders were affirmed.

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

Medicolegal Aspects of Marijuana: Issues Facing Colorado Practitioners

By Jay Tiftickjian

MedicolegalMJOn December 4, CLE in Colorado will present Medicolegal Aspects of Marijuana, an all-day event that focuses on the forensic and regulatory aspects of legal and medical cannabis in Colorado. The seminar will feature most of the authors of the textbook of the same name, available from Lawyers and Judges Publishing. This event is co-sponsored by the Colorado Bar Association Cannabis Law Committee.

Colorado voters approved Amendment 20 in 2000, making Colorado the only state at the time to legalize medical marijuana in its own constitution. Twelve years later, in 2012, Colorado citizens passed Amendment 64 with 55 percent of the vote, making Colorado the first state to legalize the recreational use of marijuana. Criminal, civil, and regulatory law has since been rapidly developing and changing in this area.

Because of these rapid changes, Colorado practitioners are faced with an ever-expanding array of marijuana-related issues:

  • Regulation of Marijuana Sales: Dispensaries must abide by strict and constantly evolving state and local laws and regulations. The program explores regulations that cover both medical dispensaries and recreational stores, and includes two major economic issues: I.R.C. 280E and the lack of access to banking.
  • Driving Under the Influence: Since recreational marijuana use was legalized by Amendment 64 for persons 21 and older, the issue of driving under the influence of drugs is in the law enforcement spotlight. Denver criminal defense attorney and program chair Jay Tiftickjian will explore the drug recognition examinations and more-permissive chemical testing that are being used, and will look at controversial studies and research regarding these methods.
  • Blood Testing for DUI-D Cases: The active substance in marijuana, THC, remains detectable in the blood for only a few hours, but some research has shown that residual levels can be found in chronic marijuana users for up to 24 hours. The program includes a discussion on blood testing for marijuana to help educate practitioners about the legal intricacies.
  • Employment Issues: In June, the Colorado Supreme Court, in Coats v. Dish Network, held that employers could terminate employees for using medical marijuana because it is illegal under federal law. The program includes a discussion of the impact this decision will have for hundreds, if not thousands, of employees who use medical and/or recreational cannabis.
  • Tension Between Federal and Colorado Controlled Substance Laws: Under federal law, the punishment for persons convicted of marijuana charges is steep, and possession continues to be a misdemeanor subject to up to one year’s imprisonment. Possession of larger quantities of marijuana could lead to a felony conviction and a substantial prison term. Even under Colorado law, illegal cultivation and distribution is a felony. Program presenters will review and contrast Colorado controlled substance law and the federal Controlled Substance Act.

Medicolegal Aspects of Marijuana will provide an extensive overview of the areas of law most affected by legal cannibals in Colorado. Colorado practitioners in all areas of the law are encouraged to attend this program. More information about the program can be found here.

CLE Program: Medicolegal Aspects of Marijuana in Criminal Law, Civil Regulations, and Forensic Science

This CLE presentation will take place Friday, December 4, 2015, in the CLE Large Classroom. Click here to register for the live program and click here to register for the webcast, or call (303) 860-0608.

Can’t make the live program? Order the homestudy here: CDMP3 audioVideo OnDemand.


Jay M. Tiftickjian, Esq., is widely considered one of the best DUI attorneys in Colorado. He was named “Barrister’s Best DUI Lawyer” by Colorado Law Week multiple times, voted “People’s Choice-Best DUI Lawyer” multiple times, is Preeminent AV® Rated by Martindale-Hubbell, and is listed in Super Lawyers. He is the elected Secretary of the Colorado Criminal Defense Bar and in succession to be the president in 2018, and has been published numerous times on the subject of DUI defense and drug law. Mr. Tiftickjian is the co-author of Colorado DUI Defense: The Law and Practice, and the editor of the Colorado Criminal Defense Bar’s DUI Defense Manual as well as Medicolegal Aspects of Marijuana. He frequently lectures to attorneys, judges, and students about criminal law, law practice management, and ethics, and provided legal expertise to The New York Times, The Denver Post, 9News, Colorado Public Radio, 850KOA, and many other local and national media outlets. Mr. Tiftickjian is president of Tiftickjian Law Firm, PC, which represents clients out of the firm’s offices in Denver and Aspen.

Tenth Circuit: User Manual Adequately Described Risk of Injury so Manufacturer Not Negligent

The Tenth Circuit Court of Appeals issued its opinion in Kirkbride v. Terex USA, LLC on Tuesday, August 25, 2015.

Larry Kirkbride was injured when a jammed piece of metal flew out of a rock crushing plant. Kirkbride brought claims against the plant’s manufacturer, Terex, for negligent manufacturing and design, negligence in providing inadequate warnings and instructions, strict products liability for failure to warn and manufacturing and design defects, and breach of express and implied warranty. Terex removed the case to the U.S. District Court for the District of Utah based on diversity jurisdiction. Before trial, Kirkbride narrowed his claims to negligence, strict products liability, breach of express warranty, and breach of the implied warranty of merchantability. Terex unsuccessfully moved for judgment as a matter of law when Kirkbride rested his case at trial. At the close of evidence, Kirkbride withdrew his express warranty and negligence claims, and the verdict form asked whether (1) Terex failed to adequately warn users of the risk of injury from the jaw crushers, (2) Terex manufactured a part that was used on the machine that day, the part was defective, and the defect was a cause of Kirkbride’s injury, and (3) Terex breached an implied warranty of merchantability because the defective part caused Kirkbride’s injury. The jury found for Kirkbride on all three claims and awarded him over $3.5 million in damages. Terex appealed.

The Tenth Circuit addressed Terex’s claim that the evidence was insufficient to support the jury’s findings and the trial court erred in denying its motion for judgment as a matter of law. The Tenth Circuit agreed. It first reviewed Terex’s challenge to the jury’s finding that it failed to warn of the dangers of removing jams from the jaw crushers. The rock crushing plant’s user manual warned of the exact injury suffered by Kirkbride, namely that stored energy could cause a jammed piece of non-crushable material to shoot out and hit the head of the person trying to remove it. When asked if he had read the manual, Kirkbride said “Why would you read a manual?” Additionally, other workers present at the time of Kirkbride’s injury testified that they had not read the manual, they were not trained on how to properly remove jammed material, and no one told Kirkbride to be very cautious when removing the jammed material. The Tenth Circuit found this evidence insufficient to support the jury’s finding of failure to warn and reversed.

Next, the Tenth Circuit addressed Terex’s argument that Kirkbride had not proven that the defective part caused his injuries. The defective part was a toggle plate that was designed to break when the jaw crushers got jammed, releasing stored energy and preventing other, more expensive parts from breaking. Kirkbride alleged that because the toggle plate was thicker than recommended in Terex’s manuals, it required more force to break, and therefore was defective. Kirkbride’s expert testified that a thicker plate would require more force to break, but did not address whether the recommended plate would have broken in the situation in which Kirkbride was injured. Because there was no evidence that a thinner plate would have broken, there was no support for the theory that Terex’s plate was defective or caused Kirkbride’s injury.

Finally, the Tenth Circuit addressed Kirkbride’s implied warranty claim and found it was largely subsumed by the products liability claim. Because the Tenth Circuit found the evidence insufficient to support Kirkbride’s strict products liability claim, his implied warranty claim also failed.

The Tenth Circuit reversed and remanded.

Colorado Supreme Court: Litigation Finance Companies are Lenders for UCCC Purposes

The Colorado Supreme Court issued its opinion in Oasis Legal Finance Group, LLC v. Coffman on Monday, November 16, 2015.

Uniform Consumer Credit Code—Litigation Finance Transactions—Loans.

The Supreme Court held that litigation finance companies that agree to advance money to tort plaintiffs in exchange for future litigation proceeds are making “loans” subject to Colorado’s Uniform Consumer Credit Code even if the plaintiffs do not have an obligation to repay any deficiency if the litigation proceeds are ultimately less than the amount due. These transactions create debt, or an obligation to repay, that grows with the passage of time. The court of appeals’ judgment was affirmed.

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

Tenth Circuit: Dismissal Appropriate Where Plaintiffs Failed to Show Scienter

The Tenth Circuit Court of Appeals issued its opinion in In re ZAGG, Inc. Securities Litigation: Swabb v. ZAGG, Inc. on Tuesday, August 18, 2015.

Robert Pedersen, former CEO and Chair of ZAGG, Inc., pledged nearly half of his shares in ZAGG, Inc., as collateral in a margin account. Pedersen’s pledged shares equaled nearly 9 percent of the company. ZAGG was required by SEC Rule S-K to disclose the amount of shares pledged as security “in a footnote or otherwise” in ZAGG’s Form 10-K, but Pedersen failed to make the required disclosure. In December 2011, ZAGG share prices fell, creating a deficiency in Pedersen’s account, and he was forced to sell 345,200 of his shares to meet the margin call. He mailed a Form 144 to the SEC disclosing the margin call on December 22, 2011, and electronically filed a Form 4 the next day. Pedersen’s account experienced a second margin deficiency in August 2012, and he was forced to sell an additional 515,000 shares. Pedersen filed a Form 4, stating the sale occurred “to meet margin calls.”

On August 17, 2012, ZAGG issued a press release announcing Pedersen was stepping down as Chair and CEO. ZAGG also filed a Form 8-K with the SEC, stating the company had implemented a policy prohibiting officers, directors, and 10 percent shareholders from pledging ZAGG securities on margin. A week later, after Pedersen’s resignation was final, a third margin call resulted in the forced sale of his remaining ZAGG shares. ZAGG held a conference call to reassure investors, and stated that Pedersen’s departure was entirely related to the margin call situation. Pedersen also spoke at the call, telling investors he had taken a step toward building investor confidence by completely deleveraging his ZAGG stock.

Plaintiffs filed a complaint against ZAGG and six individual officers and directors on behalf of a putative class of all people who purchased ZAGG stock during the relevant time period, alleging the company’s filings omitted material information regarding Pedersen’s pledged shares and also that ZAGG failed to disclose a secret succession plan that had been implemented after Pedersen’s first margin call in December 2011. Defendants filed two motions to dismiss, the first by Pedersen and the second by ZAGG and several individual officers and directors. After a hearing on the motions, the court dismissed the complaint with prejudice, finding the § 10(b) and § 14(a) claims failed because they did not allege with particularity facts giving rise to a strong inference Pedersen intended to violate securities laws. Plaintiffs appealed only the dismissal of their §10(b) and Rule 10b-5 claims and only as to Pedersen and ZAGG, and only as to Pedersen’s material omission of his margin account.

The Tenth Circuit agreed with the district court that plaintiffs failed to meet the heightened pleading requirements applicable to the scienter element in § 10(b) claims. The district court held that plaintiffs proved only one element of scienter—that Pedersen knew of the pledged securities in the margin account. The district court held, and the Tenth Circuit agreed, that the complaint failed to allege any facts showing that Pedersen knew failure to reveal the account would likely mislead investors. Plaintiffs listed five facts they claimed proved scienter: (1) Pedersen made inconsistent statements following the first margin call, (2) Pedersen selectively complied with the Item 403(b) disclosure requirement, (3) Pedersen knew that disclosing his margin account would jeopardize his position at ZAGG, (4) Pedersen was forced to resign because of his margin account, and (5) following Pedersen’s resignation, ZAGG adopted a policy prohibiting holding stock in margin accounts. The Tenth Circuit analyzed each claim.

First, the Tenth Circuit evaluated plaintiffs’ claim that Pedersen’s statements on the Forms 144 and 4 in December 2011 were inconsistent. Pedersen stated on the Form 4 that the sale was made “to meet an immediate financial obligation” and on the Form 144 that the sale was made “to meet margin calls.” The Tenth Circuit found no inconsistency in these two statements, as margin calls could certainly be characterized as immediate financial obligations. Plaintiffs also argued that it was deceptive of Pedersen to mail the Form 144 when he e-filed the Form 4, but the Tenth Circuit noted Pedersen was under no obligation to deliver the forms via the same method.

The Tenth Circuit next addressed plaintiffs’ argument that Pedersen’s failure to disclose his margin account amounted to scienter. Defendants argued that the violation of a rule is not enough to show scienter, and the Tenth Circuit agreed. Without some other facts evidencing Pedersen knowingly omitted the disclosure, the violation alone was not enough. Plaintiffs argued Pedersen failed to disclose the account because he knew it would jeopardize his position at ZAGG, but the Tenth Circuit again found that at most Pedersen’s execution of the certifications supported an inference of negligence.

The Tenth Circuit similarly found that neither Pedersen’s forced resignation nor ZAGG’s implementation of a new policy barring investors from pledging ZAGG shares on margin accounts established an intent to defraud. Rather, the Tenth Circuit found that both the resignation and new policy acknowledged that the company had found a better way to run its business moving forward. The district court found, and the Tenth Circuit agreed, that the complaint failed to allege any facts giving rise to an inference of scienter. Plaintiffs argued that even if the knowing element was not met, the facts showed that Pedersen acted with reckless disregard of a substantial likelihood of misleading investors. The Tenth Circuit disagreed, finding that plaintiffs failed to overcome the high standard necessary to show recklessness.

The Tenth Circuit affirmed the district court.

The Colorado Marijuana Industry—Legal and Accounting Advice and Compliance

Colo_MJ_IndustryTwenty years ago, the idea of legalized marijuana was laughable. Today, there are 23 states that have legalized marijuana for medicinal purposes, and four states (Oregon, Washington, Alaska, and Colorado) along with Washington, DC, that are experimenting with the legalization of recreational marijuana. The marijuana movement appears to be an unstoppable force.

We have witnessed a major shift in how the American public views marijuana. Practically all major national polls now show that a slim majority of respondents are in favor of legalizing marijuana, or share a favorable view of the drug. An even greater percentage of Americans want to see it approved for medical uses. States have also taken a markedly different approach. Once viewed with contempt, marijuana is now looked upon as a fresh tax revenue source. Revenue generated from taxing marijuana is being used to support jobs, maintain in-state infrastructure, and even support education.

The first state to officially begin selling recreation-legal marijuana was Colorado in the beginning of 2014. Colorado hit a marijuana milestone in August 2015. According to the Denver Post, August represented the first month in its short history of recreational marijuana sales that total monthly combined sales of recreational and medical marijuana topped the $100 million mark. In August, $59.2 million was sold in recreational marijuana, and another $41.3 million came from medical marijuana. In Colorado, the three taxes associated with marijuana have raised an impressive $86.7 million through just the first eight months of 2015. With $639.4 million in combined marijuana sales through August in Colorado, and Washington and Oregon both ramping up their sales, the legal marijuana business will likely total more than $1 billion in 2015 for the first time ever.

However, federal law still views marijuana as a Schedule 1 Drug. Therefore, according to federal law, it is still illegal.

This thriving industry, its tax consequences, and the resulting conflict of laws have presented our state with a unique set of challenges, which will be discussed by some of the most influential voices in the Colorado marijuana industry on November 5 at Colorado CLE’s seminar,“The Colorado Marijuana Industry – Legal and Accounting Advice and Compliance.” Barbara Brohl, the Executive Director of Colorado Department of Revenue, will give the regulatory perspective on these complex issues. Professor Sam Kamin, one of the nation’s leading experts on the regulation of marijuana, will analyze the lawsuits that have been brought against Colorado by surrounding states. Mark Mason and Deirdre O’Gorman will be at the seminar to give us the latest information about The Fourth Corner Credit Union, the only credit union constructed to serve the interests of the legalized cannabis and hemp industries and their supporters. John Walsh, the United States Attorney for the District of Colorado, will give us the federal perspective on marijuana enforcement priorities and their interaction with state priorities.

Don’t miss the panel presentation about the challenges and opportunities of owning and operating a marijuana business. Christian Sederberg, a leading practitioner in the industry, has not only represented clients, but he and his firm have helped shape the marijuana and cannabis laws and regulations. Christian will give us an update on the law. Ron Seigneur, the Program Moderator, who has over 25 years of business valuation experience and is known nationally for his expertise, will talk about investing in a cannabis business and attendant ownership and valuation issues.

CLE Program: Colorado Marijuana Industry — Legal and Accounting Advice and Compliance

This CLE presentation will take place Thursday, November 5, 2015, in the CLE Large Classroom. Click here to register for the live program and click here to register for the webcast, or call (303) 860-0608.

Can’t make the live program? Order the homestudy here: CDMP3 audioVideo OnDemand.

Social Responsibility — Doing Good While Also Making Money And Protecting Owner Interests

BLI_2015Editor’s Note: The following article is excerpted from Herrick Lidstone’s materials for the 2015 Business Law Institute on October 28, 2015. Mr. Lidstone is leading a panel discussion about social responsibility in business. For discussion of the questions he raises below, attend the Business Law Institute. Register here or by clicking the links below.

By Herrick K. Lidstone, Jr.

There are a huge number of issues surrounding corporate/entity social responsibility. Even understanding what “social responsibility” is in this context has a divergent path. For the purposes of this discussion, it can be described as “Doing Good While Also Making Money And Protecting Owner Interests.”[1] This demonstrates the potential conflict – should an investor in a business entity (the owner) look to the entity to “do good” or merely to comply with legal requirements (do not pollute; do not violate the law) while making money for the owners (profit maximization). Should the owner have a say in the business entity’s choices?

Should an entity selling t-shirts worry about the workers in Bangladesh? Should an entity selling coffee worry about how it is grown and harvested? Should an entity selling beef burritos worry about how the cattle are slaughtered?

The legal landscape in which these questions must be considered has changed dramatically in the last five years. Consumer attitudes toward many of these issues have also changed. Some businesses are now extolling their social responsibility, while others apparently continue to consider that to be a secondary consideration, at best. Citizens United v. Federal Election Comm’n, 130 S. Ct. 876 (2010), interprets the Constitution to give business entities the right of free speech in political campaigns in a manner that is not necessarily answerable to the owners.[2] Has Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751 (2014), done similarly for social responsibility and business philanthropy?

The following points are more than can be discussed at one sitting, but hopefully will form a basis for an interesting presentation.

  1. Does Hobby Lobby change the landscape for business enterprises to consider factors other than profit in making their business decisions?
  2. The duties of the Board of Directors after Hobby Lobby – can a for-profit corporation consider social responsibility even if it has the effect of reducing profits?
  3. Where investors are concerned, what is the role of disclosure regarding consideration of alternative constituencies?
  4. Should a for-profit corporation desiring to include a focus on social responsibility at the expense of profit expressly so state in its articles of incorporation or adopt a form such as (in Colorado) a public benefit corporation?
  5. Is there a religious and moral side to profit maximization and corporate social responsibility?
  6. Is there a difference between corporate social responsibility and social entrepreneurship?
  7. Are alternative entities important, and must they be carefully crafted?
  8. Is it a question of marketing?
  9. Where does “blind philanthropy” fit in?
  10. Once you have done it, can you go back?
  11. Is it the Millennials (born 1980-1995) versus the Baby Boomers (born 1945-1960)?
  12. Whither the future?

[1] Of course, the concept of “doing good” has potentially a variety of meanings depending on political, moral, religious, and other deeply held beliefs. This paper will not focus on the potentially contradictory definition of “good.” In the most controversial extreme, consider the “rights of the unborn” versus “freedom of choice” as a justification for abortion. This paper will leave the definition of “good” to others.

[2] In August 2011, the “Committee on Disclosure of Corporate Political Spending” filed a petition for rehearing with the Securities and Exchange Commission ( in which the committee asked “that the Commission develop rules to require public companies to disclose to shareholders the use of corporate resources for political activities.” Those rules still do not exist for 1934 Act reporting companies. The SEC does have rules prohibiting investment advisors from making political contributions to encourage political subdivisions to hire them as advisors. See 17 CFR § 275.206(4)-5.

Herrick K. Lidstone, Jr., Esq., is a shareholder of Burns Figa & Will, P.C. in Greenwood Village, Colorado. He practices in the areas of business transactions, including partnership, limited liability company, and corporate law, corporate governance, federal and state securities compliance, mergers & 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. He has practiced law in Denver since 1978.


CLE Program: Colorado Business Law Institute

This CLE presentation will take place Wednesday, October 28, 2015 at the Grand Hyatt Denver Downtown. Live program only – click here to register or call (303) 860-0608.

Can’t make the live program? Click here to order the CD homestudy or click here for the MP3 audio homestudy.

Tenth Circuit: No Avoidance of Transaction Made Within Ordinary Course of Business

The Tenth Circuit Court of Appeals issued its opinion in In re C.W. Mining Co.: Jubber v. SMC Electrical Products, Inc. on Monday, August 10, 2015.

C.W. Mining was forced into bankruptcy after creditors filed a petition for involuntary bankruptcy on January 8, 2008. In June 2007, C.W. had entered into an agreement with SMC Electrical Products, Inc., to purchase equipment in order to switch from a continuous method of mining to a longwall method. On September 18, 2007, SMC submitted an invoice to C.W. for $808,539.75, due in 30 days. C.W. made a $200,000 payment on the invoice on October 16, 2007, two days before it was due. The bankruptcy trustee initiated an adversary proceeding to avoid the transfer under 11 U.S.C. § 547(b). The bankruptcy court granted SMC summary judgment and rejected the trustee’s claim on the grounds that the transfer was made in the ordinary course of business. The BAP affirmed, and the trustee appealed to the Tenth Circuit.

The Tenth Circuit analyzed avoidance and the ordinary course of business exception, including the scrutiny applied to first-time transactions. The Tenth Circuit explained the purpose of the ordinary course of business transaction in detail, and examined its application as to both parties in the business transaction. Applying its analysis to the circumstances of this case, the Tenth Circuit found that the transaction between C.W. and SMC was within the ordinary course of business. The purchase was an arms’ length transaction for the purpose of assisting in mining operations. The Tenth Circuit dismissed the trustee’s arguments, characterizing them as an argument against a first-time transaction and finding that was not enough to avoid the transfer.

The bankruptcy court’s ruling was affirmed.

Tenth Circuit: Plain Language of Insurance Contract Bars Coverage for Actions Brought by Receivers Against Directors

The Tenth Circuit Court of Appeals issued its opinion in BancInsure, Inc. v. Federal Deposit Insurance Corporation on Thursday, August 6, 2015.

Columbian Bank & Trust obtained an insurance policy from BancInsure where BancInsure agreed to pay losses the insured would be legally obligated to pay. The policy contained an “insured v. insured” exclusion which barred recovery for claims “by, on behalf of, or at the behest of . . . any . . . receiver of the company” and a regulatory exclusion, barring coverage for any action brought by or on behalf of any state or regulatory agency, including actions brought by those agencies as receiver. However, Columbian purchased a regulatory exclusion endorsement that amended the policy by the deletion of the regulatory exclusion.

In August 2008, the Kansas State Bank Commissioner declared Columbian insolvent and appointed the FDIC as receiver. In September 2008, BancInsure received notice of claims the FDIC intended to file against Columbian’s officers and directors. In anticipation of such suit, Columbian’s parent company and director-defendant Carl McCaffree brought suit against BancInsure, seeking a declaratory judgment that the policy covered claims brought after the company was declared insolvent but before the policy’s expiration date. The district court ultimately held that the policy remained in effect until May 2010. On appeal, the Tenth Circuit held that no case or controversy existed at the time of the judgment and remanded with instructions to vacate the judgment.

BancInsure filed suit in Kansas state court in August 2011, seeking a declaratory judgment that it owed no duty of coverage to the director-defendants for claims brought against them by the FDIC-R. The FDIC-R joined the action and removed it to federal court, simultaneously bringing claims against several of Columbian’s directors and officers for negligence, gross negligence, and breach of fiduciary duty. BancInsure, the FDIC-R, and the director-defendants reached a settlement in February 2013 in which BancInsure agreed to make payments in partial satisfaction of the judgment, reserving the right to seek reimbursement if it succeeds in this litigation.

The parties filed cross-motions for summary judgment on the issue of coverage. The district court granted BancInsure’s motion, finding the insured v. insured exclusion unambiguously barred coverage for claims by the FDIC-R against director-defendants. The FDIC-R and director-defendants timely appealed. Meanwhile, BancInsure was placed into receivership and the Kansas Insurance Guaranty Association intervened to defend BancInsure’s rights.

On appeal, the Tenth Circuit examined BancInsure’s contract with Columbian and found no ambiguity in the insured v. insured exclusion. The Tenth Circuit found the plain meaning of the exclusion barred coverage for claims brought by receivers against director-defendants. Appellants argued the policy as a whole should be construed as ambiguous because the shareholder derivative action exclusion renders the insured v. insured exclusion ambiguous and because the regulatory exclusion renders the insured v. insured exclusion ambiguous as to claims brought by the FDIC. The Tenth Circuit first examined the shareholder derivative action exclusion and found no ambiguity because the insured v. insured exclusion specifically referenced receivership actions. Next, the Tenth Circuit found that the regulatory exclusion did not render the insured v. insured exclusion ambiguous because claims could still be brought by other regulatory agencies that were not appointed receivers.

The Tenth Circuit affirmed the district court’s grant of summary judgment to BancInsure.

Tenth Circuit: Exception to Open and Obvious Doctrine Applies Where Employees Must Confront Danger for Work

The Tenth Circuit Court of Appeals issued its opinion in Martinez v. Angel Exploration, LLC on Tuesday, August 4, 2015.

Jesus Martinez was employed Smith Contract Pumping (SCP) to conduct routine inspections on oil wells in Oklahoma. While inspecting a well owned by Angel Exploration, LLC, Martinez dropped a tool. As he bent to retrieve it, the sleeve of his sweatshirt was caught in Angel’s unguarded pump jack and his hand was pulled into the well, severing his thumb. Martinez received workers’ compensation benefits from SCP but also filed tort claims against Angel, alleging that the lack of guarding was an unreasonably dangerous condition and Angel was negligent in failing to inspect its wells and to warn or take other precautions to protect Martinez. During discovery, SCP admitted Angel relied on SCP to report any needed repairs or adjustments to Angel, but also said that SCP’s employees were not trained on what guards were needed on a pump jack. And although Angel’s managing member admitted that the lack of a guard would be obvious to anyone who saw the well, he also said Angel never confirmed that SCP knew what was required by safety regulations, including a relevant OSHA regulation. Martinez testified that although he was aware the well was not guarded, he did not know he was supposed to report that, and another person testified that the well had not been guarded since 2003.

Martinez brought additional claims against Angel, averring that his claims fell within the Oklahoma Workers’ Compensation Act’s intentional tort exception. He sought actual and punitive damages and his wife brought derivative claims for loss of consortium and household services. Angel moved for summary judgment. The district court found the danger imposed by the unguarded well was open and obvious and therefore Angel had no duty to warn or otherwise remedy the condition. The court also found that the Oklahoma Workers’ Compensation Act’s intentional tort exception did not apply because there was no evidence Angel intentionally caused the tort. The district court also entered summary judgment on Martinez’ wife’s claims since they were derivative.

Martinez appealed, arguing (1) Angel’s failure to comply with the OSHA regulation constituted negligence per se; (2) because Martinez’ attention was distracted, fact issues exist as to whether the danger was open and obvious; (3) there were competing inferences as to whether Martinez fully appreciated the danger of the unguarded belt and whether it had a deceptively innocent appearance; and (4) even if the danger was open and obvious, Angel should have anticipated harm. The Tenth Circuit summarily dismissed the first two arguments as forfeited because they were not raised in district court. The Tenth Circuit also rejected the third argument, finding reasonable minds could not differ as to the open and obvious nature of the unguarded belt. As to the fourth argument, however, the Tenth Circuit reluctantly reversed due to an intervening Oklahoma Supreme Court decision that greatly changed application of the open and obvious doctrine.

The Tenth Circuit analyzed Wood v. Mercedes-Benz, 336 P.3d 457 (Okla. 2014), and found that it dramatically changed Oklahoma’s law regarding open and obvious dangers to invitees. Wood recognized an exception to the open and obvious doctrine where the invitee was required to confront the open and obvious danger as a condition of employment. The Tenth Circuit found Martinez’ case indistinguishable from Wood, and remanded for the parties to brief and argue the scope of Wood and how Oklahoma courts might resolve the question of whether Angel had notice that its well was unguarded.

The Tenth Circuit next turned to Martinez’ claim that Angel’s failure to guard the well constituted an intentional tort. The Tenth Circuit rejected this argument, finding that the district court correctly rejected this alternative theory of liability. Martinez resisted Angel’s argument that at the time of the accident he was a statutory employee of Angel and therefore the Workers’ Compensation Act’s exclusive remedy provision applied. The Tenth Circuit rejected Martinez’ argument.

The district court’s grant of summary judgment to Angel on the intentional tort claim was affirmed. The district court’s grant of summary judgment to Angel on the open and obvious claim was reversed and remanded for reconsideration in light of Wood.

Colorado Court of Appeals: Breeder of Rodents for Food Needs “Pet Animal” License to Operate Facility

The Colorado Court of Appeals issued its opinion in Salazar v. Kubic on Thursday, October 8, 2015.

Pet Animal Care and Facilities Act—Rats and Mice are Pet Animals.

Kubic, doing business as the Willards Rodent Factory, raises and houses more than 200 mice and rats at her facility. The rodents are sold as feed for snakes and other carnivores. Until March 2013, Kubic had a valid license issued under the Pet Animal Care and Facilities Act (PACFA) to operate a “pet animal facility,” but she let it expire.

In June 2013, the Colorado Commissioner of Agriculture issued a cease and desist order to Kubic because of the lapsed license. She continued to operate, and the trial court granted the Commissioner’s request for a permanent injunction to prevent her from operating without the required PACFA license. The injunction was stayed pending the outcome of this appeal.

Kubic argued that the trial court erred in its interpretation of PACFA’s definitions of “pet animal” and “pet animal facility” to require her to be licensed to operate her facility. Specifically, she argued that her mice and rats are not within the PACFA’s definition of “pet animal.” The Court of Appeals disagreed, holding that the statutory language expressly includes mice and rats. The judgment was affirmed.

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