May 23, 2015

Bills Regarding Community Association Manager Licensure, Peace Officer Transparency, and More Signed

On Wednesday, May 20, 2015, Governor Hickenlooper signed 14 bills into law. To date, he has signed 241 bills into law this legislative session. The bills signed Wednesday are summarized here.

  • HB 15-1323 – Concerning Assessments in Public Schools, and, in Connection Therewith, Codifying the Consensus Recommendations of the Standards and Assessments Task Force Created in House Bill 14-1202, and Reducing an Appropriation, by Reps. John Buckner & Jim Wilson and Sens. Chris Holbert & Andy Kerr. The bill modifies the system of statewide assessments in English language arts.
  • SB 15-056 – Concerning Reducing the Frequency of Administering the Statewide Assessment in Social Studies and, in Connection Therewith, Making an Appropriation, by Sen. Andy Kerr and Rep. Tracy Kraft-Tharp. The bill eliminates the requirement that each public school administer an assessment in social studies and instead allows school districts to administer the test in a representative sampling of schools.
  • HB 15-1317 – Concerning Pay for Success Contracts, by Reps. Alec Garnett & Bob Rankin and Sens. Michael Johnston & Beth Martinez Humenik. The bill creates “pay for success” contracts, into which the Office of State Planning and Budgeting can enter to increase economic opportunity and improve living conditions.
  • HB 15-1129 – Concerning Disaster Prediction and Decision Support Systems by the Department of Public Safety, and, in Connection Therewith, Making an Appropriation, by Rep. Tracy Kraft-Tharp and Sen. Ellen Roberts. The bill requires the Division of Fire Prevention and Control to develop systems to predict disasters, specifically wildfires.
  • HB 15-1344 – Concerning the Financing of State Capital Construction Projects that are Included in the National Western Center or Capitol Complex Master Plans, and, in Connection Therewith, Authorizing the State to Enter Into Lease-Purchase Agreements to Finance Facilities for Colorado State University that are Included in the National Western Master Plan, Creating the National Western Center Trust Fund, and Creating a Capitol Complex Master Plan Implementation Fund as a Funding Source for Projects that are Included in the Capitol Complex Master Plan, by Reps. Crisanta Duran & Jon Becker and Sens. Jerry Sonnenberg & Pat Steadman. The bill authorizes the state treasurer to enter into lease-purchase agreements with CSU to construct facilities at the National Western Complex and CSU’s main campus.
  • HB 15-1285 – Concerning Use of Body-Worn Cameras by Law Enforcement Officers and, in Connection Therewith, Establishing a Grant Program and a Study Group to Recommend Policies on the Use of Body-Worn Cameras and Making an Appropriation, by Reps. Daniel Kagan & Angela Williams and Sens. John Cooke & Jessie Ulibarri. The bill creates the body-worn camera fund to purchase body-worn cameras and train officers in their use, as well as study best practices.
  • HB 15-1287 – Concerning Measures to Improve Peace Officer Training, by Rep. Angela Williams and Sen. John Cooke. The bill expands the scope of the Peace Officers Standards and Training Board in the Department of Law.
  • HB 15-1290 – Concerning Prohibiting a Peace Officer from Interfering with a Person Lawfully Recording a Peace Officer-Involved Incident, by Reps. Joseph Salazar & Daneya Esgar and Sens. Lucia Guzman & David Balmer. The bill specifies that people have the lawful right to record officer-involved incidents.
  • HB 15-1303 – Concerning Eliminating the Application of Certain Sentencing Provisions to Certain Persons who are Convicted of Assault in the Second Degree, by Rep. Jovan Melton and Sen. Kevin Lundberg. The bill removes mandatory crime of violence sentencing for assault against first responders.
  • SB 15-217 – Concerning Data Collection Related to Peace Officer-Involved Shootings of a Person, and, in Connection Therewith, Making an Appropriation, by Sens. Ellen Roberts & John Cooke and Rep. Angela Williams. The bill creates a process for public reporting of specified data concerning officer-involved shootings.
  • SB 15-218 – Concerning Requiring a Law Enforcement Agency to Disclose Whether a Peace Officer has Made a Knowing Misrepresentation in Certain Settings, by Sens. Ellen Roberts & John Cooke and Rep. Angela Williams. The bill requires a law enforcement agency to report any knowing instance of misrepresentation by a peace officer to the district attorney.
  • SB 15-219 – Concerning Measures to Provide Additional Transparency to Peace Officer-Involved Shootings, by Sens. John Cooke & Ellen Roberts and Rep. Joseph Salazar. The bill requires local law enforcement agencies to make public its protocols regarding contacting other agencies following officer-involved shootings.
  • HB 15-1262 – Concerning Separate Legal Entities Established by a Contract Between Two or More Political Subdivisions of the State, and, in Connection Therewith, Clarifying the Legal Status and Scope of Powers of Such an Entity, by Rep. Paul Rosenthal and Sen. David Balmer. The bill specifies the legal status and powers of an entity formed by two or more governments to provide public improvements.
  • HB 15-1343 – Concerning a Streamlined Process to Simplify the Licensure of Persons who Manage the Affairs of Common Interest Communities Under the “Colorado Common Interest Ownership Act”, and, in Connection Therewith, Making an Appropriation, by Reps. Angela Williams & Dan Thurlow and Sens. Nancy Todd & David Balmer. The bill makes several changes to the community association manager licensure program.

For a complete list of Governor Hickenlooper’s 2015 legislative decisions, click here.

Tenth Circuit: Citizenship of LLC for Diversity Jurisdiction Based on Citizenship of Each LLC Member

The Tenth Circuit Court of Appeals issued its opinion in Siloam Springs Hotel, L.L.C. v. Century Surety Co. on Tuesday, March 31, 2015.

Siloam Springs Hotel, L.L.C. operates a Hampton Inn in Siloam Springs, Arkansas. It purchased a commercial general liability insurance policy from Century Surety Co. During the applicable coverage period, the heating element of an indoor swimming pool suddenly malfunctioned, causing a sudden carbon monoxide leak and injuring several guests. Siloam sought coverage from Century, but Century denied coverage, relying on an exclusion in the insurance policy for injuries arising from noxious characteristics of indoor air. In response, Siloam filed suit in Oklahoma state court, seeking a declaration of coverage. Century removed the case to the U.S. District Court for the Western District of Oklahoma, asserting complete diversity jurisdiction and an amount in controversy exceeding $75,000. The parties filed cross-motions for summary judgment in district court, and the district court granted summary judgment to Century.

Siloam timely appealed, challenging the district court’s ruling that the indoor air exclusion barred coverage. After the parties filed their merits briefs, the Tenth Circuit recognized a jurisdictional defect in Century’s notice of removal, which labeled Siloam as a “corporation” and asserted it was organized under Oklahoma law and had its primary place of business in Arkansas. The Tenth Circuit ordered Century to show cause regarding the discrepancy, noting that although the Tenth Circuit had not addressed the issue, every other circuit to consider citizenship of an LLC for diversity jurisdiction purposes has held citizenship of the LLC is defined by citizenship of its members.

Century responded by arguing the LLC’s citizenship should be determined by treating it as a corporation, or, alternatively, the court should find Siloam’s citizenship to be of Oklahoma, Florida, New York, North Carolina, and Texas. The Tenth Circuit disagreed. First, the Tenth Circuit found that Oklahoma law defines an LLC as an unincorporated association or proprietorship, not a corporation. Following Supreme Court precedent, the Tenth Circuit determined that citizenship of an unincorporated association or proprietorship is decided based on citizenship of all its members. Next, the Tenth Circuit rejected Century’s offer that the LLC’s citizenship be Oklahoma, Florida, New York, North Carolina, and Texas, since Century based its determination on an unsworn letter from Siloam’s counsel dated after the notice of removal. The Tenth Circuit found two flaws with Century’s argument. First, residence is not equivalent to domicile, and domicile is used to determine citizenship, so the information in the unsworn letter regarding residence of the LLC’s members did not adequately address domicile. Second, the letter was dated after the notice of removal, and relevance regarding removal is to be determined at the time of removal, not after.

Without addressing the merits of the appeal, the Tenth Circuit remanded to the district court to consider whether diversity jurisdiction is proper and whether the insurance coverage questions would be better answered by certification to the appropriate state court.

Several Bills Signed Last Week by Governor Hickenlooper

On Monday through Thursday last week, Governor Hickenlooper signed several bills into law. To date, the governor has signed 219 bills into law. The bills signed last week are summarized here.

Monday, May 11, 2015

  • HB 15-1198 – Concerning Enactment of the 2008 Amendments to the “Uniform Interstate Family Support Act”, by Rep. Mike Foote and Sen. Pat Steadman. The bill updates the Uniform Interstate Family Support Act to comply with mandates of the Hague Convention.
  • HB 15-1212 – Concerning Making Permanent the State Board of Land Commissioners’ Authority to Sell State Trust Land to Local Governments, by Rep. KC Becker and Sens. Andy Kerr & Michael Merrifield. The bill makes permanent the State Land Board’s authority to convey land to a local government twice in a year.
  • HB 15-1214 – Concerning Opioid Analgesics with Abuse-Deterrent Properties, by Rep. Jonathan Singer and Sen. John Cooke. The bill requires the governor to direct the Colorado Consortium for Prescription Drug Abuse Prevention to study the use of abuse-deterrent opioid analgesic drugs.
  • HB 15-1280 – Concerning the Creation of a Capital Reserve in Certain Cash Funds, by Rep. Dave Young and Sen. Kevin Grantham. The bill requires state agencies to identify capital reserves to pay costs associated with capital assets.
  • HB 15-1308 – Concerning Certain Responsibilities of the Legislative Branch with Respect to the “State Measurement for Accountable, Responsive, and Transparent (SMART) Government Act”, by Reps. Dominick Moreno & Polly Lawrence and Sens. Kevin Lundberg & Rollie Heath. The bill amends provisions of the SMART Act concerning meetings between members of the General Assembly and executive directors of state agencies.
  • SB 15-100 – Concerning Implementation of Recommendations of the Committee on Legal Services in Connection with Legislative Review of Rules and Regulations of State Agencies, by Sen. Pat Steadman and Reps. Mike Foote & Beth McCann. The bill continues some agency rules and regulations and allows others to expire based on recommendations of the Committee on Legal Services.
  • SB 15-104 – Concerning the Continuation of the Colorado Division of Securities, and, in Connection Therewith, Implementing the Recommendations of the 2014 Sunset Report by the Department of Regulatory Agencies, by Sen. Chris Holbert and Rep. Pete Lee. The bill continues the Division of Securities and implements the recommendations of the sunset review.
  • SB 15-110 – Concerning the Continuation of the Regulation by the Director of the Division of Professions and Occupations of Funeral Establishments, and, in Connection Therewith, Implementing the Recommendations of the Department of Regulatory Agencies as Contained in the 2014 Sunset Report and Making an Appropriation, by Sen. Randy Baumgardner and Rep. Joann Ginal. The bill continues the registration of funeral homes and crematories and implements suggestions of the sunset review.
  • SB 15-211 – Concerning an Automatic Funding Mechanism for Payment of Future Costs Attributable to Certain of the State’s Capital Assets, by Sen. Kent Lambert and Rep. Bob Rankin. The bill creates a process to automatically set aside capital to finance depreciation of assets.
  • SB 15-250 – Concerning Capital-Related Transfers of Moneys, by Sen. Kent Lambert and Rep. Millie Hamner. The bill changes the source of some capital construction fund moneys and makes three transfers to the CCF.

Tuesday, May 12, 2015

  • SB 15-022 – Concerning the Wildfire Risk Reduction Grant Fund, by Sen. Ellen Roberts and Rep. J. Paul Brown. The bill transfers funds into the Wildfire Risk Reduction Grant Fund and changes terminology.
  • SB 15-205 – Concerning the Utilization of Veterans’ Fire Corps Programs by the Division of Fire Prevention and Control in the Department of Public Safety, by Sens. Ellen Roberts & Leroy Garcia and Reps. Jon Keyser & Millie Hamner. The bill recognizes the existence of veterans’ fire corps programs and authorizes the Department of Public Safety to use the Wildfire Preparedness Fund to train, equip, and supervise a veterans’ fire corps crew.
  • HB 15-1006 – Concerning the Establishment of a Grant Program for the Management of Invasive Phreatophytes, and, in Connection Therewith, Making an Appropriation, by Reps. Don Coram & Ed Vigil and Sen. Jerry Sonnenberg. The bill creates a two-year grant program for the management of invasive phreatophyte plants in riparian zones of the state.

Wednesday, May 13, 2015

  • HB 15-1173 – Concerning a Requirement that Motor Vehicles Have Certain Traction Equipment when Driving on the Interstate 70 Mountain Corridor, by Reps. Diane Mitsch Bush & Bob Rankin and Sen. Nancy Todd. The bill requires all drivers using I-70 between Morrison and Dotsero between November 1 and May 15 to use mountain snow tires or chains or have a four-wheel drive/all-wheel drive vehicle and imposes penalty for drivers who do not comply with this regulation.
  • HB 15-1225 – Concerning the Provision of State Assistance to Local Governments for the Purpose of Improved Coordination in Federal Land Management Decision-Making, and, in Connection Therewith, Making an Appropriation, by Reps. Bob Rankin & KC Becker and Sens. Ellen Roberts & Kerry Donovan. The bill requires certain executive branch officers and directors to provide support to local governments affected by federal land management.
  • HB 15-1271 – Concerning the Funding of Mobile Learning Labs Through the Colorado Existing Industry Training Program, by Reps. Susan Lontine & Millie Hamner and Sens. Vicki Marble & Kerry Donovan. The bill authorizes the Colorado Existing Industry Training Program to fund mobile learning labs, or stand-alone vehicles equipped with program-specific hands-on learning modules.
  • SB 15-138 – Concerning Funding for the Accelerating Students Through Concurrent Enrollment Program, by Sen. Kerry Donovan and Rep. Jim Wilson. The bill clarifies distribution of funding for ASCENT students.
  • SB 15-282 – Concerning the Establishment of a Rural Jump-Start Program in Highly Distressed Counties of the State for New Businesses that Bring New Jobs to the State, and, in Connection Therewith, Making an Appropriation, by Sens. Ray Scott & Michael Johnston and Reps. Crisanta Duran & Yeulin Willett. The bill provides tax benefits to new businesses that locate in a rural jump-start zone.

Thursday, May 14, 2015

  • HB 15-1217 – Concerning the Ability of a Local Licensing Authority to Provide Input to the State Licensing Authority on Applications for Approval to Operate a Sales Room Submitted by Certain Persons Licensed Under the “Colorado Liquor Code”, and, in Connection Therewith, Making an Appropriation, by Rep. Jonathan Singer and Sen. Chris Holbert. The bill allows local governments to provide input on sales room license requests.
  • HB 15-1232 – Concerning the Emergency Use of Epinephrine Auto-Injectors by Authorized Entities, and, in Connection Therewith, Making an Appropriation, by Reps. Joann Ginal & Lois Landgraf and Sens. Nancy Todd & Beth Martinez Humenik. The bill authorizes various facilities such as daycare centers, amusement parks, restaurants, and other locations where anaphylaxis could occur, to stock a supply of epinephrine auto-injectors via a valid prescription.
  • HB 15-1358 – Concerning Creating a Permanent Differential Response Program for Child Abuse or Neglect Cases of Low or Moderate Risk, by Rep.  Jonathan Singer and Sens. Kevin Lundberg & John Kefalas. The bill continues the Differential Response Pilot Program to divert low- and moderate-risk cases of abuse or neglect to voluntary services rather than adversarial court intervention.
  • SB 15-253 – Concerning the Funding of Colorado Water Conservation Board Projects, and, in Connection Therewith, Making an Appropriation, by Sen. Jerry Sonnenberg and Rep. Ed Vigil. The bill appropriates money from the CWCB Construction Fund for specific projects in FY 2015-16 and authorizes additional transfers.

For a complete list of Governor Hickenlooper’s 2015 legislative decisions, click here.

Colorado Court of Appeals: Signatory to Arbitration Agreement May Not Equitably Avoid Arbitration After Acknowledging Agreement

The Colorado Court of Appeals issued its opinion in Meister v. Stout on Thursday, May 7, 2015.

First Impression—Compelling Arbitration on a Non-signatory—Appellate Attorney Fees—Confirmation of Arbitration Award.

DeLollis and Stout founded an information technology company, Venti Solutions, LLC. Meister invested in Venti and became a member of the company. The purchase agreement signed by Venti, Stout, DeLollis, and Meister granted Meister a 20% interest in Venti in exchange for a capital contribution of $500,000.

The agreement incorporated by reference the Venti operating agreement, which was executed by Stout and DeLollis. The operating agreement had a dispute resolution article providing that arbitration was the exclusive mechanism for resolving all disputes.

In 2012, Meister sued DeLollis, Stout, and Venti. DeLollis and Venti moved to compel arbitration, and the court so ordered. The arbitrator dismissed Meister’s claims with prejudice and awarded $375,738.70 against him on Venti’s breach of contract counterclaim. The district court confirmed the award.

Meister appealed on the ground that arbitration should not have been compulsory as to his claims against Venti, a non-signatory to the operating agreement. Under Colorado law, both signatory and non-signatory parties may be bound by an arbitration agreement if so dictated by ordinary principles of contract law. Equitable estoppel may also be used to bind parties to an arbitration agreement.

The Court of Appeals held that Meister’s claims against Venti were subject to arbitration under an estoppel theory. All of his claims referenced or presumed and relied on the existence of the operating agreement. He was therefore equitably estopped from avoiding arbitration of his claims against Venti. As additional support for this conclusion, the Court noted that Meister’s claims alleged interconnected and concerted misconduct among Venti, Stout, and DeLollis, and it was admitted that Stout and DeLollis were subject to the operating agreement and the arbitration provision.

Meister also challenged the district court’s confirmation of the arbitration award. The Venti operating agreement required arbitration to take place not more than sixty days after selection of an arbitrator. Originally scheduled for July 9 and 10, 2013, arbitration was postponed to September 3 and 4, after Meister failed to pay the arbitration deposit. Meister was also under travel restrictions stemming from an unrelated federal indictment in Florida. He did not disclose these criminal proceedings to the arbitrator or to defendants. He filed a motion to appear electronically on the basis of poor health. Defendants discovered his involvement in criminal proceedings and Meister refused the arbitrator’s requests to verify his health status. His request to appear electronically was denied. The Court affirmed the district court’s ruling and remanded the case for determination of the appellees’ attorney fees and costs.

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

Bills Regarding Businesses Permitted to Provide PACE Services, Release of Information Regarding Juvenile Facility Incidents, and More Signed

On Friday, May 8, 2015, Governor Hickenlooper signed 13 bills into law. To date, the governor has signed 197 bills this legislative session. Although the 2015 session has ended, the governor will continue to sign bills for the next few weeks.

The bills signed by Governor Hickenlooper on Friday are summarized here.

  • SB 15-239 – Concerning the Transfer of Vocational Rehabilitation Programs from the Department of Human Services to the Department of Labor and Employment, and, in Connection Therewith, Making an Appropriation, by Sen. Kent Lambert and Rep. Dave Young.
  • HB 15-1299 – Concerning Use of the Petroleum Storage Tank Fund for Incentives for Significant Operational Compliance with Regard to Petroleum Storage Tanks, by Reps. Millie Hamner & Dan Nordberg and Sen.  Ray Scott. The bill allows petroleum storage tank funds to be used for upgrades to both underground and above-ground tanks.
  • HB 15-1187 – Concerning Mental Health Evaluations of Licensed Veterinarians Conducted by a Veterinarian Peer Health Assistance Program as Ordered by the State Board of Veterinary Medicine, by Rep. Steve Lebsock and Sen. Leroy Garcia. The bill allows the State Board of Veterinary Medicine to require a veterinarian to undergo a mental health exam if it has reason to suspect the veterinarian has a mental health problem.
  • SB 15-137 – Concerning Business Entities Permitted to Provide the Program of All-Inclusive Care for the Elderly, by Sen. David Balmer and Reps. Brian DelGrosso & Joann Ginal. The bill allows public, private, and for-profit entities to provide care to the elderly in the PACE program.
  • SB 15-247 – Concerning the Augmentation of the Scope of Services of the State Drug Assistance Program Administered by the Department of Public Health and Environment to Authorize Funding for Prevention, Intervention, and Other Services, and, in Connection Therewith, Making an Appropriation, by Sen. Pat Steadman and Rep. Dave Young. The bill increases the scope of services provided by the AIDS drug assistance program and makes several changes to the program.
  • HB 15-1131 – Concerning a Ban on Powdered Alcohol, by Rep. JoAnn Windholz and Sen. Nancy Todd. The bill prohibits the use, sale, possession, transfer, purchase, or manufacture of powdered alcohol, with an exemption for certain institutions conducting bona fide research.
  • HB 15-1242Concerning the Right of a Medical Patient to Designate a Caregiver to Assist the Patient with Basic Tasks Following Release from a Medical Facility, by Rep. Jessie Danielson and Sen. Irene Aguilar. The bill requires that general hospitals in Colorado give a patient the option to designate at least one caregiver.
  • HB 15-1243 – Concerning Increased Spending Authority for the Division of Parks and Wildlife, and, in Connection Therewith, Establishing the Parks for Future Generations Trust Fund, Amending the Wildlife for Future Generations Trust Fund, and Giving the Division of Parks and Wildlife Explicit Spending Authority Over Moneys Received to Mitigate or Offset Adverse Impacts to the State’s Parks and Wildlife Resources, by Rep. Ed Vigil and Sen. Jerry Sonnenberg. The bill establishes the Parks for Future Generations Trust Fund, amends the Wildlife for Future Generations Trust Fund, and provides funding for both trust funds.
  • HB 15-1267 – Concerning Conditions of Probation Relating to Medical Marijuana, by Rep. Joseph Salazar and Sen. Lucia Guzman. The bill allows probationers to use and possess medical marijuana unless the offense for which they are on probation is a medical marijuana-related offense.
  • HB 15-1304 – Concerning a Plan to Study the Available Bear Management Tools Year Round to Address Bear-Human Conflicts, by Reps. Yeulin Willett  & Steve Lebsock and Sens. David Balmer & Ray Scott. The bill requires the Division of Parks and Wildlife to study available tools for better management of the black bear population.
  • HB 15-1284 – Concerning Measures to Enhance Program Efficiency for Shared Photovoltaic Energy Generation Facilities, by Reps. Faith Winter & Kit Roupe and Sens. Kevin Grantham and Mary Hodge. The bill eliminates population requirements for community solar garden use across counties.
  • HB 15-1015 – Concerning the Creation of an Interstate Compact Allowing States that Enter the Compact to Share Emergency Medical Service Providers Under Certain Circumstances, by Rep. Faith Winter and Sen. John Cooke. The bill allows the governor to enter into a compact with other states to enable emergency medical service providers to provide services in Colorado.
  • HB 15-1134 – Concerning the New Vehicle Exemption for Emissions Testing of Heavier Diesel Vehicles with a Model Year That is No Older than 2014, by Rep. Don Coram and Sen. John Cooke. The bill extends the new vehicle exemption for heavy diesels to six years as long as the vehicle has a model year of 2014 or later.

For a complete list of Governor Hickenlooper’s 2015 legislative decisions, click here.

Tenth Circuit: Developer Not Liable for Disclosure Failures Under Interstate Land Sales Full Disclosure Act

The Tenth Circuit Court of Appeals issued its opinion in Dalzell v. RP Steamboat Springs LLC on Tuesday, March 24, 2015.

RP Steamboat Springs, LLC, was formed in 2005 to develop a mixed-housing master-planned subdivision in Steamboat Springs called Wildhorse Meadows. RP entered into an agreement with Steamboat to develop Wildhorse Meadows in eight parcels, each originally owned by RP, one of which was Trailhead Lodge. RP entered into a marketing agreement with S&P Destination Properties, and marketed the subdivision as a whole and Trailhead specifically.

A group of investors formed Trailhead Lodge at Wildhorse Meadows, LLC, for the purpose of developing Trailhead Lodge condominiums. RP transferred title to Trailhead LLC in 2007 by special warranty deed. Two days before the deed transfer, a group of buyers entered into substantially similar preconstruction purchase and sale agreements with Trailhead LLC. At the time Trailhead LLC entered into the contracts with Buyers, no one had filed a statement of record with the Department of Housing and Urban Development and Buyers were not provided a property report, both of which were required under the Interstate Land Sales Full Disclosure Act. Buyers had the right to rescind the contracts within two years of signing as a result of these failures, which they did. Trailhead LLC, now insolvent, has not returned the Buyers’ deposits.

Buyers filed an action in the U.S. District Court for the District of Colorado against Trailhead LLC, RP, and S&P, alleging all three qualified as developers under the Land Sales Act and they violated the Act by failing to file a statement of record and failing to provide a property report when Buyers purchased the condominium units. The district court granted summary judgment to Buyers against Trailhead LLC, including a specific award of damages to each Buyer and an order rescinding the contracts, and Buyers settled with S&P. The only claims remaining were Buyers’ Land Sales Act claims against RP, which did not include any allegations of fraud. The district court ultimately concluded RP was not liable under the Land Sales Act because although it qualified as a developer, it did not exercise enough control over the sales to qualify as a direct or indirect seller. Buyers appealed.

The Tenth Circuit analyzed the applicable provisions of the Land Sales Act. Buyers argued RP’s status as a developer made it liable under the disclosure provisions, and even if developer status was not enough to establish liability, RP was liable as an indirect seller. The Tenth Circuit disagreed, finding the use of the term “to sell or lease” in some provisions but not others meant that Congress intended to limit liability of developers in some provisions of the Act. Although RP probably would have been liable under the fraud provisions of the Act as a developer, it was not liable under the disclosure provisions because these were limited to sellers. The issue had not been decided by the Tenth Circuit before, but it found a similar case from the Fourth Circuit instructive.

The Tenth Circuit similarly rejected Buyers’ argument that RP was an indirect seller under the Act, agreeing with the district court that RP did not exercise sufficient control over the sales to qualify as an indirect seller under the definition. The Tenth Circuit found RP was not involved in efforts to sell the Trailhead Lodge condominium units, despite its marketing targeting the Trailhead Lodge subdivision. The Tenth Circuit also found there was not a significant ownership relationship between RP and Trailhead, LLC.

The Tenth Circuit affirmed the district court’s finding that RP was not liable under the Land Sales Act. Judge Lucero dissented.

Bills Regarding Oversight of CFIs, Electronic Benefits Card Transfer, and Promoting Water Conservation in Land Planning Signed

legislationOn Friday, May 1, 2015, Governor Hickenlooper signed 30 bills into law. To date, the governor has signed 176 bills into law. The bills signed on May 1 are summarized here.

  • HB 15-1153 – Concerning Oversight of Child and Family Investigators, and, in Connection Therewith, Making and Reducing Appropriations, by Rep. Dave Young and Sen. Pat Steadman. The bill consolidates the oversight of all CFIs into the Office of the State Court Administrator.
  • HB 15-1255 – Concerning the Enforcement of the Prohibited Use of Electronic Benefits Transfer Cards at Certain Locations, by Reps. Timothy Dore & Dan Pabon and Sens. Kevin Grantham & Cheri Jahn. The bill requires periodic reporting of the use of electronic benefits cards at prohibited locations and adds marijuana retailers to the list of prohibited locations.
  • HB 15-1294 – Concerning Alignment of State Law Regarding In-State Tuition Classification with the Federal “Veterans Access, Choice, and Accountability Act of 2014″, by Reps. Pete Lee & Jon Keyser and Sens. Nancy Todd & Owen Hill. The bill requires qualified Colorado institutes of higher education to classify eligible veterans as in-state for tuition purposes.
  • SB 15-008 – Concerning the Promotion of Water Conservation in the Land Use Planning Process, and, in Connection Therewith, Making an Appropriation, by Sen. Ellen Roberts and Rep. Ed Vigil. The bill requires the Colorado Water Conservation Board to develop conservation programs for local government land use planners.
  • SB 15-046 – Concerning Reducing the Cost of Attainment of Renewable Energy Standards by Electric Utilities that are not Investor-Owned, and, in Connection Therewith, Allowing Purchases of Electricity from Community Solar Gardens by Cooperative Electric Associations to Qualify as Retail Distributed Generation, by Sen. Kevin Grantham and Rep. Dominick Moreno. The bill reduces the retail distributed generation requirement for cooperative electric associations.
  • SB 15-060 – Concerning the Prevention of Multiple Voter Registrations by the Same Elector, by Sen. Chris Holbert and Rep. Justin Everett. The bill allows the Secretary of State to forward any information from the DMV to the appropriate county clerk for the purpose of updating voter registration information.
  • SB 15-065 – Concerning a Prohibition on the Use of Public Electronic Benefits Transfer Services at Certain Establishments, by Sen. Vicki Marble and Rep. Dan Nordberg. The bill prohibits recipients of electronic benefits transfer cards from using them at adult entertainment facilities or marijuana establishments.
  • SB 15-085 – Concerning the Expansion of the “Colorado Cottage Foods Act,” and, in Connection Therewith, Increasing the Net Revenue a Producer Can Earn Under the Act, by Sen. Beth Martinez Humenik and Reps. Faith Winter & Perry Buck. The bill allows “cottage food” producers to expand their allowable net revenues.
  • SB 15-106 – Concerning the Continuation of the Regulatory Authority Granted Under the “Barber and Cosmetologist Act,” and, in Connection Therewith, Continuing the Cosmetology Advisory Committee and Implementing the Other Recommendations of the Department of Regulatory Agencies as Contained in the 2014 Sunset Report and Making an Appropriation, by Sen. Laura Woods and Rep. Jeni James Arndt. The bill continues the “Barber and Cosmetologist Act” and enacts recommendations from the sunset review committee.
  • SB 15-122 – Concerning the Continuation of the Regulation of Massage Parlors, and, in Connection Therewith, Repealing the Regulation of Massage Parlors, by Sen. Linda Newell and Rep. Dominick Moreno. The bill limits the ability of local governments to regulate massage parlors.
  • SB 15-178 – Concerning the Continuation of the Colorado Commission for the Deaf and Hard of Hearing, and, in Connection Therewith, Implementing the Recommendations of the 2014 Sunset Report by the Department of Regulatory Agencies, by Sen. Linda Newell and Rep. Jessie Danielson. The bill continues the Colorado Commission for the Deaf and Hard of Hearing and implements recommendations of the sunset review committee.
  • SB 15-182 – Concerning Allowing the Department of Corrections to Transfer Certain Offenders to the Youthful Offender System to Participate in Age-Appropriate Programs, by Sens. Leroy Garcia & Larry Crowder and Reps. Clarice Navarro & Daneya Esgar. The bill allows the Department of Corrections to transfer offenders aged 24 or younger into or out of the Youthful Offender System.
  • SB 15-193 – Concerning the Consolidation of Two Reports that the Statewide Internet Portal Authority is Required to Submit to the Members of the General Assembly, by Sens. Patrick Neville & Tim Neville and Reps. Jack Tate & Max Tyler. The bill combines the reporting requirements of the Statewide Internet Portal Authority into one written report submitted to various legislative committees.
  • SB 15-194 – Concerning the Board of Directors of the Statewide Internet Portal Authority, by Sens. Patrick Neville & Tim Neville and Reps. Jack Tate & Max Tyler. The bill allows executive directors of executive branch agencies to select a designee to serve on the board in their stead, but designees may not serve as the board chair.
  • SB 15-198 – Concerning Modifications to the Colorado Water Conservation Board’s Fallowing Pilot Program, and, in Connection Therewith, Expanding the Program to Allow an Agricultural Water Right Owner to Lease an Agricultural Water Right for Temporary Agricultural, Environmental, Industrial, or Recreational Use, by Sen. Larry Crowder and Rep. Ed Vigil. The bill allows an agricultural water right owner to lease its right for temporary agricultural, environmental, industrial, or recreational use while the agricultural land goes fallow.
  • SB 15-235 – Concerning Increasing the Amount that the General Assembly may Appropriate for the Child Nutrition School Lunch Protection Program, and, in Connection Therewith, Making an Appropriation, by Sen. Pat Steadman and Rep. Millie Hamner. The bill increases the appropriation for the state school lunch program.
  • SB 15-236 – Concerning the Reorganization of Funds Expended by the State Historical Society, Sen. Kevin Grantham and Rep. Bob Rankin. The bill creates two separate subaccounts in the State Historical Fund.
  • SB 15-237 – Concerning Calculations Relating to Appropriations to Institutions of Higher Education, and, in Connection Therewith, Clarifying Calculations Required Pursuant to Sections 23-18-304 and 23-18-305, Colorado Revised Statutes, and Delaying Performance Funding Calculations Pursuant to Section 23-1-108, Colorado Revised Statutes, by Sen. Kent Lambert and Rep. Millie Hamner. The bill makes technical clarifications to definitions used in higher education funding formulas.
  • SB 15-238 – Concerning Allowable Uses of Moneys in the General Fund Exempt Account that are Designated to Benefit Students Attending Institutions of Higher Education, by Sen. Pat Steadman & Rep. Millie Hamner. The bill adds specific uses to the list of qualified higher education appropriations.
  • SB 15-240 – Concerning a Funding Formula for Independent Living Centers, and, in Connection Therewith, Making an Appropriation, by Sen. Pat Steadman and Rep. Dave Young. The bill requires DHS to promulgate a rule regarding funding for independent living centers and requires base funding of $600,000 to each center.
  • SB 15-241 – Concerning Collaborative Management of Multi-Agency Services Provided to Children and Families, and, in Connection Therewith, Making an Appropriation, by Sen. Pat Steadman and Rep. Dave Young. The bill allows moneys from the general fund to be allocated to the Collaborative Management Fund in the DHS and makes changes to the program for collaborative management.
  • SB 15-242 – Concerning an Allocation in Addition to the Child Welfare Block Grant to Counties for the Purpose of Hiring New Child Welfare Staff, and, in Connection Therewith, Making an Appropriation, by Sen. Kevin Grantham and Rep. Dave Young. The bill creates a new allocation for distributing funds to counties to hire additional child welfare staff.
  • SB 15-243 – Concerning a Prohibition on the Transfer of State-Operated Beds Under the Waiver for Home- and Community-Based Services for Individuals with Intellectual and Developmental Disabilities, by Sen. Kent Lambert and Rep. Dave Young. The bill prohibits DHS from selling or closing state-operated centers with beds for individuals with disabilities.
  • SB 15-244 – Concerning the Transfer of Moneys to Offset the Federal Government’s Recoupment of Mineral Lease Payments to the State, by Sen. Kevin Grantham and Rep. Bob Rankin. The bill transfers moneys from the General Fund for three fiscal years to offset recoupment of federal mineral lease moneys.
  • SB 15-245 – Concerning the Provision of State Funding for Natural Hazard Mapping, by Sen. Kevin Grantham and Rep. Dave Young. The bill creates a three-year program for state mapping of natural hazards.
  • SB 15-246 – Concerning Modifications to Accommodate Certain Statewide Financial Information Technology Systems in the Department of Personnel, by Sen. Kent Lambert and Rep. Bob Rankin. The bill requires the Department of Personnel and Administration to develop a method to bill users of its financial IT systems for the full cost of usage.
  • SB 15-248Concerning the Repeal of the State Facility Security Fund, by Sen. Kent Lambert and Rep. Millie Hamner. The bill repeals the state facility security fund, because there have been no grants made or deposits to the fund since its inception.
  • SB 15-249 – Concerning a Transfer from the Marijuana Tax Cash Fund to the General Fund, by Sen. Kent Lambert and Rep. Millie Hamner. The bill increases the transfer of moneys from the marijuana tax cash fund to the General Fund.
  • SB 15-251 – Concerning the Exclusion of Appropriations for Real Property Lease-Purchase Payments from the Basis for the Calculation of the General Fund Reserve, by Sen. Kent Lambert and Rep. Millie Hamner. The bill exempts payments for certificates of participation in lease-purchase agreements from the General Fund for purposes of calculating reserves.
  • SB 15-255 – Concerning the Deposit of Twenty Million Dollars of State Severance Tax Revenues in the General Fund, by Sen. Kent Lambert and Rep. Millie Hamner. The bill diverts money from the state severance tax fund to the General Fund.

For a complete list of Governor Hickenlooper’s 2015 legislative decisions, click here.

Colorado Court of Appeals: Attorney Fee Award in Traverse Proceeding Limited to Fees Incurred to Prepare, File, and Prosecute Traverse

The Colorado Court of Appeals issued its opinion in L&R Exploration Venture v. CCG, LLC on Thursday, April 23, 2015.

Garnishment—Attorney Fees Under CRCP 103 § 8(b)(5).

This is the second appeal in a garnishment proceeding. In the first appeal, intervenors challenged the district court’s order allowing garnishment of their bank accounts to satisfy an underlying judgment in favor of L&R Exploration Venture and its participants (collectively, L&R plaintiffs). A division of the Court of Appeals affirmed the order, concluding that the district court did not err in (1) determining that intervenor CCG is the alter ego of judgment debtor Jack Grynberg; (2) concluding that Grynberg and his alter egos had made voidable fraudulent transfers to intervenors Gadeco, Pricaspian, and Celeste Grynberg; and (3) allowing L&R plaintiffs to garnish the bank accounts of those intervenors.

Intervenors challenged the district court’s order awarding L&R plaintiffs attorney fees and costs under CRCP 103, § 8(b)(5), which states “[a]t any hearing upon a traverse, the court shall make such orders as to reasonable attorney fees, costs and expense of the parties to such hearing as are just.” The Court held that it was error to award attorney fees and costs not incurred to prepare and file the traverses of the intervenors’ challenges to the garnishments or to subsequently prosecute the traverse proceeding. It held that such an award is limited, in a successful traverse action, to only the attorney fees and costs incurred by the garnishor to prepare, file, and prosecute the traverse, and, in an unsuccessful action, to the attorney fees and costs incurred by the putative garnishee to defend against the traverse. The order was vacated for a recalculation of attorney fees and costs.

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

Tenth Circuit: Panel Rehearing Granted to Limited Extent but Rehearing En Banc Denied

The Tenth Circuit Court of Appeals issued its revised opinion in Fulghum v. Embarq Corporation on Monday, April 27, 2015. The Tenth Circuit granted panel rehearing to a limited extent and issued a revised opinion. The opinion was circulated to all judges and none requested a poll, so en banc rehearing was denied. The Legal Connection summary of the original opinion is available here.

Budget Bill and Appropriations Bills Signed by Governor Hickenlooper

On Friday, April 24, 2015, Governor Hickenlooper signed eight bills into law, including the 2015-2016 fiscal year Long Appropriations Bill. To date, the governor has signed 146 bills into law this legislative session. The bills signed Friday are summarized here.

  • SB 15-234FY 2015-16 Long Appropriations Bill, by Sen. Kent Lambert and Rep. Millie Hamner. The bill sets the state budget for the 2015-16 fiscal year. A summary of some of the budget items is available here.
  • HB 15-1266 – Concerning the Information Technology Budget Request Process, by Rep. Bob Rankin and Sen. Kent Lambert. The bill modifies the procedure for IT budget requests from state agencies and institutes of higher education.
  • HB 15-1149 – Concerning the Respondent Parents’ Counsel, and, in Connection Therewith, Making and Reducing Appropriations, by Rep. Millie Hamner and Sen. Kent Lambert. The bill pushes the start date for the judicial department’s development of an Office of Respondent Parents’ Counsel to July 1, 2016, and creates a nine-member governing commission for that office.
  • HB 15-1269 – Concerning the Transfer of Persons Who Cannot Be Safely Confined in their Current Facility Between a Department of Corrections Facility and a Facility Operated by the Department of Human Services, by Reps. Beth McCann & Joann Ginal and Sen. Kevin Grantham. The bill clarifies procedures for the transfer of inmates from a DOC facility to a DHS facility, and specifies that DHS may not transfer non-offenders to the DOC.
  • HB 15-1295 – Concerning Inspections Conducted by Institutes of Higher Education, by Reps. Jovan Melton & Kevin Priola and Sen. Chris Holbert. The bill enlarges the scope of work that may be overseen by building departments at institutes of higher education.
  • HB 15-1042 – Concerning Requiring Presentence Reports to Include a Statement Concerning a Defendant’s Eligibility for Release from Incarceration, by Rep. Mike Foote and Sen. John Cooke. The bill requires that presentence reports prepared for inmates sentenced for felonies occurring after July 1, 2004, include a statement about how long the defendant is expected to be incarcerated.
  • HB 15-1072 – Concerning Harassment Through an Interactive Electronic Medium, by Rep. Rhonda Fields and Sen. Linda Newell. The bill modifies the existing harassment statute to include harassment through electronic media.
  • HB 15-1204 – Concerning the Creation of a Distillery Pub License, by Rep. Dan Pabon and Sen. Andy Kerr. The bill creates a new liquor license for spiritous distilleries so that they may operate a pub that serves alcoholic beverages on the premises.

For a complete list of Governor Hickenlooper’s 2015 legislative decisions, click here.

Tenth Circuit: Extender Statute Cannot be Tolled by Agreement of the Parties

The Tenth Circuit Court of Appeals issued its opinion in National Credit Union Administration Board v. Barclays Capital, Inc. on Tuesday, March 3, 2015.

The National Credit Union Administration Board (NCUA), acting in its role as conservator for failing credit unions, investigated the failure of two major credit unions and found they had failed because they had relied upon misrepresentations in offering documents about residential mortgage-backed securities (RMBS) that were essentially junk loans. The NCUA began pursuing remedies against the issuers and underwriters of the RMBS and began settlement negotiations with Barclays and other defendants (collectively, Barclays). During the pendency of the settlement negotiations, the NCUA entered into contracts with Barclays that averred the statute of limitations would be tolled during the settlement negotiations and also that Barclays would not assert untimeliness as a defense in any ensuing litigation.

When the settlement negotiations failed, the NCUA initiated these actions, asserting violations of Sections 11 and 12(a)(2) of the Securities Act, as well as state securities claims under the blue sky laws of Kansas and California. Barclays moved to dismiss for failure to state a claim on several grounds, including untimeliness. Barclays initially honored the tolling agreement but argued the claims were time-barred by the Securities Act’s three-year statute of repose. The NCUA responded that the statute of repose was inapplicable to these cases and instead the Federal Credit Union Act’s “Extender Statute” applied, providing a three-year statute of limitations.

While the actions were pending, the district court issued an opinion in a different case, ruling that contractual tolling was not authorized under the extender statute. Barclays then amended its motion to dismiss based on the different ruling. The district court granted the motion to dismiss, holding the claims were covered by the Extender Statute and not the statute of repose, and that tolling could not be contractually waived. The NCUA appealed.

The Tenth Circuit first determined that the district court correctly applied the Extender Statute and not the statute of repose. The Tenth Circuit recently ruled that the Extender Statute supplants all other time limits. Explaining the difference between statutes of limitations and repose, the Tenth Circuit noted that statutes of repose cannot be equitably tolled and act as an absolute time-bar, whereas statutes of limitations are frequently tolled and are affirmative defenses rather than absolute bars. After analyzing the specific language of the Extender Statute, however, the Tenth Circuit found it explicitly and unambiguously stated it could not be tolled by contract. Nevertheless, the Tenth Circuit reversed the district court’s dismissal, finding that Barclays promised not to assert the affirmative defense of the statute of limitations and it should be held to its promise.

The Tenth Circuit reversed and remanded for further proceedings consistent with its opinion.

Tenth Circuit: Six-Year Statute of Repose for Breach of Fiduciary Duty in ERISA Contains Exception for Fraud or Concealment

The Tenth Circuit Court of Appeals issued its opinion in Fulghum v. Embarq Corporation on Tuesday, February 24, 2015.

A class of retirees (plaintiffs) of Sprint-Nextel Corporation, Embarq Corporation, or a predecessor or successor of those companies (collectively, defendants) brought suit after defendants altered or eliminated health and life insurance benefits for retirees. Plaintiffs asserted defendants violated ERISA by breaching their obligation to provide vested health and life insurance benefits, breached their fiduciary duty by misrepresenting the terms of multiple welfare benefit plans, and violated the ADEA and state laws by reducing or eliminating health and life insurance benefits. The district court granted summary judgment to defendants on the breach of fiduciary duty claims, the ADEA claims, the state-law age discrimination claims, and some of the contractual vesting claims. Plaintiffs obtained a Rule 54(b) certification and appealed.

The Tenth Circuit examined the applicable insurance contracts and summary plan descriptions (SPDs). Defendants organized 32 SPDs into five groups based on language and coverage similarities, and the district court used these groupings in its analysis of plaintiffs’ claims. Because plaintiffs did not object to the groupings, the Tenth Circuit also based its analysis on the defendants’ classifications.

The first group of SPDs contained 16 documents, each including a statement that the retiree’s coverage ends upon death and a reservation of rights clause where the employer reserved the right to modify or terminate benefits at any time. Plaintiffs argued the plan language was ambiguous because it both offered coverage until death and reserved the right to modify or terminate benefits. The Tenth Circuit found the language unambiguously informed plaintiffs of defendants’ right to modify or terminate coverage, and therefore affirmed the district court’s summary judgment as to group 1.

Next, the Tenth Circuit analyzed the three SPDs in group 2, and found none containing “clear and express language” promising vested benefits. Plaintiffs pointed to language in the SPDs, but the Tenth Circuit found the language more pertinent to amount of benefits and not duration. The Tenth Circuit affirmed summary judgment as to group 2, finding the SPDs unambiguously contemplated termination of the plans.

The third group contained 4 SPDs regarding medical benefits. Plaintiffs claimed entitlement to lifetime benefits because the plans contained language that they “will be insured” and benefits “will continue after retirement.” The Tenth Circuit found the language insufficient to confer lifetime benefits, since it did not clearly and expressly promise unaltered lifetime benefits. The Tenth Circuit also noted that each SPD contained reservation of rights language. The district court’s summary judgment was affirmed as to group 3.

As for the benefits for group 4, the Tenth Circuit found the plaintiffs “wholly failed” to point to any language in the plans promising lifetime benefits. The Tenth Circuit found as to all groups that “no reasonable person in the position of a plan participant would have understood any of the language identified by Plaintiffs as a promise of lifetime health or life insurance benefits,” and that the same reasonable person would have understood defendants’ rationale for amending the plans.

The Tenth Circuit similarly rejected plaintiffs’ attempt to incorporate by reference arguments made in district court regarding why the district court’s denial of plaintiffs’ motion for reconsideration was abuse of discretion, commenting “this is not acceptable appellate procedure.” The Tenth Circuit deemed this argument waived. The Tenth Circuit conceded defendants were only entitled to summary judgment on the claims presented to the district court based on SPDs considered by the district court, and reversed the grant of summary judgment to the extent a class member’s claim for benefits arose from an SPD not presented to the court.

Turning to the breach of fiduciary duty claims, the district court had dismissed all claims as untimely, but the Tenth Circuit found that the district court applied the wrong statutory analysis. The Tenth Circuit reversed the district court’s dismissal of the breach of fiduciary duty claims. The Tenth Circuit examined 29 U.S.C. § 1113, finding the six-year statute of repose undisputed by the parties, but discovered a circuit split on whether § 1113’s statute of limitations applies solely to claims where a fiduciary fraudulently conceals the alleged breach of fiduciary duty or if it applies where the underlying breach of fiduciary duty claim involves allegations of fraud. The Tenth Circuit declined to conflate “fraud or concealment” to “fraudulent concealment” and also declined to consider the clause a separate statute of repose. Instead, the Tenth Circuit found the language to create an exception to the six-year statute of repose for instances when the breach of fiduciary duty resulted from fraud or concealment. The Tenth Circuit found support for its construction in the legislative purpose of ERISA.

Applying its framework to the instant case, the Tenth Circuit did not find evidence of concealment by defendants, and instead looked at whether there was fraud. The district court dismissed plaintiffs’ breach of fiduciary duty claims based on defendants’ claim that the argument was not properly briefed. The Tenth Circuit reversed on this point, finding instead that defendants did not move to dismiss plaintiffs claims on the basis on which the district court granted dismissal, resulting in error.

Finally, the Tenth Circuit addressed plaintiffs claims that the reduction or termination of benefits violated the ADEA because it constituted disparate impact discrimination based on age. Defendants produced evidence of effecting the policy changes based on reasonable factors other than age, and the district court granted summary judgment to defendants. The Tenth Circuit affirmed, finding that the narrow scope of ADEA disparate impact claims only required a showing that defendants’ decision was based on reasonable factors other than age and defendants made that showing.

The Tenth Circuit affirmed in part, reversed in part, and remanded for further proceedings.