April 30, 2017

Colorado Court of Appeals: Essential Element of Abuse of Process Claim is Improper Use of Courts

The Colorado Court of Appeals issued its opinion in Active Release Techniques, LLC v. Xtomic, LLC on Thursday, February 9, 2017.

Active Release Techniques (ART) is a provider of training, seminars, and business support software for chiropractors and other health care providers. ART contracted with Xtomic to manage ART’s IT services and provide support. When one of ART’s employees started a new business, Select Seminar Services, LLC (S3), with a co-owner of Xtomic, ART petitioned for a temporary restraining order and preliminary injunction. It also initiated the current litigation, asserting claims for misappropriation of trade secrets. Xtomic responded by asserting numerous counterclaims, including a claim for abuse of process. A jury ultimately decided all claims in Xtomic’s favor.

ART appealed, arguing the trial court erred by denying its motion for a directed verdict on Xtomic’s abuse of process claim. The court of appeals noted that “a valid abuse of process claim must allege ‘(1) an ulterior purpose for the use of a judicial proceeding; (2) willful action in the use of that process which is not proper in the regular course of the proceedings, i.e., use of a legal proceeding in an improper manner; and (3) resulting damage.'” In this case, ART moved for a directed verdict on the abuse of process claim at the close of evidence on the counterclaims. Xtomic argued that ART knew from the outset that it had no legitimate claims against Xtomic and the overly aggressive manner in which it pursued its claims against Xtomic was evidence of ART’s ulterior motive to use the lawsuit as a means to harass Xtomic and run it out of business. In denying ART’s motion for directed verdict, the court relied on ART’s pretrial settlement with Xtomic, ART’s reputation for filing lawsuits to control the behavior of former 5 associates and business partners, and the nature and number of preservation letters that ART sent to numerous individuals.

The court of appeals disagreed with the trial court that the settlement could be evidence of ART’s willful misuse of judicial process, because settlement does not imply that the originally filed suit was improper. The court also disregarded the evidence of ART’s other lawsuits, finding that it was only proper to focus on the instant case. Finally, the court found that the preservation letters were not directly related to any litigation but rather were issued in response to ART’s concern that Xtomic was destroying emails.

The court of appeals denied Xtomic’s motion for appellate attorney fees, since it was not the prevailing party. The court reversed the trial court’s denial of ART’s motion for directed verdict and remanded.

Colorado Court of Appeals: Innocent Investor May Keep Some Funds Exceeding Principal Investment in Ponzi Scheme

The Colorado Court of Appeals issued its opinion in Lewis v. Taylor on Thursday, February 9, 2017.

Steve Taylor invested $3 million in a hedge fund run by Sean Mueller, a licensed securities broker, and after about a year of investing, he withdrew all his money and received a profit of over $487,000. In 2010, the Colorado Securities Commissioner determined the hedge fund was a Ponzi scheme, and Mueller was convicted of several criminal offenses. C. Randel Lewis was appointed as receiver and tasked with collecting and distributing Mueller’s assets to the creditors and investors he defrauded through the Ponzi scheme. Lewis filed a claim under CUFTA seeking to void the transfer of the over $487,000 in net profits that Taylor received from Mueller’s fund.

In the district court, both Lewis and Taylor moved for summary judgment. Taylor argued that (1) the CUFTA claim was filed outside the statutory time period, and (2) even if the claim was timely, his net profits were not recoverable under CUFTA because he was an innocent investor. Lewis argued that the claim was timely filed and that CUFTA required Taylor to return his net profits. The district court agreed with Lewis on both issues and granted him summary judgment. On appeal, a division of the Colorado Court of Appeals held the district court erred in finding the claim was timely and reversed. The court of appeals did not reach the innocent investor issue. The Colorado Supreme Court ruled that the claim was timely and remanded to the court of appeals for determination of the innocent investor issue.

On remand from the supreme court, Taylor argued that the district court erred by ruling that even though he was an innocent investor in Mueller’s fund, CUFTA nevertheless required him to return all of the payments from the fund in excess of his principal investment. The court noted that CUFTA provides that “[a] transfer . . . is not voidable under section 38-8-105(1)(a) against a person who took in good faith and for a reasonably equivalent value.” The parties agreed that Taylor was an innocent investor who withdrew his profits in good faith, but disagreed about whether he gave reasonably equivalent value for his $487,000 profits.

The court of appeals evaluated the term “reasonably equivalent value,” noting that two lines of opinions had developed among courts in jurisdictions with versions of the Uniform Fraudulent Transfers Act. The court of appeals evaluated the line of cases promoted by Lewis, particularly the leading Ninth Circuit case. The court of appeals found the Ninth Circuit’s reasoning illogical because all transfers “deplete the assets of the scheme operator for the purpose of creating the appearance of a profitable business venture.” The court similarly disagreed with other cases cited by Lewis. The Colorado Court of Appeals instead held that the value an investor gives by investing is not limited to the precise dollar amount of the principal investment, but includes the use of that money for however long it was available for investment or any other use.

The court of appeals evaluated the plain statutory language to determine whether the transfers to Taylor were voidable. The court noted that the General Assembly may wish to revisit the issue and craft a better remedy to more fairly address the circumstances while considering equitable principles embodied in doctrines such as the clean hands doctrine. The court of appeals applied the plain language to determine the district court erred in failing to account for the time value of Taylor’s principal investment in determining whether he gave reasonably equivalent value.

The court of appeals remanded for determination of the fact question of whether Taylor gave “reasonably equivalent value.” The court further directed the district court to determine based on its “reasonably equivalent value” finding whether Lewis’s and Taylor’s summary judgment motions had merit.

SB 17-055: Prohibiting Employers from Mandating Labor Organization Membership

On January 13, 2017, Sen. Tim Neville and Rep. Justin Everett introduced SB 17-055, “Concerning the Prohibition of Discrimination Against Employees Based on Labor Union Participation.”

The bill prohibits an employer from requiring any person, as a condition of employment, to become or remain a member of a labor organization or to pay dues, fees, or other assessments to a labor organization or to a charity organization or other third party in lieu of the labor organization. Any agreement that violates these prohibitions or the rights of an employee is void.

The bill creates civil and criminal penalties for violations and authorizes the attorney general and the district attorney in each judicial district to investigate alleged violations and take action against a person believed to be in violation. The bill states that all-union agreements are unfair labor practices.

The bill was introduced in the Senate and assigned to the Business, Labor, & Technology Committee. It is scheduled for hearing in committee on February 6 at 2 p.m.

HB 17-1037: Allowing the Use of Deadly Force Against an Intruder to a Business

On January 11, 2017, Rep. Justin Everett and Sen. Vicki Marble introduced HB 17-1037, “Concerning the Use of Deadly Physical Force Against a Person who has Made an Illegal Entry Into a Place of Business.”

The bill extends the right to use deadly force against an intruder under certain conditions to include owners, managers, and employees of businesses.

The bill was introduced in the House and assigned to the State, Veterans, and Military Affairs committee.

HB 17-1013: Concerning the Free Exercise of Religion

On January 11, 2017, Reps. Stephen Humphrey & Dave Williams and Sens. Tim Neville & Vicki Marble introduced HB 17-1013, “Concerning a Person’s Free Exercise of Religion.”

The bill:

  • Specifies that no state action may burden a person’s exercise of religion, even if the burden results from a rule of general applicability, unless it is demonstrated that applying the burden to a person’s exercise of religion is essential to further a compelling governmental interest and the least restrictive means of furthering that compelling governmental interest;
  • Defines ‘exercise of religion’ as the practice or observance of religion. The bill specifies that exercise of religion includes the ability to act or refuse to act in a manner substantially motivated by a person’s sincerely held religious beliefs, whether or not the exercise is compulsory or central to a larger system of religious belief; except that it does not include the ability to act or refuse to act based on race or ethnicity.
  • Provides a claim or defense to a person whose exercise of religion is burdened by state action; and
  • Specifies that nothing in the bill creates any rights by an employee against an employer unless the employer is a government employer.

The bill was introduced in the House and assigned to the State, Veterans, and Military Affairs Committee. It is scheduled to be heard in committee on January 25, 2017 at 1:30 p.m.

SB 17-003: Repealing the Colorado Health Benefit Exchange Act

On January 11, 2017, Sen. Jim Smallwood and Rep. Patrick Neville introduced SB 17-003, “Concerning the Repeal of the ‘Colorado Health Benefit Exchange Act.'”

In 2010, pursuant to the enactment of federal law that allowed each state to establish a health benefit exchange option through state law or opt to participate in a national exchange, the general assembly enacted the ‘Colorado Health Benefit Exchange Act’ (act). The act created the state exchange, a board of directors (board) to implement the exchange, and a legislative health benefits exchange implementation review committee to make recommendations to the board. The bill repeals the act, effective January 1, 2018, and allows the exchange to continue for one year for the purpose of winding up its affairs. The bill also requires the board, on the last day of the wind-up period, to transfer any unencumbered money that remains in the exchange to the state treasurer, who shall transfer the money to the general fund.

The bill was introduced in the Senate and assigned to the Finance Committee.

Colorado Supreme Court: District Court Must Take Active Role in Managing Discovery Request of Non-Party in Dissolution Proceeding

The Colorado Supreme Court issued its opinion in In re Marriage of Gromicko on Monday, January 9, 2017.

In 2015, Lisa Dawn Gromicko (Wife) filed a petition for dissolution of marriage, naming Nickifor Nicholas Gromicko (Husband) as respondent. The petition requested equitable division of marital assets and debts. In order to evaluate Husband’s income, Wife requested records from Husband’s employer, InterNACHI, a nonprofit organized as a § 501(c)(6) trade association. Although Husband initially stated he would not object to the production of certain records, he did not provide them, and Wife requested a status conference. Husband’s counsel, who was also InterNACHI’s general counsel, filed a motion in response to Wife’s discovery request, arguing (1) the only InterNACHI relevant to the divorce proceeding were those reflecting Husband’s compensation and expense reimbursements; (2) the court could not consider InterNACHI a marital asset because Wife did not allege grounds in her dissolution petition to pierce the corporate veil; and (3) the court could authorize Wife to serve a subpoena duces tecum on InterNACHI to produce the relevant documents. The court held the status conference but did not rule on the discovery issues.

Wife then served a subpoena duces tecum on InterNACHI requesting (1) Husband’s employment and compensation; (2) the employment by InterNACHI of any person related to Husband; (3) InterNACHI’s bookkeeping, accounting, and tax return or Form 990 preparation; and (4) InterNACHI’s conflict-of-interest policy. InterNACHI moved to quash the subpoena, arguing that many of the requested documents were privileged, confidential, and irrelevant to the dissolution proceeding. InterNACHI also renewed its motion that Wife did not allege any grounds sufficient to claim that InterNACHI was Husband’s alter ego and pierce the corporate veil. The court denied InterNACHI’s motion to quash, and it filed a C.A.R. 21 interlocutory appeal.

On appeal, InterNACHI argued that the district court abused its discretion in refusing to quash or modify Wife’s subpoena because (1) Wife was required to, but did not, plead in her dissolution petition a claim for piercing InterNACHI’s corporate veil and (2) certain of Wife’s discovery requests were irrelevant to her veil-piercing claim and thus were outside the scope of discovery permitted by C.R.C.P. 26. The court first analyzed the discovery requirements in domestic relations cases, which are governed by C.R.C.P. 16.2, and found that Wife was not required to plead in her dissolution petition a claim seeking to pierce InterNACHI’s corporate veil. However, the supreme court concluded the district court did not use the correct standard in evaluating InterNACHI’s objection to the requested discovery.

The court compared C.R.C.P. 16.2 to the discovery requirements in civil cases, governed by C.R.C.P. 26. The court found the two rules analogous. The court found that its holding in DCP Midstream, LP v. Anadarko Petroleum Corp., 2013 CO 36, applied in this case and required the district court to take an active role in managing discovery. The supreme court found that the district court should initially have granted Wife only such discovery as would reasonably have been necessary to allow her to attempt to establish the existence of the alter ego relationship that she claimed. The supreme court noted that if, after receiving limited discovery, Wife could prove that InterNACHI was Husband’s alter ego, she may then be entitled to receive the information in her initial request, but the court must actively monitor discovery pursuant to DCP Midstream.

The supreme court made its rule to show cause absolute and returned the case to the district court for further proceedings.

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

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

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

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

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

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

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

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

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

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

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

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

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

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Exculpatory Clauses in Fitness Agreement Did Not Bar PLA Claim

The Colorado Court of Appeals issued its opinion in Stone v. Life Time Fitness, Inc. on Thursday, December 30, 2016.

Summary Judgment—Negligence—Premises Liability Act—Liability Release—Assumption of Risk.

Stone was a member of a fitness club owned by defendants (collectively, Life Time). She fell and fractured her ankle in the club’s women’s locker room after a workout. Stone asserted a general negligence claim and a claim under Colorado’s Premises Liability Act (PLA), alleging that Life Time allowed a trip hazard and dangerous condition to exist and thus failed to exercise reasonable care.

Life Time moved for summary judgment, relying on assumption of risk and liability release language contained in the agreement Stone signed when she joined the club. The district court granted the motion, without distinguishing between the negligence and PLA claims, finding that the agreement was valid and enforceable and that Stone had released Life Time from all the claims asserted in the complaint.

On appeal, Stone contended that the district court erred in entering summary judgment and dismissing her action. As to the negligence claim, the Court of Appeals determined that the PLA provides the sole remedy for injuries against landowners on their property and abrogates common law negligence claims against landowners. Thus Stone could not bring a common law negligence claim against Life Time.

Stone also argued that the exculpatory clauses in the agreement, while applying to the workout areas, did not clearly and unambiguously apply to injuries incurred in the women’s locker room. Exculpatory agreements are generally disfavored. A court must consider four factors to determine whether an exculpatory agreement is valid: (1) the existence of a duty to the public; (2) the nature of the service performed; (3) whether the contract was fairly entered into; and (4) whether the intention of the parties was expressed in clear and unambiguous language. As to the first factor, the Colorado Supreme Court has specified that no public duty is implicated if a business provides recreational services. On the second factor, courts have consistently held that recreational services are neither essential nor a matter of practical necessity. With respect to the third factor, recreational service contracts of this type are generally considered to be fairly entered into. These three factors weighed in favor of the enforceability of the agreement. On the fourth prong, however, in waiving future negligence claims, the intention of the parties must be expressed in clear and unambiguous language. After scrutinizing the exculpatory clauses, the court of appeals concluded that the agreement used excessive legal jargon, was unnecessarily complex, and created a likelihood of confusion. Thus, the agreement did not bar Stone’s PLA claim.

The judgment on the negligence claim was affirmed, the judgment on the PLA claim was reversed, and the case was remanded.

Summary provided courtesy of The Colorado Lawyer.

Top Ten Programs and Homestudies of 2016: Business Law

The year is drawing to a close, which means that the compliance period is ending for a third of Colorado’s attorneys. Still missing some credits? Don’t worry, CBA-CLE has got you covered.

Today we are featuring the Top Ten Business Law Programs and Homestudies of 2016. These programs represent only a sampling of the wide array of business law programs and homestudies available; visit www.cba-cle.org/Practice-Area/Business to see a great selection of business-related books and programs.

10. M&A World in 15 & 2016: What Did Your CO Investment Bankers See in 15 & What Do They Expect in 2016
Investment bankers from five of Denver’s investment banking firms discussed their thoughts on what they expected to see in the M&A world in 2015, what they actually saw in 2015 and what they expected to see in 2016. The panel will provide their insights on the M&A market, trends in structuring and negotiating M&A transactions, legal issues arising in M&A transactions, particular trends in the Colorado M&A market, and their expectations going forward in 2016. Watch this  Video OnDemand homestudy (or listen to the MP3 audio homestudy) to find out if the investment bankers’ predictions were correct. Available for 2 general credits.

9. How to Understand and Analyze Financial Statements: What Lawyers Need to Know
Complex financial issues are involved in nearly every area of law, and it is your responsibility to master the skills and knowledge necessary to handle those issues effectively. This detailed program provides you with the financial literacy required to protect yourself and your clients by guiding you through an understanding of accounting concepts, terminology, and financial statements. Beginning with an examination of Generally Accepted Accounting Principles and continuing with an overview of an actual financial statement, you will gain hands-on-experience from Doug Smith, one of the nation’s leading experts in the field. Order the Video OnDemand here, the CD homestudy here, or the MP3 here. Available for 6 general credits.

8. Business Document Drafting Series: Drafting Compensation and Other Employment Agreements
Learn about the various agreements employers enter into with their current and former employees. Learn about the mechanics of these agreements, the legal parameters that apply to these agreements, how employers use these agreements to protect intellectual property and retain key employees, and the challenges posed by M&A activities. Our experienced practitioner will also teach about the important provisions in executive compensation agreements, including change in control provisions, non-competition and other restrictive covenants, and separation agreements. Order the Video OnDemand here, the CD homestudy here, and the MP3 here. Available for 2 general credits.

7. Business Document Drafting Series: Drafting LLC and Partnership Agreements
This program provides an overview of the primary drafting considerations in both LLC and partnership agreements. Learn about the key provisions and issues in drafting the LLC operating agreement as well as how to prepare the Articles of Organization. Also, learn about the most important drafting issues for a partnership, such as capital and partnership interests, profit, loss, cash flow, management and dissolution. Order the Video OnDemand here, the CD homestudy here, and the MP3 here. Available for 2 general credits.

6. Business Contracts — The Fundamentals
Drafting contracts is the bread and butter of business law attorneys. In this program, twelve Moye White attorneys discussed various aspects of contract drafting, from compliance with state and federal securities laws to sponsorship agreements and sweepstakes events to mergers and acquisitions. As a bonus, the ePDF of CBA-CLE’s book, Business Contracts, is provided with every homestudy. Order the Video OnDemand here, the CD homestudy here, or the MP3 here. Available for 6 general credits.

5. Business Document Drafting Series: Boilerplate and Drafting Business Documents
This program provides practical advice on the perils of boilerplate in document drafting. Hear specific examples of drafting issues when you use forms. Learn the importance of keeping provisions current with case law, and knowing the definition of terms you use in your agreements. Better understand the value of silence, ambiguity, and knowing for whom you are drafting provisions. Know when to avoid “overdrafting.” Learn from a practitioner with a wealth of experience in preparing the many, many different documents required of a business lawyer. Order the Video OnDemand here, the CD homestudy here, and the MP3 here. Available for 2 general credits.

4. Advising Entrepreneurs
Whether you are new to the business law arena, expanding your practice, or simply need a refresher to get up to date on advising entrepreneurs, this homestudy provides current and expert guidance on the issues, questions, and documents you will most likely encounter when representing the entrepreneur.  Develop and fine tune the lawyering skills needed to better advise entrepreneurs and start-up companies. Order the Video OnDemand here, the CD homestudy here, or the MP3 here. Available for 6 general credits, including 1 ethics credit.

3. Business Document Drafting Series: Drafting IP Licenses, InfoTechnology Contracts, and Related Documents
Businesses are focusing more and more on their intellectual property assets, and license agreements are used both to protect those assets and to leverage those assets as a source of revenue. You don’t have to be an intellectual property specialist to benefit from a fundamental understanding of how and why licenses for software, trademarks, copyrights, patents and other types of intellectual property are created. In addition, software and information technology services are increasingly a part of every type of business, so it is important to understand the company’s rights with respect to IT services and software that it receives from third parties. Learn the basics of drafting and reviewing these documents in this information-packed program! Order the Video OnDemand here, the CD homestudy here, and the MP3 here. Available for 2 general credits.

2. Limited Liability Companies in Colorado
The limited liability company (LLC) has been a very popular choice of entity for many types of business since the Internal Revenue Service adopted the “check-the-box” regulations in December 1996. Because of the combination of limited liability for all owners of the LLC, pass-through tax treatment, and ease and flexibility in customizing the relationships between the owners, the LLC is seen by many as providing the best of all worlds. Of course, there are specific disadvantages to using an LLC, and the specific facts of each matter must be analyzed before making a decision to move forward with organizing an LLC. Each homestudy order receives a copy of the CBA-CLE book, Limited Liability Companies and Partnerships in Colorado, First Edition as part of the course materials for this program. Please note the book will be provided in PDF. Order the Video OnDemand here, the CD homestudy here, and the MP3 here. Available for 8 general credits, including 1 ethics credit.

1. Annual Institute on Advising Nonprofit Organizations in Colorado/A Primer on Advising Nonprofits
This annual program provides a comprehensive overview of issues related to advising nonprofit organizations. Although it is not available as a homestudy, the live program is worth attending every year. Visit ColoradoBusinessLawInstitute.org for more information and registration information for the 2017 program.

Ethical Issues for Lawyers Serving on Nonprofit Boards

nonprofitLawyers are invited to join the boards of nonprofit corporations for a variety of reasons, the best of which relate to the judgment and analytical and communication skills lawyers may bring to bear. Service on nonprofit boards, however, often presents lawyers with irresistible opportunities to their exercise their legal training, with potential ethical implications.

One of the primary ethical concerns for attorneys serving on nonprofit boards is whether the attorney is perceived as representing the organization or actually represents the organization. Lawyers serving on nonprofit boards must take care to avoid establishing an accidental attorney-client relationship. If a lawyer does not want to enter into an accidental attorney-client relationship, he or she would be wise to make it clear from the beginning of his or her service, perhaps in writing, that there is no attorney-client relationship. Similarly, attorneys serving on nonprofit boards should emphasize their roles to the other board members.

Conflicts of interest are another ethical pitfall for attorneys serving on nonprofit boards. The lawyer’s independent professional judgment may be compromised by his or her obligation to respect the conduct of the organization regardless of whether that conduct complies with the Colorado Rules of Professional Conduct. There is also the potential for conflict between the organization and the attorney’s law firm.

Although serving on boards of directors for nonprofit organizations presents unique ethical concerns, attorneys provide valuable contributions to boards. Good practices, such as clarifying the lawyer’s role before beginning board service or refraining from voting on issues involving the lawyer’s firm, can help avoid ethical dilemmas.

Ericka Houck Englert, Of Counsel at Davis Graham & Stubbs, will present a one-hour lunch program on December 20, 2016, to discuss ethics for attorneys sitting on nonprofit boards. Register by calling (303) 860-0608, or click the links below.

 

CLELogo

CLE Program: Ethical Issues for Attorneys Serving on Nonprofit Boards

This CLE presentation will occur on December 20, 2016, at the CBA-CLE offices (1900 Grant Street, Third Floor), from 12 p.m. to 1 p.m. Register for the live program here or register for the webcast here. You may also call (303) 860-0608 to register.

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

Colorado Supreme Court: Insurer Failed to Show Documents in Question Contained Trade Secrets

The Colorado Supreme Court issued its opinion in In re Rumnock v. Anschutz on Monday, December 5, 2016.

Pretrial Procedure—Protective Orders—Trade Secrets—Commercial Information.

The Colorado Supreme Court discharged its rule to show cause and affirmed the trial court’s partial denial of defendant American Family Mutual Insurance Company’s request for a protective order to restrict plaintiff’s use of alleged trade secrets. The court held that American Family failed to meet its burden to show that the documents were in fact trade secrets or other confidential commercial information.

Summary provided courtesy of The Colorado Lawyer.