April 23, 2014

Colorado Court of Appeals: ICAO Exceeded Its Authority by Finding Worsening of Condition Despite ALJ’s Ruling to the Contrary

The Colorado Court of Appeals issued its opinion in Apex Transportation, Inc. v. Industrial Claim Appeals Office on Thursday, March 13, 2014.

Worker’s Compensation—Injury—Temporary Total Disability Benefits—Factual Determinations.

Claimant worked as a truck driver for Apex when he sustained an injury to his shoulder. He refused medical attention at the time because it was “Apex’s busiest season” and he “thought the pain would go away.” When the pain did not subside, claimant obtained a “pain pill” containing morphine from his brother. Claimant thereafter reported the injury to his employer, and was sent to employer’s workers’ compensation healthcare provider to be examined and treated. Under employer’s policies, any employee who sustains a work-related injury must submit to a drug test when initially examined. The test proved positive for morphine. Because claimant did not have a prescription for the medication, he was terminated. Several days after being terminated, claimant returned to the medical clinic, and a physician found that his condition had worsened, gave claimant pain medication, and ordered him “off work.” The administrative law judge (ALJ) thereafter denied claimant’s request for temporary total disability (TTD) benefits. The Industrial Claim Appeals Office (Panel), on the other hand, concluded that because the physician’s work restrictions were imposed post-termination, the work restrictions, not the termination, caused claimant’s wage loss, entitling him to TTD benefits.

On appeal, employer contended that the Panel exceeded its authority when it set aside the ALJ’s original order denying claimant’s request for TTD benefits. Because the factual determination of whether claimant’s termination was volitional and that his condition had not worsened after he was terminated fall squarely within the ALJ’s province, the Panel exceeded its authority by reweighing the evidence. Substantial evidence supported the ALJ’s factual findings that claimant had not suffered a worsened condition and that his for-cause termination led to his wage loss. The Panel’s final order was set aside and the case was remanded with directions to reinstate the ALJ’s original order.

Summary and full case available here.

Colorado Court of Appeals: County Court’s Judgment was Final Determination of Fraud and Plaintiffs Could Recover on Surety Bond

The Colorado Court of Appeals issued its opinion in Mendoza v. Pioneer General Insurance Co. on Thursday, March 13, 2014.

Surety Bond Recovery—Declaratory Judgment—Colorado Consumer Protection Act Fraud Claim.

In March 2009, plaintiffs Mendoza and Gonzales bought an action against Fitzgerald Automotive Group, alleging a claim that Fitzgerald violated CRS § 6-1-708, a provision of the Colorado Consumer Protection Act (CCPA) that expressly prohibits motor vehicle dealers from engaging in certain specified deceptive trade practices. After a trial to a jury, the jury found in favor of plaintiffs on their CCPA claim and also found in a special interrogatory that Fitzgerald had engaged in bad-faith conduct under CRS § 6-1-113(2)(a)(III), which allows for an award of treble damages. Judgment was entered in the amount of $3,500, which was trebled. The court also awarded attorney fees of $15,475 and costs of $436.61.

Fitzgerald then ceased operations and plaintiffs were not able to recover on their judgment. They brought this action against Pioneer General Insurance Company (Pioneer), requesting a declaratory judgment that the motor vehicle dealer’s licensing bond required by CRS § 12-6-111 “is available to consumers who have been damaged by car dealers that commit deceptive trade practices . . . and that the bond is applicable to costs and attorney fees incurred by the consumer. . . .” The district court denied the motion.

On appeal, plaintiffs argued the district court erred because the county court’s judgment was a final determination of fraud or fraudulent representation that was sufficient to satisfy CRS § 12-6-111(2)(b). The Court of Appeals agreed.

Plaintiffs argued that CRS §§ 6-1-708 and 12-6-111 should be read together to accomplish their legislative purpose of providing remedies for consumer fraud. The Court held that § 6-1-708(1)(a)(I) has “at the very least, the element of an intent to deceive.” In essence, the Court found that a prohibited deceptive trade practice requires, as a matter of law, an intent to deceive, which, if found guilty of so doing, is a determination of fraud or fraudulent misrepresentation sufficient to satisfy CRS § 12-6-111(2)(b).

The Court also found that because the CCPA specifically authorizes the recovery of costs and reasonable attorney fees, plaintiffs can recover those fees and costs from Pioneer, as the surety on the bond, in addition to their actual damages of $3,500. Accordingly, the judgment denying plaintiffs’ motion for declaratory judgment was reversed and the case was remanded.

Summary and full case available here.

Colorado Court of Appeals: Funds Received in Arbitration Award Determined to be “General Intangibles”; Prevailing Party Entitled to Attorney Fees

The Colorado Court of Appeals issued its opinion in Millenium Bank v. UPS Capital Business Credit on Thursday, March 13, 2014.

Summary Judgment—Creditors’ Rights— Uniform Commercial Code.

UPS Capital Business Credit (UPS) loaned Superior Plaster and Drywall, Inc. (Superior) $1,027,000, secured by Superior’s assets. Millennium Bank (Millennium) loaned Superior $1.5 million, also secured by Superior’s assets. Millennium and UPS entered into an Intercreditor Agreement to establish the respective priority of their secured interests in Superior’s assets. Under the Intercreditor Agreement, (1) Millennium had first priority, and UPS second priority, in Superior’s accounts receivable; and (2) UPS had first priority, and Millennium second priority, in Superior’s general intangibles.

This case arose when Millennium and UPS disputed their rights to funds awarded to Superior in an arbitration proceeding. Superior had subcontracted with Beck Development, LLC (Beck) to perform drywall and paint work as part of the construction of two condominium towers. Superior claimed Akzo Nobel Paints, LLC (Akzo) had supplied defective paint; Akzo countered that Superior’s application techniques were to blame. Superior repainted the project four times at Beck’s insistence. The problem was not fixed, and Beck terminated Superior, without paying Superior for the costs incurred in repainting.

Superior sued Beck and Akzo, claiming (1) breach of contract by Beck and Akzo; (2) breach of warranty by Akzo; and (3) the right to receive payment on a mechanic’s lien it had filed on the condominium towers for work performed on the subcontract. The three entities agreed to arbitrate the claims against Akzo.

The arbitration panel determined that Akzo’s paint was the cause of the paint problems. The panel awarded consequential damages to Beck and Superior. To Superior, the damages encompassed (1) the amount due on Superior’s lien for work performed under the subcontract on the towers; (2) Superior’s costs for excess labor and excess materials in repainting the towers; and (3) punitive damages. Two weeks later, Superior filed for bankruptcy. Approximately one year later, Beck successfully moved, without objection, for dismissal of Superior’s claims against it.

The funds awarded in the arbitration became part of Superior’s bankruptcy estate. Millennium and UPS asserted their rights in those funds as secured creditors under Colorado’s version of the Uniform Commercial Code (UCC). They disputed only the priority rights with respect to the part of the funds representing the excess costs in labor and materials ($638,226.83) incurred by Superior in repainting the towers (challenged funds).

Millennium asserted the challenged funds were the proceeds of an account, on which it had first priority; UPS asserted they were the proceeds of an intangible right, on which it had first priority. The bankruptcy court determined it lacked jurisdiction to adjudicate the priority dispute and ordered the trustee to deliver the challenged funds to Millennium and UPS jointly for state law determination of their interests in the funds.

After the parties filed a statement of undisputed facts and cross-motions for summary judgment, the district court entered summary judgment for UPS, concluding that the challenged funds were general intangibles, rather than accounts. Millennium appealed and the Court of Appeals affirmed.

The parties agreed the resolution of the case depended on whether, as a matter of law, the challenged funds were, under the UCC, proceeds of an “account” or the proceeds of a “general intangible.” The “general intangible” category of assets traditionally encompassed proceeds from the right to pursue many types of lawsuits between a debtor and a party other than the interested creditor. However, this category, under the UCC, does not include “accounts.”

Here, the challenged funds were from an arbitration award Superior recovered from Akzo on a breach of warranty claim, not the right to payment of a monetary obligation for services rendered or to be rendered. Thus, the funds recovered from Akzo were not proceeds from an “account,” but rather proceeds of a “general intangible.” The district court’s classification of the funds was affirmed.

UPS requested its attorney fees incurred on appeal pursuant to a prevailing party fee provision in the Intercreditor Agreement. The Court agreed that UPS was entitled to those fees and remanded the case to the district court to award a reasonable amount of attorney fees incurred on appeal.

Summary and full case available here.

Colorado Court of Appeals: Motion for Reconsideration Did Not Toll Time Period for Filing C.A.R. 4.2 Petition for Interlocutory Review

The Colorado Court of Appeals issued its opinion in People in Interest of A.M.C. on Thursday, March 13, 2014.

Interlocutory Appeal—CAR 4.2.

On October 23, 2013, the Denver Department of Human Health Services (Department) filed a petition in dependency and neglect, asserting that the minor child was dependent or neglected by respondent parents. At a custody hearing eleven days later before a magistrate, the respondent mother denied the allegations and requested a jury trial.

On November 5, 2013, the Department disclosed to mother and her attorney that a paralegal employed by the city attorney’s human services legal staff was the aunt of the father. Even though the father’s whereabouts were unknown and he had not participated in the case, mother asserted to the juvenile court on November 12 that this created a conflict of interest. The juvenile court agreed and ordered appointment of a special prosecutor.

On November 20, the Department filed a motion for reconsideration. The juvenile court orally denied the motion on December 10. The Department filed a motion for certification of the disqualification order for the purpose of interlocutory appeal on December 23, 2013. The juvenile court granted the motion on January 2, 2014, and the Department filed its petition in the Court on January 9, 2014.

The Court of Appeals questioned the timeliness of the motion for certification and requested that the parties provide briefs on the issue. The Department submitted a brief. The Court held that the disqualification order was not timely sought and that the Department had not demonstrated good cause to enlarge the time prescribed in CAR 4.2.

CAR 4.2(c) requires that a party seeking to file an interlocutory appeal move for certification or submit a stipulation signed by all parties “within 14 days after the date of the order to be appealed.” CAR 4.2(d) provides that after the trial court certifies an order for interlocutory appeal, “the party seeking an appeal shall file a petition to appeal with the clerk of the court of appeals with an advisory copy served on the clerk of the trial court within 14 days of the date of the trial court’s certification.”

The Department asserted it motion for certification was timely filed because its motion for reconsideration does not toll the time period for filing, the oral order was on November 12, and therefore the motion for certification was due by November 26 but was not filed until December 23. CAR 26(b) allows the deadline in CAR 4.2(d) to be extended “for good cause shown.” To obtain such an extension, a party must establish that its failure to meet the applicable deadline was due to “excusable neglect.” The Court found that the Department’s belief that the motion for reconsideration tolled the time period did not constitute excusable neglect. The interlocutory appeal was dismissed.

Summary and full case available here.

Colorado Court of Appeals: District Court Not Required to Hold Sentencing Hearing to Convert Community Corrections Sentence to DOC Sentence

The Colorado Court of Appeals issued its opinion in People v. Herrera on Thursday, March 13, 2014.

Community Corrections Program—Department of Corrections—Resentencing Hearing.

Defendant Arturo Herrera pleaded guilty to third-degree assault, resisting arrest, and second-degree burglary. Based on his preliminary acceptance into a community corrections program and the probation department’s recommendation, the district court sentenced him to six years in a community corrections program. A month after the sentencing hearing, the community corrections program rejected Herrera before he was placed in the program because of mental health concerns. The district court thereafter converted Herrera’s community corrections sentence to a six-year sentence in the Department of Corrections (DOC), followed by three years of mandatory parole.

On appeal, Herrera argued that the district court erred in converting his community corrections sentence to a DOC sentence without first holding a resentencing hearing. Pursuant to CRS §18-1.3-301, the district court was not required to hold a hearing when it resentenced him and converted his community corrections sentence to an equivalent DOC sentence.

Herrera also contended that the district court failed to exercise its discretion in resentencing him or, in the alternative, that it abused its discretion by resentencing him to six years in DOC. The district court considered appropriate factors when it originally sentenced Herrera, and it was not required to hold a resentencing hearing. Further, the DOC sentence was within the applicable sentencing range. Accordingly, it did not fail to exercise its discretion when it converted the six-year community corrections sentence to a DOC sentence.

Summary and full case available here.

Colorado Court of Appeals: Convictions for Marijuana Charges Reversed Due to Application of Amendment 64

The Colorado Court of Appeals issued its opinion in People v. Russell on Thursday, March 13, 2014.

Marijuana Possession—Retroactive Application of Amendment 64—Police Officer Testimony—Lay Witness.

Defendant and her husband (father) brought their infant son to the hospital, where he was diagnosed with a spiral fracture on his left femur. After suspecting abuse, a social worker from the Grand County Department of Social Services (DSS) interviewed defendant and subsequently obtained a court order to perform a urinalysis on her. Defendant tested positive for amphetamine, marijuana, and methamphetamine. The police searched defendant’s home pursuant to a warrant and seized several items, including drug paraphernalia, miscellaneous containers containing marijuana, marijuana concentrate, and methamphetamine. Following a jury trial, she was acquitted of the child abuse charge, but was found guilty of possession of one gram or less of a schedule II controlled substance (methamphetamine), possession of marijuana concentrate, and possession of less than one ounce of marijuana.

On appeal, defendant contended that Amendment 64 of the Colorado Constitution should be applied retroactively and that her convictions for possession of marijuana concentrate and possession of less than one ounce of marijuana should be vacated. The quantity of marijuana and marijuana concentrate possessed by defendant fell within the safe harbor established by § 16(3)(a) of Amendment 64. Because defendant’s convictions were pending appeal when Amendment 64 became effective, her convictions for possession of marijuana concentrate and less than one ounce of marijuana were reversed and vacated.

Defendant further argued that her methamphetamine conviction should be reversed because the trial court erred by allowing a police officer to testify regarding the physical effects of methamphetamine use without requiring that the officer be qualified as an expert pursuant to CRE 702. A lay witness may express an opinion as to whether a defendant was under the influence of drugs, provided that a proper foundation has been laid. As a lay witness, the officer was permitted to testify about his observations based on his eleven years of experience as a police officer. Although the officer didn’t base his testimony on any specialized training, any error was harmless because the officer’s testimony was cumulative of other evidence. Therefore, the trial court did not abuse its discretion in admitting the officer’s testimony.

Summary and full case available here.

Colorado Court of Appeals: Medical Necessity Report Obtained After Seizure of Marijuana Plants Not Admissible as Defense

The Colorado Court of Appeals issued its opinion in People v. Fioco on Thursday, March 13, 2014.

Medical Marijuana Amendment—Affirmative Defense.

After defendant’s medical marijuana card expired, he was arrested and his marijuana plants were seized. Defendant later obtained a certification from a second physician describing certain medical conditions, on the basis of which defendant “needs 25 plants.” Defendant relied on this certification to assert an affirmative defense pursuant to § 14(4)(b) of the Medical Marijuana Amendment (Amendment). The jury was instructed on this defense, but implicitly rejected it by returning a guilty verdict.

On appeal, defendant did not dispute that he cultivated marijuana plants, but contended that the prosecution failed to prove that he cultivated more than the six marijuana plants allowed by § 14(4)(a)(II) of the Amendment. However, defendant’s counsel conceded during closing argument that defendant cultivated more than six marijuana plants.

Defendant also contended that even if the prosecution proved he cultivated more than six marijuana plants, his conviction must be set aside because the prosecution failed to disprove his affirmative defense that “such greater amounts were medically necessary to address [his] debilitating medical condition.” Section 14(4)(b) of the Amendment creates an affirmative defense to the offense of cultivating marijuana, where the plants are needed for medical use. This defense, however, cannot be asserted based on a physician’s assessment obtained after the offense has been committed. Because the second physician’s certification that defendant “needs 25 plants” was obtained after defendant had committed the offense, he should not have been allowed to raise the 14(4)(b) defense. Therefore, even if the prosecution’s evidence was insufficient to disprove this defense, any error was harmless because the defense should not have been permitted in the case.

Summary and full case available here.

Colorado Court of Appeals: No Error in Ordering Restitution for Injuries Related to Not Wearing Seatbelt

The Colorado Court of Appeals issued its opinion in People v. Sieck on Thursday, March 13, 2014.

Restitution—Injuries—Failure to Wear Seatbelt—Intervening Cause.

Defendant was driving a car in excess of 110 miles per hour after consuming alcohol and drugs. He lost control of the car. One of the two passengers (J.P.) was ejected from the car as it rolled over, and he sustained a permanent debilitating brain injury. Defendant pleaded guilty to the charges, and the court granted the prosecution’s motion for $833,194.10 in restitution for medical expenses, out-of-pocket costs, and lost wages related to J.P.’s injuries.

On appeal, defendant contended that the trial court erred when it ordered him to pay restitution for losses that were attributable to J.P.’s failure to wear a seatbelt. The failure to wear a seatbelt is not gross negligence, and thus is not an intervening cause relieving a defendant of responsibility for criminal conduct. Therefore, the trial court did not err in granting the prosecution’s motion for restitution.

Summary and full case available here.

Colorado Court of Appeals: Automobile Financier Not Entitled to Tax Credit for Bad Debt Write-Off

Colorado Court of Appeals issued its opinion in Daimler Chrysler Financial Services Americas, LLC v. Colorado Department of Revenue on Thursday, March 13, 2014.

Motor Vehicles—Sales Taxes—Tax Refund—Bad Debt—Assignment of Rights.

Consumers purchased motor vehicles from several motor vehicle dealers using retail installment contracts secured by liens on the vehicles. At the times of the sales, the dealers assigned all of their rights under the contracts to Daimler Chrysler Financial Services Americas, LLC (Daimler), which paid the dealers the entire amounts due on the contracts, including the sales taxes. The dealers then remitted the sales taxes to the Department of Revenue. When certain consumers defaulted on their contracts, Daimler repossessed the vehicles securing those purchasers’ obligations. Even after repossession and sale of the collateral, unpaid balances remained on some of those contracts. Daimler “charged off” those debts for federal income tax purposes and sought a bad debt tax credit or refund from the Department of Revenue, which was denied.

On appeal, Daimler contended that the district court erred in holding that Daimler and the dealers did not constitute a “group or combination acting as a unit” for purposes of Daimler’s claim for a tax credit or refund under CRS § 39-26-102(5). Here, subsection 102(5) and subsection 113(6) conflict. Subsection 102(5) provides for a credit for sales taxes paid on accounts that are subsequently charged off as bad debts without reference to any particular kind of business. Subsection 113(6) also provides for a credit for sales taxes paid on accounts that are subsequently charged off as bad debts, but specifically addresses motor vehicle sales and limits the type of entity that can claim a credit. Thus, subsection 113(6) is the more specific provision, and it prevails. Because it is not a retail seller of motor vehicles or a wholly owned affiliate or subsidiary of such a seller, Daimler did not qualify as a seller–financer under subsection 113(6)(b) and, therefore, could not claim a tax credit.

Daimler also contended that the district court erred in concluding that the dealers could not provide Daimler valid assignments of any rights to relief under subsection 102(5) even if Daimler could not originally claim those rights as a taxpayer itself under the statute. However, because the dealers are not seller–financers and have no rights to tax credits, they have no tax credits to assign to Daimler.

Summary and full case available here.

Colorado Court of Appeals: Announcement Sheet, 3/13/2014

On Thursday, March 13, 2014, the Colorado Court of Appeals issued 12 published opinions and 40 unpublished opinions.

People v. Herrera

People v. Russell

People v. Fioco

People v. Sieck

Daimler Chrysler Financial Services Americas, LLC v. Colorado Department of Revenue

Apex Transportation, Inc. v. Industrial Claim Appeals Office

Lawson, II v. Stow, IV

Lewis v. Taylor

In re Marriage of Dadiotis

Mendoza v. Pioneer General Insurance Co.

Millenium Bank v. UPS Capital Business Credit

People in Interest of A.M.C.

Summaries of these cases are forthcoming, courtesy of The Colorado Lawyer.

Neither State Judicial nor the Colorado Bar Association provides case summaries for unpublished appellate opinions. The case announcement sheet is available here.

Colorado Court of Appeals Kicks the Can as to Whether HPA Voids Limitations-of-Liability Clauses in Residential A/E Contracts Between Construction Professionals

Tim_GordonBy Timothy Gordon

Colorado’s Homeowner Protection Act (the “HPA”) protects homeowners by voiding any contractual provision that would result in the waiver of a homeowner’s rights under the Construction Defects Action Reform Act. C.R.S. § 13-20-806(7)(a). But some have argued that this same law should also void certain waivers and releases in agreements between construction professionals working on residential projects. Recently, the Colorado Court of Appeals was faced with, but did not decide, this issue.

The HPA provision in question provides as follows:

In order to preserve Colorado residential property owners’ legal rights and remedies, in any civil action or arbitration proceeding described in section 13-20-802.5 (1), any express waiver of, or limitation on, the legal rights, remedies, or damages provided by the “Construction Defect Action Reform Act”, this part 8, or provided by the “Colorado Consumer Protection Act”, article 1 of title 6, C.R.S., as described in this section, or on the ability to enforce such legal rights, remedies, or damages within the time provided by applicable statutes of limitation or repose are void as against public policy.

C.R.S. § 13-20-806(7)(a).

The reference to “section 13-20-802.5(1)” is to the definition of the word “Action”, which is defined as “a civil action or an arbitration proceeding for damages, indemnity, or contribution brought against a construction professional to assert a claim, counterclaim, cross-claim, or third party claim for damages or loss to, or the loss of use of, real or personal property or personal injury caused by a defect in the design or construction of an improvement to real property.” So the basic argument is that construction professionals who bring cross-claims or third party claims for indemnification against other construction professionals should be protected under C.R.S. § 13-20-806(7)(a).

In Taylor Morrison of Colorado, Inc. v. Bemas Construction, Inc., et al., 2014 COA 10, Taylor Morrison hired Terracon to perform certain geotechnical engineering and construction materials testing for a residential subdivision that Taylor Morrison was developing. After many homes were constructed, homeowners began complaining about cracks in the drywall. Taylor Morrison investigated the complaints and ended up spending significant amounts of money to remedy the defective conditions.

Taylor Morrison then sued Terracon to recover the money that it spent remedying the defects. Terracon’s contract with Taylor Morrison limited Terracon’s liability to $550,000, but Taylor Morrison was seeking more. So Taylor Morrison filed a motion with the trial court, asking the trial court to determine whether the HPA invalidated the limitation of liability in its contract with Terracon. The trial court ruled in favor of Terracon, holding that the HPA did not apply to invalidate a limitation of liability clause in a contract between it and Taylor Morrison because the HPA was meant to protect homeowners, not commercial entities. The Court of Appeals affirmed, but on different grounds. Specifically, the Court of Appeals held that the HPA could not apply retroactively to the contract between Terracon and Taylor Morrison. So the issue of whether the HPA would void a limitation of liability in an engineer’s agreement with a developer remains unresolved at the appellate level.

Consider the outstanding issue in light of the Court of Appeals’ decision in Mid Valley Real Estate Solutions V, LLC v. Hepworth-Pawlak Geotechnical, Inc., et al., 2013 COA 119. There, the Court of Appeals held that a bank holding title to residential property qualifies as a “homeowner” for purposes of the economic loss rule, and therefore may bring tort claims against construction professionals for construction defects. The Court’s reasoning in Mid Valley Real Estate Solutions is broad enough to include just about any person or entity holding title to residential property. So query the following:

  • Can developers who still hold title to homes that they have developed sue their own subcontractors and consultants in tort for alleged construction defects under Mid Valley Real Estate Solutions?
  • If so, are the developers bound by limitations of liability in their contracts with their subcontractors and consultants, or does the HPA void such limitations?
  • Finally, does it make sense to make a distinction between developers who still hold title to homes and developers who no longer hold title to homes when deciding whether or not the HPA applies?

Timothy Gordon represents construction and commercial real estate clients in complex disputes, and understands the interrelationship between the long-term real estate development, project construction, and property management. A thought leader in construction law, he currently authors Construction Law in Colorado, a blog that provides insight on key cases and developments relevant to construction law in Colorado, where this post originally appeared on February 21, 2014. He is the Co-Managing Editor of The Practitioner’s Guide to Colorado Construction Law, a three-volume treatise on construction law in Colorado.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

Colorado Court of Appeals: Announcement Sheet, 3/6/2014

On Thursday, March 6, 2014, the Colorado Court of Appeals issued no published opinion and 37 unpublished opinions.

Neither State Judicial nor the Colorado Bar Association provides case summaries for unpublished appellate opinions. The case announcement sheet is available here.