April 21, 2014

IAALS Releases Preliminary Findings on Colorado Civil Access Pilot Project

Corina_Gerety_bw_smallThis post originally appeared on IAALS Onlinethe blog for IAALS, the Institute for the Advancement of the American Legal System at the University of Denver, on April 7, 2014.

By Corina Gerety

IAALS is pleased to announce the completion of its preliminary evaluation report on the Colorado Civil Access Pilot Project (CAPP), which tests a new set of pre-trial procedures for business actions in state district court. The project, which began in January 2012 and runs through December 2014, is in place in five Denver metro-area courts.

Relating to pleadings, disclosures, discovery, and case management, the CAPP rules were designed to bring the disputed issues to light at the earliest possible point, tailor the process proportionally to the needs of the case, provide active case management by a single judge, and move the case quickly toward trial or other appropriate resolution. The preliminary report combines the results of a docket study with attorney and judge surveys.

Our initial analysis reveals that the CAPP process as a whole has succeeded in achieving many of its intended effects, including a reduced time to disposition, increased court interaction, proportional discovery and costs, and a lower level of motions practice. Much of the positive feedback relates to CAPP’s early, active, and ongoing judicial management of cases, with many calling for this to become a permanent feature of the rules.

For those cases that are at least minimally contested, one of the challenges of the project relates to differences between simple and complex cases. The first part of the CAPP process (rolling and staggered deadlines for pleadings and initial disclosures) appears to work better in simple cases, while it can fall apart in complex cases. The second part of the CAPP process (everything from the joint case management report forward) appears to provide a real benefit for complex cases, while it can be too much for simple cases. This is just one nuance in the results, and the full report will provide interesting reading for those engaged in these issues—both inside and outside of Colorado.

This report accompanies other recent reports on rules projects taking place around the country, includingNew HampshireMassachusetts, and Utah. It is preliminary because some cases in the docket study sample have not yet resolved and because differences in the survey data based on case or respondent characteristics will need to be more fully explored. The final report will be released in the fall of 2014.This is, however, a very valuable starting point.

Click here to download the Preliminary Findings on the Colorado Civil Access Pilot Project.

Corina Gerety directs long-term research and evaluation projects for IAALS. Her work involves legal and empirical research, analysis, and writing, as well as research-related collaboration and presentation. She conducts research for all IAALS initiatives on an as-needed basis. Gerety came to IAALS in the Spring of 2009 from the public sector, having worked for a number of years in the Office of the Colorado Attorney General and in clerkships at the Colorado Supreme Court, Colorado’s Second Judicial District Court, and the Office of the Presiding Disciplinary Judge.

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.

Complexity of Mission and the Power of Form

joe_yockeyBy Joseph Yockey
Associate Professor of Law, University of Iowa

Consider two different social enterprises: Blue River Technology and Greyston Bakery.

Blue River applies expertise in robotics to develop new agricultural technologies. Recognizing that $25 billion is spent annually on herbicides that pose environmental risks, the company offers farmers the option to reduce their chemical usage by switching to robots pulled behind tractors that can quickly identify and kill weeds with a rotating blade.

Greyston sells brownies (including some found in Ben & Jerry’s ice cream), but it also adheres to a strict workforce development program. The company staffs its operations with hard-to-employ individuals and teaches them skills that they can use when looking for jobs across the wider foodservices industry. As Greyston’s slogan says, “We don’t hire people to bake brownies, we bake brownies to hire people.”

Greyston is organized as a benefit corporation; Blue River is not. That probably makes sense.

Blue River approaches what some call “the hybrid ideal” – a situation where everything a company does generates social value and revenue. The company’s social objectives are market driven. There is little tension between profits and impact. Mission drift is relatively easy to monitor. I wouldn’t think Blue River has much to gain by becoming a benefit corporation. Indeed, it seems to be doing just fine.

Greyston is different. It can’t align profits with public good quite as neatly. Its social mission is broader and open to greater interpretation. What does it mean for someone to be “hard-to-employ?” How should we measure something as fuzzy as workforce development? Even if we say that Greyston is near the hybrid ideal, can we be sure it won’t move toward greater pursuit of profits at the expense of public benefit? This might follow from something as simple as a change in ownership or leadership, and it could be hard to detect. Blue River’s products strike me as easily observable, but if Greyston makes discrete changes to its hiring policies, those decisions seem easier to keep under wraps.

The provisions found in benefit corporation statutes do not fully resolve these issues. However, I’m not ready to say that benefit corporation statutes are a mistake, or that becoming a benefit corporation is only about greenwashing. Instead, I argue that the benefit corporation’s best opportunity for influence is to be seen as a new institutional structure—one that can motivate the development of self-regulatory standards and provide a normative framework for social entrepreneurs and pro-social investors. This framework, in turn, can be particularly helpful to companies like Greyston that pursue more complex social missions.

First, the benefit corporation form offers a rallying or focal point that ought to make it easier for like-minded private actors to come together and collaborate on issues ranging from corporate governance practices to the development of social impact metrics. Seeing benefit corporation laws as focal in this way does not mean they will dictate particular standards. Rather, they simply incentivize firms and stakeholders to participate in a self-regulatory process by providing an archetype and hub that can facilitate communication and standards development. The form’s mandate to consider multiple interests should make such cooperation more palatable. Firms that prioritize profits above other objectives often lack the incentive to share information with their competitors. In that case, first-movers will see their profits slip if information sharing allows others to easily replicate their strategies. However, by definition, the benefit corporation form means that profits are not the overriding focus. It thus creates more room for cooperation and coordination—and as Haskell Murray reports, this already appears to be happening.

Additionally, a key step in addressing issues like mission drift is to recognize that, just as they send broader signals about values to the market, legal forms also influence corporate behavior. The people within an organization are the most significant determinants of its commitment to mission. With respect to the benefit corporation, forms that reflect a specific ideological commitment can influence internal culture by signaling the values that should inform employee decision-making.Patagonia cited this belief as a motivating factor in its decision to become a benefit corporation.

Finally, establishing a culture that leads to the internalization of values is easier when organizational goals match employees’ personal beliefs. The benefit corporation’s emphasis on dual objectives should attract socially minded employees by signaling that they will find a supportive structure in place. When employees then enter organizations that reflect their own values, they often exhibit greater motivation to act consistently with those values.

There is obviously much more to say about these points, and for anyone looking to wade deeper into them, I offer a fuller explanation here.

Unless the rapid spread of benefit corporation laws is evidence of an enthusiastic or cynical mistake (which I think is possible but unlikely), then there must be some underlying logic to unpack. My aim is to keep working to explain the social enterprise phenomenon, to put it into a clear theoretical framework, and to distill the best justifications for offering special organizational options for social entrepreneurs.

Joseph W. Yockey joined the faculty of the University of Iowa as an Associate Professor of Law in 2010 and was voted Professor of the Year by the law school student body for 2011-12.  He is also a two-time nominee for the University of Iowa’s campus-wide President and Provost Award for Teaching Excellence.  He teaches Business Associations, Securities Regulation, and a seminar on Securities Litigation.  His writing interests are in the areas of corporate governance, securities regulation, and corporate crime.

Before coming to Iowa, Professor Yockey taught as a Visiting Assistant Professor at the University of Illinois College of Law.  He is also a summa cum laude graduate of the University of Illinois College of Law, where he served as articles editor for the University of Illinois Law Review and was elected to the Order of the Coif.  After graduating from law school, he clerked for Judge John D. Tinder (presently of the U.S. Court of Appeals for the Seventh Circuit) in Indianapolis and practiced corporate and securities litigation at Sidley Austin LLP in Chicago.  He is a member of the Illinois Bar.

Professor Yockey is also a guest blogger for The Conglomerate, where this post originally appeared on March 20, 2014.

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.

 

CLE Homestudy: Public Benefit Corporation Act, Effective April 1, 2014

This CLE presentation took place on February 12, 2014. Click here to order the Video On Demand and watch the entire presentation online, click here for the MP3 Audio Download homestudy, click here for the CD homestudy, or call (303) 860-0608 to order by phone.

 

U.S. Supreme Court Rules Private Contractors and Subcontractors Are Covered By SOX Whistleblower Protections

CoburnSuttleRiordanBy Bob Riordan, Brett E. Coburn, and Brooks A. Suttle

On March 4, 2014, the U.S. Supreme Court issued its decision in Lawson v. FMR LLC,[1] addressing for the first time the whistleblower provision of Section 806 of the Sarbanes-Oxley Act (SOX), which provided in relevant part:

No [public] company . . . or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of [whistleblowing or other protected activity].[2]

While it is clear from the statutory language that a private contractor or subcontractor of a public company cannot engage in retaliatory actions against an employee, courts have divided on whether “an employee” refers only to the public, SOX-reporting company’s employees, or also protects employees of the private contractor or subcontractor from retaliation.

In Lawson, the U.S. Court of Appeals for the First Circuit took the former view, holding that the meaning of “employee” in Section 806 is unambiguous, and that employees of privately-held companies are not covered by SOX’s whistleblower protections regardless of who their employer contracts with.[3] In a 6-3 split decision, however, the high court reversed and remanded the First Circuit’s decision, finding instead that SOX’s anti-retaliation provision also covers employees of private contractors and subcontractors that are hired by public companies covered by the law. In so doing, the Court significantly expanded SOX’s whistleblower protections to give the law what appears to be, in the words of Justice Sotomayor’s dissent, a “stunning reach.”

The plaintiffs in Lawson were two former employees of private companies that contracted to advise and manage mutual funds, which had no employees and are covered by SOX as companies required to make certain regulatory filings. After they were allegedly retaliated against for attempting to report a purported fraud related to mutual funds, the plaintiffs brought a whistleblower claim against their former employers under Section 806. The defendants’ motion to dismiss was initially denied by the District Court, but the First Circuit reversed the decision and found that dismissal was appropriate because Section 806 did not protect the plaintiffs as employees of private companies.

On appeal, the Supreme Court examined the text of the statute, the context in which it was enacted, and its legislative history. Writing for the majority, Justice Ruth Bader Ginsburg wrote with regard to statutory text that the language of Section 806 is unambiguous, and contains “numerous indicators that the statute’s prohibitions govern the relationship between a contractor and its own employees.”[4] With regard to legislative intent, Justice Ginsburg likewise found that Section 806 was enacted “to encourage whistleblowing by contractor employees who suspect fraud involving the public companies with whom they work.”[5] Justice Ginsberg was joined in the majority by Chief Justice Roberts, and Justices Breyer and Kagan. Justices Scalia penned a separate opinion, joined by Justice Thomas, concurring in the ruling but criticizing the majority’s focus on legislative intent and comparisons to other whistleblower laws.

In a strongly worded dissent in which she was joined by Justices Kennedy and Alito, Justice Sotomayor wrote that the majority’s opinion gave the SOX whistleblower laws a “stunning reach” that could lead to “absurd results,” and that “nothing in the text, context, or purpose of the Sarbanes-Oxley Act suggests that Congress actually wanted to do so.”[6] Finding that the statutory text is ambiguous, and that Congress intended a narrow reading of Section 806 that excluded employees of private companies, Justice Sotomayor dissented that whatever “laudatory purpose” the majority’s interpretation of the whistleblower law might serve, “that is not the statute Congress wrote.”[7]

The dissent notwithstanding, the Court’s decision is now the law of the land, and will likely remain so unless and until Congress acts to overturn the majority’s interpretation of Section 806. While the majority was dismissive of any “floodgate-opening concerns” about a potential deluge of new whistleblower litigation,[8] there is no question that the number of employees covered by SOX’s whistleblower provisions has been enormously expanded by the Court’s ruling. As such, many private employers who have become accustomed to thinking of themselves as outside the scope of SOX’s whistleblower provisions will need to reevaluate their practices and procedures in light of Lawson, and take steps to minimize the potential for whistleblower claims. Such steps can include, among other things, changes to the company’s training programs, employee documentation and record-keeping procedures, and internal policies governing the discipline process and the permissible grounds for taking adverse action against an employee.

At a minimum, private companies who contract to do business with public companies should seek the assistance of counsel to conduct a thorough review of their internal control and compliance procedures, in addition to modifying their anti-retaliation policies as needed. Companies should also conduct training on what is and is not permissible given SOX’s whistleblower provisions, and make it clear that knee-jerk firings and other adverse actions must be avoided when an employee reports fraud or other misconduct covered by SOX, whether allegedly occurring at the public company or at the contractor-employer. Likewise, public companies need to recognize that they may now be found liable not only for retaliation against their own employees who report SOX violations, but also for retaliatory acts conducted by agents of the public company against the employees of its private contractors and subcontractors. Public company employers thus may also need to reconsider their SOX reporting and anti-retaliation policies in light of the fact that Lawson greatly expanded the pool of potential whistleblower claimants.

As a final note on Lawson, it is worth noting that the Supreme Court chose not to weigh in on another important issue recognized in the case – the extent to which a prior decision by the Department of Labor’s (“DOL”) Administrative Review Board’s (“ARB”) was entitled to deference by the Court. Several months after the First Circuit’s decision in Lawson, the ARB came to the opposite conclusion in Spinner v. David Landau & Associates, LLC.[9] In that case, the ARB held that the meaning of “employee” in Section 806 was ambiguous, and therefore the ARB did not have to follow the First Circuit’s ruling. Instead, the ARB sought to expand SOX’s reach in holding that Section 806 applied to employees of privately-held companies if they had contracts with publicly-traded companies.[10]

Thus, when the Supreme Court agreed to hear Lawson, many observers hoped that the Court would use it as an opportunity to decide the proper level of deference that courts should give to the ARB’s construction of SOX. The Court, however, essentially passed on the issue, simply noting in a footnote that “[b]ecause we agree with the ARB’s conclusion that [Section 806] affords protection to a contractor’s employees, we need not decide what weight that conclusion should carry.”[11] But while the deference issue was left unanswered, the Court’s Lawson decision will almost certainly have a large impact in the arena of SOX whistleblower litigation. At the very least, it has given both public company and private company employers plenty to consider in ensuring that they are in compliance with SOX’s anti-retaliation laws.

Brett Coburn is a partner who concentrates his practice on employment litigation and counseling. His litigation experience includes gender, race, age and disability discrimination suits under Title VII, the ADEA and the ADA, as well as FLSA wage and hour claims and FMLA interference and retaliation claims. His experience also includes the defense of collective actions under the FLSA and ADEA. He has litigated cases involving misappropriation of trade secrets, breach of employment contracts, violation of non-competition and other restrictive covenants, defamation, breach of employee duties, tortious interference and related customer and employee raiding claims.

Brooks Suttle is an associate in the firm’s Labor & Employment Group. Brooks received his J.D., with honors, from Emory University School of Law, where he was elected to the Order of the Coif. While at Emory, he served as the executive symposium editor for the Emory Law Journal, where he was responsible for planning and organizing the 2012 Randolph W. Thrower Symposium, “Innovation for the Modern Era: Law, Policy, and Legal Practice in a Changing World.” He also received the 2011 Myron Penn Laughlin Award for Excellence in Legal Research and Writing for his journal comment: “Reframing Professionalism: An Integral Approach to Lawyering’s Lofty Ideals.”

Bob Riordan is a litigator who focuses on disputes relating to employment, business torts, unfair competition and commercial transactions. He regularly represents clients in both federal and state courts, as well as various agencies and arbitral forums. He has appeared in trial and appellate courts throughout the country, and has been recognized for his achievements in Best Lawyers in AmericaChambers USA: America’s Leading Lawyers for Business, Georgia Trend’s Legal Elite, PLC Which Lawyer? and Super Lawyers magazine. Mr. Riordan has extensive experience in defending wage disputes brought on a mass and class basis as well as whistleblower claims. He also regularly defends companies against claims of all varieties of discrimination and retaliation, as well as claims relating to the law of public accommodation, tortious interference, breach of fiduciary and other duties, theft of trade secrets and similar matters. In addition, Mr. Riordan often litigates contract disputes, including earn-out and other claims tied to business combinations.

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.

 


[1] 571 U.S. ___ (March 4, 2014).

[2] 18 U.S.C. § 1514A(a) (2006 ed.) (emphasis added).

[3] See Lawson v. FMR, LLC, 670 F.3d 61 (1st Cir. 2012).

[4] Slip op. at 16.

[5] Id. at 19. Despite Justice Ginsburg’s observation, the rule of Lawson extends to reports of alleged misconduct committed by both the public company and the employer-contractor. Indeed, as pointed out in the dissent, under the majority’s holding, the employer-contractor’s alleged misconduct may have nothing to do with the contract between the employer-contractor and the public company.

[6] Id. at 2 (Sotomayor, dissenting).

[7] Id. at 20.

[8] Slip op. at 22.

[9] ARB Nos. 10-111, 10-115 (May 31, 2012).

[10] For its part, the First Circuit noted in its decision that, because the statute was unambiguous, the court owed no so-called Chevron deference to any contrary agency determinations. See Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (holding that agency interpretations of ambiguous statutes will be upheld so long as they are reasonable, but where a statute is unambiguous, the courts as well as the administrative agencies must give effect to its clear meaning).

[11] Slip op. at 9 n.6. The dissent in Lawson argues that the majority in fact declined deference by not endorsing all of the ARB’s holding in Spinner. Slip op. at 17 n.11.

Top 10 Reasons Attorneys Go In-House

Sharon_MclaughlinBy Sharon A. McLaughlin, Esq.

The majority of attorneys begin their legal careers in law firms (versus in-house corporate legal departments – i.e., “in-house”) for a variety of reasons–- e.g., there are fewer in-house opportunities for new attorneys, law school graduates often want to get “big firm” experience and training before going in-house, and the compensation can often be higher in big firms.  Nonetheless, in my experience as an attorney recruiter, many attorneys in law firms either know starting out or within their first 5 years of practice that they want to eventually transition in-house, and they usually cite one of the following 10 reasons.

 1.     Billable-hours

With in-house legal departments, companies pay their attorneys’ annual salaries/bonuses/benefits and do not have billable hour requirements or quotas that their attorneys must meet to justify their cost.  Conversely, law firms generally have a minimum billable hour requirement and quota that their attorneys must meet to justify their high salaries and to qualify for bonuses and salary increases. The billable-hour system is the way most lawyers in law firms charge their clients, and it’s a key measure of associate and partner productivity.  This system can create a culture in which everyone is pushed hard and works long hours, eventually resulting in frustration, fatigue and exhaustion.  Many attorneys despise this system, and it’s one of the most common complaints that recruiters hear from law firm attorneys.  Consequently, it’s one of the top reasons attorneys in law firms want to go in-house.

 2.     Work-life balance

Many law firm attorneys have the belief that they will have greater work-life balance going in-house, and this is often true.  However, that’s not always the case.  In their goal to become a profit center, some in-house legal departments have long, exhausting hours with a lower level of compensation.  However, this is generally not the norm.  It is incumbent on attorneys to vet this issue when interviewing with any prospective company to ensure that work-life balance exists (with appropriate questioning at the appropriate time, of course).  Many in-house interviewers will volunteer information about their organization’s work-life balance since they know this is generally something incoming attorneys want to know and a big selling point when it exists.  In addition, attorneys are often, by nature, intuitive and can sense when the in-house attorneys with whom they’re interviewing are happy and content in their roles versus overworked, exhausted and miserable.   The latter is generally a tell-tale sign that work-life balance does not exist.

3.     Predictability of schedule

Another common complaint among law firm attorneys is the fact that they are essentially on call at all times.  They must be available to deal with client emergencies or deadlines that arise at unpredictable and inopportune times – e.g., 4:00 p.m. on a Friday afternoon or over the weekend.  As a legal recruiter, I have worked with and placed many in-house attorneys who report that they keep regular hours (e.g., 8:00 am – 5:00 p.m.), do not work weekends, spend quality time with their families, plan vacations in advance and, most importantly, do not fear being penalized for taking vacation with mountains of work upon their return.

 4.    Working closely with the business team and interfacing with upper level management and executives.

Another appealing quality that attorneys have identified about going in-house is the opportunity to work closely with an organization’s business team and regularly interface with upper level management and executives.  An in-house attorney’s clients are the internal business units and the managers and executives who lead those units at the organization at which they work.  As a result, these are often the people with whom the attorneys are regularly working, communicating and assisting on a day to day basis.  For law firm attorneys, this level of interaction and exposure can be limited if not non-existent.

 5.     Career Track

In a law firm, an attorney’s career track is generally one dimensional – you begin your career as an associate and then you may or may not make partner.  If you do not make partner, you either remain an associate for many years until it becomes too embarrassing to stay; or, if it exists at your firm, you may move into a non-partner role with a special title – e.g., Counsel, Special Counsel, Of Counsel, etc.

At a company, attorneys often have various long term career opportunities available to them.  Depending on the organization and its size, you may have the opportunity to move between practice disciplines in the legal group (e.g., litigation to commercial, commercial to regulatory, etc.), be promoted to managerial positions within the legal group, move to the business side in non-legal management or executive positions, etc.  The in-house long term career opportunities are broader and may be more easily achieved than law firm partnership.

 6.     Focus on practicing law versus business development

Because law firms value attorneys that can develop and bring in new business to the firm with some level of regularity, this is generally a prerequisite to becoming a partner and remaining a partner.  However, this can be a daunting task for many attorneys because business development is generally sales-oriented, and it is not a skill that law schools or law firms teach.  And, not everyone is a natural at business development, particularly those attorneys who are more “cerebral” in the way that they approach things.

In an in-house setting, there is no business development pressure, need or requirement.  The company is the attorney’s client.  As such, in-house attorneys may simply focus on the practice of law without the worry of developing business or the pressure of “eating what you kill.”

 7.     Work on deals from start to finish

Attorneys at law firms often are called to assist their corporate clients part-way through a deal or transaction when, for example, an issue arises; or, they may only be asked to handle a specific portion of a deal.  Conversely, in-house attorneys are generally not only part of deals from start to finish, but they frequently participate in the pre-planning and business strategy.  They also have the opportunity to see how their work and legal counsel impacts the company long-term.

8.     Focus on one client

Attorneys in law firms generally have various individual and/or corporate clients with whom they work at any given time.  For in-house attorneys, the company (or business unit(s) within the company) is the client.  Only working with a single client allows you to get to know that client more intimately, better understand the client’s business strategies and perhaps assist the client in shaping future business strategies and goals.  The in-house attorney works with internal legal and business teams, all having a common goal to assist their single client.  This is contrasted with doing a little here and a little there for multiple clients and lacking the same level of cohesiveness.

9.     Sophisticated work

While many attorneys are under the impression that they may get less sophisticated work by leaving a big law firm and going in-house, this is simply not the case with many companies.  As a cost-cutting measure, more and more companies are keeping their legal work in-house versus outsourcing it to outside counsel.  So, where you have a large, global company that keeps much of their legal work in-house and engages in complex and sophisticated transactions or litigation valued at billions of dollars, the end result is that their in-house attorneys have the opportunity to work on exciting, high-profile and sophisticated legal matters to which they may not otherwise have access.  This is even more true at many big law firms where some associates get little hands-on experience or interaction with the clients.

10.  Overseas assignments

Large companies with global operations require legal counsel in the countries in which they are conducting business.  This is often accomplished with attorneys native to the country in which the company has operations, but many companies are also sending their U.S. attorneys on international expatriate assignments or temporary rotations to work in conjunction with their foreign counterparts.  This is a very appealing opportunity for some attorneys and can be a primary motivation to work for global companies.

Sharon A. McLaughlin, Esq. is a Regional Search Director with Special Counsel in Houston, Texas. As a Regional Search Director for Special Counsel, she trains and advises internal Attorney Search Directors on the permanent placement of attorneys in in-house corporate legal departments. Her role focuses on training, strategizing, coaching, developing and implementing solutions for Special Counsel’s Attorney Search Directors nationally to provide the company’s clients the best attorney search power on the market. Ms. McLaughlin has more than nine years of legal recruiting experience placing associate and partner level attorneys with law firms and in-house corporate legal departments throughout the country. Prior to transitioning into legal recruiting, Ms. McLaughlin was an attorney in private practice and specialized in business and employment-based immigration law in Texas and California. Ms. McLaughlin is admitted to the State Bar of Texas as well as the State Bar of California. She received her B.A. from Stephen F. Austin State University in Nacogdoches, Texas in 1992, and her J.D. from Southwestern University School of Law in Los Angeles, California in 1996. Special Counsel operates in 42 markets across the United States. Through its affiliation with its parent company, Adecco Group North America, the company has access to a vast network of additional locations throughout the U.S. and in over 60 other countries, enabling the company to provide permanent placement and legal staffing services and solutions nationally or internationally. Special Counsel also has a blog, where this post originally appeared on February 23, 2014.

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 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.

Surveying Intellectual Property: Predictions for the Supreme Court’s Rulings in 10 IP Cases

HarrisDoughertyBy Ray K. Harris and Thomas Dougherty

There are now ten IP cases under review in the Supreme Court. Why so many? And what will the Court do?

Why So Many IP Cases?

The Supreme Court docket demonstrates the accelerating importance of intellectual property. In the decade of the 1990s the Supreme Court wrote seven patent opinions.[1] The prior two decades saw a similar volume of patent cases. In the same decade, copyright cases decided in the Supreme Court (six)[2] and trademark cases decided in the Supreme Court (three, including two trade dress cases)[3] were about equally rare.

In the decade from 2000 to 2009, the Supreme Court increased the volume to 10 patent related opinions.[4] Total copyright cases (three)[5] and trademark cases (five, including two trade dress cases)[6] decided in the Supreme Court remained about the same.

In 2010 to 2012 the Supreme Court increased the pace to issue four patent opinions in three years.[7] The pace of Supreme Court copyright decisions (two)[8] remained about the same as over the last 20 years. The increase in patent litigation appears not to be aberrational.

Last year the Supreme Court again more than doubled the volume of patent cases handled and issued four patent-related opinions in one year.[9] The Supreme Court also decided one copyright case[10] and one trademark case.[11]

This year the Supreme Court has again increased the volume of patent cases and already has accepted for review six patent cases – more than half the volume it handled in the entire first decade of the 21st Century. The Court has also accepted for review two copyright and two trademark cases.

Why has the Supreme Court accepted review in so many IP cases? Because IP rights have grown in economic importance and clarity is required to maintain that economic value. The Federal Circuit was given exclusive jurisdiction over patent cases to avoid conflicts in treatment among the different Circuit Courts, but clarity (for example, on treatment of software-related inventions) has not uniformly emerged. Also, abusive assertion of IP rights imposes a substantial cost on the economy. Guidance for the Federal Circuit requires either Supreme Court review or Congressional action.

What Will The Court Do?

Here summaries of the issues raised and our humble PREDICTIONS of how these 10 current IP cases may be decided.

Patent. Two patent cases focus on the scope of what a patent may claim.

Alice Corp. Pty Ltd. v. CLS Bank Int’l, 717 F.3d 1269 (Fed. Cir. 2013), cert. granted, 134 S. Ct. 734 (2013) (the test for patentable subject-matter for software inventions). An equally divided court affirmed the District Court holding that the claims were not patent eligible. The Federal Circuit generated seven opinions and could not agree on the appropriate test. NEITHER CAN WE, BUT THE COURT CONTINUES TO DECIDE CASES DEFINING THE LINE BETWEEN INVENTION AND ABSTRACT IDEAS. The court will limit the scope of software patentability, but not eliminate it. SOFTWARE CAN BE PATENTED BUT NOT THESE CLAIMS. AFFIRMED. Watch for oral argument March 31.

Nautilus Inc. v. Biosig Instruments, Inc., 715 F.3d 891 (Fed. Cir. 2013), cert. granted, 134 S. Ct. 896 (2014) (determining when a claim term is indefinite — therefore invalidating the claim) There were multiple reasonable interpretations of the claim language “spaced relationship.” The Federal Circuit concluded the term was not insolubly ambiguous because “inherent parameters” would allow a person of ordinary skill to understand the term. Particular and distinct patent claiming is required by statute. 35 U.S.C. 112. REVERSED. THE COURT WILL REQUIRE TIGHTER CLAIM DRAFTING SO WHAT IS CLAIMED IS DISTINCT FROM WHAT IS NOT CLAIMED AND INFRINGEMENT LIABILITY IS MORE PREDICTABLE. Watch for oral argument April 28.

The remaining 4 patent cases focus on enforcement issues:

Medtronic Inc. v. Boston Scientific Corp., 571 U.S. ___ (Jan. 22, 2014). In a declaratory relief suit by a patent licensee the licensor/patentee always has the burden to prove infringement. REVERSED. WE ARE CERTAIN WE GOT THIS “PREDICTION” CORRECT.

Highmark Inc. v. Allcare Management Systems, Inc., 687 F.3d 1300 (Fed. Cir. 2012), cert. granted, 134 S. Ct. 48 (2013), and Octane Fitness, LLC v. ICON Health & Fitness, Inc., 496 Fed Appx. 57 (Fed. Cir. 2012), cert. granted, 134 S. Ct. 49 (2013) (the standard for awarding attorneys’ fees to the prevailing party). The infringement defendant prevailed in both cases. The Federal Circuit found no deference is owed to a district court’s finding regarding whether allegations of infringement were objectively unreasonable and neither case was “exceptional” under 35 U.S.C. § 285. The prevailing defendants assert (1) the District Court is entitled to deference, and (2) a showing that the litigation is objectively baseless and brought in subjective bad faith sets too high a standard for prevailing defendants (accused infringers) and conflicts with the lower bar set for prevailing plaintiffs (patent owners) — a showing “that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.”). THE COURT WILL ELIMINATE THE SUBJECTIVE ELEMENT OF THE REASONABLENESS TEST AND OTHERWISE AFFIRM THE APPELLATE DECISIONS ON THE OBJECTIVE ELEMENT WITHOUT DEFERENCE TO THE TRIAL COURT. This case was argued Feb. 26.

Limelight Networks, Inc. v. Akamai Technologies, Inc., 692 F.3d 1301 (Fed. Cir. 2012), cert. granted, 134 S. Ct. 895 (2014) (inducing infringement where separate elements of the method claim were carried out by different persons, hence there is no one person who directly infringed). The Federal Circuit held there can be inducement liability with no single direct infringer or agency relationship. AFFIRMED. INDUCING MULTIPLE ACTORS TO INFRINGE COLLECTIVELY IS WRONG (ONCE THE ADVERSE PRECEDENT IS NOT CONTROLLING). Watch for oral argument April 30.

Copyright. Both cases deal with defenses to enforcement of copyright protection.

Petrella v. Metro-Goldwyn-Mayer, Inc., 695 F.3d 946 (9th Cir. 2012), cert. granted, 134 S. Ct 50 (2013) (laches as a defense to damages incurred for the three-year period before suit is filed). The Copyright Act has a three-year statute of limitations, 17 U.S.C. 507(b). The Ninth Circuit found claims based on the 1980 film “Raging Bull” barred by laches. The other circuits are less receptive to this defense. AFFIRMED. DAMAGES AND INJUNCTIVE RELIEF ARE BOTH UNAVAILABLE FOR THE CONTINUING TORT ON THE FACTS PRESENTED. This case was argued Jan. 21.

American Broadcasting Companies, Inc. v. Aereo, Inc., 712 F.3d 676 (2nd Cir. 2013), cert. granted, 134 S. Ct. 896 (2014) (streaming a broadcasted video over the Internet so paid subscribers each subscriber receive transmission of a separate copy). The Second Circuit found no infringement of the public performance right. Both parties asked for review. Even the winner below wants to avoid the possibility of inconsistent decisions in other circuits. REVERSED. THE COURT WILL CONCLUDE CONGRESS DID NOT INTEND TO PERMIT THE “RUBE GOLDBERG” DESIGN ADOPTED TO AVOID INFRINGEMENT. STREAMING AND RECORDING ON DEMAND IS A PUBLIC PERFORMANCE. CONGRESS COULD AMEND THE STATUTE IF IT DISAGREES WITH THE COURT (WE ARE NOT ARROGANT ENOUGH TO TRY TO PREDICT CONGRESS — BE SERIOUS). Watch for oral argument April 22.

Trademark. Both cases involve false advertising under the Lanham Act.

POM Wonderful LLC v. Coca-Cola Co., 679 F.3d 1170 (9th Cir. 2012), cert. granted, 134 S. Ct. 895 (2014) (false advertising claims involving the labeling requirements of the Food Drug and Cosmetics Act). The Ninth Circuit found preemption. AFFIRMED. Watch for oral argument April 21.

Lexmark Int’l Inc. v. Static Control Components, Inc., 697 F.3d 387 (6th Cir. 2012), cert. granted, 133 S. Ct. 2766 (2013) (the test for standing to maintain a false advertising claim). The Ninth Circuit requires the plaintiff to be an actual competitor. Other circuits require antitrust standing. The Sixth Circuit and Second Circuit allow the plaintiff to sue if it has a “reasonable interest” in the case. AFFIRMED. THE COURT WILL ADOPT THE REASONABLE INTEREST STANDARD. This case was argued Dec. 3.

Only two of the nine remaining cases reversed. Not a smart bet? “Never tell me the odds.”[12]

Ray K. Harris practices in the area of commercial litigation, including trade secret, trademark, trade dress, computer software copyright, and other intellectual property protection matters. His representation of aerospace clients has included enforcement of patent and trade secret rights and licensing provisions related to IP. Reach Mr. Harris at rharris@fclaw.com.

Thomas A. Dougherty is a registered patent attorney who practices in all areas of intellectual property, and federal appeals. His practice includes international and domestic patent and trademark prosecution; inter partes reexaminations; portfolio management; freedom to operate, medical devices, general counsel services, M&A, and counseling for various clients and technologies. Reach Mr. Dougherty at tdougherty@fclaw.com

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.

 


[1] Eli Lilly & Co. v. Medtronic Inc., 496 U.S. 661 (1990); Cardinal Chemical Co. v. Morton, 508 U.S. 150 (1993); Asgrow Seed Co. v. Winterboer, 513 U.S. 179 (1995); Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996); Warner-Jenkinson Co, Inc. v. Hilton Davis Chemical Co., 520 U.S. 17 (1997); Pfaff v. Wells Electronics Inc., 525 U.S. 55 (1998); and Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627 (1999). See also Dickinson v. Zurko, 527 U.S. 150 (1999) (administrative burden of proof).

[2] Stewart v. Abend, 495 U.S. 207 (1990), Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340 (1991); Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994); Campbell v. Acuff-Rose Music Inc., 510 U.S. 569 (1994); Feltner v. Columbia Pictures, 523 U.S. 340 (1998); and Quality King Distributors Inc. v. L’anza Research Int’l Inc., 532 U.S. 135 (1998). See also Lotus Dev. Corp. v. Borland Int’l Inc., 116 S. Ct 804 (1996) (aff’d by an equally divided court); Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49 (1993) (copyright claim was immune from antitrust liability).

[3] Two Pesos v. Taco Cabana, Inc., 505 U.S. 763 (1992); Qualitex v. Jacobson Products Co., Inc., 514 U.S. 159 (1995) and College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board, 527 U.S. 666 (1999).

[4] JEM Ag. Supply Inc. v. Pioneer Hi-Bred Int’l, Inc., 534 U.S. 124 (2001) (patent alternative to plant variety protection act); Festo Corp. v. Shoketsu Kinzoku Kogyo Kubushiki Co., Ltd., 535 U.S. 722 (2002); Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 826 (2002); Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193 (2005); Illinois Tool Works Inc. v. Independent Ink, Inc., 547 U.S. 28 (2006) (rule of reason antitrust analysis); eBay Inc. v. Merc-Exchange, LLC, 547 U.S. 388 (2006); MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007); KSR v. Teleflex, Inc., 550 U.S. 398 (2007); Microsoft Corp. v. AT&T Corp, Int’l Co., 550 U.S. 437 (2007); and Quanta Computer Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008).

[5] New York Times Co, Inc. v. Tasini, 533 U.S.483 (2001); Eldred v. Ashcroft, 537 U.S. 186 (2003); and Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005).

[6] Wal-Mart Stores, Inc. v. Samara Bros., Inc. Co., 529 U.S. 205 (2000); TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23 (2001); Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003); Dastar Corp. v. 20th Century Fox Film Corp., 539 U.S. 23 (2003); and KP Permanent Make-Up Inc. v. Lasting Impression I, Inc., 543 U.S. 111 (2004).

[7] Bilski v. Kappos, 130 S. Ct. 3218 (2010); Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060 (2011); Bd of Trustees of Leland Stanford Jr. Univ. v. Roche Molecular Systems, Inc., 131 S. Ct. 2186 (2011); Microsoft Corp. v. i4i Ltd. Partnership., 131 S. Ct. 2238 (2011); and Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012). See also Kappos v. Hyatt, 132 U.S. 1690 (2012) (admissible evidence in administrative proceedings).

[8] Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (2010), and Golan v. Holder, 132 S. Ct. 873 (2012). See also Costco Wholesale Corp. v. Omega S.A., 131 S. Ct. 565 (2010) (aff’d by an equally divided court).

[9] Bowman v. Monsanto Co., 133 S. Ct. 1761 (2013); Gunn v. Minton, 133 S. Ct. 1059 (2013) (patent-related jurisdiction); Association for Molecular Pathology v. Myriad Genetics, 133 S. Ct. 2107 (2013); and FTC v. Actavis, Inc., 133 S. Ct. 2223 (2013) (reverse payment patent license antitrust analysis).

[10] Kirtsaeng v. John Wiley & Sons, 133 S. Ct. 1351 (2013).

[11] Already LLC v. Nike Inc., 133 S. Ct. 721 (2013).

[12] Han Solo to C-3PO, Star Wars: The Empire Strikes Back (1980).

IAALS: Integrating More Professionalism and Ethics into Law School Curriculum

This post originally appeared on IAALS Onlinethe blog for IAALS, the Institute for the Advancement of the American Legal System at the University of Denver, on February 10, 2014.

Alli_Gerkman_bw_2014By Alli Gerkman

In his Voices from the Field interview, Bill Walters, Partner at Heizer Paul and former president of the Colorado Bar Association, suggests that law schools need to expose students to the various career options they have following law school, which extend far beyond the traditional big firm practice of law. For example, dual degree programs, like dual J.D./M.B.A. programs, allow law students to use the skills they’ve learned in combination with business skills to potentially and more successfully run a business after graduating.

As to better preparing law students for practice, Walters suggests that the first year curriculum should remain largely traditional through use of the Socratic method and fundamental courses. However, in the second and third year of law school, professors should use different pedagogical methods to teach students, like experiential course offerings. Walters also underscores the importance of having practicing attorneys teach students.

Finally, Walters advocates for integrating more professionalism and ethics into law school curriculum to help produce law school graduates that are better prepared for the practice of law and serving clients. He suggests that schools need exposure to these issues beyond the Rules of Professional Conduct. By “infusing” the curriculum with ethical issues, students can better understand the issues in the context of practice. Walters suggests that a student who attends a law school that emphasizes professionalism by modeling ethical behaviors will have an advantage interviewing with law firms and will increase the potential for the student to get hired.

Hear more of Bill Walters’ suggestions for reforming legal education in his Voices from the Field interview below.

William E. (“Bill”) Walters, III, has practiced law for more than 36 years in Denver, Colorado. His practice focuses on advising nonprofit organizations, trade and professional associations, and for-profit business entities. Bill also has expertise in antitrust and trade regulation law. 

From 1978 to 1981, Bill was an Assistant Attorney General for the State of Colorado. He was President of the Denver Bar Association from 2001 to 2002 and is a former Chair of the Colorado Lawyers Committee. He was President of the Colorado Bar Association from 2008 to 2009 and served on its Executive Council and Board of Governors for many years. 

Alli Gerkman became the first full-time Director of Educating Tomorrow’s Lawyers, a national initiative to align legal education with the needs of an evolving profession, in May 2013. She joined IAALS in June 2011 as Online Content Manager, developing and managing all IAALS web properties, including Educating Tomorrow’s Lawyers, and became IAALS’ Director of Communications in August 2012. She brings significant professional development experience to the initiative, having spent five years in continuing legal education, first as a program attorney organizing multi-day conferences for a national provider and then as program attorney and manager of online content for Colorado Bar Association CLE. While at CBA-CLE, she developed an online legal resource that was the recipient of the Association of Continuing Legal Education’s 2011 Award of Professional Excellence for use of technology in education. She has written and presented nationally to continuing legal education providers, bar executives, and lawyers. Prior to her work in continuing legal education, she was in private practice.

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.

Marijuana Matters: Has your association taken a shot at regulating pot?

By Suzanne M. Leff

As you’re probably aware, effective January 1, 2014, recreational pot became legal in Colorado. This new law is already affecting homeowners associations. While some associations started planning for pot smoking residents last year when the law was passed, not every community association moved quickly to adopt rules and regulations or amend restrictive covenants to address anticipated issues related to recreational pot smoking. If your association has not yet considered whether the new marijuana laws will affect your community, or if you’re thinking about how to tackle problems before they occur, here are some things to consider:

Shared spaces. Most associations have the authority to create rules and regulations that control activities in outdoor and indoor common area spaces. If your association already regulates tobacco smoking in these areas, the association, through board of director action, may consider extending those smoking policies to marijuana use. Associations should also evaluate the extent to which local laws interact with association rules and regulations and seek to fill any regulatory gaps that warrant attention in specific communities. Boards will want to pay particular attention to areas of their communities where use of marijuana will impact other residents. For example, with tobacco smoke, smoking near doorways and windows of other units are areas that typically result in complaints from residents.

Limited common area patios and balconies. Association boards can often regulate activities within limited common areas, but you will need to look to your documents to determine the extent to which your association can adopt rules affecting these areas. Patios and balconies in close proximity to other units are certain to give rise to complaints from residents affected by smoking neighbors. Associations should carefully consider how enforcement will take place if marijuana use is regulated in these areas.

Private residences. In contrast to associations’ ability to regulate activities in shared common areas, associations are not typically empowered to impose rules and regulations on how owners and residents behave inside their homes—at least not where private activities do not impact neighbors’ use and enjoyment of their homes. If your association’s recorded covenants do not prohibit smoking and a resident chooses to smoke in his or her home, the association board of directors most likely cannot simply adopt a rule that prevents that resident from lighting up. In most cases, the owners will need to approve an amendment to the declaration to restrict smoking within the units. It remains to be seen whether Colorado courts will allow associations to rely solely on nuisance provisions in their covenants as a way of prohibiting marijuana smoking within private residences. However, based on other related nuisance court cases, a Colorado court would probably only allow an association to rely on a nuisance provision under extenuating circumstances. If your covenants prohibit residents from doing anything that violates federal law, your association may determine that regulation of marijuana activities within the units is permissible without first amending the covenants.

Other considerations for resident rules. The new marijuana laws do not address use alone. Cultivation of marijuana is another factor for boards to consider. In addition, state and local fair housing laws come into play in the context of medicinal marijuana cultivation and use.

Employees. Associations with employees should implement policies concerning marijuana use on the job and showing up to work under the influence of marijuana. Court cases concerning employment practices suggest that employers are permitted to prohibit marijuana use by their employees.

Enforcement. As your association considers how to regulate marijuana activities in your community, give careful thought to how the association will enforce any new restrictive covenants or rules and regulations. Now that pot is legal in Colorado, local law enforcement may not be there to help. Associations will best position themselves for effective enforcement by creating rules with clear violations and not violations based on one person’s opinion. To the extent your association can document violations, you will have a better chance of holding the violator accountable. That accountability can come in several forms, including fines, suspension of privileges, and, in the more extreme cases, court-ordered injunctions.

Consult with legal counsel. The number of issues for boards to consider is too numerous to address completely here, and your community and its unique needs should inform how marijuana activities are regulated. Associations should always consult with legal counsel before adopting rules or imposing restrictions related to marijuana.

Suzanne M. Leff is a partner at Winzenburg, Leff, Purvis & Payne, LLP. She provides general counsel to community associations, and focuses on general business representation, document drafting and interpretation, contract review, covenant enforcement, and governance practices. She presents educational seminars to property managers, board members, and other attorneys who work with community associations. Suzanne writes articles for the firm’s blog on topics such as changes to legislation affecting community associations, fiduciary duties of board members, the practical application of laws affecting associations, and alternative dispute resolution. This article originally appeared on her firm’s blog on January 21, 2014.

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.

Point/Counterpoint: YouTube Law—When Depositions Go Viral: (Counterpoint) Nyet to the Net

This article originally appeared in the February 2014 issue of The Colorado Lawyer. It is part of a two-part “Point/Counterpoint” series. Click here for the “Point” article.

Burtzos_FredCThree-and-a-half months before Disneyland and I appeared on the planet, the Dumont Television Network cancelled “Captain Video and his Video Rangers.” Captain Video, with the help of his Video Rangers, fought against the conspiracies and criminal elements of the late 1940s and early 1950s. Fifty-nine years later, I must respectfully disagree with my colleague John Pineau, who, in my opinion, is Colorado’s 21st-century incarnation of Captain Video. In particular, I disagree with John’s goal of creating a new generation of Video Rangers. Instead of appearing on live television, John and his apprentice rangers plan to use YouTube and other social media to post video depositions from civil cases on the Internet. This practice, which John claims is needed to bring “sunshine” about the legal world to the public, should be laid to rest alongside the likes of Al Hodge, who played Captain Video from 1950 to 1955 and who passed away in 1979.

I acknowledge the fact that technology—especially inexpensive cameras (I sometimes video record depositions with a camera I purchased on eBay for less than $50) and the ability to upload videos with a few key strokes and mouse clicks—physically allows anyone to post whatever he or she chooses on the Internet. I also am aware that the Internet is filled with videos of numerous legal proceedings, including those of Herman Goering, O. J. Simpson, Enron, and British Petroleum (BP). Still, I cannot believe that Judge Ito really thought it was a good idea to turn the O. J. Simpson case into a cable television reality show, nor can I comprehend anyone wanting to spend a great deal of time watching long dead Nazis pontificating about concentration camps. The only good thing I can say about the deposition of Tony Hayward is that it lead to my high school classmate replacing him as head of BP. The past is the past, and what some judge or tribunal allowed to be filmed and posted online cannot be removed from the archives of the Internet. I am concerned about the future as John says it should be.

I also acknowledge the very real possibility that, in the not too distant future, all court proceedings in Colorado, including every moment of every trial, will be digitally recorded, and anyone willing to pay the fee for a copy of the video record might then be able to post it online. I do not know whether this will pose copyright problems, but at present, anyone can buy a transcript of court proceedings, and I am not aware of any prohibition against posting public records, such as a trial transcript, on the Internet. There are no secret trials in America, and there should not be. The posting of pre-trial depositions, however, is another matter.

Not Lawyer’s Job to Retaliate

In a Denver Post article about you, John, and your Captain Video proclivities,[1] there is a discussion about how you were so outraged by the way some defendants tried to use the power of a government connection to intimidate your client, that after you won a judgment for your client against these defendants, you posted on YouTube the deposition video of a witness saying it was okay to lie to the government. As a result of this posting, the witness and his company apparently got into a quagmire of potential legal trouble, and even endured student protests.

In my opinion, John, once you won the case and collected the judgment, your part in the matter should have been over. It is acceptable for us attorneys to feel outrage when arguing a cause to the trier of fact, but personal outrage, no matter how justified, should not allow attorneys to try to “stick it” to someone after a case, even if he, she, or it richly deserves it. The case is about the client, not us. We took an oath not to act out of malice or outrage.[2] Going out of the way to try to embarrass a party or a witness, or to get him or her in trouble after a trial, is not okay. It is no problem for me if a client is irked and chooses to act on their outrage, as long as the client stays within the bounds of the law, but an attorney should refrain from pushing the matter once the cause is over.

Why Depositions Are Different

Even if there is no intent to try to expose a wrong or a perceived wrong, posting deposition videos online raises a host of thorny issues and problems. In depositions, the evidentiary rules are relaxed.[3] Deponents often are asked questions that could be objected to at trial but, because the answer to the deposition question might lead to the discovery of admissible evidence, it is allowed during the deposition.

Defendants in motor vehicle accident cases, for example, routinely are asked about their driving histories, the discussions they might have had with their liability insurance carriers about the accident, any traffic citations they received as a result of the accident in question in the case, and possibly their criminal history. The fact that a defendant (1) had his driving privileges suspended for six months a decade before the accident; (2) was convicted of misdemeanor theft; and (3) spoke about the careless driving citation he received following the accident with his liability insurance carrier likely would not be discussed at trial due to a variety of evidentiary rules.[4] In your universe, John, if your client did not get a good result in this case—or even if he did—it would be okay for you or the other Video Rangers to expose these non-admissible matters to the world, possibly causing grief to the 32-year-old defendant because his family, friends, and employer did not know he was convicted of petty thievery at the age of 20, or that he had his driver’s license suspended for drag racing when he was 22 years old.

Plaintiffs in injury cases routinely discuss their medical histories and, if a loss of consortium claim is involved, their sex lives. John, if you and your wife were rear-ended by a motorist on your way to the soon-to-be-opened Trader Joe’s in Boulder, and you filed a bodily injury suit as a result, would you and your wife want to see yourselves online testifying about (by way of a very fictional example): the sexually transmitted disease you contracted in law school, the three times during college you injured your back trying to ski moguls while intoxicated, and the thirty-seven sessions of marriage counseling the two of you had undergone before the motor vehicle accident? This is the universe you would be living in if depositions could be posted online.

An Ethical Slippery Slope

Still another issue in this developing quagmire of a debate is selective editing, which would be a major problem if deposition videos were posted online. In most depositions, I wager the attorney taking the deposition will find a few “golden nuggets” taken completely out of context to use at trial when questioning the deponent. If only those nuggets are posted online, doesn’t that paint a distorted picture of what the deponent actually had to say? Of course, if the goal is to make the deponent look bad anyway, then of course the new Video Rangers’ response is: “What’s the harm?” Well, the harm is very real. “Justice TV” could be an oxymoron in many cases.

John, I know you are not advocating taking the image of a deponent and, for example, putting it into an advertisement for bourbon, but if you post a video on your website of you making a deponent look foolish, aren’t you just appropriating the image of that person to further your law practice? By that reasoning, should the person be entitled to royalties for appearing in one of your home movies?

It seems that most of the courtroom clips we see on television involve high-profile criminal cases. It intuitively makes sense to anticipate that the parties to a criminal case might expect heightened public scrutiny of their situation as opposed to the parties in a routine civil case. After all, in a criminal case, the claim is that an individual violated the public law and order. In a civil case, the claim is often that one citizen tortuously or contractually caused damages to another citizen. I will guess that the average resident of Colorado Springs has no interest in a promissory note dispute between me and my neighbor, but that same person could very well be interested in a case where my child’s daycare provider has been charged with molesting my child and five other children.

I am not in favor of attorneys being a party to the posting of videos such as those that you mention, John—bank fraud, pollution, insurance bad faith, and so on. Attorneys have a different role in the legal system, and that role is not to be Alfred Hitchcock.

Trying to expand litigated cases into a worldwide arena beyond the courtroom makes no sense. It takes a private dispute that exists in a system in which those ultimately deciding the dispute are not allowed to use the Internet to decide the dispute,[5] and it turns it into a public alley fight that could remain online in perpetuity. Please note, John, that not everybody has the ability or resources to skip the court system to arbitrate a dispute.

The posting of deposition videos online could well encourage attorneys to modify their behavior at a deposition. Hardball tactics, either to look tough or to try to prevent embarrassing information from being disclosed, might become the new norm. This is not at all in keeping with CRCP 30, which tries to limit attorneys to objecting only to questions calling for the disclosure of privileged information, and it certainly is not in keeping with many routine trial court orders that specifically tell attorneys not to engage in obstructionist tactics or boorish behavior during discovery.

Conclusion

I know, John, that you have been quoted as saying that social media is the way to “take the truth and make it a little more public,”[6] but your idea about what “truth” should be posted online and why it should be posted online is not the same as mine. When a case is over, it should be put into storage and then forgotten. It ought not stay alive on YouTube, Facebook, your website, or anywhere else in cyberspace. Even if some horses have left the barn, a number of them can stay put. Unless you are ready to tell the world all of your darkest secrets, please take the idea of posting deposition videos online and lay it respectfully next to Al Hodge.

Rest in Peace.

Fred Burtzos is a Senior Claim Litigation Counsel at Paul S. Edwards & Associates in Colorado Springs—(719) 228-3835, fred.burtzos.gdz0@statefarm.com.

This article originally appeared in the February 2014 issue of The Colorado Lawyer. Articles are available online to CBA members.

 


[1] Lofholm, “Colorado Attorney Brings down the Hammer of Social Media Justice Via YouTube,” The Denver Post (May 22, 2013), www.denverpost.com/news/ci_23295396.

[2] The following is the Colorado Attorney Oath of Admission:

I do solemnly swear by the ever living God (or affirm) that: I will support the Constitution of the United States and the Constitution of the State of Colorado; I will maintain the respect due to Courts and Judicial Officers; I will employ only such means as are consistent with truth and honor; I will treat all persons whom I encounter through my practice of law with fairness, courtesy, respect and honesty; I will use my knowledge of the law for the betterment of society and the improvement of the legal system; I will never reject, from any consideration personal to myself, the cause of the defenseless or oppressed; I will at all times faithfully and diligently adhere to the Colorado Rule of Professional Conduct.

[3] CRCP 30 and 26(b).

[4] See, e.g., CRE 411; CRS § 42-4-1713.

[5] CJI 1:10.

[6] Lofholm, supra note 1.

Reasonably Ascertainable Value of Accrued Vacation and Accrued Sick Leave May Be Divided in Dissolution of Marriage

PFM Individual Photos LWMBy Lesleigh W. Monahan

On January 13, 2014, the Colorado Supreme Court issued its opinion in In re Marriage of Cardona and Castro. The supreme court granted certiorari review in this case to consider whether accrued vacation and sick leave may be considered marital property subject to division under C.R.S. § 14-10-113 of the Uniform Dissolution of Marriage Act (UDMA). The court considered this issue a matter of first impression in Colorado, noting, as did the court of appeals, that courts in other jurisdictions are split on this issue.

In Marriage of Cardona and Castro, wife raised the issue of husband’s accrued leave. The husband’s accrued leave had been reflected in his most recent pay stub, which indicated the total number of hours of vacation time and sick time that had accrued up until the date of dissolution. The pay stub did not indicate the cash value of the accrued leave or whether husband was entitled to cash payment for any portion of the leave. At the permanent orders hearing, the wife did not establish, nor did the husband render an opinion as to, whether husband was entitled to cash payment for any portion of the leave. In fact, the husband’s statements at the permanent orders hearing were somewhat vague and ambiguous as to his expectations—other than that he would be entitled to some form of pay for his accrued leave at the time of his termination.

The wife thereafter took the position that the husband’s accrued leave should be valued at $23,230.00. The trial court chose to divide the value of husband’s accrued vacation and sick leave as part of its division of the marital estate and required husband to pay wife $11,616.00 for “her interest in this pay.”

On appeal (which included additional issues other than those raised in the most recent supreme court opinion), the husband argued that accrued leave is not marital property. The divided panel of the court of appeals agreed and reversed. The majority reasoned that husband’s accrued leave was analogous to unvested stock options or an interest in a discretionary trust and “is thus not property subject to distribution on dissolution.” The case was remanded with direction to the trial court to reconsider the property division without considering husband’s accrued vacation and sick time. A petition for writ of certiorari, filed by wife, was granted on the following issue: “Whether the Court of Appeals erred in finding that accrued vacation and sick leave time is not marital property subject to division pursuant to section 14-10-113, C.R.S. (2010).”

The supreme court, in considering case law from other jurisdictions and relevant Colorado precedent, concluded that where a spouse has an enforceable right to be paid for accrued vacation or sick leave, as established by an employment agreement or policy, such accrued leave earned during the marriage is marital property for purposes of the UDMA. The court clarified that the value of such accrued leave at the time of dissolution must be equitably divided as part of the marital estate as long as such value can be reasonably ascertained at the time of dissolution. Alternatively, when a court cannot reasonably ascertain the value of such leave at the time of dissolution, the court should consider a spouse’s right to such leave as an economic circumstance of the parties when equitably dividing the marital estate. The supreme court found that there was not any competent evidence presented in the Cardona and Castro matter to establish that husband had an enforceable right to payment for his accrued leave and, accordingly, determined the trial court erred in considering the purported cash value of such leave as part of the marital estate. The court of appeals judgment was affirmed on narrower grounds.

The importance of this case to practitioners is clear in terms of trial preparation. As with other marital assets such as real estate, businesses, and retirement plans, it is essential for the practitioner to obtain accurate documentation and/or testimony from reliable sources such as the employer (as witness) and employer policies and procedures (as exhibits) relative to valuation of accrued sick time and leave. Based upon the detailed analysis in the supreme court decision, it will be critical for the trial court to assess whether the “value” of accrued vacation or sick leave, at the time of dissolution, may be so difficult to ascertain as to be speculative. Under many employment policies, different types of leave may be combined in one comprehensive paid time off plan, whereas other policies split vacation leave, sick leave, and personal leave into separate plans. Some employers allow leave to accrue and “roll over” from year to year, while others adopt a “use it or lose it” approach, under which accrued leave is forfeited if the employee does not take time off. Therefore, under this ruling, it is clear that accurate, demonstrative, and probative evidence must be presented to the trial court as to whether the value of accrued leave can be determined through a reasonable dollar estimate. If such an estimate cannot be demonstrated, it is clear that the accrued leave has speculative value that could lead a trial court to treat such leave as an “economic circumstance” under C.R.S. § 14-10-113(1)(c).

Justice Boatright concurred in the opinion but wrote separately to express two perceived errors in the reasoning of the majority opinion. The first relates to the inequity of “double counting” of accrued leave as both income and property. The second concern articulated by Justice Boatwright is that the ruling presents a contradiction in that “unlike calculating the present value of a pension, it will be nearly impossible to determine the present value of accrued leave.” Analysis would require consideration of a “bevy of speculative and indeterminate factors such as future illness, vacations, company policy, lifestyle changes, job changes, family needs and retirement.” In summary, the difficulties of valuing accrued leave led Justice Boatwright to the conclusion that it should be treated as income if the court orders child support and maintenance. Alternatively, if the court does not order child support or maintenance, it should only consider accrued leave as an “economic circumstance.”

Lesleigh W. Monahan, Esq. is a partner in the Lakewood firm of Polidori, Franklin & Monahan, LLC. Ms. Monahan has been practicing law exclusively in domestic relations since 1988. She received her Juris Doctor degree from the University of Colorado School of Law in 1987. Ms. Monahan has repeatedly been recognized for her accomplishments, and is a frequent speaker at continuing legal education programs. She was admitted as a Fellow in the American Academy of Matrimonial Lawyers in 2004 and was president of the Colorado chapter in 2011/2012. Ms. Monahan is also a member of the CBA Family Law Section, and was chair of that section’s executive council in 2002-2003.

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.

Point/Counterpoint: YouTube Law—When Depositions Go Viral: (Point) An Open Democracy is a Healthy Democracy

This article originally appeared in the February 2014 issue of The Colorado Lawyer. It is part of a two-part “Point/Counterpoint” series. Click here for the “Counterpoint” article.
Pineau_JohnCNazi Hermann Goering is on YouTube at his 1946 trial in Nuremburg testifying about the necessity of concentration camps.[1] Charles Manson is on the Internet discussing his 1970 murder trial.[2] F. Lee Bailey’s powerful 1995 cross-examination in the O. J. Simpson trial is on the Web.[3]The thoughtful testimony of Bill Gates is posted from a 1998 video deposition.[4] Bill Clinton’s 1998 attempts to weave through a deposition are uploaded.[5] Andrew Fastow’s admission to Enron fraud in 2006 is posted throughout the Internet.[6] The 2011 video deposition of Tony Hayward, nervous CEO of British Petroleum, also is preserved for us online. And there are thousands of other public court records and depositions available at the click of a few keystrokes.[7]

Court records are public records, particularly after the trial is over. They are reviewed by us, and shared in books, studies, newspapers, television, and the movies. For centuries, these records have been open to the public, and for decades, they have included video exhibits and depositions. Public access is an accepted part of our constitutional plan for an open democracy. That venerable principle is being advanced by citizens who are securing their court files in cases that expose community hazards and then sharing the facts with the public on the Internet.

This practice is a growing pain for those who endanger our safety. Wayward corporations, and the insurance companies who represent them, expect that after trial, the court records of their misconduct will be forgotten, buried in a courthouse cellar, and covered with a sleepy layer of dust. Instead, these records are being uploaded so that the evidence is available to the public. The move is to openness and accountability—two necessary components of a healthy democracy.

The Public’s Right to Access Case Records

U.S. Circuit Court Judge Frank Easterbrook wrote in Union Oil Company of California v. Leavell:

People who want secrecy should opt for arbitration. When they call on the courts, they must accept the openness that goes with subsidized dispute resolution by public (and publicly accountable) officials. Judicial proceedings are public rather than private property and the third-party effects that justify the subsidy of the judicial system also justify making records and decisions as open as possible. What happens in the halls of government is presumptively public business. Judges deliberate in private but issue public decisions after public arguments based on public records. . . . Much of what passes between the parties remains out of public sight because discovery materials are not filed with the court. But most portions of discovery that are filed and form the basis of judicial action must eventually be released.[8]

Our courts proclaim that the public has a constitutional right to access court records.[9]

The presumption of public access recognized and promoted by the local rule finds its root in the common law rights of access to judicial proceedings and to inspect judicial records—rights which are “beyond dispute.” . . . The court in Publicker, and other circuit courts of appeal, have gone beyond the undoubted common law right, however, and have found a constitutionally protected right, rooted in the First Amendment, to public access to civil trials.[10]

The general public has had online access to the contents of federal court files since 2005.[11] In Colorado courts, “C.R.C.P. 121, adopted in 1988, creates a presumption that court files will be open to the public unless a court order provides otherwise.”[12]

Hence, the rule creates a presumption that all court records are to be open; it allows a court to limit access in only one instance and for only one purpose (when the parties’ right of privacy outweighs the public’s right to know); and it grants to every member of the public the right to contest the legitimacy of any limited access order.[13]

In Exum v. United States Olympic Committee, the U.S. District Court for the District of Colorado held that “[i]n the absence of a showing of good cause for confidentiality, parties are free to disseminate discovery materials to the public.”[14] Courts have found that “[a]ccess to discovery materials is particularly appropriate when the subject matter of the litigation is of general public interest.”[15]

Openness Generally Trumps Privacy Interests

Public access to court records is founded on the principles of an open democracy.

A presumption of openness inheres in civil trials as in criminal trials. . . . [T]he civil trial, like the criminal trial, plays a particularly significant role in the functioning of the judicial process and the government as a whole. . . . [P]ublic access to civil trials enhances the quality and safeguards the integrity of the fact finding process. It fosters an appearance of fairness, and heightens public respect for the judicial process. It permits the public to participate in and serve as a check upon the judicial process—an essential component in our structure of self-government. Public access to civil trials, no less than criminal trials, plays an important role in the participation and the free discussion of governmental affairs.[16]

In fact, it is “unreasonable, as a matter of law, for the parties to litigation to expect or to assume that all of the court files will remain private.”[17]

A claim that a court file contains extremely personal, private, and confidential matters is generally insufficient to constitute a privacy interest warranting the sealing of the file. Likewise, prospective injury to reputation, an inherent risk in almost every civil lawsuit, is generally insufficient to overcome the strong presumption in favor of public access to court records.[18]

Naturally, when a party’s privacy concerns outweigh the public’s right to know, the court will enter a protective order sealing such matters.[19] As trial lawyers know, protective orders are freely granted in cases that do not impact public safety or raise public concerns.

To protect community safety, parties have posted public records and videos of child abuse,[20] abuse of the handicapped,[21] nursing home abuse of the elderly,[22] school violence,[23] workplace violence,[24] bank foreclosure fraud,[25] drinking water contamination,[26] air and water pollution,[27] insurance bad faith,[28] and hundreds of other cases of public concern. In response, errant corporations have counter-punched with personal attacks and much more. For example, in the food industry, where video evidence has lead to successful civil and criminal charges, corporate lobbyists in twelve states are pushing legislation that criminalizes such videos and the videographers.[29] Fortunately, the fact that these laws would indict innocent witnesses has been noted by the press and prosecutors, and the bills have struggled for approval.[30] It is in this environment that I was contacted by my new friend Fred Burtzos, counsel for State Farm Insurance Company, and asked to debate the issue here.

So, how do citizens share these types of records? They collect the public portion of their court file, minus any sealed material. Using the records, images, and video depositions, they create a short video and upload it to the Internet. If their video exposes dangers to the community, it is likely to be watched and shared, and it may go viral. If it is not newsworthy, it is likely to have limited circulation.

Conclusion

The sharing of public records is not just growing, it is exploding. Over the last few years, my company, JusticeTV, has joined the trend to assist lawyers and their clients with the technical aspects of creating, editing, and uploading the videos. The process is simple. The law is well-established. And, like sunshine, it is healthy for our community.

John K. Pineau is a trial lawyer in civil and criminal courts. He has handled a number of high-profile cases and lectures on trial tactics and strategy. He also is the president of JusticeTV, LLC, a company that assists lawyers and their clients in creating and sharing public record videos—(303) 440-4444, johnpineau@yahoo.com, www.johnpineau.com.

This article originally appeared in the February 2014 issue of The Colorado Lawyer. Articles are available online to CBA members.

 


[1] See www.youtube.com/watch?v=mfwujaV7Ia8.

[2] See www.youtube.com/watch?v=7MZaEt6lOq8.

[3] See www.youtube.com/watch?v=gVoIz2zNX9U.

[4] See www.youtube.com/watch?v=m_2m1qdqieE.

[5] See www.youtube.com/watch?v=xHlt1W83JFU.

[6] See www.youtube.com/watch?v=9zxAJO7owy8.

[7] See www.youtube.com/watch?v=VUINT2ibjSE.

[8] Union Oil Company of California v. Leavell, 220 F.3d 562, 568 (7th Cir. 2000) (citing U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18, 27-29 (1994), and In re Memorial Hospital of Iowa County, Inc., 862 F.2d 1299, 1302-03 (7th Cir. 1988)).

[9] Mann v. Boatright, 477 F.3d 1140, 1149 (10th Cir. 2007) (citing Nixon v. Warner Communications, Inc., 435 U.S. 589, 597 (1978)).

[10] Huddleson v. City of Pueblo, Colorado, 270 F.R.D. 635, 638 (D.Colo. 2010) (citing Publicker Industries, Inc. v. Cohen, 733 F.2d 1059 (3d Cir. 1984)). See Mann v. Boatright, 477 F.3d 1140. 1149 (10th Cir. 2007) (“Courts have long recognized a common-law right of access to judicial records.”).

[11] See www.cod.uscourt.gov/courtoperations/faq.aspx.

[12] Office of the State Ct. Administrator v. Background Info. Serv., 994 P.2d 420, 429 (Colo. 1999).

[13] In Anderson v. Home Ins. Co., 924 P.2d 1123, 1126 (Colo.App. 1996), the court stated:

In the Open Records Act, § 24-72-201, C.R.S. (1988 Repl.Vol. 10B), the General Assembly has declared that, with certain specified exceptions, it is “the public policy of this state that all public records shall be open for inspection by any person at reasonable times. . . .” This public policy means that, unless there exists a legitimate reason for non-disclosure, any member of the public is entitled to review all public records. There is no requirement that the party seeking access must demonstrate a special interest in the records requested.

[14] Exum v. United States Olympic Committee, 209 F.R.D. 201, 206 (D.
Colo. 2002).

[15] In re Texaco, Inc. 84 B.R. 14, 17 (Bankr.S.D.N.Y. 1988) (citing In Re “Agent Orange” Product Liability Litigation, 821 F.2d 139, 146 (2d Cir. 1987)).

[16] Huddleson, 270 F.R.D. at 635, 638 (citing Nixon, 435 U.S. 589).

[17] Anderson v. Home Ins. Co., 924 P.2d 1123 (Colo.App. 1996) (citing Cox Broadcasting Corp. v. Cohn, 420 U.S. 469 (1975)).

[18] Doe v. Heitler, 26 P.3d 539, 544 (Colo.App. 2001).

[19] FRCP 26(c) and CRCP 26(c).

[20] See www.youtube.com/watch?v=N8RzT0NiruQ.

[21] See www.youtube.com/watch?v=IAYXJ26j2Po.

[22] See www.wkyc.com/video/1027702353001/0/Investigator-Hidden-camera-catches-nursing-home-abuse.

[23] See www.youtube.com/watch?v=xDifkMzSLuw.

[24] See www.youtube.com/watch?v=qkxbG5HADso.

[25] See 4closurefraud.org/depositions.

[26] See www.slideshare.net/MarcellusDN/lawsuit-deposition-of-pa-dep-official-tara-upadhyay-on-water-testing-procedures.

[27] See www.youtube.com/watch?v=HgR3lDg9KhY.

[28] See www.youtube.com/watch?v=5hIzsc7muxo.

[29] Oppel, Jr., “Taping of Farm Cruelty Is Becoming the Crime,” The New York Times (April 6, 2013), www.nytimes.com/2013/04/07/us/taping-of-farm-cruelty-is-becoming-the-crime.html?_r=0.

[30] Id.

People v. Stell: Breach of POA Agent’s Fiduciary Duty is Properly Included in Criminal Indictment

CashmanBy Barbara Cashman

In an 11/7/13 published opinion, the Colorado Court of Appeals ruled on substantial questions relating to the Uniform Power of Attorney Act (UPOA) as it relates to an agent’s duties, and the types of activities authorized under a power of attorney (POA). In People v. Stell, 2013CA0492, the court of appeals reversed and remanded with directions a case involving a criminal indictment of an agent who under a POA who liquidated the principal’s assets. This decision has wide and beneficial implications for principals who have executed POAs and whose agent are acting in their own self-interests, are converting their principal’s assets for the agent’s use, or who are otherwise stealing from them. Here’s a sketch of the factual background of the case.

The principal (referred to as “victim” in the opinion) executed a POA in 2009 in Virginia. Both Virginia and Colorado have adopted the UPOA so, even though the statutory citations vary, the law is substantially the same. In the POA, the principal named as agent his son, the defendant, Stell. While acting as agent under the POA, Stell wasted no time liquidating all of principal’s bank accounts, CDs, a 401K account, a piece of real property and the timber sold from that land – to the tune of $453,928.81. The following year, Stell proposed that the principal place other assets into a trust so they would be protected from creditors. The trust document that the principal signed at his agent Stell’s direction did not name the principal as beneficiary of such trust, and so the principal was permanently deprived of the use and benefit of those assets. In October 2010, principal terminated the POA and asked the Denver District Attorney’s office to investigate. As a result of the investigation, a nine-count indictment was drawn, eight counts for theft and one count for conspiracy. The appeal of the trial court’s ruling is based on the dismissal of counts 1, 2, 4 and part of 3 – relating to the authority of the agent, Stell, to transfer the principal’s property as agent under the POA. In its dismissal of those counts, the trial court ruled that because Stell had authority under the POA to do anything with the principal’s property that principal could do with it, Stell could not commit theft against his principal. The court of appeals soundly rejected this line of thinking.

The POA is a document that confers broad powers, but it is no license to steal. In this criminal case, the court of appeals examined carefully the fiduciary duty owed by an agent to his principal under the UPOA. Citing a Virginia Supreme Court decision, the court of appeals stated that “powers of attorney are strictly construed.” (Opin. at ¶17) Going further, the court ruled that the expansive language in a POA should be interpreted narrowly and should be construed in light of the surrounding circumstances. It soundly rejected the argument that, because a POA typically gives a broad grant of authority, it could somehow give an agent the authority to misbehave, commit theft, and otherwise breach fiduciary duties owed as a consequence of the nature of the principal-agent relationship.

The fact that a POA contains a broad grant of authority to the agent does not mean that an agent can abuse that authority. The agent is duty-bound (as in an agent’s fiduciary duty, as described in the UPOA) to exercise authority while acting as agent with the utmost good faith and loyalty. The court of appeals rejected the trial court’s reasoning that a broad grant of authority to the agent implied that an agent’s actions were somehow still “authorized” because agent was acting under a POA, even though the agent’s actions were in violation of his fiduciary duties. In ¶21 of the decision, the court of appeals identified the factual questions appropriate for a jury’s determination of whether an agent under a POA was acting within or outside of his or her scope of authority as determined by agent’s fiduciary duties. They included the following questions of whether agent acted: (1) in accordance with principal’s reasonable expectations and consistently with the principal’s interests and intent; (2) in good faith; (3) loyally for the principal’s benefit; and (4) with the care, competence, and diligence ordinarily exercised by agents in similar circumstances.

In reversing and remanding the counts of the indictment dismissed by the trial court, the court of appeals gives an indication that the days of the POA as a “license to steal” for non-criminal law purposes are over. This is an important development for Colorado – for both the new mandatory reporting of financial exploitation law (read my post about that law here) as well as the ability of exploited elders and other at-risk persons to recover funds improperly taken from them by an agent under a POA. It gives more protection for principals who have been taken advantage of by their agents to establish that the agent’s conduct was improper and to strengthen the ability to recover such funds that were improperly used or converted for the agent’s exclusive benefit.

Barbara Cashman is a solo practitioner in Denver, focusing on elder law, estate law, and mediation. She is active in the Trust & Estate and Elder Law sections of the CBA and is the incoming chair of the Solo/Small Firm section. She contributes to the SOLOinCOLO blog and blogs weekly on her law firm blog, where this post originally appeared.  She can be contacted at barb@DenverElderLaw.org.

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.