May 19, 2013

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HB 13-1292: Making Multiple Changes to Contracting Requirements for State and Local Government Agencies

April 24, 2013 by Leave a Comment

On April 2, 2013, Rep. Pete Lee and Sen. Andy Kerr introduced HB 13-1292 - Concerning Modifications to Procurement Requirements for Government Contracts Related to United States Domestic Employment. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Colorado hiring on public works projects. Current law requires a contractor to use at least 80 percent Colorado labor for any public works contract that is financed in whole or in part by state, county, school district, or municipal moneys (Colorado labor requirement). Any violation of the Colorado labor requirement is currently a misdemeanor punishable by fine, imprisonment in county jail, or both. Current law does not specifically require any state entity to enforce the Colorado labor requirement.

As introduced the bill repeals the existing criminal penalties and directs the department of labor and employment (CDLE) to enforce the Colorado labor requirement. In connection with its enforcement duties, CDLE is required to receive complaints about potential violations of the Colorado labor requirement, investigate such complaints, and impose fines for violations.

If a contractor has violated the Colorado labor requirements multiple times, the executive director of CDLE may, in his or her discretion, initiate proceedings to debar the contractor. The general assembly is required to appropriate any revenue from the fines collected by CDLE to CDLE to be used for its enforcement of the Colorado labor requirements.

The bill specifies that the Colorado labor requirement applies to each construction phase of the public works project separately. The governmental body financing a public works project may waive the Colorado labor requirement for a specific type or class of labor for a construction phase of a public works project if there is reasonable evidence to demonstrate insufficient Colorado labor in a specific type or class of labor to perform the work of that construction phase of the project.

Compliance with the requirements of the Colorado labor requirement will be calculated on the total taxable wages and fringe benefits, minus any per diem payments, paid to workers employed directly on the site of the project and who satisfy the definition of Colorado labor.

Nonresident bidder reciprocity. Colorado is one of many states that requires reciprocal treatment for a non-resident bidder who is from a state that offers a preference for resident bidders of that state (non-resident bidder reciprocity). Current law does not require any state entity to enforce the nonresident bidder reciprocity requirements.

The bill clarifies the current nonresident bidder reciprocity law by specifying that in any bidding process for public works in which a bid is received from a nonresident bidder who is from a state that provides a percentage bidding preference, a comparable percentage disadvantage shall be applied to the bid of that bidder.

The department of personnel (DPA) is required to determine which states provide a bidding preference on public works contracts for their resident bidders and to submit a report to the general assembly that includes the list as well as recommendations for the implementation and enforcement of the nonresident bidder reciprocity law. In addition, the bill requires that any request for proposals issued by a state agency or political subdivision of the state include notice of Colorado’s nonresident bidder reciprocity law.

Competitive sealed best value bidding for construction contracts for public projects. Currently, construction contracts for public projects are awarded through competitive sealed bidding. The bill creates a competitive sealed best value bidding process and authorizes construction contracts to be awarded either through the existing competitive sealed bidding process or the new competitive sealed best value bidding process.

The bill requires a contract under competitive sealed best value bidding to be solicited through an invitation for bids that identifies the evaluation factors upon which the award shall be based. The bill specifies certain evaluation factors to be included in the bids.

A contract shall be awarded to the bidder whose bid is determined in writing to be the most advantageous to the state and that represents the best overall value to the state, taking into consideration the price and other evaluation factors set forth in the invitation for bids.

The bill requires the executive director of a governmental agency or the president of an institution of higher education (institution), as applicable, that enters into a construction contract for a public project to disclose to the public the agency or institution’s rationale for selecting the competitive sealed bidding process, the competitive sealed best value bidding process, or the integrated project delivery process, which also currently exists in law, as applicable. The agency or institution is required to post the disclosure on its web site.

Disclosure of outsourcing contract duties by vendor. Current law requires any prospective vendor for a contract from the state for services to disclose where services will be performed under the contract, including subcontracts, and whether any services under the contract or subcontract are anticipated to be performed outside the state or the U.S. The bill modifies current law by requiring prospective vendors to make this disclosure for subcontracts only.

In addition, the bill requires each contract entered into or renewed by a governmental body to contain a clause that requires the vendor to provide written notice to the governmental body if the vendor decides, after the contract is awarded, to subcontract any part of the contract to a subcontractor that will perform such duties in a location outside the state or the U.S.

The notice must include the specific duties that will be outsourced and the reason for the outsourcing. The governmental body is required to provide the written notice from a vendor to the director of DPA (director), and the director is required to post the notice on the official web site of DPA. If a vendor fails to notify the governmental body that is a party to the contract of outsourcing, the governmental body may, in its discretion, void the contract.

Outsourcing of certain contract duties by governmental body prohibited. The bill prohibits a governmental body from awarding a contract to a vendor outside the U.S. that will perform the direct labor necessitated by the contract outside the U.S. Direct labor includes labor that is required to be performed under a contract when the governmental body has a direct business relationship with the vendor performing the contract. It does not include computer systems, including hardware and software that is not specifically designed pursuant to the terms of the contract.

Each prospective vendor that submits a bid or proposal to a governmental body is required to certify that the direct labor covered by the bid or proposal will be performed in the U.S.

A governmental body may submit to the director written request for a waiver of the direct labor requirements. A governmental body shall include in its written waiver request findings of one or more specified circumstances to justify the need for a waiver.

The director is required to post information regarding any waiver allowed on the official web site of DPA, periodically analyze the direct labor services for which waivers are granted to a governmental body, and work with governmental bodies to facilitate the performance of such outsourced direct labor services within the U.S. for future contracts.

Disclose use of foreign-produced iron, steel, and related manufactured goods. The bill requires the contractor for any public buildings or public works project that is funded in whole or in part by state moneys and that costs more than $500,000 to disclose to DPA the five most costly goods incorporated into the contract.

The bill specifies that, in the case of an iron or steel product, all manufacturing must take place in the U.S., and in the case of a manufactured good, a good will be considered manufactured in the U.S. if all of the manufacturing processes for the final product take place in the U.S. In order for a manufactured good to be considered subject to disclosure, the product must be manufactured predominantly of steel or iron.

DPA is required to develop and maintain a list of the 5 most costly goods that are incorporated into each contract and that are not produced in the U.S., as disclosed to DPA.

Public utilities commission consideration of best value metrics in request for proposal process. Currently, the public utilities commission is required to consider certain best value employment metrics when it evaluates electric resource acquisitions. The bill requires that the public utilities commission also consider the best value employment metrics in connection with requests for a certificate of convenience and necessity for construction or expansion of generating facilities, including pollution control or fuel conservation upgrades and conversion of existing coal-fired plants to natural gas plants.

The bill has been approved by the State, Veterans, & Military Affairs, Finance, and Appropriations Committees; it is scheduled for 2nd Reading on the floor of the House.

Since this summary, the bill passed Second Reading with amendments, passed Third Reading, and was assigned to the Finance Committee in the Senate.

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Colorado Court of Appeals: Action Seeking to Enforce Contractual Agreements In Personam in Nature; Maritime Law Not Implicated

April 16, 2013 by Leave a Comment

The Colorado Court of Appeals issued its opinion in BDG International, Inc. v. Bowers on Thursday, April 11, 2013.

Subject Matter Jurisdiction—Maritime Law—Finality of Judgment—Contract—Duress—Offsetting—Attorney Fees.

Defendants Robert J. Bowers and Auxiliary Graphic Equipment, Inc. (AGE) appealed the judgment entered after a bench trial in favor of plaintiff BDG International, Inc. (BDG). The judgment was affirmed.

AGE purchased printing presses from a seller in Australia for a client located in Colorado. AGE contracted with Fortner Graphic Solutions, Inc. (Fortner) to dismantle the printing presses and transport them to Colorado. Fortner then subcontracted with BDG and other firms to perform its contractual duties. BDG was responsible for transoceanic shipping, and another company was responsible for packing and inland transportation to the client’s site in Colorado. BDG brought this action after defendants failed to pay all costs for inland and ocean freight for the dismantling and shipping of the presses and failed to make payment as required by the agreements to release the resulting liens. The court entered a judgment in favor of BDG and against defendants, jointly and severally.

On appeal, defendants contended that the trial court lacked subject matter jurisdiction over this case, because it involved admiralty or maritime law and exclusive jurisdiction resided with the federal courts. Contrary to defendants’ arguments, however, this action is not in rem in nature; rather, it is a proceeding in personam, because it sought to enforce the contractual agreements against defendants personally and not against the cargo or another type of property of a maritime nature. Accordingly, jurisdiction in this case did not lie exclusively in the federal courts, and the trial court did not lack subject matter jurisdiction to hear this case.

Defendants also contended that the judgment was not final because it does not dispose of the litigation. The judgment entered by the trial court resolved BDG’s and the third-party claim; dismissed the counterclaim with prejudice; and awarded a sum certain for damages, collection costs, and prejudgment interest. Although the trial court provided directions with regard to how the proceeds of any sums recovered by Bowers or AGE should be applied to the judgments they obtained against Fortner in Colorado and Missouri, those directions do not alter the finality of the underlying judgment.

Defendants also contended that the trial court erred in not finding the contracts voidable on the basis of duress. Although defendants may have felt economic pressure to sign the releases to obtain possession of the cargo, the lienholders did not engage in wrongful conduct to coerce payment from defendants.

Defendants further contended that the trial court erred in failing to set off against one another the judgments in this case. Contrary to defendants’ contention, however, the principle of offsetting judgments does not apply, because the judgments are not against the same parties.

BDG collection costs primarily were attorney fees amounting to 40% of the principal due under the agreements signed by defendants. The Court of Appeals therefore ruled that the trial court did not err in awarding BDG collection costs.

Summary and full case available here.

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Colorado Supreme Court: Record on Appeal Did Not Satisfy C.A.R. 10(b); Appeal Dismissed With Prejudice

February 12, 2013 by Leave a Comment

The Colorado Supreme Court issued its opinion in Northstar Project Management, Inc. v. DLR Group, Inc.  on Monday, February 11, 2013.

CAR 10(b)—Designation of Appellate Record.

The Supreme Court held that the court of appeals erred when it held that the record designated by DLR Group, Inc. (DLR) on appeal satisfied CAR 10(b). The court of appeals did not have the information necessary to determine whether the evidence sufficiently supported the jury’s verdict in favor of Northstar Project Management, Inc. The judgment of the court of appeals was reversed and the case was remanded for dismissal of DLR’s appeal with prejudice pursuant to CAR 38(e).

Summary and full case available here.

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Colorado Supreme Court: Colorado Securities Act Does Not Express Strong Public Policy Implication Voiding Choice of Forum Clauses

February 5, 2013 by Leave a Comment

The Colorado Supreme Court issued its opinion in Cagle v. Mathers Family Trust on Monday, February 4, 2013.

Forum Selection Clauses in Contracts—Colorado Securities Act—Anti-Waiver Provisions.

The Supreme Court held enforceable the forum selection clause in the sales contract in this securities case, requiring the parties to litigate in Texas. The clause is not voided by Colorado public policy as expressed in the Colorado Securities Act (CSA) or by the CSA’s anti-waiver provision, which bars agreements that waive compliance with the substantive provisions of the CSA. The court of appeals’ judgment was reversed, and the case was remanded to the court of appeals with instructions to return it to the trial court for reinstatement of the trial court’s grant of the motion to dismiss based on the forum selection clause in the parties’ sales contract.

Summary and full case available here.

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Tenth Circuit: Employment Discrimination Settlement Agreement Enforceable; Extended Time to File Notice of Appeal Applies When Judgment Not Entered in Separate Document

January 11, 2013 by Leave a Comment

The Tenth Circuit published its opinion in Walters v. Wal-Mart Stores, Inc. on Tuesday, January 8, 2013.

Bennie Walters brought employment discrimination claims against his former employer, Wal-Mart Stores, Inc. (“Wal-Mart”). The parties reached an apparent settlement during a settlement conference and signed a document entitled “Settlement Terms,” that set forth the key terms of the agreement, indicating a fuller agreement was to be prepared within 20 days. Walters later refused to sign the final agreement. The district court granted Wal-Mart’s motion to enforce the agreement and denied Walters’ motion for reconsideration but did not enter the judgment in a separate document. The court did, however, enter a “Minute Sheet” on the docket, but that unsigned document did not indicate that Wal-Mart’s motion had been granted.

Wal-Mart argued that Walters’ appeal was untimely because it was filed more than 30 days after the minute sheet entry and F.R.A.P. 4(a) requires a notice of appeal be filed within 30 days after a judgment is entered. F.R.C.P. 58(a) requires that a judgment must be set out in a separate document. The Tenth Circuit held that the unsigned minute sheet was not a separate judgment so Walters’ time for appeal was governed by F.R.C.P. 58(c)(2), which gave him 150 days to file a notice of appeal. The denial of Walters’ motion for reconsideration also did not start the clock. When no separate judgment has been entered, “an appellant remains entitled to the extended deadline for filing a notice of appeal even if he files a motion for reconsideration before the judgment is deemed ‘entered’ under F.R.C.P. 58(c).”

Once the court determined it had jurisdiction, it reviewed the district court’s decision to enforce the settlement agreement for abuse of discretion and found none. Under Oklahoma contract law, “[a] party generally may not repudiate a settlement agreement absent fraud, duress, undue influence, or mistake.” The court found no duress. The court also rejected Walters’ claim that he was improperly denied the 21 days to consider the settlement included in the final agreement. The provision was included in order to comply with the Older Workers Benefit Protection Act (“OWBPA”). Because the OWBPA 21-day consideration period for a valid waiver of an age discrimination claim does not apply to settlement of court cases, the agreement was not unenforceable on that basis. Because Walters did not challenge Wal-Mart’s compliance with OWBPA’s requirements that do apply to court cases, he waived that argument. The court affirmed the district court.

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Colorado Court of Appeals: In Breach of Contract Case, Three-Part Test to Determine Equitable Estoppel Was Satisfied

January 8, 2013 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Extreme Construction Co. v. RCG Glenwood, LLC  on Thursday, December 27, 2012.

Construction Contract—Equitable Estoppel in a Contract Action.

In this action concerning the interpretation of a payment provision in a construction contract, plaintiff Extreme Construction Co. (Extreme) appealed the amount of the monetary judgment that it obtained against defendant RCG Glenwood, LLC (RCG) and the judgment entered in favor of defendant Mike Spradlin. RCG cross-appealed the trial court’s award of attorney fees, costs, and certain prejudgment interest to Extreme, as well as the court’s denial of RCG’s request for fees and costs. The judgment was affirmed in part and vacated in part, and the case was remanded with directions.

RCG, through Spradlin, its owner, negotiated for Extreme to remodel a portion of a building. Extreme provided a budget that estimated the total price and included amounts for superintendence and labor, which were calculated at $68.50 per hour and $38.50 per hour, respectively. The contract that was entered into did not include these hourly rates. Instead, it was a Guaranteed Maximum Price contract that provided for payment of wages of construction workers employed by Extreme, as well as “Builder’s overhead and construction management fee of 5.5%, and Builder’s profit of 5.5%, for a total of 11%.”

Extreme mailed monthly bills reflecting the hourly wage charges noted above. These invoices were paid without objection, but some of RCG’s checks bounced. Each time Extreme discussed the bounced checks with Spradlin, no issues regarding the hourly rates were raised. Notwithstanding the failure of RCG to pay its bills, Extreme completed the project on time, to Spradlin’s satisfaction, and for about $45,000 less than the Guaranteed Maximum Price.

RCG failed to pay in full, and Spradlin proposed a payment schedule and “a promissory note, personally guaranteed.” Based on his request, Extreme did not file a lien and prepared a promissory note, which was never signed.

Extreme sued, claiming breach of contract against RCG and that Spradlin had breached his personal guarantee. RCG and Spradlin asserted Extreme had overbilled RCG, claiming Extreme was not permitted to bill for superintendence and labor on an hourly basis. Extreme replied that the contract was ambiguous and that extrinsic evidence, including the pre-contractual budget, favored its interpretation. In addition, Extreme claimed RCG was estopped from contesting Extreme’s interpretation of the contract.

The trial court found that the contract was ambiguous but that the extrinsic evidence supported RCG and Spradlin’s argument. It rejected the estoppel argument. The court entered judgment in favor of Extreme and against RCG in the amount of $18,523.65. Because this was significantly less than the amount Extreme had sought at trial, RCG argued it was the prevailing party under a fee-shifting provision in the contract. Also, because the amount of the judgment was less than the offer of settlement made under CRS § 13-17-202, any interest awarded to Extreme had to be abated as of the date of the offer, and RCG was entitled to an award of costs. The trial court rejected all of these arguments. Both parties appealed.

Extreme contended that RCG was equitably estopped from contesting Extreme’s interpretation of the contract, and the Court of Appeals agreed. The Court held, as a matter of first impression, that the equitable estoppel doctrine applies to disputes over contract interpretation, at least in cases involving the construction of an ambiguous contractual provision unrelated to insurance coverage.

The Court also agreed with the trial court that the contractual provision regarding wages was ambiguous. For equitable estoppel to apply, the party asserting the doctrine must establish that (1) the other party had full knowledge of the facts, (2) the other party unreasonably delayed in asserting an available remedy, and (3) the party asserting the doctrine relied on the other party’s delay to its detriment.

The trial court found, and the record supported, that the first element was satisfied. The trial court found the second element was not met because if RCG had sought redress, it would have halted the project. The Court found this was error. It is unreasonable for a contracting party who knows of, but secretly disagrees with, the other side’s contract interpretation to delay challenging the interpretation until the other side has completed its performance. This is even more the case where, as here, RCG’s silence induced Extreme’s continued performance. The trial court also erred in finding the third element wasn’t met, because the facts clearly demonstrated that Extreme relied on RCG’s failure to contest its invoices to its detriment. The award of damages was vacated and the case was remanded to the trial court to recalculate the damages.

Extreme argued it was error for the trial court to determine that Extreme never accepted Spradlin’s offer of a personal guarantee. The Court was not persuaded. It agreed with the trial court that although an offer was made by Spradlin, no action was taken that indicated an acceptance by Extreme.

RCG argued it was error to find that under the fee-shifting provision in the contract, Extreme, and not RCG, was the prevailing party. The Court disagreed. RCG was held liable for breach of the contract; therefore, it was the prevailing party for purposes of awarding attorney fees.

RCG also contended it was error for the trial court to reject its assertion that under CRS § 13-17-202, the interest awarded to Extreme should have abated as of the time of the offer of settlement. The Court disagreed, finding that RCG did not address in its briefs the trial court’s finding that RCG did not make a qualifying offer of settlement.

Summary and full case available here.

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Colorado Court of Appeals: Legislative Override of Contractual Obligations Violates Constitutional Contracts Clauses

January 7, 2013 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Raptor Education Foundation, Inc. v. State of Colorado, Department of Revenue, Division of Motor Vehicles on Thursday, December 27, 2012.

Summary Judgment—Impossibility Doctrine—Contracts Clause of U.S. and Colorado Constitutions.

Plaintiff Raptor Education Foundation, Inc. (REF) appealed the trial court’s summary judgment in favor of defendant, the Colorado Department of Revenue, Division of Motor Vehicles (Department). REF also challenged the denial of its CRCP 59(d)(6) motion for a new trial. The judgment was reversed and the case was remanded for further proceedings.

This was a second appeal, following developments after the issuance of the opinion in the first appeal. Between December 1999 and February 2000, the parties executed a “letter of agreement” regarding specialty license plates. The Department agreed to sell the specialty plates only to members of the REF. Several months after the agreement, the Department informed REF that its request had been approved but that it would not restrict sales to its members.

REF sued, alleging breach of contract and violation of equal protection resulting from the Department’s sale to unqualified purchasers. A trial judge found the letter of agreement was not a valid contract, but did find a violation of equal protection and ordered sales to be made only to REF members in the future (2002 order). Both parties appealed. In the interim, the General Assembly passed legislation requiring the Department to restrict sales of the specialty plates to REF members. On the Department’s motion, the appeal was dismissed by a division of the Court of Appeals. The Court found that a contract existed between REF and the Department and held it was error to have found otherwise. The case was remanded for a determination of damages, and the parties eventually settled.

In 2009, the General Assembly amended CRS § 42-3-208 to allow members of the Rocky Mountain Raptor Program to also purchase the specialty plates (2009 amendment). REF sued, alleging breach of contract and violation of the 2002 order. As an affirmative defense, the Department cited the 2009 amendment. The parties filed cross-motions for summary judgment. The trial court entered summary judgment in favor of the Department, concluding that the 2009 amendment made it impossible for the Department to comply with its obligations under the contract with REF. REF filed a motion for a new trial pursuant to CRCP 59(d)(6), which was denied without comment.

On appeal, REF argued that the 2009 amendment violated the Contracts Clauses of the U.S. and Colorado Constitutions. The Court agreed. Both Constitutions prohibit the passing of any laws impairing the obligation of contracts. The Contracts Clauses are not absolute prohibitions but allow legislative action that promotes “the common weal, or . . . general good of the public, though contracts previously entered into between individuals may thereby be affected.” The U.S. Supreme Court has held that the inquiry is “whether the change in state law has ‘operated as a substantial impairment of a contractual relationship.’” [Gen. Motors Corp. v. Romein, 503 U.S. 181, 186 (1992)].In Romein, as here, where a contractual obligation of the government is at issue, the examination is more stringent.

REF and the Department entered into a contract whereby the Department would sell specialty license plates only to members of REF. The 2009 amendment impaired that contract. Neither the 2002 legislation nor the 2009 amendment was foreseeable when the parties entered into their contract because they regulated an area never before subject to regulation. The Court found that the 2009 amendment substantially impaired the contract and therefore breached the Contracts Clauses.

The trial court’s judgment in favor of the Department on the breach of contract claim was reversed and the Court remanded the case for assessment of damages. In addition, the trial court’s judgment in favor of the Department on REF’s claim for violation of the court’s 2002 order was reversed. Because the 2009 amendment was unconstitutional, the trial court also must determine on remand what damages should be assessed for violation of the 2002 order.

Summary and full case available here.

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Tenth Circuit: Clickwrap Agreements That Gave Notice of Terms and Meaningful Opportunity to Assent Enforceable

December 13, 2012 by Leave a Comment

The Tenth Circuit issued its opinion in Hancock v. AT&T on Tuesday, December 11, 2012.

Plaintiffs filed a class action complaint on July 30, 2010, in the U.S. District Court for the Western District of Oklahoma. They asserted claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961, et seq., as well as various claims under state law. Plaintiffs are individuals who purchased U-verse in either Florida or Oklahoma. U-verse is the brand name for a telecommunications service that includes digital television (TV), voice-over Internet protocol (Voice), and high-speed Internet (Internet). Plaintiffs sued a number of defendants, including AT&T Operations, Inc., Southwestern Bell Telephone Company, and BellSouth Telecommunications (collectively Defendants). Southwestern Bell and BellSouth are AT&T regional affiliates who install and provide U-verse services for customers in Oklahoma and Florida, and AT&T is ultimately responsible for U-verse in those areas.

The district court dismissed Plaintiffs’ claims based on forum selection and arbitration clauses in the U-verse terms of service. The TV/Voice terms of service dictated a forum of courts in a Texas county and the Internet had a forced arbitration clause. Defendants use “clickwrap” agreements as part of their standard practice for customer acceptance of the TV/Voice and Internet terms. Clickwrap is a commonly used term for agreements requiring a computer user to “consent to any terms or conditions by clicking on a dialog box on the screen in order to proceed with [a] . . . transaction.” According to Defendants’ standard practice, TV/Voice customers were given printed copies of terms of service before agreeing to those terms on a technician’s computer prior to installation. Internet customers agreed online.

Plaintiffs argued that no contract was formed because “Defendants’ clickwrap agreements do not give customers notice of and a meaningful opportunity to assent to the U-verse terms of service.” The Tenth Circuit disagreed and found the clickwrap agreements to be of the type that are routinely upheld and found them valid and enforceable under Oklahoma and Florida law.

Plaintiffs also argued that the district court failed to draw reasonable inferences and resolve factual disputes in their favor as required when deciding a motion to dismiss for improper venue under F.R.C.P. 12(b)(3). The Tenth Circuit found that Plaintiffs failed to sufficiently rebut AT&T’s FRE 406 declarations so the court’s failure to hold an evidentiary hearing was not an abuse of discretion. Despite the fact that no declarations were provided from employees of the Bell companies who actually provided the terms of service to the customers, the court held that “the AT&T declarants demonstrated personal knowledge of the standard practice designed for regional affiliates, as well as personal knowledge that U-verse customers such as Plaintiffs generally accept terms of service through the standard practice. This was enough to raise an inference that the standard practice was followed when Plaintiffs obtained U-verse service and shifted the burden to Plaintiffs to raise a genuine factual dispute.” The Tenth Circuit affirmed the dismissal of Plaintiffs’ claims.

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Colorado Court of Appeals: Trial Court Did Not Dismiss “Entire Claim” When it Dismissed Negligence Claim, So Attorney Fees and Costs Award Not Warranted

December 12, 2012 by Leave a Comment

The Colorado Court of Appeals issued its opinion in BSLNI, Inc. v. Russ T. Diamonds, Inc. on Thursday, December 6, 2012.

Breach of Contract—Negligence—Attorney Fees—CRCP 12(c)—Expert Testimony.

Defendant Russ T. Diamonds, Inc. (Diamonds) appealed the trial court’s judgment in favor of plaintiff BSLNI, Inc. The judgment was affirmed.

BSLNI orally contracted with Diamonds to cut concrete from the deck of a bridge into sections so that BSLNI could remove the concrete in blocks. While performing the cutting, Diamonds caused damage to several of the bridge’s girders.

Diamonds argued that the trial court erred in failing to award costs and attorney fees pursuant to CRS §§ 13-16-113(2) and 13-17-201 on dismissing BSLNI’s negligence claim. Specifically, Diamonds contended that, although the trial court granted BSLNI leave to amend its complaint and add a contract claim, the court dismissed BSLNI’s entire “tort action” when it dismissed the negligence claim, which was the sole claim in BSLNI’s original complaint. Because Diamonds already had filed a responsive pleading, however, and its motion was filed on the eve of trial, Diamonds’ motion should have been treated as a motion for judgment on the pleadings under CRCP 12(c). Therefore, BSLNI’s tort claim was not dismissed under CRCP 12(b), and the trial court did not err when it denied Diamonds’ motion for attorney fees and costs.

Diamonds further contended that the trial court should have granted its pretrial motion to dismiss, its motion for directed verdict, and its motion for judgment notwithstanding the verdict, because BSLNI failed to provide expert testimony on the professional standard of care in proving its breach of contract claim against Diamonds. BSLNI’s breach of contract claim did not rely on Diamonds violating an industry or professional standard of care. BSLNI, therefore, was not required to prove an industry standard of care by expert testimony or otherwise. Further, the evidence presented at trial makes clear that the issue was within the realm of common knowledge. Therefore, BSLNI was not required to provide expert testimony to establish whether the damage was “minor” in this case.

Summary and full case available here.

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Colorado Court of Appeals: Equitable Relief, Not Legal Damages, Appropriate Where Contract Provided for Equitable Adjustment for Unanticipated Costs

October 31, 2012 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Parker Excavating, Inc. v. City & County of Denver on Thursday, October 25, 2012.

Contract Dispute—Equitable Relief.

In this government contracts case, plaintiff Parker Excavating, Inc. (Parker) appealed the trial court’s judgment awarding it $1.65 million under an equitable adjustment provision of Parker’s contract with the City and County of Denver’s Board of Water Commissioners (Denver Water). The judgment was affirmed.

This case arose out of a contract dispute between Parker and Denver Water over responsibility for increased costs associated with constructing a dam and reservoir at a sand and gravel pit. The trial court found that Parker’s costs increased by $2,373,679, but “as an equitable matter . . . both parties share some responsibility for the unanticipated muck.” The court concluded that Denver Water was more responsible than Parker. It then awarded Parker $1.65 million.

On appeal, Parker argued that the trial court erred in awarding Parker equitable relief rather than legal damages. The contract contained an equitable adjustment provision, entitling either party to seek an equitable adjustment for increased or decreased costs caused by unanticipated site conditions. Further, the contract excluded compensation for excavation costs. Therefore, from the plain language of the contract, the parties would have reasonably expected an equitable adjustment to be a remedy in equity. Further, the trial court did not clearly err in reducing the measure of equitable adjustment to account for Parker’s relative responsibility in not determining the extent of the muck. The trial court’s findings are, therefore, supported by evidence in the record that certain costs were attributable to Parker, and those findings were not disturbed on appeal.

Summary and full case available here.

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Colorado Court of Appeals: Summary Judgment In Favor of Insurance Company Appropriate Where Insurance Company Would Not Have Been Liable if In Insured’s Shoes

October 16, 2012 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Abady v. Certain Underwriters at Lloyd’s London Subscribing to Mortgage Banker’s Bond No. MBB-06-0009 on Thursday, October 11, 2012.

Summary Judgment—Damage Suffered by Investors—Direct Financial Loss—Distinction Between Liability Policy and Fidelity Bond.

Plaintiffs (investors) appealed the trial court’s summary judgment in favor of Certain Underwriters at Lloyd’s London (Lloyd’s). The judgment was affirmed.

Investors alleged that the chief executive officer (CEO) of Commercial Capital Inc. (CCI) formed CCI as a real estate lending company providing short-term financing for commercial construction projects. During 2006 and 2007, CCI solicited private investors to invest funds in the company. The proposed investment involved the acquisition of debt securities documented by a subscription agreement and promissory note from CCI (notes). Seminars were held by CCI to describe the investment.

Investors alleged that the CEO was involved in all day-to-day operations and made misrepresentations that included: (1) CCI had a $5 million policy in place to protect investors’ principal against loss; (2) the investments had high guaranteed rates of return; (3) the interests sold were registered with the Securities and Exchange Commission; (4) the investments were “more liquid than other private real estate strategies” and “enjoyed a superior risk return profile due to inefficiencies in the commercial lending market”; (5) CCI would conduct vigorous due diligence before granting any loans; and (6) the investments and any interest would be personally guaranteed by the CEO. Investors alleged that, based on these and other misrepresentations, they invested or loaned money to CCI in an amount in excess of $1 million. CCI is allegedly in default on the notes and the CEO has not honored his personal guarantee.

It appeared that CCI loaned investors’ funds to developers at lower interest rates than those payable to investors but with very high loan origination fees. On April 22, 2009, CCI filed a voluntary petition for Chapter 11 bankruptcy. Certain creditors, including investors, moved for relief from the automatic stay to pursue CCI’s rights under Insuring Clause A1(b) of the Mortgage Bankers Bond No. MBB-06-00090 (bond), which was issued to CCI by Lloyd’s. The relief was granted and the bankruptcy trustee assigned all of CCI’s rights, title, and interest in the bonds to investors, retaining 30% of the gross recovery less reasonable attorney fees and $50,000 to be paid to investors, with the balance to the investors.

Investors filed a complaint against CCI, the CEO, and Lloyd’s, alleging that CCI and the CEO officer violated the Colorado Securities Act, sold unregistered securities, committed common law fraudulent misrepresentation, constructive fraud, negligent misrepresentation or omission, civil theft, breach of fiduciary duty, and vicarious liability. Investors also asserted two first-party claims against Lloyd’s: (1) as assignee of the bond, and (2) as a garnishment claim asserting a right to garnish Lloyd’s after obtaining judgment against CCI. Lloyd’s, following some discovery, filed a motion for summary judgment, which the trial court granted. Investors appealed.

Investors conceded on appeal that the policy was a fidelity bond. As such, it is analogous to an insurance policy. As far as an assignment was concerned, an assignee stands in the assignor’s shoes “and takes ‘only as good a claim as his assignor had.’” Therefore, investors’ third-party claims were not first-party losses merely because investors were now in CCI’s shoes as first-party claimants. Investors may recover only those losses that CCI could have recovered for itself.

The Court of Appeals framed the issue presented as whether, under the agreed-on coverage, Lloyd’s would be liable to CCI for the damages suffered by investors arising out of the wrongful acts of its officers and employees in marketing interests in CCI to investors. The Court held this was not the case, because the losses asserted by investors did not constitute direct losses to CCI as contemplated by the bond. The bond provided coverage for “direct financial loss” sustained by CCI. The phrase was not defined. However, the Court again noted that this was a fidelity bond and not a liability policy. CCI could have purchased such insurance, but it did not. Thus, the Court held that “direct financial loss” unambiguously refers only to the immediate loss of CCI’s property through the dishonesty of its own officers and employees. It does not provide coverage to CCI for acts that cause damages to third parties. The summary judgment in favor of Lloyd’s was affirmed.

Summary and full case available here.

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Colorado Court of Appeals: Summary Judgment Reversed Because Trial Court Did Not Rule on Whether Plaintiffs’ Rights to COLA Were Violated

October 15, 2012 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Justus v. State of Colorado on Thursday, October 11, 2012.

Public Employees’ Retirement Association—Cost of Living Adjustment—Senate Bill 10-001—Contract Clause—Takings Clause—Impairment—Public Purpose.

Plaintiffs Gary Justus, Kathleen Hopkins, Eugene Halaas, and Robert Laird, Jr., who are recipients of retirement benefits through the Colorado Public Employees’ Retirement Association (PERA), appealed the trial court’s entry of summary judgment in favor of defendants, the State of Colorado, Governor John Hickenlooper, PERA, Carole Wright (chair of the PERA Board of Trustees), and Maryann Motza (vice chair of the PERA Board of Trustees). The judgment was reversed and the case was remanded.

Plaintiffs challenged §§ 19 and 20 of Senate Bill 10-001 (now codified at CRS §§ 24-51-1001 and -1002), which reduced the amount they were entitled to receive as a cost-of-living adjustment (COLA) to their PERA benefits. The trial court ruled that plaintiffs have no contractual right to the COLA in effect when they retired, and that absent such a contractual right, plaintiffs’ claims necessarily fail.

On appeal, plaintiffs contended that the district court erred by granting summary judgment on their Contract and Takings Clause claims, because once they became eligible to retire or had retired, they each acquired a contractual right to the COLA then in effect, which precluded the General Assembly from making any adverse change to the formula. Plaintiffs have a contractual right to have their retirement benefits calculated using the COLA in effect when their rights vested, before the effective date of Senate Bill 10-001. However, §§ 19 and 20 of Senate Bill 10-001 do not violate plaintiffs’ rights under the Contract Clauses if: (1) their contract right has not been impaired; (2) any impairment is not substantial; or (3) the change in the COLA was reasonable and necessary to serve a significant and legitimate public purpose. The trial court did not rule on those issues. Therefore, the case was remanded for the trial court to make these determinations. In light of the conclusion that the court erred in regard to plaintiffs’ Contract Clause claims, the summary judgment on the Takings Clause claim also was reversed, and the case was remanded for further proceedings on that claim.

Summary and full case available here.

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