May 26, 2016

Colorado Supreme Court: Colorado Governmental Immunity Act Does Not Apply to Prospective Injury

The Colorado Supreme Court issued its opinion in Open Door Ministries v. Lipschuetz on Monday, May 23, 2016.

Colorado Governmental Immunity Act—Injury—Nature of Action.

The Supreme Court held that the Colorado Governmental Immunity Act (CGIA), CRS §§ 24-10-101 to -120, does not bar claims for prospective relief from a future injury. Open Door Ministries (Open Door) had not suffered an injury by the time it filed its cross-claims against the City and County of Denver. Therefore, Open Door’s cross-claims—which sought prospective relief to prevent a future injury—were not subject to the CGIA. Open Door was not required to comply with the CGIA’s notice provision, and the trial court had jurisdiction over the cross-claims.

Summary provided courtesy of The Colorado Lawyer.

Nancy Elkind Honored with Colorado Lawyers Committee Outstanding Sustained Contribution Award

NancyElkindOn Monday, May 23, 2016, the Colorado Lawyers Committee held its annual awards luncheon at the Marriott Denver City Center. Nancy B. Elkind, founding partner of Elkind Alterman Harston PC, received the organization’s Outstanding Sustained Contribution Award. Ms. Elkind is on the Board of Directors for the Colorado Lawyers Committee, and she was chair of the committee from 2011 to 2013. She contributes extensively to her community through her work with the Colorado Lawyers Committee, helping the organization provide high-impact pro bono work while advocating, negotiating, and litigating for children, the poor, and other disadvantaged groups. She has practiced immigration law for over 30 years, and has provided counsel and guidance to hundreds of immigrant families and individuals, as well as to employers that are seeking to hire the “best and the brightest.” Ms. Elkind is also the managing editor of CBA-CLE’s treatise, Immigration Law for the Colorado Practitioner, and she also lectures frequently on topics related to immigration law.

AaronBoscheeAaron A. Boschee, senior associate at Squire Patton Boggs, received the Colorado Lawyers Committee’s Individual of the Year Award. Mr. Boschee is the Colorado Lawyers Committee Task Force Chair, and lead class counsel for the Taylor Ranch Litigation, through which he coordinates the pro bono efforts of over 30 lawyers at numerous law firms throughout the region. Mr. Boschee practices in the areas of commercial litigation, arbitration, and debt restructuring, focusing on debtor-creditor disputes, asset recovery and loss mitigation, real estate-based lending and litigation, creditor-lien priority, shareholder and director disputes, and fraud. He received his undergraduate degree from Minnesota State University and his law degree from the University of Denver Sturm College of Law.

SchmidtLaurenEBrownstein Hyatt Farber Schreck, LLP, received the Committee’s Law Firm of the Year Award. The Law Firm of the Year Award is given to firms whose attorneys and staff made significant pro bono contributions to Lawyers Committee projects during 2015. Lauren Schmidt, BHFS’s pro bono partner, and Martha Fitzgerald are members of the Colorado Lawyers Committee’s Board of Directors and Schmidt serves on the Executive Committee. Tenley Oldak serves on the Leadership Board of the Colorado Lawyers Committee Young Lawyers Division. Under Ms. Schmidt’s leadership, BHFS’s pro bono program has increased dramatically, and the firm is a signatory to the national Pro Bono Institute’s Law Firm Pro Bono Challenge. The firm has pledged to average 50 hours of pro bono work per lawyer per year.

Congratulations to all the honorees of the Colorado Lawyers Committee Awards.

Colorado Supreme Court: District Court Judgment Not Final Where Petition for Rehearing Timely Filed

The Colorado Supreme Court issued its opinion in People v. Penn on Monday, May 16, 2016.

Petitions for Rehearing in the District Court—C.A.R. 52—Opinion Evidence—Comment on Witness’s Credibility.

The Supreme Court held that a party may file a petition for rehearing of a district court’s review of a county court judgment within 14 days of the district court’s ruling, unless that time is shortened or extended by order or unless the district court by express order disallows the filing of the petition. Where a petition for rehearing is timely filed in the district court, the district court judgment does not become final for purposes of the 42-day filing period for a writ of certiorari under C.A.R. 52(a) until the district court denies the petition for rehearing. Because the People filed their petition for writ of certiorari within this time frame, it was timely. The Supreme Court further held that it was not plain error for the trial court to admit an officer’s testimony that he had “reason to arrest” defendant for a crime that had been committed. Accordingly, the Court reversed the judgment of the district court and remanded the case for reinstatement of the judgment of conviction.

Summary provided courtesy of The Colorado Lawyer.

Tenth Circuit: Utah Products Liability Law Requires Defect to be Present at Time of Sale

The Tenth Circuit Court of Appeals issued its opinion in Birch v. Polaris Industries, Inc. on Wednesday, December 23, 2015.

Virl Birch purchased a 2011 Polaris RZR 800 off-road vehicle at the Victory Polaris dealership in St. George, Utah. In May 2011, he and his son took the vehicle for a ride and crashed, damaging the vehicle’s rollover protection system (ROPS). Moto Zoo Powersports in St. George estimated that repairing the ROPS and other damage would cost around $6,000. Unhappy with the figure, Mr. Birch contacted Skyler Damron, the Moto Zoo technician who had provided the estimate, about repairing the vehicle “off books” in Mr. Damron’s own garage. Mr. Damron agreed. Mr. Damron purchased a new roll cage for a 2008 Polaris RZR off Craigslist. Between 2008 and 2011, Polaris had made several changes to the design of the ROPS, and the ROPS for a 2008 RZR would not fit a 2011 RZR. Mr. Damron modified the ROPS so that it would fit Mr. Birch’s vehicle. In June 2012, Mr. Birch again crashed his vehicle. The ROPS buckled on impact, pinning him under it, and he died shortly thereafter.

Mr. Birch’s son and personal representative, Justin Birch, together with Mr. Birch’s wife and other two sons, brought suit against Polaris in the District of Utah, seeking damages for strict products liability, negligence, and breach of express and implied warranties. Under Utah state law, all three claims required proof that a product’s injury-causing defect existed at the time the product was sold. The district court set a December 16, 2013 deadline for amending pleadings and a fact discovery deadline of June 6, 2014. The parties engaged in substantial discovery, and on June 26, 2014, they jointly disassembled Mr. Birch’s vehicle, definitively discovering the modified roll cage.

On October 3, 2014, Polaris filed a motion for summary judgment on all plaintiffs’ claims. Polaris argued that Mr. Damron’s modifications had introduced into Mr. Birch’s vehicle a defect that had not previously existed, therefore plaintiffs’ claims were deficient as a matter of law. On October 31, 2014, plaintiffs filed both a response to the summary judgment motion and a request to amend the complaint. Plaintiffs sought to redefine the products at issue as both the 2011 Polaris RZR and the 2008 ROPS, and sought to add a claim that inadequate training was provided to Polaris service technicians. The magistrate judge denied plaintiffs’ motion in March 2015. On November 18, 2014, plaintiffs filed a Motion for Rule 56(d) Extension, requesting that the court delay ruling on the summary judgment motion so they could conduct more discovery regarding the replacement ROPS. The magistrate judge also denied this motion in March 2015. Plaintiffs promptly filed objections to the magistrate’s rulings.

The district court announced at the March 31, 2015 hearing that plaintiffs could not survive summary judgment because they could not prove “there was a defect in the product at the time and point of sale.” The district court pointed out that the case turned on the outcome of plaintiffs’ motion to amend. Evaluating the magistrate’s ruling under the “clearly erroneous or contrary to law” standard, the district court overruled plaintiffs’ objections. The district court found the magistrate judge had not clearly erred in finding plaintiffs failed to establish excusable neglect or good cause for their untimely motion to amend and had failed to file a proper motion for extended discovery. The court granted Polaris’ motion for summary judgment. Plaintiffs appealed, contending the district court applied the wrong standard and should instead have conducted de novo review. Plaintiffs also contended the court erroneously concluded they lacked sufficient justification for their delay in filing the discovery and amendment motions.

The Tenth Circuit first evaluated the legal standard, and found that the district court correctly applied the “clearly erroneous or contrary to law” standard to its review of the magistrate’s order. Because the ruling was non-dispositive and did not have an identical effect to a dispositive ruling, the district court correctly applied the “clearly erroneous” standard of review. Further, plaintiffs waived their right to argue for de novo review by affirming in district court that the “clearly erroneous” standard was applicable. The Tenth Circuit found no error in the district court’s application of the “clearly erroneous” standard.

Next, the Tenth Circuit considered whether the district court erred in denying the motion to amend. The Tenth Circuit noted that untimely filed motions to amend require a showing of good cause and the judge’s consent. In this case, the magistrate found that plaintiffs failed to establish excusable neglect or good cause for filing the motion to amend 11 months after the deadline to do so expired. The magistrate noted that even if the plaintiffs did not discover that the ROPS was intended for a 2008 model until the June 26, 2014 disassembly, there was no justification for the four-month filing delay after that time. The district court agreed with the magistrate that the plaintiffs failed to show adequate justification for the lateness of their motion to amend. The Tenth Circuit similarly found that plaintiffs asserted no justification in their appeal briefs for the months-long delay. The Tenth Circuit ruled that the district court’s Rule 16 analysis was not an abuse of discretion.

Turning next to the motion for additional discovery, the Tenth Circuit again found no error in the district court’s denial. Again, the magistrate found that plaintiffs failed to establish good cause and excusable neglect due to its months’ long delay in filing its request for further discovery. The Tenth Circuit found no error, agreeing with the district court that the plaintiffs were not entitled to F.R.C.P. 56(d) relief because they failed to submit a sufficiently detailed affidavit.

Finally, the Tenth Circuit affirmed the district court’s grant of summary judgment to Polaris. The Tenth Circuit found that the district court correctly concluded there was no genuine dispute that the product as sold did not contain an injury-causing defect. Plaintiffs could not prevail under Utah products liability law because the defect was not present in the vehicle at the time of sale.

The Tenth Circuit affirmed the district court.

Tenth Circuit: Officer Had Probable Cause to Arrest Person Filming Security Checkpoint at Airport

The Tenth Circuit Court of Appeals issued its opinion in Mocek v. City of Albuquerque on Tuesday, December 22, 2015.

Phillip Mocek was arrested in a security checkpoint of the Albuquerque Sunport airport for concealing his identity after filming airport security procedures and being questioned on suspicion of disorderly conduct. Mocek was ultimately charged with disorderly conduct, concealing name or identity, resisting an officer’s lawful command, and criminal trespass. At trial, Mocek introduced the video footage taken prior to the arrest, and was acquitted on all counts. Mocek then brought this action in the district court alleging First and Fourth Amendment violations and seeking damages under 42 U.S.C § 1983, as well as declaratory relief. Mocek also sued the officers and City of Albuquerque for malicious abuse of process under New Mexico tort law. The district court granted the defendants’ Rule 12(b)(6) motions to dismiss for all claims, Mocek appealed, and the Tenth Circuit Court of Appeals affirmed the dismissal of all claims.

First, the Tenth Circuit affirmed the dismissal of the constitutional claims against the individual police officers (including the arresting officer, Officer Dilley) and TSA agents, holding the individual defendants are entitled to qualified immunity because their actions were reasonable and in compliance with the Fourth and First Amendments. With respect to the Fourth Amendment claims against the individual defendants, the Tenth Circuit reasoned Officer Dilley possessed reasonable suspicion that justified stopping Mocek and asking him to identify himself, considering the fact that an airport security checkpoint is a location where “order was paramount.” Further, it was reasonable for Officer Dilley to believe that an investigative stop for disorderly conduct at an airport security checkpoint required production of some physical proof of identity, and given Mocek’s continued refusal to show identification, it was reasonable for Officer Dilley to believe he had probable cause to arrest Mocek for violating a New Mexico criminal statute that prohibits the obstruction of a public officer’s legal performance of his duty. In short, Officer Dilley’s interpretation of the aforementioned New Mexico statute in establishing probable cause to arrest Mocek was reasonable, and therefore, Officer Dilley and the other individual defendants were entitled to qualified immunity on Mocek’s Fourth Amendment claims.

In rejecting Mocek’s claim that the individual defendants unconstitutionally retaliated against the exercise of his First Amendment right to film at the security checkpoint, the Tenth Circuit determined Mocek could not satisfy the third prong of a retaliation claim: that the government’s actions were substantially motivated in response to his protected speech. The Tenth Circuit reasoned when Mocek was arrested, it was not clearly established that Mocek could show the requisite motive where his arrest was arguably supported by probable cause, and therefore, the individual defendants were entitled to qualified immunity on Mocek’s First Amendment retaliation claim.

Second, with respect to Mocek’s claims for declaratory relief against the defendants in their official capacities, the Tenth Circuit affirmed the district court’s dismissal of the claim against the TSA defendants for lack of jurisdiction because Mocek’s pleadings never identified a federal waiver of sovereign immunity (which is required because a suit against a government agent is treated as a suit against the government, and the federal government may only be sued where it has waived sovereign immunity). As for the claim for declaratory relief against the police defendants in their official capacities, the Tenth Circuit affirmed the district courts dismissal, reasoning Mocek had not sufficiently alleged that his past injury resulted in continuing, present adverse effects, and because Mocek had not alleged any injury beyond a subjective chilling effect.

Third, in affirming the district court’s dismissal of Mocek’s claim that the City of Albuquerque is liable under § 1983 because it caused his injuries through unconstitutional policies and practices, the Tenth Circuit held the complaint, aside from conclusory statements, contained no allegations giving rise to an inference that the municipality itself established a deliberate policy or custom that caused Mocek’s injuries.

Fourth, considering Mocek’s claims that the arrest and subsequent filing of a criminal complaint against him constituted a malicious abuse of process, the Tenth Circuit first determined the claims were property before it through either diversity jurisdiction or through the district court’s unchallenged exercise of supplemental jurisdiction. With respect the merits of the claims, the Tenth Circuit upheld the district court’s dismal, finding Mocek was unable to satisfy either the absence of probable cause or the procedural impropriety theories of liability. Under the absence of probable cause theory, the Tenth Circuit found there was at least arguable probable cause to arrest him for concealing identity, and even if there was no probable cause for the other three charges, Mocek nowhere argues that they rendered the complaint as a whole obviously devoid of probable cause. Under the procedural impropriety theory, the Tenth Circuit found Mocek’s brief does not point to anything procedurally improper surrounding his arrest. Therefore, in determining Mocek failed to establish liability under either theory, the Tenth Circuit held Mocek had not established that the arrest and subsequent filing of a criminal complaint against him constituted a malicious abuse of process, thereby affirming the district court’s dismissal of said claims.

Max Montag is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.

Tenth Circuit: Class Certification Improper Where Parties Fail to Demonstrate Commonality

The Tenth Circuit Court of Appeals issued its opinion in Soseeah v. Sentry Insurance on Friday, December 18, 2015.

Mr. Soseeah, after being injured in a motor vehicle accident, made a claim for uninsured and underinsured motorist (“UM/UIM”) benefits under two policies of automobile insurance issued by Sentry Insurance. Additionally, Mr. Soseeah demanded that Sentry reform his two policies to provide UM/UIM coverage in accord with two recent New Mexico Supreme Court cases. According to the complaint, Mrs. Soseeah never executed a valid waiver of UM/UIM coverage under the two policies, or, alternatively, her waiver was legally insufficient under the New Mexico Supreme Court precedent. However, Sentry refused to reform the policies and rejected Mr. Soseeah’s claim for UM/UIM benefits.

Plaintiffs Delbert Soseeah, Maxine Soseeah and John Borrego then filed a class action against defendants Sentry Insurance, and a number of its related entities, claiming, in part, that Sentry failed to timely and properly notify them and other Sentry automobile insurance policyholders of the impact of two New Mexico Supreme Court decisions regarding the availability of UM/UIM coverage under their respective policies. In the first case, Progressive Northwestern Insurance Co. v. Weed Warrior Services, the New Mexico Supreme Court held that “the insurer may not exclude the maximum possible level of UM/UIM coverage in an auto liability policy unless it has offered it to the insured and the insured has exercised the right to reject the coverage through some positive act.” In the second case, Jordan v. Allstate Insurance Co., the New Mexico Supreme Court imposed upon insurers retroactive technical requirements for valid offers and rejections of UM/UIM coverage.

The proposed plaintiff class filed a number of amended complaints that contained various claims against Sentry, three of which were eventually addresses by the Tenth Circuit Court of Appeals. The complaint alleges Sentry’s failure to notify its New Mexico policyholders that UM/UIM coverage limits were reformed by Weed Warrior and Jordan, coupled with Sentry’s refusal to reform Mr. Soseeah’s policies and rejection of his claim for UM/UIM benefits, amounted to (1) a violation of New Mexico’s Unfair Practices Act (UPA), (2) a contractual breach of the insurance policies, and (3) a breach of the implied covenant of good faith and fair dealing. Further, the complain alleges three form letters sent by Sentry to its policyholders in an attempt to comply with the notice requirements of Weed Warrior and Jordan were in fact “misleading an inaccurate” in light of the two decisions. Lastly, the complaint defined a proposed class of Sentry policyholders, alleging all such insureds were entitled to policy reformation and proper notice.

The district court granted plaintiffs’ motion for class certification, thereby establishing a class of all insureds under policies issued in New Mexico by Sentry from May 20, 2004 to April 1, 2011 in which UM/UIM coverage was purportedly rejected, including as subclasses (1) insureds who received the first and second form letter, and (2) insureds who received the third form letter. Sentry subsequently sought and was granted permission to appeal the district court’s class certification ruling to the Tenth Circuit Court of Appeals.

First, the Tenth Circuit held the district court abused its discretion in concluding that the general class it certified satisfied Rule 23(a)(2)’s commonality requirement, which requires plaintiff to demonstrate that the class members have suffered the same injury that is capable of class wide resolution. In rejecting the claim of the plaintiff class under the UPA, the court found the UPA did not impose any duty on Sentry with respect to notifying existing policyholders of the impact of Weed Warrior and Jordan. Plaintiffs’ breach of contract claim cannot give rise to the common injury required for class certification, the court held, because plaintiffs have not identified a single contractual provision in any of the policies at issue, let alone one that is contained in all of the policies at issue, that would have imposed a duty on Sentry to inform the certified class of the impact of Weed Warrior and Jordan. Lastly, considering plaintiff’s bad faith claim, the court again concluded the class was unable to satisfy the common injury requirement necessary for class certification. Even assuming Sentry acted in bad faith with respect to the class by failing to inform them of the impact of Weed Warrior and Jordan, the Tenth Circuit failed to see how the purported lack of notice and information could have injured a policyholder in the absence of a viable claim against Sentry for UM/UIM benefits, considering a large percentage of the certified class members did not have any such claim at all. Therefore, the Tenth Circuit concluded the district court abused its discretion in certifying the general class.

Second, the Tenth Circuit remanded to the district court for further consideration of the certification of the two subclasses, as the Tenth Circuit did not have enough information to determine whether the district court abused its discretion is certifying said subclasses.

Max Montag is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.

Tenth Circuit: Mandamus Unavailable when Appeal in Normal Course will Supply Remedy

The Tenth Circuit Court of Appeals issued its opinion in Feinberg v. Commissioner of Internal Revenue on Friday, December 18, 2015.

Petitioners Neil Feinberg, Andrea Feinberg, and Kellie McDonald operate Total Health Concepts, or THC, an authorized Colorado marijuana dispensary. After the Internal Revenue Service (“IRS”) disallowed their business expense deductions and sent them a large bill, on the ground that their conduct violates federal criminal drug laws, the petitioners challenged that ruling in tax court. In the tax court proceedings, the IRS issued discovery requests asking the petitioners about the nature of their business in order to establish that petitioners are indeed trafficking in marijuana. The petitioners resisted these requests by asserting that their Fifth Amendment privilege against self-incrimination relieved them of the duty to respond. In response, the IRS filed with the tax court a motion to compel production of the discovery it sought, arguing because the Department of Justice’s memorandum on the legalization of marijuana by the states generally instruct federal prosecutors not to prosecute cases like this one, the petitioners should be forced to divulge the requested information. The tax court granted the motion to compel and ordered the petitioners to produce the requested discovery. In seeking to overturn this ruling, because the tax court proceedings were ongoing, the petitioners sought a writ of mandamus from the Tenth Circuit Court of Appeals.

The Tenth Circuit ultimately denied the petition for a writ of mandamus made by petitioners. The court based this denial on two independent grounds. First, the court invoked the rule that a writ of mandamus isn’t available when an appeal in the normal course would suffice to supply any necessary remedy, and more specifically, the rule established in Mid-America’s Process Service v Ellison, that any error in a court’s order compelling production of civil discovery that the petitioners believed protected the Fifth Amendment could be satisfactorily redressed in an appeal after final judgment. The court found the rule in Mid-America’s Process Service is controlling and dispositive of the issue.

Alternatively, the Tenth Circuit determined even if Mid-America’s Process Service didn’t control this case at bar, the petitioners offered no persuasive reason for thinking an appeal after final judgment would fail to remedy any wrong they might suffer. The court left open the possibility that a future party in this context may be able to put fourth a convincing argument as to why the immediate remedy of mandamus is necessary to prevent an irreparable injury. However, the petitioners here were unable to do so. And that by itself, the court reasoned, supplies an independent reason – beyond the controlling precedent of Mid-America’s Process Service – to withhold the extraordinary remedy of mandamus in this case.

Max Montag is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.

Tenth Circuit: Declaratory Judgment Action Moot where Business Interests Sold During Litigation

The Tenth Circuit Court of Appeals issued its opinion in Schell v. OXY USA, Inc. on Monday, December 14, 2015, and modified the opinion on February 9, 2016.

The plaintiff class (appellees and cross-appellants in the Tenth Circuit) consists of approximately 2200 surface owners of Kansas land burdened by oil and gas leases held or operated by OXY, the appellant and cross-appellee. The leases contained a “free gas” clause that, in substance, purported to grant the lessor access to free gas for domestic use. In August 2007, OXY sent letters warning free gas users that their gas may become unsafe to use, either because of high hydrogen sulfide content or low pressure at the wellhead, as a result of the well reaching the end of their productive life.

On August 31, 2007, leaseholders David Schell, Donna Schell, Howard Pickens, and Ron Oliver filed this action on behalf of themselves and others similarly situated, seeking a permanent injunction and a declaratory judgment based on alleged breaches of mineral leases entered into with OXY for failure to supply free usable gas. The district court certified a class of all surface owners of Kansas land burdened by oil and gas leases held or operated by OXY which contain a free gas clause. Plaintiffs and OXY then filed cross-motions for summary judgment. The district court denied OXY’s motion for summary judgment and granted the plaintiffs’ motion for summary judgment. The district court granted the plaintiffs declaratory relief requiring OXY to provide free useable gas under the contract; however, the district court denied the plaintiffs’ motion for a permanent injunction.

Because the district court found that the free gas clauses were ambiguous and interpreted them according to principles of Kansas law, OXY moved to vacate the judgment to permit it to discover extrinsic evidence of the clauses’ meaning. The district court agreed and vacated its judgment. The district court subsequently granted plaintiffs’ resubmitted motion for summary judgment. It also denied plaintiffs’ motion for attorneys’ fees, expenses, and incentive awards. OXY then filed this appeal, and the plaintiffs cross-appealed. After the appeal and cross-appeal were filed, OXY sold all of its interests in the Kansas leases to Merit Hugoton, L.P. (“Merit”). The plaintiff class filed a motion to dismiss the appeal as moot based on this sale. The Tenth Circuit Court of Appeals permitted the appeal to proceed to briefing and oral argument. One week after oral argument, Merit filed a motion to intervene as an appellant and cross-appellee, which was denied by the Tenth Circuit.

The Tenth Circuit concluded the appeal is moot, thereby granting the motion of the plaintiff class to dismiss the appeal, reasoning OXY’s sale of the leases to Merit leads to the conclusion that its conduct cannot be affected by a declaratory judgment concerning the same leases. The Tenth Circuit dismissed OXY’s argument that the leaseholders could sue OXY over its prior conduct during the time when it was operating the wells, considering the fact that allowing OXY to continue the present litigation in order to protect itself from hypothetical unfiled future litigation would render the instant declaratory judgment action a prohibited advisory opinion. Further, the court stated Merit’s request to intervene does not change the conclusion that the declaratory judgment action is moot, in that the record is devoid of any evidence suggesting that a judgment against OXY would bind Merit with respect to the plaintiff class.

Next, the Tenth Circuit determined it was appropriate to dismiss the appeal without vacating the district court’s granting of the plaintiff class’s declaratory judgment action. Although the general rule is to vacate the judgment below when the case becomes moot on appeal, the court found OXY’s intentional conduct (i.e., selling of the leases to Merit) caused the issue over the free gas clauses of the leases to be moot, and that no other entity was more responsible for mooting the controversy, thereby justifying the equitable resolution of leaving in place the district court’s judgment granting the plaintiffs declaratory relief. To act otherwise, the court noted, would permit OXY to benefit from its voluntary act by wiping away a loss.

Lastly, with respect to plaintiffs’ cross-appeal challenging the district court’s denial of their motion for attorneys’ fees, expenses, and an incentive award, the Tenth Circuit determined it had jurisdiction over the matter, as the issue of attorneys’ fees (and related issues) was not moot, despite the mootness of the merits of the appeal. The Tenth Circuit then affirmed the district court’s holding that the plaintiff class has not shown a legally sound basis for an award of attorneys’ fees and other related relief. In so holding, the court found that neither the common-benefit exception to the American Rule nor 28 U.S.C. § 2202 was applicable. Because OXY sold all of the leases to Merit, the common benefit exception does not apply, as an award of attorneys’ fees under the exception would be an impermissible penalty on OXY. The Tenth Circuit affirmed the district court’s statement that there is no independent statutory or contractual basis for attorneys’ fees under § 2202.

Max Montag is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.

SB 16-184: Eliminating Floor Rate for Post-judgment Interest

On April 11, 2016, Sens. Bill Cadman & Mark Scheffel and Rep. Yeulin Willett introduced SB 16-184Concerning Market-Based Rates for Interest on Judgments. The bill was introduced in the Senate and assigned to the Senate Judiciary Committee.

The current rate of post-judgment interest is 2 percent above the discount rate of the federal reserve bank of Kansas City, with a floor of 8 percent. This bill eliminates the floor. The current interest rate for judgments for personal injury damages caused by a tort is 9 percent. This bill ties this interest rate to the current rate of post-judgment interest.

Max Montag is a 2016 J.D. Candidate at the University of Denver Sturm College of Law.

Tenth Circuit: Jurisdiction Lacking Where Denial of Summary Judgment Based on Genuine Issues of Material Facts

The Tenth Circuit Court of Appeals issued its opinion in Henderson v. Glanz on Monday, December 28, 2015.

Aleshia Henderson was an inmate at the David L. Moss Criminal Justice Center in Tulsa, Oklahoma. She was in a holding cell of the medical unit in handcuffs and leg restraints awaiting medical treatment when Detention Officer (DO) Johnson unlocked the door in view of Inmate Jessie Earl Johnson, a violent offender who was considered extremely high risk for escape and required “extreme caution.” DO Thomas, unaware that the holding cell door was unlocked, left the medical unit to respond to a medical emergency. When a nurse returned with another emergency patient, DO Johnson left the medical unit to assist the nurses.

During this time, Inmate Johnson reported to Inmate Williams that he was going to make sexual contact with Henderson. He left his unlocked holding cell and entered Inmate Henderson’s unlocked holding cell, exiting about 10 minutes later. Both DO Johnson and DO Thomas observed Inmate Johnson leaving Henderson’s cell. DO Johnson immediately confronted Inmate Johnson, who denied being in Henderson’s cell. DO Johnson then interviewed Inmate Henderson, who would not speak but nodded when asked if Inmate Johnson had sexually assaulted her. She was taken to a hospital, where an examination showed bruising, swelling, and a midline vaginal tear consistent with forcible sexual conduct. Inmate Johnson was subsequently charged with rape, though the charge was dismissed when Henderson briefly recanted out of fear for her mother’s safety.

DO Johnson and Thomas told their immediate supervisor, Sergeant Pirtle, about the incident, and the Tulsa County Sheriff’s Office (TCSO) conducted an investigation. TCSO determined that department policy was violated when the DOs left their posts, failing to maintain the required two officers in the medical unit, and when they failed to maintain the log book. When asked later how she could have been unaware of the risk to Henderson, DO Johnson stated, “I don’t know how to answer that.”

Henderson brought suit under 42 U.S.C. § 1983 against DO Johnson, DO Thomas, and Tulsa County Sheriff Glanz, asserting violations of her Eighth Amendment rights. Defendants moved for summary judgment based on qualified immunity because Henderson could not show a constitutional violation. The district court denied summary judgment as to DO Johnson and DO Thomas, concluding there were genuine issues of material fact regarding whether DO Johnson and DO Thomas were aware of the risk of assault. The district court denied summary judgment to Sheriff Glanz because there were genuine issues of material fact regarding whether he was aware of the risk of assault to Henderson. Defendants appealed.

On appeal, the Tenth Circuit first determined it lacked jurisdiction to consider DO Johnson’s and Sheriff Glanz’s appeals. The Tenth Circuit noted that the district court’s denial of summary judgment was not ripe for interlocutory appeal because it was not a final order and did not fall into any of the exceptions allowing interlocutory appeal. The Tenth Circuit also noted that the district court found facts sufficient to support its denial of summary judgment, concluding that by viewing the facts in the light most favorable to Henderson, a reasonable jury could find a constitutional violation.

As to DO Thomas, the Tenth Circuit found it had jurisdiction to assess the district court’s denial of summary judgment. Because DO Thomas did not know DO Johnson had unlocked Henderson’s cell door and was not there when DO Johnson left the unit, he was not subjectively aware of a substantial risk of bodily harm to Henderson. The Tenth Circuit reversed the district court’s denial of qualified immunity to DO Thomas.

The Tenth Circuit dismissed the appeals of DO Johnson and Sheriff Glanz for lack of jurisdiction, and reversed the district court’s denial of summary judgment to DO Thomas.

Colorado Court of Appeals: High Net Worth First-Party Insured Must Bear Loss Resulting from Insolvent Insurer

The Colorado Court of Appeals issued its opinion in Colorado Insurance Guaranty Association v. Sunstate Equipment Co., LLC on Thursday, April 21, 2016.

Recoupment—Insolvent Insurer—High Net Worth—First Party Insured—Equal Protection—Procedural Due Process—Special Legislation—Summary Judgment—Attorney Fees.

This was a recoupment action under C.R.S. § 10-4-511(4)(a)(I) (net worth provision) in which the trial court entered summary judgment in favor of plaintiff Colorado Insurance Guaranty Association (CIGA) and against defendant Sunstate Equipment Company, LLC for workers’ compensation benefits that CIGA paid to a Sunstate employee. Sunstate had paid the benefits after its workers’ compensation insurer became insolvent and was liquidated. The court allowed Sunstate an offset based on liquidation proceeds paid to CIGA and refused to award CIGA its attorney fees incurred in connection with the employee’s claim.

Sunstate appealed on four grounds: (1) the net worth provision is unconstitutional; (2) the immunity created by C.R.S. § 10-4-517 (immunity provision) is unconstitutional special legislation, and the trial court erred in holding that it bars Sunstate from raising affirmative defenses based on CIGA’s alleged mishandling of the employee’s claim; (3) it was error to decline to require CIGA to show that it had reviewed the applicable insurance policy to determine the “covered benefits” to which the employee was entitled; and (4) the trial court miscalculated the offset. On cross-appeal, CIGA asserted that the trial court erred in allowing Sunstate any offset for the liquidation proceeds and refusing to award CIGA its attorney fees.

On the constitutional issues, the Colorado Court of Appeals looked at opinions from other states that have net worth statutes similar to Colorado’s and held that there was no violation of equal protection or procedural due process.

On the immunity provision, the court determined that providing CIGA with immunity is rationally and reasonably related to a legitimate government purpose and concluded Sunstate did not show beyond a reasonable doubt how the immunity provision violates the constitutional ban on special legislation. The court also concluded that under the immunity provision, the court properly barred Sunstate from raising its affirmative defenses.

The argument that CIGA failed to prove covered benefits by reference to the insurance policy was without merit.  But while CIGA was entitled to recover for covered claims, the trial court erred in concluding that CIGA was immune from challenges to whether payments were for covered claims, and it was error to simply accept the spreadsheet provided as a basis for entering summary judgment on the amount. This issue was therefore remanded for further proceedings.

The court held as a matter of law that Sunstate was not entitled to an offset. Under the net worth provision, CIGA had the right to recover from Sunstate “the amount of any covered claim.” Sunstate argued that allowing CIGA to recover the full amount of the claimant’s claims without accounting for the early access distributions (EADs) in the bankrupt insurer’s bankruptcy would result in a double recovery for CIGA. But California law, which controlled the liquidation of the bankrupt insurer, does not allow for such a double recovery; to the extent that CIGA recovered its payments on the claim from Sunstate, it would have to return any EADs paid to the bankruptcy estate.

Finally, the court rejected CIGA’s assertion that the attorney fees it incurred in defending and handling the claim were part of a “covered claim” and therefore were recoverable from Sunstate. The court concluded that the plain language of the Colorado Insurance Guaranty Association Act precludes including such attorney fees in a covered claim.

The judgment was affirmed in part and reversed in part, and the case was remanded.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Contract that Violates Rules of Professional Conduct Unenforceable

The Colorado Court of Appeals issued its opinion in Calvert v. Mayberry on Thursday, April 21, 2016.

Disciplinary Proceeding—Oral Contract—Colo. RPC 1.8(a)—Issue Preclusion—Void Agreement—Equitable Lien—Unclean Hands.

In a question of first impression, the Colorado Court of Appeals decided that an attorney who enters into a contract with a client that violates Colo. RPC 1.8(a) cannot later enforce the contract against the client.

The Colorado Supreme Court disbarred the attorney after a hearing board determined he had committed ethical violations, including some against the former client in this case. Specifically, the hearing board found that the attorney had loaned the former client over $100,000 and secured his interest in the loan funds by recording a false deed of trust in the chain of title on her house. The hearing board also found that the attorney had not complied with Colo. RPC 1.8(a) when he made the loans to the former client. The attorney then filed this case to recoup money he had loaned to the former client, claiming that he had an oral agreement with the client for repayment of the loans, and alternatively asserting that the trial court should impose an equitable lien on the former client’s house. The trial court granted summary judgment for the former client and her daughter (to whom she had quitclaimed her interest in the house), finding that because the oral contract between the former client and the attorney violated Colo. RPC 1.8(a), the attorney was ethically prohibited from enforcing that agreement.

The attorney appealed. On appeal, the former client contended that the doctrine of issue preclusion barred the attorney from relitigating factual issues that were litigated during the disciplinary proceeding. The court agreed; therefore, the hearing board’s factual findings bind the attorney in this case, including its finding that the attorney violated Rule 1.8(a) when he entered into the oral contract with the former client, and the oral contract between the attorney and the former client is void and unenforceable. The attorney contended that the trial court erred in applying the doctrine of unclean hands to bar his request for an equitable lien. Based on the attorney’s misconduct, the court disagreed. The attorney also asserted a fraud claim against the former client’s daughter, but his allegations did not support this claim, and it failed as a matter of law. The district court properly entered summary judgment.

The judgment was affirmed and the case was remanded to the trial court to determine whether fees should be awarded to the former client and her daughter.

Summary provided courtesy of The Colorado Lawyer.