September 3, 2015

Colorado Court of Appeals: Open Meetings Law Allows Voiding of Actions Taken Without Meeting

The Colorado Court of Appeals issued its opinion in Wisdom Works Counseling Services, P.C. v. Colorado Department of Corrections on Thursday, August 27, 2015.

Sex Offender Treatment—Application—Denial—Colorado’s Open Meeting Law.

The Approved Treatment Provider Review Board (Board) denied two applications by plaintiff for certification as an approved provider of sex offender treatment for Colorado Department of Corrections (DOC) parolees. The Board denied both applications based on independent reviews by two of its members but without a meeting among the members of the entire Board. The trial court concluded that the Board had violated former DOC Regulation 250-23 (2011) by denying the applications without meeting. The DOC appealed.

The Board is a “state public body” and subject to the Colorado’s Open Meetings Law (OML). OML prohibits public businesses from being conducted “in secret.” Although OML does not require public bodies to meet, the remedy of voiding certain actions taken without meeting applies to a public body, even if its regulations or practices do not require a meeting. Because the Board denied the applications without meeting, the denials must be set aside. On remand, the district court shall return the proceeding to the Board for further action consistent with this opinion.

On cross-appeal, plaintiff contended that the trial court erred in holding that the Administrative Procedure Act (APA) did not apply to the Board’s actions and in denying CRCP 106 relief. Because CRS § 17-1-111 exempts the denials from the APA, the portion of the trial court’s order rejecting plaintiff’s APA claim was affirmed.

Summary and full case available here, courtesy of The Colorado Lawyer.

Tenth Circuit: USPS Regulations Prohibiting Firearms in Post Office Building and Adjacent Parking Lot Constitutional

The Tenth Circuit Court of Appeals issued its opinion in Bonidy v. United States Postal Service on Friday, June 26, 2015.

Tab Bonidy is a resident of Avon, Colorado, who has a permit to carry concealed firearms. Avon does not have residential postal delivery services; instead, residents must pick up their mail at the Avon post office, which is open to the public at all times. Because the United States Postal Service (USPS) does not allow firearms on its property, Bonidy sends an assistant to pick up his mail. Bonidy, through his attorney, sent a letter to the USPS general counsel, asking if he would be prosecuted for carrying a concealed weapon into the post office or storing it in his truck in the parking lot while he got his mail, and the general counsel said he would. Bonidy sued for declaratory and injunctive relief, claiming the prohibition violated his Second Amendment right to bear arms for self-defense. Bonidy and the government filed cross-motions for summary judgment. The district court held the regulation constitutional as applied to concealed firearms, and the regulation regarding open carry was constitutional as applied to the post office building itself, but not as to the parking lot. The government appealed and Bonidy cross-appealed.

The Tenth Circuit analyzed its own and U.S. Supreme Court case law and affirmed the district court’s holding that the regulation was constitutional as applied to concealed firearms. With regard to open carry, a divided panel of the Tenth Circuit affirmed the district court’s ruling as to the post office building but reversed as to the parking lot, finding it constitutional to prohibit firearms both within the building and in the parking lot.

Citing District of Columbia v. Heller, 554 U.S. 570 (2008), the Tenth Circuit affirmed the prohibition on carrying firearms in “sensitive places such as schools and government buildings.” Although Bonidy argued the language was dicta, the Tenth Circuit noted the Supreme Court repeated its holding in a 2010 case, and the Circuit itself had followed the language in its own holdings, which made it binding precedent. The Tenth Circuit applied an intermediate scrutiny test to determine that the ban on firearms in the post office parking lot was constitutional, since the government is empowered to regulate its own business. The Tenth Circuit further found that, as a national government-owned business, the USPS may create a single national rule regarding firearms carry and need not tailor its rules to each individual customer or building.

The district court’s holding that the concealed carry ban was constitutional as applied to both the USPS building and parking lot was affirmed. The district court’s holding that the prohibition on open carry was constitutional as to the post office building was affirmed. The district court’s holding that the prohibition on open carry was unconstitutional as to the parking lot was reversed. Judge Tymkovich wrote a thoughtful dissent; he would have affirmed the district court in all aspects.

Tenth Circuit: Prison Guard May be Liable for Failing to Mitigate Risk of Sexual Assault by Offsite Supervisor

The Tenth Circuit Court of Appeals issued its opinion in Castillo v. Day on Monday, June 22, 2015.

Plaintiffs in this case are a group of women formerly incarcerated at the Hillside Community Corrections Center in Oklahoma City, Oklahoma. As part of an off-site work program, the women performed landscaping and groundskeeping work at the Oklahoma Governor’s Mansion. They were not under the direct supervision of any prison guard while at the mansion, but were supervised by the mansion’s groundskeeper, Anthony Bobelu. Bobelu and Russell Humphries, a cook at the mansion, sexually assaulted and raped the women at the mansion. In January 2009, plaintiff Reeder told Hillside guard Mary Pavliska that she had been sexually abused by Bobelu and Humphries. Pavliska told her to return to her dorm, and Reeder never heard anything else about it. Pavliska testified that she told Charlotte Day, another guard, about the assaults, but Day denied being told. On another occasion, Day taunted plaintiff Garell about beginning a sexual relationship with Bobelu.

Plaintiffs brought suit under 42 U.S.C. § 1983 and alleging violations of their Eighth Amendment right to be free from cruel and unusual punishment. Their complaint named 15 defendants, including Bobelu, Humphries, Day, and Pavliska. The claims against several defendants were dismissed without prejudice, and all remaining defendants except Bobelu moved for summary judgment. The district court granted summary judgment to all except Day and Pavliska, finding a jury could conclude they were deliberately indifferent to the known substantial risk of serious harm to plaintiffs. Day and Pavliska filed interlocutory appeals, arguing the district court erred in finding they were not entitled to qualified immunity.

The Tenth Circuit quickly disposed of Day’s appeal, noting that her challenge was to the district court’s sufficiency determination and not that the plaintiffs failed to assert violation of a constitutional right. Because the sufficiency issue was not ripe for appeal, the Tenth Circuit dismissed Day’s appeal for lack of jurisdiction.

Finding jurisdiction to evaluate Pavliska’s appeal, the Tenth Circuit considered her arguments that she was entitled to qualified immunity because plaintiffs did not allege she affirmatively violated their constitutional rights, the conduct of Bobelu and Humphries did not rise to the level of a constitutional violation, and she did not have actual knowledge of the bad acts of Bobelu and Humphries. Plaintiffs asserted Pavliska violated their Eighth Amendment right to be free from sexual assault while imprisoned by failing to take reasonable measures to abate the risk of assault. Pavliska argued that because she had no official authority over Bobelu and Humphries she could not be liable for their conduct, which the Tenth Circuit characterized as an argument that she could only be liable for conduct of those she supervised directly. The Tenth Circuit rejected this argument, finding it well established that prison officials can be held liable for failing to prevent assault. Pavliska also argued that the conduct of Bobelu and Humphries was not sufficiently serious to constitute a constitutional violation. The Tenth Circuit noted that this was a challenge to the sufficiency of the evidence and it lacked jurisdiction to hear the issue. Finally, Pavliska argued she could not be held liable for any acts occurring before January 2009, but the Tenth Circuit noted the plaintiffs in their opening brief asserted claims arising after January 2009 only.

The district court’s denial of summary judgment as to Pavliska was affirmed insofar as it was a challenge to the motion denial and not to the sufficiency of the evidence, and Day’s and Pavliska’s appeals challenging sufficiency were dismissed for lack of jurisdiction.

Colorado Court of Appeals: Foreign-Country Judgment Improperly Served so No Recognition Required

The Colorado Court of Appeals issued its opinion in Ledroit Law v. Kim on Thursday, August 13, 2015.

Ontario Judgment Enforceability—Uniform Enforcement of Foreign Judgments Act—Uniform Foreign-Country Money Judgments Recognition Act.

Ledroit Law, a Canadian law firm, filed this action seeking recognition of an Ontario court’s assessment of legal fees against Snell & Wilmer, L.L.P., an Arizona law firm with offices in Colorado, and Eugene Kim, a former associate at Snell & Wilmer. In 2011 and 2012, Snell & Wilmer represented two related Ontario entities in a civil suit they filed against an American corporation in federal court in Colorado. Kim was a first-year associate who worked on the case. Ledroit represented at least one of the Ontario entities in related proceedings in Canada.

Defendants stated that the principals of the Ontario entities instructed Snell & Wilmer to have Ledroit serve subpoenas duces tecumin Ontario related to the federal suit in Colorado. Kim communicated with Ledroit by telephone and e-mail to coordinate service. In March 2012, Ledroit sent Snell & Wilmer a bill for legal services of over $15,000 Canadian for their attempts to serve the subpoenas. There was no retainer agreement, and Snell & Wilmer stated that the Ontario entities were responsible for the bill.

In September 2012, Ledroit filed an action in the Ontario Superior Court of Justice to recover the legal fees. A “Notice of Appointment for Assessment of Costs” was sent by regular mail to Kim’s office in Colorado. The Ontario court issued an assessment in the amount of $15,829.99 Canadian against Kim and Snell & Wilmer following their non-appearance.

Ledroit filed this action in district court seeking enforcement of the assessment in Colorado under the Uniform Enforcement of Foreign Judgments Act (Enforcement Act). The district court entered an order domesticating the assessment under the Enforcement Act.

Defendants moved to vacate the order on the basis that the Enforcement Act only applies to judgments entered by sister states within the United States and that the Uniform Foreign-Country Money Judgments Recognition Act (Recognition Act) governs the recognition of foreign-country money judgments. The district court vacated its order and ultimately recognized the Ontario assessment under both the Recognition Act and common law principles of comity.

On appeal, defendants argued it was error to recognize the Ontario judgment under the Recognition Act because the Ontario court lacked personal jurisdiction over them. The Court of Appeals agreed. Under the Recognition Act, CRS § 13-62-104(2)(b), a Colorado court “may not recognize a foreign-country judgment if . . . [t]he foreign court did not have personal jurisdiction over the defendant.”

The Court found that defendants were not validly served with process by the attempt at service by regular mail. Service under Ontario law requires either service through the central authority in the contracting state or “in a manner that is permitted by the [Hague] Convention and that would be permitted by these rules if the document were being served in Ontario.” Because service by mail was not proper under the Ontario rules, the Ontario court lacked personal jurisdiction over defendants when it issued the assessment.

The Court also agreed with defendants’ contention that the district court erred in relying on principles of comity. The Recognition Act requires a Colorado court to deny recognition if the foreign court lacked personal jurisdiction. Here, where the Recognition Act applied, the Colorado court was required to deny recognition of the assessment. The order was reversed.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Adverse Inference Instruction Allowable where Non-Party Invokes Fifth Amendment

The Colorado Court of Appeals issued its opinion in McGillis Investment Company, LLP v. First Interstate Financial Utah, LLC on Thursday, August 13, 2015.

Fifth Amendment Privilege Invoked in Front of Jury by Nonparty—Adverse Inference Instruction.

This appeal, as stated by the Court, “follows a long and complicated history, ncluding prior litigation in Utah, an earlier appeal to this court, an eight-day trial, and a series of motions brought before, during, and after the trial and verdict. A voluminous record, spanning thousands of pages, contains an exhaustive rendition of the facts.”

McGillis Investment Company, LLP’s (MIC) principal, McGillis, and First Interstate Financial Utah, LLC’s and First Interstate Financial LLP’s (FIF) principal, Thurston, worked to finance a multitude of commercial real estate loans between 1995 and 2009. This dispute concerns a 2003 loan made by MIC and FIF to Kersey Commercial Park, LLC (Kersey Commercial) for $1.85 million (Kersey Loan) to purchase sixty-three acres of property to develop an industrial park (Kersey Property). When Thurston recommended that MIC finance the Kersey Loan, MIC did not know that the purchasers were involved in a series of transactions of questionable legitimacy surrounding the Kersey Property.

Kersey Commercial never made a payment on the Kersey Loan and was in default by May 2004. Thurston, on behalf of MIC and FIF, executed a Dry-Up Agreement on July 29, 2004, which sold certain Water Rights of the Kersey Property to Lower Latham Reservoir Company in return for a payment of $785,000 to one of the developers. In October 2004, MIC and FIF commenced foreclosure proceedings and on May 12, 2005 purchased the Kersey Property at foreclosure for $1.6 million. On June 6, 2006, FIF sued the appraisers. On November 8, 2006, Thurston had MIC execute an assignment of the Property (Assignment) from McGillis Investments to FIF (though the purpose of the Assignment is disputed). In 2012, FIF settled the appraiser litigation for $438,500 and remitted the proceeds to MIC.

In February 2009, FIF sued Sytech Development (one of the developers) over the Kersey Loan. After McGillis’s son took over MIC in 2008, he concluded that FIF had breached its fiduciary duty to MIC in a variety of transactions, and in April 2009, MIC filed suit in Utah against FIF. In October 2012, the jury returned a verdict in MIC’s favor for $1.25 million. Three days after the Utah verdict, FIF recorded the Assignment with the Weld County Clerk and Recorder. FIF settled the Sytech litigation on November 17, 2012 for $20,000.

On June 1, 2011, MIC filed this lawsuit against FIF, seeking to quiet title to the Kersey Property and damages for breach of fiduciary duty for FIF’s recording the Assignment and settling the Sytech litigation. On cross-motions for summary judgment, the trial court granted partial summary judgment based on claim preclusion in favor of FIF as concerned the validity of the Assignment and quieted title to the Kersey Property in FIF. MIC appealed, and a division of the Court of Appeals affirmed in part and reversed in part, vacating the decree quieting title and reversing the summary judgment on claim preclusion. Following trial on remand, the jury returned a verdict for MIC for $1,300,625 and found that MIC owned the Kersey Property.

In this appeal, FIF argued that the trial court did not follow the Court’s mandate on remand by failing to determine whether MIC knew or should have known of the Assignment’s validity when it filed the Utah action and that it was error to allow the Sysum brothers to invoke their Fifth Amendment privilege against self-incrimination in front of the jury and in giving an adverse inference instruction. In civil cases, an adverse inference may be drawn against a party who invokes the Fifth Amendment privilege against self-incrimination. The Court found no Colorado case addressing whether a nonparty witness’s invocation of the Fifth Amendment privilege constitutes admissible evidence. It adopted the analysis set forth in LiButti v. United States, 107 F.3d 110, 123 (2d Cir. 1997): the admissibility of a nonparty’s invocation of the Fifth Amendment privilege and concomitant drawing of adverse inferences should be considered on a case-by-case basis to ensure any inference is reliable, relevant, and fairly advanced. The overarching concern is whether the adverse inference is trustworthy and will advance the search for the truth.

Based on the record before it, the Court found no error in the trial court’s having decided that one of the brothers could answer a generic question, to which he invoked his Fifth Amendment right, and that there was enough evidence presented to give the adverse inference instruction as to him. The Court found it was error to allow the other brother to invoke his Fifth Amendment privilege because there wasn’t enough evidence to involve him in the alleged fraud. However, the trial court remedied this error when it did not give the adverse inference instruction as to this brother but told the jury to disregard his invocation of the privilege.

FIF also argued that it was error for the trial court not to have determined whether MIC knew or should have known there was a dispute concerning the Assignment’s validity when it filed the Utah action. The jury did consider this issue, but FIF argued it should have been the trial court that made the determination. The Court disagreed. The law of the case established in MIC I was to determine what MIC knew or should have known and there was an interrogatory to the jury that covered this issue. The jury’s answering of the interrogatory resolved the factual dispute dispositive of claim preclusion against FIF and that satisfied the law of the case.

The Court also rejected FIF’s arguments that MIC could not re-litigate anything concerning the Kersey Loan transaction other than the issue concerning the validity of the Assignment and the settlement of the Sytech litigation. The Court determined that this argument was based on a fundamental misunderstanding of the prior ruling in MIC I on the part of FIF. The judgment was affirmed.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Court of Appeals: First in Time Charging Order Issued in Colorado Takes Priority

The Colorado Court of Appeals issued its opinion in McClure v. JP Morgan Chase Bank, NA on Thursday, August 13, 2015.

Charging Order Priority.

In July 2013, JP Morgan Chase Bank NA (Chase) obtained an Arizona judgment of roughly $20 million against Reginald D. Fowler and Spiral, an Arizona corporation. In November 2013, the Arizona court issued charging orders in favor of Chase, charging Fowler’s membership interests in three Colorado LLCs. In December 2013, the Chase charging orders were served on the LLCs, and the Denver District Court entered an order domesticating Chase’s Arizona judgment. In March 2014, the McClures obtained a $1.5 million judgment in Arizona against Fowler and Spiral. In April 2014, the McClures domesticated their Arizona judgment in Colorado by filing it in the Arapahoe County District Court. During May through June 2014, the Arapahoe Court issued charging orders in favor of the McClures, charging Fowler’s and Spiral’s membership interests in the same Colorado LLCs as those charged in the Chase charging orders, and the McClures served the orders on the LLCs. In August 2014, the Denver District Court entered an order domesticating Chase’s Arizona charging orders.

The LLCs paid Fowler’s distributions into the Arapahoe County District Court registry. The McClures filed a motion for release of the funds and Chase intervened in opposition. The district court ruled that because the McClures’ charging orders were issued by a Colorado court, they “were the first enforceable charging orders served on the [LLCs] and, hence, they have priority over [Chase’s] Arizona charging orders.”

On appeal, Chase argued it was error to rule that its Arizona charging orders were unenforceable in Colorado until they had been domesticated. The Court disagreed, holding that until it had domesticated the charging orders, they were unenforceable in Colorado.

Chase also argued that its first-in-time but (not yet) domesticated charging orders took priority over the McClure’s later-in-time but Colorado-issued charging orders. The Court held the priority of charging orders issued against Colorado LLCs is determined by first-in-time service of charging orders enforceable in Colorado. The order was affirmed.

Summary and full case available here, courtesy of The Colorado Lawyer.

10 iPad Apps for Use in the Office and the Courtroom

PrintThink of the first courtroom you were ever in. Was there a flip chart? An easel? A projector and slides? Or was there a sophisticated plasma TV screen and electronic system so attorneys could showcase their best evidence through their tablets? That last example may not have appeared in your first courtroom, but it certainly is becoming a common sight today.

Attorney Jason Márquez of Johnson Márquez Legal Group uses an iPad in every courtroom presentation where the judge allows it. Using apps like Adobe, Evernote, and Pocket Scan, he can create a compelling courtroom presentation to highlight favorable evidence while minimizing costs associated with photocopying and creating exhibit notebooks. Márquez believes so strongly in using iPads in his practice that he provides them to every member of his firm. He uses several apps, but suggests these ten apps as must-haves for office use and courtroom presentations:

  1. Adobe Acrobat® is multi-platform, PDF solution that allows you to work with all kinds of documents to: View, Create, Manipulate, Print, Combine files.
  2. GoodReader® is the super-robust PDF reader for iPad, iPhone and iPod touch. Sync with Dropbox, OneDrive, any FTP or SFTP server. Sync entire folders or individual files separately.
  3. DropBox® is a folder on your computer that synchronizes your files online and across computers. Any files you place within it will be available on your other computers with Dropbox, as well as the web.
  4. Evernote® is designed for note-taking and archiving. A “note” can be a piece of formatted text, a full webpage or webpage excerpt, a photograph, a voice memo, or a handwritten “ink” note. Notes can also have file attachments.
  5. Pocket Cloud® is a secure and fast way to remotely connect to your Mac or Windows desktop with your iPad, iPhone, iPod touch, or Android device no matter where you are. Access your files, pictures, and applications like Excel, Powerpoint, Photoshop, games or any other program.
  6. Tiny Scan® turns your iPhone/iPad into a portable scanner. Scans are saved to your phone as images or PDFs. Name and organize your scans into folders, or share them by: Email, Dropbox, Evernote, DropBox, Wi-Fi to your computer, Fax (using TinyFax).
  7. Dragon® Dictation is an easy-to-use voice recognition application powered by Dragon® NaturallySpeaking® that allows you to easily speak and instantly see your text or email messages. In fact, it’s up to five (5) times faster than typing on the keyboard.
  8. Prezi® is a presentation tool that can be used as an alternative to traditional slide making programs such as PowerPoint or Keynote. Instead of slides, Prezi makes use of one large canvas that allows you to pan and zoom to various parts of the canvas and emphasize the ideas presented there.
  9. Casemaker® is an alternative legal research tool to LexisNexis and Westlaw. It allows users to search and browse a variety of legal information such as statutes, regulations, and case law on the Web. Casemaker comes free with your CBA membership!
  10. JuryPad® assists with voir dire in different jurisdictions. Create custom seating charts for any courtroom. Add or modify a juror’s information including age, occupation, education, prior jury service, and much more.

Márquez will present on “The iPad Advantage” at the 2015 Colorado Legal & Technology Expo on Friday, August 21, 2015 at the Warwick Hotel in downtown Denver. Entrance to the Expo is free, and Márquez’s CLE program is only $19 for CBA members. Join us at the Warwick on Friday and learn how you can increase your productivity—and your bottom line.

2015 Colorado Legal & Technology Expo

The 2015 Colorado Legal & Technology Expo will take place on Friday, August 21, 2015 at the Warwick Hotel in Denver. Entrance to the Expo is free. Each 50-minute CLE program is $19 for CBA members and $39 for non-CBA members. Register for the event and find more information here.

Comment Period Open for Proposed Changes to 10th Circuit Local Rules

On August 14, 2015, the Tenth Circuit Court of Appeals announced that changes to its local rules will take effect January 1, 2016. From August 14, 2015 to October 22, 2015, all interested parties are encouraged to review the changes and make comments to the clerk of the court. The changes are outlined in a memorandum explaining the proposals, and are excerpted here:

10th Cir. R. 8.3(A) (addressing applications for stay made to a single judge) This proposed change removes the language at the end of the current rule which states applications for stay made to single judges are disfavored “except in an emergency.” Given technical advancements, all emergency motions can be processed centrally.

10th Cir. R. 9.1(C) (regarding application of the Rule 46.3(B) motion requirement to bail appeals) This proposed change modifies the rule to make clear that the new motion practice announced in R. 46.3(B) does not apply to bail appeals.

10th Cir. R. 17.3 (regarding filing an appendix in agency cases) This proposed change modifies the rule to make clear that when an agency record is filed, the parties need not submit a separate appendix.

10th Cir. R. 25.6 (addressing CM technical failures) This new rule addresses procedures in the event of a CM/ECF system failure.

10th Cir. R. 27.1 (location of the “confer and consent” provision of the local rule on motions) The court’s “confer and consent” rule has been moved to the beginning of local rule 27 for greater visibility. In addition, the rule now makes clear that CJA counsel need not confer on motions filed to withdraw or for continued appointment.

10th Cir. R. 30.1(D)(6) (addressing motions to seal documents) This local rule addresses the submission of sealed materials. The proposed change to the rule requires parties submitting materials under seal (except for presentence reports, which are exempt) to file a motion to do so. The proposed change is made in accord with circuit case law emphasizing the presumption in favor of providing access to judicial records. See Eugene S. v. Horizon Blue Cross Blue Shield of New Jersey, 663 F.3d 1124, 1135-1136 (10th Cir. 2011).

10th Cir. R. 31.5 (addressing the number of hard copies required for briefs) This modification adds a specific clause regarding the court’s already existing requirement that 7 hard copies of briefs must be received in the clerk’s office within 2 business days of the electronic filing.

10th Cir. R. 33.2 (removal of the requirement to have a private settlement discussion) This modification deletes this local rule.

10th Cir. R. 46.3(B) and R. 46.4(B)(1) (incorporating the new motion requirement from the amended CJA Plan adopted effective July 8, 2015) This proposal includes a section memorializing the new motion requirement created by virtue of the court’s amendment of the circuit Criminal Justice Act Plan in July 2015. In addition, please note the language added to Rule 46.4(B)(1), which makes clear the new requirement is not a substitute for filing a motion to withdraw, as appropriate, in Anders cases. In addition, the court’s decision in United States v. Cervantes, ___F.3d___, 2015 WL 4636640 (10th Cir. May 22, 2015) has been incorporated into the rule. Finally, Addendum I of the rules, which is a copy of the CJA Plan, has been updated.

Addendum IV (removal of the Rules for Judicial Misconduct and Judicial Disability Proceedings) Because they are now available on the court’s website, the Rules on Judicial Misconduct have been deleted as an attachment to the Rules.

The Federal Rules of Appellate Procedure will not be updated January 1, 2016. A redline of the Tenth Circuit Local Rules including the proposed changes is available here.

Colorado Court of Appeals: Refusal to Bake Cake Because of Opposition to Same-Sex Marriage Discriminatory

The Colorado Court of Appeals issued its opinion in Craig v. Masterpiece Cakeshop, Inc. on Thursday, August 13, 2015.

Public Accommodations Law—Same-Sex Marriage—Freedom of Speech—Free Exercise of Religion—Relation Back Doctrine of CRCP 15 (c)—CRS § 24-34-306(2)(b)(II).

This appeal arose from an administrative decision by the Colorado Civil Rights Commission (Commission), which upheld the decision of an administrative law judge (ALJ), who ruled in favor of Craig and Mullins (complainants) and against Masterpiece Cakeshop, Inc. (Masterpiece) and its owner, Phillips, on cross-motions for summary judgment. In July 2012, complainants visited Masterpiece and asked Phillips to design and create a cake to celebrate their same-sex wedding. Phillips declined, stating he doesn’t create wedding cakes for same-sex weddings because of his religious beliefs.

Craig and Mullins filed charges of discrimination with the Colorado Civil Rights Division (Division), alleging discrimination based on sexual orientation under the Colorado Anti-Discrimination Act (CADA). Following a finding of probable cause, complainants filed a formal complaint with the Office of Administrative Courts, alleging Masterpiece had discriminated against them in a place of public accommodation because of their sexual orientation, in violation of CRS § 24-34-601(2).

The ALJ found in favor of complainants on cross-motions for summary judgment; the Commission affirmed and issued a cease and desist order requiring that Masterpiece (1) take remedial measures to ensure compliance with CADA, and (2) file quarterly compliance reports for two years with the Division.

On appeal, Philips claimed error in denying a motion to dismiss, alleging the Commission lacked jurisdiction to adjudicate the charges against him because only Masterpiece was named in the initial charge of discrimination with the Commission. The ALJ applied the relation back doctrine of CRCP 15(c) and found that adding Philips was permissible. The Court agreed and held that the relation back doctrine applied to a CADA charging document.

On the merits, Masterpiece argued it was error for the ALJ to conclude that its refusal to create a wedding cake was due to respondents’ sexual orientation, not its opposition to same-sex marriage. The Court disagreed. Because the act of same-sex marriage is closely correlated to respondents’ sexual orientation, it was not error for the ALJ to find that the refusal to create the wedding cake was because of their sexual orientation, in violation of CADA.

The Court considered whether the Commission’s application of the law violated Masterpiece’s rights to freedom of speech and free exercise of religion. Masterpiece argued that wedding cakes convey a celebratory message about marriage and therefore it was being unconstitutionally compelled to convey a celebratory message about same-sex marriage in conflict with its religious beliefs. The Court disagreed. The order merely requires that Masterpiece not discriminate against potential customers in violation of CADA, and such conduct, even if compelled by the government, is not sufficiently expressive to warrant First Amendment protections.

Masterpiece also contended that the Commission’s order unconstitutionally infringed on its right of free exercise of religion. The Court concluded that CADA is a neutral law of general applicability and therefore offends neither the First Amendment nor article II, § 4, of the Colorado Constitution. The order was affirmed.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Default Judgment Must Be Set Aside When Defendants Not Served

The Colorado Court of Appeals issued its opinion in Burton v. Colorado Access on Thursday, August 13, 2015.

Employee Retirement Income Security Act of 1974—Process Service.

Burton was formerly employed by a company known as Colorado Access. Colorado Access sponsored the Colorado Access Long Term Disability Plan (plan), which was issued and administered by Unum Life Insurance Company of America (Unum). Burton sought benefits from Unum under the plan, and Unum paid her benefits for approximately two years before terminating them. Burton filed a complaint against the plan, claiming entitlement to additional benefits under the Employee Retirement Income Security Act of 1974 (ERISA). Instead of serving the complaint on the plan, she served the complaint on the Secretary of the U.S. Department of Labor. Burton sought a default judgment against the plan, which the district court entered but later set aside. The district court also entered summary judgment in favor of the plan.

On appeal, Burton argued that the trial court erred in finding that she did not properly serve the plan administrator when she served the Secretary of Labor. A party intending to sue a plan must serve the plan administrator where it is designated as the agent for service of process. It is only where the summary plan description designates neither the plan administrator nor some other person as the agent for service of process that service on the Secretary of Labor is allowed. Given that Colorado Access was the plan administrator, and the plan designated Colorado Access as its agent for service of process, Burton could not properly serve process on the plan by serving the Secretary of Labor under § 1132(d)(1) of ERISA. Therefore, the district court did not err in determining that Burton failed to properly serve the plan.

Burton also argued that the district court erred in entering summary judgment in favor of the plan. The only proper defendants in an ERISA claim to recover plan benefits are those entities that make eligibility or payment decisions or are obligated to pay benefits. In this case, Unum (the insurer) made all decisions regarding eligibility for and payment of benefits, and made all such decisions with respect to Burton. Further, only Unum was obligated to pay any benefits owed to Burton under the plan. Therefore, the plan was not a proper defendant as to Burton’s ERISA benefits claim, and the trial court properly entered summary judgment in the plan’s favor.

Summary and full case available here, courtesy of The Colorado Lawyer.

Tenth Circuit: Nothing in Prior Tenth Circuit Remand Prevented Entry of Judgment on State Law Claims

The Tenth Circuit Court of Appeals issued its opinion in Cook v. Rockwell International Corp. on Tuesday, June 23, 2015.

In 1989, FBI agents discovered plant workers at the Rocky Flats nuclear plant had been carelessly mishandling radioactive waste for many years. Landowners neighboring the former nuclear plant brought a federal civil suit against Rockwell and Dow Chemical Corp., seeking relief under both the Price-Anderson Act and state nuisance law. After fifteen years of pretrial discovery, a jury returned a verdict for plaintiffs, including $177 million in compensatory damages, $200 million in punitive damages, and $549 million in prejudgment interest. Defendants appealed, arguing the court failed to properly instruct the jury on the terms of the Price-Anderson Act. A panel of the Tenth Circuit agreed in Cook I, vacating the judgment and remanding for further proceedings in light of the Act’s correct construction. Plaintiffs then argued that even without the Price-Anderson Act claim, their state law nuisance verdict survived. Defendants countered that (1) the Price-Anderson Act prevents state law recovery where an Act claim, albeit unsuccessful, is advanced, and (2) the Tenth Circuit’s mandate in Cook I independently barred plaintiffs from relief on their state law nuisance claims. The district court ruled for defendants and plaintiffs appealed.

On appeal, the Tenth Circuit first addressed defendants’ argument that any state law claim was preempted by the unsuccessful Price-Anderson Act claim. The Tenth Circuit characterized this as a structure where unless a nuclear claim was large enough to fall within the Act’s regulation, there could be no recovery for damages. Noting that the defendants forfeited this argument in their first appeal, the Tenth Circuit reaffirmed the first panel’s holding that Dow and Rockwell forfeited any field preemption argument long ago. The Tenth Circuit found it implausible that Congress would have intended remedies to exist only for large-scale “nuclear incidents” while foreclosing remedies for smaller claims. The Tenth Circuit could find nowhere in the Act preempting or precluding remedies for state law claims if federal claims were not proved, and found it rather seemed to imply the opposite.

Turning to defendants’ second argument, that the court mandate in the first appeal required dismissal of plaintiffs’ state law claims, the Tenth Circuit again rejected defendants’ arguments. The Tenth Circuit evaluated Cook I and noted the prior panel expressly found the jury was properly instructed on the elements of a state law nuisance claim. The Tenth Circuit found that at the end of the first trial there was a properly instructed jury, legally sufficient evidence, and a favorable jury verdict as pertains to a state law nuisance claim. The Tenth Circuit similarly rejected defendants’ proposition that the prior Tenth Circuit panel had vacated the entire verdict, including the state law portion. This panel of the Tenth Circuit averred that the state law portion of the trial court’s verdict was untouched in Cook I and therefore was the law of the case, and nothing prevented the trial court from entering a new verdict on the state law claim alone.

The Tenth Circuit remanded the case with instructions for the district court to enter judgment on the nuisance verdict promptly. Judge Moritz concurred in the judgment of remand but disagreed that the court would be able to simply reinstate the nuisance judgment without a new trial.

Tenth Circuit: Concealment of Arbitration Agreements Until Late Stage of Litigation Constituted Waiver of Right to Arbitrate

The Tenth Circuit Court of Appeals issued its opinion in In re Cox Enterprises, Inc.: Healy v. Cox Communications, Inc. on Wednesday, June 24, 2015.

Cox is a cable provider involved in class-action litigation brought by subscribers to its cable service. In 2009, subscribers in several jurisdictions filed suits against Cox, alleging the company illegally tied provision of its cable service to rental of a set-top box. The actions were consolidated in a multi-district litigation and transferred to the U.S. District Court for the Western District of Oklahoma. Cox moved to dismiss, and during the pendency of its motion began inserting mandatory arbitration clauses into contracts with many of its customers, including class members. Cox does not appear to have notified the District Court about its insertion of the clauses. Plaintiffs’ efforts to certify a nationwide class failed, and instead they sought to certify several classes for geographic regions. These actions were again consolidated and transferred to the Western District of Oklahoma.

The instant case was originally brought in April 2012, and Cox unsuccessfully moved to dismiss in September 2012. The parties then engaged in substantial discovery, and named plaintiff Healy moved to certify a class in September 2013. Cox at no time mentioned the arbitration clauses. The court granted class certification in January 2014 as the parties continued to engage in discovery. Cox appealed to the Tenth Circuit in March 2014, again failing to mention the arbitration clauses, but its petition was denied. In April 2014, Cox moved for summary judgment, and that same day it moved to compel arbitration against both the absent class and named plaintiff Healy, citing the arbitration clauses for the first time. It later clarified that it was not compelling arbitration against Healy. The district court denied the motion to compel on the basis that Cox’s prior conduct in the litigation constituted waiver. Cox appealed.

The Tenth Circuit used its six-factor Peterson test to evaluate whether the right to arbitration had been waived. The six factors are (1) whether the party’s actions are inconsistent with the right to arbitrate, (2) whether the parties were well into the preparation of a lawsuit before a party notified the opposing party of an intent to arbitrate, (3) whether a party requested arbitration enforcement close to a trial date or delayed for a long period before seeking a stay, (4) whether a defendant seeking arbitration filed a counterclaim without requesting a stay, (5) whether important intervening steps like discovery had taken place, and (6) whether the delay affected, misled, or prejudiced the opposing party.

The district court determined Cox’s failure to inform it of the presence of arbitration agreements until after class certification was inconsistent with an intent to arbitrate and suggested an attempt to manipulate the process, as it would affect the numerosity of the class. The Tenth Circuit agreed, also finding that because Cox did not request for its motion for summary judgment to be stayed pending arbitration implied an attempt to “play heads I win, tails you lose” by manipulating the litigation machinery. The district court found, and the Tenth Circuit agreed, that the second, third, and fifth Peterson factors also cut strongly against Cox. Cox did not invoke the arbitration agreements until two years after the lawsuit was commenced, and substantial discovery had occurred before the invocation. Further, Cox failed to mention a factor that would have significantly affected the district court’s Rule 23 analysis, and Healy would be significantly prejudiced if arbitration were allowed. The Tenth Circuit opined that perhaps the greatest prejudice would be to the integrity of the judicial process, since both the district court and Tenth Circuit had invested significant time and energy in analyzing literally thousands of pages of documents.

Cox argued the Peterson factors were inapplicable because a party does not invariably waive its right to impose arbitration by filing its motion to compel after class certification. The district court rejected this argument as an improper attempt to artificially narrow the scope of the waiver, and the Tenth Circuit agreed. Cox could have asserted its right to arbitration at many earlier litigation stages but chose to conceal the arbitration provisions. Further, the district court’s denial of the motion to compel was based not on Cox’s failure to compel arbitration earlier but rather its specific conduct evincing an attempt to “take multiple bites of the apple.”

The Tenth Circuit affirmed the district court.