April 29, 2017

Tenth Circuit: District Court has Wide Discretion to Impose Special Conditions of Supervised Release

The Tenth Circuit Court of Appeals issued its opinion in United States v. Bowers on Friday, February 10, 2017.

Donald Bowers was charged and convicted on two counts of civil contempt in violation of 18 U.S.C § 401(3) for willfully and repeatedly violating a permanent injunction against him stemming from a civil trade secret misappropriation suit. Bowers was sentenced to fifteen months’ incarceration and, following his release, a thirty-six month period of supervised release, during which he would make monthly payments of the remaining amount he owed to the plaintiff in the underlying civil suit. Bowers appealed, claiming that the court erred by imposing payments to the plaintiff in the civil case as part of his supervised release, denying his motion for disclosure of the criminal referral, and sentencing him for a period that exceeded six months.

The underlying civil case did not actually include Bowers himself, but his son Lonny Bowers (Lonny) and the officers of WideBand, who were sued by ClearOne Communications, Inc. for misappropriation of trade secrets. Bowers became involved when he entered into an agreement with the defendants in the case to purchase WideBand’s assets in exchange for money to pay their legal fees. The court issued a temporary restraining order and preliminary injunction to stop the transfer of assets to Bowers.

In the civil case against WideBand, the jury returned a verdict against the defendants that included compensatory damages against all the defendants, and punitive damages against two of the WideBand officers (not including Lonny). The day after the verdict in the WideBand case, Bowers filed a statement to perfect a security interest in all of WideBand’s assets. When the court ordered Bowers to appear to show why he was not in contempt for violating the existing temporary restraining order, he failed to appear, and the court determined that he was also subject to the existing restraining order as he acted in concert with the defendants in the WideBand case.

After Bowers failed to appear in multiple contempt hearings and again violated the permanent injunction by setting up and operating DialHD, Inc., a company that used the assets of WideBand, the court issued a memorandum decision and civil contempt order against Bowers for violating the permanent injunction, and directed Bowers to self-surrender for incarceration and pay ClearOne’s reasonable attorney fees and costs. Bowers failed to purge himself of the contempt charge, and the court issued a bench warrant for his arrest. The court rejected both of Bowers’ appeals from the civil cases.

The district court entered a civil judgment against Bowers in an amount of $57,188.61 in attorney fees for violating the permanent injunction, an amount of $22,743.88 to pay ClearOne’s costs and fees from the original ClearOne civil case, and $8,648 in appellate attorney fees in connection with his first appeal in the civil case. In relation to the contempt cases against Bowers, the district court judge who presided over the civil case sent a memo regarding the referral of criminal contempt charges for Bowers to the United States Attorney for the District of Utah, outlining the details of the civil case. A federal grand jury returned an indictment against Bowers for willfully disobeying the permanent injunction and civil contempt order, both in violation of 18 U.S.C. § 401(3). A jury found Bowers guilty on both counts.

Bowers was sentenced to fifteen months’ imprisonment, followed by a term of three years supervised release, during which he would make monthly payments to ClearOne. On appeal, Bowers argued that the district court abused its discretion by ordering him to make monthly payments to ClearOne, denying his motion to compel the government to disclose the criminal referral, and argued that his sentence is illegal because 18 U.S.C. § 402 limits sentences like those Bowers committed to no more than six months.

As to his first contention regarding the imposition of payments as a condition of his supervised release, the court stated that district court has broad discretion to impose special conditions of supervised release, stating that the conditions must only (1) be reasonably related to the nature and history of the defendant’s offense, the deterrence of criminal conduct, the protection of the public from the defendant’s crimes, or the defendant’s educational and other correctional needs; (2) involve no deprivation of liberty than is reasonably necessary; and (3) be consistent with pertinent policy statements issued by the Sentencing Commission. The court rejected Bowers’ argument, stating that the special condition in this case satisfies all of the requisite elements.

Bowers’ second argument on appeal, that the district court erred in denying his motion to discover the criminal referral, was also rejected by the court, as the information in the referral did not contain oral or written statements or other evidence that would render it discoverable under Fed. R. Civ. P. 16. Finally, the court also rejected Bowers’ argument that a sentence of fifteen months for his crimes was illegal under § 402, as he did not raise it at the district court level and therefore waived his right to assert the argument at the appellate level. The court added, however, that even if Bowers had not waived the argument, he still would not be entitled to relief because he was not charged under §402, but under § 401, which does not impose a maximum punishment.

The Tenth Circuit affirmed the judgment of the district court.

Colorado Court of Appeals: Contract Exception to the Collateral Source Statute is Applicable in Post-Verdict Proceedings to Reduce Damages

The Colorado Court of Appeals issued its opinion in Pressey ex rel. Pressey v. Children’s Hospital Colorado on Thursday, March 9, 2017.

Medical Malpractice—Health Care Availability Act—Damages Cap—Medicaid—Collateral Source Statute—Contract Exception—Pre-majority Economic Damages—Minor—Statute of Limitations.

Naomi Pressey (Naomi), by and through her conservator Jennifer Pressey, sued Children’s Hospital Colorado (Hospital) for negligence. The case was tried to a jury, which found the Hospital negligent and awarded Naomi $17,839,784.60. The damages award included past medical expenses, past noneconomic losses, future medical expenses, future lost earnings, and future noneconomic losses. After trial, the court reduced the damages to $1 million based on the legislative directive in C.R.S. § 13-64-302(1)(b) of the Health Care Availability Act (HCAA). The court approved Naomi’s motion to exceed the damages cap for good cause and entered judgment in her favor for $14,341,538.60.

On appeal, the Hospital argued that the court erred in excluding evidence of Medicaid benefits and private insurance available to Naomi in the post-verdict proceeding to exceed the damages cap. Sound public policy supports both the cap and the contract exception to the collateral source statute. The Colorado Court of Appeals concluded that the contract exception to the collateral source statute is applicable in post-verdict proceedings to reduce damages in medical malpractice actions under the HCAA. Medicaid benefits are paid on behalf of the injured party and are thus collateral sources subject to the contract exception. Accordingly, the trial court correctly did not consider Medicaid payments and private insurance in determining whether to exceed the HCAA damages cap.

The Hospital also argued that the trial court erred in denying its motion for judgment notwithstanding the verdict because Naomi failed to establish that she, rather than her parents, was entitled to her pre-majority economic damages. Parents own the legal right to seek reimbursement for a minor’s pre-majority economic damages. Here, Naomi’s parents did not relinquish this right and failed to institute a claim within the applicable statute of limitations.

The Hospital further argued that irrespective of the evidence of Medicaid and private insurance benefits, Naomi did not establish good cause to exceed the damages cap. The trial court considered a multitude of factors in concluding there was good cause. Its decision was not manifestly arbitrary, unreasonable, or unfair, and was not a misapplication of the law.

Lastly, the Hospital argued that Naomi received a duplicate award for future medical care and lost future earnings. The court concluded there is record support for the trial court’s findings that the damage award does not overlap with the future lost earnings award.

That portion of the judgment awarding pre-majority economic damages to Naomi was reversed. The judgment was affirmed in all other respects. The case was remanded for recalculation of the total amounts owed by the Hospital.

Summary provided courtesy of The Colorado Lawyer.

Colorado Supreme Court: Acknowledgment of Employer’s Vicarious Liability Bars Direct Negligence Claims Against Employer

The Colorado Supreme Court issued its opinion in In re Ferrer v. Okbamicael on Monday, February 27, 2017.

Tort—Respondeat Superior Liability—Direct Negligence.

In this original proceeding under C.A.R. 21, the Colorado Supreme Court reviewed trial court orders dismissing plaintiff’s direct negligence claims against an employer that acknowledged vicarious liability for its employee’s negligence, and denying plaintiff’s motion for leave to amend her complaint to add exemplary damages against the employer and the employee. The court adopted the rule articulated in McHaffie v. Bunch, 891 S.W.2d 19 822 (Mo. 1995), which held that an employer’s admission of vicarious liability for an employee’s negligence bars a plaintiff’s direct negligence claims against the employer. The court declined to adopt an exception to this rule where the plaintiff seeks exemplary damages against the employer. The court concluded that the trial court did not err in dismissing plaintiff’s direct negligence claims against the employer or in denying plaintiff’s motion for leave to amend the complaint to add exemplary damages. The court therefore affirmed the trial court orders and discharged the rule to show cause.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Penalty of Two Times Covered Benefit for Insurance Bad Faith Upheld

The Colorado Court of Appeals issued its opinion in Nibert v. Geico Casualty Co. on Thursday, February 23, 2017.

Bad Faith—C.R.S. § 10-3-1116—Jury Instructions—Statutory Delay—Attorney Fees.

Nibert and her husband were injured when a car collided with their motorcycle. As relevant to this appeal, Nibert had an underinsured motorist (UIM) policy through Geico Casualty Co. (Geico) with a $25,000 coverage limit. Geico offered Nibert $1,500 to settle her claim.

Nibert sued Geico for breach of contract, common law bad faith, and statutory delay under C.R.S. § 10-3-1116. After discovery and before trial, Geico paid Nibert the $25,000 UIM coverage limit to settle the breach of contract claim.

A jury returned verdicts awarding Nibert $33,250 in noneconomic damages on her bad faith claim and $25,000 for her statutory delay claim. The trial court entered judgment on the jury’s verdict for the bad faith claim and judgment of $50,000 for damages on the statutory delay claim. It also granted Nibert’s motion for attorney fees in the amount of $118,875.30.

On appeal, Geico argued that the trial court failed to adequately instruct the jury on its theory of defense that challenges to debatable claims are reasonable. The trial court relied on the Colorado pattern jury instructions governing common law bad faith and first-party statutory claims. While it did not accept Geico’s tendered instructions on these issues, it allowed Geico to present expert testimony regarding the “fairly debatable” issue and to argue its theory of defense to the jury. The Colorado Court of Appeals concluded that the instructions, as given, adequately instructed the jury on the applicable law and the parties were afforded ample opportunity to present their case theories to the jury. The trial court’s ruling was neither manifestly arbitrary, unreasonable, or unfair, nor a misapplication of the law.

Geico then argued that the trial court erred in awarding Nibert recovery of two times her UIM benefit as a penalty. C.R.S. § 10-3-1116(1) provides a first-party claimant the right to bring an action for “two times the covered benefit.” Geico argued that the trial court should have allowed a setoff of the ultimate statutory damages award in the amount of $25,000 previously paid to Nibert on her UIM claim. The court agreed with other divisions that have concluded that a statutory damages award of two times a delayed benefit—even when that benefit has already been paid, resulting in an effective payment of three times the contracted benefit—is contemplated by the plain meaning of C.R.S. § 10-3-1116.

Geico also contended it was error to award attorney fees incurred to prosecute the common law bad faith and statutory delay claims, both before and after the date when payment of the UIM benefit was delayed. They argued the attorney fees should be limited to the period from the date the benefit was first delayed to the date the benefit was actually paid. The court found no support for Geico’s argument that the section does not contemplate an award of attorney fees incurred litigating anything other than a contractual claim or incurred for the time before and after a delayed benefit accrues and is paid.

The court also granted Nibert’s request for an award of her appellate attorney fees.

The judgment and order were affirmed, and the case was remanded for a determination of the amount of reasonable attorney fees and costs.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Insured Not Entitled to Prejudgment Interest when Settlement Reached Prior to Filing Suit

The Colorado Court of Appeals issued its opinion in Munoz v. American Family Mutual Insurance Co. on Thursday, February 23, 2017.

Prejudgment Interest under C.R.S. § 13-21-101(1).

Munoz was injured in a collision with an uninsured motorist (UM). Munoz opened a UM claim with his insurer, American Family Mutual Insurance Co. (American Family). American Family made settlement offers to Munoz but maintained it was not required to pay prejudgment interest because it was only required to do so after a judgment had been entered by a court. Munoz accepted American Family’s final offer, understanding that it did not include interest.

Munoz then sued American Family and the UM. Munoz moved under C.R.C.P. 56(h) for a determination whether American Family was required to include prejudgment interest as part of its UM claim settlement. The trial court ruled, as a matter of law, that the insured is entitled to such interest only when a judgment has been entered and interest is awarded as a component of damages assessed by the jury’s verdict or the court.

On appeal, Munoz argued that the trial court erred because prejudgment interest is a necessary element of compensatory damages that makes an injured party whole. American Family countered that the plain language of C.R.S. § 13-21-101 states that prejudgment interest can only be awarded after a judgment, based on a damages award determined by a trier of fact, has been entered. The Colorado Court of Appeals determined the plain language of the statute requires, prior to prejudgment interest being awarded, that (1) an action must be brought; (2) the plaintiff must claim damages in the complaint; (3) there must be a finding of damages by a jury or the court; and (4) judgment is entered.

The judgment was affirmed.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Statute of Limitations Had Not Run for Enforcing Fair Campaign Practices Act Judgment

The Colorado Court of Appeals issued its opinion in Campaign Integrity Watchdog, LLC v. Alliance for a Safe and Independent Woodmen Hills on Thursday, February 23, 2017.

Fair Campaign Practices Act—Campaign and Political Finance Amendment—Statute of Limitations.

The Alliance for a Safe and Independent Woodmen Hills (Alliance) was established to work for the common good and general welfare of the Woodmen Hills community. Before the 2014 Woodmen Hills Metropolitan District board of directors’ election, Alliance sent postcards and created Facebook posts directed at undermining the character of a board candidate. Campaign Integrity Watchdog, LLC (CIW) filed a complaint with the Secretary of State alleging a violation of § 9 of the Campaign and Political Finance Amendment, Colo. Const. Art. 28 (Amendment) and various violations of the Fair Campaign Practices Act (FCPA). The matter was referred to the Office of Administrative Courts. After a hearing, the administrative law judge (ALJ) found that the alliance was a “political committee” under the FCPA and it failed to register and file required reports as of the first day of the hearing, June 26, 2014. Thus Alliance violated the FCPA. The ALJ imposed a fine and ordered Alliance to register with the Secretary of State and file all required reports.

Alliance filed a motion to stay the decision, which was denied, and immediately thereafter filed a notice of appeal, which it then withdrew. About a year later, CIW filed a complaint in district court to enforce the ALJ’s decision. Alliance filed a CRCP 12(b)(5) motion to dismiss alleging the Amendment’s one-year statute of limitations barred CIW’s enforcement action. The district court dismissed the complaint, finding it time-barred under the Amendment.

On appeal, both parties agreed that the statute of limitations is triggered by the date of “violation” in § 9(2)(a) of the Amendment, but disagreed about what “violation” means. The Court of Appeals concluded that “violation” means the act(s) of breaking or dishonoring the FCPA or Amendment and therefore the statute of limitations began running the day following the last such act.

The Court then reviewed CIW’s complaint and concluded it could be read to allege a continuing violation of the Amendment, and the record does not show when or if the continuing violation ended. The complaint states a plausible claim of a continuing violation sufficient to withstand a Rule 12(b)(5) motion to dismiss based on the statute of limitations.

The order dismissing the complaint was reversed and the case was remanded.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Economic Loss Rule Does Not Bar Civil Theft Claims

The Colorado Court of Appeals issued its opinion in Bermel v. BlueRadios, Inc. on Thursday, February 23, 2017.

Breach of Contract—Unjust Enrichment—Colorado Wage Protection Act—Civil Theft—Conversion—Economic Loss Rule—Attorney Fees.

Bermel entered into a “Contractor Agreement” with BlueRadios, Inc. under which he provided engineering services to BlueRadios. He also signed a “Proprietary Information and Inventions Agreement” (PIAA). The parties later ended their relationship. Anticipating that he might end up in litigation over unpaid wages, Bermel breached the PIAA by forwarding to his personal email account thousands of BlueRadios emails and attachments, some of which contained proprietary information. Bermel sent a demand letter to BlueRadios for unpaid wages, which BlueRadios paid. Bermel thereafter filed a lawsuit against BlueRadios asserting claims for breach of contract, unjust enrichment, and violation of the Colorado Wage Protection Act (CWPA). BlueRadios filed counterclaims against him, including breach of contract; civil theft, under C.R.S. § 18-4-405; and conversion. The court granted summary judgment in favor of BlueRadios on Bermel’s CWPA claim, and following trial, found Bermel liable on all of BlueRadios’ counterclaims.

On appeal, Bermel contended that the trial court erred when it denied his motion for summary judgment, in which he argued that the economic loss rule barred BlueRadios’ claim for civil theft. Because the economic loss rule is a judicial construct and a civil theft claim is a statutory cause of action, the economic loss rule does not preclude a cause of action under the civil theft statute.

Bermel also argued that the trial court erred in granting BlueRadios’ motion for summary judgment on his CWPA claim, contending that the court failed to apply the CWPA’s definition of “employee” when it concluded he was an independent contractor. The evidence attached to BlueRadios’ motion for summary judgment did not establish that Bermel was free from control and direction under his contract or that he was customarily engaged in an independent trade, occupation, profession, or business related to the service performed. Accordingly, BlueRadios failed to establish that no genuine dispute of material fact existed as to whether, under the parties’ contracts, Bermel was an employee for purposes of the CWPA.

Finally, BlueRadios was entitled to its appellate attorney fees under the civil theft statute.

The summary judgment on the CWPA claim was reversed, the judgment was otherwise affirmed, and the CWPA claim was remanded for further proceedings.

Summary provided courtesy of The Colorado Lawyer.

Class Action Headaches: The Intersection of Mild Traumatic Brain Injury and Sports Concussion Litigation

Iron Mike Webster

“Iron Mike” Webster played for the Pittsburgh Steelers from 1974-1988 and the Kansas City Chiefs from 1989-1990, and played in 245 games during his career. He died at the age of 50 in 2002 from a heart attack. At his death, Iron Mike was suffering from dementia, self-mutilating, and living out of his pickup truck. A doctor named Bennet Omalu performed his autopsy, which showed chronic traumatic encephalopathy, or CTE. Dr. Omalu examined the remains of several other former NFL players who had similar symptoms to Iron Mike, including Terry Long, Andre Waters, and Justin Strzelczyk. He presented his findings to the NFL Commissioner, Roger Goodell, but was largely ignored until Chris Henry of the Cincinatti Bengals died in 2006 at age 26 due to CTE.

Will Smith and Alec Baldwin starred in a December 2015 movie, “Concussion,” which detailed Dr. Omalu’s findings and his struggle to be taken seriously by the NFL. In April 2015, a federal district court judge approved a class-action settlement of former NFL players for long-term neurological problems associated with repeated concussions. All eligible retired former NFL players will receive a baseline neuropsychological and neurological examination, and additional medical testing, counseling, or treatment if they are diagnosed with moderate cognitive impairment. The settlement also provides for monetary awards, conceivably into the millions of dollars, for diagnoses of certain neurocognitive diseases or impairments, such as ALS, Parkinson’s disease, Alzheimer’s disease, or certain levels of dementia. Fewer than 200 retired NFL players have opted out of the settlement.

Other sports organizations have filed class actions, as well. A number of former college athletes have filed suit against the NCAA, alleging long-term injuries from concussions experienced while playing NCAA sports. The U.S. Soccer Federation, U.S. Water Polo, the NHL, and the World Wrestling Federation have also been the subjects of concussion-related lawsuits. Many states, including Colorado, have passed measures intended to protect young athletes from second-impact syndrome, a rare and potentially fatal consequence of repeated concussions.

Reid Neureiter of Wheeler Trigg O’Donnell has researched concussion litigation extensively. On Thursday, March 9, from noon to 1 p.m., he will present “Concussions in the Courts,” a one-hour lunch program to highlight the continuing litigation between athletes and athletic organizations. Register by calling (303) 860-0608 or by clicking the links below.

 

CLELogo

CLE Program: Concussions in the Courts

This CLE presentation will occur on March 9, 2017, at the CBA-CLE offices (1900 Grant Street, Third Floor), from 12 p.m. to 1 p.m. Register for the live program here or register for the webcast here. You may also call (303) 860-0608 to register.

Can’t make the live program? Order the homestudy here: MP3Video OnDemand.

Tenth Circuit: Concurrent Insurer Responsible for Proportional Shares of Loss for School Fire

The Tenth Circuit Court of Appeals issued its opinion in Philadelphia Indemnity Ins. Co. v. Lexington Ins. Co. on January 19, 2017.

In 2012, Philadelphia Indemnity Insurance Company issued an insurance policy to Tulsa School of Arts and Sciences (TSAS), an Oklahoma charter school. TSAS leased the Barnard Elementary School building from the Independent School District No. 1 of Tulsa County, Oklahoma. TSAS obtained the insurance policy, as required by the lease, naming the District as the payee. The District held a separate insurance policy on the building leased by TSAS and on over 100 other facilities the District owned. The building was damaged by fire on September 5, 2012. The total adjusted loss was $6,014,359.06. The insureds were paid; however, the insurers pursued litigation over which policy covered the damage. Both policies protected against fire damage and included identically worded “other insurance” provisions. Philadelphia sought a declaratory judgment in the U.S. District Court for the Northern District of Oklahoma in March 2013. The district court granted Philadelphia’s motion in December 2015 and denied Lexington’s request for summary judgment.

Rejecting Lexington’s arguments, the Tenth Circuit found that Philadelphia had standing. The court held that Philadelphia met the Constitutional requirement for a case or controversy in the context of a declaratory judgment. Philadelphia’s alleged injury was financial, definite, and concrete. The parties’ interests were adverse: either insurer would bear the loss or share it. Due to the causal connection of how the insurers’ policies interact with one another, a judicial determination of the insurers’ responsibilities under the policies would provide redress. The court stated that this action is between insurers for a declaration of the insurers’ responsibilities, and not an action to enforce a contract. Therefore, Philadelphia had standing.

The Tenth Circuit agreed with the district court’s conclusion. The court held that the district court properly applied Oklahoma insurance law in its decision on summary judgment. The panel applied the framework established by the Oklahoma Supreme Court in Equity Mutual Insurance v. Spring Valley Wholesale Nursery to affirm that both policies were primary polices, the identical policy provisions canceled each other out, and the total loss must be shared proportionally. This reasoning was further supported by the Fifth Circuit’s decision in Southern Insurance Co. v. Affiliated FM Insurance Co. In Southern Insurance, the court applied Mississippi law to hold that concurrent policies containing “other insurance” clauses canceled each other out and required pro rata calculation.

Philadelphia argued that the district court should have required Lexington to pay more because Lexington’s policy limit was $100 million, while its policy limit was $7 million. The court disagreed. Because Lexington’s policy included a “limit of liability” endorsement, Lexington’s policy limit was the amount of loss here and not the full $100 million.

Judge McHugh concurred in part and dissented in part. He agreed with Philadelphia. The district court should have used Lexington’s policy limit of $100 million and not the liability limit to determine the proportional share. The dissenting part also relies on a different interpretation of the default rule from Equity Mutual. Without expressly provided for in the insurance policy, the pro rata calculation should be based on the total policy limit of each policy. This conclusion would result in Philadelphia liable for 6.54% and Lexington 93.46%. The majority of the panel affirmed the lower court’s calculation apportioning 53.79% of the loss to Philadelphia, and 46.21% to Lexington.

Colorado Court of Appeals: Hail in Window Wells Retained Character as Surface Water for Insurance Purposes

The Colorado Court of Appeals issued its opinion in Martinez v. American Family Mutual Insurance Co. on Thursday, February 9, 2017.

Michael Martinez owned a home in Erie, Colorado. On August 3, 2013, a heavy rain and hail storm caused hail to collect in the window wells for his basement windows, and eventually the rain and hail overflowed into his basement windows, causing extensive damage. Martinez filed a claim with American Family, but the insurance company denied his claim after investigation, finding that the damage was caused by “flooding” or “surface water,” both of which were excluded under the insurance policy.

Martinez filed suit, seeking a declaratory judgment on the issue of coverage and asserting claims for contractual and extra-contractual damages. American Family moved for summary judgment on the issue of coverage, arguing that the insurance policy’s water damage exclusions for “flood” and “surface water” applied as a matter of law. The district court granted American Family’s motion, and Martinez appealed.

On appeal, Martinez raised two contentions: (1) the damage to his basement was not caused by “surface water” because the water that collected on his roof and melted hail did not fit the definition of surface water; and (2) even if the water was surface water, it lost that characteristic when it entered his window wells. The court of appeals disagreed on both counts. The court of appeals first evaluated the Colorado Supreme Court opinion in Heller v. Fire Insurance Exchange, 800 P.2d 1006 (Colo. 1990). The court found that the supreme court’s definition of surface water in Heller fit squarely with the issues raised by Martinez, although the facts in Heller differed significantly from those alleged by Martinez.

The court of appeals determined that the water on Martinez’s roof was unquestionably surface water, noting that dwellings were reasonably considered extensions of the earth’s surface. Likewise, melted hail was well within the definition of surface water. The court next evaluated Martinez’s claim that the water in his window wells lost its characteristic as surface water, and disagreed. The window wells were designed to retain the surrounding soil and allow water to drain, therefore they were reasonably considered extensions of the surface and did not transform the collected water into a different type of body of water.

The court of appeals affirmed the trial court’s entry of summary judgment in favor of American Family.

HB 17-1162: Repealing Drivers’ License Penalties for Unpaid Court Judgment

On February 6, 2017, Rep. Matt Gray introduced HB 17-1162, “Concerning Action that Can be Taken Against an Individual Based on the Individual’s Failure to Pay for a Traffic Violation.”

Under current law, an individual who is cited for certain traffic infractions must either pay the penalty assessment or appear in court for a hearing. If the individual neither pays the infraction nor appears for a hearing, the court must issue a judgment against the individual. An individual who has an outstanding judgment:

  • May have their driver’s license canceled;
  • May not receive a new driver’s license; and
  • May not renew a current driver’s license.

The bill repeals these penalties and provides courts with the option of withholding a driver’s state income tax refund in order to satisfy the outstanding judgment.

The bill was introduced in the House and assigned to the Judiciary Committee.

Colorado Court of Appeals: Essential Element of Abuse of Process Claim is Improper Use of Courts

The Colorado Court of Appeals issued its opinion in Active Release Techniques, LLC v. Xtomic, LLC on Thursday, February 9, 2017.

Active Release Techniques (ART) is a provider of training, seminars, and business support software for chiropractors and other health care providers. ART contracted with Xtomic to manage ART’s IT services and provide support. When one of ART’s employees started a new business, Select Seminar Services, LLC (S3), with a co-owner of Xtomic, ART petitioned for a temporary restraining order and preliminary injunction. It also initiated the current litigation, asserting claims for misappropriation of trade secrets. Xtomic responded by asserting numerous counterclaims, including a claim for abuse of process. A jury ultimately decided all claims in Xtomic’s favor.

ART appealed, arguing the trial court erred by denying its motion for a directed verdict on Xtomic’s abuse of process claim. The court of appeals noted that “a valid abuse of process claim must allege ‘(1) an ulterior purpose for the use of a judicial proceeding; (2) willful action in the use of that process which is not proper in the regular course of the proceedings, i.e., use of a legal proceeding in an improper manner; and (3) resulting damage.'” In this case, ART moved for a directed verdict on the abuse of process claim at the close of evidence on the counterclaims. Xtomic argued that ART knew from the outset that it had no legitimate claims against Xtomic and the overly aggressive manner in which it pursued its claims against Xtomic was evidence of ART’s ulterior motive to use the lawsuit as a means to harass Xtomic and run it out of business. In denying ART’s motion for directed verdict, the court relied on ART’s pretrial settlement with Xtomic, ART’s reputation for filing lawsuits to control the behavior of former 5 associates and business partners, and the nature and number of preservation letters that ART sent to numerous individuals.

The court of appeals disagreed with the trial court that the settlement could be evidence of ART’s willful misuse of judicial process, because settlement does not imply that the originally filed suit was improper. The court also disregarded the evidence of ART’s other lawsuits, finding that it was only proper to focus on the instant case. Finally, the court found that the preservation letters were not directly related to any litigation but rather were issued in response to ART’s concern that Xtomic was destroying emails.

The court of appeals denied Xtomic’s motion for appellate attorney fees, since it was not the prevailing party. The court reversed the trial court’s denial of ART’s motion for directed verdict and remanded.