The Colorado Court of Appeals issued its opinion in Casey v. Colorado Higher Education Insurance Benefits Alliance Trust on August 16, 2012.

Trust—CRCP 12(b)—Subject Matter Jurisdiction—Colorado Governmental Immunity Act—Tort—Contract—Breach of Fiduciary Duty—Economic Loss Rule—Breach of Covenant of Good Faith and Fair Dealing—Mistake—Inverse Condemnation.
In this class action suit, defendants, the Colorado Higher Education Insurance Benefits Alliance (CHEIBA) Trust, the eight other colleges that participated in the original trust and that continue to participate in the new CHEIBA Trust, and the trustees of the CHEIBA Trust, appealed the court’s order denying their CRCP 12(b) motion to dismiss the claims of plaintiffs, a class of employees who participated in the trusts at issue in this case. The order was affirmed in part and reversed in part, and the case was remanded for further proceedings.

Beginning in 1992, employees of nine Colorado colleges, including Mesa State College, contributed to a trust designed to provide long-term disability benefits for them if they were to become disabled. The trust agreement required the employees and Mesa State to make these contributions. The original trust was succeeded in 2003 by the CHEIBA Trust. Mesa State withdrew from the CHEIBA Trust in 2005 and created a new disability trust. CHEIBA refused Mesa State’s request to release to its new disability trust approximately $1 million from the reserve fund that Mesa State and its employees had contributed to the original trust and to the CHEIBA Trust. This interlocutory appeal was limited to determine only issues of sovereign immunity.

On appeal, defendants contended that the probate court lacked subject matter jurisdiction because all of the employees’ claims are barred by the Colorado Governmental Immunity Act (CGIA). The CGIA bars any action against a public entity or its employees that lies in tort or could lie in tort regardless of the form of relief chosen by the claimant. The CGIA does not apply to contract actions. The trust agreements are the source of the trustees’ fiduciary duty described in the employees’ breach of contract claim. As a result, the economic loss rule bars the employees from any tort recovery from the trustees. Therefore, the employees’ breach of fiduciary duty and breach of the covenant of good faith and fair dealing claims arising from the trust agreement against the trustees is not barred by the CGIA. However, the allegation that the colleges breached any fiduciary duties they owed the employees did lie, or could have lied, in tort as the trust agreement did not place any fiduciary duties on the colleges. Therefore, this portion of the breach of contract claim against the colleges is barred by the CGIA. On the other hand, the claim that the colleges violated the implied covenant of good faith and fair dealing is not barred because it does not, and cannot, lie in tort.

Defendants also contended that the CGIA bars the employees’ inverse condemnation claim. Because an inverse condemnation claim could not lie in tort, it is not barred by the CGIA.

Defendants further asserted that language in the trust agreements bars the employees from obtaining the relief they seek. Specifically, both trust agreements explicitly provide that contributions are irrevocable unless a majority of the trustees votes to dissolve the trusts. Plaintiffs claim that their contributions to the CHEIBA trust are null and void because of either unilateral or mutual mistake. The doctrine of mistake allows the mistaken party to avoid the contract and lies or could lie in tort. Therefore, this part of the declaratory judgment claim is barred by the CGIA.

Summary and full case available here.