November 29, 2015

Colorado Court of Appeals: Jury Instructions on Implied Warranty of Suitability Insufficient

The Colorado Court of Appeals issued its consolidated opinion in Rogers v. Forest City Stapleton, Inc. and Rogers v. Forest City Stapleton, Inc. on Thursday, November 19, 2015.

Implied Warranty of Suitability—Developer—Homeowner—Vacant Lot—Nuisance—Sanctions—Discovery Violation.

Defendants (collectively, Forest City) served as the master developer for the redevelopment of the old Stapleton International Airport. Forest City sold the vacant residential lot at issue here to a homebuilder, with which plaintiff Rogers contracted to build a home. Rogers paid the builder an extra fee to include a basement that could later be finished. After learning that his lot was not suitable for a home with a basement that could be finished, Rogers brought claims for breach of implied warranty, nuisance, and negligent misrepresentation.

On appeal, Forest City argued that the trial court erred by instructing the jury that it could find that an implied warranty runs from a developer to a homeowner under the circumstances of this case. An implied warranty of suitability exists between a developer of a vacant lot and the owner of a home on that lot who is not the first purchaser if (1) the developer improves the lot for a particular purpose, and (2) all subsequent purchasers rely on the developer’s skill or expertise in improving the lot for that particular purpose. Here, the trial court did not adequately instruct the jury on this law. Consequently, the judgment was reversed and the case was remanded for a new trial on the implied warranty claim.

Forest City also argued that the trial court erred in denying its motion for judgment notwithstanding the verdict on Rogers’s nuisance claim, arguing that there was insufficient evidence to support the nuisance verdict as a matter of law. Because the jury was instructed that Forest City placing RABC in the roads was a necessary element of the nuisance claim, and the record reveals no evidence that Forest City placed RABC, or anything else, in the roads in Stapleton, the evidence was insufficient to support the jury’s nuisance verdict. The trial court therefore erred by denying Forest City judgment notwithstanding the verdict on that claim pursuant to CRCP 59(e)(1).

Rogers argued that the trial court erred in the amount of sanctions awarded to Rogers and against Forest City’s counsel for the late disclosure of discovery documents. Because the trial court found that (1) the late disclosed documents were of “slight use” to Rogers, (2) Forest City’s counsel acted with “candor and professionalism,” and (3) the violation was an unintentional “oversight,” the trial court acted within its broad discretion by awarding only $10,000 of the $90,000 that Rogers requested.

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

Colorado Court of Appeals: Reservation of Rights in 1950 Deed Conveyance Preserved Mineral Interests

The Colorado Court of Appeals issued its opinion in Owens v. Tergeson on Thursday, November 5, 2015.

Mineral Rights—Summary Judgment.

Plaintiffs and defendants both asserted they were the rightful owners of certain mineral interests located in four adjacent tracts of land (Tracts A–D) in Weld County. The claims revolved around an interpretation of two warranty deeds dated November 25, 1950 (1950 Deeds). One deed conveyed Tract A; the other conveyed Tracts B–D. The disagreement was whether the language in the 1950 Deeds reserved all oil, gas, and other mineral interests in the land to the original grantors or fully conveyed those interests to the deeds’ grantees. Plaintiffs argued that as successors-in-interest to the deeds’ grantors, they were the rightful owners of the mineral rights reserved in the deeds. Defendants, as successors-in-interest to the grantees, argued they owned the mineral rights.

Defendants also asserted that a 1973 quiet title action (1973 Action) and a subsequent conveyance also gave them ownership in at least some of the disputed mineral rights. Plaintiffs argued that the 1973 Action was void because they were not named as parties and their predecessors-in-interest were not properly served. On cross-motions for summary judgment, the district court ruled in favor of plaintiffs, and the Court of Appeals affirmed.

The Court noted that the clear modern rule that a reservation of mineral interests referenced only in a deed’s habendum clause is effective despite the absence of a similar restriction in the deed’s granting clause. In other words, the deed is read as a whole. The 1950 Deeds both contained clear reservation of mineral interests contained only in the habendum clauses. The Court found it clear that the parties intended the mineral rights to be reserved to the grantors.

The parties agreed that, based on the Court’s interpretation of the 1950 Deeds, the 1973 Action only affected Tract A. The district court held the 1973 Action void because of inadequate service of process on plaintiffs’ predecessors-in-interests. They were served only by publication based on assertions that their address was unknown notwithstanding the 1950 Deeds listing the address as “Tulsa, Oklahoma” and a 1960 oil and gas lease (1960 Lease) also of public record listing a specific street address in Tulsa. The district court voided the 1973 Action judgment for failure to use due diligence in searching for an address and withholding pertinent information when moving for service by publication. The Court agreed with the district court’s analysis. It rejected an argument by defendants that they only had to demonstrate there was no address in Colorado for the defendants in the 1973 Action. The judgment was affirmed.

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

The Colorado Marijuana Industry—Legal and Accounting Advice and Compliance

Colo_MJ_IndustryTwenty years ago, the idea of legalized marijuana was laughable. Today, there are 23 states that have legalized marijuana for medicinal purposes, and four states (Oregon, Washington, Alaska, and Colorado) along with Washington, DC, that are experimenting with the legalization of recreational marijuana. The marijuana movement appears to be an unstoppable force.

We have witnessed a major shift in how the American public views marijuana. Practically all major national polls now show that a slim majority of respondents are in favor of legalizing marijuana, or share a favorable view of the drug. An even greater percentage of Americans want to see it approved for medical uses. States have also taken a markedly different approach. Once viewed with contempt, marijuana is now looked upon as a fresh tax revenue source. Revenue generated from taxing marijuana is being used to support jobs, maintain in-state infrastructure, and even support education.

The first state to officially begin selling recreation-legal marijuana was Colorado in the beginning of 2014. Colorado hit a marijuana milestone in August 2015. According to the Denver Post, August represented the first month in its short history of recreational marijuana sales that total monthly combined sales of recreational and medical marijuana topped the $100 million mark. In August, $59.2 million was sold in recreational marijuana, and another $41.3 million came from medical marijuana. In Colorado, the three taxes associated with marijuana have raised an impressive $86.7 million through just the first eight months of 2015. With $639.4 million in combined marijuana sales through August in Colorado, and Washington and Oregon both ramping up their sales, the legal marijuana business will likely total more than $1 billion in 2015 for the first time ever.

However, federal law still views marijuana as a Schedule 1 Drug. Therefore, according to federal law, it is still illegal.

This thriving industry, its tax consequences, and the resulting conflict of laws have presented our state with a unique set of challenges, which will be discussed by some of the most influential voices in the Colorado marijuana industry on November 5 at Colorado CLE’s seminar,“The Colorado Marijuana Industry – Legal and Accounting Advice and Compliance.” Barbara Brohl, the Executive Director of Colorado Department of Revenue, will give the regulatory perspective on these complex issues. Professor Sam Kamin, one of the nation’s leading experts on the regulation of marijuana, will analyze the lawsuits that have been brought against Colorado by surrounding states. Mark Mason and Deirdre O’Gorman will be at the seminar to give us the latest information about The Fourth Corner Credit Union, the only credit union constructed to serve the interests of the legalized cannabis and hemp industries and their supporters. John Walsh, the United States Attorney for the District of Colorado, will give us the federal perspective on marijuana enforcement priorities and their interaction with state priorities.

Don’t miss the panel presentation about the challenges and opportunities of owning and operating a marijuana business. Christian Sederberg, a leading practitioner in the industry, has not only represented clients, but he and his firm have helped shape the marijuana and cannabis laws and regulations. Christian will give us an update on the law. Ron Seigneur, the Program Moderator, who has over 25 years of business valuation experience and is known nationally for his expertise, will talk about investing in a cannabis business and attendant ownership and valuation issues.

CLE Program: Colorado Marijuana Industry — Legal and Accounting Advice and Compliance

This CLE presentation will take place Thursday, November 5, 2015, in the CLE Large Classroom. Click here to register for the live program and click here to register for the webcast, or call (303) 860-0608.

Can’t make the live program? Order the homestudy here: CDMP3 audioVideo OnDemand.

Tenth Circuit: Use of False Identity Immaterial to Wire and Mail Fraud and Cannot Form Basis for Convictions

The Tenth Circuit Court of Appeals issued its opinion in United States v. Camick on Friday, July 31, 2015.

Leslie Lyle Camick was a Canadian citizen who entered the United States in 2000 using the identity of his brother, Wayne Bradly Camick, who had died in infancy. Camick assumed his brother’s identity in order to avoid outstanding child support obligations and back taxes and to evade permanent driver’s license revocation due to numerous intoxicated driving offenses. Camick used his brother’s identity throughout his time in the United States.

In 2004, Camick began a professional and romantic relationship with Lyn Wattley. The couple eventually moved to Kansas and bought a home together under Camick’s assumed identity. In 2010, Camick and Wattley, together with machinist Mark Nelson, began developing an idea for a new way to cover manholes. In 2011, Camick’s and Wattley’s relationship deteriorated, and unbeknownst to Wattley, Camick filed a provisional patent application for the locking manhole cover. In the summer of 2011, Camick drove a 2006 GMC truck that he had paid for but that was titled in Wattley’s name to Arizona. Wattley became concerned about Camick driving since he had had prior intoxicated driving incidents, so she reported the vehicle stolen. Camick was arrested in New Mexico for theft of the truck but Wattley requested that the New Mexico charges be dropped. The Kansas warrant for the stolen vehicle remained outstanding.

In late 2011, Camick was arrested in New Jersey, where he was interviewed by U.S. Immigration Officer Jackey He to determine his immigration status. Eventually, Camick admitted his real name to Officer He and signed an affidavit that he had used his brother’s identity to enter and reside in the United States. Camick was placed under arrest and Officer He initiated removal proceedings against him. As a result of the arrest, Wattley discovered Camick’s true identity and initiated quiet title proceedings to remove the name Wayne Camick from their Kansas residence. She served Camick in the New Jersey detention center, but he failed to respond within the 30-day period and the Kansas court quieted title against him. More than a month after the Kansas court entered judgment, Camick submitted a response to the quiet title action, claiming he was the purchaser and owner of the subject property and that he had been unable to respond due to his immigration detention. The Kansas court responded by issuing a letter that Camick’s response did not comply with Kansas law and was untimely. Two months later, Camick sent another letter to the Kansas court claiming he had been “wrongfully detained” by ICE as a result of Wattley’s “falsified Police report.”

In March 2013, Camick was indicted on charges of mail fraud, wire fraud, material false statement to the U.S. Patent Office, and three counts of aggravated identity theft relating to the fraud and false statement charges. In July 2013, Camick filed a 42 U.S.C. § 1983 lawsuit against Wattley and others, alleging constitutional and tort violations arising from the 2011 stolen vehicle report. This lawsuit became the source of Camick’s obstruction of justice charge as contained in the government’s second superseding indictment. After a three-day trial, Camick was convicted of all seven charges and was sentenced to 48 months’ imprisonment followed by one year of supervised release. Camick was also ordered to pay $15,186 in restitution to Wattley. He timely appealed.

The Tenth Circuit analyzed the mail fraud charge, which was premised on the letter Camick mailed to the Kansas court regarding his failure to respond to the quiet title action. Camick argued the evidence was insufficient to show he made materially false statements with the intent to defraud. The Tenth Circuit agreed. The Kansas court and Wattley were aware of Camick’s true identity at the time he sent the letter, and he had been known as Wayne throughout his time in the United States. The Tenth Circuit held that Camick’s identity could have had no bearing on the Kansas court’s decision to uphold its default judgment. Camick’s statement that he had been “wrongfully detained” was likewise immaterial since it was incapable of influencing the Kansas court’s decision. The Tenth Circuit reversed Camick’s conviction for mail fraud and the related aggravated identity theft charge.

The Tenth Circuit next evaluated Camick’s challenges to the wire fraud and material false statement convictions, both of which pertained to the provisional patent application. Camick argued that because he was the actual inventor of the locking manhole cover and everyone knew him as Wayne Camick, his use of that name on the provisional patent application was insufficient to show a false statement with intent to defraud. The Tenth Circuit again agreed, holding that the false statements were immaterial to the provisional patent application. Because the provisional patent application did not require an oath or declaration by the applicant, the Tenth Circuit found Camick’s fraud in using his brother’s name immaterial to the provisional patent application. The Tenth Circuit reversed the convictions for wire fraud and material false statement. The Tenth Circuit also reversed the accompanying aggravated identity theft charges.

Camick challenged his obstruction of justice charge, arguing the evidence was insufficient to show that he filed the civil rights suit against Wattley with retaliatory intent. The Tenth Circuit, drawing inferences of retaliation from the timing of his filing, disagreed. The Tenth Circuit upheld this conviction. Judge Kelly dissented from this part of the opinion; he would have reversed the obstruction of justice conviction as well.

Finally, Camick argued that the restitution award improperly failed to tie Camick’s harms of conduct to the restitution requested by Wattley. The Tenth Circuit evaluated the restitution award and reversed the parts of the award requested for Wattley’s quiet title action and review of the provisional patent application. The Tenth Circuit also reversed the award of costs incurred in a separate civil lawsuit.

Camick’s convictions for mail fraud, wire fraud, material false statement, and aggravated identity theft were reversed. Camick’s conviction for obstruction of justice was affirmed. The case was remanded for a hearing on the remaining restitution award.

Tenth Circuit: Closure of Mines Justified Revocation of MSHA Modifications

The Tenth Circuit Court of Appeals issued its opinion in Andalex Resources, Inc. v. Mine Safety & Health Administration on Tuesday, July 7, 2015.

Andalex Resources operated two coal mines in Utah. During the course of its mining operations, Andalex requested and received several modifications to rules of the Mine Safety and Health Administration (MSHA). In 2008, Andalex ceased mining operations at both locations and sealed the mines, leaving some infrastructure in place and leaving some equipment underground. The MSHA revoked the modifications in response to Andalex’s sealing of the mines, considering the sealing a “change of circumstances” that would allow revocation under 30 C.F.R. § 44.52(c). Andalex appealed and was granted a hearing in front of an ALJ. Andalex moved for a summary decision, arguing revocation was improper because MSHA had not shown a change of circumstances and also that it was merely maintaining the mines in a “temporary idle status” rather than closing them permanently. The ALJ affirmed the MSHA’s decision to revoke the modifications, ultimately finding that the sealing of the mines was a change of circumstances warranting revocation.

Andalex appealed the ALJ’s decision to the MSHA Assistant Secretary, who affirmed the ALJ. The Assistant Secretary also concluded that the changed circumstances—the closure of the mines—justified revocation of the modifications. The Assistant Secretary further concluded Andalex’s inability to maintain the equipment was alone a change of circumstances sufficient to justify revocation of the modifications. Andalex timely petitioned for Tenth Circuit review.

The Tenth Circuit first noted that it owed wide deference to the agency determinations, particularly where they concern the agency’s area of expertise. The Tenth Circuit noted the evidentiary standard for reasonableness of the agency action was very low—more than a scintilla but less than a preponderance of the evidence. Andalex argued the agency’s action was arbitrary and capricious and that the Assistant Secretary misapprehended or misapplied the § 44.52(c) standards. MSHA countered the Assistant Secretary and ALJ properly applied the factors and correctly found a change in circumstances.

The Tenth Circuit noted that although the Assistant Secretary engaged in speculation, it could find no abuse of discretion in the Assistant Secretary’s conclusion that sealing the mines was a change in circumstances sufficient to support revocation of the modifications. The Tenth Circuit, according deference to the agency actions, also found substantial evidence supported the MHSA’s decisions.

The Tenth Circuit denied the petitions for review.

Colorado Court of Appeals: Real Estate Broker Properly Disciplined by Commission for Conversion of HOA Funds

The Colorado Court of Appeals issued its opinion in In re Disciplinary Action Against the Real Estate Broker’s License of Bernard McConnell v. Colorado Real Estate Commission on Thursday, September 24, 2015.

Real Estate Commission Discipline.

In 2010 and 2011, while serving as president of the Pinecliff Homeowners Association (HOA), McDonnell wrote four checks totaling $10,000 on the HOA’s account payable to himself or his business. When the treasurer discovered one of these checks, McDonnell claimed he had written the check by mistake and repaid the HOA. When the treasurer’s term ended, McDonnell took custody of the HOA’s accounting records and refused to appoint a new treasurer.

The next year, an HOA board member called for a meeting to discuss accounting issues. McDonnell declined to attend and resigned. He then deposited the remaining $8,000 he had withdrawn for non-HOA purposes into the HOA bank account.

When the HOA board discovered the checks, they reported McDonnell to the police and the Colorado Real Estate Commission (Commission). No criminal charges were filed, but the Commission opened an investigation. The Commission charged McDonnell with four violations of the Colorado Real Estate Broker License Law. McDonnell appealed the Commission’s order sanctioning him on some of those counts.

The Court of Appeals first rejected McDonnell’s contention that the Commission did not have authority to sanction him for conduct that does not involve “selling, exchanging, buying, renting or leasing” real estate. The Court cited numerous provisions that allow the Commission to sanction a broker’s improper conduct outside of the real estate context, particularly when it speaks to the broker’s honesty, dignity, or moral character.

The Court also rejected McDonnell’s argument that CRS § 12-61-113(1)(g) (providing for sanctions for failure to properly account for funds) only applies to a licensee’s conduct involving real estate matters. The plain language of the section is clearly broader and not so limited.

McDonnell argued that CRS § 13-16-113(1)(g.5) (providing for discipline for conversion of funds of others and diverting funds of others without authorization) applies only to real estate transactions and that, even if it applies, his conduct was not conversion because he always intended to return the money. The Court disagreed, again holding that the section applies to more than just real estate transactions. Moreover, the Commission’s conclusion that McDonnell took the funds from the HOA without authorization and used them was amply supported in the record.

The Court further rejected McDonnell’s argument that CRS § 12-61-113(1)(t) (providing for discipline for any other conduct that constitutes dishonest dealing) only applies in the real estate context. It also rejected his argument that his actions did not rise to the level of dishonest dealing. Although “dishonest dealing” is not defined in Colorado statute or case Law, a court can determine the meaning of an undefined phrase of common usage by ascertaining its usual and ordinary meaning. Here, McDonnell’s misrepresentations and misappropriations demonstrate the ordinary meaning of a dishonest act.

The Court agreed with McDonnell that he could not be disciplined under CRS § 12-61-113(1)(n) (providing for discipline for incompetency or endangerment to the public). The administrative rule implementing this section provides an exhaustive list of grounds for unworthiness or incompetence, none of which were done by McDonnell and none of which apply outside of the real estate context. Accordingly, the Court affirmed the Commission’s conclusions as to three of the four counts, along with the Commission’s sanctions.

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

Colorado Supreme Court: Judicial Evidentiary Rulings Control in Eminent Domain Valuation Hearings

The Colorado Supreme Court issued its opinion in Regional Transportation District v. 750 West 48th Ave., LLC on Monday, September 14, 2015.

Eminent Domain—Commissioner Proceedings—Duties of Trial Court.

The Supreme Court held that judicial evidentiary rulings control in eminent domain valuation hearings. A valuation commission is bound by the supervising court’s evidentiary rulings. Accordingly, the Court affirmed the portion of the court of appeals’ judgment that approved of the supervising judge’s instruction that the commission disregard previously admitted evidence as irrelevant. The Court reversed the portion of the judgment that permitted the commission to alter the judge’s in limine evidentiary ruling.

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

Colorado Supreme Court: Partial Directed Verdict Allowed by C.R.C.P. 50

The Colorado Supreme Court issued its opinion in Board of County Commissioners of Summit County v. Rodgers on Tuesday, September 8, 2015.

Nature of Directed Verdict—Nature of Summary Judgment—Colorado Civil Procedure.

The Supreme Court held that Colorado’s directed verdict rule, CRCP 50, allows trial courts to issue partial directed verdicts. CRCP 50 should be read in tandem with Colorado’s summary judgment rule, CRCP 56, which allows partial summary judgment, as well as the federal directed verdict rule, which permits partial directed verdicts. In addition, the Court concluded that plaintiffs invited the trial court to consider their various allegations of discriminatory acts as separate acts rather than as a pattern. Therefore, the trial court did not err in directing verdicts on some, but not all, of plaintiffs’ multiple claims in their 42 USC § 1983 lawsuit. Accordingly, the Court reversed the court of appeals’ opinion in its entirety and remanded the case for further proceedings consistent with this opinion.

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: Jury Improperly Instructed that “Any Note” is a Security; Reversal Required

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

Promissory Note—Securities Fraud—Colorado Securities Act—Jury Instructions—Testimony—Prosecutorial Misconduct.

Defendant was employed as a salesperson by an insurance company that specializes in low-risk insurance products for retirement-age persons. Defendant also was licensed to sell securities through an affiliated broker–dealer. Defendant obtained loans from clients or customers whom he had met through his employment to fund his personal real estate investments, giving each of them a promissory note. He was convicted by a jury of multiple counts of securities fraud and theft.

On appeal, defendant argued that the trial court erred in instructing the jury that any note is a security. One of the elements of securities fraud under the Colorado Securities Act (CSA) is that the defendant engaged in fraud in connection with a security. If there is no security, there cannot be securities fraud. The CSA defines “security” to include “any note.” Because sometimes notes are not securities, however, the court’s instruction constituted error. Because this instructional error was not harmless beyond a reasonable doubt, defendant’s securities fraud convictions were reversed.

Defendant also argued that the trial court erred in admitting the testimony of the district attorney’s investigator regarding his process for investigating someone suspected of criminal activity; under what circumstances he recommended pursuing criminal charges; and the specific investigation of, and decision to pursue charges against, defendant. Because probable cause to charge defendant was not at issue here, the investigator’s statements regarding how many potential cases he received each year and in how many of those cases charges were brought constituted inadmissible evidence. However, because there was overwhelming evidence that defendant was guilty of theft and the investigator’s comments were minimal, any error was harmless.

Defendant further contended that the prosecutor committed misconduct in closing argument when he likened defendant to Bernie Madoff and referred to the victims as members of the “greatest generation.” The Court concluded that the prosecution’s mention of Madoff was referencing a victim’s testimony, and referring to the victims as the “greatest generation” did not rise to the level of plain error.

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

Appointments Announced to New Title Insurance Commission

Last legislative session, SB 15-210, “Concerning Creation of the Title Insurance Commission, and, in Connection Therewith, Making an Appropriation,” was enacted, requiring the development of a nine-member Title Insurance Commission to act as an advisory body to the Insurance Commissioner regarding matters of title insurance. The Title Insurance Commission will propose, advise, and recommend rules, bulletins, and other consumer protection materials for promulgation by the Insurance Commissioner.

On Thursday, August 13, 2015, Governor Hickenlooper appointed the first nine members of the Title Insurance Commission. Three of the appointees must be licensed employees of title insurance companies with not less than five years’ experience, three must be licensed employees of title insurance companies meeting certain qualifications regarding geographic diversity, and three must be members of the public at large and not be engaged in the business of title insurance. Governor Hickenlooper’s appointees are:

  • Phillip Michael Schreiber of Littleton, to serve as a licensed employee of a title insurance company with not less than five years of experience in the title insurance business; for a term expiring August 5, 2017;
  • Alexander Pankonin of Denver, to serve as a resident title insurance agent with not less than five years experience in the title insurance business, for a term expiring August 5, 2017;
  • Gary Glenn of Tabernash, to serve as an at-large public member who is not engaged in the business of title insurance and resides outside of a standard metropolitan area, for a term expiring August 5, 2017;
  • Charles Hallack Cowperthwaite of Littleton, to serve as an at-large public member who is not engaged in the business of title insurance, for a term expiring August 5, 2017;
  • Paul David Dickard of Aurora, to serve as a licensed employee of a title insurance company that has netted admitted assets of less than $500 million, with not less than five years of experience in the title insurance business, for a term expiring August 5, 2019;
  • Carl Phillip Laffin of Highlands Ranch, to serve as a licensed employee of a title insurance company that has netted admitted assets of more than $500 million, with not less than five years of experience in the title insurance business, for a term expiring August 5, 2019;
  • Jason Duncan of Alamosa, to serve as a resident title insurance agent with not less than five years experience in the title insurance business, for a term expiring August 5, 2019;
  • Patrick Alan Rice of Superior, to serve as a resident title insurance agent with not less than five years experience in the title insurance business, for a term expiring August 5, 2019;
  • Mary Renee Babkiewich of Denver, to serve as an at-large public member who is not engaged in the business of title insurance, for a term expiring August 5, 2019.

For more information about the role of the Title Insurance Commission, click here.

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.