May 24, 2013

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Colorado Court of Appeals: Contractual Provisions Barred Tort Claims Under Economic Loss Rule

March 21, 2013 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Engemen Enterprises, LLC v. Tolin Mechanical Systems Co. on Thursday, March 14, 2013.

Economic Loss Rule—Summary Judgment.

Plaintiff Engeman Enterprises, LLC appealed the trial court’s entry of summary judgment in favor of defendant Tolin Mechanical Systems Company. The judgment was affirmed.

Plaintiff operates a cold storage facility that is cooled by an ammonia-charged cooling system. Defendant designs, installs, maintains, and repairs cooling systems. On June 27, 2008, high oil temperatures compromised plaintiff’s cooling system. Defendant inspected the system and recommended adding ammonia to lower the temperature. While defendant began this work,plaintiff’s representatives signed a Service Report and a Refrigeration Report, which stated defendant would perform its work in a “prudent and workmanlike manner” and disclaimed defendant’s liability beyond repairing issues caused by defective workmanship.

Instead of transferring ammonia from a tank into the cooling system, defendant’s employee mistakenly caused ammonia from the cooling system to flow out into the tank. The tank overfilled and exploded, permeating the facility with ammonia and resulting in cleanup costs, repair costs, and lost profits totaling hundreds of thousands of dollars.

Plaintiff alleged claims for negligence, vicarious liability, and negligent supervision, but not breach of contract. Defendant moved for summary judgment, and the district court concluded that the parties were bound by the contracts and the duty of care agreed to therein. Consequently, the court entered summary judgment on plaintiff’s tort claims because they were barred by the economic loss rule. In addition, the trial court found that the willful and wanton conduct of defendant did not affect the application of the economic loss rule, because plaintiff did not assert a claim for willful and wanton breach of contract. Summary judgment was entered in favor of defendant on all of plaintiff’s claims.

On appeal, plaintiff argued its tort claims were not barred by the economic loss rule because: (1) defendant owed it an independent duty of care to safely handle ammonia; (2) the damage that its facility sustained was physical harm to property and not “economic loss”; (3) defendant owed it an independent duty of care to supervise and train the employees handling ammonia; (4) the economic loss rule should not apply to service contracts; and (5) defendant’s allegedly willful and wanton tortuous conduct precludes application of the economic loss rule. The Court of Appeals rejected all these arguments.

A party suffering only economic loss from the breach of an express or implied contractual duty may not assert a tort claim for such a breach absent an independent duty of care under tort law. The Court stated that the inquiry is to be focused on the “duty” issue.

The Court first found that contrary to plaintiff’s argument, defendant did not owe plaintiff an independent duty of care beyond its contractual duty to safely handle the ammonia. The Court came to this conclusion after analyzing three factors, (1) whether the relief sought in negligence is the same as the contractual relief; (2) whether there is a recognized common law duty of care in negligence; and (3) whether the negligence duty differs in any way from the contractual duty.

The Court found that the damages that could have been recovered under a tort claim of negligence and a breach of contract claim were identical. The limitation of liability clause did not alter the Court’s analysis because it could apply equally to contract and tort actions. If plaintiff had alleged willful and wanton breach of contract, it might have defeated the limitation of liability clause. Most important in finding the application of the economic loss rule appropriate was the fact of the limitation of liability clause was contractually agreed to by the parties. This demonstrated that the parties could have had a remedy in contract for such damages if they had not chosen to limit it.

Thus, the first factor weighed in favor of finding no independent duty of care. The Court found that because there was a duty of reasonable care in handling a hazardous substance, the second factor weighed in favor of finding an independent duty of care. The Court found the third factor weighed against finding an independent duty of care, because the common law duty of care was the same as the contractual duty and, contrary to plaintiff’s argument, there was no higher tort duty imposed on the handling of a hazardous substance. In essence, the highest standard of care in handling ammonia is precisely the type of care a reasonable person would exercise. In sum, the Court found that defendant owed plaintiff a common law duty of care in negligence, that the duty did not differ from the duty defendant owed plaintiff under the contract, and a breach of that duty would allow the same recovery under both tort and contract law.

Plaintiff argued that the economic loss rule was inapplicable because the damage was to plaintiff’s property. Because the Court had concluded there was no independent duty here, it made no difference whether the damages sought were for property damage.

Plaintiff contended that its claim for negligent supervision was not barred by the economic loss rule because defendant’s common law duty to properly supervise its employees is separate from its contractual obligations to plaintiff. Again, the Court found no difference between the duty of reasonable care defendant owed plaintiff under the contract and defendant’s common law duty of reasonable care to prevent an unreasonable risk of harm to plaintiff from its employees’ conduct.

Plaintiff requested that the Court abolish the economic loss rule as it pertains to service contracts. The Court refused to depart from binding Colorado precedent to the contrary.

Finally, the Court rejected plaintiff’s argument that the economic loss rule should not bar recovery in tort when a defendant commits willful and wanton conduct. Because proof of such conduct is sufficient to defeat a limitation-of-liability clause in both contract and tort, the Court saw no reason that it should prevent application of the economic loss rule. The judgment was affirmed.

Summary and full case available here.

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Colorado Court of Appeals: Exclusive Remedy Provision of Workers’ Compensation Act Did Not Bar Plaintiff from Seeking Damages in Tort

March 20, 2013 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Krol v. CF&I Steel on Thursday, March 14, 2013.

Summary Judgment—Workers’ Compensation—CRS §§ 8-41-401 and -402—Statutory Employer—“On and To”—Summary Judgment Sua Sponte.

Plaintiff Stanislaw Krow appealed the trial court’s motion of summary judgment in favor of defendant CF&I Steel. The judgment was reversed and the case was remanded with directions.

CF&I owns a rail mill in Pueblo. It has several industrial cranes on the property, many of them inside buildings. In July 2002, CF&I and Alpine Crane entered into a contract obligating Alpine to maintain and inspect CF&I’s cranes. In January 2007, CF&I and SK’s Industrial Management, LLC (SKIM) entered into a contract obligating SKIM to train CF&I’s employees to maintain and inspect the cranes. That month, Krol, an employee of SKIM, went to the mill to provide inspection training. While he was standing on top of one of the cranes, training a CF&I employee how to inspect a crane, the crane moved and Krol was injured.

Krol received workers’ compensation benefits through SKIM’s workers’ compensation insurance. He sued CF&I, asserting several tort claims. CF&I moved for summary judgment pursuant to CRS § 8-41-402, contending that the undisputed facts established that Krol was on its property when he was injured. Therefore, CF&I argued, it was Krol’s “statutory employer” and he could not seek additional compensation from CF&I as a matter of law. Krol argued that CRS § 8-41-402 applies only when the injured person was doing work both “on and to” another’s property, and there was at least a genuine issue of fact as to whether he was doing work to CF&I’s property when he was injured.

The district court granted summary judgment in favor of CF&I, agreeing with its argument. It also found that summary judgment was appropriate under CRS § 8-41-401, because if CF&I did not contract out the training work, it would do the work itself, and because SKIM carried adequate workers’ compensation insurance.

CRS § 8-41-402 states that if a landowner is a statutory employer, and the contractor, subcontractor, or person hired to do the work carries workers’ compensation insurance covering the injured party’s injuries, the injured party is deemed an employee of that statutory employer, and the injured party may not seek damages from the statutory employer. The Court of Appeals found that, contrary to the district court’s finding and CF&I’s argument, an injured party does not only have to have been “on” the landowner’s property when performing work for the statute to apply, but the injured party also must have been doing work “to” the property for it to apply. This determination was based on the plain language of the statute. The Court further held that there was a factual question as to whether the work Krol was performing was to CF&I’s property. Therefore, the grant of summary judgment was in error.

The district court also erred in alternatively granting summary judgment under CRS § 8-41-401, which provides immunity when the work contracted out by the entity sought to be held liable is part of that entity’s regular business, as defined by its total business operation. The Court held that although summary judgment may be granted for a reason not raised by a moving party, the court should not do so without first giving the parties notice and reasonable opportunity to argue the issue and present evidence. Thus, it was error for the district court to grant summary judgment on grounds not raised by CF&I and of which Krol had no notice to argue.

Summary and full case available here.

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Colorado Court of Appeals: Bashor-type Agreement Upheld as Permissible; Summary Judgment Reversed

February 19, 2013 by Leave a Comment

The Colorado Court of Appeals issued its opinion in DC-10 Entertainment, LLC v. Manor Insurance Agency, Inc. on Thursday, February 14, 2013.

Insurance Coverage—Broker—Damages—Assignment of Claims—Assault and Battery Exclusion—Negligent Misrepresentation.

DC-10 Entertainment, LLC (DC-10) appealed the trial court’s summary judgment in favor of Manor Insurance Agency, Inc. (Manor). The judgment was reversed and the case was remanded for further proceedings.

DC-10, a nightclub and lounge, obtained insurance coverage through Manor, an independent insurance broker that services multiple insurance companies. Through Manor, DC-10 procured a commercial general liability policy with Penn-Star Insurance Company (Penn-Star) and a liquor liability policy with Founders Insurance Company (Founders).

Heaven Henderson suffered injuries when she was physically assaulted by an unknown assailant on DC-10’s premises. Henderson sued DC-10. DC-10 then submitted claims to Penn-Star and Founders for defense and indemnity coverage. Both companies denied the claim because the policies contained an assault and battery exclusion. DC-10 settled with Henderson and then sued Manor, asserting claims of negligence and negligent misrepresentation. The court granted Manor’s motion for summary judgment.

DC-10 contended the trial court erred in determining that the settlement agreement was insufficient to establish that DC-10 incurred damages. Because the agreement does not contain a pretrial stipulated damages award, DC-10 did not bear the burden of proving the reasonableness of the judgment. Instead, the burden shifted to Manor to prove that the damages award, as determined by the arbitration judge, was unreasonable. In challenging the reasonableness of the damages award, Manor also may raise the affirmative defense of collusion or fraud. Because these are factual issues, the trial court erred in granting summary judgment.

Manor challenged the enforceability of an assignment of proceeds of negligence claims against an insurance broker. Manor owed a duty to DC-10 to obtain the insurance coverage that DC-10 requested. An assignment of claims against an insurance broker, where the claim arises from a commercial transaction and the insured has the same expectations of the insurance broker that he or she would have of the insurer, is not prohibited. Accordingly, DC-10’s assignment of the proceeds from its negligence and negligent misrepresentation claims against Manor to Henderson, the injured third party, was enforceable.

Finally, Manor contended that DC-10’s negligence and negligent misrepresentations claims failed as a matter of law because DC-10 did not present evidence that assault and battery coverage, if obtained, would have covered the alleged patron-on-patron assault in the underlying lawsuit. Because the availability of coverage sought by DC-10 remained a disputed factual question, Manor did not meet its burden of proof on this issue on its motion for summary judgment.

Summary and full case available here.

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Tenth Circuit: Summary Judgment for 42 U.S.C. § 1983 Defendants Affirmed Because Lawyer Failed to Address Qualified Immunity Claim

February 18, 2013 by Leave a Comment

The Tenth Circuit published its opinion in Smith v. McCord on Friday, February 15, 2013. The court sua sponte decided to publish the Order and Judgment it previously entered in this case on January 29, 2013. There are no substantive changes to the opinion.

The plaintiff, John Smith, a 75 year-old man, was assaulted by Las Cruces police and then arrested after questioning why they were in his front yard. Smith sued the officers under 42 U.S.C. § 1983 for using excessive force in the arrest. But when the officers moved for summary judgment claiming qualified immunity, Mr. Smith’s attorney did not respond to the qualified immunity claim. Because plaintiff failed to meet his burden of showing the defendant violated a constitutional right and that the “infringed right at issue was clearly established at the time of the allegedly unlawful activity such that a reasonable law enforcement officer would have known that his or her challenged conduct was illegal,” the district court had no choice but to grant summary judgment for the defendants. The Tenth Circuit affirmed, after pointing out that it was unfortunate that the plaintiff was bound by his lawyer’s actions.

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Tenth Circuit: Summary Judgment Upheld Under Foreign Sovereign Immunities Act

February 7, 2013 by Leave a Comment

The Tenth Circuit published its opinion in Hansen v. PT Bank Negara Indonesia (Persero) Tbk.   on Tuesday, February 5, 2013.

The plaintiff-appellant, Theodore Hansen, owned gas stations, convenience stores, and other businesses. He decided to sell these assets and related liabilities to defendant Native American Refinery Company (“NARCO”) for $50 million. To secure its obligations, NARCO provided various financial instruments from PT Bank Negara Indonesia (BNI), some of which were bank guaranties, others were letters of credit. When NARCO failed to meet its obligations, Hansen contacted BNI, which refused to make payment and denied issuing or authenticating any of the instruments.

The district court granted BNI’s motion for summary judgment for lack of jurisdiction under the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. § 1604 (“FSIA”). BNI was majority-owned by the government of Indonesia so it was immune from suit in the United States under the FSIA unless plaintiffs met their burden of showing a FSIA exception applied. BNI argued the commercial activity exception did not apply. It had not engaged in commercial activity with the plaintiffs because all the instruments at issue were fraudulent.

Hansen had gotten a phone number from BNI from a BNI website and spoke to two individuals he believed to be BNI employees who confirmed the bank’s relationship with NARCO and the guaranties. Hansen argued the phone conversations were admissions of party-opponents under FRE 801 so the district court erred in finding they were inadmissible hearsay. The Tenth Circuit disagreed. It found the calls could not be authenticated under FRE 901 because there was no evidence the phone number was assigned to BNI by the telephone company. The court also found the website where Hansen got the phone number could did not have sufficient indicia of reliability to be self-authenticating under FRE 902.

The court also found no abuse of discretion in the district court’s exclusion of an affidavit from a man who claimed to have met with BNI officials in Indonesia on behalf of NARCO. The affidavit failed to meet the personal knowledge standard required by F.R.C.P. 56. The court affirmed the grant of summary judgment to BNI.

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Tenth Circuit: Qualified Immunity Proper Where Backward-Looking Right to Court Access Claim Not Clearly Established

January 10, 2013 by Leave a Comment

The Tenth Circuit published its opinion in Lynch v. Barrett on Friday, January 4, 2013.

Plaintiff Nick Lynch sued three Denver police officers (Officers) for excessive force. After losing that case, Lynch sued the Officers and the City and County of  Denver (City) for violating his constitutional right to court access by refusing to disclose who exercised excessive force against him in the course of an arrest. Lynch also claimed the City “violated his right to court access by adopting a policy and practice that precipitated the ‘conspiracy of silence’ waged against him.” On the court access claim, the district court denied the Officers qualified immunity in the context of their motion for summary judgment. As to Lynch’s policy and practice claim, the district court denied the City’s motion for summary judgment.

For purposes of deciding the qualified immunity question, the Tenth Circuit assumed the facts were sufficient to find that the Officers violated Lynch’s constitutional right to court access by a cover-up. This assumption allowed it to focus on deciding the second part of a qualified immunity analysis, whether plaintiff’s right to court access was clearly established. Because of prior Tenth Circuit law, “the question of whether an evidentiary cover-up by police officials may violate an individual’s constitutional right to court access was not clearly established at the time of the alleged violation. A reasonable officer might not have understood what Defendant Officers did (or refused to do) violated that right.” The court reversed the denial of qualified immunity to the officers.

The court dismissed the City’s appeal for lack of subject matter jurisdiction. The collateral order doctrine did not apply to the City’s appeal because it was not inextricably intertwined with the Officers’ appeal.

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Tenth Circuit: No Copyright Infringement Without Substantial Similarity

December 31, 2012 by Leave a Comment

The Tenth Circuit published its opinion in Blehm v. Jacobs on Thursday, December 27, 2012.

Gary Blehm brought a copyright infringement action against Albert and John Jacobs and the Life is Good Company (collectively “Life is Good”). Blehm is the creator of copyrighted posters featuring cartoon characters called “Penmen.” He alleged that numerous Life is Good depictions of a cartoon character called “Jake” infringed on his copyrighted works. The district court granted Life is Good’s motion for summary judgment, holding that no infringement occurred because the accused works were not substantially similar to the legally protectable elements of the copyrighted Penmen works.

The Tenth Circuit first discussed the idea/expression distinction required by the § 102(b) of the Copyright Act. Because the Act protects expression, not ideas, the court looks at only the protected elements, the expression, to determine if there are substantial similarities to an accused work. The test is “whether the accused work is so similar to the plaintiff’s work that an ordinary reasonable person would conclude that the defendant unlawfully appropriated the plaintiff’s . . . expression by taking material of substance and value.” After comparing the images, the court found them “so dissimilar as to protectable expression that the substantial similarity question need not go to a jury” and affirmed summary judgment for the defendants.

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Tenth Circuit: Summary Judgment for Employer Reversed in Workers’ Compensation Retaliation Claim

December 28, 2012 by Leave a Comment

The Tenth Circuit published its opinion in Barlow v. C.R. England, Inc. on Wednesday, December 26, 2012.

Plaintiff Willie Barlow worked for C.R. England (England) as a security guard. He formed a company to provide janitorial service to England and did that in addition to his security job. He filed a workers’ compensation claim in June 2007 after being struck in the head by a heavy gate. He continued working at England in both capacities while receiving workers’ compensation benefits, but had a lifting restriction of 25 pounds. In November 2007, England terminated Barlow’s janitorial contract and fired him in April 2008 from his security guard job. The district court granted summary judgment for England on Barlow’s Title VII and § 1981 race discrimination claims, FLSA overtime claim, and wrongful discharge in violation of public policy claim based on workers’ compensation retaliation.

The Tenth Circuit affirmed summary judgment on the race discrimination claims, holding Barlow failed to establish a prima facie case. The court also affirmed summary judgment for England on the FLSA claim. Barlow alleged he had the status of employee under the FLSA while performing janitorial work and was thus due overtime pay. The court applied the economic realities test and decided Barlow was not an employee for purposes of FLSA coverage while performing his janitorial work.

The court held Barlow had established a prima facie case of retaliatory discharge from his security guard job. England’s site facility manager, Smith, fired Barlow six days after an email exchange with England’s workers’ compensation manager, who expressed frustration with Barlow’s collection of benefits. The court disagreed with England’s argument that timing did not support Barlow’s case because he had filed for benefits 10 months before termination. “Colorado law protects an employee’s ongoing receipt of workers’ compensation benefits, not just the employee’s initial filing.” The Tenth Circuit reversed summary judgment on the retaliatory discharge claim regarding the security job and remanded on the janitor retaliatory discharge claim as it was not clear if the district court applied state or federal law in determining Barlow was an independent contractor rather than an employee.

 

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Tenth Circuit: Individual Plaintiffs Barred From Bringing Title VII Pattern-or-Practice Claims

December 17, 2012 by Leave a Comment

The Tenth Circuit issued its opinion in Daniels v. United Parcel Service, Inc. on Tuesday, December 11, 2012.

Regina Daniels worked for United Parcel Service (UPS) as a dispatch specialist in a position that covered different shifts. She applied for promotions in 2005 and 2006 but, contrary to UPS policy, her manager never assessed her for the positions and UPS never followed up with her. She also had been training for the busiest shift, the “twilight window,” when a new policy was instituted that only full-time supervisors could work that shift. Her training ended. In 2008, Daniels met with UPS Human Resources to complain about her replacement in the cover position and assignment permanently to one shift and UPS’s lack of follow up to her promotion applications. In November 2008, Daniels filed an EEOC charge. The district court granted UPS’s motion for summary judgment on Daniels’s Title VII, ADEA, and Kansas state law claims.

The Tenth Circuit held that Daniels did not file her EEOC charge in a timely manner. Regarding the failure to promote claim, her conversation with human resources was not the relevant trigger date because it did not inform her of an adverse employment action. The court also rejected her arguments that 1) the futility doctrine applied, 2) the failure to promote was a compensation decision so a cause of action accrued with each paycheck and 3) the Morgan decision was overruled by the Fair Pay Act.

The court also held that individual plaintiffs may not bring pattern-or-practice claims so her denial of training claim also failed. Thus, she could only bring it in 2008 if the denial of training was a continuing violation and the court held it was not.

The court held that Daniels’s permanent assignment to night shift and replacement by a younger male in the cover position was not discrimination because it was not an adverse employment action. It also rejected her wage discrimination claim. The court held that to make out a prima facie case of wage discrimination, she would have had to perform substantially similar duties to full-time supervisors and because there were significant duties she did not perform, she failed. Finally the court held Daniels failed to establish a prima facie case of retaliation and affirmed summary judgment for UPS.

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Tenth Circuit: Dismissal For Lack Of Personal Jurisdiction in Product Liability Case Affirmed

December 11, 2012 by Leave a Comment

The Tenth Circuit issued its opinion in Monge v. RG Petro Machinery on Friday, December 7, 2012.

Employees of Richard Energy, an Oklahoma company, traveled to China and purchased rigs that are used to repair oil wells from RG Petro, a Chinese manufacturer. Richard Energy took possession of the rigs in China and exported them to the United States. The rigs were consigned to Eagle Well Service, Inc. (EWS), a Kansas corporation, and delivered in Kansas. EWS later moved one of the rigs to Oklahoma, where Joel Monge, an EWS employee covered by workers’ compensation, was seriously injured during an accident involving the rig.

Monge filed a diversity action against EWS under Oklahoma’s intentional tort exception to the exclusive remedy of Oklahoma’s Workers’ Compensation Act and against Richard Energy and RG Petro under Oklahoma’s manufacturers’ products liability laws. RG Petro filed a motion to dismiss based on lack of personal jurisdiction, and EWS filed a motion for summary judgment contending the intentional tort exception does not apply. The district court granted both motions.

To come under the intentional tort exception to Oklahoma’s Workers’ Compensation Act, Monge would have to prove that EWS “acted with the knowledge that [Monge’s] injury was substantially certain to result from [its] conduct.” Showing a high probability of injury was not enough. EWS’s failure to follow the industry safety standard was also not enough to give rise to an intentional tort. The Tenth Circuit affirmed summary judgment for EWS.

Monge had filed a motion under FRCP 59(e) to alter or amend the court’s summary judgment order, which the district court denied except for a request to fix a date in the order. The motion was based on the deposition testimony of an EWS employee that Monge argued constituted newly discovered evidence. The Tenth Circuit agreed with the district court that the evidence was not newly discovered. Monge’s counsel knew about the employee several months before EWS filed its motion for summary judgment and deposed him before the court granted summary judgment. Minge could have asked the court to defer consideration of the summary judgment motion or supplemented his response to the motion after taking the deposition.

The Tenth Circuit found that the district court lacked personal jurisdiction over the Chinese company RG Petro. Specific jurisdiction did not exist because Monge’s injuries did not arise out of or relate to activities that RG Petro purposefully directed at residents of Oklahoma. Although an Oklahoma company bought the rig, RG Petro knew it was consigned to EWS, a Kansas company, and shipped to Kansas. The rig’s presence in Oklahoma was due to the unilateral act of EWS in moving it there, not to RG Petro’s acts. General personal jurisdiction also did not exist because a limited number of emails and limited number of sales to Oklahoma residents did not constitute “continuous and systematic general business contacts” with Oklahoma.

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Tenth Circuit: Summary Judgment for Employer Affirmed on FMLA and FLSA Claims

November 29, 2012 by Leave a Comment

The Tenth Circuit issued its opinion in Brown v. ScriptPro, LLC on Tuesday, November 27, 2012.

The plaintiff, Frank Brown, brought Fair Labor Standards Act (FLSA) and Family Medical Leave Act claims against his former employer, ScriptPro, who had terminated him. The district court granted summary judgment to ScriptPro.

Brown brought both FMLA interference and FMLA retaliation claims. Brown was fired only two days after his emails and meeting with supervisors about taking time off to care for his wife and new baby. While the court agreed that timing can be particularly suggestive in determining whether termination relates to the exercise of FMLA rights, it found that Brown would have been terminated regardless of his FMLA request. The court based this determination on a partially unfavorable performance evaluation and strong evidence of continuing performance issues after the evaluation. Because an employer’s intent is not necessary to FMLA interference claims and there is no burden-shifting McDonnell Douglas analysis, the court analyzed Brown’s arguments regarding ScriptPro’s proffered reason for firing him not as pretext, but rather as attempting to show a genuine dispute regarding its affirmative defense.

Regarding Brown’s FMLA retaliation claim, the court did use a burden-shifting McDonnell Douglas analysis. The court held that “‘[t]o raise a fact issue of pretext,’ Mr. Brown must ‘present evidence of temporal proximity plus circumstantial evidence of retaliatory motive.’” The court held that Brown had not raised a triable issue of fact on this claim either.

The Tenth Circuit also affirmed summary judgment on Brown’s FLSA claim. While he had shown he actually worked overtime, he failed to prove the amount of overtime he worked. The burden would have been on ScriptPro to show the amount of overtime worked only if it failed to keep accurate records. Because Brown failed to enter his time in ScriptPro’s timekeeping system as required, the failure to pay him overtime was not an FLSA violation.

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Colorado Court of Appeals: No Bright Line Rule that Claims that Survive Summary Judgment Are Not Abuse of Process

November 13, 2012 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Health Grades, Inc. v. Boyer on Thursday, November 8, 2012.

Abuse of Process—Summary Judgment—Directed Verdict—Judgment Notwithstanding the Verdict—Sham Litigation.

Plaintiff Health Grades, Inc. appealed the trial court’s judgment following a jury verdict in favor of defendants Christopher Boyer and Patrick Singson on their abuse of process counterclaim. The judgment was reversed and the case was remanded with directions.

Health Grades is a Web-based information resource that provides health-care information and provider ratings online. Defendants are former Health Grades employees who resigned over a dispute as to whether websites they created improperly competed with Health Grades’ business.

Health Grades contended that the trial court erred by denying its motions for directed verdict and judgment notwithstanding the verdict as to defendants’ abuse of process counterclaim. Health Grades argued that, once its claims survived motions for summary judgment and directed verdict, they could not, as a matter of law, constitute “sham litigation.” However, there is no bright-line rule—and the Court of Appeals declined to adopt one—that states that any lawsuit that survives a motion for summary judgment or directed verdict cannot be the basis for an abuse of process claim. Thus, defendants’ abuse of process counterclaim was not automatically barred, because Health Grades’ claims survived motions for summary judgment and directed verdict. Nonetheless, the constitutional aspect of Health Grades’ defense to the abuse of process claims should have been decided by the court and should not have been submitted to the jury. Because the court failed to apply the heightened standard to determine whether the claims asserted by Health Grades were devoid of reasonable factual support or had no cognizable basis in law, the judgment was reversed and the case was remanded to the trial court to make this determination.

Summary and full case available here.

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