August 24, 2019

Archives for June 12, 2012

Tenth Circuit: District Court Properly Dismissed Complaint for Failure to Exercise Rescission Rights Within Three-Year Response Period

The Tenth Circuit Court of Appeals published its opinion in Rosenfield v. HSBC Bank, USA on Monday, June 11, 2012.

The Tenth Circuit affirmed the district court’s decision. Petitioner “appeals from the district court’s order granting a motion to dismiss filed by [Respondent Bank]. [Petitioner] brought claims seeking declaratory and injunctive relief, and damages against [Respondent] for alleged violations of the Truth in Lending Act (“TILA”), averring that her lender failed to make required disclosures in a residential loan refinancing agreement executed by the parties, and that, as a result, she is entitled to a rescission of her loan agreement. [Petitioner] argues that the district court erred in dismissing her claims and holding that she failed to timely exercise her right of rescission within the applicable three-year time bar specified by TILA.

The Court concluded that “the district court properly dismissed [Petitioner]’s complaint on the ground that she failed to exercise her rescission rights within the three-year repose period under § 1635(f) and, therefore, her rescission rights expired. Relatedly, [the Court held] that her rescission argument based upon her defensive actions in Colorado’s Rule 120 proceeding is unavailing, and the district court did not abuse its discretion in declining to allow [Petitioner] to amend her complaint to incorporate facts related to it. In light of these two rulings, which establish that [Petitoiner]’s TILA rescission rights were extinguished, [the Court did not] reach [Petitioner]’s third argument relating to whether the limitations period of § 1640 barred her TILA claims.

Tenth Circuit: No Legitimate Claim of Entitlement to Pre-Termination Hearing Under State Law

The Tenth Circuit Court of Appeals published its opinion in Ribeau, Jr. v. Katt on Monday, June 11, 2012.

The Tenth Circuit affirmed the district court’s decision. Petitioner was hired as a maintenance mechanic for a school district in 1984. “Over the years, he was promoted, assumed various job titles, and took on supervisory duties.” Respondents, his supervisors, decided to terminate Petitioner’s employment based on his alleged poor work performance, and twice told Petitioner that the Board of Education had approved his termination. “Due to the [Respondents]’ representations, [Petitioner] believed he could not file a grievance because the Board had already approved his termination. The Board, however, had not yet given its approval. . . . During [Petitioner]’s employment, he signed 23 separate employment agreements. Each agreement stated that [Petitioner] was an at-will employee.” Petitioner sued Respondents, alleging that they had deprived him of his property interest in continued employment without due process of law, in violation of his rights under the Fourteenth Amendment. The district court held that because Petitioner was an at-will employee, he did not have a protected property interest in his continued employment.

Petitioner “moved to alter or amend the district court’s judgment under Rule 59(e) of the Federal Rules of Civil Procedure. He requested that the court address an ‘alternative property interest . . . separate and distinct from his alleged property interest in his continued employment.’ This property interest was an implied ‘contract right to be heard by the Board of Education itself before the Board decided to terminate [Petitioner’s] employment.’ The district court denied [Petitioner]’s Rule 59(e) motion, and explained that Petitioner “did not have an implied right to be heard by the [B]oard” because the Handbook “does not provide for the right to be heard by the [B]oard before termination.”

The Tenth Circuit concluded that Petitioner had an express employment contract, and therefore Kansas courts would not recognize his implied-contract theory. “[A]ny entitlement [Petitioner] had to a pre-termination Board hearing must derive from his express employment contract. The language of that contract is unambiguous and does not provide for a pre-termination hearing before the Board. [Petitioner] therefore had no legitimate claim of entitlement to a pre-termination hearing under state law, and the district court was correct to dismiss his § 1983 claim.”

Tenth Circuit: Government Not Required to Assert Its Interest in Protecting Identity of Informant; Court Assumes Interest Is Safety or Not Compromising Other Investigations

The Tenth Circuit Court of Appeals published its opinion in United States v. Cruz on Monday, June 11, 2012.

The Tenth Circuit affirmed the district court’s conviction. Petitioner was convicted, after a jury trial, of possession with intent to distribute methamphetamine and sentenced to 63 months’ imprisonment and three years’ supervised release. “On appeal, he argues that the district court erred (1) in not requiring the government to disclose a confidential informant involved in a controlled buy, and (2) in relying on certain disputed facts about the controlled buy contained in the PSR.

The Court found that “panels that uphold such denials [of requests for disclosure] generally find that the value of the informant to the defense is ‘speculative’ or irrelevant” and this case is similar. Additionally, “no case law requires the government specifically to assert its interest in protecting the identity of the informant. [The Court] assumes the interest is informant safety, keeping the information flowing, or not compromising other investigations. . . . The district court indicated on the record that it considered the controlled buy to be relevant conduct, and in doing so relied not only on the PSR but evidence it took at trial. Remand would only allow the court to reiterate or to state more clearly what is already implicit,” and the outcome would be the same.

Tenth Circuit: Person Entitled to Enforce an Instrument May Be a Holder, and Need Not Be an Owner, of the Instrument

The Tenth Circuit Court of Appeals published its opinion in McDonald v. OneWest Bank on Monday, June 11, 2012.

The Tenth Circuit affirmed the district court’s decision. Petitioner took out a secured by a deed of trust on Colorado real property in favor of the lender, IndyMac Bank. Petitioner “made payments on the loan from its 2003 inception until April 2009, including while IndyMac was operated in receivership by the Federal Deposit Insurance Corporation (“FDIC”).” The FDIC sold IndyMac to a holding company that operated it as Respondent OneWest which, as the new loan servicer, notified Petitioner of the sale. Petitioner stopped making payments because, claiming that OneWest “did not provide [him] with the instrument or reasonable evidence of authority to make such a presentment” in accordance with his demands for the original Note. However, OneWest did provide him with a copy of the Note and deed of trust. “Ultimately, OneWest foreclosed on the property and obtained a Rule 120 Order authorizing the sale of the property, after it produced the original Note, the deed of trust, and a pooling and servicing agreement governing the Note.”

Petitioner claims on appeal that “OneWest was not entitled to foreclose because it was not ‘a holder in due course,’ and did not own the underlying Note.” The Court found that this “attempt to graft ‘holder in due course’ requirements onto this process, though obvious in its purpose, is meritless and clearly distorts the law. In Colorado, non-judicial foreclosure based upon a violation of a deed of trust provision can be accomplished by ‘a holder of an evidence of debt.’ The ‘holder of an evidence of debt’ includes a ‘person entitled to enforce an evidence of debt’ and presumptively includes ‘[t]he person in possession of a negotiable instrument evidencing a debt, which has been duly negotiated to such person or to bearer or indorsed in blank.’ As the commercial code makes clear, a person entitled to enforce an instrument may be a holder, and need not be an owner, of the instrument. Contrary to [Petitioner]’s position, nothing in the law states that ‘holder in due course’ status is required.”

Tenth Circuit: Convictions for Offenses Related to Unauthorized Practice of Law Affirmed; Two Sentences Vacated

The Tenth Circuit Court of Appeals published its opinion in United States v. Kieffer on Monday, June 11, 2012.

The Tenth Circuit affirmed in part and vacated in part the district court’s decision. Petitioner held himself out as a successful nationwide criminal law attorney based in Santa Ana, California, and subsequently gained admission to several federal trial and appellate courts around the country, where he appeared on behalf of numerous criminal defendants. All the while, Petitioner was not and never has been an attorney. “He never went to law school, never sat for a bar exam, and never received a license to practice law.” In 2009, a jury in the District of North Dakota convicted Petitioner of mail fraud and making false statements, finding that he “gained admission to the District of North Dakota by submitting a materially false application to the court. He then relied on that admission to gain admission to the District of Minnesota, District of Colorado, and Western District of Missouri. Once admitted in those districts, [Petitioner] proceeded to appear on behalf of federal criminal defendants unaware of his true identity. The district court sentenced [Petitioner] to 51 months imprisonment and ordered him to pay $152,750 in restitution to six victims of his scheme. The Eighth Circuit affirmed.”

In 2010, a jury in the District of Colorado also convicted Petitioner of making false statements in addition to wire fraud and contempt of court. “As to the false statements count, the jury found that to gain admission to the District of Colorado, [Petitioner] fraudulently represented to the court clerk’s office that he was licensed to practice law in the District of Columbia. As to the wire fraud count, the jury found [Petitioner] used a website, www.boplaw.com, to promote his unauthorized practice of law and bilk a criminal defendant’s brother out of several thousand dollars. Lastly, as to the contempt count, the jury found [Petitioner] jeopardized the administration of justice by lying to the clerk’s office and purporting to represent that criminal defendant before the district court. The district court sentenced Defendant to 57 months imprisonment to run consecutively to the 51 month sentence previously imposed on him in the District of North Dakota. The court further ordered him to pay restitution in the amount of $152,019 to seven victims of his scheme unaccounted for in North Dakota, and directed him as a special condition of supervised release to obtain the probation office’s preapproval of any proposed employment or business ventures.” Petitioner appealed his most recent convictions and sentence. The Tenth Circuit affirmed the district court’s judgment of conviction, but vacate its judgment of sentence on the wire fraud and false statements counts.

Tenth Circuit: Unpublished Opinions, 6/11/12

On Monday, June 11, 2012, the Tenth Circuit Court of Appeals issued five published opinions and four unpublished opinions.

Birbari v. United States

United States v. Valenzuela

Jones v. Taylor

United States v. Elwood

No case summaries are provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.

Colorado Court of Appeals: More than One Factor Should Be Used to Determine Whether an Independent Contractor is an Employee for Unemployment Tax Liability Purposes

The Colorado Court of Appeals issued its decision in Softrock Geological Services, Inc. v. Industrial Claim Appeals Panel on June 7, 2012.

Unemployment Tax Liability—Covered Employment—Colorado Employment Security Act.

In this unemployment tax liability case, petitioner Softrock Geological Services, Inc. (Softrock) sought review of a final order of the Industrial Claim Appeals Office (Panel) reversing a hearing officer’s decision and concluding that services performed for Softrock by Waterman Guy Ormsby constituted covered employment under the Colorado Employment Security Act (Act), CRS §§ 8-70-101 to 8-82-105. The order was set aside and the case was remanded to the Panel with directions.

Softrock provides geological services in the oil and gas industry. Ormsby is a geologist who provided well site services to Softrock on a project basis from 2007 through 2010 under a written agreement with Softrock. Softrock did not train him. Ormsby used his own vehicle, clothing, tools, and equipment, except for some specialized and expensive laboratory equipment that he rented from Softrock. He had his own business cards, paid his own liability insurance, and did not represent himself to be a Softrock employee.

In March 2011, the Division of Employment (Division) conducted an audit of Softrock and issued a notice of liability, finding that Ormsby was a covered employee for purposes of the Colorado Employment Security Act (Act). The hearing officer reversed the Division’s decision. The Panel agreed that Ormsby had not been under the direction and control of Softrock, but reversed on the ground that Ormsby’s business as a geologist did not survive independently of his relationship with Softrock, because he only worked for Softrock during 2007 to 2010.

On appeal, Softrock argued that the Panel erred by substituting its findings of fact for those of the hearing officer and in using only one factor to hold that Ormsby was not customarily engaged in an independent trade or business. The Court agreed that the Panel improperly based its decision on only one factor and remanded the case with instructions that it look at other factors.

Under the Act, the putative employer must overcome a rebuttable presumption of an employment relationship. Even if the presumption is rebutted, the trier of fact still must determine whether the worker is free from control and direction, and is customarily engaged in an independent trade, occupation, profession, or business related to the service performed.

The determination of whether a worker is engaged in a separate business venture is a multifactor test. Here, it was undisputed that Ormsby provided no services for others between 2007 and 2010. Softrock, however, argued that other factors support its contention that Ormsby was an independent contractor. The Court found that the Panel needed to at least consider and make findings regarding the other factors and could not make its determination just based on the exclusive service relationship during the noted period. It remanded to the Panel for consideration of all factors relevant to Ormsby’s relationship with Softrock.

Colorado Court of Appeals: Relation-Back Doctrine Not Applicable When No Actual Notice of Second Judgment Lien Given to Lienholder in Priority Dispute

The Colorado Court of Appeals issued its opinion in Goodman Associates, LLC v. Winter Quarters, LLC on June 7, 2012.

Priority Between Lienholders—Amended Judgment Lien Versus Deed of Trust.

In this priority dispute between competing lienholders, plaintiff Goodman Associates, LLC (Goodman) appealed the trial court’s order that Goodman’s amended judgment lien does not have priority over a deed of trust given by defendant Winter Quarters, LLC (Winter Quarters) to defendant Capital West National Bank (Capital West) for the purchase price of certain property in Grand County. Goodman also appealed the trial court’s order denying its motion for reconsideration. The judgment was affirmed.

On October 22, 2008, Goodman filed a complaint in Eagle County District Court alleging claims against WP Mountain Properties, LLC (WPMP) for declaratory judgment and breach of contract arising out of a failed purchase and sale agreement between the parties (Eagle County case). WPMP filed no responsive pleadings and Goodman moved for entry of a default judgment. On December 4, 2008, the Eagle County District Court entered a default judgment. Goodman filed a transcript of the default judgment with the Grand County Clerk and Recorder, which identified a judgment amount of $152,289.98, plus 8% interest “per annum compounded annually from the date of judgment until paid in full,” and a judgment date of December 4, 2008 (December 2008 judgment lien). The transcript of judgment encumbered all real property owned by WPMP in Grand County, including the subject property, Lot 13 within the Lakota Park subdivision.

On January 9, 2009, Winter Quarters purchased Lot 13 from WPMP, financed by a promissory note secured by a deed of trust in favor of Capital West. The deed of trust was recorded on January 23, 2009.

On April 3, 2009, WPMP filed a motion to set aside the default judgment, and Goodman objected. The Eagle County District Court granted WPMP’s motion to set aside the default judgment.

On June 10, 2009, Goodman filed a petition for relief pursuant to CAR 21 with the Colorado Supreme Court, seeking to overturn the order setting aside the default judgment. On January 11, 2010, the Supreme Court issued a rule made absolute granting Goodman’s requested relief and directing the Eagle County District Court to reinstate the default judgment. On February 11, 2010, pursuant to the Supreme Court’s mandate, the Eagle County District Court vacated the order, setting aside the default judgment and directing that the order filed on December 7, 2008 should be reinstated nunc pro tunc.

Goodman filed a motion for an award of attorney fees and costs against WPMP and a supplement thereto in the amount of $134,138.90, plus interest. On June 17, 2012, the Eagle County District Court entered the amended judgment. Goodman recorded the transcript of judgment with the Grand County Clerk and Recorder on July 1, 2010. The transcript identified the judgment amount as $307,081.27 and the judgment date as December 4, 2008, plus 8% post-judgment interest per annum “compounded annually from the date of judgment until paid in full” (July 2010 amended judgment lien).

While the Eagle County case was pending, a foreclosure action involving Lot 13 had been commenced in Grand County. Goodman filed a cross-claim for priority and foreclosure of the July 2010 amended judgment lien. The parties filed cross-motions for determination of a question of law regarding whether Capital West’s interest in Lot 13 was subject to the July 2010 amended judgment lien.

The trial court determined that Capital West had notice of the December 2008 judgment and accrual of interest but not the subsequent litigation that resulted in the July 2010 amended judgment lien. It ruled that Capital West purchased Lot 13 subject only to the December 2008 judgment lien.

On appeal, Goodman argued it was error to conclude that the July 2010 amended judgment lien did not relate back to the December 2008 judgment lien. The Court of Appeals disagreed.

Colorado’s Recording Act is a “race-notice” system. Colorado courts recognize actual notice, constructive notice, and inquiry notice. There was no dispute that Capital West had actual notice of the December 2008 judgment lien, which has priority over Capital West’s deed of trust. The Court found that Capital West did not know nor should have known about the possibility of future litigation between Goodman and WPMP that resulted in the increased July 2010 amended judgment lien.

Summary and full case available here.

Colorado Court of Appeals: Landowners Who Sold Property Rights Not Allowed to Sever Shares in Mutual Ditch Company from Land in Violation of Previously Existing Conservation Easement

The Colorado Court of Appeals issued its opinion in Mesa County Land Conservancy, Inc. v. Allen on June 7, 2012.

Conservation Easement—Mutual Ditch Shares—Summary Judgment—Injunctive Relief.

In this dispute over a conservation easement encumbering mutual ditch shares, defendants Sam and Susie Allen appealed the trial court’s judgment (1) granting summary judgment in favor of plaintiff Mesa County Land Conservancy, Inc. (Mesa Land Trust); (2) denying the Allens’ motions for summary judgment; and (3) granting injunctive relief in favor of Mesa Land Trust. The judgment was affirmed.

In 1990, the United States, acting by and through the Farmers Home Administration, granted a deed of conservation easement (1990 Easement) to Mesa Land Trust. The conservation easement covered 140 acres of land and provided that “[a]ll water rights held at the date of this conveyance shall remain with this land.” It was recorded in the Mesa County real estate records. At the time of the conveyance, the United States held nine shares of capital stock in a mutual ditch company, the Big Creek Reservoir Company (Big Creek Shares).

The Allens purchased the property in 1993, subject to the 1990 Easement and their deed specifically referred to the Big Creek Shares. In 2007, the Allens sold the property, but purported to exempt the Big Creek Shares from the conveyance. Mesa Land Trust sought declaratory and injunctive relief against the Allens for violating the terms of the 1990 Easement by attempting to sever the Big Creek Shares from the land.

The Allens filed two motions for summary judgment on grounds that the Big Creek Shares were not encumbered by the 1990 Easement because it did not comply with CRS § 38-30.5-104(5) or with article 8 of Colorado’s Uniform Commercial Code (UCC). Mesa Land Trust moved for summary judgment, seeking a declaratory judgment that the Big Creek Shares could not be exempted from the conveyance. The trial court issued a permanent injunction in favor of Mesa Land Trust, requiring the Allens to convey the Big Creek Shares to the purchasers and prohibiting them from severing them from the property. The Allens appealed.

In 2003, the General Assembly amended certain parts of the conservation easement statutes. The Allens argued that the 1990 Easement is invalid because the definition of “conservation easement” in the relevant statute in effect in 1990 did not authorize encumbrance of water rights; and (2) the 1990 Easement does not comply with the notice requirements of the 2003 amendment of CRS § 38-30.5-104(5). Mesa Land Trust argued that the 1990 Easement is valid because the definition of conservation in the statute in effect when the 1990 Easement was created—the 1976 statute—allowed water rights to be encumbered, and if the 2003 amendment to the notice requirement applies retroactively, it is unconstitutionally retrospective.

The Court of Appeals determined that (1) the statutory language was ambiguous before the 2003 amendments; (2) the legislature intended to clarify, and not to change, the statute; and (3) the statute includes a provision that the 2003 amendment applies to previously created conservation easements. Therefore, the Court held that the legislature intended the statute to apply retroactively. It then considered whether it was unconstitutionally retrospective.

Mesa Land Trust contended that the 2003 amendment is unconstitutionally retrospective solely as to the notice requirement because it impairs Mesa Land Trust’s vested rights in the Big Creek Shares. The Allens responded that Mesa Land Trust does not have any vested rights in the Big Creek Shares because the 1976 statute did not recognize conservation easements encumbering water rights as valid interests in land. The Court disagreed with the Allens, finding that the 1976 statute did authorize the creation of conservation easements encumbering water rights (this was clarified by the 2003 amendment).

The Court also agreed with the trial court that application of the 2003 notice requirement to easements that predated the enactment of that requirement would be unconstitutional. If the requirement were imposed, it would render all pre-existing conservation easements covered by that requirement invalid unless, by chance, a grantor complied with a sixty-day notice provision that did not exist when the easement was created.

Finally, the Allens argued that the Big Creek Shares are securities subject to a previous version of the UCC. The Court rejected this argument, finding that it is well established that the UCC does not apply to mutual ditch shares as they are not corporations in a legal sense but merely vehicles for individual ownership of water rights. Accordingly, the trial court’s judgment was affirmed.

Summary and full case available here.

Colorado Court of Appeals: Oil and Gas Conservation Commission Correctly Declined to Interpret Lease Provision Due to Lack of Jurisdiction

The Colorado Court of Appeals issued its opinion in Chase v. Colorado Oil & Gas Conservation Commission on June 7, 2012.

Mineral Estate—Designated Outdoor Activity Area—Drilling Permits—Jurisdiction—Colorado Oil and Gas Conservation Commission.

Plaintiffs Laura Chase and Michael Sutak (collectively, landowners) appealed the district court’s judgment affirming orders of defendant Colorado Oil and Gas Conservation Commission (COGCC): (1) declining to interpret the lease between defendants Magpie Operating, Inc. (Magpie) and the Colorado State Board of Land Commissioners (Board); (2) denying landowners’ request to have their property deemed a Designated Outdoor Activity Area (DOAA); and (3) granting a permit to drill for natural gas to Magpie. The judgment was affirmed in part and reversed in part, and the case was remanded for further findings by the COGCC.

In 1997, landowners purchased a 77-acre surface estate in Larimer County, knowing it was subject to a mineral rights reservation. The 1916 patent reserved to the state all mineral rights and “the right of ingress and egress for the purpose of mining together with enough of the surface of [the property] as may be necessary for the proper and convenient working of such minerals and substances.” The Board owns the mineral estate and manages it for the benefit of the School Trust pursuant to the Colorado Constitution.

An irrigation ditch divides the property into two parcels. The south parcel is used for agricultural purposes and also contains a residence, agricultural outbuildings, and an indoor riding arena.

Since 1977, the Board had been a party to an Oil and Gas Lease (lease) over a 640-acre section of land that includes the property. The lease was assigned many times, most recently to Magpie. The first attempt to access the mineral estate occurred in June 2008, when Magpie submitted applications for permits to drill (APD) wells on the property.

Magpie consulted with landowners before submitting its APDs. Landowners contacted the COGCC in December 2007 to request onsite inspection of the property to assist in identifying a drilling site. Consultation and an inspection occurred in 2008, principally to address landowners’ concerns about the potential impact of drilling on their equestrian activities.

After submitting the APDs but before COGCC’s evaluation was completed, landowners applied to have their surface estate declared a DOAA. Magpie and the Board protested. The COGCC evaluation was completed in November 2009 and revealed that the proposed alternative drilling site was outside the drilling window. COGCC staff recommended that the COGCC address the request for a DOAA and, if it was denied, allow drilling on the alternative site. The Board approved the alternative well site on December 12, 2009. The staff also recommended a number of conditions of approval of the APDs.

On February 22, 2010, the COGCC held a hearing on the DOAA request and expressed a number of concerns. It ultimately denied the request by a vote of six to three.

Magpie tried to resolve the conflict with landowners by offering to withdraw the request for one well and to move the other. Landowners responded with multiple additional conditions for the well site. The COGCC granted Magpie’s APD for one well at the location suggested by landowners and approved many of their proposed conditions.

Landowners appealed the denial of the DOAA request, as well as the grant of the permit to drill. The district court affirmed the denial of the DOAA and the grant of the APD. Landowners appealed.

Landowners argued that the COGCC erred in granting Magpie a permit to drill because the lease between Magpie and the Board prohibits Magpie from conducting exploration or drilling operations within 200 feet of any improvement on the property without landowners’ consent. The COGCC determined it lacked jurisdiction to interpret the lease. The Court of Appeal agreed, finding that the COGCC’s interpretation of its Statement of Basis was reasonable and that it limited its jurisdiction, which did not extend to “contracts between surface owners and operators governing surface use. . . . ”

Landowners argued that the COGCC erred in denying their DOAA request because the COGCC failed to apply the clear and unambiguous requirements of the DOAA rule. Landowners stated that the rule provides that the subject area be occupied by at least twenty people for forty days or more, but does not require that all the occupants be present at any one time. The Court agreed but found that the COGCC failed to make the necessary factual findings concerning the DOAA request. Accordingly, the case was remanded for detailed findings on whether the property meets the criteria of a DOAA under the COGCC rules.

Summary and full case available here.