July 17, 2019

Archives for August 21, 2012

Tenth Circuit: 11 U.S.C. § 523(a)(19) Requires a Violation of Securities Laws to Render Judgment Debt Nondischargeable

The Tenth Circuit Court of Appeals published its opinion in Okla. Department of Securities v. Wilcox on Monday, August 20, 2012.

After the instigator of a Ponzi scheme was convicted of securities violations, the Oklahoma Department of Securities (the Department) sued several of the early investors to recoup funds. Early investors the Wilcoxes and Robert Mathews were found to have been unjustly enriched and disgorgement of their profits was required. The three investors filed for bankruptcy and each sought to discharge the approximately $500,000 of the judgment debt. The Department sought to avoid discharge of the debt and was granted summary judgment by the bankruptcy court. The debtors appealed the district court’s affirmation of the bankruptcy court’s determination that “the debts were not dischargeable because they fell under the exception in 11 U.S.C. § 523(a)(19) as judgments for violation of securities laws.”

In a 2-1 decision, the Tenth Circuit reversed. The burden is on a creditor to show the nondischargeability of  a debt under11 U.S.C. § 523(a). The court held that the plain language of the statute required a violation of the securities laws and that was not present here. The debtors had not been prosecuted by the Department for violation of the securities laws, but for unjust enrichment. Had they been convicted of securities violations, the judgment ordering them to disgorge their profits would not have been dischargeable in bankruptcy.

Tenth Circuit: Unpublished Opinions, 8/20/12

On Monday, August 20, 2012, the Tenth Circuit Court of Appeals issued one published opinion and nine unpublished opinions.

McClain v. Davis

Ace Investors v. Rubin

United States v. Ricketts

Monroe v. Franklin

Awe v. Napolitano

United States v. Eaton

Miller v. M.B.C.C. Facility Warden

Smith v. Wynne

United States v. Patterson

No case summaries are provided for unpublished opinions.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

Colorado Court of Appeals: When Calculating Lodestar Amount, Court Should Have Applied Percentage Reductions to Total Hours Billed Before Applying Hourly Rate Multiplier

The Colorado Court of Appeals issued its opinion in Payan v. Nash Finch Co. on August 16, 2012.

Colorado Consumer Protection Act—Civil Theft—Fee Award—Lodestar Amount.

Plaintiffs appealed the trial court’s order awarding attorney fees in their favor against defendant Nash Finch Company, doing business as Avanza Supermarket (Nash Finch). The order was affirmed in part and reversed in part, and the case was remanded.

In June 2008, Nash Finch implemented a misleading pricing scheme in two of its Denver metro area supermarkets. Customers were led to believe they would receive an additional 10% savings compared to regular prices, when in fact, the cashier added 10% to the price at checkout. Plaintiffs were customers at these supermarkets who did not immediately realize they had paid more than the advertised price. Plaintiffs ultimately litigated their Colorado Consumer Protection Act (CCPA) and civil theft claims at trial. Three days before trial, Nash Finch filed an admission of liability and confession of judgment for the full amount of the statutory damages sought by plaintiffs, a total of $4,200. The trial court entered an order awarding plaintiffs attorney fees.

Plaintiffs asserted that the trial court’s fee award was in error in numerous respects. First, plaintiffs contended the trial court did not take the proper arithmetical steps in calculating the lodestar amount before it made subsequent adjustments to that amount. The trial court should have applied the percentage reductions to the total hours billed before applying the hourly rate multiplier. Therefore, the court’s calculation of the lodestar amount was in error, and that amount should be recalculated on remand.

Plaintiffs further contended that the trial court abused its discretion and committed legal error in making certain downward adjustments to counsel’s billed hours. A trial court retains discretion to reduce the hours billed based on block billing if the court is unable to determine whether the amount of time spent on various tasks was reasonable. Therefore, the court did not abuse its discretion in making such adjustments to counsel’s billed hours.

Plaintiffs next contended that the trial court abused its discretion by making a reduction for time spent on dismissed claims and the class action complaint. Plaintiffs failed to present any proof as to the number of hours actually spent on the dismissed claims. Therefore, the trial court’s decision was not disturbed on appeal.

Plaintiffs also argued that the trial court erred in making a reduction for lack of complexity. The trial court was in the best position to observe and determine the relative complexity of the issues and arguments presented to it. Therefore, the trial court’s reduction of 5% for lack of complexity was not an abuse of discretion.

Plaintiffs also contended that the trial court erred in determining reasonable hourly rates for plaintiffs’ counsel based on its view of appropriate staffing of the case. The trial court did not abuse its discretion in making such a determination.

Furthermore, the trial court correctly determined that (1) the rule of proportionality could not be applied; (2) the court’s 10% reduction in the lodestar amount for lack of public importance was not an abuse of discretion, because the record supports the conclusion that plaintiffs’ suit was not a factor in inducing Nash Finch to cease its improper conduct; and (3) the court did not abuse its discretion in denying plaintiffs’ motion for discovery of Nash Finch’s billing records, given that both experts were able to produce their reports without the aid of such discovery.

Summary and full case available here.

Colorado Court of Appeals: Breach of Fiduciary Duties Arising from Trust Agreement Against Trustees Not Barred by Governmental Immunity; Barred Against Colleges

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

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

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

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

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

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

Summary and full case available here.

Colorado Court of Appeals: Department of Medicaid Does Not as Victim for Purposes of Restitution Statute

The Colorado Court of Appeals issued its opinion in People v. McCarthy on August 16, 2012.

Restitution—“Victim”—Colorado Department of Health Care Policy and Financing.

Defendant appealed the trial court’s order concluding that the Colorado Department of Health Care Policy and Financing (Department) is a victim for purposes of the criminal restitution statute and granting restitution to the Department for costs incurred as a result of defendant’s vehicular assault. The order was reversed and the case was remanded.

Defendant, while driving under the influence, ran a red light and struck another car, causing seriously bodily injury to two passengers in the other car. The trial court ordered that defendant pay $417,750 to the Department for Medicaid disability benefits paid to a rehabilitation hospital on behalf of one of the victims.

Defendant argued that the Department does not qualify as a “victim” for purposes of the restitution statute. Under the vehicular assault statute, a victim is a human being. Because the Department has not been expressly identified by the legislature as a victim in the restitution statute, and the particular nature of the crime does not establish a right to restitution, the Department cannot qualify as a victim under the restitution statute. Accordingly, the case was remanded to the trial court with directions to modify the order so that it excludes the grant of $417,750 in restitution to the Department.

Summary and full case available here.

Colorado Court of Appeals: No Abuse of Discretion in Declining to Limit Number of Juror Questions; Nothing to Show Juror Was Not Paying Attention

The Colorado Court of Appeals issued its opinion in People v. Garrison II on August 16, 2012.

Crim.P 24(g)—Juror Questions—Challenge for Cause—Extraneous Evidence.

Defendant appealed the judgments of conviction entered on a jury verdict finding him guilty of first-degree murder after deliberation, first-degree felony murder, conspiracy to commit first-degree murder with a crime of violence sentence enhancer, two counts of aggravated robbery, and conspiracy to commit aggravated robbery. The judgment was affirmed.

Defendant argued that the trial court erred in allowing jurors to submit hundreds of questions for witnesses over the course of the two-week trial. Crim.P. 24(g) provides that jurors are allowed to ask questions. Due to the length and complexity of the trial, the trial court did not abuse its discretion in declining to prohibit or limit the number of juror questions.

Defendant also contended that the trial court erred in not removing a juror who did not pay attention during the trial. However, the record indicates that the juror at issue submitted significantly more questions for witnesses than the other jurors, and there is not anything in the record to show that the juror was not paying attention. Accordingly, the trial court did not abuse its discretion in declining to remove the juror.

Defendant argued that the jury improperly viewed a cell phone admitted into evidence, and that the cell phone constituted extraneous prejudicial information. Two of the cell phones admitted, which both the prosecution and defense believed had dead batteries, were turned on by the jury. There jurors therefore had access text messages on the girlfriend’s phone and photographs on one of the other phones. Because the cell phones were admitted without any qualifications or limitations, the text messages and other data discovered by the jurors during deliberations did not constitute extraneous evidence.

Defendant further argued that the trial court abused its discretion in denying his challenge for cause to potential Juror T. During voire dire, Juror T. indicated that he was biased in favor of law enforcement. However, he also confirmed that he could be fair to defendant. The record supports a determination that Juror T. would render a fair and impartial verdict based on the evidence and the jury instructions. Therefore, the trial court did not abuse its discretion in denying defendant’s challenge for cause as to this juror.

Summary and full case available here.