March 24, 2019

Archives for March 2013

Tenth Circuit: District Court’s Entry of Default Judgment as Sanctions for Plaintiff’s Discovery Abuses Affirmed

The Tenth Circuit published its opinion in Klein-Becker v. Englert on Wednesday, March 27, 2013.

Klein-Becker owned the trademark StriVectin. The StriVectin line of skin care products could only be sold through authorized sellers that Klein-Becker approved and trained. Mr. Englert was never an authorized seller of StriVectin. Nonetheless, Mr. Englert sold StriVectin online without authorization.

Klein-Becker sued Patrick Englert for trademark infringement, copyright infringement, false advertising, and unfair competition under the Lanham Act; false advertising under the Utah Truth in Advertising Act; unfair competition under the Utah Unfair Practices Act; fraud; civil conspiracy; and intentional interference with existing and prospective business relations. Mr. Englert was sanctioned several times for failing to comply with court orders and discovery schedules. The third and final sanction resulted in the entry of default judgment for Klein-Becker on all remaining claims. A bench trial determined damages.

The district court entered judgment in favor of Klein-Becker for Lanham Act damages, fraud damages, stolen property, and copyright damages. The district court later issued a permanent injunction.

Mr. Englert appeals the district court’s (1) entry of default judgment against him on all existing claims as sanctions for his discovery abuses, (2) award of damages to Klein-Becker, (3) determination that Klein-Becker is entitled to a permanent injunction, (4) denial of his demand for a jury trial, and (5) denial of his request to call an unlisted witness.

(1) Entry of Default Judgment on All Claims as Sanctions for Englert’s Discovery Abuses

FRCP 37(b)(2)(A)(vi) allows a district court to issue sanctions, including default judgment against the disobedient party” when a party disobeys a discovery order. To determine if a sanction such as dismissal or default judgment is appropriate, courts should consider “(1) the degree of actual prejudice to the defendant; (2) the amount of interference with the judicial process; . . . (3) the culpability of the litigant.” Ehrenhaus v. Reynolds, 965 F.2d 916, 920 (10th Cir. 1992). Due to Mr. Englert’s continued noncompliance with discovery orders, the district court did not abuse its discretion when it entered default judgment on Klein-Becker’s claims for Englert’s discovery abuses.

Although the Tenth Circuit had not addressed the issue, other circuits have held that a district court may establish personal liability through entry of default judgment. The Tenth Circuit agreed that personal liability may be established through entry of default judgment.

(2) Damages Award

Under the Lanham Act, plaintiffs must show either actual damages or willful action on the part of the defendant as a prerequisite to recover disgorgement of profits. Because the parties agreed that Englert’s sales of StriVectin undermined the reputation and goodwill of the brand and hurt Klein-Becker’s relationships with authorized resellers, as well as their competitiveness in the cosmetics industry, the district court found that Klein-Becker established actual damages. Further, the district court found that Mr. Englert’s use of Klein-Becker’s registered mark was sufficient to support the inference that Mr. Englert acted willfully and in bad faith, entitling Klein-Becker to disgorgement of profits. Finally, equitable considerations favored judgment in favor of Klein-Becker. The district court did not err in its damages award calculation.

(3) Permanent Injunction

The Tenth Circuit agreed with the district court’s analysis of the factors for issuing an injunction: (1) actual success on the merits; (2) irreparable harm unless the injunction is issued; (3) the threatened injury outweighs the harm that the injunction may cause the opposing party; and (4) the injunction, if issued, will not adversely affect the public interest. Absent a permanent injunction barring Mr. Englert from using Klein-Becker’s trademarks or selling its products, Klein-Becker’s interests could continue to be harmed. The Tenth Circuit held that Klein-Becker’s injury outweighed any interest Mr. Englert had in continuing to violate Klein-Becker’s trademarks and found that a permanent injunction was appropriate and necessary to prevent future violations of the law.

(4) Denial of Englert’s Demand for a Jury Trial

Because he never formally objected to the magistrate judge’s ruling on his jury demand, Mr. Englert waived this argument on appeal. See United States v. One Parcel of Real Prop., 73 F.3d 1057, 1060 (10th Cir. 1996).

(5) Denial of Englert’s Request to Call an Unlisted Witness

Because Mr. Englert had not listed the witness on any of the witness lists he had submitted to the court, the Tenth Circuit concluded the district court did not abuse its discretion in denying Mr. Englert’s request to call the witness.

AFFIRMED.

Tenth Circuit: Jury’s Award in Breach of Insurance Contract Case Affirmed

The Tenth Circuit published its opinion in Ryan Development Company v. Indiana Lumbermens Mutual Insurance Company on Wednesday, March 27, 2013.

This case arose from a fire that destroyed a Texas manufacturing facility in April 2009. The owner of the facility, Agriboard, manufactured building panels made of compressed straw. At the time of the fire, Agriboard was insured under a fire and related losses insurance policy issued by Indiana Lumbermens Mutual Insurance Company (“ILM”) with various coverages, including lost income. ILM paid $450,000. Agriboard sued ILM for breach of an insurance contract, and ILM paid $1.8 million. Agriboard continued to seek recovery under the policy, but ILM refused to pay the amount requested. Agriboard re-filed suit, seeking $2.4 million in unpaid coverage.

The jury awarded Agriboard $2,261,166 for breach of contract. ILM renewed its motion for judgment as a matter of law, or in the alternative, for a new trial, asserting four grounds for relief: (1) prejudicial remarks in Agriboard’s closing arguments; (2) confusing and inappropriate jury instructions; (3) inadmissible expert testimony; and (4) a verdict unsupported by the evidence. The trial court denied the motion. ILM appealed.

At issue on appeal was ILM’s motion for a new trial.

First, ILM argued it was entitled to a new trial because Agriboard’s accountants offered expert testimony after the trial court ruled in limine that such testimony was inadmissible. Because the district court admitted the accountants’ testimony under FRE 701, where a non-expert witness may offer opinions not based on scientific, technical, or other specialized knowledge within the scope of Rule 702, the Tenth Circuit held that the district court did not abuse its discretion in admitting the accountants’ testimony.

Second, ILM challenged certain jury instructions, asserting they were (1) inappropriate because Agriboard never elicited testimony that the policy was ambiguous, and (2) designed to confuse the jury. The Tenth Circuit’s review of the record confirmed the district court’s finding that the instructions on how to interpret an insurance policy and what to do when the policy and endorsement conflict were suitable for the jury.

Third, ILM argued a new trial was warranted because Agriboard’s counsel made improper remarks during closing arguments. The decision to grant a new trial based upon counsel’s misconduct is left largely to the discretion of the district court. A new trial is appropriate only if the moving party shows that it was prejudiced by the attorney misconduct. Because the jury was instructed that closing arguments are not evidence, any remarks were brief and unlikely affected Agriboard’s substantial rights, particularly given that the jury was instructed to follow the law as the judge explained.

Finally, ILM argued the verdict was not supported by the evidence. When a new trial motion asserts that the jury verdict is not supported by the evidence, the verdict must stand unless it is clearly, decidedly, or overwhelmingly against the weight of the evidence. Absent an award that shocks the judicial conscience or raises an irresistible inference that passion, prejudice, corruption or other improper cause played a part in the jury’s damage award, an appeals court will not disturb the jury’s damage award. Ample evidence was introduced at trial for the jury to conclude that ILM breached its contract. Thus, the trial court did not abuse its discretion.

AFFIRMED.

Colorado Court of Appeals: Announcement Sheet, 3/28/13

HB 13-1209: Changing Several Provisions of Uniform Dissolution of Marriage Act Regarding Child Support

On February 1, 2013, Rep. Jenise May and Sen. Jeanne Nicholson introduced HB 13-1209 – Concerning Changes to Child Support ProvisionsThis summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

As adopted by both houses, the bill makes several changes to the child support sections of the Uniform Dissolution of Marriage Act, including:

  • Revises the schedule of basic child support obligations, including the application of a minimum order formula for income below $1,100 per month rather than the existing level of $850 per month;
  • Revises the minimum child support amount in circumstances in which the parents’ combined monthly adjusted gross income is less than $1,100 per month to $50 per month for one child; $70 per month for two children; $90 per month for three children; $110 per month for four children; $130 per month for five children; and $150 per month for six or more children;
  • Revises the formula for calculating the low-income adjustment by removing the 40 percent multiplier factor;
  • Makes amendments to the definition of “gross income,” including clarification of when earnings or gains on retirement accounts may be included in gross income;
  • Adds language concerning the handling and application of lump sum social security disability benefits or retirement benefits;
  • Provides language concerning the retroactive establishment of child support in situations where there has been a post-order change of physical care agreed on by the parents; and
  • Revises the duties, make-up, and terms of the child support commission.

The bill passed out of the Senate on March 19; on March 21, the House voted to concur with the amendments made to the bill in the Senate. The bill moves to Gov. Hickenlooper for action.

HB 13-1204: Enactment of the “Uniform Premarital and Marital Agreements Act”

On February 1, 2013, Rep. Bob Gardner and Sen. Jessie Ulibarri introduced HB 13-1204 – Concerning the “Uniform Premarital and Marital Agreements Act.” This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Colorado Commission on Uniform State Laws

The bill enacts the “Uniform Premarital and Marital Agreements Act” (Act) drafted by the National Conference of Commissioners on Uniform State Laws. The bill describes the formation of premarital and marital agreements, when such agreements are effective, provisions that are unenforceable in premarital or marital agreements, and when an agreement is enforceable.

The bill makes changes to the Act with respect to the enforcement of spousal maintenance provisions in a premarital or marital agreement.

Under the bill, provisions relating to spousal maintenance are unenforceable if the provisions are unconscionable at the time of enforcement. The Act applies to premarital or marital agreements signed on or after July 1, 2014.

The bill amends a probate provision relating to the waiver of marital rights or obligations to conform to the Act.

The CBA LPC voted to support the bill with the amendments that were adopted in the House Judiciary Committee. On March 19, the House gave final approval of the bill; it is assigned to the Judiciary Committee in the Senate.

HB 13-1200: Creation of the “Uniform Deployed Parents Custody and Visitation Act”

On February 1, 2013, Rep. Bob Gardner and Sen. Ellen Roberts introduced HB 13-1200 – Concerning the “Uniform Deployed Parents Custody and Visitation Act.” This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Colorado Commission on Uniform State Laws

The bill establishes the ““Uniform Deployed Parents Custody and Visitation Act” (act). Provisions of the act address:

  • Custodial responsibility, caretaking, and decision-making authority during the deployment of one parent who is a service member;
  • Procedures for granting custodial responsibility and caretaking or decision-making authority during deployment, temporary orders, filing orders with the court, hearings, and child support; and
  • Custodial responsibility, visitation, and temporary orders after return from deployment and termination of temporary agreements and orders

The CBA LPC voted to oppose the introduced version of the bill but is also working with the sponsors to find compromise language to various sections of the bill. The House gave final approval on March 19; the bill is assigned to the Judiciary Committee in the Senate.

The American Taxpayer Relief Act of 2012: Bidding Adieu to the Sunset

Editor’s Note: This is Part 1 of a series. Stay tuned for Parts 2 and 3.

By Merry H. Balson and Laurie A. Hunter

On January 1, 2013, while the ink on many year-end gift tax transfers was still wet, the 112th Congress passed the American Taxpayer Relief Act of 2012 (the “2012 Tax Act”).[1] The 2012 Tax Act was signed into law the following day, ending more than a decade of estate and gift tax uncertainty. This article summarizes the estate and gift tax provisions of the 2012 Tax Act, discusses the Act’s impact on estate planning, and outlines select income tax provisions affecting planning for individuals.

Phase-Ins and Sunsets: A Brief History of the Federal Estate, Gift and Generation-Skipping Transfer Tax System

The federal tax on transfers at death has been in existence since 1916 and the tax on inter vivos gifts has been part of the federal tax system since 1924, with the exception of a brief hiatus during its repeal between 1926 and 1932.[2] Phased in changes to the unified credit against estate and gift taxes and applicable transfer tax rates have been part of the estate planning practice for over three decades. In 1976, with the passage of the Tax Reform Act (“TRA”) of 1976, Congress created a unified estate and gift tax system and added the generation skipping transfer tax (“GST”).[3] It also phased in increases in the estate tax exemption from $60,000 in 1976 to $175,000 in 1981. The Economic Recovery Tax Act of 1981 (“ERTA”), among many other things, phased in increasing unified credit amounts over six years, increasing exemption equivalent amounts from $175,625 to $600,000 by 1987.[4] The top estate tax rate under ERTA was reduced to 55%, down from a maximum tax rate of 70% prior to enactment. Similarly, the Taxpayer Relief Act of 1997 provided for a phased in exemption equivalent from $600,000 to $1,000,000 in 2006.[5] The TRA ‘97 phase in never fully took effect because in 2001, when the exemption was only $675,000 and the estate and gift tax rate remained at 55% (plus 5% for estates over $10,000,000), the Economic Growth and Tax Relief Reconciliation Act (“EGTRRA”) of 2001 changed the estate and gift tax unified credit and rates yet again.[6] EGTRRA increased the exemption equivalent to $1,000,000 in 2002 and then incrementally through 2009 to $3,500,000, maintaining the gift tax exemption at a flat $1,000,000, decreasing the top rate to 45% by 2009 (which was subsequently accelerated to 2007), repealing the estate and gift tax in 2010 (but a carry-over basis regime) and sunsetting all EGTRRA provisions on January 1, 2011, with the effect of reverting to the law as it existed on January 1, 2001.[7] At the end of 2010, after nearly a year of estate and gift tax repeal, Congress passed the taxpayer friendly Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “2010 Tax Act”).[8] The 2010 Tax Act extended EGTRRA’s sunset provisions for two additional years (through January 1, 2013), increased the exemption equivalents to $5,000,000 for estate and gift tax (indexed for inflation starting in 2012) and reduced the tax rate to 35%.[9] The 2010 Tax Act also introduced the concept of “portability,” whereby a surviving spouse could “port” or use his or her deceased spouse’s unused unified credit provided certain conditions were satisfied.[10]

Finally a “Permanent” Tax Bill? After 12 years of planning under a looming sunset, finally there is no automatic sunset date for the 2012 Tax Act (although as noted below, certain extenders are set to expire). The major estate planning provisions include the following:

  • The estate and gift tax exemptions remain unified, and will stay at $5 million, but will be indexed for inflation. For 2013, both exemptions are $5,250,000.[11]
  • The GST exemption will also stay at $5 million, again, as indexed for inflation. The GST exemption is also $5,250,000 for 2013.[12]
  • Portability is permanent.[13] A deceased spouse’s unused estate tax exemption is “portable” if the surviving spouse timely files a U.S. Estate Tax Return (form 706). With certain exceptions, portability allows the surviving spouse to use the deceased spouse’s unused estate tax exemption immediately in addition to their own exemption. Importantly, however, the GST exemption is not portable and any unused portion at the first spouse’s death is lost. The 2012 Tax Act also corrected a technical problem in the 2010 Tax Act to be consistent with Treasury Regulations issued last summer that were favorable to the taxpayer by permitting “tacking on” of more than one former deceased spouse’s unused exemption to the surviving spouse.
  • Gift, estate and GST tax rate increases to 40% on the amount over the exemption.[14] The rate was 35% in 2011 and 2012, but had been 45% in 2009.

Additional effects of the repeal of the EGTRRA Sunset. The result of finally repealing the looming sunset provisions of EGTRRA and the strange results from it disappearing “as if it had never been enacted,” are among the following:

  • QFOBI is truly gone. The Qualified Family Owned Business Interest deduction, a complicated estate tax deduction that had no effect after 2003 due to the increase in estate tax exemptions, is now permanently repealed.
  • The state death tax credit was converted to a deduction, and now stays that way. For Colorado and about half the states, this means no state death tax, but the other half of the states changed their laws to include a state inheritance or estate tax, so continue to check local laws if your clients own real estate outside Colorado.
  • GST automatic allocation rules[15] and GST qualified severance rules both remain in effect.[16] These taxpayer-friendly rules are now permanent.

This is Part 1 of a 3-part series. Stay tuned for parts 2 and 3.

 

Merry H. Balson is Of Counsel at Wade Ash Woods Hill & Farley, P.C., where her practice emphasizes estate planning, estate and trust administration and forming and advising exempt organizations. She can be reached at mbalson@wadeash.com or 303-329-2215.

Laurie A. Hunter is a Shareholder at Wade Ash Woods Hill & Farley, P.C., where her practice emphasizes estate planning, probate and trust administration. She can be reached at lhunter@wadeash.com or 303-329-2227.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

 


[1] Pub.L. 112-240, H.R. 8, 126 Stat. 2313 (2013).

[2] The estate tax was enacted by the Revenue Act of 1916 (39 Stat. 756). The gift tax was first put in place by the Revenue Act of 1924 (43 Stat. 253), repealed by the Revenue Act of 1926 (44 Stat. 9), then reenacted by the Revenue Act of 1932 (47 Stat. 169).

[3] Pub. L. 94-455, H.R. 10612, 90 Stat. 1520 (1976).

[4] Pub. L. 97-34, H.R. 4242, 95 Stat. 172 (1981).

[5] Pub. L. 105-34, H.R. 2014, 111 Stat. 787 (1997).

[6] Pub. L. 107-16, H.R. 1836, 115 Stat. 38 (2001).

[7] See Sec. 901, Sunset Provisions of EGTRRA.

[8] Pub. L. 111-312, Title III, H.R. 4853, 124 Stat. 3296 (2010).

[9] Id.

[10] Id., Sec. 303.

[11] Rev. Proc. 2013-15, Sec. 2.13, 2013-5 IRS 444 (January 11, 2013).

[12] Under I.R.C. Sec. 2631(c), the GST exemption is equal to the basic estate tax exclusion amount.

[13] Pub.L. 112-240, Sec 101, H.R. 8, 126 Stat. 2313 (2013).

[14] Id. at Sec 101(c).

[15] See I.R.C. Sec. 2632(b-c) for deemed GST allocation rules.

[16] See I.R.C. Sec 2642(a)(3) for qualified severance rules.

Congratulations to Charley Garcia, the 2013-2014 Colorado Bar Association President-Elect

charley garciaCharles (Charley) Garcia has been named president-elect of the Colorado Bar Association for 2013-2014. He is a graduate of the University of Wisconsin, and he worked in international tax as a CPA for Arthur Andersen and Price Waterhouse for ten years before practicing law. While working as an accountant, he graduated from the University of Denver College Of Law, and joined the Office of the Colorado State Public Defender. He practiced as a criminal defense trial attorney for twenty five years, retiring in 2007 as the Office Head for the Denver Office of the Colorado State Public Defender.

In retirement, Charles took time out to teach constitutional and comparative law in the Ukraine with the Center for International Studies, and in 2009 worked with the Center for Education in Law and Democracy in the Dominican Republic. In 2011 he was appointed Manager of Safety for the City and County of Denver where he oversaw the police, sheriff and fire departments. Charles is currently Special Counsel to the Governor where he has served under both Governor Ritter and Governor Hickenlooper.

In his spare time, Charley is an Adjunct Professor of Law at the University Of Denver Sturm College of Law and a teacher for the National Institute of Trial Advocacy, while sitting on the Judicial Advisory Council of the Colorado Supreme Court, the Colorado Access to Justice Commission, the Colorado Criminal and Juvenile Justice Commission, the Governor’s Community Corrections Advisory Council, the Colorado Juvenile Parole Board, the Chief Justice Commission on Professionalism and the Denver Crime Prevention and Control Commission (CPCC). He is also the current treasurer of the Colorado Bar Association, and a CBA representative to the ABA House of Delegates.

Tenth Circuit: Unpublished Opinions, 3/27/13

On Wednesday, March 27, 2013, the Tenth Circuit Court of Appeals issued two published opinions and two unpublished opinions.

Brown v. Bravo

Hallcy v. Clements

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

SB 13-219: Implementing Rules for Remediation of Property Contaminated by an Illegal Drug Lab

On Friday, March 15, 2013, Sen. Lois Tochtrop introduced SB 13-219 – Concerning the Remediation Performed on Property Contaminated by an Illegal Drug Laboratory. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Currently, the state board of health may promulgate rules for the cleanup of illegal drug labs. The bill requires the board to implement and promulgate rules addressing the following:

  • Testing and evaluating contamination;
  • Training and certifying people to assess and clean up illegal drug laboratories;
  • Approval of consultants’ or contractors’ trainers; and
  • Certifying that property meets the cleanup standards established by the board.

The board is also directed to establish fees and administrative penalties to implement these standards.

Currently, a person who documents cleaning up an illegal drug lab to the board’s standards is immune from a lawsuit but the manufacturer of the illegal drugs is not immune. The bill adds, as a person who is not immune, a person convicted of possession of chemicals, supplies, or equipment with intent to manufacture the illegal drugs.

A person who violates a rule of the board is subject to a penalty of up to $15,000. The bill sets procedures for notifying a person of an alleged violation and issuing an order and establishes standards for taking administrative action and determining the penalty. The bill is assigned to the Health & Human Services Committee.

SB 13-216: Specifying Certain Young Adult Offenders Who May be Sentenced to the Youthful Offender System

On Friday, March 15, 2013, Sen. Angela Giron introduced SB 13-216 – Concerning Youthful Offenders Within the State Department of Corrections. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill recreates and reenacts, with amendments, certain provisions relating to the sentencing of young adult offenders to the youthful offender system in the state department of corrections (department), which provisions were repealed on Oct. 1, 2012. The provisions allow certain young adult offenders to be sentenced to the youthful offender system. A “young adult offender” means a person who is at least 18 years of age but under 20 years of age at the time the crime is committed and under 21 years of age at the time of sentencing.

A young adult offender may be sentenced to the youthful offender system if he or she:

  • Is convicted of a felony enumerated as a crime of violence;
  • Is convicted of a felony involving a firearm;
  • Used, or possessed and threatened the use of, a deadly weapon during the commission of a felony against a person;
  • Is convicted of vehicular homicide, vehicular assault, or felonious arson;
  • Is convicted of a class 3 felony other than sexual assault, and has, within the two previous years, been adjudicated a juvenile delinquent for a delinquent act that would constitute a felony if committed by an adult; or
  • Is convicted of a felony offense and is determined to have been an habitual juvenile offender.
  • A young adult offender shall be ineligible for sentencing to the youthful offender system if he or she is convicted of any of the following:

  • A class 1 or class 2 felony;
  • A sexual offense, including incest or aggravated incest; or
  • Any offense, if the young adult offender has received a sentence to the youthful offender system for any prior conviction.
  • A young adult offender who is charged with first degree murder and pleads guilty to a class 2 felony as a result of a plea agreement is eligible for sentencing to the youthful offender system if the young adult offender would be eligible for sentencing to the youthful offender system for a conviction of the felony underlying the charge of first degree murder.

    On or before Aug. 1, 2013, the department shall implement policies pursuant to the federal “Prison Rape Elimination Act of 2003,” 42 U.S.C. 15601 et seq., to ensure compliance with certain provisions relating to youthful offenders.

    On or before Oct. 1, 2013, and on or before each Oct. 1 thereafter, the department shall report to the judiciary committees of the House of Representatives and Senate concerning the implementation of the new policies within the youthful offender system. The bill is assigned to the Judiciary Committee.

    SB 13-212: Increasing Financing Options Available Through Colorado New Energy Improvement District for New Energy Improvements

    On Thursday, March 14, 2013, Sen. Matt Jones introduced SB 13-212 – Concerning Increased Options for Financing Available Through the Colorado New Energy Improvement District for the Completion of New Energy Improvements, and, in Connection Therewith, Allowing Commercial Buildings to Access District Financing, Requiring Consent for Subordination of Mortgage Liens, and Facilitating Private Third-Party Financing. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

    The Colorado new energy improvement district (district) currently allows for financing of the completion of new energy improvements only for residential real estate. The bill allows owners of commercial property to utilize such financing, repeals the maximum 95 percent loan-to-value requirement for qualified applicants, and repeals the percentage-of-value and dollar caps on allowable new energy improvements. The bill also includes fuel cells within the definition of “renewable energy improvement” and includes improvements that increase the overall illumination of a property or bring the property up to building code within the definition of ”energy efficiency improvement.” The bill directs the governor to appoint five members to the district board by Sept. 1, modifies their qualifications, removes the legislative appointees from the board, and reduces the quorum from six to four members.

    The bill directs the district to develop:

    • A program for the financing of new energy improvements by private third-party financing in addition to by district bonds; and
    • The parameters for requiring consent in all cases by existing mortgage holders to subordinate the priority of their mortgages to the priority of the district’s lien.

    Current law includes increased market value and decreased energy bills attributable to a new energy improvement in the calculation of the amount of the special assessment; the bill repeals these factors from that calculation and also repeals language that allows special assessments to be prepaid.

    If district special assessments are attributable to new energy improvements that were financed by a private third party:

    • The bill directs the board to credit the proceeds of the special assessments to the private third party; and
    • The bill specifies that district bonds are not payable from the special assessments.

    The bill also prohibits county assessors from taking into account any increase in the market value of the eligible real property resulting from the completion of a new energy improvement when assessing the value of the property. The bill also affirms that the state will not impair the rights or remedies of private third parties that have financed new energy improvements. Current law conditionally repeals the district on Jan. 1, 2016; the bill repeals the repeal date.

    On March 21, the Agriculture, Natural Resources, & Energy amended the bill then sent it to the full Senate for consideration on 2nd Reading.