August 14, 2018

Archives for February 26, 2014

Winds of Change (Part 3)

rhodesMy wife is used to the kinds of research I do for these articles, but even she raised an eyebrow when I brought home James Hillman’s book Suicide and the Soul. “Is there something I should know?” she asked. Yeah, I think so. I think there’s something we all should know, not just about individual lawyer suicides, but also about how they mirror the collective, transformational death occurring in our profession.

Hillman called suicide “the urge for hasty transformation” – referring to the death of an individual psyche under the stress of personal transformation. In a postscript written 40 years later, Hillman added insights about the communal nature of suicide:

Once we have grasped that involvement [in relationships with others] is fundamental to the soul, we would be inescapably connected by definition, turning and twisting the threads of our fate with the souls of others. Others are entangled in your death as you are in theirs. Suicide becomes a community matter.

No suicide dies or takes his life alone; the rest of the community dies and takes his life with him. We don’t want to hear that. We quickly deny any personal responsibility, avoid the topic, turn away when it comes up. Hillman explains our response this way:

This [community aspect] helps account for the common reaction against those who attempt suicide. They are not welcomed with sympathy by family, friends or clinic, but rather are met with anger and disgust. Before we sympathize with a person’s plight or pain that may have occasioned the attempt, we blame; we find ourselves spontaneously annoyed, outraged, condemnatory. I do believe this all too common response points to the enduring strata of the psyche that we all share, call it our archetypal humanity. We are societal animals, as well as having individual destinies. Something insists we belong to a wider soul and not to ourselves alone.

This is why lawyer suicide stories are so disturbing to those left behind – such as the CNN story that prompted this series, or this one about a prominent Washington, D.C. lawyer who shot himself in his office after changing his voice mail greeting to say, “As of April 30, 2009, I can no longer be reached. If your message relates to a firm matter, please contact my secretary. If it concerns a personal matter, please contact my wife.”

Can’t you just see yourself doing that? I can. Change the voice mail message, set up an out-of-office email reply, write a memo about the status of pending cases… be the consummate professional to the end. A comment in that story is illustrative of Hillman’s individual/community insight:

To some his final act was a rebuke to what his beloved profession had become—a statement made in the very office he had been told to vacate.

The legal profession is a controlled access community, and once we’re in the club we have a lifetime membership. (“Once a lawyer always a lawyer.”) When one of our members is lost, we all lose. We can gloss over the statistics and get back to work, but we cannot remain unaffected.

Concerned bar leaders have written monographs such as this one, detailing the causes and signs of individual psychological distress and exhorting us to notice who’s not bearing up so well. They have their place in promoting help for the afflicted individual, but they do not reach the terminally fearful dynamics of communal transformation. For that, we need to also examine the systemic context which allowed – or maybe even promoted – that level of individual distress in the first place.

To be continued.

Kevin Rhodes is a lawyer in private practice and a registered mentor with the Colorado Supreme Court’s CAMP program. He offers career coaching for lawyers and leads workshops for a variety of audiences, including the CBA’s Solo and Small Firm Section and the Job Search and Career Transitions Support Group. You can email Kevin at kevin@rhodeslaw.com.

Colorado Rule of Evidence 803(10) Amended to Conform to Changes to FRE 803(10)

On Wednesday, February 26, 2014, the Colorado State Judicial Branch announced Rule Change 2014(03), amending subsection 10 of Colorado Rule of Evidence 803.

CRE 803 lists hearsay exceptions where the availability of the declarant is immaterial. Subsection 10 addresses the absence of a public record. The changes to Subsection 10 are substantial (see redline of changes below) and the committee comment was also revised to reflect that the changes were made to conform CRE 803 to FRE 803, which was amended in December 2013.

(10) Absence of a Ppublic Rrecordor entryTestimony or a certification under Rule 902 that a diligent search failed to disclose a public record or statement if:

(A) the testimony or certification is admitted to prove that

(i)     the record or statement does not exist; or

(ii)     a matter did not occur or exist, if a public office regularly kept a record or statement for a matter of that kind; and

(B) in a criminal case, a prosecutor who intends to offer a certification provides written notice of that intent at least 14 days before trial, and the defendant does not object in writing within 7 days of receiving the notice unless the court sets a different time for the notice or the objection.

To prove the absence of a record, report, statement, or data compilation, in any form, or the non-occurrence or non-existence of a matter of which a record, report, statement, or data compilation, in any form, was regularly made and preserved by a public office or agency, evidence in the form of a certification in accordance with Rule 902, or testimony, that diligent search failed to disclose the record, report, statement, or data compilation, or entry.

(Federal Rule Identical.)  

The changes to CRE 803(10) are effective February 18, 2014.

For a complete list of the Colorado Supreme Court’s rules changes, click here.

Tenth Circuit: Defendant’s Sentence Vacated Because Amount of Methamphetamine in PSR Not Supported by Trial Testimony

The Tenth Circuit Court of Appeals published its opinion in United States v. Harrison on Tuesday, February 25, 2014.

Defendant Leslie Susan Harrison was convicted by a jury of conspiring to manufacture and distribute 50 grams or more of methamphetamine. The United States District Court for the Northern District of Oklahoma sentenced her to 360 months in prison. On appeal, she challenged the sentence on five grounds. She argued first that the court improperly adopted the calculation in the probation office’s presentence report (PSR) that Defendant was responsible for more than 1.5 kilograms of methamphetamine, leading to a base offense level of 34, see USSG § 2D1.1(c)(3).

The Tenth Circuit agreed with Harrison’s first argument. When she challenged the drug-quantity calculation in the PSR, the district court did not require the government to put on evidence supporting the calculation, which stated that the PSR was based on trial testimony. This statement was inaccurate, and the error was not harmless because the trial evidence would not compel a finding of at least 1.5 kilograms of methamphetamine.

The government argued that Defendant’s challenge to the drug-quantity calculation was not preserved below. The only objection raised at the hearing was raised by Defendant herself, not her counsel. And a district court does not need to consider pro se objections made by defendants represented by counsel. The government also argued that Defendant’s objection was not specific enough. Again, the government was correct that an insufficiently specific objection does not preserve a claim of error. However, the Tenth Circuit held that Harrison’s objection was specific enough to indicate to the district court the precise ground for her complaint.

At sentencing, the district court may rely on facts stated in the presentence report unless the defendant has objected to them. When a defendant objects to a fact in a presentence report, the government must prove that fact at a sentencing hearing by a preponderance of the evidence. The government can meet its burden by pointing to trial evidence. But the PSR’s calculation was not derived from trial testimony. The government conceded at oral at argument that nothing at trial supported the amount of methamphetamine in the PSR. The district court erred in saying that the PSR calculation came from trial testimony. The government argued the district court’s error was harmless.

The Tenth Circuit disagreed. The court vacated the sentencing because it was not sufficiently confident that the district court, had it considered the matter, would have found at least 1.5 kilograms of methamphetamine based on the trial testimony, and the Defendant’s sentence may have been different.

The court VACATED Defendant’s sentence and REMANDED for resentencing.

Tenth Circuit: In Sex Discrimination Case, Genuine Issues of Fact Existed as to Plaintiff’s Title VII Claims

The Tenth Circuit Court of Appeals published its opinion in Kramer v. Wasatch County Sheriff’s Office on Tuesday, February 25, 2014.

Camille Kramer worked for the Wasatch County Sheriff’s Department from 2005 to 2007. During that time, she was the victim of repeated sexual harassment, sexual assault and rape at the hands of Sergeant Rick Benson.

Ms. Kramer sued Wasatch County, alleging that the sexual harassment she experienced at the hands of Sergeant Benson constituted sex discrimination prohibited by both Title VII of the Civil Rights Act, 42 U.S.C. § 2000e-2(a)(1), and the Constitution, 42 U.S.C. § 1983. The district court granted summary judgment to Wasatch County. The court held that Sergeant Benson was not Ms. Kramer’s supervisor for Title VII purposes because he did not have the actual authority to unilaterally fire her. It further held that supervisor status could not be premised on apparent authority because no reasonable juror could find Ms. Kramer reasonable in believing Sergeant Benson had the power to fire her. Even assuming Sergeant Benson was Ms. Kramer’s supervisor, the court concluded that Wasatch County was not vicariously liable for his conduct because Ms. Kramer suffered no tangible employment action and, alternatively, because Wasatch County was entitled to prevail on its Faragher/Ellerth affirmative  defense as a matter of law.

Finally, the district court held that Wasatch County was not negligent and thus could not be liable for Sergeant Benson’s harassment under co-worker harassment standards. As to Ms. Kramer’s § 1983 claims, the court determined that Sheriff Van Wagoner was entitled to qualified immunity, and that the County was not liable because it had no pattern, practice, or custom of illegal sex discrimination. Ms. Kramer appealed on all claims.

Sexual harassment in the workplace is a form of sex discrimination prohibited by Title VII. In general, an employer is directly liable for an employee’s unlawful harassment if the employer was negligent with respect to the offensive behavior. If the harasser is a supervisor rather than merely a co-worker, however, the employer may be vicariously liable for the conduct, depending on the circumstances.  If the supervisor’s harassment culminates in a “tangible employment action,” the employer is strictly liable for sex discrimination, with no defense. If no tangible employment action occurs, the employer may still be vicariously liable for the supervisor’s harassment if the plaintiff proves the harassment was severe or pervasive, and the employer is unable to establish the affirmative defense announced in Faragher v. City of Boca Raton, 524 U.S. 775, 807 (1998), and Burlington Indus., Inc. v. Ellerth, 524 U.S. 742 (1998). For these reasons, whether the harasser was a “supervisor” within the meaning of Title VII is a critical threshold question in determining whether the employer can be held vicariously liable for the harassment.

The United States Supreme Court has held that a “supervisor” under Title VII is an employee whom the employer has empowered to take tangible employment actions against the victim, i.e., to effect a significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits. Importantly, however, an employee need not be empowered to take such tangible employment actions directly to qualify as a supervisor. A manager who works closely with his or her subordinates and who has the power to recommend or otherwise substantially influence tangible employment actions, and who can thus indirectly effectuate them, also qualifies as a “supervisor” under Title VII.

Sergeant Benson was Ms. Kramer’s direct supervisor. He completed her performance evaluations and made recommendations regarding her employment status. The record established that Ms. Kramer raised a genuine issue of fact as to whether the Wasatch County Sheriff’s Department effectively delegated to Sergeant Benson the power to cause tangible employment actions regarding Ms. Kramer by providing for reliance on recommendations from sergeants such as Benson when making decisions regarding firing, promotion, demotion, and reassignment.

Even if it was determined that Sergeant Benson lacked the actual supervisory authority described above, he could still qualify as a supervisor under apparent authority principles. In the usual case, a supervisor’s harassment involves misuse of actual power, not the false impression of its existence. But in the unusual case, apparent authority can suffice to make the harasser a supervisor for Title VII purposes, so long as the victim’s mistaken conclusion is a reasonable one. Under the circumstances here, given the County’s and the Sheriff’s manuals, there was a genuine issue of fact as to whether Ms. Kramer was reasonable in believing that Sergeant Benson had additional powers – such as the power to transfer, discipline, demote, or fire her. A jury was especially likely to conclude such beliefs were reasonable because Sergeant Benson repeatedly told Ms. Kramer he did in fact possess such powers.

If Sergeant Benson was a supervisor, Wasatch County would be strictly liable for his harassment of Ms. Kramer if it culminated in a tangible employment action. However, the Tenth Circuit held that none of the following actions constituted tangible employment actions: (1) the rape; (2) the bad performance evaluation that was never submitted; (3) Sergeant Benson denying her vacation days; and (4) Sergeant Benson refusing to give her road training and assigning her to the magnetometer full-time. The Tenth Circuit held that no tangible employment action occurred. Because these actions did not constitute “tangible employment action,” the County could not be held strictly liable for sex discrimination.

Even absent a tangible employment action, if Sergeant Benson qualified as a supervisor, the County could be vicariously liable for his severe or pervasive sexual harassment unless it could establish the affirmative defense announced in Faragher and Ellerth. This defense has two elements: (a) that the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior, and (b) that the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise.

The Tenth Circuit held that Wasatch County did not support its summary judgment motion with evidence that entitled it to judgment as a matter of law under either of the affirmative defense’s two prongs. Wasatch County’s evidence did not establish as a matter of law that the County took reasonable means to prevent and promptly correct sexual harassment. The County did not provide any evidence that the Sheriff Department’s interventions were reasonably calculated to end the harassment, deter future harassers, or protect Ms. Kramer. Not only did the investigation here fail to demonstrate that the County employed reasonable means to discharge its Title VII obligations, the Sheriff’s response to Ms. Kramer’s allegations suggested that he did not understand he had a Title VII compliance matter on his hands. There was no evidence the Department sought to improve its sexual harassment prevention program or otherwise reduce the risk of future harassment. On this record, there remained a genuine issue of fact as to whether the County’s response to Ms. Kramer’s sexual harassment complaint fell short of demonstrating that the County took reasonable efforts to discharge its duty under Title VII, as required to establish the affirmative defense.

Under prong two of the affirmative defense, Wasatch County’s evidence did not compel the conclusion that Ms. Kramer was unreasonable. Ms. Kramer did not lodge a formal complaint. However, she testified that on numerous occasions Sergeant Benson sexually assaulted her and subsequently told her to “be quiet” and “not say anything” or it would be “a career ender.” Sergeant Benson also threatened Ms. Kramer with a poor evaluation unless she would keep her mouth shut and not say anything. The court concluded that the record demonstrated a persistent theme: Sergeant Benson was an intimidating person with job-related power over Ms. Kramer who would sexually harass her and then threaten that she would lose her job if she complained.

Ms. Kramer’s fear that Sergeant Benson would make good on his threats was not per se unreasonable given that he did in fact take adverse job actions against her at work – denying her leave time, threatening her with a bad performance evaluation, and giving her long shifts on the magnetometer. Even if these actions did not rise to the level of a tangible employment action, a reasonable employee could well find a combination of threats and actions taken with the design of imposing both economic and psychological harm sufficient to dissuade him or her from making or supporting a charge of discrimination. This evidence raised a genuine issue of fact as to whether Ms. Kramer’s fears of Sergeant Benson were credible and reasonable because they were grounded in concrete reasons to apprehend that complaint would result in affirmative harm to the complainant.

Taken together, the evidence was also sufficient to raise a genuine issue of fact as to whether Ms. Kramer was reasonable in believing it would be futile and potentially detrimental to herself to complain. Accepting Ms. Kramer’s version of the facts, a picture emerged in which Sergeant Benson used his job-related power over Ms. Kramer to compel, pressure, or coerce her to do his bidding. While Ms. Kramer technically could have avoided some of the encounters, the record did not establish that she could have done so without incurring some form of adverse employment action.

Accordingly, the Tenth Circuit reversed summary judgment for Wasatch County on both prongs of the Faragher/Ellerth defense.

However, the court affirmed the district court’s holding that the County’s liability could not be premised on negligence. The record evidence viewed in the light most favorable to Ms. Kramer failed to support an inference that the County had actual or constructive knowledge of Sergeant Benson’s sexual harassment before Ms. Kramer’s car accident.

Finally, the County was not liable for sex discrimination under § 1983. As to institutional liability under § 1983, the County could only be liable for the actions of Sergeant Benson if it had a custom, practice, or policy that encouraged or condoned the unconstitutional behavior – here, workplace sexual harassment. Kramer had to demonstrate a direct causal link between the municipal action and the deprivation of federal rights, and she had to show that the municipal action was taken with deliberate indifference to its known or obvious consequences. Ms. Kramer had to establish that the County failed to prevent sexual harassment with deliberate indifference, that the need for more or different action was so obvious, and the inadequacy so likely to result in the violation of constitutional rights, that the policymakers of the city can reasonably be said to have been deliberately indifferent to the need. The court held that, on the record in this case, no reasonable jury could find that the risk of sergeants sexually assaulting their subordinates was “so obvious” the County’s policymakers should have known about it.

The Tenth Circuit therefore AFFIRMED summary judgment as to the § 1983 claim, but REVERSED on the Title VII claim, which the court REMANDED for trial.

Tenth Circuit: Unpublished Opinions, 2/25/2014

On Tuesday, February 25, 2014, the Tenth Circuit Court of Appeals issued two published opinions and two unpublished opinions.

Standard Bank v. Runge, Inc.

Hamstein Cumberland Music Group v. Williams

Case summaries are not provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.

SB 14-129: Amending Criminal Provisions Related to Marijuana

On Monday, January 27, 2014, Sen. Pat Steadman introduced SB 14-129 – Concerning Changes to Criminal Provisions Related to Marijuana. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill adds consumption and possession of marijuana and possession of marijuana paraphernalia to the crime of underage possession or consumption of alcohol. The bill changes the penalty structure for the crime as follows:

  • For a first offense, there is a fine of up to $100 or a requirement to attend substance abuse education classes;
  • For a second offense, there is a fine of up to $100; a requirement to attend substance abuse education classes; if appropriate, an order for a substance abuse assessment and any treatment recommended by the assessment; and up to 24 hours of public service; and
  • For a third or subsequent offense, there is a fine of up to $250, an order for a substance abuse assessment and any treatment recommended by the assessment, and up to 36 hours of public service.

Under current law, the P.O.S.T. board is encouraged to offer an advanced roadside impaired driving training course at basic academy training. The bill encourages the P.O.S.T. board to offer the course as an elective to basic field sobriety training recertification.

The bill changes the open marijuana container crime to require that prosecution prove that the container has a broken seal, that the contents were partially removed, and that there is evidence that marijuana was consumed in the vehicle. Current law only requires proof of one of those three elements. The bill makes conforming amendments.

On Feb. 12 the Judiciary Committee amended the bill and referred it to the Finance Committee. The Finance Committee approved the bill on Feb. 18 and sent it to the Appropriations Committee for consideration of the Fiscal Impact. On Feb. 21 the Appropriations Committee amended the bill and sent it to the full House for 2nd Reading.

Since this summary, the bill passed the Senate on Second Reading, with amendments.

SB 14-118: Strengthening Protections for Individuals with Disabilities

On Monday, January 27, 2014, Sen. Pat Steadman introduced SB 14-118 – Concerning Improving Protections for Individuals with Disabilities. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill conforms several definitions related to discrimination based on a disability (discrimination) to the federal “Americans With Disabilities Act of 1990,” including changing the term “assistance dog” to “service animal.” The fine for discrimination in places of public accommodation, housing, and or violations of the rights of an individual with a disability who uses a service animal or a trainer of a service animal is increased to $3,500. Penalties are added for a person who causes harm to a service animal or service animal in training or a person who owns an animal that causes harm to a service animal or service animal in training. The bill makes conforming amendments. The bill is assigned to the Judiciary Committee.

Colorado Adopts Tougher Air Rules for the Oil and Gas Industry—The First in the Nation

BillRitterColorado air quality control commissioners voted 8-1 on Sunday to pass tougher air pollution rules for the oil and gas industry. The rules are the first in the nation designed to detect and reduce methane emissions, a gas linked to climate change. The impetus for the change was the failure of Front Range air to meet federal health standards.

Trying to satisfy environmental needs with those of the oil and gas industry can by difficult, as evidenced by the objections of the Colorado Oil and Gas Association and the Colorado Petroleum Association. The rule changes did, though, have the support of leading oil and gas companies including Anadarko Petroleum, Noble Energy, and Encana.  The impact of these new rules could be tremendous for environmental lawyers and those practicing in the area of Natural Resources & Energy.

This Friday, Feb. 28, the CBA Environmental Law Section is co-sponsoring a program with Colorado Bar Association CLE, “Oil & Gas Development in Colorado: Balancing Energy and the Environment.” Will Allison, the director for the Air Pollution Division, Colorado Department of Public Health and Environment, will review the new pollution rules and the potential effects in Colorado. Bill Ritter, former governor and now director for the Center for the New Energy Economy, is the keynote speaker and will address the challenges of balancing energy production and new environmental regulation in Colorado.

Other energy and environmental experts are speaking at the program including leaders from the Colorado Oil & Gas Commission, the Colorado Department of Natural Resources, and Colorado energy companies and law firms.

Scott Clark, chair for the program and attorney with Burns, Figa, & Will said, “This program will provide a balanced and focused look at key issues raised by the explosion of oil and gas development in Colorado.”

CLE Program: Oil & Gas Development in Colorado – Balancing Energy and the Environment

This CLE presentation will take place on February 28, 2014. Click here to register for the live program, and click here to register for the webcast. You may also call (303) 860-0608 to register.

Can’t make the live program? Order the homestudy here — MP3 audio downloadVideo OnDemandCD homestudy

Colorado Supreme Court: Defendant Did Not Overcome Presumption of Regularity Regarding Incorrect Verdict Forms in Record on Appeal

The Colorado Supreme Court issued its opinion in LePage v. People on Monday, February 24, 2014.

Presumption of Regularity.

The Supreme Court considered whether the court of appeals correctly applied the presumption of regularity when it determined that the jury did not receive the correct verdict forms. The trial judge read to the jury the correct elemental instructions and verdict forms; therefore, it can be inferred that the jury received the correct verdict forms. When the record was certified on appeal, however, one of the verdict forms was stapled to a refused jury instruction that was not given to the jury, raising the inference that the jury in fact may not have received the correct verdict forms.

The Court held that defendant failed to show that the jury did not receive the correct verdict forms. The court of appeals had affirmed the trial court’s judgment, holding that failure to give the jury the verdict form for the lesser included offense was not reversible error. The Supreme Court, however, affirmed the trial court’s judgment because defendant did not show that the trial court erred. Therefore, the Court affirmed the court of appeals’ judgment on other grounds.

Summary and full case available here.

Colorado Supreme Court: For Purposes of Parole Eligibility, Rules of Statutory Construction Require DOC to Construe All Sentences as One Continuous Sentence

The Colorado Supreme Court issued its opinion in Nowak v. Suthers on Monday, February 24, 2014.

Parole Eligibility Date—Statutory Interpretation.

In this habeas corpus appeal, the Supreme Court evaluated for the first time the relationship between CRS §§ 17-22.5-101 and -403(1) of article 22.5, which governs inmate and parole time computation. The Court held that, for the purpose of computing an inmate’s parole eligibility date, § 17-22.5-101 requires the Department of Corrections to construe all sentences as one continuous sentence when the inmate has been committed under several convictions with separate sentences, even when doing so results in the inmate becoming parole eligible before serving at least 50% of the second sentence. Accordingly, the Court affirmed the trial court’s judgment.

Summary and full case available here.

Tenth Circuit: Issue of Fact Existed Concerning Whether Investments Were “Investment Contracts” Under Securities Law

The Tenth Circuit Court of Appeals published its opinion in SEC v. Shields on Monday, February 24, 2014.

The Securities and Exchange Commission (“SEC”) brought this civil enforcement action against Defendant-Appellees Jeffory D. Shields, GeoDynamics, Inc. (“GeoDynamics”), and several other business entities affiliated with Mr. Shields, alleging securities fraud in connection with four oil and gas exploration and drilling ventures Mr. Shields, as managing partner of GeoDynamics, marketed to thousands of investors nationwide as Joint Venture Agreements (“JVAs”). The district court granted defendants’ Fed. R. Civ. P. 12(b)(6) motion to dismiss. The SEC appealed, contending that despite their labels as JVAs, the investment agreements were actually “investment contracts” and thus “securities” subject to federal securities regulations as defined by the Securities Act of 1933 and the Securities Exchange Act of 1934 (collectively, the “Securities Acts”).

The central issue raised on appeal was whether the investments sold by Mr. Shields as managing partner of GeoDynamics were “investment contracts” and thus “securities” subject to federal securities regulations.

Congress painted with a broad brush in defining a “security.” Coverage of the antifraud provisions of the securities laws is not limited to instruments traded at securities exchanges and over-the-counter markets, but extends to uncommon and irregular instruments. Although the Securities Acts broadly define a security, neither act specifically defines an “investment contract.” The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others.

The parties confined their argument to whether the investment was premised on a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others. See SEC v. W.J. Howey Co., 328 U.S. 293 (1946). The joint venture agreements here were denominated general partnerships, and the Tenth Circuit applies a strong presumption that an interest in a general partnership is not a security, mainly because the partners – the investors – are ordinarily granted significant control over the enterprise. But presumptions are not per se rules, and the court recognized that the presumption can be rebutted by evidence that the general partners were rendered passive investors because they were somehow precluded from exercising their powers of control and supervision. Access to information about the investment, and not managerial control, is the most significant factor in determining whether investors are in need of the protections of the securities acts.

The Tenth Circuit agreed with the SEC that the allegations in the complaint were clearly sufficient to rebut the presumption that the purported general partnerships were not securities, and raised a fact issue concerning whether investors were relying on the efforts of Mr. Shields and GeoDynamics to significantly affect the success or failure of the ventures. The allegations also raised a fact issue as to whether the investors actually had the type of control reserved under the agreements to obtain access to information necessary to protect, manage, and control their investments at the time they purchased their interests. The allegations were sufficient to defeat a motion to dismiss on the issue of whether the investors lacked meaningful control over their interests. They raised a plausible claim that the joint venture agreements, in substance as opposed to form, actually distributed powers similar to a limited partnership, which is usually held to be a security.

Because it could not be said as a matter of law that the investments at issue were not “investment contracts,” the Tenth Circuit REVERSED and REMANDED for further proceedings consistent with this opinion.

Tenth Circuit: Unpublished Opinions, 2/24/2014

On Monday, February 24, 2014, the Tenth Circuit Court of Appeals issued one published opinion and three unpublished opinions.

United States v. McBride

United States v. Sedillo

Green v. Hininger

Case summaries are not provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.