March 22, 2019

Archives for June 8, 2015

Phillip Douglass Appointed to 18th Judicial District Court Bench

On Friday, June 5, 2015, the governor’s office announced Governor Hickenlooper’s appointment of Phillip Douglass to the district court bench in the Eighteenth Judicial District. Douglass will fill a vacancy created by the retirement of Hon. J. Mark Hannen, effective July 1, 2015.

Currently, Douglass is Of Counsel at Rowe Law, LLC in Denver, where he focuses his practice on general commercial litigation, labor and employment law, arbitration, and internal corporate investigations. Prior to his work at Rowe Law, Douglass was in-house counsel at Qwest, MediaOne, and US WEST, and he was also an associate at Baker & Botts in Texas. Douglass earned his undergraduate degree from Brigham Young University and his law degree from Cornell Law School.

 

Colorado Court of Appeals: School District had Clear Duty to Obtain Majority Support for Innovation Plans

The Colorado Court of Appeals issued its opinion in Denver Classroom Teachers Association v. City & County of Denver School District No. 1 on Thursday, June 4, 2015.

Innovation Schools Act of 2008—Majority Support—Jurisdiction—CRCP 106(a)(2)—Administrative Procedures Act.

Appellants (collectively, Associations) brought this action claiming that appellees (collectively, DPS) violated the Innovation Schools Act of 2008 by implementing innovation plans at eleven district schools without first obtaining approvals for the plans from the majority of teachers employed at the schools. The district court granted relief with respect to two schools and denied any relief with respect to the remaining nine schools.

On appeal, DPS asserted that the district court lacked jurisdiction to entertain the Associations’ action. CRCP 106(a)(2) specifically authorizes district courts to consider whether to compel a governmental body, board, or officer to perform a duty required of it by law. Therefore, the court had jurisdiction to consider the merits of the Associations’ claims.

DPS also contended that the Associations had another available remedy under the Administrative Procedure Act and failed to exhaust it. However, the state board’s review was limited in scope to determine whether an innovation plan is likely to result in a decrease in academic achievement within the innovation school and whether it is fiscally feasible.Therefore, the Associations could not have challenged the innovation plans on the grounds relied on in the district court or on appeal. Accordingly, the Associations were not required to seek judicial review of the state board’s designations before seeking mandamus relief.

The Associations argued that they had a clear right to relief and DPS had a clear duty to obtain evidence of approval from teachers, staff, and School Accountability Councils (SACs) regarding the innovation plans. Such majority support by a majority of teachers, staff, and SACs is clearly mandated by statute, and this provision applies to both new and existing schools. However, a new school’s innovation plan cannot meet the requirements of subsection 104 of the Innovation Schools Act until the school has commenced operations and its plan has received the necessary majority consents from teachers, administrators employed at the school, and the school’s SAC, which includes parents of students enrolled at the school. As a result, a new school that has neither teachers nor students cannot seek innovation status. Here, DPS failed to obtain majority support with respect to the nine schools at issue. The judgment was affirmed with respect to the two schools and reversed as to the remaining nine schools, and the case was remanded to the district court for further proceedings.

Summary and full case available here, courtesy of The Colorado Lawyer.

Tenth Circuit: Statements as to Reason for Deal Failure Could Have Materially Misled Investors

The Tenth Circuit Court of Appeals issued its opinion in Nakkhumpun v. Taylor on Tuesday, April 7, 2015.

Patipan Nakkhumpun, lead plaintiff in a securities class action against executives of Delta Petroleum Corp., filed suit in district court after a deal between Delta and Opon International, LLC fell through. Plaintiffs alleged the Delta executives violated § 10(b) of the Securities Act and SEC Rule 1ob-5 by misleading investors through statements about the proposed transaction with Opon and about Delta’s financial condition. The district court granted Defendants’ motion to dismiss, holding Plaintiffs failed to allege loss causation regarding the Opon deal and falsity regarding the statements about Delta’s financial condition. Plaintiffs moved for leave to amend, which the district court denied.

Plaintiffs appealed, and the parties dispute whether Plaintiffs adequately pled falsity, scienter, and loss causation as to the Opon transaction and falsity and scienter as to the financial statements. The Tenth Circuit first addressed the Opon transaction.

Delta issued a press release in March 2010 announcing a preliminary agreement with Opon, in which Opon would purchase a 37.5% non-operating interest in Delta’s Vega Area assets for $400 million. Defendants issued more press releases between March and June 2010 indicating that Opon was trying to obtain financing for the transaction, and in a July 2010 press release, Delta board chair Taylor announced termination of the deal, stating that Opon failed to receive financing. However, confidential informants related that the Opon deal fell through because Opon determined the assets were not worth $400 million and refused to pay that price, and further negotiations between Opon and Delta were unsuccessful.

The district court agreed with Plaintiffs that the statements were false or misleading but concluded Plaintiffs failed to show loss causation. On appeal, Plaintiffs argue they alleged all requirements for securities fraud under § 10(b), and the Tenth Circuit agreed. The Tenth Circuit found a reasonable investor would have been lead to believe that the Vega Area assets were worth $400 million, satisfying the falsity prong. The Tenth Circuit also found Plaintiffs established scienter, finding potential for Taylor’s statements to mislead buyers and sellers and noting the danger was so obvious Taylor must have been aware of it. The Tenth Circuit reversed the district court’s dismissal of Plaintiffs’ § 10(b) claim on this issue.

Turning next to the loss causation issue, the Tenth Circuit affirmed the district court’s finding that Plaintiffs’ proposed amended complaint contained adequate allegations of loss causation under a theory of materialization of a concealed risk. Plaintiffs pleaded particular facts tying financial loss to Taylor’s misleading explanation about the reason the Opon deal fell through.

The Tenth Circuit found adequate support for Plaintiff’s § 10(b) arguments as to defendant Taylor, but not regarding the other named defendants. The Tenth Circuit therefore affirmed the dismissal of Plaintiffs’ complaint as to the other named defendants.

Finally, the Tenth Circuit turned to Plaintiffs’ claims that Defendants made false or misleading statements regarding its financial situation. In the district court and on appeal, Defendants challenged these statements as failing to allege scienter or falsity. The district court granted Defendants’ motion to dismiss on the ground that the statements were not false. The Tenth Circuit affirmed the dismissal but on the ground that the statements were missing allegations of either scienter or falsity.

The Tenth Circuit reversed the dismissal of Plaintiffs’ Opon-related claims as to defendant Taylor but affirmed as to all other defendants. On the claims of misleading financial statements, the Tenth Circuit affirmed the district court’s dismissal and denial of leave to amend.

Tenth Circuit: District Court has Wide Discretion Regarding Whether to Hold Franks Hearing

The Tenth Circuit Court of Appeals issued its opinion in United States v. Herrera on Monday, April 6, 2015.

Jose Herrera was suspected of drug trafficking, and an undercover officer sought a warrant to attach a GPS device to his car. In the warrant application, the officer attested that she and a confidential informant repeatedly purchased methamphetamine from Mr. Herrera, that Mr. Herrera had told them he was going to take a trip and would be unavailable, and that he was gathering funds. The officer further attested that in her experience these facts suggested Mr. Herrera was gathering funds for a meeting with an out-of-town supplier. A magistrate approved the warrant and officers attached the GPS device to Mr. Herrera’s vehicle, which showed Mr. Herrera making a quick trip to LA and heading quickly back to Colorado. Officers pulled the car over and found drugs in a hidden compartment in the vehicle.

Mr. Herrera moved to suppress the evidence from the search, arguing the warrant was unlawfully issued. The district court agreed, and the government appealed the suppression order. On appeal, the government argued that the district court erred by conducting a Franks hearing without requiring the defendant to make some showing that the officer’s affidavit contains a material reckless misstatement or omission. The Tenth Circuit disagreed, finding that the district court has broad discretion to conduct a hearing regardless of whether the defendant first makes a showing. Finding no abuse of discretion, the Tenth Circuit affirmed the district court’s allowance of a Franks hearing.

Next, the government argued the district erred in applying both aspects of the Franks test. At the first step, the district court found the officer’s affidavit recklessly created the impression Mr. Herrera had used his vehicle for drug smuggling since 2009, when in fact he did not obtain the vehicle until 2011. The district court also suggested the informant lacked more recent knowledge of the vehicle’s use in drug smuggling. However, the Tenth Circuit noted that the affidavit did not say anywhere that the vehicle dated to 2009, only that the informant knew from “past experience” that Mr. Herrera used the vehicle in drug smuggling. The Tenth Circuit further found the attesting officer seemed to have solid grounds for believing the informant. The Tenth Circuit failed to see any basis for the district court’s finding of recklessness.

Turning to the second part of the Franks test, the Tenth Circuit found the district court erroneously disregarded virtually everything the confidential informant said instead of striking the reckless statements and considering whether the affidavit could still stand. Although the confidential informant was an “unsavory character,” his information was reliable in many instances and it was erroneous for the district court to disregard his information.

The Tenth Circuit upheld the district court’s allowance of a Franks hearing but reversed the order suppressing evidence due to the district court’s misapplication of both parts of the Franks test.

Tenth Circuit: Unpublished Opinions, 6/5/2015

On Friday, June 5, 2015, the Tenth Circuit Court of Appeals issued no published opinion and two unpublished opinions.

United States v. Crosby

Foster v. Trammell

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