August 23, 2019

Archives for June 22, 2015

Colorado Supreme Court: Announcement Sheet, 6/22/2015

On Monday, June 22, 2015, the Colorado Supreme Court issued one published opinion.

Upper Black Squirrel Creek Ground Water Management District v. Cherokee Metropolitan District

The summary for this case is forthcoming, courtesy of The Colorado Lawyer.

Neither State Judicial nor the Colorado Bar Association provides case summaries for unpublished appellate opinions. The case announcement sheet is available here.

Tenth Circuit: Junk Fax Claims Against Commercial Insurer Barred by Policy Language

The Tenth Circuit Court of Appeals issued its opinion in Emcasco Insurance Co. v. CE Design, Ltd. on Monday, May 4, 2015.

In April 2008, Custom Mechanical Equipment, Inc., an Oklahoma company, faxed an unsolicited advertisement to CE Design, Inc. in Illinois. Rather than simply throw the fax away, CE Design sued Custom in Illinois state court and sought to certify a class of others who had received unsolicited faxes from Custom. CE Design alleged Custom breached the Telephone Consumer Protection Act (TCPA), which provides $500 in damages for each violation, as well as alleging common law conversion based on the use of paper, toner, the fax machine, and CE Design staff time. Custom submitted the claim to its insurer, Emcasco, which denied coverage and declined to defend Custom. In June 2011, CE Design and Custom settled, entering into an agreement for $1,276,000 in damages ($500 for each of the 2,552 junk faxes Custom sent) whereby CE Design agreed to enforce the judgment only against Emcasco. The Illinois trial court approved the settlement in September 2011.

CE Design brought suit against Emcasco in the U.S. District Court for the Western District of Oklahoma, seeking a declaratory judgment that Emcasco’s policy legally obligated it to pay the CE Design’s judgment. Emcasco then filed suit in the U.S. District Court for the Northern District of Illinois, seeking a declaratory judgment that it was not liable. Upon CE Design’s motion, the Illinois district court transferred the case to Oklahoma. In June 2013, both parties moved for summary judgment. Emcasco argued it had properly denied coverage and refused to defend because Custom’s fax was neither an “occurrence” causing property damage nor a “personal and advertising injury,” and alternatively argued that three policy exclusions barred coverage. CE Design responded that the policy covered Custom and no exclusion applied. After hearing arguments, the district court granted summary judgment in favor of Emcasco and denied CE Design’s motion. CE Design appealed.

On appeal, the parties agreed that Oklahoma law regarding insurance contracts governed the dispute. At oral argument, CE Design conceded the statutory violation language in the policy removed Emcasco’s duty to defend the TCPA claim. The Tenth Circuit agreed. Turning next to the conversion claim, the Tenth Circuit found that CE Design sufficiently pleaded conversion, but in doing so defeated policy coverage, since by pleading conversion CE Design acknowledged that the fax was not an “accident” for policy purposes. The Tenth Circuit next turned to CE Design’s “negligent conversion” claim, alleging conversion under a mistaken belief of right to appropriation of the property. The Tenth Circuit agreed that such “negligent conversion” could qualify as an “accident” under the policy, but CE Design’s bare allegations of mistake were not supported by anything in the record, noting that “[i]f this sufficed as an accident, it is hard to imagine what would not.” The Tenth Circuit found Emcasco had no duty to defend under the “negligent conversion” theory. Tenth Circuit similarly rejected CE Design’s Illinois Consumer Fraud Act (ICFA) claim, finding CE Design was required to prove the defendant intended the plaintiff to rely on a deceptive act in order to further an ICFA claim, and further finding such a deceptive act would trigger all of the same exceptions from Emcasco’s coverage.

The Tenth Circuit next analyzed Emcasco’s argument that its statutory violation exclusion barred coverage under all three of CE Design’s claims. The Tenth Circuit, looking at the plain language of the insurance policy, agreed that coverage would have been barred, since all of CE Design’s claims relied at their core on violations of the TCPA. Because TCPA claims were barred by the contract, all of CE Design’s claims failed.

The Tenth Circuit affirmed the district court’s grant of summary judgment to Emcasco.

Tenth Circuit: Settlement Fair Because it Incentivized Western Union to Change its Business Practices

The Tenth Circuit Court of Appeals issued its opinion in Tennille v. Western Union Co. on Friday, May 1, 2015.

Western Union was the subject of a class action lawsuit challenging its practice of holding and earning interest on customers’ money after failed wire transfers without notifying customers of the failure. While an interlocutory appeal from Western Union was pending, Western Union and the class representatives reached a settlement, agreeing that Western Union would change its business practices to notify customers when wire transfers failed, would help customers whose unclaimed money had escheated to the state to reclaim their money, and would pay interest for the time Western Union held the funds before the escheat. The settlement will be funded using approximately $135 million in customers’ unclaimed funds still held by Western Union, and the funds will be distributed as follows: (1) a $7,500 incentive award to each of the four named plaintiffs; (2) interest to the customers who have already claimed their money from Western Union for the time period from the transfer’s failure to the customer’s claim, minus Western Union’s administrative fees; (3) the unclaimed money plus interest to the customers whose money Western Union still holds, minus Western Union’s administrative fees; (4) the costs of administering the settlement; and (5) 30 percent of the settlement award to class counsel as attorney fees.

Because the settlement was reached during the pendency of the interlocutory appeal, the Tenth Circuit remanded to the district court to consider whether to certify the class and approve the settlement. The district court preliminarily certified the class and approved the settlement, directing that notice be sent to the approximately 1.3 million putative class members. A dozen class members objected to the settlement, including Sikora Nelson (represented by counsel) and Paul Dorsey (pro se). The district court held a “fairness hearing” and eventually overruled all the objections, entered a final class certification, approved the settlement, and entered judgment. Objectors posted bond after it was reduced by the Tenth Circuit and appealed.

The named plaintiffs argued the objectors lacked standing to pursue the appeal, but the Tenth Circuit disagreed, finding Article III standing as to all class members. Plaintiffs also argued the objectors were raising arguments that were not properly preserved below, but the Tenth Circuit again disagreed, noting it has wide discretion to consider all arguments on appeal and the arguments were raised in some form in the lower court proceedings.

Objectors first contended the district court erred in certifying the class because the named plaintiffs could not fairly and adequately protect the interests of the class as a whole, and the district court should have created subclasses to adequately address the needs of all class members. Objector Nelson first argued that because the named plaintiffs had arbitration clauses in their agreements with Western Union and not all class members had arbitration provisions, including Nelson, the plaintiffs could not adequately protect the other class members’ interests. The Tenth Circuit noted that at the time the class was certified the district court had already ruled the arbitration provisions were unenforceable. Nelson argued she, and other similarly situated class members, could have negotiated a much better settlement than the named plaintiffs, but the Tenth Circuit disagreed, finding Nelson had agreed not to initiate any class actions in her contract.

Next, Nelson argued that because she was a Michigan resident and a Michigan statute allowed treble damages for such failed wire transactions, the named plaintiffs could not adequately represent her interest or the interest of other Michigan residents. However, because the district court had already ruled that Colorado law governed the claims, the Tenth Circuit found this argument unavailing. Nelson also argued that because the plaintiffs had already reclaimed their money from Western Union while she and other class members had not, plaintiffs were not similarly situated. The Tenth Circuit noted that Western Union’s challenged conduct was the same as to all class members, and the difference was not enough to preclude plaintiffs from representing the class.

Nelson also challenged the district court’s approval of the settlement, contending it was unfair because absent class members will finance most of the settlement for the entire class. Although the Tenth Circuit was “not unsympathetic to Nelson’s argument,” it determined them to be ultimately unpersuasive, since Nelson and others who had not already claimed their money would not have known about it absent the settlement agreement, and because the settlement agreement incentivized Western Union to change its business practices. Although there is a possibility that the settlement funds will run out before all class members have received their share, that possibility is unlikely to be realized based on historical data indicating that only 15 percent of Western Union’s customers ever seek a refund of their money.

The Tenth Circuit next addressed Nelson’s procedural challenge to the Rule 23 notice, finding the given notice satisfied due process by identifying several ways they could obtain additional information about the claims they would be releasing if they joined the settlement. Objector Dorsey also challenged how the notice was given to class members, arguing Western Union should have cross-checked all its databases instead of mailing to the last known address of class members. The named plaintiffs assert that Western Union did cross-check its databases, and also the class administrator used the post office’s change of address database to update the addresses. The Tenth Circuit found the mailed notice sufficient. Dorsey also speculated that those plaintiffs whose transactions were “zeroed out” by administrative fees may not have received notice, but the Tenth Circuit found that in fact all class members were notified. The Tenth Circuit similarly found a typo in the notice insignificant, given the corrective measures taken on the class action website. Dorsey finally argued that because he did not receive the email notice, despite having a current email address on file with Western Union, there must have been something wrong with the email notice. The Tenth Circuit disagreed.

Finally, Dorsey and Nelson argued the district court failed to exercise its independent judgment by adopting verbatim the orders drafted by plaintiffs and Western Union in certifying the class and approving the settlement. The Tenth Circuit was satisfied that the court exercised independent judgment. Objectors also claim the district court did not address their objections, but the Tenth Circuit found that it did, albeit briefly.

The Tenth Circuit affirmed the district court’s order certifying the class and approving the settlement.

Tenth Circuit: Interlocutory Appeal of Preliminary Injunction Related to 2014 Elections Moot

The Tenth Circuit Court of Appeals issued its opinion in Fleming v. Gutierrez on Tuesday, May 5, 2015.

The 2012 general election in Sandoval County, New Mexico, was fraught with problems. Some voters waited more than five hours to vote, and others left before casting their ballots. Following the disastrous election, the Sandoval County Board of Commissioners passed two resolutions condemning the handling of the 2012 election and designating more voting centers for the 2014 election.

Several voters filed suit in federal district court after the 2012 elections, alleging equal protection and due process § 1983 violations and a violation of New Mexico’s constitutional free-and-open-elections clause. In September 2014, the district court entered a preliminary injunction against the county that essentially made any discretionary aspects of the Board’s resolutions non-discretionary. The injunction explicitly stated it was to apply through the November 2014 elections, at which point the court would reevaluate the case. The county filed an interlocutory review, seeking vacation of the injunction on the grounds that the voters lacked standing and were unlikely to prevail on the merits, and also seeking expedited review. The Tenth Circuit declined expedited review and the November 2014 election occurred under the bounds of the preliminary injunction.

The voters requested the Tenth Circuit to dismiss the appeal as moot. The county argued the election did not moot the injunction because it falls within the exception to the mootness doctrine for issues capable of repetition yet evading review, and because the injunction remains relevant to the issue of the prevailing party’s attorney fees. The Tenth Circuit addressed each contention in turn.

The Tenth Circuit held that the November 2014 election mooted the interlocutory appeal, finding any decision about the district court’s order would have no present day effect on the parties because the election and the effective time for the injunction had passed. The Circuit further found the exception to the mootness doctrine for issues capable of repetition yet evading review did not apply to the preliminary injunction, though it could apply to the case as a whole. Because the complaint, in which the voters sought permanent injunctive relief as to all future elections, was still pending in the district court, the issues were capable of review.

As to the attorney fee award, the Tenth Circuit found that the voters were the prevailing party as to the preliminary injunction but may not prevail on the suit in district court. Because no fee request had been filed, the Tenth Circuit lacked jurisdiction to address the issue.

The Tenth Circuit granted the voters’ motion to dismiss the appeal as moot and dismissed the appeal for lack of jurisdiction.

Tenth Circuit: Unpublished Opinions, 6/19/2015

On Friday, June 19, 2015, the Tenth Circuit Court of Appeals issued one published opinion and six unpublished opinions.

White v. Kansas Department of Corrections

Trujillo v. Franco

United States v. Madsen

United States v. Coleman

People’s Electric Cooperative v. Western Farmers Electric Cooperative

United States v. Hosier

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