June 16, 2019

Archives for March 21, 2016

Bills for Exemptions from Liquor Licensing, Rule of 7 for Children’s Code, and More Signed by Governor

On Friday, March 18, 2016, Governor Hickenlooper signed 14 bills into law. To date, he has signed 37 bills this legislative session. The bills signed Friday include a bill conforming Children’s Code statutes to the “Rule of 7,” exemptions from liquor license requirements for institutes of higher education and home brewers, dates of performance audits for certain governmental entities, and more. The bills signed Friday are summarized here.

  • HB 16-1013 – Concerning Authorizing School Districts to Purchase Crime Insurance Coverage in Lieu of Surety Bonds, by Rep. Alec Garnett and Sen. Vicki Marble. The bill allows school districts to purchase crime insurance instead of surety bonds. Currently surety bonds are required for certain district employees who handle funds in excess of $50.
  • HB 16-1028 – Concerning Modifications to the Statewide Death and Disability Plan Administered by the Fire and Police Pension Association, by Rep. Kevin Van Winkle and Sen. John Cooke. The bill changes computations of fund transfers between the statewide death and disability plan and the Fire and Police Pension Association.
  • HB 16-1042 – Concerning an Exemption from Liquor Licensing Laws for a Brewing Program Offered by a State Institution of Higher Education, by Rep. Jeni James Arndt and Sen. Jerry Sonnenberg. The bill creates an exemption from state liquor licensing laws for state institutions of higher education engaging in manufacturing and tasting of beer for teaching or research purposes. The beer cannot be sold or offered for sale and may only be tasted by students, researchers, expert tasters, and qualified employees who are at least 21 years old.
  • HB 16-1043 – Concerning the Joint Technology Committee’s Authority to Approve the Request for a Waiver of Certain Deadlines after Moneys for a Project have been Appropriated, by Rep. J. Paul Brown and Sen. Randy Baumgardner. Currently, state agencies and institutes of higher education that receive funding for projects are required to encumber some of the funds within a certain time period or, if they cannot, they are required to request a waiver. The bill exempts information technology capital projects overseen by the Joint Technology Committee from the waiver requirements.
  • HB 16-1057 – Concerning Statutorily Established Time Periods that are Multiples of Seven Days, by Rep. Kim Ransom and Sen. Michael Merrifield. The bill modifies time periods in the Children’s Code to conform to the “Rule of 7.”
  • HB 16-1081 – Concerning Removing Obsolete Reporting Provisions in Title 25.5 of the Colorado Revised Statutes, by Reps. Kim Ransom & Daneya Esgar and Sens. Kevin Lundberg and Linda Newell. The bill repeals reporting requirements for the Department of Health Care Policy and Financing for certain topics.
  • HB 16-1084 – Concerning a Modification from the Exemption from the “Colorado Liquor Code” for Home Brewers to Permit an Adult Other Than the Head of the Family to Engage in Home Brewing Activities for Personal Use Without Obtaining a Liquor License, by Rep. Steve Lebsock and Sen. Chris Holbert. Currently, the head of a family can brew beer or wine for family use without obtaining a liquor license. The bill expands the allowance to any adult in the household for personal use.
  • HB 16-1086 – Concerning a Modification of the Dates on Which the Required Performance Audits of Certain Governmental Entities are Due, by Reps. Su Ryden & Dan Nordberg and Sen. Chris Holbert. The bill extends the deadline by which the Department of Personnel and Administration and State Personnel Board must complete an audit from December 1, 2016, to December 1, 2019. The bill also eliminates the requirement that the department and board must be audited every four years.
  • HB 16-1284 – Concerning Divestment by the Public Employees’ Retirement Association from Companies that have Economic Prohibitions Against the State of Israel, by Reps. Dan Nordberg & Dominick Moreno and Sens. Owen Hill & Leroy Garcia. The bill requires PERA to take steps to identify all companies that have economic prohibitions against Israel by January 1, 2017, and to update the list biannually thereafter. PERA is required to notify each company of its restricted status and remove companies that cease to have prohibitions within 180 days.
  • SB 16-022 – Concerning Removing Certain Limitations on the Pilot Program to Mitigate Cliff-Effect for Low Income Families who are Working and Receiving Child Care Assistance, by Sen. Beth Martinez Humenik and Rep. Brittany Petterson. The bill removes the existing 10-county cap on counties that can participate in the Colorado Child Care Assistance Cliff Effect Pilot Program, and also removes the two-year participation requirement if the Department of Human Services determines that participation for a shorter period will provide relevant information.
  • SB 16-029 – Concerning Changes to Colorado Insurance Laws Necessary to Maintain Accreditation with the National Association of Insurance Commissioners (NAIC) And, In Connection Therewith, Adopting a New Own Risk and Solvency Assessment Law (ORSA) in a Form Substantially Similar to the NAIC Model and Enhancing Colorado’s Insurance Holding Company System Law by Adding a Required NAIC Model Provision Specifying the Insurance Commissioner’s Power to Issue Subpoenas and Examine Witnesses, by Sens. Mark Scheffel & Rollie Heath and Reps. Crisanta Duran & Polly Lawrence.
  • SB 16-031 – Concerning Authority of the Director of the Office of Legislative Legal Services to Sign Vouchers for Expenditures of the Office, by Sen. Pat Steadman and Rep. Timothy Dore. Currently, the chair of the Committee on Legal Services is required to sign any voucher for OLLS expenditure. The bill allows the director of OLLS to sign vouchers that do not exceed $5,000.
  • SB 16-050 – Concerning a Hold Harmless Provision for Retailers Liable for Any Money Payable as a Result of an Incorrect Location Code Assigned by the Department of Revenue, by Sens. Tim Neville & Cheri Jahn and Reps. Lori Saine & Su Ryden. The bill releases retailers from liability for failure to collect sales tax because of a misassigned Department of Revenue location code.
  • SB 16-066 – Concerning Creation of the Contingency Reserve Fund for School Districts, by Sen. Pat Steadman and Rep. Millie Hamner. The bill recreates the State Contingency Reserve Fund in statute without substantive changes. The fund was mistakenly repealed on July 1, 2015.

For a complete list of Governor Hickenlooper’s 2016 legislative decisions, click here.

Tenth Circuit: Managers Acted in Bad Faith by Painting Grim Financial Picture to Valuation Firms

The Tenth Circuit Court of Appeals issued its opinion in Leone v. Owsley on Wednesday, November 25, 2015.

Charles Leone was a principal of Madison Street Partners, LLP (MSP). In 2012, he resigned his position, and fellow principals Stephen Owsley and Drew Hayworth (Managers) elected to buy Leone’s interest in MSP. The Operating Agreement required the purchase price to be set at fair market value, and the Managers received two independent valuations from St. Charles Capital, LLC, and INTRINSIC. Although it was not used in calculating the offer to Leone, in 2009 Duff & Phelps had valued MSP at between $50 and 65 million. The Managers reluctantly gave the Duff & Phelps report to St. Charles and INTRINSIC, but urged them to ignore it, arguing it was not relevant. The Managers characterized MSP as having poor performance and did not give the valuation firms MSP’s newsletters or other relevant information.

St. Charles valued MSP with a total 2011 revenue of $5.892 million and total net income of $2.21 million. MSPs internal profit and loss statement listed total 2011 revenue as $7.289 million and net income of $3.398 income. INTRINSIC prepared a less detailed report without an opinion as to MSP’s value. Based on the two reports, the Managers offered Leone a purchase price of $135,850. Leone rejected the offer and retained his own expert to value his interest. Leone’s expert calculated his interest as of August 2012 at $1.5 million. Around the same time, Owsley sent his father an email expressing an interest in buying out Leone, remarking that MSP was stable.

In November 2012, Leone brought suit against the managers in the U.S. District Court for the District of Colorado, alleging that they had breached Article 10, Section 10.2(d) of the Operating Agreement by failing to act in good faith in valuing his interest in MSP. Leone also argued the Managers breached the implied covenant of good faith by unreasonably attempting to force him to sell his interest for a price far below fair market value. Managers claimed Leone’s claims were barred because of their “good faith reliance on the advice of one or more third parties.” They moved for summary judgment, and the district court granted their motion. The district court ruled that the valuation firms were qualified to provide expert reports and there was no evidence Managers relied blindly on the reports. As to Leone’s claim that the Managers improperly influenced the valuation firms in order to receive more favorable numbers, the district court found that he had failed to raise a dispute of material fact about the procedural integrity of the valuation.

On appeal, Leone argued that the district court erred in its interpretation of Delaware law by (1) conflating express and implied contractual obligations of good faith, (2) holding that bad faith requires a tortious state of mind, and (3) refusing to consider the substantive unreasonableness of the offered purchase price. He also argued that the district court erred in granting summary judgment because he raised genuine issues of material fact. The Tenth Circuit first evaluated Leone’s argument that the district court erred in conflating express and implied bad faith. The Tenth Circuit noted that under either standard, a good faith evaluation of the ownership interests would require the Managers to refrain from taking action that would result in a lower valuation.

The Tenth Circuit next addressed Leone’s contention that the district court erred in finding that a tortious state of mind is required for bad faith. Analyzing the district court’s opinion as a whole, the Tenth Circuit found it properly stated the Delaware requirements for bad faith. The Tenth Circuit next addressed Leone’s argument that Delaware’s safe harbor provision does not immunize the Managers because they acted in bad faith by wrongfully influencing the valuation firms and relying on valuation figures that were clearly erroneous. The district court concluded it should refrain from considering the substantive accuracy of the valuation reports absence a finding of wrongdoing, then held that no reasonable juror could find that the Managers did anything that affected the procedural integrity of the valuation. The Tenth Circuit disagreed with the district court’s conclusion, noting that when taken in the light most favorable to Leone, a reasonable jury could conclude that the Managers did not rely in good faith on the valuation firms.

Addressing Leone’s claim that the district court erred in granting summary judgment, the Tenth Circuit agreed. Considering the evidence in the light most favorable to Leone, the Tenth Circuit found the district court erred in rejecting that an inference of bad faith could be drawn by the Managers’ actions. The Tenth Circuit noted that a reasonable jury could find that the Managers engaged in conscious wrongdoing based on inaccurate statements to the valuation firms. The Tenth Circuit noted that a reasonable jury could disagree with the district court’s conclusion that the Managers’ false statements did not materially influence the valuation firms’ reports.

The Tenth Circuit reversed the district court’s grant of summary judgment and remanded for further proceedings.

Tenth Circuit: Unpublished Opinions, 3/18/2016

On Friday, March 18, 2016, the Tenth Circuit Court of Appeals issued no published opinion and two unpublished opinions.

United States v. Mejia-Melgar

United States v. Hopson

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