July 22, 2018

Colorado Court of Appeals: Contract Between Private Cable Provider and Government Void Because It Does Not Provide for Annual Appropriations

The Colorado Court of Appeals issued its opinion in Falcon Broadband, Inc. v. Banning Lewis Ranch Metropolitan District No. 1 on Thursday, June 28, 2018.

Contract—Colorado Governmental Immunity Act—Tort—Civil Conspiracy—Unjust Enrichment—Promissory Estoppel—Annual Appropriation—Attorney Fees.

Falcon Broadband, Inc. (Falcon) signed a contract, the “Bulk Services Agreement” (BSA), with Banning Lewis Ranch Metropolitan District No. 1 (the District) to provide Internet and cable services to Banning Lewis Ranch area residents. Under the BSA, the District granted Falcon the exclusive right to provide Internet and cable services to residents for a monthly per-resident fee. The BSA states that it remains in effect until 2,700 homes in the development are occupied, which hasn’t yet occurred. The District later disavowed the BSA, stopped paying Falcon, and stopped collecting fees from residents. Falcon sued the District, its directors, and Oakwood Homes, LLC (the developer) and related Oakwood entities (collectively, Oakwood).  The district court dismissed Falcon’s complaint in part as barred by the Colorado Governmental Immunity Act (CGIA) and granted summary judgment in defendants’ favor on the remaining claims not subject to dismissal under the CGIA.

On appeal, Falcon contended that the district court erred in its application of the CGIA and in granting summary judgment. It is undisputed that the District is a public entity within the meaning and protection of the CGIA. Thus, the district court properly dismissed the civil conspiracy claim against the District because that claim is undeniably a tort claim. However, the court improperly dismissed the unjust enrichment and promissory estoppel claims as sounding in tort because they were grounded in contracts; the district court should have granted summary judgment to the District on these claims. The district court properly granted the District summary judgment on the breach of contract, breach of implied covenant of good faith and fair dealing, and declaratory judgment claims. The District directors are also protected by the CGIA, and the district court should have dismissed the claims against them. All of the Oakwood entities are private associations; thus, the district court erred in dismissing some claims against Oakwood under the CGIA.

Falcon also contended that the district court erred by determining that the BSA is void and by entering summary judgment on its tortious interference and civil conspiracy claims regardless of the BSA’s validity. The BSA is void under C.R.S. § 29-1-110 because it is a multi-year contract that does not provide that the obligation to pay is subject to annual appropriations. Because all of Falcon’s claims are premised on the BSA’s validity, only its unjust enrichment claim against Oakwood survives.

The District and the directors cross-appealed, arguing that the court erred by failing to award them attorney fees under C.R.S. § 13-17-201. Because the gist of Falcon’s action against the District was the District’s failure to perform the BSA, not its commission of any tort, and those claims were dismissed on summary judgment, the District is not entitled to fees. On the other hand, the only claims Falcon brought against the directors were tort claims. Because Falcon’s entire action against the directors should have been dismissed under C.R.C.P. 12(b)(1) as tort claims barred by the CGIA, the directors are entitled to an award of their reasonable attorney fees under C.R.S. § 13-17-201. The directors are also entitled to an award of their reasonable attorney fees incurred in their successful appeal under C.R.S. § 13-17-201.

The judgment was affirmed on all claims except Falcon’s unjust enrichment claim against Oakwood, which was reversed. The district court’s denial of the District’s request for attorney fees was affirmed. The district court’s denial of the directors’ request for attorney fees was reversed and the case was remanded to determine those fees.

Summary provided courtesy of Colorado Lawyer.

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