August 21, 2019

Colorado Supreme Court: “Plausible on its Face” Standard Applies to Motions to Dismiss

The Colorado Supreme Court issued its opinion in Warne v. Hall on Monday, June 27, 2016.

Civil Procedure—Pleading.

Warne petitioned for review of the Colorado Court of Appeals’ judgment reversing the dismissal of Hall’s complaint, which asserted a claim of intentional interference with contract. Although invited to apply the standard for dismissal articulated in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), the district court dismissed for failure to state a claim upon which relief could be granted without addressing either Twombly or Iqbal in its written order. By contrast, the court of appeals expressly declined to apply the more recent U.S. Supreme Court jurisprudence governing F.R.C.P. 12(b)(6), finding itself instead bound by the Colorado Supreme Court’s existing precedent, which had heavily relied on the U.S. Supreme Court’s earlier opinion in Conley v. Gibson, 355 U.S. 41 (1957), and particularly its language to the effect that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove “no set of facts” in support of his claim. Declining, therefore, to be influenced by the U.S. Supreme Court’s more recent admonition to the federal courts that “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face,’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570), the court of appeals found the complaint sufficient to state a claim.

The supreme court reversed the judgment of the court of appeals. Because the court’s case law interpreting the Colorado Rules of Civil Procedure in general, and C.R.C.P. 8 and 12(b)(5) in particular, reflected first and foremost a preference to maintain uniformity in the interpretation of the federal and state rules of civil procedure and a willingness to be guided by the U.S. Supreme Court’s interpretation of corresponding federal rules whenever possible, rather than an intent to adhere to a particular federal interpretation prevalent at some fixed point in the past, the Colorado Supreme Court found that its precedent was interpreted too narrowly by the court of appeals. Because it also found that plaintiff’s complaint, when evaluated in light of the more recent and nuanced analysis of Twombly and Iqbal, failed to state a plausible claim for relief, the court found the complaint insufficient under the Colorado Rules of Civil Procedure.

Summary provided courtesy of The Colorado Lawyer.

Tenth Circuit: Remand Order Non-Reviewable Where Based on Lack of Unanimity

The Tenth Circuit Court of Appeals issued its opinion in Harvey v. Ute Indian Tribe of the Uintah and Ouray Reservation on Thursday, August 13, 2015.

Ryan Harvey and other plaintiffs filed a complaint in Utah state court against the Ute Indian Tribe of the Uintah and Ouray Reservation, seeking a declaration regarding the authority of the Tribe over non-Indian businesses operating on certain categories of land. Plaintiffs also alleged three individuals affiliated with the Uintah Tribal Employment Rights Office had harassed and extorted Plaintiffs. Defendants filed a motion to dismiss, arguing that service of process had been insufficient, the state court lacked jurisdiction in the absence of a valid waiver of tribal immunity, the Tribe and its officers were immune from suit but were indispensable parties, and Plaintiffs failed to exhaust administrative remedies in tribal court. Following a hearing on the motion to dismiss, the state court ordered further briefing regarding whether the defendants’ motion constituted a general appearance. The court granted Plaintiffs’ motion to amend its complaint to add defendants.

Defendants filed a notice of removal in the U.S. District Court for the District of Utah, stating that certain defendants consented to removal and the others would consent. All except one eventually consented to removal. Plaintiffs then filed a motion to remand, arguing the initial defendants waived their right to remove by litigating in state court, removal was untimely, the defendants had not unanimously consented to removal, and the federal court lacked subject matter jurisdiction. The district court granted the motion to remand, finding the initial defendants waived their right to consent to removal because they manifested an intent to litigate in state court, and the unanimity requirement could not be met.

The Tenth Circuit first noted that 28 U.S.C. § 1447(d) specifies that a district court order remanding to state court is “not reviewable on appeal or otherwise.” Following Supreme Court precedent establishing that some orders are reviewable despite the statute’s plain language, the Tenth Circuit noted that § 1447(d) has been interpreted to preclude review only for lack of subject matter jurisdiction or defects in removal procedure. The Tenth Circuit commented that although the circuits are split on whether remand based on waiver is reviewable, it would only address remand for lack of unanimity. The Tenth Circuit evaluated whether the remand was based on lack of unanimity and found that it was. The Tenth Circuit declined to review the remand order.

The Tenth Circuit granted appellees’ motion to dismiss and dismissed the appeal.

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.

Colorado Supreme Court: Trial Court Abused Discretion by Denying Unopposed Motion to Dismiss

The Colorado Supreme Court issued its opinion in People v. Storlie on Monday, June 16, 2014.

Criminal Law—Dismissal, Nolle Prosequi, or Discontinuance.

In this CAR 21 proceeding, defendant and the district attorney sought extraordinary relief from the trial court’s denial of the district attorney’s motion to dismiss the charges against defendant pursuant to Crim.P. 48(a). The Supreme Court issued a rule to show cause and made the rule absolute. A trial court may deny the prosecution’s unopposed motion to dismiss only where it has been shown by clear and convincing evidence that the interests of the defendant or the public are jeopardized by the refusal to prosecute. The prosecution is presumed to be acting in the best interests of the public unless the prosecution is shown to have been acting in bad faith. Here, the district attorney made a good-faith prosecutorial decision to dismiss the charges based on an assessment of available testimony. Accordingly, the trial court’s denial of the motion to dismiss was an abuse of discretion.

Summary and full case available here.

Colorado Court of Appeals: Defendant’s Successful Objection to Joinder of Two Cases at Trial Barred Joinder of Dismissal

The Colorado Court of Appeals issued its opinion in People v. Marshall on Thursday, April 10, 2014.

Joinder—Objection—Waiver Dismissal.

A grand jury indicted defendant in November 2009 for securities fraud, theft, conspiracy, and organized crime. In February 2012, the prosecution filed a second case by information that contained numerous similar counts. The prosecution moved to join the two cases, but defendant objected, and the court denied the prosecution’s motion. A jury acquitted defendant in the first case. He then asked the court to dismiss the second case because the charges in that case should have been joined with the first case. The court agreed with defendant’s argument and granted his request.

The People argued on appeal that the trial court erred in dismissing the second case against defendant. Defendant’s successful objection to the prosecution’s motion to join the two cases barred his subsequent motion to dismiss the second case, because it was not joined with the first. Therefore, defendant waived his joinder rights under Crim.P. 8(a)(1) and CRS § 18-1-408(2). The judgment dismissing this case was reversed, and the case was remanded to the trial court to reinstate the charges against defendant.

Summary and full case available here.