July 20, 2019

Colorado Supreme Court: Water Court Entitled to Draw Reasonable and Commonsense Inferences from Circumstances Before It

The Colorado Supreme Court issued its opinion in People v. Sease on Tuesday, November 13, 2018.

Contempt—Acts or Conduct Constituting Contempt of Court.

In this direct appeal, the supreme court reviewed the water court’s contempt order, which imposed punitive and remedial sanctions on defendant. The water court determined that defendant was responsible for work performed on his property, the Sease Ranch, which caused out-of-priority depletions of water from Sheep Creek in violation of a court order. In its ruling, the water court inferred from defendant’s ownership of the Sease Ranch that he, not someone else, was responsible for the contemptuous work.

The court concluded that the water court had ample evidence to find that defendant is the owner of the Sease Ranch. Further, the court determined that the water court did not shift the burden of proof to defendant. The water court was entitled to draw reasonable and commonsense inferences from the circumstances before it. Thus, it was appropriate for the water court to consider the lack of evidence, and the corresponding improbability, that someone else entered the Sease Ranch and performed the contemptuous work without defendant’s authorization.

Accordingly, the water court’s judgment was affirmed.

Summary provided courtesy of Colorado Lawyer.

Tenth Circuit: Attorneys Who Withheld Information About Appraiser Properly Sanctioned

The Tenth Circuit Court of Appeals issued its opinions in Auto-Owners Ins. Co. v. Summit Park Townhome Association on March 30, 2018. The Tenth Circuit Court of Appeals VACATED its original opinions and issued the following revised opinions: Auto-Owners Ins. Co. v. Summit Park Townhome Ass’n, No. 16-1638, and Auto-Owners Ins. Co. v. Summit Park Townhome Ass’n, No. 16-1352.

Two attorneys, Mr. William Harris and Mr. David Pettinato, represented Summit Park Townhome Association against its insurer. The two attorneys were sanctioned for failing to disclose information to the district court. The attorneys appealed the sanction on these five arguments:

  1. The district court lacked authority to require the disclosure requirements.
  2. The attorneys did not violate the court’s disclosure requirements.
  3. The district court awarded attorneys’ fees beyond the scope of an earlier sanctions order.
  4. The district court’s award of attorneys’ fees resulted in a deprivation of due process.
  5. The amount of attorneys’ fees awarded was unreasonable.

The Tenth Circuit Court of Appeals AFFIRMED the district court’s actions in issuing sanctions, determining the scope of the sanctions, and calculating the amount of the sanctions.

The initial lawsuit was related to an insurance dispute following a claim filed by Summit Park with Auto-Owners Insurance for hail damage. The parties disagreed on the dollar amount of the damages, and Auto-Owners sued for a declaratory judgement to decide the value.

Summit Park attorneys Harris and Pettinato moved to compel an appraisal following the insurance policy requirements. Auto-Owners asked the district court to resolve the dispute over the dollar amount by ordering an “appraisal agreement.” The district court ordered the appraisal agreement and warned both parties that if the parties and/or counsel did not comply, the court would impose sanctions.

George Keys was the appraiser for Summit Park, and Auto-Owners questioned his impartiality. Mr. Keys and the court-appointed umpire both agreed on an appraisal award of over $10 million. Auto-Owners then objected to Mr. Keys based on impartiality and that Summit Park had failed to disclose evidence bearing on his impartiality. The court disqualified Mr. Keys and vacated the appraisal award. Auto-Owners then moved for sanctions against Mr. Harris and Mr. Pettinato, including attorney fees and expenses. The district court assessed sanctions against the two attorneys for $354,350.65 in fees and expenses.

Attorneys Harris and Pettinato questioned the district court’s authority to enter the disclosure order, and they refused to comply with the order. They could have sought reconsideration or a writ, but they could not violate the order. See Maness v. Meyers, 419 U.S. 449, 458 (1975) (“If a person to whom a court directs an order believes that order is incorrect the remedy is to appeal, but, absent a stay, he must comply promptly with the order pending appeal.”). Orders issued by a court must be obeyed by the parties until “reversed by orderly and proper proceedings.” United States v. United Mine Workers, 330 U.S. 258, 293 (1947); See United States v. Beery, 678 F.2d 856, 866 (10th Cir. 1982); and see also GTE Sylvania, Inc. v. Consumers Union of U.S., Inc, 445 U.S. 375, 386 (1980). Failure to comply with the court order could trigger sanctions. See United Mine Workers, 330 U.S. at 294 (quoting Howat v. Kansas, 258 U.S. 181, 190 (1922)), so Mr. Harris and Mr. Pettinato were obligated to comply in the absence of an appellate challenge, and could be sanctioned for noncompliance.

Attorneys Harris and Pettinato challenged the district court’s conclusion that they had violated the disclosure order by arguing that the district court misinterpreted the term “impartial” and that Harris and Pettinato disclosed sufficient information about Mr. Keys.

Because Mr. Harris and Mr. Pettinato urged a legal error consisting of misinterpretation of the term “impartial,” the Tenth Circuit Court of Appeals engaged in de novo review. Hamilton v. Boise Cascade Express, 519 F.3d 1197, 1202 (10th Cir. 2008), and it otherwise confined the review sanctions under the abuse-of-discretion standard. Russell v. Weicker Moving & Storage Co., 746 F.2d 1419, 1420 (10th Cir. 1984) (per curiam).

The district court requested disclosure of (1) the appraiser’s “financial or personal interest in the outcome of the appraisal,” (2) any “current or previous relationship” between the appraiser and Summit Park’s counsel, and (3) any other facts subsequently learned that “a reasonable person would consider likely to affect” the appraiser’s impartiality.

Harris and Pettinato made two disclosures:

  1. “Mr. Keys does not have any significant prior business relationship with [Merlin], Summit Park, or C3 Group. Mr. Keys has acted as a public adjuster and/or appraiser on behalf of policyholders that [Merlin] has represented in the past, however, this obviously does not affect his ability to act [as] an appraiser in the matter.” Appellant’s App’x, vol. 2 at 292.
  2. “Mr. Keys has acted as a public adjuster and/or appraiser on behalf of policyholders that [Merlin] has represented in the past. Mr. Keys has no financial interest in the claim, and has no previous relationship with the policyholder in this matter.” Id. at 298.

Mr. Keys made the following disclosure: “I do not have a material interest in the outcome of the Award and have never acted either for or against Summit Park Townhome Association. My fee agreement is based upon hourly rates plus expenses. . . . I do not have any substantial business relationship or financial interest in [Merlin]. There have been cases where both [Merlin] and Keys Claims Consultants acted for the same insured but under separate contracts.” Id. at 307-08.

Regardless of the district court’s definition of “impartial,” attorneys Harris and Pettinato failed to disclose that (1) other attorneys in their firm (Merlin Law Group) had worked with Mr. Keys on appraisals for at least 33 clients, (2) Merlin attorneys had represented Mr. Keys on various matters for over a decade, (3) Merlin’s founder and Mr. Keys had co-founded a Florida lobbying operation, and (4) Merlin attorneys had served as the incorporator and registered agent for one of Mr. Key’s companies.

Attorneys Harris and Pettinato claim they disclosed sufficient information about Mr. Keys’ impartiality and that they lacked personal knowledge about the undisclosed facts. Both of these arguments failed. The district court could reasonably find that the undisclosed information was meaningful, and Harris and Pettinato knew about some of Mr. Keys and Merlins contacts, and they had an obligation to inquire about contacts with other Merlin attorneys. Therefore, the district court acted within its discretion on Mr. Harris’ and Mr. Pettinato’s failure to disclose information.

As far as Mr. Harris’ and Mr. Pettinato’s argument over the district court’s definition of “impartial,” the disclosure order issued by the district court defined “impartial” by stating: “An individual who has a known, direct, and material interest in the outcome of the appraisal proceeding or a known, existing, and substantial relationship with a party may not serve as an appraiser.” Id. at 245.

Using the definition of “impartial” provided in the district court’s order, the district court required disclosure of any facts that a reasonable person would view as likely to affect the appraiser’s impartiality. Mr. Harris and Mr. Pettinato argued that evidence of an appraiser’s advocacy was unlikely to affect the appraiser’s impartiality. See Owners Ins. Co. v. Dakota Station II Condominium Ass’n, 2017 WL 3184568, at *4 (Colo. App. July 27, 2017), cert. granted, 2018 WL 948601 (Colo. Feb. 20, 2018). Even if Mr. Harris and Mr. Pettinato were correct, the district court could have reasonably viewed Mr. Keys’ undisclosed prior statements as likely to affect his impartiality based on a known, direct, and material interest in the outcome. Additionally, in an advertisement on Mr. Keys’ website, Mr. Pettinato endorsed Mr. Keys, saying: “Both Mr. Keys and his staff have assisted me as well as my firm in resolving an untold number of large multi-million dollar losses to an amicable resolution and settlement to the policyholders’ benefit and satisfaction.” Id. at 704. And a profile on Merlin’s website reported that Mr. Keys “ha[d] dedicated his professional life to being a voice for policyholders in property insurance claims.” Id. at 723. In this profile, Mr. Keys stated: “I was taught to always handle a claim as if my momma was the insured.” Id.

Therefore, the district court did not abuse its discretion by finding that Mr. Harris and Mr. Pettinato had violated the disclosure order.

Mr. Harris and Mr. Pettinato argued that Auto-Owners waived the right to object by failing to object despite their knowledge of past relationships between Merlin and Mr. Keys. The Tenth Circuit disagreed, because without the undisclosed information, Auto-Owners would not have had full knowledge of the relationship.

For the sanction against the two attorneys, the district court invoked 28 U.S.C. § 1927. Under § 1927, an attorney “who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” 28 U.S.C. § 1927. The two attorneys argued that these three items fell outside of the initial sanctions order: (1) Auto-Owners’ preparation of the motion for sanctions ($51,309.50), (2) Auto-Owners’ preparation of the application for attorneys’ fees and expenses ($16,960.50), and (3) Auto-Owners’ other related work ($61,662.50).

The Tenth Circuit disagreed with those arguments, because the district court explained the attorney fees in the sanctions order. Therefore, the Tenth Circuit deferred to the district court’s interpretation of its own order. See, e.g., Chi., Rock Island & Pac. R.R. v. Diamond Shamrock Ref. & Mktg. Co., 865 F.2d 807, 811 (7th Cir. 1988) (“We shall not reverse a district court’s interpretation of its own order ‘unless the record clearly shows an abuse of discretion.’” (quoting Arenson v. Chicago Mercantile Exch., 520 F.2d 722, 725 (7th Cir. 1975))). The Tenth Circuit found it reasonable for the district court to consider these litigation expenses.

The fifth area that Mr. Harris and Mr. Pettinato questioned was a deprivation of due process based on an inability to respond to the district court’s inclusion of litigation activities outside of the initial sanctions order. The Tenth Circuit disagreed because they could have objected to any of the attorney fees included on the Auto-Owners application that was filed. This opportunity supplied due process. See Resolution Tr. Corp. v. Dabney, 73 F.3d 262, 268 (10th Cir. 1995); see also Auto-Owners Ins. Co. v. Summit Park Townhome Ass’n, No. 16-1352, slip op. at 17-19 (10th Cir. Mar. 30, 2018) (to be published) (discussing a similar argument made by Summit Park Townhome Association).

The last argument was that the court awarded an unreasonable about of attorney fees. The Tenth Circuit reviewed a determination of attorney fees for an abuse of discretion. See AeroTech, Inc. v. Estes, 110 F.3d 1523, 1528 (10th Cir. 1997). In applying the abuse-of-discretion standard, the Circuit considered whether the district court’s determination appeared reasonable in light of the complexity of the case, the number of strategies pursued, and the responses necessitated by the other party’s maneuvering. See Robinson v. City of Edmond, 160 F.3d 1275, 1281 (10th Cir. 1998). The district court was not required to identify and justify every hour allowed or disallowed. See Malloy v. Monahan, 73 F.3d 1012, 1018 (10th Cir. 1996).

Based on the Tenth Circuit’s review, the district court considered three areas when determining reasonableness of fees. First, the district court concluded that it was reasonable for Auto-Owners’ counsel to spend long hours because “Auto-Owners had over $30 million at stake” and the issues were complex. Appellants’ App’x, vol. 3 at 673-74. Second, the court considered the local market, the qualifications of the attorneys, and the contentiousness of the litigation. These considerations led the district court to find that the billing rates had been reasonable. Third, the court considered the use of billing judgment by Auto-Owners’ counsel through concessions such as staffing with lower-billing attorneys, declining to charge for all hours worked, and discounting hours worked by paralegals and secretaries. The district court acted reasonably in considering these concessions. The Tenth Circuit concluded that the district court did not abuse its discretion in calculating the amount of the sanction ($354,350.65).

The Tenth Circuit Court of Appeals concluded that the district court did not err in sanctioning Mr. Harris and Mr. Pettinato, that Mr. Harris and Mr. Pettinato violated the district courts order by failing disclose information bearing on Mr. Key’s impartiality, and that the amount set by the district court was reasonable.

Colorado Court of Appeals: Contract that Violates Rules of Professional Conduct Unenforceable

The Colorado Court of Appeals issued its opinion in Calvert v. Mayberry on Thursday, April 21, 2016.

Disciplinary Proceeding—Oral Contract—Colo. RPC 1.8(a)—Issue Preclusion—Void Agreement—Equitable Lien—Unclean Hands.

In a question of first impression, the Colorado Court of Appeals decided that an attorney who enters into a contract with a client that violates Colo. RPC 1.8(a) cannot later enforce the contract against the client.

The Colorado Supreme Court disbarred the attorney after a hearing board determined he had committed ethical violations, including some against the former client in this case. Specifically, the hearing board found that the attorney had loaned the former client over $100,000 and secured his interest in the loan funds by recording a false deed of trust in the chain of title on her house. The hearing board also found that the attorney had not complied with Colo. RPC 1.8(a) when he made the loans to the former client. The attorney then filed this case to recoup money he had loaned to the former client, claiming that he had an oral agreement with the client for repayment of the loans, and alternatively asserting that the trial court should impose an equitable lien on the former client’s house. The trial court granted summary judgment for the former client and her daughter (to whom she had quitclaimed her interest in the house), finding that because the oral contract between the former client and the attorney violated Colo. RPC 1.8(a), the attorney was ethically prohibited from enforcing that agreement.

The attorney appealed. On appeal, the former client contended that the doctrine of issue preclusion barred the attorney from relitigating factual issues that were litigated during the disciplinary proceeding. The court agreed; therefore, the hearing board’s factual findings bind the attorney in this case, including its finding that the attorney violated Rule 1.8(a) when he entered into the oral contract with the former client, and the oral contract between the attorney and the former client is void and unenforceable. The attorney contended that the trial court erred in applying the doctrine of unclean hands to bar his request for an equitable lien. Based on the attorney’s misconduct, the court disagreed. The attorney also asserted a fraud claim against the former client’s daughter, but his allegations did not support this claim, and it failed as a matter of law. The district court properly entered summary judgment.

The judgment was affirmed and the case was remanded to the trial court to determine whether fees should be awarded to the former client and her daughter.

Summary provided courtesy of The Colorado Lawyer.

Tenth Circuit: Sanctions Award Inappropriate When Trigger was Date Expert Report Exchanged

The Tenth Circuit Court of Appeals issued its opinion in Baca v. Berry on Tuesday, December 1, 2015.

Several citizens brought suit in state court against Albuquerque Mayor Richard Berry in January 2013 over the city’s redistricting plan enacted after the 2010 caucus. The citizens alleged that the newly adopted redistricting map denied Latinos opportunities to participate in the political process and elect candidates of their choice. The mayor removed the case to federal court.

In March 2013, a city charter amendment changed the percentage of the vote needed for a candidate to win from 40% to 50%. On June 25, 2013, the mayor produced an expert report that tended to disprove the plaintiffs’ arguments about redistricting. Later, the plaintiffs filed a motion to dismiss without prejudice, which the mayor opposed, requesting dismissal with prejudice instead. The district court decided to wait to rule on the motions until after the November elections.

The court held a phone conference with the parties after the November elections and set a status conference in December 2013. However, the court cancelled the December conference due to scheduling conflicts and did not reschedule. In January 2014, the court dismissed the plaintiffs’ claims with prejudice. The mayor moved for sanctions under 28 U.S.C. § 1927, arguing the plaintiffs vexatiously multiplied the proceedings. The district court granted the mayor’s motion and entered an attorney fee award against plaintiffs beginning on June 25, 2013, the date the mayor’s expert submitted his report. Plaintiffs appealed.

The Tenth Circuit evaluated the district court’s sanction award for abuse of discretion. The voters argued that the court’s order staying the case identified no legal prejudice to the mayor and was based solely on its convenience, which constitutes an abuse of discretion. The Tenth Circuit disagreed. The Tenth Circuit first noted that there is a difference between a court staying proceedings and dismissing a case, and there was no abuse of discretion in the court’s stay order. The voters did not appeal the dismissal. The Tenth Circuit also noted that, contrary to the voters’ assertions, the court did not issue the stay merely out of convenience, but because it found the record incomplete and believed that the upcoming mayoral elections would provide direction whether to dismiss the case with or without prejudice.

The Tenth Circuit similarly rejected the voters’ Voting Rights Act and one-person-one-vote claims. The Tenth Circuit found that the plaintiffs’ expert failed to satisfy the second and third prongs of the Gingles test. Because the mayor’s expert exposed the flaws in plaintiffs’ arguments by showing that the preferred candidates actually won all elections in which the plaintiffs’ were arguing Voting Rights Act violations, the Tenth Circuit found no error in the district court’s decision. The Tenth Circuit also found no one-person-one-vote violation, finding the population variance well within acceptable limits.

The Tenth Circuit next evaluated the sanctions award and determined that although the district court had discretion to issue sanctions under § 1927, it was an abuse of discretion for the court to base the sanction award on the day plaintiffs received the report from the mayor’s expert. The Tenth Circuit found that it would be unreasonable to expect the plaintiffs to withdraw their complaint on the day that the report was exchanged, since they would likely need time to review it and determine whether it had merit. Because of this, the Tenth Circuit reversed the sanction award. The Tenth Circuit noted that, on remand, the district court was free to revisit fees on remand.

The Tenth Circuit reversed the district court. Judge Phillips wrote a thoughtful dissent; he would not have allowed a sanction award at all because of the potentially chilling effect on legitimate voter discrimination claims.

Colorado Court of Appeals: Prosecution Not Entitled to Withdraw from Plea Bargain Regardless of Prosecutorial Misconduct

The Colorado Court of Appeals issued its opinion in People v. Mazzarelli on Thursday, March 10, 2016.

Mazzarelli was charged with child abuse in violation of C.R.S. § 18-6-401(1)(a), a class 3 felony, but entered into a plea agreement in which he agreed to plead guilty to a reduced charge of class 4 felony child abuse in exchange for a stipulated sentencing range of 2 to 8 years. The trial court accepted the plea agreement at the initial hearing but delayed sentencing until it could review the presentence report.

At the next hearing, the prosecution proposed a five-year sentence, arguing that the defendant was unemployed and was playing video games when the incident in question occurred. The trial judge, who was also presiding over the accompanying dependency and neglect proceeding, informed the prosecution that it disliked the sentence because the father’s incarceration would not be in the child’s best interest, further saying he was not going to accept the plea agreement. The judge offered the parties a chance to withdraw the agreement at that time.

After that hearing, Mazzarelli filed a motion for a special prosecutor due to “blatantly false statements” made by the People. At the third hearing, the People clarified the misstatements, saying that defendant had been employed when the abuse occurred and was not playing video games as they had previously represented. The People requested to withdraw the plea agreement and set the case for trial, but the trial court denied the request and sentenced Mazzarelli to 36 months supervised probation.

The People appealed, contending the trial court should be bound by the plea agreement because it did not inform the parties that it was not inclined to accept the proposed sentencing, and that the court erred when it found prosecutorial misconduct and would not allow the People to withdraw from the plea agreement. The court of appeals disagreed with the People’s arguments but did not address the prosecutorial misconduct issue because the People had no right to withdraw from the plea agreement, further finding that the trial court had decided not to sentence the defendant pursuant to the plea agreement prior to having knowledge of the prosecutorial misconduct.

The court of appeals affirmed.

Tenth Circuit: Sanctions Against Attorney Affirmed Where He Negligently Disregarded Discovery Obligations

The Tenth Circuit Court of Appeals issued its opinion in Sun River Energy, Inc. v. Nelson on Wednesday, September 2, 2015.

Attorneys James E. Pennington and Stephen E. Csajaghy were sanctioned for their refusal to disclose insurance coverage during securities litigation involving Sun River. Pennington was in-house counsel for Sun River and Csajaghy was retained to represent the company in the underlying litigation. During the underlying litigation, a magistrate judge set a discovery deadline of April 6, 2011, by which time Sun River was obligated to disclose any insurance coverage. However, no disclosure was made until nearly 18 months later, after repeated requests from opposing counsel, and by the time the policy was disclosed the coverage period had expired. Opposing counsel moved for sanctions against Sun River under Rule 37(b)(2)(A), requesting that Sun River’s claims against defendants be dismissed and entering default judgment for defendants on their counterclaims.

The magistrate judge held an evidentiary hearing, and ultimately recommended that default judgment be entered against Sun River but not approving dismissal. The magistrate judge noted that there was not intentional misrepresentation by Sun River’s attorneys, but neither attorney actually looked at the policy to see if it provided coverage, instead relying on their mistaken beliefs that the policy would not be relevant. Sun River objected to the magistrate judge’s recommendations, and a district judge addressed the contentions at a pretrial hearing. By that time, Csajaghy had withdrawn from the representation and Pennington appeared as counsel of record. The district court decided counsel were culpable for the misrepresentation and should be held personally responsible. The district court ultimately imposed the sanction of opposing counsel’s attorney fees against Pennington and Csajaghy in the amount of $20,435.

Pennington and Csajaghy moved for reconsideration, arguing Rule 37(c) does not allow imposition of sanctions on counsel, counsel acted with substantial justification, any sanction should have been imposed on Sun River, and due process precluded imposition of a sanction against Csajaghy, who had withdrawn before the sanctions were imposed. In response, defendants argued the sanction was not only justified under Rule 37 but under Rule 26(g)(3) and the district court’s inherent power as well, also noting that counsel’s deliberate indifference demonstrated a lack of substantial justification, sanctioning counsel was appropriate, and that both attorneys had been afforded substantial due process in the matter. The district court issued a thorough written decision, granting in part and denying in part the motion for reconsideration. The district court noted that Rule 37(b)(2)(C) authorizes a monetary sanction for failure to obey a discovery order and expressly allowed the attorney advising the party to be sanctioned, finding that since Csajaghy was Sun River’s attorney of record at the time of the discovery violation the sanction against him was appropriate. As to Pennington, since he was not the attorney of record at the time of the discovery violation, the district court held he was not subject to Rule 37(b)(2)(C) sanctions, but became responsible for timely updating discovery responses under Rule 26 when he became attorney of record, and therefore the sanction was justified under Rule 37(c)(1)(A). The attorneys appealed.

The Tenth Circuit began its analysis by examining the sanction against attorney Pennington. The Tenth Circuit noted that the only case law on the subject held that the sanctions were enforceable against parties only, not attorneys. The district court rejected the holding as unpersuasive, but the Tenth Circuit disagreed with the district court’s analysis as overbroad. The Tenth Circuit noted that there was no express textual reference extending the sanction against attorneys, and found that consideration of the relevant text cut against the district court’s analysis. Under the circumstances of this case, the Tenth Circuit found the sanctions against Pennington unwarranted by Rule 37. Turning to defendants’ argument that the sanctions were allowed by the district court’s inherent power, the Tenth Circuit again disagreed, finding that although his failure to disclose was not substantially justified, it was not vexatious, wanton, oppressive, or done in bad faith. The Tenth Circuit reversed the sanction against Pennington.

Turning to attorney Csajaghy, the Tenth Circuit found there was no question that the district court had authority to impose a personal sanction. Csajaghy objected to the sanction, arguing the sanction was not warranted on the facts, sanctioning counsel was inconsistent with the decision not to sanction Sun River, and the procedure through which he was sanctioned violated due process. The Tenth Circuit found no merit to any of his arguments. The Tenth Circuit admonished that, as counsel of record in the litigation, it was irresponsible for Csajaghy to assume that the in-house counsel, Pennington, had reviewed the policy. Even if had known Pennington reviewed the policy, Csajaghy should have conducted an independent review to satisfy his professional obligations. The Tenth Circuit further chastised Csajaghy for assuming the policy would not provide coverage in lieu of exercising critical judgment. The Tenth Circuit also approved of the district court’s decision to sanction Csajaghy while not sanctioning Sun River, because the company reasonably relied on its counsel to provide relevant disclosures and counsel failed to do so. Finally, the Tenth Circuit addressed Csajaghy’s due process arguments, and although it agreed with the district court that the initial order imposing the sanction was procedurally defective, any defect was cured by the subsequent proceedings on the motion for reconsideration.

The Tenth Circuit reversed the sanction against attorney Pennington and affirmed the sanction against attorney Csajaghy.

Tenth Circuit: Sanctions Reversed for Lack of Notice and Hearing

The Tenth Circuit Court of Appeals issued its opinion in United States v. Melot on Friday, September 26, 2014.

Katherine Melot (plaintiff) and her husband Billy owe the government millions of dollars in federal taxes, and Billy is serving a prison sentence for tax crimes. The tax debt led the government to foreclose on the Melots’ properties. The Melots tried to stop the foreclosures using fraudulent methods — namely, by asserting liens on the property in the name of Stephen Byers, an incarcerated and destitute person. The liens and Byers’ motion to intervene in the foreclosure proceedings were signed by Mrs. Melot and they were mailed from the address of a friend of the Melots. The government suspected fraud and, at the hearing on the motion to intervene, presented evidence tending to show the scheme between Melot and Byers.

At the hearing, Mrs. Melot’s counsel requested notice prior to the imposition of any sanctions, and the magistrate noted that the Melots would be noticed on any hearing regarding the contempt. The magistrate certified criminal contempt by the Melots. More than a year later, the district court issued an order addressing the contempt certifications, and, recognizing the costs of prosecuting a criminal contempt matter, declined to order contempt, instead imposing the following sanctions: (1) removal of Mrs. Melot and her children from the property; (2) reimbursement of the government’s costs for the hearing; (3) striking the Melots’ pending motions, responses to motions, and requests for stays; and (4) imposing filing restrictions.

Mrs. Melot appealed the sanctions, arguing the district court violated the Fifth Amendment’s Due Process clause by imposing sanctions without giving the Melots notice and an opportunity to be heard. The Tenth Circuit agreed. Sanctions cannot be imposed without notice that sanctions are being considered by the court and a subsequent opportunity for the defending party to be heard. Although the magistrate had provided notice of the possibility of criminal contempt, there was no notice of the imposition of sanctions. The Tenth Circuit reversed the district court’s sanction order and remanded for further proceedings, noting that the district court was not barred from re-imposing sanctions after proper notice and hearing.

Colorado Court of Appeals: Attorney Must Pay Opposing Party’s Appellate Fees and Costs for His Frivolous Appeal

The Colorado Court of Appeals issued its opinion in Rose L. Watson Revocable Trust v. BP America Production Co. on Thursday, January 30, 2014.

Frivolous and Groundless Claim Sanctions.

Attorney William Bontrager brought claims against BP America Production Company (BP) on behalf of the Rose L. Watson Revocable Trust (Trust). The Trust alleged that BP had failed to explore and develop natural gas formations pursuant to its lease of the Trust’s property. Sixteen months after suit was filed, BP moved for summary judgment. As of that date, the Trust had not conducted any discovery and had not set the case for trial. The Trust did not respond to BP’s motion. Bontrager stated that the Trust was choosing not to respond and, instead, sought leave to conduct extensive discovery. He did not submit an affidavit pursuant to CRCP 56(f) requesting additional time to respond to BP’s motion after completing discovery.

The district court granted BP’s motion. In its order, the court expressed doubt as to whether Bontrager had conducted an adequate investigation before filing suit and found that the Trust’s complaint was frivolous and groundless, entitling BP to an award of attorney fees and costs under CRS §§ 13-17-101 to -106.

The Trust appealed, and a division of the Court of Appeals affirmed the summary judgment and remanded for a determination of BP’s reasonable attorney fees incurred on appeal. Following a hearing, the district court issued an order detailing why BP was entitled to an award of fees and costs. The court awarded $162,697 in fees to BP and ordered Bontrager to pay 75% of that sum. Bontrager appealed.

Bontrager filed the notice of appeal on April 10, 2013 and his opening brief on June 22, 2013. BP filed an answer brief on July 29, 2013. Bontrager filed a reply brief on August 19, 2013. On December 1, 2013, Bontrager filed a one-sentence motion to voluntarily dismiss his appeal. BP opposed, arguing that CAR 42(b) requires that if the appeal is voluntarily dismissed, it must be conditioned on Bontrager paying BP’s appellate attorney fees. The Court ordered Bontrager to reply to BP’s opposition. Bontrager’s reply stated he was moving to dismiss because (1) substantial attorney fees had been awarded against him in other similar cases; and (2) owing to decisions of the Court and denials of certiorari review in other similar cases, he had “lost all hope” that his arguments would be resolved on the merits.

The Court of Appeals denied Bontrager’s motion, holding that it would not be in the interests of justice or fairness to allow him to voluntarily dismiss the appeal at this point and not pay BP its appellate attorney fees. The Court next declared the appeal frivolous. The Court noted that other similar cases filed by Bontrager had been dismissed by various district courts and divisions of the Court as frivolous. It rejected Bontrager’s continued assertion that the summary judgment order was incorrectly granted and rejected his repeated arguments already held to be frivolous by other divisions of the Court. The Court granted BP’s request for an award of its attorney fees incurred on appeal and remanded the case for a determination of those fees.

Summary and full case available here.

Colorado Court of Appeals: Trial Court’s Imposition of Fine in Excess of Damages Upheld

The Colorado Court of Appeals issued its opinion in In re Estate of Hossack: Robinson v. Hossack on Thursday, April 25, 2013.

Contempt—Fine as Remedial Sanction for Contempt.

Gladys Robinson appealed the trial court’s order denying her motion to set aside a judgment in favor of decedent’s children and against Robinson in the sum of $231,300. The order was affirmed.

Robinson lived with the decedent, Charles Erroll Hossack, at the time of his death. Following the settlement of his estate, the court ordered her to return specified items of personal property to Lori and Kirk Hossack, decedent’s children. Robinson did not comply.

In a written order issued November 14, 2007, made effective nunc pro tunc August 21, 2007, the court found Robinson in contempt because she did not return the property. Robinson did not timely appeal the contempt order and did not comply with its terms. The fines that were imposed ($100 per day and later $1,000 per day) eventually accumulated to a sum of $231,300.

The decedent’s children moved to reduce this amount to judgment in March 2008. This motion was granted in January 2010, with interest accruing at 8% annually.

Robinson moved under CRCP 60(b)(3) to set aside the judgment. She argued that the amount of the fine should have been limited to any damages the decedent’s children may have suffered. The trial court denied the motion, and Robinson appealed.

CRCP 60(b)(3) allows a court to grant a party relief from a void judgment. Robinson based her argument on cases and language in CRCP 107(d) that limited the amount of a remedial fine to the damages the adverse party suffered. Due to amendments to the rule, effective April 1, 1995, the rule now defines remedial sanctions for contempt to be “[s]anctions imposed to force compliance with a lawful order or to compel performance of an act within the person’s power or present ability to perform.” It also empowers the court to continue to fine a contemnor until an act ordered to be performed is performed.

Robinson also argued that any fine could only be payable to the court and not to decedent’s children. The Court found no authority for this argument. Accordingly, the order was affirmed.

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