December 16, 2018

Tenth Circuit: On Interlocutory Review, Class Certifications Were Not Abuse of Discretion by District Court

The Tenth Circuit Court of Appeals issued its opinion in Menocal, et al. v. The GEO Group, Inc. on February 9, 2018.

The appeal addresses whether or not immigration detainees housed in a private contract detention facility in Aurora, Colorado may bring claims as a class under 18 U.S.C. § 1589, a provision of the Trafficking Victims Protection Act (TVPA) that prohibits forced labor, and Colorado unjust enrichment law.

The GEO Group, Inc. (GEO) owns and operates the Aurora Facility under government contract. While there, the plaintiff detainees (Appellees) rendered mandatory and voluntary services to GEO. Under GEO’s mandatory policies, they cleaned their housing units’ common areas. They also performed various jobs through a voluntary work program, which paid them $1 a day.

The district court certified two separate classes: (1) all detainees housed at the Aurora Facility in the past ten years (TVPA class), and (2) all detainees who participated in the Aurora Facility’s voluntary work program in the past three years (unjust enrichment class). On interlocutory appeal, GEO argues that the district court abused its discretion in certifying each class under Rule 23(b)(3) of the Federal Rules of Civil Procedure. It primarily contended that the Appellees’ TVPA and Colorado unjust enrichment claims both require predominantly individualized determinations, making class treatment inappropriate.

At all times relevant to this appeal, GEO owned and operated the Aurora Facility under contract with the U.S. Immigration and Customs Enforcement (ICE). In operating this facility, GEO implemented two programs that form the basis for this case: (1) the Housing Unit Sanitation Policy, which required all detainees to clean their common living areas; and (2) the Voluntary Work Program, which compensated detainees $1 a day for performing various jobs.

The Aurora Facility’s Sanitation Policy had two components: (1) a mandatory housing unit sanitation program, and (2) a general disciplinary system for detainees who engaged in “prohibited acts,” including refusal to participate in the housing unit sanitation program. Under the mandatory housing unit sanitation program, GEO staff generated daily lists of detainees from each housing unit who were assigned to clean common areas after meal service. Upon arriving at the Aurora Facility, each detainee received a handbook notifying them of their obligation to participate in the program.

Under the disciplinary system, detainees who refused to perform their cleaning assignments faced a range of possible sanctions, including the initiation of criminal proceedings, disciplinary segregation—solitary confinement—for up to 72 hours, loss of commissary, loss of job, restriction to housing unit, reprimand, or warning. The Aurora Facility handbook included an explanation of the disciplinary system and the possible sanctions for refusing to clean. The Appellees alleged that the TVPA class members were all “forced to clean the housing units for no pay and under threat of solitary confinement as punishment for any refusal to work.”

Under the Aurora Facility’s Voluntary Work Program (VWP), participating detainees received $1 a day in compensation for voluntarily performing jobs such as painting, food services, laundry services, barbershop, and sanitation. Detainees who wished to participate in the VWP had to sign the “Detainee Voluntary Work Program Agreement,” which specified that “compensation shall be $1 per day.” Detainees had the additional option of working without pay if no paid positions were available. The complaint alleged that the VWP class members were all “paid one dollar $1 per day for their VWP labor.”

The Appellees filed a class action complaint against GEO in the U.S. District Court for the District of Colorado on behalf of current and former ICE detainees housed at the Aurora Facility. The complaint alleged a TVPA forced labor claim based on the Sanitation Policy, and an unjust enrichment claim under Colorado law based on the VWP. GEO moved to dismiss the complaint under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. Regarding the TVPA claim, GEO argued that the Thirteenth Amendment’s civic duty exception to the prohibition on involuntary servitude should also apply to the TVPA’s ban on forced labor. Regarding the unjust enrichment claim, GEO asserted sovereign immunity as a government contractor because ICE “specifically directed it to establish a voluntary detainee work program and pay the detainees who volunteer for that program $1 per day.” The district court rejected these arguments and denied GEO’s motion to dismiss the TVPA and unjust enrichment claims. GEO moved for reconsideration of the court’s rulings. The court denied the motion, finding that GEO “d[id] not identify any intervening change in controlling law or new evidence previously unavailable” to warrant reconsideration. After prevailing on the motion to dismiss, Appellees moved for certification of a separate class for each claim under Fed. R. Civ. P. 23(a) and (b)(3). GEO petitioned the Tenth Circuit for interlocutory review of the class certifications. Accordingly, only the district court’s order granting class certification—and not its rulings on whether the complaint stated TVPA and unjust enrichment claims—is before us.

The Tenth Circuit reviewed the district court’s decision to certify a class for an abuse of discretion. The Tenth Circuit affirmed the district court’s certification of the TVPA class. GEO contended that the district court abused its discretion in determining that the TVPA class satisfied commonality, typicality, predominance, and superiority. The court did not abuse its discretion as to any of these requirements in certifying the TVPA class.

The Tenth Circuit also affirmed the district court’s certification of unjust enrichment class. GEO argued the district court abused its discretion in determining that the unjust enrichment class satisfies commonality, typicality, predominance, and superiority. The district court reasonably determined that the class members shared the circumstances relevant to the unjustness question and that individual damage assessments would not predominate over the class’s common issues. Its findings on commonality, typicality, and superiority were likewise reasonable and fell within its discretion.

The Tenth Circuit Court of Appeals affirmed the district court’s certification of both classes.

Colorado Court of Appeals: District Court Erred in Summarily Dismissing Conversion and Unjust Enrichment Claims

The Colorado Court of Appeals issued its opinion in Scott v. Scott on Thursday, February 22, 2018.

Torts—Conversion—Unjust Enrichment—Life Insurance Proceeds—Motion to Dismiss under C.R.C.P. 12(b)(5) and (6)—Attorney Fees and Costs.

Roseann’s marriage to Melvin Scott was dissolved. Their separation agreement provided that Melvin’s life insurance policies were to be maintained until Roseann remarried, and at that time the beneficiaries could be changed to the children of the parties. Upon emancipation of the children, if Roseann had remarried, Melvin could change the beneficiary to whomever he wished. A Prudential life insurance policy was the policy at issue in this case.

After the divorce, Melvin married Donna and remained married to her until his death. Roseann never remarried. A few years before Melvin died and decades after his divorce from Roseann, Melvin changed the named beneficiary on his life insurance policies to Donna. Melvin died and Donna received the proceeds from his life insurance policies. Roseann sent a demand letter to Donna, requesting the proceeds pursuant to the separation agreement. The proceeds were placed in a trust account pending the outcome of this litigation.

Roseann sued Donna in Mesa County District Court, alleging civil theft, conversion, and unjust enrichment/constructive trust. Donna did not answer but removed the case to federal district court based on administration of the veteran life insurance policies by the federal government. She then moved to dismiss Roseann’s claims under a theory of federal preemption. Ultimately, the federal court agreed with the preemption argument and dismissed Roseann’s claims with prejudice as to the veteran policies but remanded the remaining claims to the Mesa County District Court for resolution regarding the Prudential policy.

Donna filed a motion in the district court to dismiss under C.R.C.P. 12(b)(5) and (6), arguing that Roseann’s claims failed to state a claim upon which relief could be granted and that she had failed to join Melvin’s estate, a necessary party. The district court granted the motion and a subsequent motion for attorney fees and costs.

On appeal, the court of appeals first examined whether Roseann had stated claims sufficient to withstand the plausibility standard required to survive a motion to dismiss under C.R.C.P. 12(b)(5). To state a claim for civil theft, a plaintiff must allege the elements of criminal theft, which requires the specific intent of the defendant to permanently deprive the owner of the benefit of his property. Roseann made a single, conclusory allegation, repeating the language in the statute, that Donna acted with the requisite intent to state a claim for civil theft. The court concluded that, without more, the allegation was not entitled to the assumption of truth, and the district court did not err in dismissing the civil theft claim.

Conversion, unlike civil theft, does not require that the convertor act with the specific intent to permanently deprive the owner of his property. Even a good faith recipient of funds who receives them without knowledge that they belonged to another can be held liable for conversion. Here, Roseann adequately alleged that Donna’s dominion and control over the Prudential policy proceeds were unauthorized because of the separation agreement language and Donna’s refusal to return the allegedly converted funds. Roseann pleaded each element of conversion sufficiently for that claim to be plausible and withstand a request for dismissal under C.R.C.P. 12(b)(5).

Similarly, the court concluded it was error to dismiss Roseann’s claim for unjust enrichment and constructive trust. In general, a person who is unjustly enriched at the expense of another is subject to liability in restitution. Here, Roseann alleged that Donna received a benefit that was promised to Roseann in the separation agreement and it would be inequitable for Donna to retain the funds. Roseann asked the court to impose a constructive trust on the assets. While this may be a difficult case in that two arguably innocent parties are asserting legal claims to the same insurance proceeds, resolution should be left to the fact finder and not resolved under a C.R.C.P. 12(b)(5) motion to dismiss.

It was not clear whether the district court had dismissed the claims for failure to join a necessary party under C.R.C.P. 12(b)(6), so the court addressed this issue as well. Here, the court held that Melvin’s estate was not a necessary party because Donna has possession of the proceeds at issue, and thus complete relief can be accorded between Roseann and Donna. In addition, the life insurance proceeds were never a part of Melvin’s estate assets and therefore the estate has no interest in those proceeds. Further, this is not an action for enforcement of the separation agreement, but is essentially an action in tort. The district court erred by dismissing the case under C.R.C.P. 12(b)(6).

Lastly, Roseann contended that Donna is not entitled to attorney fees and costs because the court erred in granting Donna’s motion to dismiss. The court agreed.

The judgment was affirmed in part and reversed in part, and the case was remanded with directions. The award of attorney fees and costs was vacated.

Summary provided courtesy of Colorado Lawyer.

Colorado Supreme Court: Hospital Has No Private Right of Action Against Police Department for Cost of Treatment

The Colorado Supreme Court issued its opinion in City of Arvada ex rel. Arvada Police Department v. Denver Health & Hospital Authority on Monday, October 9, 2017.

Prisons—Costs of Incarceration.

Arvada police arrested a severely injured man and sent him to Denver Health Medical Center. Denver Health and Hospital Authority (Denver Health) sued Arvada for the cost of care, claiming that C.R.S. § 16-3-401, which says that persons in custody “shall be . . . provided . . . medical treatment,” required Arvada to pay the hospital for the detainee’s care. Here, the Colorado Supreme Court clarified that (1) whether a statute provides a private right of action is a question of standing, and (2) the same test for a private right of action under Allstate Insurance Co. v. Parfrey, 830 P.2d 905 (Colo. 1992), applies for claims against both governmental and non-governmental defendants. Applying Parfrey to Denver Health’s statutory claim, the court held that C.R.S. § 16-3-401 does not provide hospitals a private right of action to sue police departments for the cost of providing healthcare to persons in custody. Accordingly, it concluded that the trial court erred by granting summary judgment to Denver Health on the statutory claim. The court remanded the case for consideration of Denver Health’s unjust enrichment claim based on Arvada’s statutory duty to provide care for persons in custody.

Summary provided courtesy of Colorado Lawyer.