Justia Colorado Supreme Court Opinion Summaries

Articles Posted in Contracts

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The United States District Court for the District of Colorado certified a question of law to the Colorado Supreme Court. The question centered on proof of equitable estoppel. In 2017, a group of current and former exotic dancers sued the owners of clubs where they performed and the club owners’ corporate parent companies alleging the defendants acted in concert to wrongfully deprive the dancers of basic protections provided by law to employees. The plaintiffs contended they were misclassified as nonemployee “independent contractors” or “lessees” pursuant to “Entertainment Lease” agreements that identified the club-owner defendants as “landlords” rather than employers. According to the plaintiffs’ pleadings, the club-owner and corporate-parent defendants were jointly and severally liable for denying the dancers earned minimum wages and overtime pay, confiscating or otherwise misallocating their gratuities, charging them fees to work, and subjecting them to onerous fines. The club-owner defendants have successfully compelled arbitration of the plaintiffs’ claims based on the arbitration clause included in the agreements the dancers signed with the club owners. The corporate-parent defendants sought to do the same, but because they were not parties to the agreements or to any other written contract with the dancers, they had to find a different hook to compel the dancers into arbitration: that the dancers should be equitably estopped from litigating their claims against one set of defendants because they were in compelled arbitration of the same claims against the other set of defendants. The Colorado Supreme Court held Colorado’s law of equitable estoppel applied in the same manner when a dispute involves an arbitration agreement as it did in other contexts. Thus, a nonsignatory to an arbitration agreement could only assert equitable estoppel against a signatory in an effort to compel arbitration if the nonsignatory can demonstrate each of the elements of equitable estoppel, including detrimental reliance. View "Santich v. VCG Holding Corp." on Justia Law

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A condominium association, Dakota Station II Condominium, filed two claims with its insurer, Owners Insurance Company, for weather damage. The parties couldn’t agree on the money owed, so Dakota invoked the appraisal provision of its insurance policy. The parties each selected an appraiser, putting the rest of the provision’s terms into motion. Ultimately, the appraisers submitted conflicting value estimates to an umpire, and the umpire issued a final award, accepting some estimates from each appraiser. Dakota’s appraiser signed onto the award, and Owners paid Dakota. Owners later moved to vacate the award, arguing that Dakota’s appraiser was not “impartial” as required by the insurance policy’s appraisal provision and that she failed to disclose material facts. The trial court disagreed and “dismissed” the motion to vacate. A division of the court of appeals affirmed. In its review, the Colorado Supreme Court interpreted the policy’s impartiality requirement and determined whether a contingent-cap fee agreement between Dakota and its appraiser rendered the appraiser partial as a matter of law. The Court concluded the plain language of the policy required appraisers to be unbiased, disinterested, and unswayed by personal interest, and the contingent-cap fee agreement didn’t render Dakota’s appraiser partial as a matter of law. Accordingly, the Court affirmed the judgment of the court of appeals with respect to the contingent-cap fee agreement, reversed with respect to the impartiality requirement, and remanded for further proceedings. View "Owners Ins. v. Dakota Station II Condo. Ass'n" on Justia Law

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In 2013, Blooming Terrace No. 1 (“Blooming Terrace”) obtained an $11 million loan from KH Blake Street, LLC (“KH Blake Street”), a special purpose entity organized by Kresher Holdings, LLC. The loan was secured by a deed of trust and memorialized by promissory note. Blooming Terrace paid a $220,000 origination fee upon execution of that note. The note specified that interest would accrue on the outstanding principal at a rate of 11% per annum. In the event of default, the note provided for a higher default interest rate of 21% per annum. The note required monthly interest payments in the amount of 8% per annum throughout the term of the loan, though these periodic payments did not apply to reduce the principal balance of the loan. In the event of any late monthly payment, a 5% late fee was applicable to the overdue amount. The note was to mature in 2014. However, KH Blake Street reserved the right to accelerate Blooming Terrace’s full loan repayment obligation upon an event of default. Prior to paying down any portion of the principal, Blooming Terrace defaulted on its monthly payment obligation. The parties entered into a forbearance agreement; at that time, the parties stipulated that the accrued charges due and owing to KH Blake Street under the original loan agreement were $778,583.33. In exchange for KH Blake Street’s agreement not to pursue collection of that sum, or any other remedies, Blooming Terrace agreed to pay a $110,000 fee. Payment of this new fee did not substitute for any other charges that continued to accrue during the forbearance period, including, but not necessarily limited to, default interest and late fees. Instead, a condition of the forbearance was Blooming Terrace’s compliance with all of the original loan terms. The Colorado Supreme Court granted certiorari to clarify the proper method for determining the effective rate of interest charged on a nonconsumer loan to ascertain whether that rate was usurious under Colorado law: the effective interest rate should be calculated by determining the total per annum rate of interest that a borrower is subjected to during a given extension of credit. Here, where a forbearance agreement was entered into after an event of default, all charges that accrued during the period of forbearance must be totaled and then annualized using only that timeframe as the annualization period. Such includable interest must then be combined with any interest that continued to accrue pursuant to the original loan terms to determine the effective rate of interest subject to the 45% ceiling set by Colorado’s usury statute, section 5-12-103, C.R.S. (2018). View "Blooming Terrace No. 1, LLC v. KH Blake Street, LLC" on Justia Law

Posted in: Business Law, Contracts

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Douglas Schoninger was interested in launching a professional rugby league in the United States. Toward that end, he formed PRO Rugby and approached the United States of America Rugby Football Union (“USAR”), the national governing body for rugby in the United States. PRO Rugby and USAR entered into the Sanction Agreement, which authorized PRO Rugby to establish a professional rugby league in the United States. At issue before the Colorado Supreme Court in this appeal was whether a nonsignatory to an arbitration agreement could be required to arbitrate under that agreement by virtue of the fact that it was a purported agent of a signatory to the agreement. Specifically, the Court was asked to decide whether the district court erred when it entered an order requiring petitioner Rugby International Marketing (“RIM”), a nonsignatory to a Professional Rugby Sanction Agreement (the “Sanction Agreement”), to arbitrate pursuant to an arbitration provision in that Agreement that covered the parties and their agents. The court found that because RIM was an agent for USAR, a signatory of the Sanction Agreement, RIM fell “squarely within the broad language of the arbitration provision.” The Supreme Court found that the weight of authority nationally established that, subject to a number of recognized exceptions, only parties to an agreement containing an arbitration provision could compel or be subject to arbitration. Here, because RIM was not a party to the Sanction Agreement and because respondents PRO Rugby and Schoninger had not established any of the recognized exceptions applied, the Supreme Court concluded the district court erred in determining that RIM was subject to arbitration under the Sanction Agreement. View "In re N.A. Rugby Union v. U.S. Rugby Football Union" on Justia Law

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David Calvert was disbarred for various ethical violations, including entering into an oral agreement with a client without complying with the requisite safeguards of Colorado Rule of Professional Conduct 1.8(a). After being disbarred, Calvert sued his former client, Diane Mayberry, for breach of that same oral agreement, claiming that there was a contract between them. The trial court granted Mayberry’s motion for summary judgment, and the court of appeals affirmed. On appeal to the Colorado Supreme Court, Calvert challenged: (1) whether an attorney who was found to have violated Rule 1.8(a) in a disciplinary proceeding was estopped from relitigating the same factual issues in a civil proceeding; (2) whether a contract between an attorney and a client entered into in violation of Rule 1.8(a) was enforceable; and (3) whether the trial court abused its discretion in awarding attorney’s fees against Calvert after finding his lawsuit groundless and frivolous. The Colorado Supreme Court declined the issue preclusion issue raised because Calvert conceded he could not relitigate whether he entered into an agreement with a client without meeting Rule 1.8(a)’s requirements. The Court held that when an attorney enters into a contract without complying with Rule 1.8(a), the contract was presumptively void as against public policy; however, a lawyer may rebut that presumption by showing that, under the circumstances, the contract does not contravene the public policy underlying Rule 1.8(a). Further, the Court held the trial court did not abuse its discretion in awarding attorney’s fees at the trial level because the record supported the finding that the case was groundless, frivolous, and brought in bad faith. But as to attorney’s fees at the appellate level, because the questions of whether issue preclusion applied in this proceeding and whether a contract made in violation of Rule 1.8(a) is void as against public policy were legitimately appealable issues, thereby making a grant of appellate attorney’s fees inappropriate. Therefore, the Supreme Court affirmed the court of appeals as to the merits on other grounds, affirmed the award of attorney’s fees at the trial level, and reversed the court of appeals’ order remanding for a determination of appellate attorney’s fees. View "Calvert v. Mayberry" on Justia Law

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The issue this case presented for the Colorado Supreme Court's review were the insurance proceeds owed to petitioners Rosalin Rogers and Mark Thompson because of a failed property investment orchestrated by their broker-dealer, United Securities Alliance. Ten years into litigation, the issue of the amount of debt at issue has remained at issue, and unresolvable by the courts. United's insurer, Catlin Insurance, was ordered to pay petitioners under a professional liability policy; an appellate court upheld a district court's determination of attorney fees and costs that Catlin could deduct from the liability limit under the policy. The Supreme Court first addressed whether the "Thompson IV" division erred when it upheld the district court’s decision to consider new evidence on remand from Thompson v. United Securities Alliance, Inc. (Thompson III), No. 13CA2037, (Colo. App. Oct. 16, 2014). And Secondly, the Supreme Court addressed whether the Thompson IV division erred when it held that there was no legal basis for awarding prejudgment interest in a garnishment proceeding. As to the first issue, the Supreme Court affirmed the court of appeals; as to the second, it reversed and remanded for further proceedings. View "Thompson v. Catlin" on Justia Law

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Plaintiff-petitioner Charissa Schultz was injured in a 2015 car accident in which the other driver failed to stop at a stop sign. The other driver’s insurance company settled for its $25,000 policy limit, and Schultz made a demand on her own uninsured/underinsured motorist benefits under her GEICO policy, which also had a $25,000 limit. In April 2017, after months of correspondence and apparent review of an MRI performed on Schultz in April 2015, GEICO offered Schultz its full policy limit, and it did so without requesting that she undergo an independent medical examination (“IME”). Indeed, GEICO’s claim logs reveal that at the time GEICO decided to offer Schultz its policy limits, it “concede[d] peer review wouldn’t be necessary,” indicating an affirmative decision not to request an IME. A few months later, Schultz filed the present lawsuit asserting claims for bad faith breach of an insurance contract and unreasonable delay in the payment of covered benefits. GEICO denied liability, disputing the extent and cause of Schultz’s claimed injuries and asserting that causation surrounding the knee replacement surgeries was “fairly debatable” because Schultz had preexisting arthritis, which GEICO claimed may independently have necessitated her surgeries. To establish its defense, GEICO ordered the IME and the district court granted that request. The Colorado Supreme Court concluded GEICO’s conduct had to be evaluated based on the evidence before it when it made its coverage decision and that, therefore, GEICO was not entitled to create new evidence in order to try to support its earlier coverage decision. The Court also concluded the district court abused its discretion when it ordered Schultz to undergo an IME over three years after the original accident that precipitated this case and a year and a half after GEICO had made the coverage decision at issue. View "Schultz v. GEICO Casualty Company" on Justia Law

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R. Parker Semler, a member of a condominium association, filed a breach-of- contract claim against the law firm that employed the association’s attorney. He alleged the attorney had a contract with the association’s president not to represent one association member against another. He also alleged that the attorney had, on behalf of other association members he was representing, acquired a deed conveying ownership of parking spaces over which Semler also claimed ownership, thereby breaching the contract and damaging Semler. The trial court dismissed the claim for lack of standing. A division of the court of appeals reversed, concluding that Semler had sufficiently alleged a breach-of-contract claim as a third-party beneficiary, and concluding that the strict privity rule, which “precludes attorney liability to non-clients absent fraud, malicious conduct, or negligent misrepresentation” did not bar Semler’s claim. The Colorado Supreme Court determined the strict privity rule barred Semler's breach-of-contract claim, and as such, he lacked standing to assert it. View "Bewley v. Semler" on Justia Law

Posted in: Contracts

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When Charlotte Fischer moved into a nursing home, she received an admissions packet full of forms. Among them was an agreement that compelled arbitration of certain legal disputes. The Health Care Availability Act (“HCAA” or “Act”) required such agreements contain a four-paragraph notice in a certain font size and in bold-faced type. Charlotte’s agreement included the required language in a statutorily permissible font size, but it was not printed in bold. Charlotte’s daughter signed the agreement on Charlotte’s behalf. After Charlotte died, her family initiated a wrongful death action against the health care facility in court. Citing the agreement, the health care facility moved to compel arbitration out of court. The trial court denied the motion, and the court of appeals affirmed, determining the arbitration agreement was void because it did not strictly comply with the HCAA. At issue was whether the Act required strict or substantial compliance. The Colorado Supreme Court held "substantial:" the agreement at issue her substantially complied with the formatting requirements of the law, notwithstanding the lack of bold type. View "Colorow Health Care, LLC v. Fischer" on Justia Law

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U.S. Welding sought review of the court of appeals’ judgment affirming the district court’s order awarding it no damages whatsoever for breach of contract with Advanced Circuits. Notwithstanding its determination following a bench trial that Advanced breached its contract to purchase from Welding all its nitrogen requirements during a one-year term, the district court reasoned that by declining Advanced’s request for an estimate of lost profits expected to result from Advanced’s breach prior to expiration of the contract term, Welding failed to mitigate. Because an aggrieved party is not obligated to mitigate damages from a breach by giving up its rights under the contract, and because requiring Welding to settle for a projection of anticipated lost profits, rather than its actual loss, as measured by the amount of nitrogen Advanced actually purchased from another vendor over the contract term, would amount to nothing less than forcing Welding to relinquish its rights under the contract, the Colorado Supreme Court concluded the district court erred. The court of appeals’ judgment concerning failure to mitigate was therefore reversed, and the case was remanded for further proceedings. View "U.S. Welding, Inc. v. Advanced Circuits, Inc." on Justia Law

Posted in: Business Law, Contracts