Colorado Bar Association
Business Law Section
January 10, 2007
Recent Colorado Judicial Decisions
Mark J. Loewenstein
Professor of Law, University of Colorado Law School
Summary of recent Colorado business law decisions announced through December 28, 2006.
AGENCY
COLORADO SUPREME COURT
*Raleigh v. Performance Plumbing and Heating, Inc, 130 P.3d 1011 (Colo. 2006).
Negligent Hiring—Duty—Scope of Duty—Reasonable Foreseeability—Undue Risk of Harm—
Dangerous Propensities—Causation—Scope of Employment.
The Raleighs sued respondent ("Performance Plumbing") for damages they suffered in an
automobile accident caused by Weese. Weese was driving his own truck home from work when
the accident took place. The Raleighs’ suit was based on two legal theories, respondeat superior
and negligent hiring. The Supreme Court upholds the judgment of the Court of Appeals requiring
dismissal of the respondeat superior and negligent hiring claims, but on different grounds as to
the negligent hiring claim.
Following the decision in Connes v. Molalla Transp. Sys., Inc., 831 P.2d 1316 (Colo. 1992), the
Court holds that the tort of negligent hiring, when applicable under the circumstances of a
particular case, can operate to hold an employer liable for intentional or negligent acts of an
employee that are either within or outside the scope of employment. However, under the facts of
this case, the trial court should not have submitted the negligent hiring claim to the jury; having
done so, it should have granted judgment in favor of Performance Plumbing notwithstanding the
verdict.
The Court of Appeals ruling invalidated the Raleighs’ negligent hiring award based on their
failure to prove the causation element of the tort. The Supreme Court holding focuses on the first
element of the tort, the scope of the employer’s legal duty based on the job duties for which the
employer hired the employee. The accident occurred after Weese had finished his workday. The
scope of Performance Plumbing’s duty to the Raleighs under the tort of negligent hiring did not
extend to the Raleighs, because they did not come into contact with Weese through his
employment.
The job required employees to commute to and from work on their own time. In this regard, this
company is no different from any of a large number of Colorado employers that expect their
employees to get to work on their own time and in their own way, and do not assume liability as
part of their hiring decision to act as a surety for automobile accidents their employees may
cause when commuting to and from work.
Hopp & Flesch, LLC v. Backstreet, 123 P.3d 1176 (Colo. 2005).
Use Immunity Under the Apparent Authority Doctrine—Professional Malpractice.
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The Supreme Court holds that a public employer’s advisement that any statements its employee
made during an internal investigation could not later be used against her in a criminal proceeding
did not constitute an enforceable offer of use immunity pursuant to the apparent authority
doctrine under the facts of this case. The apparent authority doctrine implying a grant of use
immunity does not apply because: (1) the employer was not authorized by statute to make an
offer of immunity; (2) the employee’s attorney advised her not to rely on the advisement; and (3)
the employee followed her attorney’s advice, The Court further holds that the attorney’s advice
not to cooperate with the employer did not constitute malpractice. The employer’s advisement
could be construed under current law to either satisfy or not satisfy the test of whether it was
sufficiently coercive to unconstitutionally compel statements from the employee, therefore
protecting those statements from use in a subsequent criminal proceeding. Thus, the judgment of
the Court of Appeals is reversed with instructions to remand the case to the trial court for entry
of judgment in favor of petitioner
Colorado Court of Appeals
Stokes v. The Denver Newspaper Agency, LLP., --- P.3d ----, 2006 WL 2563881
(Colo.Ct.App. 2006).
Respondeat Superior Liability—Car Accident—Attorney Fees—Summary Judgment.
In this case involving the scope of respondeat superior liability, plaintiff appeals the trial court’s
summary judgment in favor of defendant The Denver Newspaper Agency, LLP, including an
award of attorney fees. The judgment is affirmed in part and vacated in part, and the case is
remanded for further findings on the issue of attorney fees.
Plaintiff’s suit against defendant arose out of a car accident between plaintiff and defendant’s
employee. After settling her claims against the employee, plaintiff sued defendant under a
respondeat superior theory. The trial court granted defendant’s motion for summary judgment
and dismissed the case. The trial court also awarded defendant attorney fees without explaining
the basis for the award.
Plaintiff asserts the trial court erred in dismissing her respondeat superior claim because an issue
of material fact existed as to whether the employee was acting within the scope of his
employment. Employees traveling to work from home or from home to work are not within the
service of their employers. Here, the trial court found the employee worked for defendant at the
time of the collision and the employee used his own car to conduct defendant’s business. At the
time of the accident, the employee was merely driving home from work. The trial court declined
to consider information from plaintiff’s affidavit concerning the employee’s working status and
hours because it contained hearsay statements inadmissible at trial. Thus, plaintiff did not
provide any admissible evidence to rebut the statement in the employee’s affidavit that he was
finished with his duties and driving home from work at the time of the collision. As a result, the
summary judgment for defendant was proper.
Plaintiff also contends the trial court’s attorney fees award was an abuse of discretion. When
awarding attorney fees, the court must make specific findings of the reasons supporting the
award. Here, the trial court did not identify in its order why it awarded attorney fees. Thus, the
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award cannot stand, and the case is remanded to the trial court to make specific findings of
whether attorney fees are warranted.
Daly v. Aspen Center for Women’s Health, Inc., 134 P.3d 450 (Colo. Ct. App. 2005).
Negligence—Physician—Agency—Respondeat Superior—Inherent Agency Power—Nonservant
Agent—Apparent Agency.
In this case concerning a corporation’s liability for the alleged negligence of a physician,
plaintiff Daly appeals from the judgment entered in favor of defendant Aspen Center for
Women’s Health, Inc. ("ACWH"). The judgment is affirmed.
Daly was referred to a doctor who worked at ACWH. The doctor examined Daly and
subsequently performed surgery. Daly alleges that, during a follow-up visit, the doctor
negligently dispensed medication, causing her to suffer a stroke. Daly filed suit against the
doctor and ACWH. She did not claim that ACWH had been negligent; instead, she asserted
various theories to hold ACWH accountable for the doctor’s alleged negligence. The trial court
rejected Daly’s theories and granted summary judgment in favor of ACWH.
Daly argues that ACWH may be held accountable for the doctor’s alleged negligence on
principles of actual agency. As a general rule, the doctrine of respondeat superior cannot give
rise to vicarious liability when negligent work is performed by an independent contractor.
Furthermore, the corporate practice of medicine doctrine rests on the idea that "it is impossible
for a fictional entity, a corporation, to perform medical actions or be licensed to practice
medicine." Because the Colorado Supreme Court continues to recognize the common law
corporate practice of medicine doctrine, and because the legislature has not altered the doctrine
with respect to corporations owned by nurse midwives, ACWH may not employ doctors,
perform medical services, or interfere with a doctor’s independent medical judgment. It therefore
may not be held accountable under the doctrine of respondeat superior or inherent agency power
for the doctor’s alleged negligence.
Daly also contends that ACWH may be held vicariously liable on the basis of apparent agency.
In the context of medical malpractice actions, courts have articulated various formulations of
apparent agency. But courts agree on two elements: (1) the entity must have acted in such a way
that a reasonable person would believe that the doctor was a servant or agent; and (2) the entity’s
actions must have caused the plaintiff to rely on the care or skill of the doctor. But the
undisputed evidence refutes the second element. Daly did not allege that ACWH’s
representations caused her to seek treatment from the doctor. On the contrary, undisputed
evidence shows that Daly was referred to the doctor by her regular physician. The judgment is
affirmed.
Estate of Harper v. Denver Health and Hospital Authority, 140 P.3d 273 (Colo. Ct. App.
2006)
Wrongful Death—Corporate Practice of Medicine Doctrine—Vicarious Liability.
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In this wrongful death action, plaintiffs appeal the trial court order granting the motions of
defendant, Denver Health and Hospital Authority ("DH"), for partial dismissal under C.R.C.P.
12(b)(5) and for attorney fees pursuant to CRS § 13-17-201. The order is affirmed and the case is
remanded with directions.
Carolyn Harper sought medical treatment at DH following a business trip to West Africa. The
doctor told her she was suffering from influenza and prescribed ibuprofen. Four days later, she
was placed in intensive care at Aurora Medical Center and shortly thereafter died from malaria.
Harper’s three children and her estate sued the doctor and DH, alleging negligent diagnosis
against the doctor and vicarious liability against DH. The trial court dismissed all claims against
DH and awarded attorney fees pursuant to CRS § 13-17-201. On appeal, the Court of Appeals
addresses only the dismissal of the vicarious liability claim against DH.
Plaintiffs maintain that the Health Authority Act, CRS §§ 25-29-101 et seq., creates a statutory
exception to the common law corporate practice of medicine doctrine. The Court of Appeals
disagrees. The corporate practice of medicine doctrine is a principle recognizing that it is
impossible for a corporation to perform medical actions or be licensed to practice medicine,
thereby shielding corporations from vicarious liability for the negligent acts of their physician
employees.
In 2002, the Colorado Supreme Court concluded that professional medical corporations practiced
medicine and could be vicariously liable. The General Assembly legislatively overruled the
Supreme Court’s decision by amending CRS § 12-36-134. Thus, the corporate practice of
medicine doctrine precludes vicarious liability on the part of DH. Because a party who
successfully defends a dismissal of an action under C.R.C.P 12(b) on appeal is entitled to its
attorney fees, the Court of Appeals remands for such an award.
ECONOMIC LOSS RULE
COLORADO SUPREME COURT
A.C. Excavating v. Yacht Club II Homeowners Association, Inc., 114 P.3d 862 (Colo. 2005)
Economic Loss Rule—Independent Duty of Care—Contract Obligations—Subcontractors—
Residential Construction Defects.
The Supreme Court holds that subcontractors owe homeowners a duty of care, independent of
any contractual obligations, to act without negligence in the construction of homes. After
reviewing the economic loss rule, the Supreme Court explains that the rule has no application
where there exists an independent tort duty.
The Court examines how the economic loss rule operated to bar a negligence claim in Town of
Alma v. Azco Constr. Inc., 10 P.3d 1256 (Colo. 2000), because the duties were prescribed solely
by contract, while in Cosmopolitan Homes v. Weller, 663 P.2d 1041 (Colo. 1983), the rule had
no application, because the negligence claim was predicated upon a duty of care that existed
independently from any contractual obligations. The Court then reiterates that Cosmopolitan
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Homes is consistent with the economic loss rule as articulated in Town of Alma, because both
cases recognize that builders are under an independent duty of care to construct homes without
negligence.
Finding that the General Assembly has recognized that subcontractors are bound by this common
law duty of builders, the Court concludes that subcontractors owe homeowners an independent
duty of care to construct homes without negligence.
COLORADO COURT OF APPEALS
*Park Rise Homeowners Association, Inc. v. Resource Construction Co.,
--- P.3d ----, 2006 WL 1643177 (Colo. Ct. App. June 15, 2006)
In light of Supreme Court decision in A. C. Excavating, the Court of Appeals reversed the trial
court and held that the economic loss rule does not bar a negligence claim by a homeowners
association against the general contractor, as the general contractor has an independent duty of
care to construct homes without negligence. (N.B. this case arguably extends the rule in A. C.
Excavating inasmuch as that case involved a claim against a subcontractor, while this case
involved a claim against a general contractor. As the general contractor has a more direct
contractual relationship than does a subcontractor, there is less of a reason to ignore the contract
of the parties and rely on common law negligence.)
CONTRACTS
COLORADO SUPREME COURT
Zab, Inc. v. Berenergy Corporation, 136 P.3d 252 (Colo. 2006).
Declaratory Judgments –Colorado Uniform Declaratory Judgment Law –Oral Contracts –
Statutory Interpretation
In this opinion, the Supreme Court reviews whether declaratory relief is appropriate in oral
contract disputes under the Colorado Uniform Declaratory Judgment Law (CUDJL).
The Supreme Court holds that trial courts may "declare rights, status, and other legal relations,"
section 13-51-105, C.R.S. (2005), when relief would "terminate the controversy or remove an
uncertainty," section 13-51-109, C.R.S. (2005) . This broad power is not limited to written
contracts. Therefore, the Supreme Court concludes a trial court may grant declaratory relief in
oral contract disputes where relief would "terminate the controversy or remove an uncertainty."
Here, Respondent sought a declaration of whether an enforceable oral contract existed with
Petitioners. The trial court denied relief because it determined that oral contract disputes were
outside of the purview of the CUDJL. On review, the Supreme Court holds the trial court abused
its discretion in failing to grant declaratory relief because such relief would terminate the
controversy between the parties by clarifying whether a contractual relationship exists and, if so,
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the terms of that relationship. Accordingly, the Supreme Court remands the case to the trial court
for its review of Respondent’s motion for declaratory relief.
*Lane v. Urgitus, 145 P.3d 672 (Colo.Sup.Ct. 2006).
Arbitration—Contract Interpretation—Implied Conditions—Arbitration Agreements—
Professional Associations—Real Estate Brokers—Uniform Arbitration Act.
Defendants, Colorado-licensed real estate brokers, challenge the district court’s order compelling
arbitration. Defendants, like the plaintiffs, were members of the Denver Metropolitan
Commercial Association of REALTORS® (DMCAR). As a condition of membership, DMCAR
requires arbitration when disputes among its members arise. All the brokers who are parties to
this case consented to arbitration in regard to disputes arising among themselves when they are
members.
The Supreme Court holds that, when brokers enter into real estate transaction referral fee
agreements and they previously consented to arbitration of professional disputes, arbitration is an
implied condition of the referral fee agreements. The arbitration order is affirmed.
COLORADO COURT OF APPEALS
*Reed Mill & Lumber Co., Inc. v. Jensen, ___ P.3d ___, 2006 WL 2563880 Colo.Ct.App.
2006).
Asset Purchase Agreement—Non-compete Agreement—Tortious Interference with Contract—
Duration.
Plaintiff Reed Mill & Lumber Co., Inc. ("Reed Mill") appeals the judgment in favor of
defendants Neil Jensen and General Building Materials, Inc. ("GBM"). The judgment is
affirmed.
Jensen worked for Reed Mill, a mill and lumber business, from 1973 until 2002. In 1996, Reed
Mill sold its name and all or nearly all of its operating assets to Vranian Enterprises, Inc.
("buyer"). During the parties’ negotiations, it was agreed that each of Reed Mill’s shareholders,
including Jensen, would be required to sign a non-compete agreement prohibiting competition
within a 100-mile radius for a period of three years.
Jensen’s non-compete agreement states that it was made pursuant to the asset purchase
agreement, and provides that the three-year prohibition against competition would begin upon
termination of Jensen’s employment for any reason, and continue for three years thereafter.
Jensen resigned in 2002 and began working for GBM. Reed Mill sued Jensen for breach of the
non-compete agreement and sued GBM for tortious interference with contract. The court ordered
a directed verdict and entered judgment for defendants, finding that the duration of the noncompete agreement was unreasonable.
Reed Mill contends that the trial court erred when it concluded that the duration of the agreement
was unreasonable. When a covenant not to compete is statutorily permitted, it is enforceable only
if it is reasonable in duration and geographic scope. The trial court’s finding that the non-
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compete agreement was made in connection with the purchase agreement; however, it was no
longer enforceable against Jensen, is supported by the record. Specifically, the trial court found
that: (1) the evidence established that three years was a sufficient time for buyer to take over the
business, learn the trade, and be free of competition from the former owners of Reed Mill; (2)
three years was a reasonable period of time and more than sufficient for buyer to establish itself
in the industry; (3) there was no valid reason why Jensen should have a non-compete agreement
that extended six years; (4) at the time of his termination from new Reed Mill, Jensen was not in
a position of management or in an executive position; and (5) under the circumstances, it would
pose an undue hardship on Jensen to require that he not participate in employment in the only
area in which he had experience. The judgment is affirmed.
Sopko v. Clear Channel Satellite Services, Inc., ___ P.3d ___, 2006 WL 3437654
(Colo.Ct.App. 2006)
Arbitration Agreement—Discrimination Claims—Interim Award—Stay of Arbitration—Attorney
Fees—Colorado Wage Act.
Plaintiff Sopko appeals the district court’s order granting the motion filed by defendants to stay
additional arbitration proceedings and vacating the arbitrator’s interim award in plaintiff’s favor.
The order is reversed and the case is remanded with directions.
Plaintiff is a former employee of Clear Channel Satellite Services, Inc. (Clear Channel).
Defendants Harms and Dent are management employees of Clear Channel. In February 2004,
plaintiff filed a complaint against defendants in district court, asserting claims for unpaid wages,
nonpayment on a check, and the value of a computer allegedly taken by defendants. In 2002,
plaintiff had executed an "Arbitration Agreement" with Clear Channel in which they agreed to
submit claims between them to arbitration to be conducted under the auspices of, and in
accordance with the rules of, the American Arbitration Association (AAA). The district court
stayed the proceedings pending arbitration.
Plaintiff’s demand for arbitration asserted additional claims, including federal law claims for age
and religious discrimination. The arbitration took six days. On December 28, 2004, the arbitrator
notified the parties the arbitration hearing was closed. She issued an interim award on January
24, 2005, in which she found in plaintiff’s favor on his claim under the Colorado Wage Act and
his age discrimination claim. She awarded plaintiff $27,701.47 on the Wage Act claim and
ordered an additional hearing on damages in the age discrimination claim and on his claim for
attorney fees. The arbitrator found for defendants on all the remaining claims.
Defendants filed an objection to further proceedings, asserting that the arbitrator’s jurisdiction
expired thirty days after the arbitration formally was closed. The arbitrator denied the objection
and scheduled the hearing. Defendants filed an emergency motion in the district court to stay the
arbitration. The district court determined that because no final award had been issued within
thirty days from the closing of the hearing, the interim order was void and the arbitrator had no
authority to conduct further hearings.
The Court of Appeals agrees with plaintiff that the district court erred. There was no basis for
disregarding the arbitrator’s interpretation and application of the relevant provisions of the AAA.
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The Court notes that the Arbitration Agreement empowered the arbitrator to determine any
dispute regarding the agreement, which would include the application of the thirty-day period.
The Court concludes that contractual and statutory time requirements for issuance of an award
are directory, not mandatory or jurisdictional. Moreover, it is clear from the record that
defendant was in no way prejudiced or harmed as a result of the delay in issuing the actual
award. The interim award is reinstated, the stay of arbitration is vacated, and the case remanded
to the arbitrator for additional proceedings consistent with her original ruling.
*Scoular Company v. Denney, __ P.3d __, 2006 WL 3094065 (Colo.Ct.App. 2006)
Contract—Firm Offer Acceptance—Statute of Frauds—Merchant Exception.
In this contract action, defendant Denney appeals from the trial court’s judgment entered in favor
of plaintiff Scoular Company. The judgment is reversed and the case is remanded with
directions.
Denney contends that the trial court erred in concluding that he had entered into an enforceable
contract with Scoular to sell millet because the contract was not in writing or signed by both
parties. Here, the trial court found that Denney had made a "firm offer" as that term is employed
in the grain industry. In that industry, the term "firm offer" refers to a standing offer by a
producer to sell a set amount of bushels, at a set price, for a set delivery date. This type of oral
offer remains open and viable until the producer revokes it.
Denney also contends that the trial court erred when it found that Scoular had accepted his offer.
The trial court did not find that Scoular had rejected the offer, or that Scoular had indicated that
it would not pay the offer's price. On the other hand, Scoular did not effectively accept the offer
when it entered into a contract with a third party to re-sell the millet. When the offeree relies on
the beginning of performance as the mode of acceptance, the offeree must notify the offeror of
the acceptance within a reasonable time. Additionally, it is unclear if a contract was formed
when the parties spoke on the phone. Consequently, a remand is necessary for the trial court to
determine whether, during the phone conversation, Scoular accepted or Denney revoked the
offer.
Denney next asserts that the contract is unenforceable due to the statute of frauds. However, the
type of contract at issue here fell within the "merchant exception" to the statute of frauds. Under
that exception, the statute of frauds is satisfied between merchants "if, within a reasonable time a
writing in confirmation of the contract and sufficient against the sender is received[,] . . . the
party receiving it has reason to know its contents," and written objection to its contents is not
"given within ten days after it is received." Here, Denney does not dispute that the purchase
contract sufficed as a written confirmation of an agreement; and he does not challenge on appeal
either his receipt of the purchase contract or his having failed to object to it within the requisite
ten days.
Mapes v. City Counsel of the City of Walsenburg, ___ P.3d ___, 2006 WL 1914069
(Colo.Ct.App.).
Real Estate—Brokerage Commission—Open Listing Contract—Breach of Contract—Failure to
State a Claim.
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In this case for recovery of a real estate brokerage commission, plaintiff Mapes appeals the
district court’s order granting the motion to dismiss defendant, the City Council of the City of
Walsenburg ("City"). The order is reversed and the case is remanded for further proceedings.
Mapes, a real estate broker, and the City entered into an open listing contract for the sale of a
ranch owned by the City. The contract provided for a listing price of $506,000, with a minimum
earnest money deposit of $10,000, and a 6 percent sales commission. After Mapes located a
buyer, who made an offer of $510,000 with an earnest money deposit of $10,000 and no
contingencies, the City entered into a contract to sell the property to another party. Mapes filed
this action for breach of contract to recover his sales commission. The district court granted the
City’s motion to dismiss for failure to state a claim upon which relief could be granted.
Mapes contends that the district court erred in granting the City’s motion to dismiss for failure to
state a claim. The Court of Appeals agrees. With an open listing, a broker is not the exclusive
agent for the sale of the property and is entitled to compensation only upon the sale of the
property to a buyer whom the agent has introduced to the selling principal. The broker earns a
commission by finding a ready, willing, and able purchaser before other agents or before the
owner finds such a purchaser, and before the owner revokes the offer. Under the plain language
of the contract at issue, Mapes is entitled to a commission because he was the first broker to
procure a buyer ready, willing, and able to purchase the property on the City’s terms, even if the
City refused to enter into a purchase contract with his client and subsequently sold the property
to a third party. The fact that a contract is an open listing rather than an exclusive listing is
immaterial. Therefore, the order is reversed and the case is remanded for further proceedings
consistent with this opinion.
Pollock v. Highlands Ranch Community Association, 140 P.3d 351 (Colo.Ct.App. 2006)
Negligence Claim by a Minor—CRS § 13-22-107—Motion for Dismissal—Retroactive Action.
In this negligence action, plaintiff appeals the summary judgment entered in favor of defendants,
Highlands Ranch Community Association, Inc. ("Association") and an employee. The judgment
is reversed and the case is remanded with directions.
On January 8, 2004, plaintiff commenced this action seeking damages for personal injuries
sustained in a fall from a rock-climbing wall at the Association’s recreational facility. The fall
occurred on January 10, 2002, when plaintiff was 9 years old. Defendants moved for summary
judgment based on a "Waiver, Release, Covenant not to Sue, and Indemnity Agreement" that
plaintiff’s mother had signed on his behalf four years before the accident.
Defendants argued the release was valid under CRS § 13-22-107, which became effective five
months after the accident, and legislatively overruled the Supreme Court’s decision in Cooper v.
Skiing Co., 48 P.3d 1229 (Colo. 2002). Before the trial court ruled, plaintiff filed a "Motion to
Amend Complaint in the Event Summary Judgment is Granted." The proposed amended
complaint included claims for gross negligence and willful and wanton misconduct, which would
not be waivable under the statute.
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The court granted summary judgment in favor of defendants and granted plaintiff leave to file
the amended complaint. On appeal, plaintiff contends the trial court erred in applying § 13-22107 retroactively to the release, because the statute did not become effective until after his cause
of action accrued.
Defendants argued that even if it was error to apply § 13-22-107 retroactively, the release still
bars plaintiff’s claims under the law in effect when the cause of action accrued. The Court of
Appeals disagrees, finding that Cooper clarified that the law in Colorado at the time of this
release and before was that parental releases such as the instant one are invalid. The judgment is
reversed and the case is remanded to reinstate plaintiff’s complaint.
Adams Reload Company, Inc. v. International Profit Associates, Inc.,143 P.3d 1056 (Colo.
Ct. App. 2005).
Forum Selection Clause—False Representations—Breach of Contract—Colorado Consumer
Protection Act—Judicial Economy.
Plaintiffs Darrell Adams and Adams Reload Company, Inc. ("Adams Reload") appeal the trial
court’s order granting the motion to dismiss of defendant International Profit Associates, Inc.
("IPA"), based on a forum selection clause in the parties’ contract. The order is affirmed.
Adams Reload and IPA entered into a contract for IPA to provide certain business consulting
services to Adams Reload. Plaintiffs, contending that IPA made false representations concerning
its business consulting services and that IPA failed to provide the consulting services under the
contract, filed a lawsuit in Denver District Court. The trial court granted IPA’s motion to dismiss
based on the contract’s forum selection clause, which provided that "exclusive jurisdiction and
venue shall vest in the Nineteenth Judicial District of Lake County, Illinois, Illinois law
applying."
Plaintiffs first contend that the trial court erred by granting IPA’s motion to dismiss. Because
plaintiffs are seeking specific statutory relief under the Colorado Consumer Protection Act
("CCPA"), plaintiffs contend that enforcement of the forum selection clause would contravene
Colorado’s public policy. The Court of Appeals concludes that this provision of the CCPA does
not alone demonstrate a public policy precluding enforcement of the forum selection clause, and
the CCPA does not prohibit agreements waiving or modifying its terms.
Plaintiffs next contend that the trial court erred in granting IPA’s motion to dismiss because the
forum selection clause is "unfair, unreasonable, and overreaching." The Court concludes that the
parties’ agreement as to the place of the action cannot oust a state of judicial jurisdiction, but
such an agreement will be given effect unless it is unfair or unreasonable. The inconvenience of
litigating in Illinois was reasonably foreseeable at the time the contract was entered into, and the
agreement arose from an arm’s length transaction between persons having business experience.
Finally, plaintiffs contend that the trial court erred in granting IPA’s motion to dismiss because
the policy of judicial economy supports adjudicating all of plaintiffs’ claims in a single judicial
forum and proceeding in the sate of Colorado. Although the Court agrees that judicial economy
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supports all claims being litigated in one action, if possible, the forum selection clause is
interpreted as applying to all of plaintiffs’ claims. The order is affirmed.
First Christian Assembly of God, Montbello v. City and County of Denver, 122 P.3d 1089
(Colo. Ct. App. 2005).
Breach of Contract—Dispute Resolution Clause—Denver Revised Municipal Code 56-106.
In this breach of contract action, plaintiff appeals from the trial court’s entry of summary
judgment in favor of defendant, the City and County of Denver ("City"). The judgment is
reversed and the case is remanded with directions.
Plaintiff entered into a contract with the City in July 2000. On March 28, 2002, the City
terminated the contract and refused to reimburse plaintiff pursuant to the contract. On May 17,
2002, plaintiff requested informal discussions in writing pursuant to the contract’s dispute
resolution clause. The City responded that plaintiff’s request to invoke the dispute resolution
procedure was untimely. Plaintiff then filed a complaint, alleging breach of contract, breach of
the implied covenant of good faith and fair dealing, and unjust enrichment. The trial court
determined that plaintiff’s attempt to initiate the required dispute resolution procedures was
untimely and granted summary judgment in favor of the City. Plaintiff now appeals.
The dispute resolution clause in the parties’ contract provides that if a dispute cannot be resolved
by informal discussions, it should be resolved by administrative hearings pursuant to the
procedure established by D.R.M.C § 56-106. The issue is whether the reference to § 56-106 in
the parties’ contract concerns only the procedures set forth in subsections (b) through (f), or
whether subsection (a) also is included. If the latter is correct, then the time limitation for
initiating the dispute resolution process under is one year, not thirty days as determined by the
trial court.
The Court of Appeals holds that, by the plain terms of the parties’ contract, plaintiff was not
required to initiate the mandatory dispute resolution procedure within thirty days or even within
one year, but could invoke the procedure just by requesting "informal discussions" within a
"reasonable time." Furthermore, plaintiff has thirty days, not one year, from the unsuccessful
conclusion of informal discussions to file a request for an administrative hearing under § 56106(b). The judgment is reversed and the case is remanded to the trial court with directions to
stay judicial proceedings on plaintiff’s claims pending determination of these claims through the
administrative dispute resolution proceedings.
U.S. COURT OF APPEALS FOR THE TENTH CIRCUIT
MACTEC, Inc. v. Gorelick, 427 F.3d 821 (10th Cir. 2005).
Arbitration Agreement—Nonappealability Clause Enforceable—Patent Royalties—No Appellate
Jurisdiction
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The parties disagreed about payment of royalties for a patented invention. Pursuant to their
arbitration agreement, they arbitrated the dispute. The arbitrator found in favor of defendant
Gorelick and awarded him $4.5 million. Plaintiff MACTEC then filed suit in federal court to
vacate the arbitration award. The district court denied relief, and the plaintiff appeals.
The Tenth Circuit Court holds, as matter of first impression, that a nonappealability clause in an
arbitration agreement that forecloses judicial review of an arbitration award beyond the district
court level is enforceable. Because the instant arbitration agreement contained such a clause, the
appellate court did not have jurisdiction over plaintiff’s appeal from the district court’s order
denying the application to vacate the arbitration award. The appeal is dismissed.
Ansari v. Qwest Communications Corp., 414 F.3d 1214 (10th Cir. 2005).
Federal Arbitration Act—Forum Clause in Arbitration Agreement—Power to Compel
Arbitration—Compel Arbitration in Designated Forum
The parties entered into a contract containing an arbitration clause stating that any dispute shall
be settled by arbitration in Washington, D.C., under the Commercial Arbitration Rules of the
American Arbitration Association. Plaintiff filed suit in a Colorado federal court and defendant
moved to compel arbitration in Colorado. The district court ruled that it had no authority to
compel arbitration either in Colorado or Washington, D.C. Defendant appealed.
The Tenth Circuit first holds that the Federal Arbitration Act ("FAA") conferred jurisdiction over
an appeal from an order denying a petition to compel arbitration. The court also holds that under
§ 4 of the FAA, where the parties agreed to arbitrate in a particular forum, only a district court in
that forum has authority to compel arbitration. Accordingly, the Colorado federal district court
correctly declined to order arbitration. The arbitrability of plaintiff’s claims must be decided by a
court in the chosen forum, Washington, D.C. The district court’s judgment is affirmed.
CORPORATIONS/SECURITIES
COLORADO SUPREME COURT
*In re Phillips: Connolly v. Englewood Post No. 322 Veterans of Foreign Wars of the
United States, Inc., 139 P.3d 639 (Colo. 2006).
Piercing the Corporate Veil—Reverse-Piercing the Corporate Veil—Outside Reverse Piercing—
Inside Reverse Piercing—Alter Ego Doctrine
In this certified question, the Supreme Court reviews whether Colorado law permits a court to
reverse-pierce the corporate veil. Reverse-piercing occurs when a claimant seeks to disregard the
corporate form to obtain the assets of a corporation due to the actions of a dominant shareholder
or other corporate insider.
Two types of reverse-piercing exist: inside and outside. Due to the facts of the case, the Supreme
Court limits its review to outside reverse-piercing. Outside reverse-piercing occurs when a
13
corporate outsider seeks to disregard the corporate form and attach liability on the corporation
for the obligations of a dominant shareholder or other corporate insider.
Although the Supreme Court previously has not addressed outside reverse-piercing, Colorado
law does permit traditional veil piercing. Traditional piercing penetrates the corporate fiction to
impose liability on individual shareholders for the obligations of the corporation.
The Supreme Court holds that Colorado law permits outside reverse-piercing the corporate veil
due to the similarities in purpose between traditional veil piercing and outside reverse-piercing.
A court may outside reverse-pierce the corporate form when: (1) the controlling insider and
corporation are alter egos of each other; (2) justice requires recognizing the substance of the
relationship over the form because the corporate fiction is used to perpetuate a fraud or defeat a
rightful claim; and (3) an equitable result is achieved. Accordingly, the Supreme Court answers
the certified question in the positive.
COLORADO COURT OF APPEALS
*Salazar v. Clancy Systems International, Inc., --- P.3d ----, 2006 WL 2563880
(Colo.Ct. App. 2006).
Stock Certificates—Restrictive Legends—Tort Claims—Uniform Commercial Code—CRS § 4-8401.
Plaintiff appeals from the trial court’s summary judgment in favor of defendant Clancy Systems
International, Inc. The judgment determined that plaintiff’s tort claims relating to restrictive
legends on stock certificates were preempted by state statute. The judgment is reversed and the
case is remanded for further proceedings.
Plaintiff alleged in his complaint that the value of his stock had depreciated by approximately $2
million between the time of his initial request for a stock certificate and the date the certificate
was reissued without the restrictive legend. He asserted, as relevant here, tort claims of trespass
to chattel and intentional interference with prospective advantage, alleging that defendant’s
inclusion of the restrictive legend was wrongful and malicious and deprived him of his legal
right to sell the stock. Defendant moved for summary judgment, asserting that plaintiff’s
common law tort claims were preempted by the Uniform Commercial Code ("UCC"),
specifically CRS § 4-8-401. The trial court granted summary judgment in favor of defendant.
Plaintiff contends that the trial court erred in granting defendant’s motion for summary judgment
and in concluding that plaintiff’s common law tort claims were preempted by the UCC,
specifically CRS § 4-8-401. Common law tort remedies remain available unless a provision of
the UCC clearly states otherwise. Although CRS § 4-8-401(b) affords a remedy for a failure or
refusal to register a transfer, this provision does not evince a clear intent by the General
Assembly to occupy the entire field regarding the transfer of securities, particularly with respect
to the placement or removal of restrictive legends. Thus, coextensive remedies under this
provision and under the common law may exist and CRS § 4-8-401 does not preempt common
law claims or remedies relating to the placement and removal of restrictive legends. The
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summary judgment is reversed, and the case is remanded for further proceedings consistent with
this opinion.
Ski Time Square Condominium Association, Inc. v. Ski Time Square Enterprises, 119 P.3d
588 (Colo. Ct. App. 2005).
Restrictive Covenants—Administrative Dissolution—Attorney Fees.
Defendant owns "Ski Time Square," which consists of condominiums and commercial
establishments at the base of the Steamboat Springs ski area. Plaintiff is a nonprofit corporation
that represents the condominium owners. Some of defendant’s property is burdened by
restrictive covenants for the benefit of plaintiff, arising from a 1974 agreement. One covenant
requires that no building or structure be placed on the burdened property without plaintiff’s
consent.
In April 2001, plaintiff was administratively dissolved by the Secretary of State for failure to file
a corporate report. In the spring 2002, defendant’s tenant built a deck on a portion of the
burdened property without plaintiff’s consent. Plaintiff subsequently sought and obtained
reinstatement of its corporate status and filed an action to have the deck removed.
On cross-motions for partial summary judgment regarding the dissolution’s effect upon the
restrictive covenants, the trial court granted plaintiff’s motion, holding that the covenants were
still in force and the construction of the deck was prohibited without plaintiff’s permission. The
Court of Appeals affirms and remands.
The agreement between the parties stated that the covenants end if plaintiff "shall legally
dissolve." Defendant contended that the administrative dissolution automatically terminated the
covenants. The trial court held, and the Court of Appeals agrees, that the term "legally dissolve"
was ambiguous and that a temporary suspension for failure to follow a statutory requirement did
not automatically terminate the restrictive covenants. Moreover, the Court looks at the
termination provisions in light of the purpose of the covenants and concludes that it would be
incongruous to read the agreement as providing that the protection of the covenants would
disappear, absent consent, while the condominium development and its association continued to
exist. The Court remands for consideration of plaintiff’s request for attorney fees under the
agreement, including for the defense of the appeal.
ATTORNEYS
COLORADO SUPREME COURT
Crowe v. Tull, 126 P.3d 196 (Colo. 2006).
Colorado Consumer Protection Act—Application to Attorneys—Deceptive Trade Practices—
Significant Public Impact.
15
In this original proceeding, the Supreme Court considers whether the Colorado Consumer
Protection Act ("CCPA") applies to allegedly deceptive trade practices by attorneys. The trial
court dismissed the petitioner’s CCPA claim on the basis that it was duplicative of his legal
malpractice claim against the attorneys and that the CCPA did not apply to the practice of law.
The petitioner, Richard Crowe, brought a CCPA claim against the respondent law firm, Franklin
D. Azar & Associates ("Azar & Associates"), alleging that the firm uses television
advertisements that tout its abilities and promise to obtain full value for its clients’ personal
injury claims to perpetrate a fraud on the public. Crowe alleges that he retained Azar &
Associates to handle his personal injury case based on the representations made in its
advertisements, that the firm did not perform as advertised, and that he was pressured into
settling for far less than the full value of his claim.
The Supreme Court holds that attorneys may be held liable for violations of the CCPA. A private
CCPA claim against an attorney must allege that the attorney or law firm knowingly engaged in
a deceptive trade practice, which occurred in the course of the attorney or firm’s business,
vocation, or occupation, significantly impacting the public as actual or potential consumers of
legal services, and causing injury in fact to a legally protected interest of the plaintiff. The Court
remands to the district court with directions to permit the petitioner to replead his CCPA claim
and for further proceedings consistent with this opinion.
COLORADO COURT OF APPEALS
Aller v. Law Office of Carole C. Schriefer, PC, 140 P.3d 23 (Colo. Ct. App. 2005).
Legal Malpractice—Disclosure of Confidential Information—Breach of Fiduciary Duties—
Summary Judgment—Damages.
Plaintiff appeals the trial court’s summary judgment in favor of defendant law firm and attorney
(collectively referred to herein as "defendant") in a legal malpractice claim based on defendant’s
breach of fiduciary duty owed to plaintiff. Judgment is affirmed.
Plaintiff disclosed personal and confidential information to defendant in the course of
defendant’s representation of her in a matter involving the termination of a business. Later,
defendant represented plaintiff’s business associate in a lawsuit brought by the associate against
plaintiff. The court disqualified defendant, and a new attorney settled the case.
Plaintiff then filed a complaint against defendant, alleging defendant had breached her fiduciary
duties to plaintiff. Defendant moved for summary judgment, submitting affidavits from the
business associate and her new attorney that attested that the associate would have sued plaintiff
regardless of who represented her. The associate also attested that she had the same information
as plaintiff and would have disclosed it to any attorney representing her in a suit against plaintiff.
Summary judgment was granted based on the theory that even if there were a fiduciary duty that
was breached, plaintiff did not suffer any damages as a result of the breach.
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On appeal, plaintiff argued that a genuine issue of material fact existed as to whether the breach
caused her damages. Because the associate’s new attorney attested that he would have asserted
the same claims against plaintiff and that any reasonable attorney would have done the same, the
Court finds that there were no genuine issues of material fact as to whether damages resulted
from the breach.
The Court also affirms the trial court in holding that emotional distress and other noneconomic
damages are not available in a legal malpractice action that is essentially based on negligence. In
this case, where the allegation is that the defendant breached the applicable standard of care
imposed on her as an attorney, the breach of fiduciary duty claim is indistinguishable from one
for professional negligence and, therefore, noneconomic damages are unavailable. Judgment is
affirmed.
EMPLOYMENT
COLORADO COURT OF APPEALS
Jaynes v. Centura Health Corp., __P.3d ___, 2006 WL 1171858 (Colo.App., May 04, 2006).
Employment—Termination—Public Policy—Wrongful Discharge—Breach of Implied
Contract—Promissory Estoppel—Disclaimer—CRS § 25-3-109.
In this wrongful discharge action, plaintiff appeals from the summary judgment entered in favor
of defendant dismissing plaintiff’s public policy and breach of implied contract or promissory
estoppel claims. The judgment is affirmed.
Defendant terminated plaintiff’s employment as a nurse without using the corrective action
process after plaintiff was suspended for two specific incidents. Plaintiff first contends the trial
court erred in entering summary judgment for defendant on her public policy wrongful discharge
claim. A public policy wrongful discharge claim cannot be based solely on rules of professional
conduct or ethics. Therefore, plaintiff’s ethical obligations as a nurse do not support her public
policy wrongful discharge claim.
Plaintiff next argues that her termination violated public policy arising from the Colorado quality
management functions statute, CRS § 25-3-109 ("QM statute"), because it was partly in
retaliation for her having filed an occurrence report with the hospital’s Quality Assurance
Committee. The QM statute does not establish "a public duty"; it does not create "an important
job-related right or privilege"; and it can only be violated by disclosing confidential documents
relating to quality management functions (which is not an issue in this case). Therefore, the QM
statute does not support plaintiff’s public policy wrongful discharge claim.
Plaintiff finally contends the trial court erred in entering summary judgment on her breach of
implied contract or promissory estoppel claim because defendant’s personnel policies modified
her at-will status. A disclaimer to an employee handbook or personnel policy is effective "if the
employer has clearly and conspicuously disclaimed intent to enter a contract limiting the right to
discharge employees." The disclaimer language on page 2 of defendant’s Principals is clear and
17
conspicuous, and the disclaimer was sufficient to apprise plaintiff that no principles or guidelines
created an express or implied contract. Plaintiff cannot assert any rights under the termination
policy, because they were internal policies and plaintiff did not have access to them.
Furthermore, even if she did have access to them, plaintiff did not follow the policy by
submitting a written request to invoke the termination steps as required by the policy, and the
remaining policies gave management discretion in dealing with unacceptable employee conduct.
Hence, defendant made no promise of specific treatment, and the policy did not create an implied
contract or give rise to estoppel. The judgment is affirmed.
Speedy Messenger & Delivery Service v. Industrial Claim Appeals Office, 129 P.3d 1094
(Colo. Ct. App. 2005).
Unemployment Compensation—Employee—Independent Contractor—CRS § 8-70-115(1)(c).
Petitioner, Speedy Messenger & Delivery Service ("Speedy"), seeks review of an order of the
Industrial Claim Appeals Office ("Panel"). The order is affirmed.
The Division of Employment determined that Speedy was required to pay unemployment
compensation taxes as an employer of certain couriers, because Speedy had not proven that the
couriers were independent contractors. Speedy appealed to the Panel, which affirmed the
decision.
Speedy contends that its written contract created a rebuttable presumption of an independent
contractor relationship. However, the contract failed to disclose that the couriers, as independent
contractors, were not entitled to unemployment insurance benefits, one of the required
disclosures pursuant to CRS § 8-70-115(1)(c).
Furthermore, under CRS § 8-70-115(1)(b), services performed by an individual for another are
deemed to be "employment" unless the putative employer can demonstrate that: (1) the
individual is free from control and direction in the performance of the service, both under the
contract, and in fact; and (2) the individual is customarily engaged in an independent trade,
occupation, profession, or business related to the service performed. The evidence supports the
determination that the couriers were not customarily engaged in a related independent trade or
business. The order is affirmed.
Galbraith v. Clark, 122 P.3d 1061 (Colo. Ct. App. 2005).
Arbitration—Employment Agreement—Estoppel.
Plaintiff Galbraith appeals the district court’s judgment compelling arbitration and dismissing
her action against defendants Clark and Campbell. The judgment is affirmed.
Defendants were managers at Dillard’s, Inc., where Galbraith also worked. In 2001, Galbraith
signed an agreement that required her to arbitrate any dispute that might arise at work. In 2004,
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Galbraith sued defendants in district court, requesting damages for intentional interference with a
contractual relationship, civil conspiracy, and outrageous conduct.
She alleged that defendants had engaged in harassment and had fired her to retaliate for her filing
a gender discrimination suit. She also alleged that defendants had conducted her termination in a
humiliating manner. Defendants moved to compel arbitration and dismiss the case. Galbraith
resisted, arguing that: (1) the arbitration agreement did not apply to a suit against defendants in
their individual capacities; and (2) defendants were estopped from enforcing the agreement. The
court ordered the parties to arbitrate and dismissed the case.
Galbraith contends that the district court erred in compelling arbitration. Absent clear and
unmistakable evidence to the contrary, the question of whether the parties agreed to arbitrate is to
be decided by the court, not the arbitrator. However, arbitration is ultimately a matter of contract
between the parties. The parties agreed that an arbitrator would decide "[a]ny dispute concerning
this Agreement—the way it was formed, its applicability, meaning, enforceability, or any claim
that all or part of this Agreement is void or voidable." The Court of Appeals therefore concludes
that the district court did not err in failing to address Galbraith’s estoppel argument. The
enforceability of the agreement is one of the issues that the arbitrator must decide.
Galbraith also argued that the agreement does not apply when managers are being sued in their
individual capacities. A court must order arbitration if there is a valid agreement and if the
subject matter of the dispute is covered by the agreement. Because Galbraith’s lawsuit is based
on events that occurred while defendants were acting as managers of a Dillard’s store, Galbraith
may not escape the natural reach of the arbitration agreement merely by asserting that defendants
were acting solely in their individual capacities. The Court of Appeals concludes that the district
court properly ordered the parties to arbitrate. The judgment is affirmed.
Shotkoski v. Denver Investment Group Inc., 134 P.3d 513 (Colo. Ct. App. 2006).
Breach of Contract—Arbitration—Real Estate License—Deceptive Trade Practice.
In this breach of contract action, defendants appeal the trial court’s order denying their motion to
compel plaintiffs to arbitrate their claims. The order is reversed and the case is remanded with
directions.
In 1994, plaintiffs purchased a home. They later fell behind on the mortgage payments, and a
foreclosure proceeding was initiated. However, before the foreclosure sale, plaintiffs and
defendant Denver Investment Group, Inc. ("DIG") entered into a contract ("Customer
Agreement") for the sale of the home, which required the parties to arbitrate all claims pertaining
to the transaction.
Plaintiffs later filed suit alleging several claims. Defendants moved to compel arbitration, and
plaintiffs objected, contending the contract was illegal and unenforceable. Following an
evidentiary hearing on defendants’ motion to compel arbitration, the court found that: (1) none of
the defendants was a licensed real estate broker when plaintiffs signed the Customer Agreement;
(2) the Customer Agreement was illegal and unenforceable because of defendants’ failure to
19
obtain the required real estate licenses; and (3) defendants had engaged in a deceptive trade
practice by purchasing real estate without the required licenses. Based on those findings, the
court denied defendants’ motion to compel arbitration.
Defendants contend the trial court erred in denying their motion to compel arbitration because
the validity of the Customer Agreement is unaffected by the fact that they were not licensed real
estate brokers. The court may refuse to compel arbitration only on a showing that: (1) there is no
agreement to arbitrate; or (2) the issue sought to be arbitrated clearly is beyond the scope of the
arbitration provision. The Court of Appeals concludes as a matter of law that: (1) Thomas’s
failure to obtain a broker’s license and the agreement for her brokerage services did not
invalidate the Customer Agreement; and (2) the validity of the Customer Agreement also was
unaffected by the fact that DIG was not a licensed broker. Therefore, the trial court’s ruling
denying arbitration on this basis is reversed.
Defendants also contend the trial court erred in denying arbitration based on their alleged
violation of the Colorado Consumer Protection Act. Contrary to the trial court’s assertion, CRS §
6-1-105(1)(z) does not apply to real estate purchases. Accordingly, the Court of Appeals
concludes the trial court erred in denying arbitration on that basis. The order is reversed and the
case is remanded to the trial court with directions to grant defendants’ motion to compel
arbitration.
Remote Switch Systems, Inc. v. Delangis, 126 P.3d 269 (Colo. Ct. App. 2005).
Employment—Prevailing Party—Wage Claim Act—Prejudgment Interest—Postjudgment
Interest—Attorney Fees—CRS § 13-17-102.
Defendant ("employee") appeals the trial court’s judgment finding he was not the prevailing
party in this action with his former employer. The judgment is affirmed in part and reversed in
part, and the case is remanded for further proceedings.
A special master issued a report finding, among other things, that employer was the owner of the
technology developed after employee joined the company; employee had a duty to assign to
employer any inventions developed after the first effective date of his full-time employment; and
employee was entitled to additional wages. The trial court entered a final judgment adopting the
findings of the special master. This appeal followed.
Employee asserts that the trial court erred in denying him an award of attorney fees under the
Wage Claim Act ("Act"). Pursuant to CRS § 8-4-114, whenever it is necessary for an employee
to commence a civil action for the recovery of wages, the judgment in such action shall include a
reasonable attorney fee in favor of the winning party. Because employee was the prevailing party
on his Act counterclaim, he is entitled to reasonable attorney fees.
Employee contends that the trial court erred in dismissing all the claims, except for his claim
brought under the Act, without identifying any prevailing party and without issuing any findings
of fact and conclusions of law. The trial court based its rulings on the report provided by the
20
special master, pursuant to C.R.C.P. 53(e). Therefore, the record properly supports the dismissal
of employee’s other counterclaims.
Employee also contends that the trial court erred in denying him awards for prejudgment and
postjudgment interest on his Act claim. Pursuant to CRS § 5-12-102(1), employee is entitled to
an award of prejudgment interest calculated on his award from the effective date of his
resignation from the company until the date of final judgment. However, because the award of
wages was set off from the greater amount that employee owed employer for the special master’s
fee, an award of postjudgment interest is not proper.
Employee further contends that the trial court erred in not designating him as the prevailing party
in the case. Because both parties prevailed on a significant claim, the ruling is affirmed.
Nelson v. Gas Research Institute, 121 P.3d 340 (Colo. Ct. App. 2005).
Employment—Summary Judgment—Fraud—CRS § 8-2-104—Negligent Misrepresentation.
Plaintiff (“employee”) appeals the trial court’s summary judgment in favor of defendants. The
judgment is affirmed.
Employee was employed by Gas Research Institute (“GTI”), an Illinois corporation. GTI, with
employee’s assistance, set out to acquire a majority interest in TICORA, a Colorado company.
Employee alleges that GTI and TICORA made representations to induce him to move to
Colorado. Employee subsequently filed a lawsuit, asserting claims based on statutory fraud and
negligent misrepresentation. The trial court granted summary judgment in favor of GTI and
TICORA on those claims.
Employee contends the trial court erred in granting summary judgment on his claim under CRS §
8-2-104, because there are genuine issues of fact as to whether GTI and TICORA used false
pretenses to induce him to move to Colorado. CRS § 8-2-104 prohibits any person from inducing
workers to change from one place of employment to another or to bring workers to Colorado by
means of false or deceptive representations. The elements a plaintiff must establish to sustain an
action under CRS § 8-2-104 are the same as those for common law fraud. Both require that the
defendant made a false representation of fact; that the representation was made to induce a
person to act or with the intention that it be acted upon; and that damage was sustained in
reliance on, or in consequence of, the false or deceptive representation. Employee admitted the
statements were not commitments or facts but predictions of uncertain future events. Because
there are no genuine issues of material fact as to whether employee justifiably relied on the
alleged statements, the summary judgment was appropriate.
Employee also contends the trial court erred in dismissing his claim for negligent
misrepresentation. “Negligent misrepresentation” may occur if a person—in the course of his or
her business, profession, or employment—supplies false information to another for guidance in
the other’s business transactions, and the other suffers a pecuniary loss caused by justifiable
reliance on the false information. Employee’s allegations are insufficient to show justifiable
reliance, and the summary judgment is affirmed.
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INSURANCE
COLORADO SUPREME COURT
USAA Casualty Insurance Co. v. Anglum, 119 P.3d 1058 (Colo. 2005).
Ambiguous Insurance Policy—Charged Increased Premium.
Petitioner USAA Casualty Insurance Company ("USAA") seeks review of a Court of Appeals
determination that its automobile policy is ambiguous with respect to when it can charge an
adjusted premium for newly acquired vehicles. The Supreme Court concludes that the "Changes"
provision of USAA’s policy unambiguously authorizes USAA to charge an increased premium
for newly acquired vehicles from the date the insured acquires the vehicle. Accordingly, the
Court of Appeals decision is reversed and the case is remanded with instructions to reinstate the
trial court’s order dismissing respondent’s complaint.
COLORADO COURT OF APPEALS
Certain Underwriters at Lloyd’s London Subscribing to Certificate No. 986557 v. Rychel,
126 P.3d 234 (Colo. Ct. App. 2005), cert. granted, 2006 WL 259661 (Colo. Jan. 23. 2006).
Summary Judgment—Professional Athlete Disability Insurance—No Coverage for Injury Caused
by Fight.
Defendant Rychel appeals summary judgment in favor of plaintiff, Certain Underwriters at
Lloyd’s London Subscribing to Certificate No. 986557 ("Underwriters"). The judgment declared
that the professional athlete disability insurance Underwriters sold Rychel does not cover his
claimed disability. The Court affirms the ruling.
Rychel was a hockey player on the Colorado Avalanche, a National Hockey League ("NHL")
team, when Underwriters sold him an insurance policy. When his hand was injured in a fight
during a hockey game, Rychel filed a claim. Underwriters denied the claim and filed a complaint
for declaratory relief. Seeking summary judgment, Underwriters argued that Rychel’s injury did
not result from an unexpected event, as required by the policy. In response, Rychel submitted
evidence that his role on the ice was not only that of a player, but also that of an "enforcer,"
which required him to play a particularly tough physical game and to engage in fights with
opposing players. As his injury prevented him from forming a tight fist, he could no longer fight
effectively. As a consequence, no NHL team has signed him to play for them.
The Court of Appeals affirms the trial court’s ruling that Rychel is not entitled to disability
benefits because he intentionally engaged in a fight and therefore cannot claim that his injury
occurred as the result of an unexpected event. The insurance policy defines accident as a "single,
sudden and unexpected event . . . which causes unexpected bodily injury at the time it occurs."
The Court concludes that the phrase "sudden and unexpected event" is clear and unambiguous.
The only reasonable interpretation of that phrase is that it refers to the precipitating event without
which the injury could not have occurred. Here, there is no genuine issue regarding the fact that
22
the precipitating event was the fight, that Rychel expected to fight, and that the fight caused the
injury. Under the terms of the policy and as a matter of law, there is no coverage. The judgment
is affirmed.
MISCELLANEOUS
COLORADO SUPREME COURT
COLORADO COURT OF APPEALS
Porter Construction Services, Inc. v. Ehrhardt, Keefe, Steiner, and Hottman, P.C., 131
P.3d 1115 (Colo. Ct. App. 2005).
Accounting Malpractice—Accrual of Prejudgment Interest.
In this accounting malpractice action, defendant ("Ehrhardt") appeals the trial court’s judgment
awarding prejudgment interest to plaintiffs Porter Construction Services, Inc. and Bruce Porter
(collectively "Porter"). The judgment is affirmed.
In 1998, Porter hired Ehrhardt to perform year-end accounting reviews of its financial records.
Ehrhardt failed to detect that a Porter employee had been embezzling large sums of money and
had failed to pay the company’s federal employment taxes, which later resulted in the assessment
of penalties against Porter by the IRS. Porter’s employees discovered the financial problems
early in 2000 and discovered Ehrhardt’s negligence some time later.
After the jury found Ehrhardt liable for its negligence, the trial court calculated prejudgment
interest from July 1998. Ehrhardt contends that interest should not have been awarded until
Porter’s employees discovered the financial problems and Ehrhardt’s negligence in late February
or early March 2000. Porter argues that its damages were ascertainable in July 1998, when
interest and penalties were assessed by the IRS.
The Court of Appeals agrees with Porter. The date that a claim "accrues" is not necessarily the
same for purposes of the statute of limitations and for purposes of calculating interest under CRS
§ 5-12-102(1)(b). The legislative history of the statute indicates that it was intended to provide
interest to a prevailing party from the time it was wronged, or actually suffered damages, which
may be much earlier than the date of discovery.
Even though Porter’s employees did not discover the financial problems caused by the
embezzlement and Ehrhardt’s negligence until 2000, Porter was injured much earlier, because it
was assessed penalties dating back to 1998 for its failure to pay employment taxes. Thus, Porter
was wronged when Ehrhardt breached its duty to them in July 1998. The judgment awarding
prejudgment interest from July 1998 is affirmed.
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