The Hall & Evans Rocky Mountain Litigation Reporter is a periodic online newsletter directed to a select group of individuals and organizations. In this edition, we summarize recent decisions from the Colorado Supreme Court, the Colorado Court of Appeals, and the United States Court of Appeals for the Tenth Circuit, as well as administrative developments at the local level.
Topics In This Issue
Cases
First Amendment Claim Rejected
Release Bars Lawsuit Against Rafting Company for Wrongful Death Despite Allegations of Fraud and Statutory Violations
Colorado Governmental Immunity Act Does Not Bar Claim for Implied Contract
Intended Beneficiaries of Estate Planning Documents Cannot Sue Attorney
Alternate Juror May Not Participate in Jury Deliberations if One Party Objects
Litigation Finance Companies Are Making Loans
Newly Adopted Municipal Ordinances
Denver Mayor Signs Construction Defect Claim Reform Ordinance Effective January 1, 2016
Aurora Adopts Construction Defect Reform Ordinance to Promote Condominium Development and Reduce Litigation
Cases
First Amendment Claim Rejected
An internal auditor for a school district raised concerns that the district’s budgeted salary figures had been inflated in advance of negotiations with the teachers’ union. After the district’s finance team attempted to demonstrate that the auditor’s figures were incorrect, the auditor accused the budget director of illegal activity, and the school district hired an independent expert to review the budget. When the expert found no support for the auditor’s accusations, the auditor approached several members of the board of education and asked to present her findings before the entire board. After making her presentation, the auditor was eventually fired and sued the district for wrongful termination. She included a First Amendment claim in her lawsuit, along with several state law claims. The district court entered summary judgment in favor of the school district, and the auditor appealed.
On appeal, the auditor’s primary argument on the First Amendment claim was that the reference in Lane v. Franks, 134 S. Ct. 2369 (2014), to an employee’s “ordinary job responsibilities” meant the job duty at issue must be performed on a regular basis. Because the auditor had never before made representations to the board of education, she argued her efforts to do so were outside the scope of her ordinary job responsibilities and therefore protected speech. The United States Court of Appeals for the Tenth Circuit rejected this approach and followed prior circuit cases finding that a particular job duty fell within an employee’s general job duties if it was consistent with the types of activities she was paid to perform, even if it was not done on a regular basis. Because the auditor was expected to report to the board of education, she was acting within the scope of her duties when making her presentation to the board, and her speech was not protected.
The Tenth Circuit also affirmed the dismissal of the auditor’s supplemental state law claims, finding no evidence to support her allegation that the district had feigned engagement in a review of her budgetary concerns in order to fabricate a reason to fire her. Full text of decision . . . Holub v. Gdowski, 2015 U.S. App. LEXIS 16930 (10th Cir. 2015).
Thomas J. Lyons, a Member of Hall & Evans, and Gillian Dale, Special Counsel at Hall & Evans, represented the school district. For further information regarding this case, please contact Thomas Lyons at 303-628-3355 or by email to lyonst@hallevans.com or Gillian Dale at 303-628-3328 or by email to daleg@hallevans.com.
Release Bars Lawsuit Against Rafting Company for Wrongful Death Despite Allegations of Fraud and Statutory Violation
Sue Ann Apolinar hired a guide for a family adventure in the Colorado Rockies: an overnight rafting and camping excursion on the Arkansas River. After she arrived at the outfitter’s office, Apolinar signed a release before proceeding to the river. The next day, the raft capsized and Apolinar drowned. Apolinar’s son, Jesus Espinoza, sued the rafting company for wrongful death, alleging negligence per se and fraud. The rafting company sought summary judgment, arguing that the release Apolinar signed barred the lawsuit. The district court granted summary judgment and Espinoza appealed.
On appeal, Espinoza argued that the release violated public policy as expressed in the Colorado River Outfitters’ Act which makes it a misdemeanor for rafting companies to operate any raft in a “careless or imprudent manner.” The United States Court of Appeals for the Tenth Circuit rejected this argument, finding that to establish the “public policy” necessary to invalidate a release requires more than showing that the activity is subject to state regulation. Because whitewater rafting is a recreational activity, public policy does not invalidate a release of liability given in exchange for participating in this activity, so long as the release was fairly entered into.
The Tenth Circuit also rejected Espinoza’s argument that the rafting company engaged in fraud when presenting the release to Apolinar. In response to the motion for summary judgment, Espinoza presented evidence that when Apolinar made her reservation, she was told by company representatives that the trip was appropriate for beginners and involved at most only class III rapids. Espinoza claimed that the stretch of river where Apolinar drowned has class IV rapids. The Tenth Circuit rejected these arguments, finding that whatever the rafting company told Apolinar before she signed the release, the warnings on the release controlled. The release offered a detailed picture of numerous and serious problems that could be encountered during the rafting expedition. In light of these statements in the release, Apolinar could not reasonably rely upon the company’s earlier comments regarding the nature of the expedition. Full text of decision . . . Espinoza v. Arkansas Valley Adventures, 809 F.3d 1150 (10th Cir. 2016).
The defendant Arkansas Valley Adventures was represented in district court by Ryan Winter, Member of Hall & Evans, and by Conor Boyle, Special Counsel at Hall & Evans, and on appeal by Alan Epstein, Member of Hall & Evans. For further information regarding this case, contact Alan Epstein at epsteina@hallevans.com or by telephone at 303-628-3354; Ryan Winter at winterr@hallevans.com or by telephone at 303-628-3358; or Conor Boyle at boylec@hallevans.com or by telephone at 303-628-3484.
Colorado Governmental Immunity Act Does Not Bar Claim for Implied Contract
Police officers for the City of Arvada arrested a man for domestic violence. During the arrest, the man either attempted to commit suicide or was shot by the police. Because the man was wounded, officers took him to Denver Health and Hospital Authority for treatment. After he was released, Denver Health sent an invoice to the City of Arvada seeking reimbursement for the services rendered, pursuant to an informal agreement or implied contract between Denver Health and the City of Arvada.
The City of Arvada resisted payment. Among other defenses, Arvada asserted that the claim by Denver Health was barred by the Colorado Governmental Immunity Act (“CGIA”) because it included allegations of unjust enrichment, a tort theory. The parties agreed upon a stipulated set of facts and the case was decided on cross motions for summary judgment. The trial court ruled for Denver Health, concluding that the CGIA did not bar Denver Health’s claim for breach of implied contract.
The City of Arvada appealed and the Colorado Court of Appeals affirmed. Agreeing with the trial court, the Court of Appeals held that a claim for breach of implied contract is not subject to the CGIA even if the plaintiff alleges unjust enrichment. The Court of Appeals rejected Arvada’s argument that Denver Health’s claim “could lie in tort” because it was based on allegations of unjust enrichment, a tort theory. This decision is interesting because the CGIA expressly applies to claims “which lie in tort or could lie in tort.” Full text of opinion . . . Denver Health v. City of Arvada, 2016 COA 12 (January 28, 2016).
Intended Beneficiaries of Estate Planning Documents Cannot Sue Attorney
Alternate Juror May Not Participate in Jury Deliberations if One Party Objects
Albert Johnson sued VCG Restaurants for personal injury. In addition to the six regular jurors chosen, one alternate juror was selected and attended trial. The trial court allowed the entire jury (including the alternate juror) to engage in pre-deliberation discussions. At the close of evidence, the court asked the parties if they wanted to allow the alternate juror to participate in deliberations. Defendant objected, but the trial court overruled his objection and allowed the alternate juror to participate in deliberations. The jury found in favor of plaintiff and against VCG, and judgment entered accordingly. VCG then appealed.
On appeal, VCG contended that the trial court erred in allowing the alternate juror to participate in deliberations. The Court of Appeals agreed and reversed the judgment. In Colorado (and in most states that follow the Rules of Civil Procedure), “If the court and the parties agree, alternate jurors may deliberate and participate fully with the principal jurors in considering and returning a verdict.” The trial court believed it had discretion to allow the alternate juror to participate in deliberations, because he had allowed the entire jury to participate in pre-deliberation discussions. The Court of Appeals rejected that argument, holding that the court has no discretion: if either party objects, the alternate juror may not participate in deliberations. The Court of Appeals also held that allowing an alternate juror to deliberate despite a party’s objection creates a presumption of prejudice which, if not rebutted, requires reversal. One issue not addressed in this appeal is whether the trial court had discretion to allow the regular jurors to engage in pre-deliberation discussions in the first place. Full text of opinion . . . Johnson v. VCG Restaurants, 2015 COA 179 (December 31, 2015).
Litigation Finance Companies Are Making Loans
Litigation finance companies that agree to advance money to tort plaintiffs in exchange for a percentage of future litigation proceeds are actually extending loans which are forgiven in the event the proceeds obtained from litigation are less than the amount due. These transactions create a debt, or an obligation to repay, that increases with the passage of time. These transactions are therefore subject to Colorado’s Uniform Consumer Credit Code. Full text of opinion . . . Oasis Legal Finance Group v. Coffman, 2015 CO 63 (November 16, 2015).
Newly Adopted Municipal Ordinances
Denver Mayor Signs Construction Defect Claim Reform Ordinance Effective January 1, 2016
Denver has joined a growing number of Colorado cities which have approved ordinances regarding construction claims in common interest communities. Denver’s ordinance adopts several provisions popular among Colorado cities, including: (1) a builder’s right to repair defects prior to the filing of a lawsuit which is not dependent upon owner approval; (2) homeowner associations must provide notice to and obtain a majority consent of homeowners before filing lawsuits; and (3) amendments to alternative dispute resolution provisions and declarations are ineffective and void against public policy absent consent of the declarant. The Denver ordinance also has additional provisions. For example, §10-202 provides that a violation of any building code or a failure to comply with any code, in and of itself, shall not create a private cause of action regardless of the statutory or common law theory asserted unless the violation or failure to comply results in one or more of the following: (1) actual damage to property; (2) actual loss of use of property; (3) bodily injury or wrongful death; or (4) a risk of bodily injury or death to the occupants of the residential property. The ordinance bars strict liability claims for code violations or common law claims for “negligence per se.” In addition, any improvements which are in compliance with code shall not be considered defective.
For further information regarding this matter, contact Benton Barton, Member of Hall & Evans, at bartonb@hallevans.com or by telephone at 303-628-3403.
Aurora Adopts Construction Defect Reform Ordinance to Promote Condominium Development and Reduce Litigation
In 2007, the Colorado Legislature passed the Homeowner Protection Act (“HPA”) which made it significantly easier for property owners and homeowners’ associations to bring construction-defect claims against home builders. As a result, Colorado has seen a dramatic increase in both the number of construction defect lawsuits being filed and the damages awarded to plaintiffs filing such lawsuits.
The HPA has had a depressing impact upon condominium developers and builders. Over the past decade, condominium construction in Colorado has slowed dramatically due to the inability of condominium builders to obtain insurance for their projects. In turn, cities have seen an important segment of their affordable housing market virtually disappear. This is of particular concern to Aurora, where new condominium construction is considered vital to the proper development of transit station areas along the Aurora light rail line.
The Colorado Legislature has been unwilling to adopt legislation favorable to the condominium industry, leaving it to the individual cities to find a solution. In that regard, Aurora amended its city code by the adoption of §22-701, containing four key elements designed to avoid the expense of litigation and promote condominium development:
(1) The condominium builder is given the right to repair any construction defects prior to the filing of a lawsuit. Under this new ordinance, the builder’s right to repair is not dependent upon the owner’s approval.
(2) A homeowners’ association must obtain the consent of a majority of the homeowners in order to file a lawsuit.
(3) The condominium builder is given the option of offering a monetary settlement in lieu of pursuing repairs, which, if accepted, may be recorded with the clerk and recorder’s office.
(4) Subsequent amendments to alternative dispute resolution provisions contained in community declarations are deemed void and not effective with regard to any construction defect claim that is based on alleged acts or omissions that predate the amendment.
The goal of Aurora’s ordinance is to reduce the cost of litigation associated with construction defects and residential housing, particularly with respect to the condominium industry. Aurora anticipates that the ordinance will have a positive impact upon the construction of new condominium units in the city, thereby extending home ownership opportunities for new and existing residents.
For further information regarding this matter, contact Adam Wiens, Special Counsel at Hall & Evans, at wiensa@hallevans.com or by telephone at 303-628-3332.