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Cases of Note

Courts presume that the General Assembly is aware of court decisions that construe state statutes or the constitution. The OLLS will update this web page quarterly to notify the General Assembly of such court decisions. Cases that may be of particular interest because they meet certain criteria have been summarized and are listed below in chronological order. Summaries for cases older than a year are available in an archive.

 

 

Lewis v. Taylor, Colorado Court of Appeals No. 13CA0239 (February 9, 2017)

Holding: If an investor gives reasonably equivalent value for the receipt in good faith of profits from an investment in a Ponzi scheme, the transfer of the profits to the investoris not voidable.

Case Summary: Steve Taylor (defendant) invested money in a Ponzi scheme. Before the scheme was shut down and without knowing that it was an illegal arrangement, he received substantial profits and withdrew all of his principal. After the Ponzi scheme was discovered and shut down, the trial court appointed a receiver. The receiver sued the defendant in Denver District Court under the "Colorado Uniform Fraudulent Transfer Act" (CUFTA) to void the transfers of the profits to him so that those profits could be used to provide restitution to later investors in the Ponzi scheme who lost some or all of the principal amounts of their investments. The defendant argued that the receiver's claim was not timely and that even if it were timely the transfers of profits were not voidable because he received the profits in good faith and gave reasonably equivalent value for them.

The district court granted summary judgment to the receiver, holding that the claim was timely and that the transfers of profits to the defendant were voidable. The Court of Appeals reversed the trial court, holding that the receiver's claim was not timely. The Supreme Court reversed the Court of Appeals, holding that the receiver's claim was timely, and remanded the case to the Court of Appeals to determine whether the transfers of profits to the defendant were voidable.

The Court of Appeals, in what it said was a case of first impression in Colorado, held that if an investor gives reasonably equivalent value for the receipt in good faith of profits from an investment in a Ponzi scheme, transfers of the profits to the investor are not voidable. The court declined to follow federal case law that construed other states' versions of the "Uniform Fraudulent Transfer Act" so that "reasonably equivalent value" can never be given for profits from a Ponzi scheme. Those cases reasoned that upholding transfers of profits depletes the assets of the scheme operator, thus depriving subsequent investors of the return of their principal. But the Court of Appeals noted that upholding transfers of principal has the exact same effect of depleting the assets and reducing other parties' restitution and further reasoned that the time-value of money could constitute reasonably equivalent value. Finding the relevant provision of CUFTA, section 38-8-109 (1), C.R.S., which states that "[a] transfer or other obligation is not voidable . . . against a person who took in good faith and for a reasonably equivalent value . . .", to be clear, it remanded the case to the district court to make particularized findings of fact as to whether reasonably equivalent value was given for each individual transfer of profits. The Court of Appeals also suggested hat the General Assembly may wish to enact a new statute if it finds that the current statute does not provide sufficiently equitable remedies for victims of Ponzi schemes. (For more information, contact Thomas Morris.)

 

 

People v. Crouse, Colorado Supreme Court No. 14SC109 (January 23, 2017)

Holding: Section 14(2)(e) of article XVIII of the state constition that requires law enforcement to return marijuana after an acquittal based on a medical marijuana defense is unconstitutional.

Case Summary: The defendant was charged with cultivating and possessing marijuana with the intent to distribute. The police seized drug paraphernalia, 55 marijuana plants, and approximately 2.9 kilograms of marijuana from the defendant's home. The defendant asserted the defense that he was a medical marijuana patient authorized to cultivate and possess marijuana. The jury acquitted the defendant. The defendant requested the police return the seized marijuana paraphernalia and marijuana plants pursuant to section 14(2)(e) of article XVIII of the state constitution. That section requires "marijuana and paraphernalia seized by state or local law enforcement officials from a patient . . . in connection with the claimed medical use of marijuana shall be returned immediately upon . . . the dismissal of charges, or acquittal". The people opposed the motion arguing that it conflicts with and is preempted by the Federal Controlled Substances Act. The Supreme Court agreed with the people that the return provision of the constitution requires police officers to violate federal law by distributing marijuana when they return the marijuana to the acquitted person. The Supreme Court declared there was a positive conflict between state and federal law and therefore the state law was preempted by the Federal Controlled Substances Act. (For more information, contact Michael Dohr.)

 

 

People v. Patton, Colorado Court of Appeals No. 14CA2087 (December 29, 2016)

Holding: The term "notice" in section 18-5-702, C.R.S., is not limited to notice in person or in writing.

Case Summary: On December 21 and 22, 2009, the defendant purchased over $8000 worth of electronics equipment from an electronics store using a debit card issued to him. The card was declined during the transaction, but the defendant used a false override authorization code to force the sale. Defendant's bank had cancelled the card on December 9, 2009, after the defendant called the bank to report that he never received the card. A bank representative testified that the bank employee would have told the defendant during the phone call that the card was cancelled. Defendant was charged with unauthorized use of a financial instrument and theft.

Under section 18-5-702 (1), C.R.S., a person commits unauthorized use of a financial instrument if he or she uses a financial device, such as a debit card, after he or she has notice that the "device has expired, has been revoked, or has been cancelled". Section 18-5-702 (2), C.R.S., states that notice "includes either notice given in person or notice give in writing to the account holder". The question before the court was whether notice under section 18-5-702, C.R.S., is limited to just notice in person or in writing. The prosecution relied on the phone call to satisfy the notice element. The Court of Appeals suggested that the statute was ambiguous or unclear. The defendant argued that the term "includes" makes the definition of notice exclusive to just in-person or in-writing notice. The court disagreed. The court found that the notice element is not limited to in-person or in-writing notice because the word "includes" is a word of extension and illustration not limitation. The Court of Appeals upheld the conviction, finding that notice by means of a phone call was sufficient to satisfy that element of the crime since the statute did not limit notice to being in writing or in person. (For more information, contact Michael Dohr.)

 

 

City of Northglenn v. Bd. of County Comm'rs, Colorado Court of Appeals No. 15CA1743 (December 15, 2016)

Holding: Adams County does not have either constitutional or stautory authority to impose a special sales tax on retail marijuana.  Accordingly, the Adams County special sales tax on retail marijuana is invalid. In addition, the Cities had standing to sue Adams County becuase the county marijuana sales tax levied by Adams County would likely harm the fiscal interests of the Cities by reducing their tax revenue.

Case Summary: In 2012, Colorado voters approved Amendment 64 to the Colorado Constitution, which authorizes personal use and regulation of marijuana. In 2013, the General Assembly proposed, and Colorado voters approved, a 10% state special sales tax on all sales of retail marijuana and retail marijuana products (state marijuana sales tax). The state marijuana sales tax is levied in addition to the general state sales tax, which also applies to such sales. Section 39-28.8-203, C.R.S., requires the state to apportion a portion of state marijuana sales tax revenue to local governments and section 39-28.8-203 (1)(a)(VI), C.R.S., clarifies that the distribution mechanism "shall [not] be construed to prevent a local government from imposing, levying, and collecting any fee or any tax upon the sale of retail marijuana or retail marijuana products." Accordingly, in addition to the state special sales tax, the Adams County cities of Northglenn, Aurora, and Commerce City (the Cities), which as home rule cities all have "the full right of self-government in both local and municipal matters," levy special sales taxes on all sales of retail marijuana and retail marijuana products occurring within the cities (city marijuana sales taxes).

Article 2 of title 29, C.R.S., explicitly authorizes a county to impose a general countywide sales tax, as well as special sales taxes for specified purposes, but does not explicitly authorize a county to impose a special sales tax on retail marijuana or retail marijuana products (county marijuana sales tax). Nonetheless, in 2014, the board of county commissioners of Adams County proposed, and the registered electors of Adams County approved, a county marijuana sales tax.

In May 2015, the Cities sued Adams County in Adams County District Court, claiming that Adams County had no legal authority to impose or collect the county marijuana sales tax and that imposition of the unauthorized tax would reduce their marijuana-related tax revenue by placing retail marijuana businesses in the cities at a competitive disadvantage to retail marijuana businesses in other jurisdictions where there is no county marijuana sales tax. The Cities argued that the state and cities are expressly authorized to respectively levy state and city marijuana sales taxes but that even though the General Assembly has expressly authorized counties to levy certain other special sales taxes, it has not authorized counties to levy a county marijuana sales tax. Adams County argued that section 39-28.8-203 (1)(a)(VI), C.R.S., authorizes the county to levy a county marijuana sales tax by clarifying that section 39-28.8-203 does not prevent a local government from imposing, levying, and collecting a tax on the sale of retail marijuana. Adams County also argued that the Cities lacked standing to sue. 

The District Court held that the Cities had standing to sue because the county marijuana sales tax levied by Adams County likely would likely harm the fiscal interests of the cities by reducing their tax revenue. The District Court also concluded that the plain language of section 39-28.8-203 (1)(a)(VI), C.R.S., when read in conjunction with both the statutory definition of "local government", which includes counties, and the statutory provision authorizing the state to levy the state marijuana sales tax, authorizes counties to levy a county marijuana sales tax.

The Cities appealed, and the Colorado Court of Appeals, after briefly confirming that the Cities had standing to sue on the same grounds relied upon by the District Court, reversed the District Court on the merits, concluding that Adams County does not have constitutional or statutory authority to impose a county marijuana sales tax. 

The Court of Appeals, noting that "in Colorado a grant of taxation authority . . . must be explicit" and that "counties only have those powers expressly conferred by the state," first determined that a county may impose a special sales tax like a county marijuana sales tax only if there is express constitutional or statutory authority to do so. The Court then held that neither the general county sales tax authority in section 29-2-103, C.R.S., nor the state retail marijuana sales tax authority in section 39-28.8-203, C.R.S., confers express authority for a county to levy a county marijuana sales tax, specifically stating that the general county taxing authority authorizes only a general county sales tax and that the absence of an explicit prohibition against counties imposing a county marijuana sales tax in section 39-28.8-203, C.R.S., does not itself authorize a county to impose such a tax. Finally, the Court rejected Adams County's argument that the election approving the county retail marijuana sales tax deprived the court of authority to invalidate the tax, finding the validity of the election irrelevant to whether Adams County had the underlying legislative power to impose the tax. Accordingly, the Court held that Adams County’s county marijuana sales tax is invalid and reversed the judgment of the District Court. (For more information, contact Nicole Myers.)

 

 

Grand Valley Water Users Ass’n v. Busk-Ivanhoe, Inc., Colorado Supreme Court No. 14SA303 (December 5, 2016)

Holding: In construing a water rights decree, the water court erred in finding an implied right to store transmountain water before its original direct-flow use in the importing basin.  Just because transmountain water can be reused to extinction after it has been put to its original use does not mean that it can be stored before its original direct-flow use.

Case Summary: A 1928 water rights decree authorized the collection and storage of water in the Colorado river basin and the delivery of the water through a tunnel into the Arkansas river basin for direct-flow irrigation use. The decree did not authorize any storage of the water other than in the Colorado river basin. Historically, the original owners of the water right stored the water in the Arkansas river basin before it was used for irrigation. 

The City of Aurora eventually acquired the water rights and filed an application with the water judge to change the type of use from irrigation to municipal and the place of use to Aurora. The water judge, after considering extrinsic evidence that was not considered in the adjudication of the 1928 decree, construed the decree to include an implied right to store the water in the Arkansas river basin. It therefore included the use of the stored water when calculating the amount of historic consumptive use to determine how much water Aurora would be allowed to use in Aurora.

The supreme court reversed the water judge's judgment, holding that it was error to consider the extrinsic evidence when construing the 1928 decree and that just because transmountain water can be reused to extinction after it has been put to its original use does not mean that it can be stored before its original direct-flow use. Therefore, the 1928 decree does not impliedly authorize the storage of the water in the Arkansas river basin, the storage was unlawful, and the use of that water could not be considered in calculating the amount of historic consumptive use. (For more information, contact Thomas Morris.)

 

 

Dept. of Transp. v. Amerco Real Estate Co., Colorado Supreme Court No. 16SA75 (September 26, 2016)

Holding: Section 43-1-208, C.R.S., grants condemnation authority to the transportation commission, not the department of transportation, and the commission may not delegate that authority to the department. Unlike other circumstances in which statutes grant the department of transportation authority to determine whether to acquire property by condemnation, the decision to approve the acquisition of property for the kinds of highway alterations enumerated in section 43-1-208, C.R.S., and whether to limit the amount for which that property may be acquired, is a decision vested solely in the transportation commission.

Case Summary: The department of transportation (department) filed a petition in condemnation in Jefferson County District Court to acquire property owned by Amerco Real Estate Company and occupied by U-Haul, citing sections 43-1-208, 43-1-209, and 43-1-210, C.R.S,. as legal authority for its exercise of condemnation power. In the petition, the department asserted that it needed the property for a highway expansion project (project) at the U.S. Highway 36 and Wadsworth Boulevard interchange. Shortly thereafter the department filed a motion for immediate possession of the property.

U-Haul filed a brief in opposition to the department's motion for immediate possession and also requested that the district court dismiss the entire petition in condemnation on the ground that the department lacked legal authority to condemn the property. Specifically, U-Haul argued that the department and the transportation commission (commission) had failed to comply with section 43-1-208 (1) and (2), C.R.S., condemnation prerequisites that: (1) the chief engineer of the department (chief engineer) provide a written report to the commission describing both the project and the specific properties to be condemned and estimating the damages and benefits that would accrue to each affected landowner; and (2) the commission, after receiving the report, make a public determination that both the project itself and the acquisition of the particular properties required for its completion would serve the public interest or convenience (condemnation prerequisites). U-Haul also disputed the legal sufficiency of documents that the department relied on as authority for its condemnation power, specifically a 1994 commission resolution directing the executive director of the department to handle the approval of land acquisition on behalf of the commission and a "Land Acquisition Approval" document signed by the chief engineer that listed properties to be acquired for the project and that also referenced a 2009 commission resolution approving the project.

The district court declined to dismiss the petition in condemnation and granted the department's motion for immediate possession. The district court concluded that: (1) the commission's enabling statutes authorized it to acquire property by either conducting condemnation proceedings itself using the procedures specified in section 43-1-208, C.R.S., or  using the general condemnation procedures specified in title 38, C.R.S. (general condemnation procedures); and (2) the 1994 resolution did not improperly delegate the commission's power of condemnation under section 43-1-208, C.R.S., to the chief engineer, but instead simply directed the chief engineer to exercise the commission's power to acquire property using general condemnation procedures.

U-Haul appealed directly to the Colorado Supreme Court. The supreme court reversed the district court, holding that although other statutes grant condemnation authority to the department in other circumstances, section 43-1-208, C.R.S., which specifically applies to the acquisition of property needed for projects that "establish, open, relocate, widen, add mass transit to, or otherwise alter a portion of a state highway," does not and that "the decision to approve the acquisition of property for the kinds of highway alterations enumerated in section [43-1-]208, [C.R.S.] in the first instance, and whether to limit the amount for which that property may be acquired, is a decision vested solely in the commission." The supreme court also concluded that the commission could not skip the condemnation prerequisites and simply acquire property using general condemnation procedures, but must instead first satisfy the condemnation prerequisites and then decide whether to acquire the needed property using the procedure specified in section 43-1-208, C.R.S., or general condemnation procedures.

Justice Gabriel, joined by two other justices, filed an opinion concurring in the judgment. Justice Gabriel agreed with the majority of the supreme court that that the commission lacked authority to delegate its section 43-1-208, C.R.S., condemnation authority to the department but disagreed with the majority's conclusion that the commission could not skip the condemnation prerequisites and itself acquire property by simply using general condemnation procedures. (For more information, contact Jason Gelender.)

 

 

Martinez v. Estate of Bleck, Colorado Supreme Court No. 14SC346 (September 12, 2016)

Holding: When a public employee defendant files a motion to dismiss a lawsuit based on immunity under the Colorado Governmental Immunity Act (CGIA) and alleges that his or her allegedly tortious conduct was not willful and wanton, he or she is claiming sovereign immunity, which is the only kind of immunity that can be claimed under the CGIA. Consequently, under section 24-10-118 (2)(a) and (2)(a.5), C.R.S., the trial court must determine all issues, including factual issues relating to the immunity claim, before trial and the court's decision regarding the motion is a final decision that is subject to interlocutory appeal. In deciding whether a public employee's conduct is willful and wanton, a court errs in applying a negligence standard and must instead determine whether the conduct exhibits "a conscious disregard of the danger."

Case Summary: Alamosa Police Department officer Jeffrey Martinez (Martinez) and fellow officers responded to a call that Steven Wayne Bleck (Bleck) was suicidal and possibly armed. When Bleck did not respond to the officers' command to show his hands and lie down on the floor, Martinez, without holstering his previously drawn firearm, attempted to subdue him. In the process, Martinez's firearm accidentally discharged and injured Bleck.

Bleck filed a civil lawsuit for battery against Martinez in Alamosa County District Court. Martinez filed a motion to dismiss for lack of subject matter jurisdiction, alleging that because his conduct in attempting to subdue Bleck was not willful and wanton, he was entitled to CGIA immunity under section 24-10-118 (2)(a), C.R.S., which states that "a public employee shall be immune from liability in any claim for injury . . . which lies in tort or could lie in tort . . . and which arises out of an act or omission of such employee . . . unless the act or omission causing such injury was willful and wanton." The district court denied the motion to dismiss, applying a negligence standard and finding that Bleck had adequately pled willful and wanton conduct by alleging that Martinez should have known that attempting to subdue Bleck without first holstering his firearm was dangerous.

Pursuant to section 24-10-118 (2)(a.5), C.R.S., which states that a district court's decision regarding a public employee's motion that raises the defense of sovereign immunity is "a final judgment" that is "subject to interlocutory appeal," Martinez filed an interlocutory appeal of the district court's denial of his motion to dismiss with the Colorado Court of Appeals. The court of appeals concluded that it lacked jurisdiction to hear the appeal because Martinez was only entitled to claim qualified immunity, which is not appealable on an interlocutory basis, not sovereign immunity, which is appealable.

Martinez appealed to the Colorado Supreme Court. The supreme court reversed the court of appeals and remanded the case back to the district court for a determination as to whether Martinez's conduct was willful and wanton. Noting that the CGIA refers only to sovereign immunity and not to qualified immunity, the supreme court "disavow[ed]" language in previously decided supreme court cases that had distinguished between qualified immunity and sovereign immunity and held that sovereign immunity is the only type of immunity that a public employee defendant may raise under the CGIA. Consequently, the question of whether a public employee's conduct is willful and wanton under section 24-10-118 (2)(a), C.R.S., the very question raised by Martinez in his motion to dismiss, implicates the public employee's sovereign immunity and, under section 24-10-118 (2.5), C.R.S., is a final decision that is subject to interlocutory review. The supreme court also held that because "trial courts must resolve all issues pertaining to sovereign immunity prior to trial, including factual issues," the district court had erred by failing to determine whether Martinez's conduct was willful and wanton. Finally, the supreme court held that the district court had incorrectly applied a negligence standard for willful and wanton conduct when it determined that Bleck's claim was sufficiently pled. The supreme court instructed the district court, when deciding on remand whether Martinez's conduct was willful and wanton, to determine whether Martinez's conduct had "exhibited a conscious disregard of the danger." (For more information, contact Jason Gelender.)

 

 

Farmer v. Colo. Parks & Wildlife Comm'n, Colorado Court of Appeals No. 14CA2199 (August 25, 2016)

Holding: The parks and wildlife commission's discretion is unfettered when neither the statutes nor the rules provide it with any guidance regarding the appropriate period for which wildlife license privileges should be suspended for the unregistered provision of outfitting services, so the commission's suspension of the privileges for twenty years is vacated as being arbitrary and capricious.

Case Summary: A hunting outfitter allowed his Colorado outfitter registration to lapse but continued to be qualified as an outfitter in Utah. While providing outfitter services in Utah, he and his client followed a mountain lion into Colorado, where the client shot and killed the lion.

Providing unregistered outfitting services is deemed to be the illegal sale of wildlife, a class 5 felony. The outfitter pleaded guilty; the deferred judgment prohibited him from engaging in any hunting activities for two years. The conviction triggered a hearing before the parks and wildlife commission. The statute specifies that the administrative penalty for the illegal sale of wildlife is the suspension of any or all wildlife license privileges for a period of between one year and lifetime. Neither the statutes nor the commission's rules set any standards to guide the commission's determination of an appropriate suspension period.

A hearing officer suspended the outfitter's wildlife license privileges for 20 years, and the commission affirmed the suspension. The outfitter appealed the commission's order to the district court, which affirmed the commission's action.

The court of appeals reversed and vacated the commission's suspension of the outfitter's wildlife license privileges. Because the commission's discretion is unfettered when neither the statutes nor the rules provide it with any guidance regarding the appropriate period for which wildlife license privileges should be suspended, the commission's action was arbitrary and capricious. The court did not express an opinion regarding whether the commission could, after adopting appropriate rules to guide the hearing officer's discretion, institute new suspension proceedings against the outfitter. (For more information, contact Thomas Morris.)

 

 

TABOR Found. v. Reg'l Transp. Dist., Colorado Court of Appeals No. 15CA0582 (June 30, 2016)

Holding: HB13-1272, which eliminated special districts' sales tax exemptions without prior voter approval, is constitutional because it neither imposes a "new tax" nor constitutes a "tax policy change" within the meaning of TABOR.

Case Summary: The Regional Transportation District ("RTD") and the Scientific and Cultural Facilities District ("SCFD") have general authority under their enabling statutes to levy sales taxes on any transactions upon which the state levies sales tax. On several occasions following the enactment of the RTD and SCFD enabling statutes, the General Assembly enacted legislation that created new state sales tax exemptions or subjected previously exempt transactions to the state sales tax but did not similarly modify the RTD and SCFD sales tax bases. In 2013, the General Assembly enacted House Bill 13-1272, (HB 13-1272) which eliminated some of the districts' exemptions and created other new exemptions for them in order to again make the districts' and the state's sales tax bases identical.

The TABOR Foundation filed a lawsuit in Denver District Court against RTD, SCFD and others alleging that HB 13-1272 created new RTD and SCFD taxes on the items that were previously exempted and that the new taxes are unconstitutional because the districts did not receive prior voter approval for them as required by the Taxpayers' Bill of Rights (TABOR). The district court granted summary judgment in favor of the defendants, concluding that taxation of the items previously exempted did not create new taxes because the initial grant to the districts of taxing authority coterminous of that of the state was not expanded even though the state modified it over time. The district court also held that taxation of the previously exempted items is an administrative simplification and not a "tax policy change" requiring prior voter approval under TABOR.

The TABOR Foundation appealed the district court's grant of summary judgment to defendants, and the Colorado Court of Appeals affirmed. Before addressing the merits of the case, the court noted that the "beyond a reasonable doubt" standard of unconstitutionality applies to TABOR-based challenges to a statute and that under Colorado Supreme Court precedent a court must not strike down a statute "unless a 'clear and unmistakable' conflict exists between the statute and a provision of the Colorado Constitution." The court of appeals then clarified that "to hold a statute unconstitutional beyond a reasonable doubt, the constitutional flaw must be so clear that the court can act without reservation." Although the court of appeals determined that the district court had misapplied the "beyond a reasonable doubt" standard by requiring "evidence that 'the legislature drafted a law using language designed to circumvent the requirements of TABOR, i.e., a tax policy change disguised as administrative simplification," after conducting its own de novo review it agreed with the district court that HB 13-1272 is not unconstitutional beyond a reasonable doubt.

First, the court of appeals held that HB 13-1272 did not violate TABOR's voter approval requirement because it does not impose a new tax, noting that the primary purpose of the bill was not to raise revenue and that requiring an election to remove exemptions under TABOR would hamper the General Assembly's ability to administer taxation efficiently. Recognizing that the new tax question "is close", the court of appeals alternatively held that even if HB 13-1272 did impose a new tax, the voters approval of past sales tax ballot questions—in 1973 for RTD and in 1994 for SCFD—authorized the districts to collect taxes on the items for which HB 13-1272 removed exemptions.

The court of appeals found the second TABOR challenge—whether prior voter approval was required by TABOR because eliminating sales tax exemptions is a "tax policy change directly causing a net tax revenue gain" to the districts—to not be a close question. The court focused on the plain meaning of the word "policy" in this TABOR phrase and defined it as a "high level overall plan". It then concluded that with respect to the sales tax, the districts' high level overall plans are to tax a broad range of tangible items, and that eliminating exemptions did not change the high level overall plans. Accordingly, the court held that the removal of exemptions by HB 13-1272 did not constitute a tax policy change. (For more information, contact Ed DeCecco.)

 

 

Warne v. Hall, Colorado Supreme Court No. 14SC176 (June 27, 2016)

Holding: When considering a motion to dismiss a civil complaint for failure to state a claim upon which relief can be granted under Colorado Rule of Civil Procedure 12 (b) (5), a court must determine, in accordance with the United States Supreme Court's decisions in Bell Atlantic Corp. v. Twombley, 550 U.S, 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), whether the complaint contains sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. The "plausible on its face" standard supersedes the longstanding state standard for dismissal, based on the United States Supreme Court's decision in Conley v. Gibson, 355 U.S. 41 (1957), that allowed a court to dismiss a complaint only if it appeared beyond doubt that the plaintiff could prove no set of facts that would establish his or her claim for relief. It is necessary to use the "plausible on its face" standard instead of the "no set of facts" standard to ensure procedural uniformity between state and federal courts in deciding motions to dismiss under CRCP 12 (b) (5) and the nearly identical Federal Rule of Civil Procedure 12 (b) (6) and to increase the effectiveness of state courts in weeding out groundless complaints at the pleading stage.

Case Summary: Plaintiff Bill Hall (Hall) had a purchase agreement to sell land in the town of Gilcrest (Gilcrest) to Ensign United States Drilling, Inc., (Ensign), which intended to build its headquarters on the property. But Ensign terminated the purchase agreement when it could not obtain Gilcrest's approval for its proposed site development plan. Hall sued both Gilcrest and its mayor, Menda Warne (Warne), in state district court under several state and federal law theories, including intentional interference with contractual obligations,

Hall's complaint alleged that Warne caused Ensign to terminate its purchase agreement with Hall by imposing unauthorized and unreasonable conditions on Ensign's proposed site development plan by mayoral order after the Gilcrest town board had conditionally approved the plan at a public hearing. Warne filed a motion to dismiss the complaint for failure to state a claim upon which relief can be granted under Colorado Rule of Civil Procedure (CRCP) 12 (b) (5) (motion to dismiss). The district court found that Hall's complaint did not sufficiently allege that Warne had caused the conditions to be imposed on Ensign's proposed development plan and granted the motion to dismiss but also granted Hall leave to file an amended complaint.  Hall amended his complaint with additional allegations, and Warne renewed her motion to dismiss. The district court granted the renewed motion and awarded attorney fees to Warne, concluding that the amended complaint lacked necessary allegations that specific conduct by Warne  caused Ensign's breach of its purchase agreement with Hall.

Hall appealed and the Colorado Court of Appeals reversed, declaring itself bound by Colorado Supreme Court precedent to apply the "no set of facts" standard established by the United States Supreme Court in Conley v. Gibson, 355 U.S. 41 (1957), for consideration of a motion to dismiss under CRCP 12 (b) (5), which allows a court to grant a motion to dismiss only if it appears beyond doubt that the plaintiff can prove no set of facts that would establish his or her claim for relief. The court of appeals rejected Warne's proposal to instead apply the newer "plausible on its face standard" established by the United States Supreme Court in Bell Atlantic Corp. v. Twombley, 550 U.S, 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 (2009), which requires a court to grant a motion to dismiss unless the complaint contains sufficient factual matter to state a claim for relief that is plausible on its face. The court of appeals concluded that Hall's allegations concerning Warne's actions were sufficiently plead to state a claim for relief under the "no set of facts" standard. 

Hall appealed, and the Colorado Supreme Court reversed. The Supreme Court explained that its main reason for applying the "no set of facts" standard for the last fifty years had been to ensure that state courts decided CRCP 12 (b) (5) motions to dismiss consistently with how the federal courts decided motions to dismiss under the similar Federal Rule of Civil Procedure 12 (b) (6). Accordingly, since the United States Supreme Court had abandoned the Conley "no set of facts" standard in favor of the Twombley/Iqbal "plausible on its face" standard, the Supreme Court chose to continue favoring procedural uniformity between state and federal courts by adopting the "plausible on its face" standard and requiring state courts to apply that standard when considering motions to dismiss. The Supreme Court further noted that application of the "plausible on its face" standard might increase the effectiveness of state courts in weeding out groundless complaints at the pleading stage.

Applying the newly adopted "plausible on its face" standard to Hall's complaint, the Supreme Court found that the complaint failed to sufficiently allege that Warne acted improperly in inducing Ensign's breach of its purchase agreement with Hall. The Court dismissed the complaint but remanded the case with instructions to allow Hall to file another amended complaint because he had not previously had notice that he was required to state his claims in a manner sufficient to meet the "plausible on its face" standard.

Justice Gabriel, joined by two other justices, filed a dissenting opinion stating that he could not subscribe to the "plausible on its face" standard because it "will deny access to justice for innumerable plaintiffs with legitimate complaints." He noted that  the "no set of facts" standard had recognized "the practical limitations on how much a plaintiff can reasonably be required to plead, particularly given that the plaintiff often lacks information that is in the defendant's exclusive possession and has no means of obtaining that information absent discovery." He also argued that the "plausible on its face" standard is inconsistent with and contrary to the purposes of several state rules of civil procedure that "require only fair notice of a claim" and "will likely result in the disproportionate dismissal of meritorious claims, thereby closing the courthouse doors to many deserving claimants when the pleading rules were, in fact, designed to open the doors for them." (For more information, contact Jason Gelender.)

 

 

Carson v. Reiner, Colorado Supreme Court No. 15SA292 (May 23, 2016)

Holding: In a 6-1 decision, the Colorado Supreme Court held that section 1-1-113 (1), C.R.S., does not permit a court to consider a pre-election challenge to an election official's certification to the ballot of a candidate on the sole ground that the candidate does not meet the qualifications for the office if the statutory period specified in section 1-4-501 (3), C.R.S., for directly challenging the qualification of the candidate has expired.

Case Summary: One week before the regular biennial school board election for Mesa County Valley School District 51, three registered electors of the school district filed a verified petition with the district court, challenging as wrongful the certification to the ballot of one of the candidates. The petition indicated that it was filed pursuant to section 1-1-113 (1), C.R.S., which does not impose any specific duty or function upon any election official but instead provides a general procedural vehicle or method for the adjudication of controversies arising from a breach or neglect of duty or other wrongful act that occurs before the day of an election. The petitioners sought a judicial determination and declaration: (1) that Paul Pitton, a certified candidate for school board director of District B, was unqualified to be a candidate for that office; (2) that the designated election official committed a wrongful act in failing to verify Pitton's residence before certifying him to the ballot; and (3) that the clerk and recorder must not record or tabulate ballots marked for Pitton. The petition named as respondents the Mesa County clerk and recorder and the district board of education's designated election official.

The district court denied the relief requested in the petition, finding that section 1-1-113 (1), C.R.S., did not authorize adjudication of Pitton's eligibility as a candidate at that stage in the election cycle. Instead, it ordered that the election be allowed to proceed. Petitioners immediately filed an application for review by the Colorado Supreme Court pursuant to section 1-1-113 (3), C.R.S.

Affirming the order of the district court, the Colorado Supreme Court held that section 1-4-501 (3), C.R.S., which specifically requires a challenge to the qualification of any candidate by an eligible elector to be made within five days after the certification of the candidate and establishes a specific and abbreviated timeframe within which a district court must determine whether the candidate is or is not qualified for office, conflicts with section 1-1-113, C.R.S.,  The Court, while noting that section 2-4-205, C.R.S., expresses the General Assembly's preference for resolving a conflict between two statutes by construing the statutes, whenever possible, to give effect to both, concluded that any construction that would either treat the five-day period of section 1-4-501 (3), C.R.S., as anything other than a limitation on the time permitted for filing a challenge to a candidate's qualifications or permit a pre-election challenge to a candidate's qualifications indirectly through section 1-1-113, C.R.S., after the five-day period specified in section 1-4-501 (3), C.R.S., had passed would effectively render the five-day provision superfluous. Accordingly, the Court concluded that it could not reasonably give effect to both section 1-4-501 (3), C.R.S. and section 1-1-113, C.R.S., and that, because section 2-4-205, C.R.S., specifies that when two statutes irreconcilably conflict the specific provision prevails as an exception to the general provision unless that general provision is later enacted and clearly intended to prevail over the specific provision, section 1-4-501 (3), C.R.S., as a specific provision enacted later in time, overrides the more general and earlier enacted section 1-1-113, C.R.S.

In its holding, the Supreme Court also noted that the General Assembly expressly contemplated the situation in which an ineligible candidate could be elected, and that it addressed that scenario (without allowing for disruption of the election process once underway) by providing for a post-election challenge to a winning candidate's qualifications, resulting, if successful, in a vacancy in office rather than a declaration that the next-highest vote getter was legally elected. (For more information, contact Kate Meyer.)

 

 

Fort Collins v. Colo. Oil & Gas Ass’n, Colorado Supreme Court No. 15SC668 (May 2, 2016)

Holding: A municipal 5-year moratorium on fracking within city limits is preempted by state law (Oil & Gas Conservation Act).

Case Summary: In November of 2013, the citizens of Fort Collins, a home-rule city, voted in favor of a citizen-initiated ordinance placing a moratorium on hydraulic fracturing ("fracking") and the storage of any associated waste products within the City or on lands under its jurisdiction for a period of 5 years (that is, until 2018) in order to fully study the impacts of fracking on property values and human health. After voters approved the moratorium, the City amended its municipal code accordingly.  

Thereafter, the Colorado Oil and Gas Association (COGA) sued the City and requested: (1) a declaratory judgment declaring that the Oil and Gas Conservation Act, §§ 34-60-101 to -130, C.R.S., and the rules promulgated pursuant thereto preempt the fracking moratorium; and (2) a permanent injunction enjoining the enforcement of the moratorium. COGA and the City filed cross-motions for summary judgment on the declaratory judgment claim, and the district court ruled that the moratorium was preempted by state law. On appeal by the City, the Court of Appeals requested transfer of the case to the Colorado Supreme Court under C.A.R. 50.  

The Colorado Supreme Court determined that fracking is a matter of mixed state and local concern, and therefore applied a preemption analysis. Finding neither express nor implied preemption under the oil and gas statute, the Court examined the requirements of the state and municipal legislation, respectively, and found that the City's 5-year moratorium on fracking and the storage of fracking waste operationally conflicts with the effectuation of state law. Accordingly, the moratorium was declared preempted by state law, therefore invalid and unenforceable. (For more information, contact Duane Gall.)

 

 

City of Longmont v. Colo. Oil & Gas Ass’n, Colorado Supreme Court No. 15SC667 (May 2, 2016)

Holding: The Colorado Supreme Court affirmed the district court's order enjoining the City of Longmont from enforcing its ban on fracking because the ban is preempted by state law and, therefore, is invalid.

Case Summary: In 2012, the residents of Longmont voted to ban hydraulic fracturing, commonly known as fracking, and the storage and disposal of fracking waste within their city limits. The Colorado Oil and Gas Association (Association) sued Longmont, seeking a declaratory judgment to invalidate, and a permanent injunction to enjoin, the fracking ban. Granting the Association's motion for summary judgment, the district court ruled that the Oil and Gas Conservation Act (Act) preempted the fracking ban and issued an order enjoining Longmont from enforcing the ban. The district court stayed its order, pending appeal. Longmont appealed the district court's order to the Colorado Court of Appeals, which requested a transfer of the case to the Colorado Supreme Court. The Colorado Supreme Court accepted the transfer and affirmed the district court's permanent injunction order. 

The Colorado Supreme Court first determined that Longmont's status as a home-rule municipality would not insulate its fracking ban from preemption if the ban conflicts with state law because fracking is a matter of mixed state and local concern and a home-rule municipality's ordinance supersedes a conflicting state law only with respect to a matter that is strictly of local concern. The court then determined that the fracking ban materially impedes the effectuation of the state's interest in the efficient and responsible development of oil and gas, an interest that the state has furthered by promulgating numerous rules regulating various aspects of fracking, from the chemicals used in the process to the location of disposal sites. A local ordinance that materially impedes the state's interest regarding a matter of mixed state and local concern operationally conflicts with state law and, therefore, is preempted by state law. Accordingly, the court concluded that state law preempts Longmont's fracking ban because the ban conflicts with the Act and rules promulgated under the Act.

The Colorado Supreme Court also rejected an argument, asserted by several environmental groups who had been added to the case as citizen intervenor plainitffs, that preemption of the fracking ban would violate article II, section 3 of the Colorado Constitution, which declares certain rights of individuals to be "natural, essential, and inalienable," because the fracking ban protects those rights. In doing so, the court noted both that no existing legal authority supported application of article II, section 3 to its preemption analysis and that acceptance of the citizen intervenor plaintiffs' reasoning would always preclude preemption of any "local regulation alleged to concern life, liberty, property, safety,  or happiness" and would arguably render the municipal home rule provision of the Colorado Constitution unnecessary in violation of the principle that courts avoid interpretations that "render a constitutional provision superfluous or a nullity." (For more information, contact Jennifer Berman.)

 

 

Colo. Ethics Watch v. Indep. Ethics Comm’n, Colorado Supreme Court No. 15SA244 (April 25, 2016)

Holding: By a 4-3 decision, the Colorado Supreme Court held that a decision by the Independent Ethics Commission to dismiss a complaint as frivolous is not subject to the judicial review provisions found in section 24-18.5-101 (9), C.R.S.

Case Summary: Colorado Ethics Watch (Ethics Watch) filed an ethics complaint with the Independent Ethics Commission (IEC) against a county commissioner. The IEC, in accordance with provisions of article XXIX of the Colorado constitution (Amendment 41) that allow it to "dismiss frivolous complaints without conducting a hearing" and require it to keep any frivolous complaint that it dismisses confidential, conducted a preliminary investigation, met in executive session to discuss the complaint, and dismissed the complaint as frivolous. Ethics Watch then sued the IEC, requesting that the trial court declare the IEC's frivolity determination unlawful and order the IEC to proceed with a full investigation and public hearing. After the trial court denied the IEC's responsive motion to dismiss for lack of subject matter jurisdiction, the Colorado Supreme Court, at the request of the IEC, agreed to exercise original jurisdiction over the case to determine whether or not a court has subject matter jurisdiction to review an IEC determination that an ethics complaint is frivolous.

In a 4-3 decision, the Colorado Supreme Court held that an IEC determination that an ethics complaint is frivolous is not subject to judicial review. Interpreting and applying provisions of Amendment 41 that authorize the General Assembly to enact legislation concerning the manner of recovery of penalties imposed by the IEC and the imposition of additional penalties but prohibit the General Assembly from enacting legislation that "limit[s] or restrict[s]" the powers of the IEC, the Court concluded that Amendment 41 prohibits the General Assembly from enacting legislation pertaining to IEC decisions that do not involve the enforcement of penalties. Accordingly, while the General Assembly may authorize judicial review of an enforcement decision by the IEC, it may not authorize judicial review of a decision of the IEC to dismiss an ethics complaint because such a dismissal does not involve the enforcement of penalties but instead represents the IEC's decision not to enforce. In order to interpret section 24-18.5-101 (9), C.R.S., which provides for judicial review of any final IEC action concerning a complaint, in a manner that "preserves its constitutionality", the Court held that section 24-18.5-101 (9), C.R.S., authorizes only judicial review of an IEC enforcement decisions and does not apply to a decision by the IEC to dismiss a complaint as frivolous. (For more information, contact Bob Lackner.)

 

 

BP Am. v. Colo. Dep’t of Revenue, Colorado Supreme Court No. 13SC996 (April 25, 2016)

Holding: The plain language of section 39-29-102 (3) (a), C.R.S., authorizes a severance tax deduction for any transportation, manufacturing, and processing costs, and the cost of capital is a deductible cost that resulted from the investment in transportation and processing facilities.

Case Summary: Colorado levies a tax on the gross income generated from oil and gas severed from the earth in the state, section 39-29-105, C.R.S. The tax is levied at the point at which oil and gas emerges from the earth's surface, but the oil and gas is usually not sold at this point. Accordingly, section 39-29-102 (3) (a), C.R.S., allows a taxpayer to deduct from revenue "any transportation, manufacturing, and processing costs borne by the taxpayer," which effectively subtracts any post-extraction value added by the taxpayer.

In the 1980s, BP's predecessor in interest constructed facilities to process and transport natural gas that it extracted from coal seams in southwest Colorado. In 2005, BP filed amended severance tax returns for tax years 2003 and 2004, seeking to deduct the cost of capital related to these facilities from the revenue generated by natural gas sales. Cost of capital is the amount of money that BP's predecessor could have earned if it had invested in other ventures rather than in building the facilities.

The Department of Revenue denied the deduction, and BP contested the determination in district court, which ruled in BP's favor. The department appealed and the Colorado Court of Appeals reversed the trial court's decision and held that the cost of capital was not a deductible transportation and processing cost. BP appealed this decision, and the Colorado Supreme Court reversed the lower court's decision.

In doing so, the court concluded that the phrase "any transportation, manufacturing, and processing costs" was unambiguous. "Costs" means the "price or expenditure" and by using the phrase "any . . . costs" the legislature did not distinguish between different types of costs. Therefore, all transportation, manufacturing, and processing costs are deductible. This conclusion was bolstered by a comparison with a similar property tax statute in which the General Assembly omitted the term "any" and instead conferred discretion to the property tax administrator to determine the scope of allowable deductions.

Having determined the scope of allowable deductions, the court then rejected the department's argument that the cost of capital is only a benefit foregone to pursue a different opportunity and not an actual cost. Rather, the court determined that it is a cost that is equal to the difference between the amount of cost recovery that the predecessors actually received from constructing the facilities and the amount of recovery or deductions that the predecessors could have received if they had invested in other ventures. Accordingly, BP was entitled to recover the stipulated refunds plus interest.

After this decision the department advised the General Assembly that other taxpayers were owed refunds for amended severance returns that included cost of capital deductions. In addition, the department anticipated that it would have to refund additional amounts based on the court's interpretation of the phrase "any transportation, manufacturing, and processing costs." In order to ensure that there was sufficient revenue available for all of the potential refunds and to allow continuity of programs that are funded from severance taxes, the General Assembly enacted Senate Bill 16-218, which temporarily made income tax revenue available for severance tax refunds. (For more information, contact Ed DeCecco.)

 

 

Amerigas Propane and Indem. Ins. Co. of N. Am. v. Indus. Claim Appeals Office, Colorado Court of Appeals No. 15CA1210 (April 21, 2016)

Holding: Allowing a workers' compensation claimant to waive benefits for all consequences of an injury, whether known or unknown, as part of a settlement agreement is not contrary to public policy.

Case Summary: Claimant was a truck driver who slipped and fell on ice while making a delivery.  His shoulder was seriously injured and eventually required replacement with an artificial joint.  The claimant settled with his employer before reaching maximum medical improvement.  At the time of the settlement, unbeknownst to the claimant, his attorney, the employer, or anyone else, the claimant had sustained a bone fracture during the surgery to correct the initial injury.  The settlement agreement provided that all claims for injuries, including unknown injuries, would be "FOREVER closed" and "FOREVER settled."  (Emphasis in original.)  After discovering the latent bone fracture, the claimant moved to reopen the settlement under § 8-43-204, C.R.S., which allows reopening only on grounds of fraud or "mutual mistake of material fact." 

The Court of Appeals held that, under these circumstances, the general waiver of benefits for injuries both known and unknown at the time of the settlement precluded reopening of the settlement on the basis of mutual mistake.  The court distinguished a prior opinion of the Colorado Supreme Court allowing reopening under similar circumstances because here, unlike in the prior case, the fracture was not part of the "basic character of the primary injury" but occurred later, during treatment of the primary injury.  Therefore the claimant "was fully aware 'of the basic character of the primary injury for which the release was sought and executed.'" 

The Court of Appeals also opined that neither case law nor prior amendments to the statute had specified "whether the parties to an agreement could limit what factors would qualify as a mutual mistake of material fact," and that the "strong legislative policy" allowing reopening in cases of mutual mistake did not overcome the parties' expressed intent to foreclose all future claims in this case.

This outcome raises the question of whether the language of § 8-43-204 (1), C.R.S., allowing reopening of a settlement in a workers' compensation case on the basis of mutual mistake, requires clarification.  (For more information, contact Duane Gall.)

 

 

Rocky Mtn. Gun Owners v. Hickenlooper, Colorado Court of Appeals No. 14CA2178 (March 24, 2016)

Holding: Trial court erred in dismissing plaintiff's claims relating to the constitutionality of a 2013 law concerning ammunition magazines. The case is remanded to allow this claim to proceed.

Case Summary: In 2013, the Colorado General Assembly enacted several bills addressing the possession and transfer of firearms. Shortly after the bills were signed into law, plaintiffs filed a complaint in Denver district court challenging the constitutionality of two of the bills. Specifically, plaintiffs alleged that (1) HB13-1224 and HB13-1229 unconstitutionally restrict the right to bear arms, (2) HB13-1229 is an unconstitutional delegation of legislative and executive authority, and (3) HB13-1229 violates the due process and equal protection provisions of the state constitution. The district court concluded that the plaintiffs failed to state a claim for which relief could be granted. It dismissed the plaintiffs' claims, and the plaintiffs brought this appeal.

The court of appeals affirmed those portions of the district court's decision dismissing the claims relating to HB13-1229. However, the court of appeals found that the district court erred in dismissing the plaintiffs' claims with regard to the constitutionality of HB13-1224. The district court had relied in part on the facts and reasonsing set forth in Colo. Outfitters Ass'n v. Hickenlooper, 24 F. Supp. 3d 1050 (D. Colo. 2014), to dismiss these claims. However, as the court of appeals stated, the allegations in the plaintiffs' complaint "deserve testing through the crucible of factfinding," and plaintiffs are entitled to present evidence at trial of the basis for their claim. The case was remanded to the district court with instructions to allow the claim to proceed. (For more information, contact Richard Sweetman.)