By: Alan Schindler, Esq. and Anna Goldman, Esq.,
HMLL LLC v. MJM Holdings, Avniel Wellner, and ORAM LLC
Division VI, Opinion by Judge Wellner; Judges Lipinsky and Gomez concur.
Decision: Affirmed
Procedure: On appeal from Denver District Court, Judge Andrew P. McCallin
Factual background and district court holding:
Plaintiff HMLL LLC (“HMLL”) attempted to enter into a business deal with Defendants MJM Holdings Ltd. (“MJM”), ORAM LLC (“ORAM”), and Avniel Wellner (“Wellner”) and was ultimately unsuccessful. The intent behind this deal was essentially to allow HMLL to enter into Colorado’s highly regulated marijuana industry by transferring the ownership of a marijuana business from Wellner to HMLL
HMLL was not permitted to invest in a marijuana business under standards issued by the Colorado Marijuana Enforcement Division (“MED”) regarding residency requirements. HMLL devised a plan to enter the marijuana market without becoming Colorado residents: HMLL would find a Colorado-based “resident owner” or “proxy” to obtain a MED-approved ownership license for a marijuana business and HMLL would provide funding and control the company’s operations without being the owner on paper. Then, once HMLL’s members were approved for their ownership licenses by the MED, HMLL would buy the business from the resident owner.
Wellner agreed to be the resident owner of the marijuana business. When the time came for Wellner to transfer the business to HMLL, the relationship between the two parties deteriorated. Negotiation to transfer the business ultimately failed, and HMLL filed an action against the defendants for specific performance of the agreement to transfer the marijuana business. The defendants asserted numerous counterclaims.
After a lengthy bench trial, the district court denied relief to all the parties on all the claims and counterclaims. With respect to HMLL’s claims, the district court concluded that “HMLL’s violations of the MED regulatory process make equitable relief inappropriate.” Similarly, the court denied Wellner any relief on his counterclaims on the grounds that “[h]e was a willing and knowing[] participant in HMLL’s illegal plan to evade the MED’s regulatory scheme.”
HMLL appealed this decision, but the defendants did not.
Issue: Whether the trial court erred by (1) applying the doctrine of unclean hands to deny it relief on its unjust enrichment claims and (2) declining to enforce HMLL’s agreement with Wellner on the grounds that its terms were illegal and against public policy.
The division affirmed the district court’s denial of relief for all defendants, holding that the district court properly applied the doctrine of unclean hands to deny it relief on its unjust enrichment claims. The MED’s regulations required HMLL to disclose itself as an owner of the marijuana business because it had a financial interest in the company and acted like an “Indirect Beneficial Interest Owner.” HMLL’s actions support the district court’s finding that HMLL was more of an owner than just an unsecured creditor because it controlled the company’s finances and operations.
The division also affirmed that HMLL was not entitled to any relief on a promissory note between HMLL and Wellner because the agreement was illegal and against public policy. HMLL and Wellner’s agreement violated the MED’s regulations. See Marijuana Enf’t Div. Rule 202.1, 1 Code Colo. Regs. 212-2 (effective Jan. 1, 2018). The MED made it abundantly clear that any agreement made in violation of its regulations is void. Id. at Rule 202.1(H)(2)(a).
Trudgian v. LM General Insurance Co.
Division IV, Opinion by Judge Pawar; Judges Navarro and Johnson concur.
Decision: Affirmed
Procedure: On appeal from Denver District Court, Judge Shelley I. Gilman.
Factual background and district court holding:
The total loss statute, section 10-4-639(1), C.R.S. 2023, imposes an affirmative duty on motor vehicle insurers: they “shall pay” to the insured the title and registration fees “associated with the total loss of [the insured’s] motor vehicle.”
Plaintiff, Barbara Trudgian, owned a motor vehicle that was insured by defendant, LM General Insurance Company (LM). The insurance policy included coverage for the total loss of the vehicle. Trudgian renewed her vehicle registration in June 2017, paying the fees for the following twelve months, until June 2018. But in September 2017, approximately three months into the twelve-month registration period, the vehicle was involved in an accident and LM determined that the vehicle was a total loss.
Trudgian claimed that LM failed to reimburse her for the amount of registration fees she had paid that were applicable to the time period after the car was totaled. Trudgian attempted to bring this suit as a class action.
LM moved for summary judgment, arguing that section 10-4-639(1) could not be enforced through a private civil action. The district court agreed. In applying Allstate Insurance Co. v. Parfrey , 830 P.2d 905 (Colo. 1992), the court noted that section 10- 4-601.5, C.R.S. 2023, provides that the Colorado Insurance Commissioner “shall administer and enforce the provisions of this part 6.” The court reasoned that this provision manifested the legislature’s intent to entrust enforcement of all of part 6, including section 10-4-639(1), to the commissioner, thereby precluding private civil actions to enforce the statute. The court therefore granted LM summary judgment on all of Trudgian’s claims because they all attempted to enforce section 10-4-639(1)
Issue: Whether there is an implied private right of action to enforce the statutory duty found in C.R.S. section 10-4-630(1).
After applying the factors articulated in Parfey , the division concluded that there is no implied right of action to enforce section 10-4-639(1). In Parfey , the court addressed whether a statute that imposed an affirmative duty on motor vehicle insurers but was silent as to whether that duty could be enforced by a private civil action. Parfrey , 830 P.2d at 910. To answer this question, the court considered three factors: (1) whether the plaintiff was within the class of people the statute was intended to benefit; (2) whether the legislature intended to imply a private right of action; and (3) whether a private right of action was consistent with the purposes of the legislative scheme. Id . at 911.
Section 10-4-639(1) imposes a duty on motor vehicle insurers and says nothing about a private right of action, so the division applied the Parfey factors. First, LM does not contest that Trudgian and the class members are within the group of people that section 10-4-639(1) is meant to benefit.
Second, the division determined the legislature’s intent by reading section 10-4-639(1) in the context of the statute. Through those means, the division determined that nothing about any legislative intent to imply a private right of action in section 10-4-639(1) is clear or clearly expressed, leading the division to conclude that the second factor cuts against finding an implied private right of action.
Third, the division found that finding an implied private right of action to enforce section 10-4-639(1) would have a negligible effect on the purposes of the statutory scheme.
Thus, there is no private right of action to enforce section 10-4-639(1).
Grand Junction Peace Officers’ Association v. City of Grand Junction
Division VI, Opinion by Judge Lipinsky; Judges Schutz and Bernard concur.
Decision: Appeal dismissed in part, judgment affirmed, and case remanded with directions.
Procedure: On appeal from Mesa County District Court, Judge Valerie J. Robison.
Factual background and district court holding:
The Grand Junction Peace Officers’ Association (the “Association”) filed a class action complaint against the City of Grand Junction (the “City”) regarding the funding of a retirement program. The City asserted that the Association’s requested relief violated the Colorado Governmental Immunity Act (the “CGIA”), sections 24-10-101 to -120, C.R.S. 2023, because the Association’s claims lie in tort. In a later discovery motion, the City asked for a blanket stay of the proceedings, including a stay for the Association’s request for class certification, while the court determines whether the City has governmental immunity. The Association argued this was not necessary.
The district court granted the motion to stay and said it would reserve ruling on the certification motion until it had ruled on whether the Association’s claims were barred under the CGIA. After conducting some discovery related to governmental immunity, the City filed a motion to dismiss. The Association opposed the dismissal motion and requested a hearing on the applicability of the CGIA, pursuant to Trinity Broadcasting of Denver, Inc. v. City of Westminster , 848 P.2d 916 (Colo. 1993) (a “Trinity hearing”). Following the Trinity hearing, the court entered an order dismissing the Association’s breach of fiduciary duty and unjust enrichment claims. At the conclusion of this order, the court concluded that the Association’s complaint must be dismissed under the CGIA.
The Association appealed, contending that the court erred by (1) failing to certify this case as a class action before ruling on whether the CGIA barred the Association’s claims; (2) dismissing its breach of contract, unjust enrichment, and breach of fiduciary duty claims; (3) applying the incorrect standard under Trinity and its progeny by “[e]ssentially” having the Association “prove their entire case at the Trinity hearing”.
Issue: Whether the CGIA issues took precedence over class certification.
The General Assembly enacted the CGIA to limit the potential liability of public entities for compensatory damages in tort. City of Aspen v. Burlingame Ranch II Condo. Owners Ass’n , 2024 CO 46, ¶ 29, ___ P.3d ___, ___. Unless the CGIA waives immunity, “[a] public entity shall be immune from liability in all claims for injury which lie in tort or could lie in tort regardless of whether that may be the type of action or the form of relief chosen by the claimant.” § 24-10-106(1), C.R.S. 2023; see also § 24-10-108.
The purpose of a class action is “to eliminate the need for repetitious filing of many separate lawsuits involving the interests of large numbers of persons and common issues of law or fact by providing a fair and economical method for disposing of a multiplicity of claims in one lawsuit.” Mountain States Tel. & Tel. Co. v. Dist. Ct ., 778 P.2d 667, 671 (Colo. 1989). The court “shall determine” whether to maintain a class action “[a]s soon as practicable after the commencement of an action brought as a class action.” C.R.C.P. 23(c)(1). An order certifying a class action “may be conditional, and [it] may be altered or amended before the decision on the merits.” Id .
The division rejected the Association’s argument that the court violated C.R.C.P. 23(c)(1) by determining whether the CGIA barred the Association’s claims before considering the certification motion. Waiting until after the Trinity hearing to determine whether to certify the class was practicable, because the court would have expended judicial resources in determining whether the class was certifiable before the claims potentially got dismissed.
Issue: Whether the court erred by dismissing the Association’s claims.
The division agreed with the district court that the CGIA barred the Association’s claims for breach of contract and unjust enrichment. In considering whether, for purposes of the CGIA, a claim lies in tort or could lie in tort, a court “is less concerned with what the plaintiff is arguing and more concerned with what the plaintiff could argue.” Robinson v. Colo. State Lottery Div ., 179 P.3d 998, 1005 (Colo. 2008). Because “the form of the complaint is not determinative of the claim’s basis in tort or contract,” the court must instead consider “the nature of the injury and the relief sought” when determining whether the CGIA bars a claim. Id .
The division held that although the Association’s claims on their face are contract claims, the claims in their essence are premised on allegations of misrepresentation and fraud, and could thus lie in tort. Therefore, the district court properly dismissed the Association’s breach of contract and unjust enrichment claims.
Issue : Whether the district court utilized the wrong standard in the Trinity hearing.
The CGIA requires trial courts to “resolve all issues pertaining to sovereign immunity prior to trial, including factual issues, regardless of whether those issues pertain to jurisdiction.” Martinez v. Est. of Bleck , 379 P.3d 315, 322 (Colo. App. 2016). One such issue is whether a public employee’s conduct was willful and wanton. § 24-10-118(2)(a). However, a court does not decide issues of negligence or causation at the Trinity hearing stage because those issues are distinct from immunity. See City of Colorado Springs v. Powell , 48 P.3d 561, 567 (Colo. 2002).
The Association contended that in the Trinity hearing, the court required the Association to prove causation and damages. The division disagreed, holding that the trial court was instead analyzing whether the Association demonstrated that employees of the City willfully and wantonly breached a fiduciary duty. Thus, the division held that the court did not apply an incorrect legal standard in reviewing the Association’s claims.
