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Van Rees v. Unleaded Software, Inc.

Supreme Court of Colorado, En Banc

June 27, 2016

John Van Rees, Sr., d/b/a ExquisiteCrystals.com, Petitioner
v.
Unleaded Software, Inc., a/k/a the Unleaded Group, Respondent

          Certiorari to the Colorado Court of Appeals. Court of Appeals Case No. 12CA1014.

          Judgment Affirmed in Part and Reversed in Part.

          SYLLABUS

         After Unleaded Software, Inc., failed to deliver contracted-for websites and services, Van Rees brought suit alleging various tort theories, civil theft, three breach of contract claims, and a violation of the Colorado Consumer Protection Act (" CCPA" ). The trial court dismissed all but the contract claims, and the court of appeals affirmed, holding that the economic loss rule barred the tort and civil theft claims, and that Van Rees failed to allege a significant public impact under the CCPA. We affirm in part and reverse in part. The economic loss rule applies only if there is no independent tort duty. Here, where Van Rees alleges Unleaded induced him into entering a contractual relationship when it knew it would not be able to perform the promised services, there is an independent tort duty, and we therefore reverse as to Van Rees's tort claims. We do not reach the question of the economic loss rule as it relates to civil theft and instead affirm the dismissal of that claim because Van Rees failed to adequately allege the knowing deprivation of a thing of value. Finally, we affirm the dismissal of the CCPA claim for failure to allege a significant public impact.

         For Petitioner: Westerfield & Martin, LLC Zachary S. Westerfield Logan R. Martin Denver, Colorado.

         For Respondent: Law Offices of Peggy Stevens, P.C., Peggy E. Stevens, Lakewood, Colorado.

          OPINION

         EID, JUSTICE

          [¶1] Petitioner John Van Rees, Sr., sells metaphysical crystals through his website, ExquisiteCrystals.com. Van Rees contracted with respondent Unleaded Software, Inc., to perform web-related services and to design additional websites. After Unleaded missed deadlines and failed to deliver the promised services, Van Rees brought suit asserting multiple tort claims, a civil theft claim, three breach of contract claims, and a claim for violations of the Colorado Consumer Protection Act (" CCPA" ).

          [¶2] Granting Unleaded's C.R.C.P. 12(b)(5) motion, the trial court dismissed all but Van Rees's contract claims, on which the jury found in Van Rees's favor. Van Rees appealed the dismissal of his other claims, and the court of appeals affirmed, determining that the tort and civil theft claims were barred by the economic loss rule because they were related to promises memorialized in the contracts, and the CCPA claim failed to allege a significant public impact. Van Rees v. Unleaded Software, Inc., 2013 COA 164, ¶ ¶ 26, 43, 47, P.3d .

          [¶3] We granted Van Rees's petition for certiorari and now affirm in part and reverse in part. The economic loss rule " serves to maintain a distinction between contract and tort law." Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256, 1262 (Colo. 2000). The question is not, however, whether the tort claims relate to a contract, as the court of appeals held here, but rather whether they stem from a tort duty independent of the contract. Id. at 1262. In this case, Van Rees's tort claims allege that Unleaded induced him to enter into a contractual agreement with false promises of its capabilities to perform web-related services. These pre-contractual misrepresentations are distinct from the contract itself, and may form the basis of an independent tort claim. See Keller v. A.O. Smith Harvestore Prods., Inc., 819 P.2d 69, 72 (Colo. 1991). Accordingly, we reverse the court of appeals' judgment as to the tort claims. As to the civil theft claim, we need not reach the question of the application of the economic loss rule to civil theft because we affirm the court of appeals on the ground that the claim fails to adequately allege the knowing deprivation of a thing of value. Finally, we affirm the judgment as to the CCPA claim on the ground that Van Rees failed to allege a significant public impact. Accordingly, we affirm in part and reverse in part, and remand the case for further proceedings consistent with this opinion.

         I.

          [¶4] Van Rees sells metaphysical crystals at ExquisiteCrystals.com. After successfully running the website, Van Rees wanted to add three new websites that would cater to specific customers but tie into the same warehouse and inventory.

          [¶5] Unleaded advertises itself as a certified Gold Partner of Magento, a leading e-commerce software program. Based on this and Unleaded's representations that it was a web design, search-engine optimization (" SEO" ), webhosting, and media company, Van Rees hired Unleaded to redesign ExquisiteCrystals.com and build the three additional websites. The contract[1] signed in early December 2009 outlined that Unleaded would create a new website using Magento; design three new sites; provide ECC Integration (a QuickBooks application), training, and website optimization; and have the sites live on January 22, 2010.

          [¶6] But January 22 did not bring new websites. Instead, it brought news from Unleaded that the websites would not be ready until at least March 4. On March 2, the parties entered into a second contract for SEO services. March 4 brought another delay and Unleaded said the website would be live and operational on April 1. The parties then entered into a third contract, specifying that Unleaded would host the website on a dedicated server. But SEO services were not performed, the website was not hosted on a dedicated server but on a shared one, and Van Rees alleges that within minutes of going live on April Fools' Day, Unleaded's work ...


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