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LaFondFX Inc. v. Kopelman

United States District Court, D. Colorado

April 17, 2017

LaFONDFX, INC., Plaintiff/Counter-Defendant,
v.
STEVE KOPELMAN, and ROB ZOMBIE'S GREAT AMERICAN NIGHTMARE, d/b/a Haunt Holdings, Defendants/Counter-Plaintiffs.

          ORDER

          R. Brooke Jackson United States District Judge.

         This matter is before the Court on two pending motions: (1) plaintiff LaFondFX, Inc.'s (“LFX”) Motion for Partial Summary Judgment on Defendants' Counterclaim, ECF No. 74; and (2) defendant Steven Kopelman's Second Motion for Determination of Question of Law, ECF No. 75. For the reasons below, the Court DENIES plaintiff's motion [ECF No. 74] but GRANTS Mr. Kopelman's motion [ECF No. 75].

         I. STANDARD OF REVIEW

         The Court may grant summary judgment if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party has the burden to show that there is an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The nonmoving party must “designate specific facts showing that there is a genuine issue for trial.” Id. at 324. A fact is material “if under the substantive law it is essential to the proper disposition of the claim.” Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998). A material fact is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court will examine the factual record and make reasonable inferences in the light most favorable to the party opposing summary judgment. Concrete Works of Colo., Inc. v. City & Cnty. of Denver, 36 F.3d 1513, 1517 (10th Cir. 1994).

         II. ANALYSIS

         The Court previously discussed the background and procedural history of this suit in its order dated March 3, 2017. See Order, ECF No. 89, at 1-4. With these pending motions, filed before the Court's prior order but not ripe until recently, both parties seek rulings in their favor on discrete issues. First, LFX seeks a partial summary judgment on defendants' counterclaim for breach of contract. See ECF No. 74. Mr. Kopelman seeks a ruling of his own that LFX's damages, should it ultimately prevail in this breach of contract action, are capped at $53, 029.28. See ECF No. 75. I discuss both motions in turn and in greater detail below.

         A. LFX's Motion for Partial Summary Judgment on Defendants' Counterclaim for Breach of Contract [ECF No. 74].

         LFX argues that because Mr. Kopelman terminated the parties' contract for an alleged “defect” with the “haunts” LFX built (i.e., an apparent failure to apply flame retardant) and did not give plaintiff a 30-day window to “cure” this alleged defect per Section 5.1 of the parties' Agreement, defendants are precluded from asserting a breach of contract counterclaim. See ECF No. 74 at 5-7; ECF No. 74-2 at 4 (the Agreement). In response, defendants argue that LFX has waived this “right to cure” affirmative defense by failing to plead it. See ECF No. 88 at 2-10. Alternatively, they argue that LFX's motion should be denied because genuine issues of material fact exist on three crucial issues related to plaintiff's affirmative defense: (1) whether LFX knew about the defects with the haunts before it shipped them to defendants; (2) whether LFX was in fact given a reasonable opportunity to cure; and (3) whether LFX's alleged breaches were even “curable.”[1] See id.at 24-27. Finding that a fact question exists at the very least over whether defendants provided LFX with a reasonable opportunity to “cure” the alleged defects with the haunts, the Court DENIES LFX's motion.[2]

         As defendants point out, at the meeting when they eventually terminated their contract with LFX, Henry Cottel, Mr. Kopelman's partner, provided plaintiff's counsel with an “Options” document. See ECF No. 88-8 at 2 (Options document); Dep. of Henry Cottle, ECF No. 88-7 at 19:17-25, 28:3-23. That document referenced defects defendants found with plaintiff's work (e.g., the failure to apply flame retardant), and likewise ostensibly detailed several options defendants were giving plaintiff going forward for how to deal with those issues. See ECF No. 88-8 at 2. On its face, that document provided plaintiff with what it now claims it was not given: notice of the alleged defects with plaintiff's products and an opportunity to “cure.” See Id. Indeed, two out of the three “options” defendants apparently gave plaintiff through that document expressly allowed for continuation of the parties' Agreement after LFX “fixed” the flame retardant issue. See id.

         For its part, LFX denies that defendants or Mr. Cottle ever identified the specific claimed deficiencies with plaintiff's work. ECF No. 74 at 4 n.3. It nevertheless argues that even if plaintiff was given this document, defendants immediately terminated the parties' contract which, it contends, makes that the disputed issue of whether defendants gave plaintiff an opportunity to cure through this “Options” document immaterial. See Id. I disagree.

         Construing the facts in a light most favor to defendants as I must do at this point in the litigation, see, e.g., Concrete Works of Colo., 36 F.3d at 1517, I find instead that it was possible that plaintiff rejected reasonable opportunities defendants gave it to cure before defendants terminated the contract at that same meeting. See ECF No. 88-7 at 28:3-23. Indeed, it is also possible based on the facts the parties provide that defendants terminated the contract because plaintiff elected the third “option” provided for in the “Options” document-i.e., that plaintiff would not make use of any opportunity to cure and that the parties would instead “let the attorneys settle the rest.” See id.; ECF No. 88-8 at 2. Accordingly, I disagree with plaintiff and find that a fact question exists over plaintiff's “right to cure” affirmative defense. Its motion for summary judgment on defendants' counterclaim based on that argument is accordingly DENIED.

         B. Steven Kopelman's Second Motion for Determination of Question of Law [ECF No. 75].

         Next, Mr. Kopelman has moved for a ruling that should plaintiff ultimately prevail in this suit, that its damages are capped at $53, 029.28. See ECF No. 75. As Mr. Kopelman explains, that amount is what the parties agree is what defendants apparently still owe plaintiff under the parties' Agreement but which, to date, has not been paid. See Id. at 2; Pl.'s Rule 26(a)(1) Initial Disclosures, ECF No. 75-1, at 7. He nevertheless acknowledges that the parties' Agreement includes what appears to be “liquidated damages” provisions. See ECF No. 74-2 at 3 (Sections 2.2 and 2.3). One of those provisions provides that if Mr. Kopelman breaches the Agreement, which is what plaintiff alleges in this suit, plaintiff is entitled to not only the amounts it has already received prior to the drafting of the agreement and any amounts defendants still owed it under the remaining portions of the Agreement, but also to ownership and possession of the haunts it constructed for defendants. See id.

         Faced with this provision, Mr. Kopelman nevertheless contends that plaintiff's damages must be capped at $53, 029.28 because that provision is a “penalty” clause that is unenforceable under Colorado law. ECF No. 75 at 10-14. Plaintiff, by contrast, asserts that it can recover $405, 591.55 in damages, arguing that the parties' provision should be interpreted as a “convey or pay” clause-in other words, a specific performance provision that provides that if defendants breach, that plaintiff can elect to obtain either the haunts (which it values at $405, 591.55) or defendants' remaining financial ...


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