In Re: Villas at Highland Park Homeowners Association, Inc., a Colorado nonprofit corporation, Plaintiff
Villas at Highland Park, LLC, a Colorado limited liability company; CC Communities, LLC, a Colorado limited liability company f/k/a Century Communities, LLC; Century Communities, Inc., a Delaware corporation f/k/a Century Communities Colorado, LLC; Horizon Building Services, LLC, a Colorado limited liability company; Dale Francescon, individually; Amy L. Anders, individually; John Healy, individually; Joseph Huey, individually; Kathy Ellis, individually; and John Geary, individually. Defendants
Proceeding Pursuant to C.A.R. 21 Arapahoe County District
Court Case No. 13CV31625 Honorable Elizabeth A. Weishaupl,
Attorneys for Plaintiff: Burg Simpson Eldredge Hersh &
Jardine PC Brian Keith Matise Mari K Perczak Englewood,
Attorneys for Defendants Villas at Highland Park, LLC; CC
Communities, LLC; Century Communities, Inc.; Horizon Building
Services, LLC; and Dale Francescon: Don, Galleher &
Associates Shelley B. Don Watson W. Galleher Denver, Colorado
Attorneys for Movants Burg Simpson Eldredge Hersh &
Jardine PC and Mari Perczak: Fennemore Craig, P.C. Troy R.
Rackham Denver, Colorado Burns Figa & Will PC Alexander
"Alec" R. Rothrock Greenwood Village, Colorado
Attorneys for Amicus Curiae Colorado Trial Lawyers
Association: Bachus & Schanker LLC Scot C. Kreider
appearance on behalf of: Amy L. Anders, John Healy, Joseph
Huey, Kathy Ellis, or John Geary.
This original proceeding arises in a construction-defect case
filed by a homeowners' association against several
real-estate developers. An attorney for the homeowners'
association, Mari Perczak, previously represented one of the
real-estate developers, Dale Francescon, when Francescon was
a defendant in other construction-defect litigation. Based on
Perczak's prior representation of Francescon, the
developers in this case (including Francescon) moved to
disqualify Perczak and her law firm under Rules 1.9 and 1.10
of the Colorado Rules of Professional Conduct.
Rule 1.9 provides that an attorney has certain ethical duties
to former clients that persist even after the attorney-client
relationship has concluded. Relevant here, Colo. RPC 1.9(a)
prohibits an attorney from representing a party whose
interests are materially adverse to those of a former client
if the former and present matters are "substantially
related" to one another such that there is a substantial
risk that confidential information that normally would have
been obtained in the prior representation would materially
advance the current client's position in the present
matter. People v. Frisco, 119 P.3d 1093, 1096 (Colo.
2005). If an individual attorney has a disqualifying conflict
under Colo. RPC 1.9(a), that conflict may be imputed to the
lawyer's firm and require disqualification of the entire
firm. See Colo. RPC 1.10.
This is not the first time Francescon has sought to
disqualify Perczak; indeed, Francescon has moved to
disqualify her under Colo. RPC 1.9(a) in at least two other
construction-defect cases in which she brought claims on
behalf of a homeowners' association against Francescon
and other real-estate developers. In one of these previous
cases, Sawgrass at Plum Creek Community Association, Inc.
v. Sawgrass at Plum Creek, LLC, the trial court
denied the motion to disqualify because it concluded that the
Sawgrass lawsuit was not "substantially
related" to the prior matters in which Perczak
represented Francescon. No. 2010CV3532 (Douglas Cty. Dist.
Court Sept. 5, 2013).
In the present case, the trial court denied the
developers' disqualification motion without meaningfully
analyzing for purposes of Colo. RPC 1.9(a) whether this case
is "substantially related" to the prior matters in
which Perczak represented Francescon. Instead, the trial
court relied on issue preclusion, the doctrine that bars
relitigation of an issue that is "identical" to an
issue that was previously litigated and decided, Stanton
v. Schultz, 222 P.3d 303, 307 (Colo. 2010). Here, the
trial court appeared to conclude that the Sawgrass
ruling denying the motion to disqualify Perczak in that case
had preclusive effect so as to bar the developers' motion
under Colo. RPC 1.9(a) in this case. The developers filed a
C.A.R. 21 petition in this court, seeking review of the trial
court's order denying the disqualification motion on the
basis of issue preclusion.
We issued a rule to show cause to determine whether the trial
court erred in relying on the doctrine of issue preclusion to
deny the developers' attorney-disqualification motion.
The disqualification inquiry under Colo. RPC 1.9(a) asks
whether an attorney's prior representation and current
representation are "substantially related." This
inquiry under Colo. RPC 1.9(a) is specific to the particular
matter for which disqualification is sought. Therefore, we
conclude that a motion to disqualify under Colo. RPC 1.9(a)
will rarely, if ever, raise an "identical" issue to
a disqualification motion in another case because the
analysis under Rule 1.9(a) of whether the prior and current
matters are substantially related will differ in each case.
The dispositive legal issue in the developers'
attorney-disqualification motion- whether this case is
"substantially related" to Perczak's prior
representation of Francescon-is specific to the present
dispute. Moreover, the nature of the claims asserted in this
case differs from the nature of the claims asserted in
Sawgrass. Thus, we conclude that the dispositive
issue here is not "identical" to the issue decided
in Sawgrass, and therefore, the doctrine of issue
preclusion does not apply to the developers' motion in
this case. Accordingly, the trial court abused its discretion
by relying on issue preclusion to deny the developers'
disqualification motion. We therefore make the rule absolute,
vacate the trial court's order denying the
developers' motion to disqualify Perczak and her law
firm, and remand this case for the trial court to analyze the
merits of the developers' motion under Colo. RPC 1.9.
Facts and Procedural History
The attorney at the center of this disqualification dispute,
Mari Perczak, filed the present lawsuit
("Villas") on behalf of Villas at Highland
Park Homeowners Association, Inc., in November 2013. The
lawsuit named as defendants Villas at Highland Park, LLC; CC
Communities, LLC; Century Communities, Inc.; and Horizon
Building Services, LLC; as well as six individuals, including
Dale Francescon (collectively, the "developers").
Because the developers seek relief from the trial court's
denial of their motion to disqualify Perczak and her law
firm, we consider the allegations contained in the motion to
According to the developers, Francescon has been involved in
the residential construction business in Colorado since the
1990s. Francescon and his brother founded a number of
companies through which they developed residential
construction projects. Between July 1996 and November 1999,
various plaintiffs filed six separate lawsuits against those
companies; some of those lawsuits also asserted claims
directly against the Francescons.
Perczak, then a partner at the law firm Godin & Baity,
served as lead counsel for the Francescons and the corporate
defendants in five of those cases. In those earlier matters,
Perczak advised the Francescons and the corporate defendants
on various topics, including litigation strategies
(particularly the defense of alter-ego and
construction-defect claims); the establishment and structure
of special-purpose corporate entities for residential
construction; settlement strategies and risk tolerance; and
the nature and extent of the Francescons' involvement
with the corporate entities. Among the defendants in the
earlier cases, only Francescon is a defendant in the present
Perczak left Godin & Baity in 2005. In 2007, Perczak
became a shareholder in the law firm then named Vanatta,
Sandgrund, Sullan & Sullan, P.C. (the "Sullan
Firm"), which merged in 2014 with the firm in the
present case, Burg Simpson Eldredge Hersh & Jardine PC
(the "Burg Firm"). As relevant to this case,
Perczak and other attorneys with the Sullan Firm represented
homeowners' associations in two construction-defect
lawsuits against Francescon and some of the same corporate
defendants in this case.
First, in December 2010, attorneys with the Sullan Firm filed
Sawgrass at Plum Creek Community Association, Inc. v.
Sawgrass at Plum Creek, LLC
("Sawgrass"), No. 10CV3532 (Douglas Cty.
Dist. Court), and Perczak later appeared as counsel for the
homeowners' association. The Sawgrass litigation
alleged construction defects at a planned community in Castle
Rock, Colorado. The operative complaint in Sawgrass
asserted claims against Francescon and other defendants
(including one of the defendants in this case, CC
Communities, LLC) for negligence, breach of implied warranty,
misrepresentation/nondisclosure, violation of the Colorado
Consumer Protection Act ("CCPA"), breach of
fiduciary duty, and promissory estoppel.
Second, in March 2011, attorneys with the Sullan Firm filed
Highlands at Westbury Townhome Association, Inc. v.
Highlands at Westbury, LLC
("Westbury"), No. 11CV333 (Adams Cty.
Dist. Court), and Perczak later appeared as counsel for the
homeowners' association. The Westbury litigation
alleged construction defects at a community of townhomes in
Westminster, Colorado. As in Sawgrass, the operative
complaint in Westbury asserted claims against
Francescon and several other defendants (including two of the
defendants in this case, CC Communities, LLC, and Horizon
Building Services, LLC) for negligence, breach of implied
warranty, misrepresentation/nondisclosure, violation of the
CCPA, breach of fiduciary duty, and promissory estoppel.
Perczak and other attorneys with the Sullan Firm filed the
present case, Villas at Highland Park Homeowners
Association, Inc. v. Villas at Highland Park, LLC, in
November 2013. No. 13CV31625 (Arapahoe Cty. Dist. Court). The
Villas litigation concerns alleged construction
defects in a planned community in Arapahoe County, Colorado.
Like the complaint in Sawgrass, the initial
complaint in Villas asserted claims on behalf of the
homeowners' association against several corporate
defendants, Francescon, and several other individual
defendants for negligence, breach of implied warranty,
misrepresentation/nondisclosure, violation of the CCPA, and
breach of fiduciary duty. In September 2014, however, the
Villas homeowners' association filed an amended
complaint, adding new claims, including claims for
conversion, unjust enrichment, and civil theft. These
additional claims arose from the allegedly improper transfer
of a parcel of land referred to as "Tract H" from
the plaintiff homeowners' association to the Highland
Park Metropolitan District. The claims for conversion and
civil theft were asserted against Francescon individually, in
addition to other defendants.
Francescon and other named defendants moved to disqualify
Perczak and her firm under Colo. RPC 1.9 and 1.10 in all
three of these cases. In July 2013, the Westbury
court initially granted the motion to disqualify in that
litigation. The Westbury court concluded that during
her prior representation of Francescon, Perczak would have
learned confidential information about the structure of
Francescon's businesses, which required Perczak's
disqualification under Colo. RPC 1.9(a), as well as the
disqualification of the Sullan Firm, because Perczak's
conflict was imputed to the firm under Colo. RPC 1.10.
Perczak and the Sullan Firm moved for reconsideration of this
ruling. The Westbury court provisionally vacated its
disqualification order and allowed the Westbury
defendants to file a response to the motion to reconsider.
The parties then settled the case before the
Westbury court ruled on the motion to reconsider.
In September 2013, the Sawgrass court denied the
motion to disqualify in that litigation. In a detailed,
fourteen-page order, the Sawgrass court concluded
that disqualification was unwarranted because Perczak's
prior representation of Francescon was not
"substantially related" to Sawgrass within
the meaning of Colo. RPC 1.9(a). Specifically, the
Sawgrass court reasoned that although Perczak's
defense of Francescon and the Sawgrass lawsuit both
involved construction-defect claims based on negligence, the
various lawsuits "involve[d] completely distinct
projects over a significant period of time. . . .
[Perczak's prior representations of Francescon] related
to entirely distinct building projects, where there were
different applicable building codes, separate contractors,
and unique allegations of defective construction."
Several of the Sawgrass defendants sought relief
from this court under C.A.R. 21, which we denied. In re
CC Cmtys. LLC v. Sawgrass at Plum Creek Cmty. Ass'n,
No. 13SA230 (Colo. Sept. 12, 2013). Shortly thereafter, the
The developers filed a motion to disqualify in the
present case in September 2014, arguing that Perczak and her
firm must be disqualified because this matter is
"substantially related" to Perczak's prior
representation of Francescon. With the motion, the developers
filed supporting documents, including the Westbury
initial disqualification order, the Sawgrass
disqualification order, lists of filings from the
Westbury and Sawgrass cases, four
affidavits from Dale Francescon, an opinion letter from
insurance-defense attorney Daniel Fowler, and an affidavit
from professor emeritus of legal ethics Charles Wolfram.
Perczak and the Burg Firm then moved to strike the
developers' motion to disqualify on the basis of issue
preclusion. Perczak and the Burg Firm argued that the
Sawgrass order addressed "the same issue, based
on effectively identical facts" and concluded that the
Sawgrass lawsuit was not "substantially
related" to Perczak's prior representation of
Francescon. According to Perczak and the Burg Firm, the
Sawgrass order resolved these issues "in a
full, fair, and final order, " and therefore, the issue
preclusive effect of the Sawgrass order barred the
developers' disqualification motion in this case.
The trial court held a hearing in February 2015 and denied
the motion to strike in part. The court concluded that although
"[t]he doctrine of issue preclusion, if shown, applies
to this situation, " Perczak and the Burg Firm had not
shown that the issue they sought to preclude-whether Perczak
must be disqualified because the present case is
"substantially related" to Perczak's prior
representation of Francescon-was "identical" to the
issue the court decided in Sawgrass. The court
Although the surface issue in the prior proceeding was the
same-the disqualification of Ms. Perczak [under Colo. RPC
1.9]-the underlying reasons why [the Sawgrass court]
determined disqualification was not necessary seem factually
different in this case. Although both the prior proceeding
and this case have a claim for a violation of the [CCPA], it
does not appear that [the Sawgrass court] addressed
that claim. Further, this suit, unlike the Sawgrass
matter, includes claims directly against Mr. Francescon for
Civil Theft, Breach of Fiduciary Duty, and Conversion.
court concluded that a hearing was necessary "to
determine if anything Ms. Perczak may have learned in her
representation of Mr. [Francescon], other than those things
[the Sawgrass court] ruled would not cause a
conflict . . ., would materially advance Plaintiff's
personal claims against Mr. [Francescon] in this case."
At that hearing, held in May 2015, the developers
tendered-and the court accepted-an offer of proof nearly 300
pages in length, consisting of affidavits from, or statements
summarizing the anticipated testimony of, Francescon and four
other individuals. According to the offer of proof, these
witnesses would testify to the nature of the confidential
information that Perczak would have obtained in her prior
representation of Francescon, as well as legal opinions on
Perczak's alleged conflict and the applicability of issue
preclusion in this context. At the same hearing, defense
counsel also argued that issue preclusion did not apply
because the issue Perczak and the Burg Firm sought to
preclude was not "identical" to the
attorney-disqualification issue in Sawgrass.
See Tr. of Oral Arg. at 58:13-15, Villas at
Highland Park Homeowners Ass'n, Inc. v. Villas
at Highland Park, LLC, No. 13CV31625 (Arapahoe Cty.
Dist. Court May 21, 2015) ("There is no identity of
issues here as is required under the elements of . . . issue
preclusion . . . .").
On February 25, 2016, the trial court entered an order
granting Perczak's and the Burg Firm's motion to
strike on the basis of issue preclusion and denying the
developers' motion to disqualify. The order did not make
specific factual findings about the scope of Perczak's
prior and present representations, as the Sawgrass
court had done when it concluded that the Sawgrass
lawsuit was not "substantially related" to
Perczak's prior representation of Francescon. However,
the order reasoned that Perczak's knowledge of
Francescon's fear of being sued personally-which was
discussed in the offer of proof-would not create a conflict
or materially advance the claims against Francescon in this
The developers petitioned this court for a rule to show cause
under C.A.R. 21, arguing that the trial court erred in
applying issue preclusion based on the Sawgrass
order. The developers' petition further argued that
Perczak and the Burg Firm must be disqualified under Colo.
RPC 1.9 and Colo. RPC 1.10 because this case is
"substantially related" to the construction-defect
matters in which Perczak represented Francescon. We issued a
rule to show cause and now make the rule absolute.
Original relief under C.A.R. 21 is an extraordinary remedy
that is limited in both purpose and availability. People
v. Darlington, 105 P.3d 230, 232 (Colo. 2005). The
exercise of original jurisdiction under C.A.R. 21 falls
within this court's sole discretion. Fognani v.
Young, 115 P.3d 1268, 1271 (Colo. 2005). We generally
exercise jurisdiction under C.A.R. 21 when the normal
appellate process provides an inadequate remedy or when a
trial court order places one party at a significant
disadvantage in litigating the merits of a controversy.
People v. Hoskins, 2014 CO 70, ¶ 16, 333 P.3d
828, 834; DCP Midstream, LP v. Anadarko Petroleum
Corp., 2013 CO 36, ¶ 22, 303 P.3d 1187, 1193. In
addition, this court will generally elect to hear cases under
C.A.R. 21 to consider important issues of first impression.
People v. Johnson, 2016 CO 69, ¶ 7, 381 P.3d
According to the developers' allegations, Perczak's
conflict of interest and her possession of confidential
information from her prior representations fundamentally
undermines the fairness of the district court proceedings,
thereby rendering normal appellate relief ineffective.
Further, this court has not previously addressed the
applicability of issue preclusion in the context of attorney
disqualification under Colo. RPC ...