United States District Court, D. Colorado
ALAN EUGENE HUMPHREY, an individual, and WYOMING GTL, LLC, a Wyoming LLC, Plaintiffs,
ESCALERA RESOURCES CO., a Maryland Corp., Defendant.
RAYMOND P. MOORE UNITED STATES DISTRICT JUDGE.
matter is before the Court on Defendant's Renewed Motion
for Judgment as a Matter of Law on Colorado Securities Fraud
Cause of Action (the “Renewed Motion”) (ECF No.
137) seeking relief under Fed.R.Civ.P. 50(b) after a jury
verdict was reached in favor of Plaintiff Alan Eugene
Humphrey (“Mr. Humphrey) on his claim under §
11-51-604(3), Colo. Rev. Stat., of the Colorado Securities
Act. Upon consideration of the Renewed Motion, Mr.
Humphrey's Response, Defendant Escalera Resources
Co.'s Reply, the court record, and the applicable
statutes, rules, and case law, and being otherwise fully
advised, the Renewed Motion is DENIED.
action arises from a failed gas-to-liquid (“GTL”)
plant project which involved, among other things, Mr.
Humphrey's April 2014, $500, 000 stock purchase in
Escalera and the parties' May 30, 2014, “Letter
Agreement.” The Letter Agreement contemplated the
parties would “commence negotiating a definitive
written agreement” which would govern the parties'
relationship concerning the GTL plant. (Trial Exhibit 6.) No.
definitive agreement was ever reached and disputes arose
between the parties, resulting in this lawsuit.
complaint alleged six causes of action: (1) fraud in the
inducement; (2) fraud; (3) securities fraud - under the
federal and Colorado securities act; (4) declaratory relief;
(5) breach of contract; and (6) breach of the implied
covenant of good faith and fair dealing. Escalera filed one
counterclaim for breach of contract. Escalera also filed a
Motion for Summary Judgment which the Court granted in part
and denied in part by Order dated February 16, 2017 (the
“Order”). While Escalera's Motion for Summary
Judgment addressed the securities fraud claim under the
federal securities act, it failed to address such claim under
the Colorado Securities Act. Therefore, the Court did not
address the merits of, much less grant summary judgment on,
Court held a trial preparation conference where the parties
agreed they would present all their evidence at trial, even
as to the declaratory judgment claim to be decided by the
Court after trial. Trial to a jury was held from August 7-11,
2017. During the first day of the trial, before jury
selection, the Court reminded the parties that the summary
judgment motion did not address the Colorado Securities Act
in any way (including remedies) and asked the parties to
brief what subsections of Colo. Rev. Stat. § 11-51-604
were at issue as well as the remedies, stating that
rescission may still be in play as to the Colorado Securities
Humphrey's brief, filed the morning of August 8, 2017, he
identified Colo. Rev. Stat. §§ 11-51-501(1) and
11-51-604(3) as the subsections on which his Colorado
Securities Act claim was based, and that rescission was a
remedy available under § 11-51-604(3). That section
provides, in relevant part:
Any person who recklessly, knowingly, or with an intent to
defraud sells or buys a security in violation of section
11-51-501(1)…is liable to the person buying or selling
such security…for such legal or equitable relief that
the court deems appropriate, including rescission,
actual damages, interest at the statutory rate, costs, and
reasonable attorney fees.
(Emphasis added.) Escalera's response brief, filed August
9, 2017, argued that the Court's Order concluded Mr.
Humphrey waived any right to rescission. Escalera further
argued that even if the Order did not apply to the Colorado
Securities Act claim, “it is undisputed that
it applied to his various proposed remedies, ”
including rescission. (ECF No. 115, page 2, emphasis added.)
In other words, Escalera contended that the Order finding Mr.
Humphrey waived his right to rescission applied to
all claims, even the Colorado Securities Act claim
which was not mentioned at all in the papers on the Motion
for Summary Judgment. Of course, the briefs - along with what
the Court had advised the parties on the morning of the first
day of trial - showed to the contrary. Meanwhile, Mr.
Humphrey testified during August 7-8, with both sides
inquiring about his $500, 000 stock purchase, and the fact
that he still owned the stock (which he testified was
“worthless”) as of the time of trial.
three of trial, after Plaintiffs rested, as relevant here,
Escalera moved for judgment as a matter of law under
Fed.R.Civ.P. 50(a) on the Colorado Securities Act claim based
on the argument that no allowable damages existed. (ECF No.
156, page 420, ll. 16-21.) Escalera argued (1) the Court had
found Mr. Humphrey waived his right to rescission in its
Order, and (2) if that remedy was not already determined
waived as to the Colorado Securities Act claim, the evidence
at trial plus the evidence submitted in support of the Motion
for Summary Judgment (which evidence Escalera failed to
elicit at trial) supported waiver of rescission. (ECF No.
156, page 425, ll. 1-20.) The Court, however, had reminded
Escalera that the Court did not address the Colorado
Securities Act claim and its ruling did not speak to a
statute that it had not even looked at in reviewing the
Motion for Summary Judgment. (ECF No. 156, page 424, ll.
14-22.) In addition, the Court found the evidence at trial
was such that the issue of waiver should be submitted to the
jury. Accordingly, the Court allowed the Colorado Securities
Act claim to go forward, to be decided by the jury, with
rescission as the remedy.The jury returned a verdict in favor of
Mr. Humphrey on this claim. Escalera's Renewed Motion
pursuant to Rule 50(b) followed and is now before the Court.
Rule 50(b), the district court may allow judgment on the
jury's verdict, order a new trial, or enter judgment as a
matter of law for the moving party.” In re: Cox
Enterprises, Inc., 871 F.3d 1093, 1096 (10th Cir. 2017).
The court “may grant judgment as a matter of law only
when ‘a party has been fully heard on an issue during a
jury trial and the court finds that a reasonable jury would
not have a legally sufficient evidentiary basis to find for
the party on that issue.'” Id. (quoting
Rule 50(a)(1)). Thus, such judgment “is appropriate
only if the evidence points but one way and is susceptible to
no reasonable inferences which may support the nonmoving
party's position.” Id. (quotation marks
and citation omitted). The court's “task is to
determine whether a jury could render a verdict in favor of
the non-movant.” Perez v. El Tequila, LLC, 847
F.3d 1247, 1255 (10th Cir. 2017). The court “must
construe evidence and inferences in favor of the nonmoving
party, and avoid substituting [its] judgment for that of the
jury.” Id. (quotation marks, citation, and
raises three arguments as to why the issue of rescission
should not have gone to the jury and judgment should be
entered in its favor as a matter of law. First, Escalera
contends the Court already found, via Escalera's Motion
for Summary Judgment, that Plaintiffs could not recover
rescission on any of their claims, including Mr.
Humphrey's Colorado Securities Act claim. Next, Escalera
contends the Court determines Mr. Humphrey's remedy under
Colo. Rev. Stat. § 11-51-604(3) and Mr. Humphrey has
presented insufficient evidence to allow the Court to award
rescission. Finally, Escalera contends that by his arguments
in response to Escalera's Rule 50(a) motion at trial, Mr.
Humphrey elected to affirm rather rescind his stock purchase.
The Court addresses each argument in turn.
Escalera's Motion for Summary Judgment and this
argues (and has argued) the Court ordered that the remedy of
rescission may not be had under all of
Plaintiffs' claim - including the Colorado Securities Act
claim to which Escalera's Motion for Summary Judgment
failed to address. Escalera apparently contends the Court did
so because, as Escalera claims in its Renewed Motion, it
sought summary judgment on: (1) “certain” of
Plaintiffs' causes of action - meaning all but the
Colorado Securities Act claim; (2) its counterclaim; and (3)
Plaintiffs' remedies as to “all of Plaintiffs'
causes of action.” (ECF No. 137, page 2.) Thus,
Escalera asserts, in addressing Escalera's arguments
regarding rescission as a remedy, the Court addressed such
remedy as to all claims, even that which Escalera failed to
address in its motion. Mr. Humphrey argues to the contrary,
asserting that because Escalera did not address the Colorado
Securities Act claim, the Court did not (and could not have)
concluded the rescission remedy was inappropriate for such
claim. The Court agrees, as shown by the record.
the record shows the Court did not rule, and could not have
ruled, on what remedy was or was not feasible under the
Colorado Securities Act claim.
• Section 11-51-604 of the Colorado Securities Act
contains many subsections;
• As the movant, it was Escalera's burden to
identify that for which it sought summary judgment. Escalera
failed to identify much less address the Colorado Securities
Act in any respect, whether it be the bases ...