Rocky Mountain Exploration, Inc. and RMEI Bakken Joint Venture Group, Petitioners
Davis Graham & Stubbs LLP and Gregory Danielson. Respondents
Certiorari to the Colorado Court of Appeals Court of Appeals
Case Nos. 14CA1483 & 15CA216
Attorneys for Petitioners: German May PC William D. Beil
Phillip G. Greenfield Kansas City, Missouri The Viorst Law
Offices Anthony J. Viorst Denver, Colorado
Attorneys for Respondents: Connelly Law LLC Sean Connelly
Denver, Colorado Lewis Roca Rothgerber Christie LLP Gregory
B. Kanan Frederick J. Baumann Tamara F. Goodlette Denver,
Attorneys for Amicus Curiae Attorneys' Liability
Assurance Society, Inc.: Snell & Wilmer L.L.P. James D.
Kilroy Denver, Colorado
This case arises out of a series of transactions in which
petitioners Rocky Mountain Exploration, Inc. and RMEI Bakken
Joint Venture Group (collectively, "RMEI") sold oil
and gas assets to Lario Oil and Gas Company
("Lario"). In that transaction, Lario was acting as
an agent for Tracker Resource Exploration ND, LLC and its
affiliated entities (collectively, "Tracker"),
which were represented by respondents Davis Graham &
Stubbs LLP and Gregory Danielson (collectively,
Prior to RMEI's sale to Lario, RMEI and Tracker had a
business relationship related to the oil and gas assets that
were ultimately the subject of the RMEI-Lario transaction.
The RMEI-Tracker relationship soured after Tracker
unsuccessfully sought to buy out RMEI's interests at a
price that RMEI deemed too low.
Thereafter, Tracker and Lario reached an understanding by
which Lario would seek to purchase RMEI's interests and
then assign a majority of those interests to Tracker.
Recognizing the history between Tracker and RMEI, however,
Tracker and Lario agreed not to disclose Tracker's
involvement in the deal.
DG&S represented Tracker throughout RMEI's sale to
Lario. In that capacity, DG&S drafted the final agreement
between RMEI and Lario, worked with the escrow agent, and
hosted the closing at its offices. No party disclosed to
RMEI, however, that DG&S was representing Tracker, not
After the sale from RMEI to Lario was finalized, Lario
assigned a portion of the assets acquired to Tracker, and
Tracker subsequently re-sold its purchased interests for a
substantial profit. RMEI then learned of Tracker's
involvement in its sale to Lario and sued Tracker, Lario, and
DG&S for breach of fiduciary duty, fraud, and civil
conspiracy, among other claims. As pertinent here, the
fiduciary breach claims were based on RMEI's prior
relationship with Tracker. The remaining claims were based on
allegations that Tracker, Lario, and DG&S misrepresented
Tracker's involvement in the Lario deal, knowing that
RMEI would not have dealt with Tracker because of the
parties' strained relationship. Based on these claims,
RMEI sought to avoid its contract with Lario.
Lario and Tracker eventually settled their claims with RMEI,
and DG&S moved for summary judgment as to all of
RMEI's claims against it. In this motion, DG&S argued
(1) prior agreements between Tracker and RMEI expressly
disavowed any fiduciary duties between the two companies, (2)
RMEI could not establish that it reasonably relied on the
alleged misrepresentations, and (3) DG&S did not owe RMEI
a duty to disclose that it represented Tracker.
The district court granted DG&S's motion, and in a
unanimous, published opinion, a division of the court of
appeals affirmed. Rocky Mountain Expl., Inc. v. Davis
Graham & Stubbs LLP, 2016 COA 33, P.3d . RMEI then
sought, and we granted, certiorari to consider whether (1)
Lario and DG&S created the false impression that Lario
was not acting for an undisclosed principal (i.e., Tracker)
with whom Lario and DG&S knew RMEI would not deal; (2) an
assignment clause in the RMEI-Lario transaction agreements
sufficiently notified RMEI that Lario acted on behalf of an
undisclosed principal; (3) prior agreements between RMEI and
Tracker negated all previous joint ventures and any fiduciary
obligations between them; (4) RMEI stated a viable claim
against DG&S for fraud based on affirmative
misrepresentations; and (5) RMEI can avoid the Lario sale
based on statements allegedly made after RMEI and Lario
signed the sale agreement but prior to closing.
We now affirm the division's ruling. Addressing the first
and second certiorari questions together, we conclude that
the assignment clause in the RMEI-Lario transaction
agreements made clear to RMEI that Lario had partners in the
transaction to whom Lario could assign a portion of its
interests. As a result, Tracker was not an undisclosed
principal under the Restatement provision on which RMEI's
contract avoidance argument is exclusively premised, and that
argument and the civil conspiracy claim against DG&S that
flowed from it fail as a matter of law. Even if the
Restatement provision applied, however, the record does not
support the requisite finding that either Lario or DG&S,
as its purported attorney, created a false impression that
Lario was not acting on behalf of an undisclosed principal.
For this reason as well, the civil conspiracy claim against
DG&S, which is premised on the allegation that Lario was
a fraudulent strawman purchaser, fails as a matter of law,
and in light of this disposition, we need not address the
fifth certiorari question.
Turning then to the fourth certiorari question, we conclude
that, as a matter of law, RMEI did not demonstrate the
requisite false representation or reasonable reliance to
support a viable fraud claim against DG&S.
Finally, addressing the third certiorari question, we
conclude that the controlling agreements between RMEI and
Tracker expressly disavowed any pre-existing joint ventures
and any fiduciary obligations between the parties.
Accordingly, the district court properly granted summary
judgment on RMEI's claim against DG&S for aiding and
abetting a purported breach of fiduciary duty by Tracker.
Facts and Procedural History
In 2006, RMEI and Tracker signed a purchase and sale letter
agreement (the "Tracker Purchase Agreement") under
which RMEI agreed to sell to Tracker an undivided eighty
percent of its oil and gas interests in certain oil and gas
leaseholds in North Dakota. Pursuant to that Agreement, the
parties entered into an area of mutual interest that
surrounded and included certain of the leases that RMEI
already owned. The Tracker Purchase Agreement contemplated
that Tracker and RMEI would jointly acquire more oil leases
within the area of mutual interest, on an undivided
eighty/twenty profit-and-loss basis.
Over the succeeding two years, RMEI and Tracker entered into
a model form of operating agreement (the "Tracker
Operating Agreement") and a participation agreement (the
"Tracker Participation Agreement"). The purpose of
the latter was "to provide for [the parties']
participation in the development of the Subject Lands and the
[area of mutual interest]." As pertinent here, the
Tracker Participation Agreement provided that "[it] and
the [Tracker Operating Agreement] contain the entire
agreement between the Parties concerning the subject matter
referred to herein and they shall supersede and replace any
prior agreements between the Parties concerning such subject
matter." In addition, the Tracker Operating Agreement
contained a provision disclaiming any joint venture or
fiduciary relationship between RMEI and Tracker:
It is not the intention of the parties to create, nor shall
this agreement be construed as creating, a mining or other
partnership, joint venture, agency relationship or
association, or to render the parties liable as partners,
co-venturers, or principals. In their relation with each
other under this agreement, the parties shall not be
considered fiduciaries or to have established a confidential
relationship but rather shall be free to act on an
arm's-length basis in accordance with their own
respective self-interest, subject, however, to the obligation
of the parties to act in good faith in their dealings with
each other with respect to activities hereunder.
After proceeding under the foregoing agreements for a period
of time, the relationship between Tracker and RMEI
deteriorated. Tracker offered to buy out RMEI's remaining
twenty percent interest in the leases, but RMEI declined
Tracker's offer as too low. Thereafter, the parties'
relationship continued to decline as a result of
disagreements concerning the leases, with Tracker claiming
that RMEI had breached the Tracker Operating Agreement and
RMEI denying that allegation.
Eventually, RMEI engaged a broker to find a third-party
purchaser for RMEI's interest. RMEI asserts that it did
so because of its soured relationship with Tracker.
Lario subsequently learned both that RMEI's interest was
for sale and that Tracker had sought to purchase this
interest but was unable to do so as a result of animosity
between the two companies. Perceiving an opportunity, Lario
spoke with Tracker about jointly bidding on RMEI's
interest, with Lario receiving twenty-five percent of the
leasehold interests acquired in the sale. Tracker was
amenable to such an arrangement, and it and Lario agreed to
have Lario pursue a deal with RMEI. Tracker and Lario further
agreed that they would not disclose Tracker's involvement
to RMEI, recognizing that the issues between RMEI and Tracker
might make a deal impossible if RMEI knew of Tracker's
involvement. Tracker and Lario's agreement effectively
established Lario as Tracker's agent in the transaction.
Lario then requested RMEI's permission to use DG&S as
its attorney on the deal. Lario stated that DG&S's
knowledge of RMEI's assets, which knowledge was based on
DG&S's prior representation of Tracker, would
facilitate the transaction. Although RMEI's president
agreed to allow such representation, DG&S subsequently
determined that its ongoing representation of Tracker created
a conflict of interest that prevented it from representing
Lario in the proposed transaction. Accordingly, DG&S
would only represent Tracker in the deal.
Ultimately, RMEI and Lario signed a letter of intent for RMEI
to sell its interest to Lario (the "Lario Letter of
Intent"). Tracker and Lario then signed their own letter
of intent (the "Tracker Letter of Intent"), under
which Lario agreed to assign to Tracker seventy-five percent
of Lario's interest in the Lario Letter of Intent.
Several weeks later, RMEI and Lario signed an asset purchase
and sale agreement (the "Lario Purchase and Sale
Agreement"), under which Lario purchased RMEI's
interest in the oil and gas leaseholds at issue.
Notably, in its capacity as counsel for Tracker (whose
interests Lario was representing in the RMEI-Lario
transaction), DG&S drafted many of the pertinent
documents in that transaction, communicated with RMEI's
bank, and facilitated the creation of an escrow account. In
addition, when preparing deal documents, DG&S scrubbed
the metadata from anything coming from Tracker to prevent
RMEI from learning of Tracker's involvement, which
Tracker feared could threaten the deal.
After RMEI and Lario had signed the Lario Purchase and Sale
Agreement but before the sale had closed, Lario's
president emailed RMEI's president, stating, among other
things, "[O]ur attorney is preparing the partial Lien
[sic] release for Citizen's Bank to execute."
DG&S received a copy of this email and later sent the
lien release to RMEI's president, but it did not correct
Lario's assertion that its attorney would be
sending the document. Similarly, in a subsequent email that
Lario sent and on which RMEI's president was copied,
Lario again referred to DG&S as its law firm. And
RMEI's president referred to DG&S as Lario's
counsel in two subsequent emails that DG&S received.
Again, DG&S did not correct RMEI's apparent
misunderstanding that DG&S was Lario's counsel.
Both the RMEI-Lario transaction and the Tracker-Lario
transaction closed, with the closings taking place on the
same day and in DG&S's offices, albeit in separate
conference rooms. Thereafter, Tracker sold all of its
interests in the North Dakota leaseholds at issue and
received a substantial price premium.
RMEI then learned of Tracker's involvement in the
RMEI-Lario transaction, and in a 53-page, 225-paragraph
complaint asserting eighteen separate claims, it proceeded to
sue Tracker, Lario, certain of their officers, and DG&S.
As pertinent here, RMEI alleged that DG&S (1) engaged in
a civil conspiracy to misappropriate RMEI's interests in
the leaseholds at issue by setting up Lario as a strawman
purchaser; (2) aided and abetted Tracker's breach of its
fiduciary duty to RMEI; (3) committed fraud; (4) engaged in a
civil conspiracy to commit fraud; and (5) aided and abetted
Ultimately, all of the defendants except DG&S either
settled their claims with RMEI or had their claims dismissed.
DG&S, however, moved for summary judgment, asserting, as
pertinent here, that RMEI could not establish the requisite
justifiable reliance on the alleged misrepresentations
because the RMEI-Lario transaction documents made clear that
Lario had unnamed partners and investors and that Lario could
sell the assets purchased. DG&S further argued that RMEI
could not establish that DG&S owed RMEI a duty to
disclose that it represented Tracker. Finally, DG&S
asserted that RMEI could not establish that Tracker owed a
fiduciary duty to RMEI because the Tracker Operating
Agreement negated any fiduciary relationship between the
parties. Therefore, RMEI's claim against DG&S for
aiding and abetting a breach of such a fiduciary duty could
The district court granted DG&S's motion, agreeing
that as a matter of law, RMEI could not establish either a
duty by DG&S to disclose that it represented Tracker or a
fiduciary duty owed by Tracker to RMEI, which RMEI had to
establish to support its claim against DG&S for aiding
and abetting a breach of such a duty. The district court also
concluded that the use of a strawman purchaser was not fraud,
citing, among other authorities, the Restatement (Third) of
Agency (Am. Law Inst. 2006).
RMEI appealed, arguing that the district court erred in
granting summary judgment on RMEI's fraud and breach of
fiduciary duty claims. The division, however, affirmed the
district court's grant of summary judgment in favor of
DG&S. Rocky Mountain, ¶ 68. As pertinent
here, the division observed that under the Restatement
(Third) of Agency, a contracting party may not avoid a
contract entered into by an agent acting for an undisclosed
principal unless (1) the agent falsely represented that it
did not act on behalf of a principal and (2) the principal or
agent had notice that the third party would not have dealt
with the principal. Id. at ¶ 23. The division
concluded that the foregoing prerequisites for avoiding a
contract either did not apply or were not satisfied because
(1) the agreements between RMEI and Lario gave RMEI notice
that Lario was acting as agent for a principal and thus
Tracker was an unidentified but not an undisclosed principal
and (2) Lario did not falsely represent that it did not act
on behalf of a principal. Id. at ¶¶ 29-34.
The division thus concluded that RMEI did not establish the
existence of a disputed material fact as to the applicability
of the pertinent section of the Restatement. Id. at
¶¶ 27-34. In addition, the division concluded that
the district court had correctly determined that Tracker owed
no fiduciary duty to RMEI because the agreements between RMEI
and Tracker had expressly disclaimed the existence of a joint
venture or fiduciary relationship. Id. at ¶ 51.
Finally, the division concluded that the district court had
properly construed RMEI's fraud claims as claims for
fraudulent nondisclosure and therefore RMEI could not prevail
unless it demonstrated that DG&S had a duty to disclose
Tracker's involvement in the RMEI-Lario transaction,
which it could not do. Id. at ¶¶ 60-63.
RMEI petitioned this court for certiorari review, and we
granted that petition.
We begin by setting forth the applicable standard of review.
We then address together the first two questions on which we
granted certiorari and conclude that RMEI's civil
conspiracy claim against DG&S, which was premised on
RMEI's assertion that Lario was a fraudulent strawman
purchaser, fails as a matter of law. We then proceed to
discuss the fourth question on which we granted certiorari,
and we conclude, as a matter of law, that RMEI did not
demonstrate the requisite justifiable reliance to support its
claim against DG&S for fraud based on affirmative
misrepresentations. Finally, we address RMEI's claim
against DG&S for aiding and abetting Tracker's
alleged breach of fiduciary duty, and we conclude that
because the Tracker Operating Agreement expressly disavowed
any fiduciary obligations between RMEI and Tracker,
RMEI's aiding and abetting claim is not viable as a
matter of law.
Standard of Review
We review a grant of summary judgment de novo. Hardegger
v. Clark, 2017 CO 96, ¶ 13, 403 P.3d 176, 180.
When, as here, the material facts are undisputed, summary
judgment is proper only when the pleadings and supporting
documents show that the moving party is entitled to judgment
as a matter of law. Id.; accord C.R.C.P.
56(c). In determining whether summary judgment is proper, a
court grants the nonmoving party the benefit of all favorable
inferences that may reasonably be drawn from the undisputed
facts and resolves all doubts against the moving party.
Hardegger, ¶ 13, 403 P.3d at 180. In responding
to a properly supported summary judgment motion, however, the
nonmoving party may not rest on mere allegations or demands
in its pleadings but must provide specific facts
demonstrating a genuine issue for trial. Id.
RMEI's Request to Avoid
We first consider the two certiorari questions related to
RMEI's assertion that the Restatement (Third) of Agency
permits it to avoid the sale to Lario because Lario gave the
impression that DG&S was representing it in the sale. We
begin with the principles of agency law that the parties
agree apply here, and we then apply those principles to the