Fifth Third Bank v. Morales

          ORDER DENYING PLAINTIFF'S MOTION FOR ATTORNEY FEES

          CHRISTINE M. ARGUELLO UNITED STATES DISTRICT JUDGE

         This matter is before the Court on Plaintiff Fifth Third Bank's Motion for Damages for Conspiracy. (Doc. # 67.) Because Colorado law does not support the award Plaintiff requests, the motion is denied.

         I. BACKGROUND

         This case stems from a defaulted bank loan by Defendant Lucy Morales and the subsequent fraudulent transfer of real property (the Montrose Property) from Ms. Morales and her Trust to Ms. Morales's daughters, Defendants Marie Korallus and Marie Ludian. (Doc. # 64.) On December 19, 2017, this Court granted Plaintiff's Motion for Summary Judgment, finding the existence of a fraudulent transfer and a civil conspiracy to effectuate that transfer as a matter of law. (Id. at 12, 14.) The Court then set the matter for a hearing on damages. (Id. at 15; Doc. # 65.)

         At that hearing, Plaintiff argued to the Court that it was entitled to attorney fees as actual, compensatory damages stemming from Defendants' conspiracy.^[1] The Court requested briefing on the matter, which was thereafter submitted and is now ripe for ruling. (Doc. ## 67, 68, 69.)

         II. DISCUSSION

         In support of its request for attorney fees as actual compensatory damages flowing from Defendants' conspiracy, Plaintiff relies heavily on the Tenth Circuit decision in Hetronic Int'l, Inc. v. Rempe, 697 Fed.Appx. 589 (2017), and the Colorado Court of Appeals ruling in Double Oak Const., LLC v. Cornerstone Dev. Intern., LLC, 97 P.3d 140 (2003).

         Specifically, Plaintiff urges this Court to award attorney fees as actual damages in accordance with Hectronic Int'l, a case in which the Tenth Circuit reversed the decision of a district court in the Western District of Oklahoma denying a plaintiff's request for attorney fees as actual compensatory damages stemming in part from defendants' conspiracy. Id. at 591. The panel held that because Oklahoma law provides for the recovery of attorney fees under certain conditions “as one of the elements of damages flowing from the wrongful act of the defendant, ” the district court should not have denied plaintiff's request for such an award. Id. at 590.

         Plaintiff asserts that, pursuant to the Colorado Court of Appeals decision in Double Oak, Colorado courts, like Oklahoma courts, provide for attorney fees as actual compensatory damages on a conspiracy claim. (Doc. # 67 at 3-4.) However, after thoroughly reviewing Hectronic, Double Oak, and other relevant Colorado and Oklahoma cases, the Court finds no legal support for an award of the legal fees that Plaintiff requests in this case.

         Hectronic Int'l cites three Oklahoma cases standing for the proposition that attorney fees are recoverable as damages flowing from the wrongful act of the defendant: Barnes v. Oklahoma Farm Bureau Mut. Ins. Co., 11 P.3d 162, 181 (Okla. 2000); Griffin v. Bredouw, 420 P.2d 546, 547 (Okla. 1966); and Sec. State Bank of Comanche v. W.R. Johnston & Co., 228 P.2d 169, 173 (Okla. 1951). All of those cases, and Hectronic Int'l, however, rely on a proposition that Plaintiff appears to overlook: attorney fees are recoverable as damages only “where the wrongful acts of the defendant have involved the plaintiff in litigation with others, or have placed him in such relation with others as to make it necessary for him to incur attorney fees to protect his interests.” Barnes, 11 P.3d at 181 (emphasis added); see also Hectronic, Int'l, 697 Fed.Appx. at 590; Griffin, 420 P.2d at 559; Sec. State Bank of Comanche, 228 P.2d at 173. “Others” cannot be the wrongdoer defendant; indeed, an award is not permitted when “the litigation for which [the plaintiff] seeks to recover attorney fees is with the defendant [rather than a] third party.” Sec. State Bank of Commanche, 228 P.2d at 173. This proposition is commonly known as the wrong-of-another doctrine.

         In Double Oak, which Plaintiff urges us to equate with Hectronic, Int'l and the above-mentioned Oklahoma cases, the Colorado Court of Appeals did not apply the wrong-of-another doctrine; it is not even mentioned in the opinion. Double Oak involved litigation between a construction company (plaintiff) and the developer of a shopping plaza, among others, (defendants) over defendants allegedly fraudulent sale of the plaza to shield the property from being used to pay a large arbitration award owed to plaintiff. Id. at 144-45. Like here, plaintiff brought claims of conspiracy and a violation of CUFTA, and plaintiff prevailed. Id. at 145. Plaintiff then sought, and the trial court awarded, attorney fees as damages on the conspiracy claim. Id. at 149-50.

         The Colorado Court of Appeals upheld that award but not under the wrong-of-another doctrine set forth in Hectronic or Oklahoma law. Instead, the Court of Appeals emphasized long-standing Colorado precedent demonstrating that

Colorado follows the American rule under which a party cannot recover his or her legal fees, whether as ‘costs' or ‘damages,' unless there is some exception to the general rule. . . . In the absence of a statute or contractual agreement, attorney fees are not ordinarily recoverable as an element of damages in a tort or contract action.

Id. at 150; Silverstein v. Sisters of Charity of Leavenworth Health Servs. Corp., 38 Colo.App. 286, 290 (1976) (“[F]ees are not recoverable as an item of damages in the absence of express contractual or statutory liability.”). The Double Oak Court then discussed exceptions to the American Rule that applied in the context of a conspiracy lawsuit: (1) when an action or claim is substantially frivolous, groundless, or vexatious, pursuant to Colorado Revised Statute § 13-17-101, et seq.; or (2) under the obdurate behavior doctrine where “the losing party has acted in bad faith or for oppressive reasons.” Id. at 150-51. The Court upheld the trial court's fee award under both exceptions, ...