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Bewley v. Semler

Supreme Court of Colorado, En Banc

September 24, 2018

Charles Bewley and Berenbaum Weinshienk P.C., Petitioners:
R. Parker Semler. Respondent:

          Certiorari to the Colorado Court of Appeals Court of Appeals Case No. 15CA206

          Attorneys for Petitioners: Wheeler Trigg O'Donnell LLP Carolyn J. Fairless Rebecca Graves Payne Denver, Colorado

          Attorneys for Respondent: Semler & Associates P.C. R. Parker Semler Andrew Oh-Willeke Jeremy Goldblatt Denver, Colorado

          Attorneys for Amicus Curiae Colorado Bar Association: Montgomery Little & Soran, P.C. Christopher B. Little Erin C. Nave Christopher T. Carry Greenwood Village, Colorado

          Attorneys for Amicus Curiae Colorado Civil Justice League: Taylor Anderson LLP Lee Mickus Denver, Colorado



         ¶1 R. Parker Semler, a member of a condominium association, filed a breach-of- contract claim against the law firm that employed the association's attorney. In support of that claim, he alleged that the attorney had a contract with the association's president not to represent one association member against another. He also alleged that the attorney had, on behalf of other association members he was representing, acquired a deed conveying ownership of parking spaces over which Semler also claimed ownership, thereby breaching the contract and damaging Semler.

         ¶2 The trial court dismissed the claim for lack of standing. A division of the court of appeals reversed, concluding that Semler had sufficiently alleged a breach-of-contract claim as a third-party beneficiary. In doing so, the division concluded that the strict privity rule, which "precludes attorney liability to non-clients absent fraud, malicious conduct, or negligent misrepresentation," Baker v. Wood, Ris & Hames, P.C., 2016 CO 5, ¶ 1, 364 P.3d 872, 874, did not bar Semler's claim.

         ¶3 We granted certiorari and now reverse. We conclude that the strict privity rule bars Semler's breach-of-contract claim, meaning he lacks standing to assert it.

         I. Facts and Procedural History [1]

         ¶4 This litigation began as a dispute over the ownership of three parking spaces at a condominium in downtown Denver. Semler, a member of the 1940 Blake Street Condominium Association ("the Association"), acquired an ownership interest in two of those parking spaces years ago. More recently, Perfect Place LLC, also an Association member, claimed that it had acquired a quitclaim deed that conveyed an ownership interest in those same two parking spaces, as well as a third.

         ¶5 To settle the competing claims to ownership, Perfect Place filed a quiet-title action, asking the trial court to declare it the rightful owner of the parking spaces.[2] Semler countered that he is the rightful owner of the parking spaces and that Perfect Place had wrongfully acquired the quitclaim deed.

         ¶6 While that litigation was ongoing, Semler initiated a second action asserting various claims against (as relevant here) the following four defendants: (1) Perfect Place; (2) Bruce S. Hellerstein, Perfect Place's principal and the Association's treasurer; (3) Bruce S. Hellerstein CPA, P.C., Hellerstein's accounting firm; and (4) Charles Bewley, an attorney who served as counsel to the Association and helped Perfect Place acquire the quitclaim deed at Hellerstein's direction (but did not represent Perfect Place in the quiet-title action). Semler alleged that those defendants had conspired to "seize" all rights in the parking spaces, that in doing so Hellerstein had breached his fiduciary duty to the Association's members, and that the other three defendants had aided and abetted Hellerstein's breach. Semler later amended his complaint to add as a defendant the law firm Berenbaum Weinshienk P.C., which was Bewley's employer at all relevant times.

         ¶7 Facing motions to dismiss for failure to state a claim under C.R.C.P. 12(b)(5), Semler moved for leave to file a second amended complaint. His proposed second amended complaint alleged that Bewley had fraudulently acquired the quitclaim deed on Hellerstein and Perfect Place's behalf, and it added fraud-based claims against Bewley and Hellerstein. It also asserted a number of claims against Berenbaum Weinshienk, including one for breach of contract, the claim at issue here. In support of that claim, the proposed second amended complaint alleged that the Association's president had "instructed" Bewley that neither he nor Berenbaum Weinshienk was to represent the Association against any of its members or to represent one member against another. Moreover, it alleged that (1) Bewley agreed to those terms on behalf of himself and Berenbaum Weinshienk; (2) Semler, as a member of the Association, was an intended third-party beneficiary of that agreement; and (3) Berenbaum Weinshienk breached the agreement by representing Perfect Place in its acquisition of the quitclaim deed, thereby "forc[ing Semler] to litigate his rightful claim to ownership of [the parking spaces]" and causing him to "suffer[] a tangible economic loss to his legally protected interests, including lost opportunity damages."

         ¶8 The trial court issued an order addressing both the defendants' motions to dismiss and Semler's motion to file a second amended complaint. The court reasoned that the person whom Perfect Place acquired the quitclaim deed from-not Semler-was "the victim of [any] fraud" that occurred, and Semler therefore lacked standing to sue. The court thus denied Semler's motion for leave to file a second amended complaint and granted the motions to dismiss. The court also ordered that Semler pay the defendants' attorney's fees and costs.

         ¶9 Semler appealed. Before the court of appeals division heard oral arguments, however, this court issued two opinions that bear on the case. In Baker, we reaffirmed the "strict privity rule," i.e., that an attorney's liability to a non-client "is generally limited to the narrow set of circumstances in which the attorney has committed fraud or a malicious or tortious act, including negligent misrepresentation." ¶ 2, 364 P.3d at 874. And in Warne v. Hall, 2016 CO 50, ¶ 24, 373 P.3d 588, 595, we adopted the "plausible on its face" pleading standard, as articulated by the U.S. Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ash ...

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