State of Colorado ex rel. Philip J. Weiser, Attorney General; and Jan M. Zavislan, Administrator, Uniform Consumer Credit Code, Plaintiffs-Appellants and Cross-Appellees,
Castle Law Group, LLC; Lawrence E. Castle; and Caren A. Castle, Defendants-Appellees and Cross-Appellants, and Absolute Posting & Process Services, LLC; Ryan J. O'Connell; Kathleen A. Benton; and RE Records Research, LLC, Defendants-Appellees.
and County of Denver District Court No. 14CV32763 Honorable
Morris B. Hoffman, Judge.
J. Weiser, Attorney General, Alissa H. Gardenswartz, Deputy
Attorney General, Megan Paris Rundlet, Assistant Solicitor
General, Jennifer H. Hunt, First Assistant Attorney General,
Mark L. Boehmer, Assistant Attorney General, Denver,
Colorado, for Plaintiffs-Appellants and Cross-Appellees.
Richards Carrington, LLC, Christopher P. Carrington, Denver,
Colorado; Law Office of Ruth Moore, P.C., Ruth M. Moore,
Conifer, Colorado; Reilly Pozner LLP, Larry Pozner, Denver,
Colorado; Pan American Legal Services, LLC, Phillip A.
Vaglica, Glendale, Colorado, for Defendants-Appellees and
Cross-Appellants Castle Law Group, LLC, Lawrence E. Castle,
and Caren A. Castle.
Goldfarb & Rice, L.L.C., Billy-George Hertzke, Ashley J.
DeVerna, Denver, Colorado, for Defendants-Appellees Absolute
Posting & Process Services, LLC, Ryan J. O'Connell,
and Kathleen A. Benton.
Law, LLC, Daniel J. Vedra, Denver, Colorado, for
Defendant-Appellee RE Records Research, LLC.
BERNARD CHIEF JUDGE.
1 Plaintiffs, the State of Colorado and the State's
Administrator of the Uniform Commercial Code, brought a civil
law enforcement action against defendants (1) Castle Law
Group, LLC and its principals, Lawrence E. Castle and Caren
A. Castle; (2) Absolute Posting & Process Services, LLC
and its principals Ryan J. O'Connell and Kathleen A.
Benton; and (3) RE Records Research, LLC. We will refer to
the plaintiffs collectively as "the State." (The
State also sued a fourth company that is not part of this
2 Following a bench trial, the trial court ruled in favor of
defendants on all the claims but one. The State appeals the
trial court's judgment on its unsuccessful claims. We
affirm this part of the judgment.
3 As to the State's one successful claim, the trial court
assessed civil penalties against the Castle Law Group, LLC
and its principals, which we shall call "the law
firm," under the Colorado Consumer Protection Act,
section 6-1-105(1)(l), C.R.S. 2018. The law firm
filed a cross-appeal challenging this ruling. For the reasons
stated below, we reverse this portion of the trial
court's judgment and remand to the trial court to vacate
the judgment against the law firm.
4 The allegations in this case arise in the context of the
subprime mortgage crisis that occurred about a decade ago.
During the crisis, homeowners began defaulting in record
numbers on their home loans. When a homeowner defaulted, the
lender could initiate a foreclosure proceeding through the
public trustee. § 38-38-101, C.R.S. 2018. Because of the
sheer number of foreclosures during this period, mortgage
servicers, acting on behalf of lenders, hired foreclosure law
firms using comprehensive retainer agreements. (As is
pertinent to this appeal, these mortgage servicers included
two quasi-public entities: (1) the Federal National Mortgage
Association, or "Fannie Mae"; and (2) the Federal
Home Loan Mortgage Corporation, or "Freddie Mac.")
5 Under the retainer agreements at issue in this case, the
mortgage servicers would agree to pay the law firm a flat fee
for each case, and the law firm would arrange for all the
foreclosure legal work, including posting of notices and land
title research. The law firm would hire an outside vendor to
complete these services. The mortgage servicers would then
reimburse the firm for its "actual, necessary, and
reasonable" costs for these services, in accordance with
Colorado law, section 38-38-107(3)(b), C.R.S. 2018, as well
as the homeowners' loan documents, and the retainer
6 The law firm was the largest foreclosure law firm in
Colorado during this period. The State alleged that the law
firm exploited this reimbursement system by engaging in a
deceptive scheme with Absolute Posting & Process
Services, which we shall call "the posting
company," and RE Records Research, which we shall call
"the title company."
7 The law firm hired the posting company to provide two
posting services pertinent to this case. First, in 2009, our
legislature passed a law that allowed eligible borrowers to
defer a foreclosure and required that the mortgage servicer
give notice of the deferral opportunity by posting a notice
on the property. Ch. 404, sec. 5, § 38-38-802, 2009
Colo. Sess. Laws 2222-23. Second, in 2010, the legislature
passed a bill requiring mortgage servicers to post a notice
of the time and date of a foreclosure hearing on the
property. Ch. 200, sec. 2, § 38-38-105, 2010 Colo. Sess.
Laws 872. The posting company charged $125 for each posting.
8 The law firm hired the title company to do title searches
and periodic updates to those searches. The title company
charged the law firm $275 for the title search and $75 for an
9 Generally, the agreements between the law firm and a
mortgage servicer allowed the law firm to hire
"affiliated vendors" for posting and title
services. But some agreements required the law firm to
disclose any financial interest in, or other relationship
with, its affiliated vendors. As is relevant to this appeal,
the principals of the law firm held a minority interest in RP
Holdings Group, which we shall call "the holding
company." In 2009, the holding company negotiated an
agreement with the posting company under which the holding
company received 40% of the posting company's net profits
in exchange for cash and stock in the holding company. The
law firm never disclosed this interest to its clients.
10 We prepared the following diagram to help the reader
understand the relationships among the various individuals
and businesses that we have just described.
11 In 2014, the State sued the law firm, the posting company,
the title company, and their respective principals for making
"false or misleading statements of fact concerning the
price" of their foreclosure services under section
6-1-105(1)(Z) of the Colorado Consumer Protection Act. We
note that this Act is sometimes called the CCPA for short,
but, to be more descriptive, we shall refer to it as
"the Consumer Act." (The State brought similar
claims under the Colorado Fair Debt Collection Practices Act,
sections 12-14-101 to -136, C.R.S. 2016, but the trial court
found that those claims merely "duplicate[d]" the
claims under the Consumer Act.) The State also alleged that
the law firm had illegally fixed prices in violation of the
Colorado Antitrust Act of 1992, which we shall call "the
Antitrust Act." § 6-4-104, C.R.S. 2018.
12 The State contended that the law firm, the title company,
and the posting company engaged in a conspiracy that went
like this: (1) the law firm conspired with the title company
and the posting company to charge a price for services in
excess of the market rate; (2) the law firm convinced its
clients that the price was the "actual, necessary, and
reasonable" cost for those services; (3) the law firm
paid those costs to the title company and the posting
company, and then passed them along to the servicers, who
reimbursed the law firm; and (4) the title company and the
posting company shared a portion of the inflated costs with
the law firm.
13 The State alleged that this scheme also benefitted, in
part, from a second conspiracy, in which the law firm
conspired with its largest competitor, Aronowitz &
Mecklenburg, which we shall call "the competitor,"
to set the minimum price for one kind of posting. The
allegation continued that, after reaching this agreement with
the competitor, the law firm convinced its clients that this
pre-set minimum price was the market rate.
14 In January 2016, about one week before the trial was
scheduled to begin, the trial court precluded the State from
presenting evidence of rates charged by other vendors.
State ex rel. Coffman v. Castle Law Group, LLC, 2016
CO 54, ¶ 18 (Castle I). The State wanted to
present this evidence to establish a market rate to show that
the fees charged by the title company and the posting company
were grossly inflated above the average market rate.
Id. at ¶ 17. By showing the difference in
pricing, the State hoped to prove that the law firm's
charges were not "actual, necessary, or
reasonable." Id. at ¶¶ 9, 17. If the
price was not "actual, necessary, or reasonable,"
then, as the State contended, the law firm, the title
company, and the posting company had engaged in a deceptive
statement about the price of the service, which was a
practice that the Consumer Act prohibited. Id.
15 But the trial court believed that the market rate evidence
was irrelevant. Id. at ¶ 16. Rather, the trial
court thought that "[c]harging high prices is not
deceptive or unjust, as long as those prices are accurately
disclosed." Id. at ¶ 18. In the trial
court's opinion, it did not matter what the title company
and the posting company charged for their services; it only
mattered whether the law firm benefitted by getting a
"kickback." Id. The court made it clear in
its order that "the only reason [it] did not knock out
[the Consumer Act claim] on dispositive motion is because
[it] read [the State's] complaint to allege that some
part of these high prices were kicked back to [the law firm]
in a scheme to avoid contractual or regulatory caps on their
attorney fees." Id.
16 The State appealed the trial court's exclusion of the
market rate evidence by filing an original proceeding under
C.A.R. 21. Id. at ¶ 19. The supreme court
issued a rule to show cause, and it ordered the trial court
to stay the trial pending resolution of the Rule 21
proceeding. Id. at ¶ 20. The supreme court then
reversed the trial court.
17 In December 2016 and January 2017, after the trial
court's jurisdiction was restored, it held a bench trial
that lasted about three weeks. More than twenty witnesses
testified, and the court received more than 250 exhibits. The
court issued its detailed, ninety-two-page written order in
18 The State makes two contentions on appeal. First, it
contends that the trial court erred by misapplying the law of
the case because it did not follow Castle I. Second,
the State maintains that the trial court erred when it did
not require two nonparty witnesses to take the witness stand
for purposes of invoking their Fifth Amendment rights.
of the Case
19 The State asserts that the trial court disregarded the law
of the case doctrine, in the form of Castle I, in
determining that the posting and the title search charges
were "actual" and "reasonable." We
20 The law firm and the title company assert that the State
did not preserve this issue for appellate review. (The
posting company does not contest preservation.)
21 The State contends that it preserved the issue during its
opening statement, argument on its motion for directed
verdict, and its closing argument. The law firm and the title
company counter that the State never mentioned the supreme
court's mandate and that it did not specifically object
to the trial court's orders that it believed had
contradicted the law of the case.
22 We conclude that the State did enough to preserve the
issue. In the portions of the record that the State cites, it
tried to express its position on the question of whether the
charges were "actual" or "reasonable." We
do not think that the State had to mention the mandate to
preserve the issue. See Rael v. People, 2017 CO 67,
¶ 17 ("We do not require that parties use
'talismanic language' to preserve an argument for
23 We therefore will review any putative error under the
harmless error standard. C.R.C.P. 61. We will not reverse
unless "the error substantially influenced the verdict
or affected the fairness of the trial." Leiting v.
Mutha, 58 P.3d 1049, 1053-54 (Colo.App. 2002).
of the Case Doctrine
24 The law of the case "doctrine contains two branches,
analyzed differently, depending on whether the prior
'law' of the case involved a court's own rulings
or the rulings of a higher court." Hardesty v.
Pino, 222 P.3d 336, 339 (Colo.App. 2009). We address the
latter in this case, which is known as the "mandate
25 "Conclusions of an appellate court on issues
presented to it as well as rulings logically necessary to
sustain such conclusions become the law of the case."
Super Valu Stores, Inc. v. Dist. Court, 906 P.2d 72,
79 (Colo. 1995). A trial court does not have discretion to
disregard the binding rulings of an appellate court.
Hardesty, 222 P.3d at 340.
Supreme Court's Mandate
26 We begin by discussing the supreme court's
"[c]onclusions [in Castle I] . . . on [the]
issues presented to it as well as rulings logically necessary
to sustain such conclusions." Super Valu
Stores, Inc., 906 P.2d at 79.
27 First, the supreme court rejected, as a matter of law, the
trial court's determination that "charging high
prices is not deceptive as long as the prices are accurately
disclosed." Castle I, ¶ 29. Instead, the
supreme court reasoned that disclosure alone does not cure
the false claim if "the prices themselves are
deceptive." Id. Said another way, the deception
- the alleged scheme to inflate prices above the market rate
and then to share in the benefits - occurred before
the law firm invoiced its clients.
28 Second, the supreme court concluded that the market rate
evidence was therefore relevant to determine whether the
prices the title company and the posting company charged were
"the actual or reasonable costs of such services."
Id. at ¶ 30. If the prices the title company
and the posting company charged were not "actual"
or "reasonable," then they could potentially be
part of a "false or misleading statement of fact
concerning the price of [that] service." §
6-1-105(1)(l). So the court indicated that market
rate evidence gave "some reference point by which to
measure the actual, necessary, or reasonable cost."
Castle I, ¶ 23.
29 Third, the supreme court held that the evidence was also
relevant to establish whether the law firm's vendors
"also benefitted" from the conspiracy with the law
firm. Id. That is, the supreme court rejected the
trial court's assumption that there could only be a
violation of the Consumer Act if the law firm received
kickbacks from its vendors. Rather, the price could still be
deceptive, presumably, if only the vendors themselves
financially benefitted from the artificially inflated price.
30 The State contends that the trial court disregarded the
supreme court's opinion when it determined that the
prices of the title company and the posting company were
"actual" and "reasonable."
31 We pause here momentarily so we may lay some additional
groundwork regarding the words "actual,"
"necessary," and "reasonable." We first
note that the trial court and our supreme court refer to
phrases such as "actual, necessary, and
reasonable"; "actual, necessary, or
reasonable"; "actual and reasonable;" and
"actual or reasonable" interchangeably and without
any clarification as to whether there is a difference among
these different arrangements of the terms. In its order, the
trial court placed the terms in two separate categories: (1)
actual; and (2) necessary and reasonable. And the State
bifurcates its argument in a similar way: (1) actual; and (2)
reasonable. Because no one has asserted that the word
"necessary" conveys some additional indispensable
meaning to the terms "actual" and
"reasonable," we will confine our discussion to the
latter two terms.
32 Our supreme court did not define either "actual"
or "reasonable." But the court gave us one
important piece of information regarding how we should
interpret these words: The State's market rate evidence
was intended to give "some reference point by which to
measure the actual . . . or reasonable cost."
Id. at ¶ 23. So, if the State could prove that
the prices charged by the title company and the posting
company did not reflect the market rate, then it could
establish that they were not the "actual" or
"reasonable" costs of those services.
33 Under the State's "actual-and-reasonable
theory," it had to first show that the title company and
the posting company charged an above-market-rate price. Then,
if the State could establish other aspects of its case, such
as (1) the law firm conspired with the title company and the
posting company to set the high price; and (2) the law firm,
the title company, and the posting company shared in the
benefits of the high price, then the State could prove that
the law firm's charges to its clients were a "false
or misleading statement of fact concerning the prices of
[its] service." § 6-1-105(1)(l). But, if
the State could not establish that the title company and the
posting company charged prices above the market rate, then
the State's actual-and-reasonable theory could not
34 With this groundwork, we draw the following conclusions.
First, the trial court did not err by rejecting the
State's market rate evidence. Second, even if the trial
court misinterpreted the supreme court's mandate when it
concluded that the costs were "actual," we conclude
that it did not commit reversible error. Third, the trial
court did not err when it considered Fannie Mae's
approval of the charges as evidence that the charges were
reasonable. Fourth, the trial court did not improperly
consider the State's "kickback theory."
35 Review of a trial court's judgment following a bench
trial involves mixed questions of fact and law. Deutsche
Bank Tr. Co. Ams. v. Samora, 2013 COA 81, ¶ 37.
Generally, the court's findings of fact are reviewed for
clear error, and the ...