Certiorari to the Colorado Court of Appeals Court of Appeals
Case No. 16CA102
Attorneys for Petitioner: Kishinevsky & Raykin, Attorneys
at Law Igor Raykin Aurora, Colorado.
The
Law Office of Ian T. Hicks, Esq. Ian T. Hicks Denver,
Colorado.
Attorneys for Respondent: Seserman Law, LLC David Seserman
Denver, Colorado.
Anderson Barkley, LLC Richard P. Barkley Denver, Colorado.
OPINION
MÁRQUEZ JUSTICE.
JUSTICE HOOD does not participate.
¶1
In this case, we are asked to determine whether the economic
loss rule bars a statutory claim for civil theft where the
theft also constitutes a breach of the parties' contract.
We conclude it does not.
¶2
Chris Bermel contracted to provide engineering services for
BlueRadios, Inc., a wireless data and voice communications
company. In 2014, Bermel knowingly forwarded thousands of
company emails containing proprietary information to his
personal email account without authorization. For this
conduct, the trial court found Bermel liable for breach of
contract and for civil theft under section 18-4-405, C.R.S.
(2018) (titled "Rights in stolen property" and also
referred to as the "civil theft" statute). The
statute allows the rightful owner of stolen property to
recover the greater of $200 or three times the actual damages
sustained, as well as costs and reasonable attorney fees.
¶3
Bermel argues that BlueRadios' remedies were limited to
those for breach of contract, and that Colorado's
economic loss rule bars BlueRadios' claim for civil
theft. We disagree and hold that the judge-made economic loss
rule cannot bar a statutory cause of action. Accordingly, we
affirm the judgment of the court of appeals and remand the
case for further proceedings consistent with this
opinion.[1]
I.
Facts and Procedural History
¶4
Petitioner Chris Bermel worked as an engineer for Respondent,
BlueRadios, Inc., starting in June 2009. As
part of their working relationship, Bermel and BlueRadios
entered into certain agreements, including a "Contractor
Agreement" setting forth Bermel's work duties and
compensation and a "Proprietary Information and
Inventions Agreement" governing Bermel's access to
BlueRadios' company information and materials
(collectively, "the Agreements"). Paragraph 6 of
the Contractor Agreement, which addresses "Confidential
or Proprietary Information," incorporated the
Proprietary Information and Inventions Agreement in its
entirety.
¶5
The Agreements defined "Proprietary Information" to
include any information "developed, created, or
discovered by or on behalf of [BlueRadios]" that
"has commercial value in [BlueRadios']
business," and they further defined "Company
Materials" to include "documents or other media or
tangible items that contain or embody Proprietary Information
or any other information concerning the business, operations
or plans of [BlueRadios]."
¶6
The Agreements prohibited Bermel from "remov[ing] any
Company Materials [including Proprietary Information] from
the business premises of [BlueRadios] . . ., except as
[Bermel was] required to do in connection with performing
[his] duties" under the Contractor Agreement.
Additionally, the Agreements required Bermel to return
Company Materials upon the termination of his working
arrangement with BlueRadios. The Contractor Agreement
provided that BlueRadios would be entitled to injunctive
relief if Bermel revealed or threatened to reveal
confidential information or trade secrets without
authorization.
¶7
Anticipating that he might end up in litigation with
BlueRadios, Bermel knowingly forwarded thousands of emails
and attachments in his BlueRadios business email account to
his personal Gmail account without authorization in June or
July 2014. These forwarded emails contained confidential and
proprietary information, including trade secrets.
¶8
In August 2014, Bermel filed suit against BlueRadios,
asserting that BlueRadios owed him unpaid wages and expenses
he incurred on behalf of the business. Bermel brought claims
for breach of contract, unjust enrichment, and violation of
the Colorado Wage Protection Act, § 8-4-109(1)(a), (b),
C.R.S. (2018).
¶9
Alleging that Bermel had improperly taken confidential and
proprietary information from the company, BlueRadios filed
counterclaims against Bermel, including claims for breach of
contract, civil theft, conversion, and violation of the
Uniform Trade Secrets Act ("UTSA").
¶10
Bermel moved for summary judgment on BlueRadios'
counterclaims. The trial court initially granted the motion
as to the UTSA counterclaim and denied the motion as to the
remaining counterclaims. However, the trial court later
granted BlueRadios' motion to reconsider its ruling as to
the UTSA counterclaim and allowed all of BlueRadios'
counterclaims to proceed to a bench trial.
¶11
After the close of evidence at trial, Bermel moved for a
directed verdict on BlueRadios' civil theft counterclaim,
arguing that this counterclaim was barred by the economic
loss rule. The court denied Bermel's motion, reasoning
that the economic loss rule does not bar a statutory cause of
action. Ultimately, the court found Bermel liable on all of
BlueRadios' counterclaims, awarding BlueRadios $200 in
statutory damages on the civil theft and conversion
counterclaims[2] and $1 in nominal damages on each of the
other counterclaims under the UTSA and for breach of
contract.
¶12
The court of appeals affirmed the trial court's
conclusion that the economic loss rule did not bar
BlueRadios' civil theft counterclaim. Bermel v.
BlueRadios, Inc., 2017 COA 20, ¶ 29, __P.3d__. The
court reasoned that the economic loss rule is "a
judge-made" rule intended to "maintain the boundary
between the law of contracts and torts," whereas civil
theft is a "legislatively created cause of action."
Id. at ¶¶ 23-24. The court thus concluded
that, under separation of powers principles, the judicially
constructed economic loss rule cannot preclude a statutory
claim for civil theft. Id. at ¶¶ 24-29.
¶13
The division below acknowledged its disagreement with a
different division's ruling in Makoto USA, Inc. v.
Russell, 250 P.3d 625 (Colo.App. 2009). The
Makoto division held that the economic loss rule
barred a plaintiff's civil theft claim because there was
no indication that the legislature intended for the rights in
stolen property statute to provide a remedy in addition to
the plaintiff's existing contract law remedies.
Id. at 629.
¶14
We granted Bermel's petition for a writ of certiorari to
review the court of appeals' ruling on BlueRadios'
civil theft counterclaim.[3]
II.
Analysis
¶15
Under Colorado's economic loss rule, "a party
suffering only economic loss from the breach of an express or
implied contractual duty may not assert a tort claim for such
a breach absent an independent duty of care under tort
law." Town of Alma v. AZCO Constr., Inc., 10
P.3d 1256, 1264 (Colo. 2000). Our previous cases have applied
the economic loss rule to bar only certain common law
negligence claims. Today, we are asked to determine whether
the judge-made economic loss rule may also bar a statutory
cause of action. In particular, we are asked to decide
whether the economic loss rule may bar a claim for civil
theft under section 18-4-405 where the theft also constitutes
a breach of the parties' contract.
¶16
Bermel urges us to adopt the reasoning of the Makoto
division and hold that the legislature did not intend to make
redress under section 18-4-405 available in
breach-of-contract cases. He argues that because forwarding
himself Company Materials breached his Agreements with
BlueRadios, the economic loss rule bars the company from
asserting a counterclaim against him under the civil theft
statute for the same conduct.
¶17
BlueRadios responds that the division below correctly held
that the economic loss rule does not bar statutory claims for
civil theft, and asks us to affirm that holding.
¶18
We begin by reviewing our adoption and previous applications
of the economic loss rule, noting that we have applied the
rule only to common law tort claims for negligence and
negligent misrepresentation, and have never addressed whether
the rule bars statutory claims for civil theft. Next, we
describe the split of authority in the court of appeals on
that question. We then consider BlueRadios' argument that
civil theft is not a tort, and therefore that recovery for
civil theft cannot be barred by the economic loss rule.
Ultimately, we conclude that, even if civil theft is a claim
sounding in tort, separation of powers principles dictate
that the judge-made economic loss rule cannot bar a statutory
cause of action. We observe that it would be particularly
inappropriate to apply the economic loss rule to bar
statutorily imposed liability for intentionally wrongful
conduct. Accordingly, we affirm the judgment of the court of
appeals and remand with instructions to return the case to
the trial court for further proceedings consistent with this
opinion.[4]
A.
Colorado's Economic Loss Rule
¶19
Broadly speaking, the economic loss rule is a judge-made
doctrine that "serves to maintain a distinction between
contract and tort law." Alma, 10 P.3d at 1262.
Under Colorado's rule as we announced it in
Alma, "a party suffering only economic loss
from the breach of an express or implied contractual duty may
not assert a tort claim for such a breach absent an
independent duty of care under tort law." Id.
at 1264.
¶20
In adopting the economic loss rule in Colorado, we expressed
concern about imposing both contract and tort liability for
the same economic injury. We compared contract and tort law,
observing that "contract obligations arise from promises
made between parties," whereas "[t]ort obligations
generally arise from duties imposed by law . . . without
regard to any agreement or contract." Id. at
1262. We reasoned that "[l]imiting the availability of
tort remedies" for economic losses when a contract
exists between the parties holds parties to the terms of
their bargain and serves to "encourage parties to
confidently allocate risks and costs . . . without fear that
unanticipated liability may arise in the
future."[5] Id. Relatedly, we were concerned
that the threat of liability in tort for a breach of contract
causing only economic losses might undermine the parties'
expectations.[6] Id. In addition to considerations
of parties' primary behavior in bargaining, our adoption
of the rule was motivated by a concern that the possibility
of simultaneous liability in tort and contract could generate
confusion and unnecessary complexity in litigation.
Id. at 1263 & n.11.
¶21
Notably, however, since adopting the economic loss rule, we
have applied it only to bar common law tort claims of
negligence or negligent misrepresentation. See id.
at 1264-65 (holding that economic loss rule barred a
town's negligence claim against a contractor for careless
construction of the town's water supply); BRW, Inc.
v. Dufficy & Sons, Inc., 99 P.3d 66, 67-68 (Colo.
2004) (holding that economic loss rule barred negligence and
negligent misrepresentation claims brought by subcontractor
against engineering firm and inspector); Grynberg v. Agri
Tech, ...