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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
En
Banc
OPINION
MÁ
RQUEZ, JUSTICE
[¶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
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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 Colorados 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 Bermels work duties and
compensation and a "Proprietary Information and
Inventions Agreement" governing Bermels 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.
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[¶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 Bermels 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 courts 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 divisions 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 plaintiffs 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 plaintiffs existing contract law remedies. Id.
at 629.
[¶14]
We granted Bermels petition for a writ of certiorari to
review the court of appeals ruling on BlueRadios civil
theft counterclaim.[3]
II. Analysis
[¶15]
Under Colorados 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
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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. Colorados 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 Colorados 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 ...