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Falcon Broadband, Inc. v. Banning Lewis Ranch Metropolitan District No. 1

Court of Appeals of Colorado, Seventh Division

June 28, 2018

Falcon Broadband, Inc., a Colorado corporation, Plaintiff-Appellant and Cross-Appellee,
Banning Lewis Ranch Metropolitan District No. 1; Oakwood Homes, LLC; Chad M. Ellington; Charles P. Leder; Jeffrey P. Carlson; Mike Tinlin; William Ritchie; Bruce Rau; MREC Oakwood Colorado Ranch, LLC; MREC Oakwood Colorado Investments, LLC; MREC Colorado Land Investments, LLC; MREC Oakwood Colorado IV-VI, LLC; and MREC Oakwood Colorado, LLC, Defendants-Appellees and Cross-Appellants.

          El Paso County District Court No. 16CV30823 Honorable Thomas K. Kane, Judge

          Hamre, Rodriguez, Ostrander & Dingess, P.C., Donald M. Ostrander, Stephanie M. Ceccato, Paul Rufien, Denver, Colorado, for Plaintiff-Appellant and Cross-Appellee

          Vaughan & DeMuro, Gordon L. Vaughan, Ann B. Smith, Colorado Springs, Colorado; Spencer Fane, LLP, Jamie N. Cotter, Jacob F. Hollars, Denver, Colorado; Gordon & Rees LLP, John R. Mann, Edward J. Hafer, John D. Keen, Denver, Colorado, for Defendants-Appellees and Cross-Appellants


          JUDGE J.

         ¶ 1 In 2007, Falcon Broadband, Inc. (Falcon), signed a contract - called the Bulk Services Agreement (BSA) - with Banning Lewis Ranch Metropolitan District No. 1 (the District) to provide internet and cable services to the residents of the Banning Lewis Ranch area. Five years later, Falcon sued the District, Oakwood Homes, LLC (the developer), several of Oakwood Homes' sister companies (we refer collectively to all of the related Oakwood entities as Oakwood), [1] and a number of individuals who are affiliated with Oakwood and serve as directors on the District's board (Directors) after the District disavowed the BSA.[2] On motions from all defendants, the district court dismissed Falcon's complaint in part as barred by the Colorado Governmental Immunity Act (CGIA), sections 24-10-101 to -120, C.R.S. 2017, and granted summary judgment in defendants' favor on the remaining claims not subject to dismissal under the CGIA.

         ¶ 2 Falcon appeals the judgment. The District and the Directors cross-appeal the district court's denial of their requests for attorney fees. Though we conclude that the district court incorrectly applied the CGIA in certain respects, we ultimately affirm the judgment in favor of all defendants in all respects except one; we reverse the judgment for Oakwood on the unjust enrichment claim and remand for further proceedings on that claim. We also affirm the district court's denial of the District's requests for attorney fees. But we reverse the district court's denial of the Directors' request for attorney fees and remand for a determination of the Directors' reasonable attorney fees incurred in the district court and on appeal.

         I. Background

         ¶ 3 Under the BSA, the District granted Falcon the exclusive right to provide internet and cable services to residents of Banning Lewis Ranch in exchange for a monthly per resident fee. The BSA doesn't have a definite duration, but says that it remains in effect until 2, 700 homes in the development are occupied. That hasn't yet occurred.

         ¶ 4 After the original developers of Banning Lewis Ranch went bankrupt, Oakwood acquired the property in 2012, appointed a new slate to the District's board of directors (all of whom have some association with Oakwood), and decided it wasn't happy with the BSA. The parties tried to negotiate modifications to the BSA, without success. So the District, saying that the BSA was invalid, stopped paying Falcon and stopped collecting fees from residents.

         ¶ 5 In its amended complaint, Falcon asserts a total of seven claims against defendants. Against the District, Falcon asserts claims for (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) promissory estoppel; (4) unjust enrichment; (5) civil conspiracy; and (6) declaratory judgment.[3]Against Oakwood, Falcon asserts claims for (1) unjust enrichment; (2) tortious interference with contract; (3) civil conspiracy; and (4) declaratory judgment. Finally, against the Directors, Falcon asserts claims for (1) tortious interference with contract and (2) civil conspiracy.

         ¶ 6 Defendants sought dismissal under the CGIA and summary judgment under several theories. After an evidentiary hearing pursuant to Trinity Broadcasting of Denver, Inc. v. City of Westminster, 848 P.2d 916 (Colo. 1993), to determine the court's subject matter jurisdiction under the CGIA, the district court granted defendants' motions.[4] Ruling that the CGIA bars the promissory estoppel, unjust enrichment, and civil conspiracy claims asserted against the District, the district court dismissed them "against all defendants."[5] The court then determined that the BSA is void and unenforceable for several reasons, and on that basis it entered summary judgment in all defendants' favor. But the court denied the District's and the Directors' requests for attorney fees.

         II. Falcon's Appeal

         ¶ 7 Falcon contends that the district court erred in its application of the CGIA, and in granting summary judgment. We conclude that the court erred in applying the CGIA, in part.[6] But we agree with the district court that the BSA is void. And since the majority of Falcon's claims are premised on the BSA's validity, summary judgment is appropriate for all but one of Falcon's claims. That one claim is Falcon's claim for unjust enrichment against Oakwood.

         A. Governmental Immunity

         ¶ 8 Because of its jurisdictional implications, we first address whether the CGIA bars any of Falcon's claims against the District, Oakwood, or the Directors.

         ¶ 9 Falcon argues that the district court erred by dismissing its promissory estoppel and unjust enrichment claims against the District based on governmental immunity because those claims are contract claims, not tort claims. It also argues that the district court erred by dismissing its claims against Oakwood based on governmental immunity, in part for the same reason but also because the Oakwood entities are private, not public. The Directors argue that the court should've dismissed both of Falcon's claims against them - for tortious interference and civil conspiracy - under the CGIA because the Directors are public employees within the meaning of the CGIA.[7] We agree with all three arguments.

         ¶ 10 The CGIA provides that "public entit[ies] shall be immune from liability in all claims for injury which lie in tort or could lie in tort" unless immunity has been expressly waived. § 24-10-106(1), C.R.S. 2017. It also immunizes public employees from tort claims so long as they acted within the scope of their employment. § 24-10-118(2)(a), C.R.S. 2017. A "public employee" is "an officer, employee, servant, or authorized volunteer of the public entity, whether or not compensated, elected, or appointed." § 24-10-103(4)(a), C.R.S. 2017. A court lacks jurisdiction to adjudicate tort claims against an entity or employee protected by the CGIA. Springer v. City & Cty. of Denver, 13 P.3d 794, 798 (Colo. 2000).

         ¶ 11 Where the facts are undisputed and the issue is one of law, we review a district court's application of the CGIA de novo. Ceja v. Lemire, 154 P.3d 1064, 1065 (Colo. 2007).

         1. The District

         ¶ 12 It's undisputed that the District is a public entity within the meaning and protection of the CGIA. So the district court properly dismissed the civil conspiracy claim against the District because that claim is undeniably a tort claim. See Resolution Tr. Corp. v. Heiserman, 898 P.2d 1049, 1056 (Colo. 1995); Double Oak Constr., L.L.C. v. Cornerstone Dev. Int'l, L.L.C., 97 P.3d 140, 148-49 (Colo.App. 2003).

         ¶ 13 But we agree with Falcon that the court improperly dismissed its unjust enrichment and promissory estoppel claims as sounding in tort. Governmental immunity doesn't apply to actions "grounded in contracts." Berg v. State Bd. of Agric., 919 P.2d 254, 258 (Colo. 1996). "The essential difference between a tort obligation and a contract obligation is the source of the parties' duties." Carothers v. Archuleta Cty. Sheriff, 159 P.3d 647, 655 (Colo.App. 2006). "Contract obligations arise from promises made between parties," whereas "[t]ort obligations generally arise from duties imposed by law, and tortious conduct is a breach of a duty imposed by law, not by contract." Id. at 655-56. We apply a "case by case analysis" to determine whether the claims in this case could sound in tort. See Berg, 919 P.2d at 259.

         ¶ 14 Promissory estoppel "involves a promise by a government agency or official." Allen Homesite Grp. v. Colo. Water Quality Control Comm'n, 19 P.3d 32, 35 (Colo.App. 2000). The supreme court has recognized that "promissory estoppel is a distinct contract claim," so the CGIA doesn't bar such a claim when the plaintiff pleads the claim in terms of a promise that the governmental entity failed to fulfill. Berg, 919 P.2d at 259.

         ¶ 15 "Unjust enrichment is a form of quasi-contract or contract implied in law" that "can be predicated on either tort or contract law." Robinson v. Colo. State Lottery Div., 179 P.3d 998, 1007 (Colo. 2008). To determine which is the predicate in a given case, a court must assess "the nature of the injury and the relief requested." Id.

         ¶ 16 In support of its promissory estoppel claim, Falcon alleges that "[t]hrough negotiation of the [BSA] and as reflected in the [BSA], [the] District promised Falcon that it would [perform as agreed in the BSA]" and that Falcon reasonably relied on that promise to its detriment. Similarly, Falcon alleges in support of its unjust enrichment claim that the District unjustly benefited from the BSA.

          ¶ 17 The District argues that these claims are based on its allegedly fraudulent - that is, tortious - actions. But neither claim is based on an alleged misrepresentation or duty independent of the BSA; rather, the source of both claims is the BSA. Indeed, both are essentially asserted in the alternative in the event the BSA is declared invalid. And the type of relief Falcon seeks is enforcement of contractual promises through the quasi-contractual theory of promissory estoppel and the restitution theory of unjust enrichment. Thus, these claims sound firmly in contract. Cf. Robinson, 179 P.3d at 1005 (claims brought based on allegations that the Colorado State Lottery Division misrepresented the possibility of winning the lottery were tort claims); CAMAS Colo., Inc. v. Bd. of Cty. Comm'rs, 36 P.3d 135, 139 (Colo.App. 2001) (contractor's claim for quantum meruit sounded in contract while claims for fraud, negligent misrepresentation, and interference with future contracts sounded in tort); Lehman v. City of Louisville, 857 P.2d 455, 457 (Colo.App. 1992) (equitable estoppel claim sounded in tort because it was based on a misrepresentation).

          ¶ 18 We therefore conclude that the CGIA doesn't bar either of these claims. But, as discussed below, the District is entitled to judgment anyway.

         2. Oakwood

         ¶ 19 All the Oakwood entities are private associations; none is a public entity. The district court therefore erred in dismissing some of Falcon's claims against Oakwood under the CGIA. § 24-10-103(5) (defining a "[p]ublic entity" for purposes of the CGIA); § 24-10-106(1) ("[a] public entity shall be immune from liability"); see also Podboy v. Fraternal Order of Police, 94 P.3d 1226, 1229 (Colo.App. 2004) (employee union wasn't a public entity and therefore wasn't entitled to the protection of the CGIA).[8]

         3. The Directors

         ¶ 20 As noted, Falcon asserts two claims against the Directors - tortious interference and civil conspiracy - both of which are clearly tort claims. And, as officers of the District, the Directors are public employees for purposes of the CGIA. See Tallman Gulch Metro. Dist. v. Natureview Dev., LLC, 2017 COA 69, ¶ 17.

         ¶ 21 Nonetheless, Falcon argues that it has sued the Directors in their private capacities as agents of Oakwood rather than as directors of the District.[9] We therefore look at the totality of the circumstances to decide whether the acts in question were "necessarily incidental to [public] employment." First Nat'l Bank of Durango v. Lyons, 2015 COA 19, ¶ 47 (quoting Gallagher v. Bd. of Trs. for Univ. of N. Colo., 18 P.3d 837, 843 (Colo.App. 2002)). This determination turns on whether the acts bear a relationship to the business or are customary in the business. Id.

         ¶ 22 We don't see any evidence in the record to support Falcon's argument that it has sued the Directors in their private capacities. Falcon characterizes the Directors as "individuals who have been elected or appointed to serve or have served on the Board of Directors of the District and who are or have been employees, agents or representatives of Oakwood." But in the Trinity hearing, Falcon's president, Randy DeYoung, testified that Falcon is suing the Directors because they're on the District's board of directors. And Falcon's amended complaint similarly emphasizes the individuals' positions as board members. Falcon alleges that the District, "acting through its Board of Directors," breached the BSA, and that "Oakwood met with the District, through the [Directors]." According to Falcon, Oakwood told the Directors what to do. But Falcon doesn't allege that the Directors did anything outside the scope of their roles as District directors or otherwise acted as private individuals.

         ¶ 23 In short, Falcon sued the Directors because they, as District directors, decided to stop honoring the BSA; it didn't allege, much less present any evidence at the Trinity hearing indicating, that the Directors, as private individuals, caused the District to stop honoring the BSA.

         ¶ 24 Because the Directors allegedly acted in their roles as directors of the District, governmental immunity protects them. It follows that the district court should've dismissed the claims against them under C.R.C.P. 12(b)(1). W.O. Brisben Cos. v. Krystkowiak, 66 P.3d 133, 137 (Colo.App. 2002) (where the plaintiff improperly postured his motion to dismiss as a C.R.C.P. 12(b)(1) motion, the reviewing court analyzed it under the proper standard without remand), aff'd on other grounds, 90 P.3d 859 (Colo. 2004); Norsby v. Jensen, 916 P.2d 555, 559 (Colo.App. 1995) (district court improperly treated a C.R.C.P. 12(b)(1) motion as a C.R.C.P. 12(b)(5) motion, but reviewing court applied governing rule without remand).

         B. Falcon's Other Contentions

         ¶ 25 Falcon also contends that the district court erred by determining that the BSA is void and by entering summary judgment on its tortious interference and civil conspiracy claims ...

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