February Case Law Update

COLORADO CASE LAW UPDATE

Colorado Supreme Court

Ryals v. City of Englewood – The Court held that statute did not pre-empt local ordinance restricting sex offender residency (01/16/16). This case involved a certified question of law from the Tenth Circuit regarding a challenge to a home rule ordinance. Claimant argued that state statute pre-empted a City ordinance effectively barring sex offenders from residing. The Supreme Court held that state law does not preempt the ordinance as it was a matter of mixed state and local concern; and it does not conflict with Colorado’s statutory regime for regulating sex offenders. The Court therefore answered the certified question in the negative and returned this case to the Tenth Circuit for further proceedings. NOTE: This case has significance on fracking and construction defect ordinances.

Colorado Court of Appeals

Ravenstar LLC v. One Ski Hill Place LLC – Court of appeals holds that clause giving non-defaulting party option of choosing damage remedy does not violate law in Colorado on liquidated damages (CA 01/28/16). Plaintiffs are five Colorado companies that entered into separate contracts to purchase to-be-built condominium units from developer Defendant. When plaintiffs defaulted, OSHP opted to retain the full deposits as liquidated damages. Plaintiffs then filed this action against OSHP, seeking the return of their deposits. Plaintiffs contended that the liquidated damages provision in their contracts was invalid as a matter of law because it gave OSHP the option to choose between liquidated damages and actual damages. Under Colorado law, a liquidated damages provision is valid and enforceable if three elements are met: (1) the parties intended to liquidate damages; (2) when the contract was made, the amount of liquidated damages was a reasonable estimate of presumed actual damages; and (3) at the time of contract, it was difficult to ascertain the amount of actual damages that would result from a breach. The Court of Appeals held that the mere presence of an option to elect between liquidated damages and actual damages does not render the liquidated damages clause unenforceable. It did, however, leave the door open for invalidating these types of clauses in situations where the election is punitive in nature.

Tenth Circuit Court of Appeal

Martin Marietta Materials v. Kansas DOT – Tenth Circuit holds that “approved list” is not a property right under constitutional law – No. 13-3314 (10th Cir. 01/13/16). Martin Marietta Materials, Inc. appealed a district court’s dismissal of its due-process claims against the Kansas Department of Transportation (KDOT). After KDOT removed two Martin Marietta quarries from its preapproved lists of limestone aggregate suppliers, Martin Marietta unsuccessfully sought pre- and post-deprivation hearings from KDOT. Among its many claims in its federal lawsuit, Martin Marietta asserted a property-right claim under the Fourteenth Amendment, claiming a property interest in keeping its two quarries on “the approved list” of aggregate suppliers, and a liberty interest in its reputation as a supplier of quality materials under the Fourteenth Amendment. After review, the Tenth Circuit held that Martin Marietta had not plausibly alleged a protected property interest, and thus that KDOT did not violate Martin Marietta’s procedural-due-process rights by failing to provide pre- or post-deprivation hearings. Furthermore, the Court held that Martin Marietta had no cognizable liberty interest, because KDOT did not make defamatory statements about Martin Marietta and because Martin Marietta failed to allege sufficiently significant harm to its business.

Christy v. Travelers Indemnity – Tenth Circuit holds that factual issue about significance of failure of insured to inform carrier of change of business form created factual issue upon summary judgment – No. 14-2168 (10th Cir. 01/20/16) Plaintiff-Appellant Corey Christy purchased a commercial general-liability insurance policy from Travelers in the name of his sole proprietorship, K&D Oilfield Supply. Subsequently, Christy registered his business as a corporation under the name K&D Oilfield Supply, Inc. Christy renewed his CGL Policy annually, but did not notify Travelers that he had incorporated his business. After Christy formed K&D, Inc., he was in an accident and made a claim under the CGL Policy. Travelers denied coverage based on Christy’s failure to inform it of the change in business form, and Christy filed this action. On cross motions for summary judgment, the district court found in favor of Travelers. However, because there was a material factual dispute as to whether Christy knew or should have known Travelers would have considered the formation of K&D, Inc. material to its decision to renew the Policy, the Tenth Circuit found that summary judgment based on Christy’s legal duty to speak was inappropriate.