Free Trial Brief - District Court of Colorado - Colorado

Case 1:01-cv-00568-LTB-PAC

Document 395

Filed 11/14/2005

Page 1 of 8

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 01-CV-00568-LTB-PAC CROSS COUNTRY LAND SERVICES, INC., a Texas corporation, Plaintiff, v. PB NETWORK SERVICES, INC., a Delaware corporation, PB TELECOMMUNICATIONS, INC., a Delaware corporation, LEVEL 3 COMMUNICATIONS, LLC, a Delaware limited liability company, KIEWIT NETWORK SERVICES CO., a Delaware corporation, and KIEWIT CONSTRUCTION CO., a Delaware corporation, Defendants, and PB NETWORK SERVICES, INC., a Delaware corporation, LEVEL 3 COMMUNICATIONS, LLC, a Delaware limited liability company, and KIEWIT NETWORK SERVICES CO., a Delaware corporation, Third-Party Plaintiffs, v. JAMES STEVENSON, WILLIAM STEVENSON, ED CROWSTON, and LARRY ORTH, Third-Party Defendants. _____________________________________________________________________________ DEFENDANTS' BRIEF REGARDING EVIDENTIARY ISSUES _____________________________________________________________________________ Defendants PB Network Services, Inc. ("PBNS"), Level 3 Communications, LLC ("Level 3"), Kiewit Network Services Co. ("KNS") and Kiewit Construction Co. ("KCC"), by counsel, Grimshaw & Harring, P.C., submit the following brief regarding evidentiary issues that may arise before the Court in the trial of this matter.

Case 1:01-cv-00568-LTB-PAC

Document 395

Filed 11/14/2005

Page 2 of 8

1.

Evidentiary issues regarding Cross Country's fraud claims. A. Cross Country's presentation of evidence regarding fraud should be limited to its particularly pled allegations regarding fraud. fraudulent

Cross Country has asserted two separate fraud claims against PBNS:

misrepresentation and fraudulent concealment. Third Amended Cross-Claims, dated July 1, 2003, ¶¶ 57-67. Through the claim for fraudulent misrepresentation, Cross Country alleges that PBNS represented to Cross Country that the contract terms "demanded by PBNS from Cross Country were substantially similar to those agreed to between PBNS and [KNS]," and that this representation was false because the PBNS-Cross Country Contract and the KNS-PBNS Contract are not substantially similar. Third Amended Cross-Claims, ¶¶ 58-59. Through the claim for fraudulent concealment, Cross Country alleges that PBNS concealed the terms of the KNS-PBNS Contract from Cross Country in order to induce Cross Country to sign the PBNS-Cross Country Contract and that Cross Country would not have signed the PBNS-Cross Country Contract if it had known the terms of the KNS-PBNS Contract. Third Amended Cross-Claims, ¶¶70-72. Both of Cross Country's fraud claims rely solely upon Cross Country's allegations of the following alleged material differences between the PBNS-Cross Country Contract and the KNSPBNS Contract: a. The KNS-PBNS Contract does not provide that PBNS' initial rates were retroactively adjustable; b. c. PBNS was not required to refund to KNS amounts for services previously rendered; PBNS was not forced to agree to accept lower rates through the duration of the Project than originally negotiated; d. e. Cross Country's rates were not substantially similar to the rates of PBNS; Cross Country was not compensated under the Award Fee program as was PBNS; and

2

Case 1:01-cv-00568-LTB-PAC

Document 395

Filed 11/14/2005

Page 3 of 8

f.

Unlike the payment terms of the KNS-PBNS Contract which provides for KNS to pay PBNS within 15 days of invoicing, PBNS maintains that the PBNS-Cross Country Contract is a "pay-if-paid" contract, i.e., Cross Country gets paid only, if and after, PBNS is paid by KNS.

Third Amended Cross-Claims, ¶ 45(a)-(f). Now, in its Proposed Findings of Facts and Conclusions of Law ("Proposed Findings & Conclusions"), Cross Country has proposed new facts that were not previously pled with respect to the fraud claims. Specifically, paragraphs 79(a) through (e) of the Proposed Findings & Conclusions set forth entirely new facts that Cross Country apparently intends to present in order to prove its fraud claims. In summary, these newly-proposed facts are: a. PBNS misrepresented the reasons for its failure to timely pay Cross Country invoices in December 1998 and January 1999; b. c. PBNS misrepresented the amount of alleged overbilling and the reasons therefore; PBNS misrepresented that its multipliers with KNS were the result of audited overhead information; d. e. PBNS misrepresented the markup allowed on its contract labor; and PBNS misrepresented the impact of revised billing procedures.

None of these facts were ever pled by Cross Country and Defendants had no knowledge or opportunity to do any discovery regarding such facts. Furthermore, it should be noted that Cross Country sought leave to amend its cross-claims in October of 2004, seeking to add factual allegations containing some of the newly-proposed alleged misrepresentations in the Proposed Findings & Conclusions. See ¶¶ 52-59 of Exhibit A to Cross Country's Motion for Leave to File Fourth Amended Cross-Claims, dated October 29, 2004. Cross Country's motion for leave to amend was denied by the Court on April 18, 2005 and therefore these facts are not part of the pleadings before by the Court.

3

Case 1:01-cv-00568-LTB-PAC

Document 395

Filed 11/14/2005

Page 4 of 8

Pursuant to Fed.R.Civ.P. 9(b) the allegations of fraud are subjected to a heightened pleading standard, which requires pleading with particularity all material elements of fraud: "In all averments of fraud or mistake, the circumstances constituting the fraud or mistake shall be stated with particularity." One of the purposes of Rule 9(b) is to ensure that a defendant has adequate information to formulate a defense to a fraud claim. United States ex rel. Wilkins v. N. Am. Constr. Corp., 173 F.Supp.2d 601, 614 (S.D.Tex. 2001). "In order to adequately plead fraud under Rule 9(b), a complaint must 'set forth the time, place and contents of the false representation, the identity of the party making the false statements and the consequences thereof.'" SEC v. C. Jones & Co., 312 F. Supp.2d 1375, 1381 (D. Colo. 2004) (quoting Schwartz v. Celestial Seasonings, Inc., 124 F.3d 1246, 1252 (10th Cir.1997)); see also Kaiser v. Bowlen, 181 F. Supp.2d 1200, 1203 (D. Colo. 2002) (citing Armani v. Maximum Healthcare Servs., Inc., 53 F. Supp.2d 1120 (D. Colo. 1999)). Here, the only specifically pled allegations regarding fraud before the Court are the allegations contained in Cross Country's Third Amended Cross-Claims, all of which relate solely to the alleged material differences between the PBNS-Cross Country Contract and the KNS-PBNS Contract. Cross Country should not be permitted to present any evidence regarding the five new un-pled misrepresentations that Cross Country has set forth in its Proposed Findings & Conclusions. Such an evidentiary ruling would be consistent with other federal court rulings precluding the admission of such evidence. Federal Trade Comm'n v. Feecom Communications, Inc., 401 F. 3d 1192, 1198 (10th Cir. 2005) (trial court granted motion in limine to limit presentation of evidence on fraud claims to "those acts and practices alleged with particularity in the First Amended Complaint."); Tirapelli v. Advanced Equities, Inc., 215 F. Supp.2d 964, 969 (N.D. Ill 2002) (prohibiting the introduction of evidence of fraudulent conduct that is wholly unrelated to the alleged fraudulent statements that plaintiffs properly pled in their complaint).

4

Case 1:01-cv-00568-LTB-PAC

Document 395

Filed 11/14/2005

Page 5 of 8

B.

Cross Country has no claim for constructive fraud and should not be permitted to present evidence regarding a constructive fraud claim.

In its Proposed Findings & Conclusions, Cross Country also sets forth several pages regarding the law of constructive fraud and its application to the facts Cross Country proposes to prove at trial. Proposed Findings & Conclusions, pp. 39-45. Cross Country does not have a claim for constructive fraud in this case and should not be allowed to present evidence regarding constructive fraud. In fact, Cross Country's Motion for Leave to File Fourth Amended CrossClaims, discussed in Section 1. B., supra, also sought leave to add an entirely new claim for constructive fraud. This attempt to add a constructive fraud claim was specifically denied by the Court. See Order of April 18, 2005. Now, Cross Country resurrects its constructive fraud by setting forth six pages of legal argument regarding constructive fraud in its Proposed Findings & Conclusions and asking the Court to find that the PBNS-Cross Country Contract would not have been made but for the constructive fraud of PBNS. Proposed Findings and Conclusions, p. 39-45. This attempt to add a constructive fraud claim at the eleventh hour must be rejected by the Court: Cross Country's motion for leave to add a claim for constructive fraud was specifically denied by the Court and, as with all fraud claims, any claim for constructive fraud would have to be pled with particularity according to Fed.R.Civ.P. 9(b). 2. Defendants' relevancy objections to Cross Country's exhibits.

Federal Rule of Evidence 402 states: "All relevant evidence is admissible [except as otherwise disallowed by law] . . . . Evidence which is not relevant is not admissible." To the extent that Cross Country is attempting to offer exhibits or testimony that is not relevant to the issues to be tried at this first trial on liability, such evidence should be excluded. The types of exhibits to which Defendants object include copies of information taken from web sites (Exs. 3 & 4), drafts and notes of budget discussions between KNS and PBNS (Exs. 8, 19, 20, 21 & 22),

5

Case 1:01-cv-00568-LTB-PAC

Document 395

Filed 11/14/2005

Page 6 of 8

letters from subcontractors (Exs. 36, 36.1, 36.2, 36.3), post-contract billing and audit documents (Exs. 53, 54, 56.1, 56.2, 56.3, 56.4, 56.5), and damages exhibits (Exs. 59 through 66). 3. Defendants' objections to Cross Country's cumulative exhibits.

Federal Rule of Evidence 403 states: "Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by its considerations of undue delay, waste of time, or needless presentation of cumulative evidence." A number of the Cross Country exhibits appear to be cumulative to the testimony of Cross Country's witnesses and therefore such evidence should be excluded. 4. Defendants' hearsay objection to Cross Country's exhibits.

Federal Rule of Evidence 802 states: "Hearsay is not admissible except as provided by these rules or by other rules prescribed by the Supreme Court pursuant to statutory authority or by Act of Congress." Federal Rule of Evidence 801(c) states: "' Hearsay' is a statement, other than one made by the declarant while testifying at trial or hearing, offered in evidence to prove the truth of the matter asserted." A statement made out-of-court by someone not in court to testify, offered for the truth of the matter asserted, is hearsay. A "statement" may be a written or oral assertion, or nonverbal conduct, if it is intended as an assertion. Hearsay depends upon the use of the statement. The same statement may have a hearsay and a nonhearsay use. Whether words were said or not is nonhearsay. Another witness can testify as to what was said and can be cross examined to find out if it was really said. Whether words spoken are true or not is hearsay. The opposing party must have the opportunity to cross examine the declarant to show whether the declarant is telling the truth. Cross Country has identified a number of exhibits written by third parties who have not been endorsed as witnesses. Defendants object to those exhibits to the extent the exhibit will be offered for the truth of the content.

6

Case 1:01-cv-00568-LTB-PAC

Document 395

Filed 11/14/2005

Page 7 of 8

Dated this 14th day of November, 2005.

Respectfully submitted, GRIMSHAW & HARRING, P. C. s/ Richard L. Harring Richard L. Harring Philip M. Quatrochi 1700 Lincoln Street, Suite 3800 Denver, Colorado 80203 Telephone: (303) 839-3800 Attorneys for Defendants PB Network Services, Inc., Level 3 Communications, LLC, Kiewit Network Services Co. and Kiewit Construction Co.

7

Case 1:01-cv-00568-LTB-PAC

Document 395

Filed 11/14/2005

Page 8 of 8

CERTIFICATE OF SERVICE I hereby certify that on November 14, 2005, I electronically filed the foregoing DEFENDANTS' BRIEF REGARDING EVIDENTIARY ISSUES using the CM/ECF system which will send notification of such filing to the following: Gregory C. Smith Fairfield and Woods, P.C. Wells Fargo Center, Suite 2400 1700 Lincoln Street Denver, CO 80203-4524 Martin Pedata 115 E. Indiana Ave. De Land, FL 32724

s/ Richard L. Harring

8