Free Response to Motion - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 1:01-cv-00083-REB-CBS STOCKMAN'S WATER COMPANY, LLC, a Colorado limited liability company, Plaintiff, and PETER HORNICK, an individual domiciled in New York, and AMERICAN WATER DEVELOPMENT, INC., a Colorado corporation, Intervening Plaintiffs, vs. VACA PARTNERS, L.P., a Delaware limited partnership; FARALLON CAPITAL MANAGEMENT, LLC, a Delaware limited liability company; and JASON FISH, a California resident, an individual, Defendants.

RESPONSE TO AMERICAN WATER DEVELOPMENT, INC.'S MODIFIED MOTION FOR RELIEF FROM ORDER

Defendants, Vaca Partners, L.P. ("Vaca"), Farallon Capital Management, LLC ("Farallon"), and Jason Fish ("Fish") (collectively, "Defendants"), submit the following response to Intervening Plaintiff, American Water Development, Inc.'s ("AWDI") Modified Motion for Relief from Order or in the Alternative for Entry of Judgment (the "Motion"). INTRODUCTION AWDI seeks to prolong this protracted litigation even further. AWDI has moved under Fed. R. Civ. P. 60(b) to reopen the action on the ground that the basis for the Court's prior

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decision dismissing AWDI's claims against Defendants ­ the Rooker-Feldman doctrine ­ is inconsistent with the Supreme Court's subsequent decision in Exxon Mobil Corp. v. Saudi Basic Industries Corp., ___ U.S. ___, 125 S. Ct. 1517 (2005). The Court should deny AWDI's Motion. Although in light of the new rule announced in Exxon, AWDI's claims are not barred by Rooker-Feldman, they are barred by the doctrine of issue preclusion/collateral estoppel because issues that are dispositive of this case have been decided by another court and affirmed on appeal. Accordingly, granting AWDI's Motion will be a "futile gesture" that will, in the end, not alter the inevitable outcome of this case: dismissal of AWDI's claims. See, e.g., Boyd v. Bulala, 905 F.2d 764, 769 (4th Cir. 1990). PROCEDURAL BACKGROUND A. AWDI's Claims in This Action. This action was commenced on January 16, 2001, by Stockman's Water Company, LLC, to enjoin the sale of the Baca Ranch and associated water rights (the "Property"), to The Nature Conservancy. On April 5, 2001, AWDI moved to intervene and filed a proposed Complaint in Intervention ("AWDI's Federal Complaint"). The gravamen of AWDI's Federal Complaint were: When Cabeza de Vaca Land & Cattle Co. ("Cabeza") purchased the Property, it entered into an agreement with AWDI entitled "Assignment of Gross Revenues Interest" ("AGRI"), that "conferred upon [AWDI] a 10% interest in the gross revenues to be received from Cabeza from any future 'Disposition' of all or any part of the 'Water Assets' associated with the [Property]" (AWDI's Fed. Compl. ¶16); and The proposed sale of the Property to The Nature Conservancy breached the AGRI in that it "would deprive [AWDI] of its rights under the [AGRI] and would deprive [AWDI] from realizing the benefits of the gross revenues interest acquired under the [AGRI]." (Id. ¶23; see also AWDI's Motion to Intervene ¶¶4-6). AWDI's Federal Complaint pled (i) a declaratory judgment claim, seeking a declaration that "Defendants and Cabeza . . . have breached the [AGRI]" (AWDI's Fed. Compl. ¶36); and (ii) a 2

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claim for tortious interference with contract, alleging that "Defendants intentionally interfered with Cabeza's performance of the [AGRI], thereby causing Cabeza to fail to perform its obligations to [AWDI] under the [AGRI] . . . ." (Id. ¶41.)1 Thus, the central issue in both claims in this action was the issue of breach of the AGRI. B. The State Action.

On March 21, 2002, Cabeza brought a declaratory judgment action (the "State Action") against AWDI in the Colorado District Court for Saguache County ("State Court"). In its complaint, Cabeza sought a declaration of the parties' rights and obligations under the AGRI (see Complaint for Declaratory Relief, and Request for Speedy Hearing Pursuant to CRCP 57(m) ("Cabeza's State Complaint") ¶38 (Ex. A)), including a declaration that AWDI was required to release its security interests in the Property. (Id. ¶54.) On April 11, 2002, AWDI moved to dismiss or stay the State Action on the ground that it duplicated this action. (See Motion to Dismiss or, in the Alternative, Stay Action ("Mot. to Dismiss") (Ex. B).) In the very first paragraph of the Motion to Dismiss, AWDI stated: The subject of this declaratory judgment action, the Assignment of Gross Revenues Interest ("AGRI") between Plaintiff and AWD[I], is the subject of an action which has been pending in the United States Court for the District of Colorado for fifteen months. The parties bringing this action have agreed to the jurisdiction of the Federal Court and have sought in that court exactly the same relief under the AGRI that they seek in their Complaint in this action. (Ex. B at 1.) The State Court declined to dismiss or stay the action, but placed the action "on a slower track than requested" so the parties could arbitrate "the value of" AWDI's interest under the AGRI. Arbitration took place in October 2002. On January 22, 2003, the arbitration panel ruled
1

Cabeza also pled a claim for Preliminary and Permanent Injunction "prohibiting [Defendants] from effecting the Proposed Sale" to The Nature Conservancy. (Id. ¶31.) Because the Court has dismissed that claim as moot, Defendants do not address it here. 3

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that Cabeza was "liable to [AWDI] and shall pay it ten percent of the 'Water Assets' allocation of the overall valuation, i.e. $694,000.00." (Ex. C p.8.) The same day the Arbitration Award was issued, Cabeza tendered payment to AWDI. (Ex. D). AWDI refused the tender. (Ex. E). Because AWDI refused Cabeza's tender, on January 24, 2003, Cabeza filed in the State Action a Petition for an Order to Show Cause Under C.R.S. § 38-35-204(1) and § 38-35-109(3) ("Petition") (Ex. F).) In the Petition, Cabeza sought a determination that AWDI's security interests in the Property were invalid because (a) the AGRI contractually obligated AWDI to release its security interests, and (b) AWDI had breached the AGRI by refusing to release its security interests. (See, e.g., Pet. ¶¶8, 12, 13, 14, 15, 31 (allegations of breach of AGRI).) In its response, AWDI made an host of arguments including that the issues in the Petition duplicated the issues in this action. "The issues in the Federal Court Action have not been resolved or litigated," AWDI declared, "and, as will be demonstrated, are central to the issues pertinent to any release of AWD[I]'s senior lien." (See Ex. G ¶10 (emphasis added); see also id. ¶¶4, 16, 53.) AWDI also argued extensively that Cabeza, not AWDI, breached the AGRI. (See, e.g., id. ¶¶38, 41, 50.) (Ex. G at 1.) On March 18, 2003, argument was held on the Petition. Cabeza made it clear that its claim that the security interests were invalid was based on AWDI's breach of the AGRI: There are two reasons that these security documents are invalid and spurious . . . . The first is that as of February of 2002 . . . AWDI has been ignoring [its] contractual responsibility not to unreasonably withhold release of those security documents given reasonable arrangements to protect their interest in a cash payment equal to the amount of their gross revenues interest. . . . [Second], the security documents are doubly spurious and fraudulent now that Cabeza has tendered payment in satisfaction of the underlying debt to AWDI. (Tr. of March 18, 2003 Hearing ("Tr."), p.81, ll.13-20; id., p. 83, ll.13-15 (Ex. H).) On May 9, 2003, the State Court issued its Order That Security Documents of American

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Water Development, Inc Are Invalid and Released and for Damages and Other Relief Provided for by C.R.S. § 38-35-204 and C.R.S. § 38-35-109 ("54(b) Order") (Ex. I). The State Court ruled, unmistakably, that (a) AWDI, not Cabeza breached the AGRI (see id. at 6, 8, 9, 11, 12), and (b) for that reason AWDI's security interests were invalid. See, e.g., id. at 9 ("AWDI's refusal to release was unreasonable, knowing, intentional, and unsupported by any rational argument based on evidence or law. As such, the Security Documents are groundless and invalid. . . ."). C. AWDI's Appeal to the Colorado Court of Appeals.

AWDI appealed the 54(b) Order and the State Court certified it as a final judgment. (See Ex. J-K.) In its appeal, AWDI argued that (a) it "had no notice or opportunity to litigate fully the merits of its claims" (Ex. L, p.4), and (b) the state district court erred in finding that AWDI, not Cabeza, breached the AGRI. (Id., pp.7-11.) The Colorado Court of Appeals rejected both arguments. First, the Court held that AWDI had a full and fair opportunity to litigate the issues: AWD contends that . . . it had no notice or opportunity to litigate fully the merits of its claims. We disagree. . . . [T]he record . . . establishes that AWD had notice of the claim and a fair opportunity to litigate. . . . [W]e agree with the trial court that AWD had notice of the claim and a full and fair opportunity to litigate it on the merits. (Ex. L, pp. 4, 5, 6.) Second, the Court of Appeals bluntly rejected the argument that Cabeza, not AWDI, breached the AGRI: Cabeza made an absolute and unconditional tender to AWD for the proper amount pursuant to its ten percent interest under the AGRI. There was no rational basis for AWD's rejection of that tender because it was equal to the amount of AWD's interest pursuant to the Agreement. Therefore, AWD was obligated to authorize a release of the security agreements pursuant to section II(b) of the AGRI. . . . Under the contract, AWD unreasonably withheld its release of the security documents. Because AWD unreasonably refused to release the security documents, we conclude that AWD breached the terms of the AGRI. (Ex. L, p.10.) On March 18, 2005, the mandate issued and the 54(b) Order became final. 5

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D.

Proceedings in This Court After May 9, 2003.

After the State Court issued the 54(b) Order, Defendants filed in this action a "Suggestion" that the Court dismiss AWDI's claims against Defendants. The grounds for the Suggestion were that the Court lacked jurisdiction (a) under Rooker-Feldman because AWDI's federal claims, in substance, sought review and reversal of matters that had been decided by the State Court in the State Action; and (b) because AWDI's claims were moot. On December 31, 2003, the Court dismissed AWDI's claims. Although the dismissal did not resolve all of the claims in the action, AWDI nonetheless filed an appeal and then sought certification of the Court's order under Fed. R. Civ. P. 54(b). On May 18, 2004, this Court, over the objections of Defendants, certified its dismissal order as a final judgment under Rule 54(b). On September 28, 2005, while the dismissal order was on appeal, this Court dismissed the remaining claims in this action and closed it. Two weeks later, on October 12, 2005, the Tenth Circuit dismissed AWDI's appeal on the ground that it lacked jurisdiction over the appeal. ARGUMENT I. THE COURT SHOULD DENY THE MOTION AS FUTILE BECAUSE AWDI'S CLAIMS ARE BARRED BY ISSUE PRECLUSION. A district court may grant a Rule 60(b)2 motion "only in extraordinary circumstances and only when necessary to accomplish justice." Lyons v. Jefferson Bank & Trust, 994 F.2d 716, 729 (10th Cir. 1993). Courts are:

2

AWDI does not identify which provision of Rule 60(b) AWDI believes applies to its Motion. Although AWDI cites a decision by the Northern District of Illinois for the proposition that a "60(b)(1) motion filed within the time for appeal is a proper means for calling the trial court's attention to an intervening controlling appellate decision" (Mot. at 6 (quoting Watson v. Symons Corp., 121 F.R.D. 351, 353 (N.D. Ill. 1988)), the Tenth Circuit has stated that "in a diversity 6

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disinclined to disturb judgments under the aegis of Rule 60(b) unless the movant can demonstrate that certain criteria have been achieved. These criteria include (1) timeliness, (2) the existence of exceptional circumstances justifying extraordinary relief, and (3) the absence of unfair prejudice to the opposing party. Teamsters, Chauffeurs, Warehousemen and Helpers Union, Local No. 59 v. Superline Transp. Co., 953 F.2d 17, 19-20 (1st Cir. 1992). In addition, a fourth "sentry . . . guards the gateway to Rule 60(b) relief." Id. at 20. It is "the invariable rule . . . that a litigant, as a precondition to relief under Rule 60(b), must give the trial court reason to believe that vacating the judgment will not be an empty exercise." Id. (and cases cited therein); see also Boyd, 905 F.2d at 769 ("Under all the provisions of Rule 60(b), a threshold condition for granting the relief is that the movant demonstrate that granting that relief will not in the end have been a futile gesture, by showing that she has a meritorious defense or claim."). Here, AWDI's Motion cannot meet the "threshold condition" for Rule 60(b) relief: showing a meritorious claim. Vacating the judgment entered against AWDI will be "an empty exercise" because its claims are barred by the doctrine of issue preclusion. AWDI's claims, therefore, will still be subject to dismissal; the only thing that will change is the reason. AWDI spends virtually all of its Motion arguing that the doctrine of issue preclusion does not bar its claims here. AWDI's defensive efforts, however, are unavailing. Although issue action Rule 60(b)(6) is the proper means by which to bring a change in the applicable state law subsequent to entry of final judgment to our attention." Wilson v. Al McCord Inc., 858 F.2d 1469, 1478 (10th Cir. 1988). Thus, in this response, Defendants assume that AWDI's motion is brought under Rule 60(b)(6). It should be noted, however, that in Dowell v. Board of Education of Oklahoma City Public Schools, Independent District No. 89, Oklahoma City, Oklahoma, 8 F.3d 1501 (10th Cir. 1993), however, the Tenth Circuit limited Wilson's rule to cases in which "essential aspects of the record" might not have been developed. Id. at 1509. Because that situation does not exist here ­ AWDI has not even attempted to identify a part of the record that has not been developed ­ relief under Rule 60(b) does not appear to be proper under Wilson. By responding to AWDI's Motion, Defendants do not waive, and in fact preserve, the argument that under Wilson, AWDI's Motion is improper. 7

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preclusion did not bar AWDI's claims when the Court originally dismissed them ­ because an appeal was pending, there was no final judgment, see, e.g., Rantz v. Kaufman, 109 P.3d 132, 141 (Colo. 2005) ­ a final state court judgment now exists holding that AWDI, not Cabeza, breached the AGRI. As a result, AWDI is precluded by the doctrine of issue preclusion from rearguing the issue of breach in this case. And because the breach issue is central to both of AWDI's claims here, AWDI cannot prevail on them. A. AWDI's Claims Are Barred by the Doctrine of Issue Preclusion.

The doctrine of issue preclusion "provides that a court's final decision on an issue actually litigated and decided in a previous suit is conclusive of that issue in a subsequent suit." Rantz, 109 P.3d at 138. For the doctrine of issue preclusion to apply, the following four requirements must be met: (1) The issue precluded is identical to an issue actually litigated and necessarily adjudicated in the prior proceeding; (2) The party against whom estoppel was sought was a party to or was in privity with a party to the prior proceeding; (3) There was a final judgment on the merits in the prior proceeding; (4) The party against whom the doctrine is asserted had a full and fair opportunity to litigate the issues in the prior proceeding. Rantz, 109 P.3d at 139 (quoting Bebo Constr. Co. v. Mattox & O'Brien, P.C., 990 P.2d 78, 84-85 (Colo. 1999)). In its Motion, AWDI does not dispute that it was a party to the prior proceeding ­ the State Action ­ and thus the third requirement for issue preclusion is met. AWDI, however, does argue that the other three requirements are not met. AWDI's arguments are without merit. 1. There was a final judgment on the merits in the State Action.

AWDI's first argument is that the doctrine cannot be applied in this case because no final

8

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judgment has been entered in the State Action.3 (Mot. at 9.) The 54(b) Order is indisputably a final judgment. Rule 54(b) provides: When more than one claim for relief is presented in an action . . . or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. C.R.C.P. 54(b) (emphasis added). Here, the State Court complied fully with Rule 54(b). In its October 7, 2003 Order, the State Court discussed at length the criteria for certifying an order under Rule 54(b), and then ruled: "THE ORDER OF MAY 9, 2003, IS MADE FINAL AND CERTIFIED PURSUANT TO RULE 54(b)." (Capitalization in original). Accordingly, the 54(b) Order is a final judgment. See, e.g., Zapata Gulf Marine Corp. v. P.R. Maritime Shipping Auth., 925 F.2d 812, 814-15 (5th Cir. 1991); Gencorp, Inc. v. American Int'l Underwriters, 178 F.3d 804, 832 (6th Cir. 1999); Johnson v. Orr, 897 F.2d 128, 130 (3d Cir. 1990). Further, commentators and courts alike recognize that an order entered under Rule 54(b) is a final judgment for purposes of issue and claim preclusion. See, e.g., 10 Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and Procedure § 2661 (3d ed. 1998); 10 James Wm. Moore, Moore's Federal Practice § 54.26[2] (3d ed. 2005); Willard v. City of Myrtle Beach, 728 F. Supp. 397, 406-07 (D.S.C. 1989); Humphreys v. Bic Corp., No. 90-5529, 923 F.2d

3

AWDI apparently does not believe its own argument. Although the heading of AWDI's first argument is that "there has been no final judgment" by the State Court, (Mot. at 9 (capitalization omitted)), in the text AWDI essentially concedes that the 54(b) Order is a final judgment. (See id. ("It may be true that the issue of whether AWDI asserted spurious liens or not has been reduced to final judgment").) 9

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854, 1991 WL 4705, at *3 (6th Cir. Jan. 18, 1991) (unpublished) (attached as Exhibit N). In fact, several courts have held that that it is proper for a court to certify an order as a final judgment under Rule 54(b) so that the order will have preclusive effects. See, e.g., Continental Airlines v. Goodyear Tire & Rubber Co., 819 F.2d 1519, 1525 (9th Cir. 1987); Shamley v. ITT Corp., 869 F.2d 167, 170 (2d Cir. 1989). Thus, there can be no serious dispute that the Rule 54(b) Order certified by the State Court was a final judgment for purposes of applying collateral estoppel.4 Despite the overwhelming authority showing that the 54(b) Order was a final judgment, AWDI contends that because the State Court declined to enter a final judgment under C.R.C.P. 58 for all of the State Court claims, the State Court's 54(b) Order should not be considered a final judgment on the issue of breach. But AWDI's argument misapprehends the reason the State Court did not enter a final judgment for the entire case. As the State Court itself explained, because of the context in which the Rule 54(b) Order arose, the State Court was not certain that all of the issues relevant to all of the claims had been decided as part of the Petition. The State Court explained: [Defendants'] desire to have the Court enter a Final Judgment on all claims is premature. Had the parties addressed all issues under Rule 56, the Court might have been able to address them all. But this Court does not have the benefit of those procedures, and the Court is not prepared to say that the existing Order from May 9, 2003, does or does not make moot or resolve all claims. (Ex. J ¶9.) Thus, the State Court's decision not to enter a final judgment for the entire case was simply precautionary because of the procedural posture of the State Action. Nowhere did the

4

Even if that were not the case, the Colorado Supreme Court has ruled that "C.R.C.P. 54(b) certification is not required before a judgment can be given preclusive effect. . . . [R]equiring C.R.C.P. 54(b) certification for collateral estoppel purposes is unwarranted. Such a requirement is limited to the judgment's appealability, not its preclusive effect." Carpenter v. Young, 773 P.2d 561, 565, 568 (Colo. 1989). 10

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State Court suggest that the issues it decided ­ including the issue of breach ­ were not final. To the contrary, the Court's certification of the Rule 54(b) Order belies any such suggestion.5 2. The issue of breach of the AGRI was actually litigated and necessarily adjudicated in the State Action.

The next requirement for issue preclusion is that the issue to be precluded must be identical to an issue actually litigated and necessarily adjudicated in the prior proceeding. An issue is actually litigated when the parties "have raised it in a prior action." Grynberg v. Ark. Okla. Gas Corp., 116 P.3d 1260, 1263 (Colo. App. 2005). "'A legally raised issue is one that a party, by appropriate pleading, asserts through a claim or cause of action against the other.'" Id. at 1263-64 (citation omitted). An issue is necessarily adjudicated "when a determination on that issue was necessary to the judgment." Id. at 1264. As shown above, the issue of breach undeniably was raised in the State Action. It was raised by Cabeza in its Petition (See, e.g., Pet. ¶¶8, 12, 13, 14, 15, 31), addressed by AWDI in its response (id. ¶¶38, 41, 50), argued to the State Court in the evidentiary hearing on the Petition (Tr., p.81, ll.13-20; id., p. 83, ll.13-15), decided by the State Court (54(b) Order at 6, 8, 9, 11, 12), and affirmed by the Colorado Court of Appeals. (Ex. L, p.10.) In addition, the issue of breach was "necessarily adjudicated" in the State Court because a determination on the issue "was necessary to the judgment" that was entered on the Petition. The State Court found that AWDI's security interests were spurious and invalid because of AWDI's The State Court invited the parties to submit summary judgment motions (see id. ¶11), which Cabeza did. AWDI incorrectly argues, at three separate points in its Motion, that because the State Court has not yet ruled on the Cabeza's motion, it must intend to deny it. (Mot. at 8, 9, 10.) In a status conference earlier this week, however, the State Court stated that it would rule on Cabeza's motion in the near future. Thus, the parties, and this Court, will know soon whether Cabeza's summary judgment motion has been granted or denied.
5

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breaches of the AGRI. (54(b) Order at 6, 8, 9.) In other words, the court's judgment on the Petition was causally linked to its finding of breach; if the State Court had not found that AWDI breached the AGRI, it could not have found that AWDI's security interests were invalid. In fact, AWDI concedes this causal connection in its Motion. AWDI writes: "Here, the State Court found that AWDI breached the AGRI by refusing to accept Cabeza's tender, and that such refusal rendered the Security Documents spurious." (Mot. at 12 (emphasis added).) AWDI also argues that the Court should not apply issue preclusion to issues in this case because the issues decided by the State Court in the Spurious Lien Order are not identical to the issues here. In this case, AWDI contends, it "is asserting claims for declaratory judgment under the AGRI, [and] tortious interference against Defendants for interfering with Cabeza's performance of the AGRI . . . ."6 "These claims," AWDI argues, "have little to do with the issue of a spurious lien and/or the Security Documents." (Mot. at 10.) But AWDI's argument confuses issue preclusion and claim preclusion. Issue preclusion, as its name indicates, bars relitigation of issues that were previously litigated, regardless whether they arise in different claims. See Rantz, 109 P.3d at 138 ("'[issue preclusion] is broader than [claim preclusion] since it applies to claims for relief different from those litigated in the first action . . . .") (quoting City and County of Denver v. Block 173 Assocs., 814 P.2d 824, 831 (Colo. 1991)). Accordingly, the fact that the claims in the two cases were different is immaterial; to state a claim, they both require a determination of the breach issue.

6

AWDI also states that it alleged in this action a claim for "breach of covenant of good faith and fair dealing." AWDI's Complaint does not contain such a claim. Even if it did, however, the claim would be barred by the doctrine of issue preclusion because it would require this Court to decide the same issue ­ breach of the AGRI ­ that was decided by the State Court. 12

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AWDI also argues that the issues in the two cases are not identical because the breach of the AGRI issue decided by the State Court is somehow different than the breach of the AGRI issue before this Court. "The only breach of the AGRI that was at issue in the State Court," AWDI contends, "was whether AWDI had to release the Security Documents. This was only one of the many issues with respect to various claimed breaches under the AGRI." (Mot. at 10.)7 But AWDI's efforts to parse the breach issue so finely fails. The issue in the State Court was whether AWDI or Cabeza breached the AGRI, and if it were AWDI, whether that breach rendered its security interests spurious. The issue in this case is whether AWDI or Cabeza breached the AGRI, and if it were Cabeza, whether that breach "deprived AWDI from realizing the benefits of the gross revenues interest." (AWDI's Fed. Compl. ¶¶23, 36.) Thus, the breach issue is identical in both cases although the consequences from deciding that issue differ.8 AWDI's belated effort to create a distinction between the breach of the AGRI issue in this case and the breach of the AGRI issue in the State Action also founders on its prior representations to the State Court. When the Petition was filed, for example, AWDI asserted that "[t]he issues in the Federal Court Action have not been resolved or litigated and . . . are central to the issues pertinent to any release of AWD[I]'s senior lien." (Ex. G¶10 (emphasis added); see also Ex. B at 1.) Accordingly, AWDI's opportunistic change of position should be rejected.9

7

AWDI's unsupported assertion is contrary to its response to the Petition, in which AWDI argued that Cabeza breached the AGRI in various ways. (See, e.g., id. ¶¶37, 38, 41, 48.)
8

Further, for AWDI to prevail in this case, the Court (or other fact finder) would have to decide the breach issue by finding that Cabeza, not AWDI, breached the AGRI. That finding would be flatly contrary to the State Court's finding that AWDI, not Cabeza, breached the AGRI.
9

AWDI also claims that the issues in the two cases were different because "the Federal Action concerns only facts that occurred prior to the State Action being filed, and the State Action 13

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3.

The Colorado Court of Appeals already has held that AWDI had a full and fair opportunity to litigate the breach issue.

AWDI's final argument against the application of issue preclusion is that it did not have a full and fair opportunity to litigate the breach issue. That issue, however, has already been decided adversely to AWDI by the Colorado Court of Appeals, which held: AWD contends that . . . it had no notice or opportunity to litigate fully the merits of its claims. We disagree. . . . [T]he record . . . establishes that AWD had notice of the claim and a fair opportunity to litigate. . . . [W]e agree with the trial court that AWD had notice of the claim and a full and fair opportunity to litigate it on the merits. (Ex. L, pp. 4, 5, 6.) Further, the basis for AWDI contention ­ that it was not allowed "an evidentiary hearing on the merits" (Mot. at 11) ­ was likewise rejected by the Colorado Court of Appeals. (See Ex.L, pp.46.) Still further, the State Court expressly stated that the hearing on the Petition was "an evidentiary hearing." (See Ex. J, ¶6 ("On March 18, 2003, this Court held an evidentiary hearing on the issues raised by" the Petition).) Thus, for this Court to find that AWDI was not allowed an evidentiary hearing, it would have to reject the rulings of two other courts. Even further, the assertion that AWDI did not have a fair opportunity to litigate the issue of breach is contrary to the record. The evidentiary hearing on the Petition was scheduled more than six weeks in advance; the length of the evidentiary hearing was expanded at AWDI's request; AWDI specifically agreed to the setting of the evidentiary hearing; AWDI was given an opportunity to submit briefs and evidence on the Petition, which it did; the trial court issued a concerns only facts that occurred after the Federal Action was filed . . . ." (Mot. at 10.) That is not correct. The State Court Counterclaims expressly reference and duplicate the Federal Action claims on multiple occasions. (See, e.g., AWDI's Amended Counterclaims and Third Party Complaint ¶28, attached as Ex. O ("As AWD[I] has asserted in the Federal Action, Cabeza, Vaca Partners and the other defendants named in the Federal Action have failed and refused to reasonably pursue development of the Water Assets and have otherwise breached or caused Cabeza to breach its obligations of good faith and fair dealing to AWD[I]."). 14

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comprehensive and well-reasoned order; and the Court of Appeals, after reviewing the record, affirmed the State Court's 54(b) Order. (See Feb. 2003 Tr. p.5:22 - p.13, l.18; Ex. M; Ex. L.) Accordingly, AWDI's claim that it did not have a full and fair opportunity to litigate the breach issue rings hollow.10 In summary, all of the requirements for applying issue preclusion to the issue of breach of the AGRI are met here. And because AWDI cannot establish that essential element, it cannot prevail on its claims. Accordingly, granting AWDI's Motion and reopening this case would be a "futile gesture" that would not in any way alter the outcome. AWDI's motion should be denied. CONCLUSION For the reasons set forth above, Defendants request the Court to deny AWDI's Motion. Respectfully submitted this 9th day of November, 2005. BROWNSTEIN HYATT & FARBER, P.C. By: s/Stanley L. Garnett_______________ Stanley L. Garnett Richard P. Barkley Annie T. Kao 410 17th Street, 22nd Floor Denver, Colorado 80202 (303) 223-1100 [email protected] [email protected] [email protected] ATTORNEYS FOR APPELLEES, VACA PARTNERS, L.P., FARALLON CAPITAL MANAGEMENT, LLC, AND JASON FISH
10

AWDI contends that the evidentiary hearing was "analogous to hearing for a preliminary injunction." (Mot. at 13.) AWDI, of course, cites no authority for this supposed analogy which is flawed on its face. A preliminary injunction is ­ as its name states ­ a preliminary determination. Here, the State Court's 54(b) Order was certified as a "final judgment." (Ex. J-K). Thus, the two proceedings are not in any way analogous. 15

Case 1:01-cv-00083-REB-CBS

Document 346

Filed 11/09/2005

Page 16 of 16

CERTIFICATE OF SERVICE The undersigned hereby certifies that on the 9th day of November, 2005, a true and correct copy of the foregoing RESPONSE TO AMERICAN WATER DEVELOPMENT, INC.'S MODIFIED MOTION FOR RELIEF FROM ORDER was served via the CM/ECF system to the following addresses: Allan L. Hale, Esq. John G. Lubitz, Esq. Robert T. Hoban, Esq. Hale Friesen, LLP 1430 Wynkoop Street, Suite 300 Denver, Colorado 80202 [email protected] [email protected] [email protected] Richard I. Brown, Esq. Patrick J. Casey, Esq. Laura J. Nelson, Esq. John Alan Call, Esq. Lottner Rubin Fishman Brown & Saul, P.C. 633 Seventeenth Street, Suite 2700 Denver, Colorado 80202 [email protected] [email protected] [email protected] [email protected] Robert J. Bruce, Esq. Lindsey & Bruce, P.C. 730 17th Street, Ste. 370 Denver, CO 80202 [email protected]

s/ Julie A. Jacks____________ Julie A. Jacks