Free Response to Objection to Report and Recommendation - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 04-cv-1099-JLK-DLW WOLF CREEK SKI CORPORATION, INC. Plaintiff(s), v. LEAVELL-MCCOMBS JOINT VENTURE D/B/A THE VILLAGE AT WOLF CREEK Defendant(s). ______________________________________________________________________________ DEFENDANT'S RESPONSE TO PLAINTIFF'S OBJECTION TO RECOMMENDATION OF MAGISTRATE JUDGE ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT REGARDING FRAUDULENT INDUCEMENT AND NEGLIGENT MISREPRESENTATION CLAIMS ______________________________________________________________________________ Defendant Leavell-McCombs Joint Venture (the "Joint Venture"), through its undersigned counsel, hereby files its Response to Plaintiff's Objection to Recommendation of Magistrate Judge on Plaintiff's Motion for Summary Judgment Regarding Fraudulent Inducement and Negligent Misrepresentation Claims (the "Objection"), and states as follows: I. 1. INTRODUCTION

This case centers on the Wolf Creek Ski Corp.'s (the "Ski Corp.") betrayal of the

Joint Venture. The Ski Corp.'s actions, both before and after it entered in to a series of four agreements with the Joint Venture (the "1999 Agreements"), clearly reveal that the Ski Corp. was telling the Joint Venture one thing, and the United States Forest Service ("Forest Service" or "USFS") and the environmentalists something entirely different. Although the Ski Corp.

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promised to help the Joint Venture obtain an access road (the "Access Road") to its inheld property ("Village Property") and promised to support the Joint Venture's efforts to develop that property ("Village Development"), the Ski Corp. has done everything in its power to kill the project. 2. In the summer of 1999, the Ski Corp. faced a seemingly insurmountable hurdle.

It needed final approval from the Forest Service and 40-acres of Village Property to expand its ski area operations. Moreover, it needed both before winter set in to avoid delay penalties associated with a million-dollar ski lift construction contract it had signed earlier in the year. Time was short, more than half the building season had already passed, and if it could not get the easement from the Joint Venture, hundreds of thousands of dollars worth of ski lift materials would spend the winter rusting under the snow. The solution to this dilemma is the core of the fraudulent inducement claim. 3. To convince the Joint Venture to convey the 40-acre easement, the Ski Corp.

promised to use its experience, expertise, and wherewithal to obtain the Access Road so that the Village Property could be developed into an upscale ski resort community (the "Village"). Additionally, the Ski Corp. represented that it would support the Preliminary Development Plan for the Village and that it would include the Access Road in its own facilities expansion application to the Forest Service so as to save the Joint Venture the cost and delay of preparing the same. The Ski Corp. represented that it had years of experience and expertise in working with the Forest Service and, based on that experience and expertise, was confident that it could get approval for the Access Road along with its own facilities expansion as part of an indivisible "a package." In furtherance of these goals, the Ski Corp. pledged to use its "best efforts."

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4.

At the same time it was negotiating with the Joint Venture, however, the Ski

Corp. was silently abandoning the Village and its interests. This retreat is illustrated in the series of Master Development Plans ("MDP") prepared by the Ski Corp. as required by the Forest Service. In the 1989 MDP, the Village Development was outlined with great detail including projecting the number of lodging units to be in excess of 2,400. By September of 1998, nearly a year before the Ski Corp. entered into the 1999 Agreements, the Ski Corp.'s new MDP merely discussed the Village Development as a mere possibility. Why this drastic change? Because the Ski Corp. had already faced opposition from environmentalists opposed to the ski area expansion and the Village Development. The Ski Corp. realized that the Village Development was

becoming a liability and so it began distancing itself from the Village. 5. At the same time, the Ski Corp. still needed the Joint Venture's cooperation to

implement its expansion plans. Financially, the Ski Corp. had taken a million dollar risk that it would be able to get the easement before the winter of 1999. On February 3, 1999 the Ski Corp. had executed a contract with a ski lift manufacturer to install a new lift on the 40-acre easement area at the cost of $1,117,500 ("Lift Obligation"). The Lift Obligation contained a provision that would impose a 3% penalty on the cost of the installation if the same was not completed in 1999 and would impose greater installation costs if the installation was commenced after May 1, 1999. By May, the Ski Corp. ­ despite its efforts ­ had no easement and nowhere to install its lift. Yet, it had already paid over $300,000 to the lift manufacturer pursuant to the Lift Obligation. On July 9, 1999, without an agreement in place, the Ski Corp. received the first delivery of the lift parts. The Ski Corp. had financially backed itself into a corner ­ it had to get the easement from the Joint Venture no matter what it had to promise to get it.

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6.

Believing the Ski Corp.'s faithless promises, the Joint Venture signed the 1999

Agreements on July 16, 1999. At that time, the Ski Corp. knew four things: (1) although the Forest Service had approved the Ski Corp.'s expansion in a June 1999 Decision Notice, two weeks remained for environmental opponents to appeal; (2) if an appeal were filed, challenging it would cause months of delay eliminating the possibility that the new lift would be built in 1999; (3) a delay would be financially devastating to the Ski Corp. as it had already signed the million-dollar-plus Lift Obligation with attendant penalties for construction delays; and (4) if push came to shove, the Ski Corp. would abandon the Village Development in favor of its own expansion. In short, the Ski Corp. knew at the time it signed the contracts that, in the face of an appeal, it would not keep its "best efforts" commitment to the Joint Venture. Two weeks later, environmental group Colorado Wild appealed the 1999 Decision Notice. 7. The Ski Corp's lack of commitment to using its best efforts is demonstrated by

statements made by Davey Pitcher, president of the Ski Corp., to Jeff Berman of Colorado Wild less than a month after the 1999 Agreements were executed. In that conversation Davey Pitcher stated that Colorado Wild's concerns about the Access Road were "worthwhile," that the Pitcher family (the sole shareholders of the Ski Corp.) would like the Forest Service to reacquire the Village Property, and that Davey Pitcher did not want to hire a lawyer to litigate the appeal. Statements of this nature show that the Ski Corp. had no intention of fulfilling its commitments. 8. In reality, as soon as the 1999 Agreements conveying the easements were signed,

the Ski Corp. abandoned all efforts to obtain the Access Road. Barely five weeks after executing the 1999 Agreement, and without a word to the Joint Venture, the Ski Corp. secretly negotiated a settlement with Colorado Wild. Soon thereafter, and again without a word to the Joint Venture,

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it entered into a binding agreement with the Forest Service and Colorado Wild to cut the Access Road 250-feet short of the Village Property. Going even further, the Ski Corp., again without consulting the Joint Venture, agreed to a provision in the settlement that would significantly hinder the Joint Venture's ability to ever get an Access Road. Specifically, the Ski Corp. capitulated to a requirement that any future effort by the Joint Venture to complete the Access Road would not be undertaken without a full-blown Environmental Impact Statement. 9. To this day, seven years later, the Joint Venture has yet to get reasonable access to

the Village Property and certainly has not gotten a route to the property that even resembles the Access Road. II. 10. convenience. May 1989: Ski Corp. Master Development Plan discusses the Village Development in great detail projecting the number of lodging units to be in excess of 2,400. (Exhibit A-34) October 1997: Wolf Creek submits a draft Environmental Assessment ("EA") for its proposed ski lift and parking lots. Draft EA states that the road to ski lift is intended to be the "future link" to the Village. (Exhibit A-35) February 20, 1998: Kingsbury Pitcher writes Joint Venture explaining that (1) Wolf Creek has had the road from Highway 160 to the Village surveyed and mapped, (2) Wolf Creek hopes to have USFS approval by early summer, and (3) Wolf Creek will carry the EA, engineering, and construction of the road at its expense. (Exhibit A-36) June 1, 1998: Wolf Creek 1998 Master Development Plan includes access road to Village, parking lot, and ski lift. (Exhibit A-37) July 25, 1998: EA for proposed parking lots and ski lift is published showing the access road to the Village in the attached Map of Proposed Alternative IV and describing "The Village to Wolf Creek access road." (Exhibit A-38) FACTUAL BACKGROUND

The following sets forth the relevant events in timeline format for this Court's

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October 27, 1998: USFS issues a Decision Notice approving Alternative IV, which includes the parking lots and the access road to the Village. (Exhibit A-39) October 29, 1998: Alternative EA that the Pitchers helped draft states that the access road will serve as "future link" to the Village. Assessment details the efforts of the "Village partners." (i.e., Wolf Creek) (Exhibit A-40 p. 6) December 11, 1998: Carson Forest Watch formally appeals October 27, 1998 USFS Decision Notice. (Exhibit A-41) December 12, 1998: Davey Pitcher tells Associated Press he will meet with Carson Forest Watch at the end of December to "discuss the possibility of compromise." (Exhibit A-42) January 5, 1999: Kingsbury Pitcher writes Davey Pitcher expressing his lack of concern for the Village by saying, "So much for Honts and the Village. They can get their easements anytime." (Exhibit A-43) January 5, 1999: In response to Carson Forest Watch's appeal, USFS withdraws its October 27, 1998 Decision Notice. (Exhibit A-44) February 3, 1999: Wolf Creek executes contract with ski lift seller and installer. (Docket No. 156 [Defendant's Response to Plaintiff's Motion for Summary Judgment], Exhibit A-21) March 24, 1999: Pitchers submit a Supplemental Draft EA to the USFS which deletes all reference to the access road to the Village and states that Village development is too speculative. (Exhibit A-45) March 29, 1999: Kingsbury Pitcher writes letter to "Venture Partners" outlining the agreements between Wolf Creek and Joint Venture. Pitcher states that Wolf Creek wants to move forward with construction of its next ski lift and that Joint Venture will gain access to the Village without having to negotiate with the Colorado Department of Transportation or file a separate EA. (Docket No. 127 [Plaintiff's Motion for Summary Judgment], Exhibit 14) May 1, 1999: Wolf Creek pays $133,256.25 as a progress payment to the ski lift builder. (Docket No. 156 [Defendant's Response to Plaintiff's Motion for Summary Judgment], Exhibit A-21) June 14, 1999: USFS issues Decision Notice that does not address access road to the Village. (Exhibit A-46) June 30, 1999: Denver Post article recognizes that if Carson Forest Watch appeals the June 14, 1999 Decision Notice, Wolf Creek's ski lift will not be completed before winter. (Exhibit A-47) July 9, 1999: Wolf Creek receives first delivery of ski lift parts. (Exhibit A-48)

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July 16, 1999: Wolf Creek and Joint Venture execute four contracts (the "July Agreements"). (only portions of the relevant two agreements are attached hereto) (Exhibit A-49) July 28, 1999: Joint Venture requests that Wolf Creek keep the Joint Venture apprised of environmental comments to the EA. (Exhibit A-50). August 2, 1999: Bob Honts telephones Davey Pitcher twice asking if an appeal of the June 14, 1999 Decision Notice has been filed. (Docket No. 156 [Defendant's Response to Plaintiff's Motion for Summary Judgment], Exhibit A-23). August 3, 1999: Colorado Wild appeals the June 14, 1999 Decision Notice. (Id., Exhibit A-24). August 13, 1999: Jeff Berman's (Colorado Wild) notes of his conversations with Davey Pitcher wherein Berman reports that Pitcher states that Colorado Wild's concerns about the Access Road are "worthwhile," that the Pitcher family would like the Forest Service to take back the Village Property, and that he does not want to hire a lawyer to litigate the appeal. (Exhibit A-51) Approx. August 18 1999: Davey Pitcher meets privately with Jeff Berman and other Colorado Wild representatives in Vail, Colorado to discuss the appeal. (Id.) August 20, 1999: Jeff Berman, Davey Pitcher, and USFS memorialize a compromise settlement (the "Joyner Settlement") in a written agreement by which the Ski Corp. agreed to maintain a 250-foot buffer between the end of the road to the parking lots and the Village Property, and that any future access road to the Village Property would require NEPA review. (Exhibit A-52) September 1, 1999: Colorado Wild drops its appeal. (Exhibit A-53) September 3, 1999: Bob Honts writes B.J. McCombs and others that Davey Pitcher has informed him that Colorado Wild has dropped its appeal, that this is "great news" and that he does not have anything in writing yet. (Docket No. 156 [Defendant's Response to Plaintiff's Motion for Summary Judgment], Exhibit A-25). September 8, 1999: Colorado Wild's Marie Jordan called to thank Davey Pitcher for "working on the appeal" and to say she was glad to hear Wolf Creek was getting its lift towers installed. (Id., Exhibit A-23). September 10, 1999: Bob Honts sees article in Mineral County Miner regarding the Joyner Settlement and revealing that the parties had agreed to stop the road short of the Village Property. Honts immediately calls and leaves a message for Davey Pitcher. (Id., Exhibit A-23). September 15, 1999: Davey Pitcher's secretary, Shelly Burgan, sends Bob Honts a copy of the Joyner Letter. (Id., Exhibit A-26).

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March 22, 2000: Davey Pitcher writes a letter taking credit for the Joyner Settlement and stating: "I was able to get Colorado Wild to drop the appeal on our Alberta Lift and new parking lots...the arrangement that tied more NEPA to a request from Leavell/McCombs for a road permit seemed to satisfy all parties." (Id., Exhibit A-27) III. 11. RULE 72(b) STANDARD OF REVIEW

Rule 72(b) provides that "a party may serve and file specific, written objections to Fed.R.Civ.P. 72(b)

the proposed findings and recommendations" of the magistrate judge.

(emphasis added). Rule 72(b) calls for "rifle-shot" objections that direct the district court to a genuine bone of contention; it does not authorize "a vague shotgun blast" that requires the reviewing judge to rummage through the "haystack" of briefs and exhibits "in search of the most evanescent of needles." Sackall v. Heckler, 104 F.R.D. 401, 402-403 (D.R.I. 1984). 12. Indeed, when a party makes general and conclusory objections that do not direct

the court to a specific error in the magistrate's proposed findings and recommendations, de novo review of a magistrate judge's opinion is completely unnecessary. Strawbridge v. Sugar Mountain Resort, Inc., 243 F. Supp.2d 472, 475 (W.D.N.C. 2003) citing Orpiano v. Johnson, 687 F.2d 44, 47 (4th Cir.1982). In addition, the Rule is "not to be construed as a second opportunity to present the arguments already considered by the Magistrate Judge." Betancourt v. Ace Ins. Co. of Puerto Rico, 313 F. Supp.2d 32 (D. Puerto Rico 2004) 13. Here, the Objection consists largely of the same recycled arguments, in abridged

form, as those made by the Ski Corp. in its Fraud MSJ briefs. Latching on to Magistrate Judge West's "by the slimmest of margins" remark, the Ski Corp. essentially asks this Court to review the entire record (which includes seven briefs1 and 58 exhibits) in the faint hope of a second,

The Plaintiff's Fraud MSJ, the Joint Venture's response, the Ski Corp.'s reply, two supplemental briefs requested by the Court, the Joint Venture's surreply and the Ski Corp.'s response thereto.

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more favorable, opinion. Such exercise undermines the effectiveness of the magistrate system, requires this Court to rummage through a mountain of briefs and exhibits, and results in profligate waste of judicial resources. This Court should be spared the chore of traversing ground already plowed by Magistrate Judge West since the Ski Corp. has not meet the conditions for de novo review under Rule 72(b). IV. A. THE SKI CORPORATION ARGUMENT

CONTINUES TO MISCONSTRUE THE LAW OF FRAUD AND THE BURDEN OF PROOF OF FRAUDULENT INTENT.

14.

The Ski Corp.'s Objection is premised on the same two erroneous propositions The first incorrect premise is that certain false

advanced in its Fraud MSJ briefings.

representations2 identified by the Joint Venture are not actionable because they are mere promises or "predictions"3 regarding the future rather than misrepresentations of an existing or past fact. (Objection p. 2, ¶ 2 and p. 3 ¶ 6). Responding to a similar argument in United International Holdings, Inc. v. Wharf Holdings, Ltd., 946 F. Supp. 861 (D. Colo. 1996), this Court rejected it "out of hand" stating "[t]he nonperformance of a promise to do something at a future time may be fraudulent if it is accompanied by a present intent not to perform." Id. at 870. This is precisely the nature of the fraud alleged by the Joint Venture in this case, as has been explained to the Ski Corp. again and again. Its stubborn insistence on clinging to the erroneous premise described above can be taken as evidence of the merit of its remaining legal analysis.

The Objection has singled out only two of the identified False Commitments and thus concedes the others. The "prediction" terminology used in the Objection is taken directly from Magistrate Judge West's Recommendation in an attempt to lend support for the Ski Corp.'s Objection. The Ski Corp. thus appears to be applauding the Recommendation on this issue rather than pointing out an infirmity or error. Accordingly, the Ski Corp. has not satisfied its obligation to direct this Court to any particular error committed by Magistrate Judge West on this issue.
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15.

The second erroneous contention advanced by the Ski Corp. is that conduct

occurring after execution of the 1999 Agreements cannot provide evidence of false intent at the time the agreement was signed. (Objection pp. 5-6, ¶¶ 7-8). Ignoring the pre-execution evidence advanced by the Joint Venture in its briefings, the Objection relies on the Recommendation to support its position, noting that the "only evidence of intent cited in the Recommendation is conduct that occurred after the July 1999 Agreement was executed." (Objection p. 4, ¶ 7 (emphasis in Objection)).4 As discussed below, this conclusion is incorrect and there is indeed evidence of pre-execution intent, including the deposition admissions of Kingsbury Pitcher. Regardless, and although the same absolutely exists, pre-execution evidence is not necessary to establish fraudulent intent and the Ski Corp. has cited no legal authority for its argument on this point. 16. Intent is rarely provable by direct evidence, thus, it may be inferred from the Frontier Exploration, Inc. v.

totality of the circumstances for purposes of a fraud claim.

American Nat. Fire Ins. Co., 849 P.2d 887, 891 (Colo. App. 1992); Kopeikin v. Merchants Mortg. and Trust Corp., 679 P.2d 599, 602 (Colo. 1984). "Although a party may have no direct evidence of fraudulent intent, circumstantial evidence may give rise to an inference of it. If a reasonable person could draw such an inference, a triable issue exists." Cincinnati Ins. Co. v. Guccione, 719 N.E.2d 787, 792, (Ill. App. 1999) (internal citations omitted, emphasis added). In this case, a reasonable person could draw such an inference. Indeed, Magistrate Judge West found such an inference possible, even if only by, in his opinion, a narrow margin. Accordingly,

Of course, the Ski Corp.'s reliance on Magistrate Judge West's Recommendation again begs the question as to what specifically the Ski Corp. is objecting to, other than the fact that the outcome was a close call.

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a triable question exists and the Recommendation properly recommended denial of the Fraud MSJ. 17. Moreover, "questions of intent often present witness credibility issues that lie

within the peculiar province of the finder of fact." Brown v. Bennett, 136 S.W.3d 552, 556 (Mo. App. 2004) (citation and internal quotation marks omitted). Here, the testimony of Bob Honts, Davey Pitcher, and Kingsbury Pitcher will be central to the determination of what was promised and what was intended. Whether that testimony is credible will be up to the jury. 18. Finally, "[w]hile it is the party's intent at the time the representation was made by

the party which must be determined, intent may be inferred from the party's acts after the representation is made." Batto v. Gafford, 119 S.W.3d 346, 348 (Tex. App. 2003) (emphasis added). See also Armani v. Maxim Healthcare Services, Inc., 53 F.Supp.2d 1120, 1130 (D. Colo. 1999) (evidence that the defendant's promises to compensate the plaintiff for overtime were false when made -- or made with reckless disregard for their truthfulness -- could be properly inferred from the defendant's failure to pay and from the defendant's subsequent conduct). "Slight circumstantial evidence of fraud, when considered with the breach of promise to perform, is sufficient to support a finding of fraudulent intent." Id. (emphasis added). "Fraudulent intent at the time of contracting can be inferred based on subsequent conduct of the defendant that is unusual, suspicious, or inconsistent with what would be expected from a contracting party who had been acting in good faith." BTL COM Ltd., Co. v. Vachon, 628 S.E.2d 690, 696 (Ga. App. 2006) (emphasis added). 19. In this case, the Ski Corp.'s secretive and suspicious conduct in the weeks

immediately following execution of the 1999 Agreements speaks volumes about its intent prior

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to and on the day it signed that agreement. For example, Mr. Honts repeatedly asked the Pitchers to keep him abreast of developments in the Forest Service Approval Process. (See Docket No. 156, ¶35 and referenced Exhibits A-20 ¶ 8 and A-22). In fact, he wrote Davey Pitcher on July 28, 19995 and called him on twice on August 2, 19996 asking to be advised if there were any new developments. Davey Pitcher ignored those calls, however, and did not bother to inform Mr. Honts, either before or after, that the day after his last two calls, on August 3, 1999, Colorado Wild filed an appeal of the Forest Service's June 1999 Decision Notice approving the 1999 EA and Access Road therein. (Docket No. 156, ¶ 36 and referenced Exhibit A-18). Nor did Davey Pitcher inform Mr. Honts, either before or after, of his private meeting with representatives of Colorado Wild in mid-to-late August 1999. (Id. ¶ 37 and referenced Exhibit A-18, 253:9-13). Likewise, he did not tell Mr. Honts in advance of the final disposition conference with Calvin Joyner and Jeff Berman on August 20, 1999, wherein the terms of the settlement of Colorado Wild's appeal were finalized. (Id. ¶ 36 and referenced Exhibit A-18, 233:16-22). 20. Furthermore and significantly, even though the Access Road was the quid-pro-

quo of the 1999 Agreements, and even though the Ski Corp. knew how vital that road was to the Joint Venture, neither Davey nor Kingsbury Pitcher ever bothered to pick up the phone after the Joyner Settlement to give Mr. Honts the news. Instead, five days after the disposition

conference, Bob Honts called Davey Pitcher begging for information on the status of the Approval Process. (Id. ¶ 41 and referenced Exhibit A-23, part 2, page 1). It was over a week later, on Friday, September 3, 1999, when Davey Pitcher finally informed Mr. Honts about the Joyner Settlement. (Id. and referenced Exhibit A-25). Notably, he only told Mr. Honts half of
5 6

Exhibit A-49. Docket No. 156, ¶ 35 and referenced Exhibit A-23, part 1, page 4.

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the story: that Colorado Wild had committed to dropping the appeal. (Id.) Ultimately, Mr. Honts learned that the Joyner Settlement stopped the Access Road short of the Village Property boundary by reading an article about it in the Mineral County Miner. (Id. ¶ 42). Only after that did the Ski Corp. send Mr. Honts a copy of the Joyner Letter. (Id. and referenced Exhibit A-26). Such shameful conduct on the part of the Ski Corp., the true nature of which was not revealed until discovery in this case,7 is inconsistent with what would be expected from a contracting party who had been acting in good faith. It is reasonable, therefore, to infer that the Ski Corp.'s conduct a scant two through six weeks after execution of the 1999 Agreements was congruent with the intentions it harbored at the time it executed that agreement. 21. Equally, if not more telling, however, is Davey Pitcher's admission during his

October 2004 deposition taken herein that, when he was conducting his negotiations with Colorado Wild and the Forest Service to resolve the appeal, he made zero effort to protect or further the Joint Venture's interest in obtaining the Access Road. (Id. ¶ 48 and referenced deposition excerpt A-18 ("nobody had represented to me from Leavell-McCombs that I was doing anything for them.")). It is this lack of effort and its nondisclosure, hidden until discovery in this case, that is so suspect. Yet, the 1999 Agreements executed scarcely a month earlier committed the Ski Corp. to "diligently pursue" any and all necessary Forest Service approvals for the Access Road and to use its "best efforts" to obtain the necessary permits therefore. (Exhibit A-49 WC000416 and 424 (§§ 2.03 and 5.01)). Either Davey Pitcher knew nothing of this contractual commitment or, more likely, the commitment was empty from the start. Even

As set forth in its Motion for Leave to File Second Amended Counterclaim, the Joint Venture only discovered Davey Pitcher's secret meetings with Colorado Wild and the other factual basis for its fraud claims when it took the depositions of Davey and Kingsbury Pitcher in October 2004. See Docket No. 26.

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assuming the former, (a highly improbable assumption given the months and months of negotiations that had gone into the 1999 Agreements), Davey Pitcher's ignorance could only mean that Kingsbury Pitcher did not inform or impress upon him the Ski Corp.'s obligation to use diligent and "best efforts"8 to obtain the Access Road and to include it as "a package"9 with its own requested expansion. Since Davey Pitcher was the designated point person for the Ski Corp. with respect to negotiations with the Forest Service, Kingsbury Pitcher's failure in this regard creates the inference that the Ski Corp.'s commitments were insincere from the start. Again, this conduct is inconsistent with what would be expected from a contracting party acting in good faith. 22. To have acted in accordance with its oral and written commitments, the Ski Corp.

would have to have made a genuine effort to persuade Colorado Wild to drop its appeal or offered, tried to offer or give the Joint Venture the informed opportunity to offer, some other carrot as a compromise. At a minimum, the Ski Corp. should have hired an attorney to advise it as to the merits of Colorado Wild's appeal. Armed with such advice, the Ski Corp. surely would have been better equipped to negotiate intelligently and effectively. But the Ski Corp. did none of these things. 23. The Ski Corp. was in a financial bind -- it needed final Forest Service approval in

time to begin construction on its new Alberta Chair Lift before winter10 and could not afford the delay that would ensue if it challenged Colorado Wild's appeal. The Ski Corp. was well aware of these time constraints when it executed the 1999 Agreements. In fact, the Denver Post made
8 9

Exhibit A-49 § 2.01. Exhibit A-36. 10 On February 3, 1999, Kingsbury Pitcher executed a contract with chairlift supplier Garaventa CTEC committing Wolf Creek to spend over a million dollars over the ensuing months for the engineering and construction of the Alberta Lift. (See Docket No. 156, ¶ 34 and referenced Exhibit A-21).

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that very straightforward conclusion in an article dated June 30, 1999. (Exhibit A-47).

Thus,

when Colorado Wild filed its appeal, the Ski Corp. had already secretly decided that it would not provide the effort required by its contract and would not fight the appeal. (Of course, the Joint Venture knew nothing of this secret decision and assumed, based on the Ski Corp.'s promises, that the EA would be vigorously pursued). 24. Instead, when Davey Pitcher met with Colorado Wild representatives, he

completely capitulated. In fact, he more than capitulated, he changed allegiance. Rather than even attempting to bluff or threaten litigation, he admitted to Colorado Wild's negotiator, Jeff Berman, that he was unwilling to hire an attorney. (See Exhibit A-51 (Jeff Berman's notes entry dated Aug. 13, 1999)).11 Worse, he admitted to Jeff Berman that Colorado Wild's concerns about the Village Development were "worthwhile," a complete betrayal of the Ski Corp.'s commitment to help bring the Village Development to fruition. (Id.) He even confessed that the Pitcher family was discussing a land exchange proposal for the Forest Service to re-acquire the Village Property. (Id.) Such an exchange would be completely antithetical to the Ski Corp.'s commitment to obtaining the Access Road and to support the Joint Venture's Preliminary Development Plan as set forth in the 1999 Agreements. 25. Finally, seven months after the Joyner Settlement, Davey Pitcher wrote a letter to

the Forest Service, taking full credit for his sell-out of the Joint Venture: As you know, I was able to get Colorado Wild to drop the appeal on our Alberta Lift and new parking lots. Between Steve Hartvigsen and Cal Joyner in the Forest Service, and Jeff Berman of Colorado Wild and myself, the arrangement that tied

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Jeff Berman testified that these notes reflected his contemporaneous typing during his phone conversations with Davey Pitcher and that they accurately reflected Mr. Pitcher's comments. (See Exhibit A-54 [Berman deposition transcript 40:1-18]).

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more NEPA to a request from Leavell/McCombs for a road permit seemed to satisfy all parties. (Docket No. 156, ¶ 49 and referenced Exhibit A-27). This letter was hidden from the Joint Venture until discovery in this case and, upon discovery of this and other previously hidden facts, the Joint Venture promptly filed leave to amend. See Docket No. 26. 26. Thus, mere nonperformance of the 1999 Agreements is not the only evidence of

the Ski Corp.'s fraudulent intent. Such intent is betrayed by the Ski Corp.'s failure to inform the Joint Venture of the Colorado Wild appeal, its surreptitious negotiations with Colorado Wild scarcely one month after signing the 1999 Agreements, its failure to timely inform the Joint Venture of the Joyner Settlement, the alacrity with which Davey Pitcher succumbed to the environmentalists' demands, Davey Pitcher's admission that he felt absolutely no obligation to try to obtain the Access Road for the Joint Venture, his confession to Colorado Wild that the Pitcher family was discussing a land exchange, and his willingness to join forces with Colorado Wild to place restrictions on future efforts to extend the truncated road the rest of the way to the Village Property (as set forth in the Joyner Letter), combine to create the strong inference that the Ski Corp. was similarly minded five weeks earlier when it signed the 1999 Agreements. B. THERE IS AMPLE EVIDENCE OF PRE-EXISTING INTENT. 27. In addition to the post-execution evidence, which alone creates an inference of

fraudulent intent, the Joint Venture has deposition testimony from Kingsbury Pitcher as to his intent in February 1998 when he made the written commitment to "carry the EA" for the Access Road and pay for its engineering and construction. (Exhibit A-36). Although Kingsbury

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Pitcher's letter specifically referenced "[t]he road from Highway 160 to The Village property,"12 Kingsbury Pitcher testified that he did not intend to do those things with respect to the Access Road, he only meant to do so for the part of the road that ran from Highway 160 to the proposed new ski area parking lots. (See Docket No. 156, ¶ 46 and referenced Exhibit A-17, 11:11-12:10). Such interpretation flies in the face of the specific language of the letter as well as the conclusion penned by Kingsbury that "[t]his should complete one more step in making the Village property merchantable." (Id.) Whatever his private intent, clearly, the language Kingsbury Pitcher chose was intended to assure the Joint Venture that the Ski Corp. would complete the approval process and construction for the entire Access Road. 28. Kingsbury Pitcher also admitted that when he promised on March 29, 1999 that

the Ski Corp. would provide a dedicated entry to the Village Property without the need for negotiations with the Colorado Department of Transportation or the necessity of filing a separate environmental assessment, he had no factual basis for his statement. (Id. ¶ 47 and referenced Exhibit A-17, 52:6-56:5). A promise made without knowledge of the promisor's ability to perform is actionable fraud. U.S. v. 1,557.28 Acres of Land in Osage County, Kansas, 486 F.2d 445, 448 (10th Cir. 1973). Similarly, evidence of indifference to the truth can amount to evidence of fraudulent intent. U.S. v. Trammell, 133 F.3d 1343, 1352 (10th Cir. 1998). See also Kunz v. Warren, 725 P.2d 794, 796 (Colo. App. 1986); Morrison v. Goodspeed, 68 P.2d 458, 462 (Colo.1937) (representation made with a reckless disregard of its truth or falsity constitutes fraud). Kingsbury Pitcher's March 1999 statement was made with indifference i.e. reckless

12

Id.

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disregard for the truth, and therefore constitutes actionable fraud. Further, he admitted his indifference to the truth providing direct evidence of his fraudulent intent. 29. In addition to Kingsbury Pitcher's admissions, the Ski Corp.'s pre-existing

fraudulent intent can be inferred from the fact that the first drafts of the EA prepared by Davey Pitcher referred to the Access Road as the "future link" to the Village Property. (Exhibit A-40, WC1462). Subsequent drafts, however, removed such language. (Exhibit A-45). The Ski Corp. was quietly backing down from its commitment to include the Access Road as a "package" with its own expansion request. (And since the Ski Corp. had represented that it would "carry the EA" and the Joint Venture had no reason to distrust it, the Joint Venture did not review or plow through each draft EA to check up on the Ski Corp.'s performance). 30. The fact is, Davey Pitcher all along harbored a secret opposition to the Village

Development and, indeed, the very land exchange that made it possible. On March 29, 2006, he testified that he "had suspicions all along," as far back as the early to mid 1990's, about the legality of the initial land trade that gave the Village Property to the Joint Venture. (Exhibit A55, 42:20-43:3). He believed there was something "illegal, improper, untoward, possibly illegal or influence peddling" in the fact that the Forest Service initially rejected the land trade, but then reversed its position a short while later. (Id. 60:24-61:18). Davey Pitcher also testified that as early as 1989, he was concerned that the number of development units being proposed, approximately 2,100, was tenfold greater than originally envisioned at the time of the land trade. (Id. 47:16-48:8). Accordingly, even before the Ski Corp. signed the 1999 Agreements approving a 2,172 unit development, Davey Pitcher opposed the development concept and secretly harbored suspicions about the legality of the land trade. Once the Ski Corp. got the land it

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needed from the Joint Venture, however, Davey Pitcher's quiet opposition rapidly transformed into vocal criticism. 31. Finally, since this issue is before the Court on summary judgment, Magistrate

Judge West properly drew all reasonable inferences most favorably to the Joint Venture, the nonmovant, to conclude that there are genuine issues of material fact as to the Ski Corp.'s intent at the time it made its False Commitments and entered into the written commitments reflected in the 1999 Agreements. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998). Accordingly, there is sufficient evidence of fraudulent intent both before and after execution of the 1999 Agreements to create a triable fact for the jury. C. THE SKI CORPORATION'S EQUITABLE ESTOPPEL ARGUMENT IS INCORRECT MATTER OF LAW AND IS BARRED BY THE LAW OF THE CASE DOCTRINE. 32.
AS A

The Ski Corp.'s equitable estoppel argument overlooks one important fact: the

statute of limitations issue, including the equitable estoppel issue, has already been litigated and decided contrary to the position advanced by the Ski Corp. As such, the law of the case precludes the Ski Corp.'s argument. The law of the case doctrine "posits that when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case." Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 816, 108 S. Ct. 2166 (1988); Roth v. Green, 466 F.3d 1179, 1187 (10th Cir. 2006). 33. Specifically, the Ski Corp. argues that the `assurances' purportedly relied upon by

the Joint Venture were insufficient to support the doctrine of equitable estoppel as to the contract claim. (Objection p. 7 ¶ 10). But this argument was rejected by Magistrate Judge West in his Recommendation denying Plaintiff Wolf Creek Ski Corp., Inc.'s Motion for Partial Summary Judgment on Breach of Fiduciary Duty Claim and Partial Summary Judgment on Breach of

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Contract Claims (the "Breach of Contract MSJ"). The argument surfaced again in the Ski Corp.'s Objection to that Recommendation. (See Docket No. 125, p. 13). This Court overruled the Ski Corp.'s Objection, however, and approved the Recommendation, implicitly rejecting this argument. (Docket No. 141). 34. The Ski Corp. nevertheless raises this argument again and attempts to distinguish

the assurances relied upon in connection with the contract claim with those relied upon with respect to the fraudulent inducement claim. This is an artificial distinction and ignores the critical fact that the fraud here, the fact that was misrepresented, was the Ski Corp.'s intent not to honor its contractual commitments, not to go through with the Access Road, and indeed, not to support the development. Thus, the breach of contract and fraudulent inducement claims are inextricably bound and the reassurances on which the Joint Venture's breach of contract claims were equitably tolled are identical to those that apply to the fraudulent inducement claim. 35. Moreover, the Ski Corp.'s reassurances went far beyond mere promises of

performance, as the Objection argues. They included reassurances that the Ski Corp. was the expert in such matters that knew how to deal with these complicated governmental approval issues, that it was in partnership with the Joint Venture, and that it could be trusted to look out for the Joint Venture's interests. For example, on September 15, 1999 when Bob Honts first learned of the Joyner letter cutting short the Access Road, he immediately confronted Kingsbury Pitcher. As Mr. Honts testified, Mr. Pitcher explained: "We got you a partial road and we will get the rest of it. Our obligation is not completed. We will continue to lead the way to get the Forest Service to approve the road that we contractually agreed to provide." His commitment -- his statement was, "The Forest Service often acts not in one action but in a series of actions, and we're the guys who know how to get things done with the Forest Service. Keep on trusting us."

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"Sometimes the Forest Service acts in various steps, and we will get you the rest of the access road in the future. We think that with the road within 250 feet, then the approval won't be as difficult as if you had to get the whole road." (Docket No. 156, pp. 41-42). 36. Thereafter, the Ski Corp. continued to reassure the Joint Venture that it could be

trusted to handle what needed to be done to make the Access Road a reality. For example, in October 2001, Kingsbury Pitcher, in a letter describing himself as "a village partner," assured the Joint Venture as follows: Please do not attempt to do parallel engineering, as far as the road is concerned...I hope the enclosed letter will reassure you that we do, in fact, know what we are doing and you can rely on the Wolf Creek Ski Corporation. (Docket No. 220 [supplemental briefing on Fraud MSJ entitled "Response to Order"], and referenced Exhibit A-31 (emphasis added)). These are the same assurances on which the Joint Venture relied in connection with its breach of contract claim as set forth in its summary judgment briefs therein. (See Docket No. 38 at p. 19 ¶ 43 and 57 and referenced Exhibits therein; see also id. ¶¶ 44, 53, 54). Therefore, even assuming that the Joint Venture had discovered Wolf Creek's fraudulent intent when Bob Honts first saw the Joyner Letter, Kingsbury Pitcher's continued reassurances tolled the statute of limitations. 37. The Ski Corp. also advances another argument that was explicitly rejected by

Magistrate Judge West in his earlier Recommendation and overruled by this Court on the Ski Corp.'s Objection to that Recommendation. Specifically, the Ski Corp. argues that the Joint Venture had ample time after discovering the Ski Corp.'s wrongful conduct in December 2001 to file suit within the remaining statutory period and that equitable estoppel only applies if the defendant sleeps on its rights "for the entire limitations period." (Objection p. 8, ¶ 11 (emphasis

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in Objection)). This same argument was made in the Ski Corp.'s Breach of Contract MSJ briefings,13 and at oral argument before Magistrate Judge West,14 and in the Ski Corp.'s Objection to Magistrate Judge West's Recommendation on the Breach of Contract MSJ.15 38. This contention is legally incorrect, however, as demonstrated by one of the very

cases cited by the Ski Corp. in support of its equitable estopple argument. In Colorado-Ute Electric Ass'n v. Envirotech Corp., 524 F. Supp. 1152 (D. Colo. 1981),16 the plaintiff's reliance did not continue throughout the entire statutory period. Nevertheless, Judge Carrigan allowed the suit to go forward, concluding that the defendant's repeated reassurances and efforts to remedy the product "tolled the running of the statute of limitations." Id. at 1155 See also Strader v. Beneficial Finance Co. of Aurora, 551 P.2d 720, 724 (Colo. 1976) (applying

equitable estoppel to bar defendant's statute of limitations defense where plaintiff learned of the wrong within the statutory period but nevertheless filed suit three to four months after the running of the statute.) Thus, the case law does not support the Ski Corp.'s position. 39. Apparently recognizing and rejecting the Ski Corp.'s flawed analysis, Magistrate

Judge West recommended denial of the Ski Corp.'s Breach of Contract MSJ. (Docket No. 117). This Court approved the Recommendation noting that Magistrate Judge West "properly construed and applied the operative law." (Docket No. 141, p. 10). Thus, the law of the case doctrine applies and this erroneous application of the equitable estoppel doctrine is foreclosed.
See Docket No. 46, at p. 24 ("[a] necessary prerequisite in order for plaintiff to rely upon equitable estoppel is a showing of positive acts by defendants which would have caused the plaintiff to fail to initiate her suit within the statutory period.") (Emphasis in briefing). 14 See Docket No. 181 [Defendant's Surreply to Fraud MSJ], Exhibit A-33, 61:22-62:12 (Hearing Transcript). 15 See Docket No. 125, p. 10 ("Finally, the Joint Venture must show injury through having been lulled into not filing a claim during the entirety of the limitations period.") (Emphasis in brief)) 16 The Ski Corp. cited Colorado-Ute on page 24 of its Breach of Contract MSJ Reply brief and p. 10 of its Objection. However, in Colorado-Ute, the reliance did not, in fact, continue throughout the entire statutory limitations period yet the case was allowed to proceed.
13

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See Eastern Tunneling Corp. v. Southgate Sanitation Dist., Arapahoe County, Colo., 487 F. Supp. 109, 116 (D.C.Colo.1979) (Discussion of applicable law made by Judge Kane in connection with defendant's first motion for summary judgment was the law of the case on defendant's second motion for summary judgment). 40. Accordingly, the Ski Corp.'s equitable estoppel argument, both as to the nature of

the reassurances made and as to tolling of the statute of limitations, in addition to being just plain wrong, is barred by the doctrine of the law of the case. IV. 41. CONCLUSION

In summary, the Joint Venture has produced adequate evidence of fraudulent

intent, both before and after execution of the 1999 Agreements. Such evidence consists of the shameful manner in which the Ski Corp. ignored the Joint Venture in the weeks after the 1999 Agreements was executed, the admissions of Davey Pitcher that he felt no obligation to the Joint Venture to try to get the Access Road, the speed with which Davey Pitcher ditched the Joint Venture to join the environmentalist opposition once the land was acquired, the admissions of Kingsbury Pitcher that he did not intend what he wrote and did not know if he could fulfill the promises he made when he made them, as well as the fact that, since the execution of the 1999 Agreements, the Ski Corp. has made virtually no effort to fulfill its commitments and has done everything in its power to oppose the Access Road and the Village development. Moreover, the Ski Corp.'s equitable estoppel arguments are barred by the law of the case, as well as the case law itself which does not support the Ski Corp.'s premise. 42. Accordingly, Magistrate Judge West's Recommendation should be approved and

the Ski Corp.'s Objection overruled.

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Respectfully submitted this 19th day of December, 2006.

s/ Kim A. Tomey George V. Berg, Jr. Kim A. Tomey Sally Berg BERG HILL GREENLEAF & RUSCITTI LLP 1712 Pearl Street Boulder, CO 80302 Phone: (303) 402-1600 Fax: (303) 402-1601 Email: [email protected] Attorneys for Defendant

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CERTIFICATE OF SERVICE I hereby certify that on December 19, 2006, I electronically filed the foregoing DEFENDANT'S RESPONSE TO PLAINTIFF'S OBJECTION TO RECOMMENDATION OF MAGISTRATE JUDGE ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT REGARDING FRAUDULENT INDUCEMENT AND NEGLIGENT MISREPRESENTATION CLAIMS with the Clerk of the Court using the CM/ECF system which will send notification to

Andrew R. Shoemaker Hogan & Hartson LLP 1470 Walnut Street, Suite 200 Boulder, CO 80302 [email protected] Jim Moriarty Moriarty Leyendecker 1123 Spruce Street, Suite 200 Boulder, CO 80302 [email protected] Sally Berg Moriarty Leyendecker 1123 Spruce Street, Suite 200 Boulder, CO 80302 [email protected]

Denise D. Riley Hogan & Hartson LLP 1200 Seventeenth Street, Suite 1500 Denver, CO 80202 [email protected] Cynthia A. Mitchell Hogan & Hartson LLP 1470 Walnut Street, Suite 200 Boulder, CO 80302 [email protected]

s/Martha Meshak

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