Free Appeal of Magistrate Judge Decision to District Court - 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, v. LEAVELL-McCOMBS JOINT VENTURE, d/b/a THE VILLAGE AT WOLF CREEK, Defendant.

PLAINTIFF'S OBJECTION TO RECOMMENDATION OF MAGISTRATE JUDGE ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT REGARDING FRAUDULENT INDUCEMENT AND NEGLIGENT MISREPRESENTATION CLAIMS

Plaintiff, Wolf Creek Ski Corporation ("Wolf Creek"), through its undersigned counsel, submits this Objection to Magistrate Judge West's Recommendation on Wolf Creeks' Motion for Summary Judgment Regarding Fraudulent Inducement and Negligent Misrepresentation Claims, and states as follows: 1. In a case originally filed as a breach of contract case, Magistrate Judge West

found a genuine issue of material fact as to fraudulent inducement "by the slimmest of margins." Wolf Creek respectfully requests that this Court reexamine what the Recommendation acknowledges is a close call. 2. The Leavell-McCombs Joint Venture ("Joint Venture" or "Defendant") has

engaged in extensive discovery in an attempt to turn this contract case into a fraudulent inducement case. The subject of this dispute is a set of contracts negotiated at arm's length by a

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sophisticated agent to a billionaire businessman, who was ably represented by counsel. The only evidence cited to support the fraudulent inducement claim are, (1) a statement by Kingsbury Pitcher, which, as the Recommendation notes, is a prediction rather than an actionable statement of material fact, and (2) evidence of conduct that occurred after the agreement at issue was executed. Such evidence cannot, as a matter of law, support a fraudulent inducement claim. Accordingly, the Joint Venture's attempt to convert a contract claim into a fraud claim should be rejected on summary judgment. 3. To prevail on its fraudulent inducement claim, the Joint Venture must prove that

Wolf Creek knowingly made a false representation of material fact and that the Joint Venture justifiably relied on the misrepresentation to its detriment. See Chase v. Dow Chem. Corp., 875 F.2d 278, 281 (10th Cir. 1989); Coors v. Sec. Life of Denver Ins. Co., 112 P.3d 59, 66 (Colo. 2005). The misrepresentation must concern a material fact that either exists in the present or has existed in the past. Leece v. Griffin, 371 P.2d 264, 265 (Colo. 1962) (quoting Bell Press, Inc. v. Phillips, 364 P.2d 398 (Colo. 1961); Russell v. First Am. Mortgage Co., 565 P.2d 972, 975 (Colo. App. 1977). 4. Predictions, guesses, or prophecies about the occurrence of a future event are not

statements of material fact. See Van Leeuwan v. Nuzzi, 810 F. Supp. 1120, 1124 (D. Colo. 1993); Leece, 371 P.2d at 265. Thus, "[m]erely expressing an opinion in the nature of a prophecy as to the happening of a future event is not actionable." Ballow v. PHICO Ins. Co., 875 P.2d 1354, 1362 (Colo. 1993) (citing Leece, 371 P.2d at 265); see also Van Leeuwan, 810 F. Supp. at 1124 ("A promise as to future events without a present intent not to fulfill the promise is not actionable."); Lundin v. Shimanski, 368 N.W.2d 676, 685­86 (Wis. 1985) (statements or

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opinions concerning whether a city would likely grant a conditional use permit are not actionable unless the asserting party knew of facts that made the assertion false). 5. Likewise, an individual may not rely on legal opinions or statements about which

access to truthful information is equally available to all parties. M.D.C./Wood, Inc. v. Mortimer, 866 P.2d 1380, 1382 (Colo. 1994); Two Inc. v. Gilmore, 679 P.2d 116, 117 (Colo. App. 1984). 6. In this case, the Joint Venture cannot establish a fraudulent inducement claim

because it has not identified any actionable representations. As noted in the Recommendation, the Joint Venture bases its claim on Wolf Creek's alleged representation that the July 1999 Agreement1 would allow the Joint Venture to secure an access road to its property without having to prepare an environmental assessment or negotiate with the Colorado Department of Transportation ("CDOT"). See Recommendation of Magistrate Judge on Plaintiff Wolf Creek Ski Corporation, Inc.'s Motion for Summary Judgment Regarding Fraudulent Inducement and Negligent Misrepresentation Claims ("Recommendation") (Docket #233) at 5, 10-11. This claim, however, does not concern a material fact that either exists in the present or has existed in the past. Rather, as Judge West put it, it is "more of a prediction about the requirements for getting access to the Village." Recommendation at 11 (emphasis added). As such, the Joint Venture cannot have relied on this statement as a matter of law, and its fraudulent inducement claim

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The July 1999 Agreement is the Agreement for Ski Utilities, Road and Parking Easements for the Village at Wolf Creek, which was executed by the parties on July 16, 1999. See Motion for Summary Judgment Regarding Fraudulent Inducement and Negligent Misrepresentation Claims ("Motion for Summary Judgment") (Docket #127) at p. 18, ¶ 5.

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should be dismissed.2 See generally Reply in Support of Summary Judgment ("Reply") (Docket # 159) at 10-13. 7. Additionally, the Joint Venture cannot prevail on its fraudulent inducement claim

because it cannot provide legally sufficient proof of intent. The crux of any fraudulent inducement claim is proof that an alleged wrongdoer did not intend to fulfill its commitments under a contract when it entered into the contract. See Leece v. Griffin, 371 P.2d 264, 265 (Colo. 1962) (Quoting Bell Press, Inc. v. Phillips, 364 P.3d 398 (Colo. 1961); Swallow v. Calcium Co., 348 P.2d 715, 723 (Colo. 1960) (reversing judgment on fraud in the inducement claim where there was no proof that "the defendants misrepresented their state of mind at the time that the contract was signed in that there was no intent to carry out the undertakings.") (emphasis added). Otherwise, every contract case would be converted to a fraud case based on the purported breach. The only evidence of intent cited in the Recommendation is conduct that occurred after the July 1999 Agreement was executed. Recommendation at 11; see also Reply at 4-9; Plaintiff Wolf Creek Ski Corporation's Response to the Court's October 13, 2006 Order (Docket # 219) at 1-2.

Magistrate Judge West also found that there is a question of fact about whether Wolf Creek was in a position of superior knowledge about the approval process or had access to greater information. Recommendation at 11. As an initial matter, whether Wolf Creek had superior knowledge as to the Forest Service and CDOT does not transform a non-actionable prediction of future fact or of law into a statement of existing, material fact. The Recommendation does not identify any then-existing fact--in existence prior to execution of the July 1999 Agreement--of which Wolf Creek had superior knowledge or to which it had greater access. Moreover, as to any predictions as to Forest Service and CDOT or any legal issues, it is undisputed that the Joint Venture was at all times represented by sophisticated development counsel at Holland & Hart, and that the Joint Venture's members and representatives had significant development experience and were aware that the outcome of the NEPA process was uncertain. Motion for Summary Judgment at 13-14.

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8.

The Joint Venture alleges that it was fraudulently induced to enter into the July

1999 Agreement. More specifically, the Joint Venture claims that because Wolf Creek purportedly met with representatives of Colorado Wild and cut a deal to address Colorado Wild's appeal on August 20, 1999 (as described in the Joyner Letter) after the execution of the Agreement, Wolf Creek must never have intended to honor its obligations when it signed the Agreement. See Recommendation at 13-14. However it is undisputed that Colorado Wild did not file its appeal until August 3, 1999, weeks after the July 1999 Agreement was executed. See Motion for Summary Judgment at 25, Ex. 18. The fact that Wolf Creek then purportedly reached a compromise deal with Colorado Wild in response to the appeal (approximately one-month after the July 1999 Agreement was executed) is not evidence that Wolf Creek contemplated such a step before it executed the July 1999 Agreement. If anything, these facts constitute "mere evidence of non-performance," which, as a matter of law, is not evidence of a pre-existing intent not to perform a contract. See Strum v. Exxon Co., USA, 15 F.3d 327, 331 (4th Cir. 1994); see also Reply at 4-5. Thus, Wolf Creek respectfully disagrees with the conclusion that evidence of Wolf Creek's post-agreement conduct creates a question of fact, even "by the slimmest of margins." Recommendation at 11. To the contrary, such evidence is at best nothing more than "a mere scintilla" of proof, which cannot withstand summary judgment. See, e.g., Garrison v. Gambro, Inc., 428 F.3d 933, 935 (10th Cir. 2005) ("The mere existence of a scintilla of evidence in support of the nonmovant's position is insufficient to create a dispute of fact that is `genuine'; an issue of material fact is genuine only if the nonmovant presents facts such that a reasonable jury could find in favor of the nonmovant."). As such, Wolf Creek respectfully submits that the fraudulent inducement claims should be dismissed.

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9.

Finally, even if it could produce evidence of Wolf Creek's pre-existing intent not

to perform the July 1999 Agreement, the Joint Venture's claim is barred by the statute of limitations. As argued in prior briefing, all of the facts the Joint Venture needed to bring its fraud claim were known to the Joint Venture as of September 1999 when it received the Joyner Letter describing an agreement with Colorado Wild. See Reply at 16-18; Plaintiff Wolf Creek Ski Corporation's Response to the Court's October 13, 2006 Order (Docket # 219) at 3-5. This is particularly important here, as the Recommendation identifies the purported deal with Colorado Wild­an agreement the Joint Venture undisputedly learned about when it received the Joyner Letter in September 1999­as the slim evidence of Wolf Creek's intent not to follow through with the 1999 Agreement. Recommendation at 11. However, if that is the evidence sufficient to create a question of fact as to intent, it certainly was sufficient to trigger discovery of the purported fraud as well.3 Thus, the statute of limitations expired in September 2002 (three years after the Joint Venture learned of the purported agreement with Colorado Wild) for any such fraud claim. See C.R.S. § 13-80-102(1)(c); Recommendation at 12. 10. Accordingly, the Recommendation must, and apparently does, rely on the

doctrine of equitable estoppel to deny summary judgment as to the statute of limitations. Once a cause of action, such as fraud, is discovered, the clock starts ticking on the statute of limitations

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Further, there is no question about when the Joint Venture discovered that Kingsbury Pitcher's purported predictions were incorrect. That became crystal clear to the Joint Venture in September 1999 (even if Mr. Pitcher somehow had superior knowledge or access to information prior to that date). See Recommendation at 13.

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unless the party asserting that the statute of limitations has run is equitably estopped. 4 Although a disfavored doctrine, 5 equitable estoppel may be applicable if Wolf Creek convinced the Joint Venture to sleep on its claims until after the expiration of the limitations period. Aldrich v. McCulloch Props. Inc., 627 F.2d 1036, 1043 n7 (10th Cir. 1980). In previous briefing by the parties as to summary judgment on the contract claims, Wolf Creek argued that the "assurances" purportedly relied upon by the Joint Venture were insufficient to support the doctrine of equitable estoppel as to the contract claim. See Wolf Creek Ski Corporation's Reply in Support of Motion for Summary Judgment (Docket # 46) at 20-21. As to the fraudulent inducement claim, these same arguments apply to the purportedly fraudulent predictions, but with even greater force. As weak as they were, the purported assurances related solely to Wolf Creek's performance of the July 1999 Agreement. They did not related to any predictions about what

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The Joint Venture has attempted to confuse this issue in its prior briefing by suggesting that it has an "equitable tolling" defense to the statute of limitations. See, e.g., Defendant's Response to Plaintiff's Motion for Summary Judgment (Docket # 156) at 41-43. However, the Joint Venture has always in fact relied on the doctrine of equitable estoppel. Equitable tolling applies where a party cannot obtain information central to its claim within the statutory period. See Noel v. Hoover, 12 P.3d 328, 330 (Colo. App. 2000); Redmond v. Chains, Inc., 996 P.2d 759, 763-64 (Colo. App. 2000); see also Bell v. Fowler, 99 F.3d 262, 266 n2 (8th Cir. 1996) ("As a rule . . . [e]quitable tolling is appropriate when the plaintiff, despite all due diligence, is unable to obtain vital information bearing on the existence of his claim. Equitable tolling does not require any misconduct on the part of the defendant. On the other hand, the doctrine of equitable estoppel focuses on the defendant's conduct . . . [and] presupposes that the plaintiff knows of the facts underlying the cause of action but delayed filing suit because of the defendant's conduct.") (internal citations and quotation marks omitted). Here, the Joint Venture has contended that although it learned of the deal with Colorado Wild in September 1999, it was "reassured" that Wolf Creek would still complete the 1999 Agreement. As such, equitable estoppel rather than equitable tolling is the doctrine at issue here. Equitable estoppel is a disfavored doctrine, and it will only be applied where each element has been clearly established. Dove v. Delgado, 808 P.2d 1270, 1275 (Colo. 1991). The Joint Venture has the burden to establish each and every element of the doctrine. Black v. Southwestern Water Conserv. Dis., 74 P.3d 462, 467 (Colo. App. 2003). The purpose of the equitable estoppel doctrine is to prevent "manifest injustice." Committee for Better Health Care v. Meyers, 830 P.2d 884, 891 (Colo. 1992).

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actions regulatory agencies such as the Forest Service and CDOT might take. Indeed, as set forth in the Recommendation, the Joint Venture was working directly with those agencies by September 1999 (and certainly by January 2000). Recommendation at 5-6. There are no claims of superior knowledge or relationships as of that time. 11. More importantly, however, equitable estoppel cannot apply here because

Magistrate Judge West found that the purported assurances, such as they were, were no longer effective as of December 4, 2001, or at the latest January 2, 2002. Recommendation at 16. Equitable estoppel will only excuse the Joint Venture's failure to file its fraud claim within the three year limitations period if Wolf Creek caused the Joint Venture to sleep on its rights for the entire limitations period. 6 Thus, even accepting that Wolf Creek's purported assurances about its intent to perform the July 1999 Agreement did somehow cause the Joint Venture to forego its

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See, e.g., Aldrich v. McCulloch Props. Inc., 627 F.2d 1036, 1043 n7 (10th Cir. 1980) (wrongdoer must "prevail[] upon the other to forego enforcing his right until the statutory time has elapsed") (emphasis added); United States v. Reliance Ins. Co., 627 F.2d 1336, 1370 (10th Cir. 1971) ("[A] debtor who induces his creditor to defer action by means of a request for delay, and by assurances that the debt would be paid or settled, should not be able to deny liability by deferring legal action beyond the effective statute of limitations.") (emphasis added); Lee v. City and County of Denver, 482 P.2d 389, 392 (Colo. App. 1971) ("[A] necessary prerequisite in order for plaintiff to rely upon this doctrine is a showing of positive acts by the defendants which would have caused the plaintiff to fail to initiate her suit within the statutory period."); see also Marshall v. Duryea, 569 N.Y.S.2d 112, 113 (1991) (refusing to apply equitable estoppel defense where plaintiff had received a copy of an allegedly illegal stock transfer agreement that had been hidden from her for five years when one year remained in the limitations period); Dobie v. Liberty Homes, Inc., 632 P.2d 449, 452-53 (Or. App. 1981) (affirming summary judgment where defendant learned, within limitations period, of basis to stop relying on inducement); Brewer v. Food Giant Supermarkets, Inc., 589 P.2d 459, 460 (Az. App. 1978) (summary judgment affirmed where basis for estoppel ended within limitations period); Luther v. Sohl, 181 N.W.2d 268, 270 (Neb. 1970) ("Judicial decisions almost uniformly support the proposition that if a plaintiff has ample time to institute his action, after the inducement for delay has ceased to operate, he cannot excuse his failure to act within the statutory time on the ground of estoppel") (citations omitted); McCoy v. Wesley Hosp. and Nurse Training Sch., 362 P.2d 841, 846-47 (Kan. 1961) (inducement to delay bringing action ended within the limitations period, and therefore "the doctrine of equitable estoppel is not available to interrupt the running of the statute . . . .").

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fraud claims for a period of time, the assurances expired at least nine months prior to the end of the limitations period. See Plaintiff Wolf Creek's Response to the Court's October 13, 2006 Order (Docket # 219) at 5-6. Rather than sue Wolf Creek within the limitations period--which it had ample time to do--the sophisticated Joint Venture slept on its rights for years. As a matter of law, the Joint Venture cannot meet its burden of demonstrating a manifest injustice that can only be remedied by application of the equitable estoppel doctrine. For the foregoing reasons, and for the reasons cited in Wolf Creek's briefs regarding its motion for summary judgment, Wolf Creek respectfully requests that this court grant Wolf Creek's motion for summary judgment and dismiss the Joint Venture's claim for fraudulent inducement.

Dated this 4th day of December, 2006. HOGAN & HARTSON L.L.P.

By:

s/Andrew R. Shoemaker Andrew R. Shoemaker Cynthia Mitchell Jacqueline S. Cooper 1470 Walnut Street, Suite 200 Boulder, Colorado 80302 [email protected] (720) 406-5300 telephone (720) 406-5301 facsimile Attorneys for Wolf Creek Ski Corporation, Inc.

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CERTIFICATE OF SERVICE I hereby certify that on this 4th day of December, 2006, I electronically filed the foregoing 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 Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: George V. Berg: Kimberly A. Tomey: Sally P. Berg: James R. Moriarty: [email protected] [email protected] [email protected] [email protected]

s/Andrew R. Shoemaker

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