Free Response - District Court of Colorado - Colorado

Case 1:04-cv-01099-JLK-DW

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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). ______________________________________________________________________________ DEFENDANTS' RESPONSE TO COURT'S REQUEST FOR FURTHER BRIEFING ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT REGARDING FRAUDULENT INDUCEMENT AND NEGLIGENT MISREPRESENTATION CLAIMS ______________________________________________________________________________ Defendant Leavell-McCombs Joint Venture (the "Joint Venture") respectfully submits this supplemental briefing in response to this Court's October 13, 2006 Minute Order requesting briefs describing the significance, or lack thereof, of the December 4, 2001 draft default letter prepared by Holland & Hart (the "Draft Letter") as it would relate specifically to the statute of limitations questions in Plaintiff's Motion for Summary Judgment Regarding Fraudulent Inducement and Negligent Misrepresentation Claims (the "Motion") as follows: I. INTRODUCTION The Draft Letter has virtually no impact on the statute of limitations arguments in the Ski Corporation's Motion for three reasons. First, the False Commitments1 constitute fraud and the statute of limitations for fraud is three years ­ thus the Joint Venture had until December 4, 2004
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Capitalized terms have the same meanings set forth in the Motion and the Joint Venture's Response to the Motion.

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to file its fraud claims and met this deadline by filing its Answer and Counterclaim on June 7, 2004. Second, to the extent such False Commitments also constitute negligent misrepresentation subject to a two-year limitations period, the Draft Letter does not suggest that the Joint Venture knew or should have known that, at the time the Ski Corporation made the False Commitments, its subjective intent was not to keep them. The nature of the False Commitments in this case is the dispositive factor and kept the Joint Venture from discovering the Ski Corporation's duplicity until after litigation commenced and discovery was obtained. Finally, the Draft Letter has no impact on the Joint Venture's equitable estoppel argument. Accordingly, the Draft Letter should be disregarded. II. ARGUMENT The elements of fraud include: (1) a false representation of a material existing fact; (2) knowledge on the part of the one making the representation that it is false; (3) ignorance on the part of the one to whom the representation is made of the falsity; (4) representation made with intention that it be acted upon; (5) representation resulting in damage. Trimble v. City and

County of Denver, 697 P.2d 716, 724 (Colo.1985). With respect to negligent misrepresentation, "[n]egligent misrepresentation may occur if a person, in the course of his or her business, profession, or employment, supplies false information to another for guidance in the other's business transactions, and the other suffers a pecuniary loss caused by justifiable reliance upon the false information." Nelson v. Gas Research Institute, 121 P.3d 340, 345 (Colo. App. 2005). The False Commitments identified in the briefings all constitute fraud because, as established by the testimonial and documentary evidence, all were made with false present intent, for the purpose of inducing, and in fact did induce, the Joint Venture into entering into the

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1999 Agreement and related agreements.2 In any event, the Ski Corporation's Motion concedes by omission that all elements of fraud and misrepresentation have been met with the exception of challenging the material existing fact. The Response pointed out that the material existing fact was the Ski Corporation's lack of intent to make good on its promises of future performance. A. THE JOINT VENTURE'S FRAUD CLAIM WAS FILED WITHIN THE THREE YEAR LIMITATIONS PERIOD. The statute of limitations for fraud is three years. C.R.S. § 13-80-101(1)(c).3 Claims based on misrepresentation accrue on the date the misrepresentation is discovered or should have been discovered by the exercise of reasonable diligence. C.R.S. § 13-80-108(3). Under Rule 15, an amended pleading relates back to the date of the original pleading for purposes of the statute of limitations when "the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading." Assuming for the sake of argument that the December 4, 2001 Draft Letter marks the date upon which the statute of limitations started to run, the Joint Venture should have filed its fraud claim before December 4, 2004. The Joint Venture filed its Answer and Counterclaim on June 7, 2004, almost six months before the limitation's period expired. See Docket # 3. The Joint

Venture's December 14, 2004 Second Amended Counterclaim asserting fraud and negligent

Defendants have identified at least eight False Commitments made by the Ski Corporation. Response ¶¶ 17-20. These False Commitments were made prior to the execution of the 1999 Agreement to induce the Joint Venture into entering into same as testified to by Bob Honts. See Ex. A-19 to Response. It is undisputed that, as a result of the 1999 Agreement, the Ski Corporation obtained approximately 40 acres of easements over the Joint Venture's Property and essentially all the Joint Venture received in return were empty promises. It is also undisputed that the Joint Venture has incurred hundreds of thousands of dollars to obtain the Forest Service approval it bargained for in the 1999 Agreement. 3 The statute of limitations for negligent misrepresentation is two years. C.R.S. § 13-80-102(1)(a). However, the false representations identified in the briefings all constitute fraud. To the extent those misrepresentations also constitute negligent misrepresentations, the two year limitations period was met for the same reasons discussed in section B.

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misrepresentation4 relates back to the date of the original Answer and Counterclaim, for purposes of the statute of limitations, because the False Commitments arose from the same transactions and occurrences set forth therein. See Perfect Plastics Industries, Inc. v. Cars & Concepts, Inc., 758 F. Supp. 1080, 1083 (W.D. Pa. 1991) (allegation of fraud in the inducement of the contract arises from the same transaction as alleged in the Answer). Paragraph 6, 7, 15, 16, 17, and 19 of the Answer and Counterclaim (among others) describe evolution of the 1999 EA, the execution of the 1999 Agreement and related easement agreements, the Ski Corporation's undertaking to represent the Joint Venture in the Forest Service approval process to obtain the Access Road, the Ski Corporation's insistence that the Joint Venture stay out of that process, and the negotiated settlement that took place behind closed doors and without prior, contemporaneous, or timely subsequent notification to the Joint Venture. Accordingly, even if the Joint Venture should have discovered the Ski Corporation's fraud on December 4, 2001, its fraud claim relates back to June 7, 2004, six months before the expiration of the fraud statute of limitation. B. THE DRAFT LETTER AT BEST EVIDENCES THAT THE JOINT VENTURE KNEW OR SHOULD HAVE KNOWN THAT THE SKI CORPORATION HAD COMMITTED A BREACH OF CONTRACT. On a motion for summary judgment, a court must view the factual record and draw all reasonable inferences most favorably to the non-movant. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998). Only when the evidence clearly shows that a party's discovery of the pertinent facts giving rise to a cause of action occurred or should have occurred upon a particular date can the issue be decided as a matter of law. In re Marriage of Smith, 7 P.3d 1012, 1015 (Colo. App. 1999). Otherwise, such issue presents a question of fact for the jury. Id.

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Docket # 26.

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Here, the Draft Letter at best suggests that the Joint Venture should have known as of December 4, 2001 that the Ski Corporation had committed a breach of the 1999 Agreement. Indeed, the Draft Letter talks in terms of "breach" and "default" and expresses a hope that the Ski Corporation will act to correct that breach. Had the Joint Venture known at that time of the Ski Corporation's falsity and secret intent never to fulfill its False Commitments, it most certainly would not have entertained any hope that the Ski Corporation would cure its default. Moreover, it is undisputed that the Draft Letter was never sent thereby indicating that the Joint Venture still had faith that the Ski Corporation would honor its representations and contractual obligations. The Joint Venture's faith was not unfounded: barely two months earlier, Kingsbury Pitcher, as a self-proclaimed "Village partner," had written the Joint Venture regarding the Access Road: "I hope the enclosed letter will assure you that we do, in fact, know what we are doing and you can rely on Wolf Creek Ski Corporation." Exh. A-31 (emphasis added). The Joint Venture's trust in the Ski Corporation continued even after the date of the Draft Letter. Only a week later, on December 11, 2001, Bob Honts wrote Davey Pitcher seeking his counsel and support on a proposed amendment to the National Energy Bill. Exh. A-32. Such actions indicate that the Joint Venture continued to trust the Ski Corporation and believed it to be an ally, not a traitor. Thus, nothing in the Draft Letter and contemporaneous correspondence suggests that the Joint Venture knew or should have known that the Ski Corporation had deceit in its heart when it made the False Commitments and executed the 1999 Agreement. Indeed, the very nature of the False Commitments contributed to the delay in their discovery. By way of contrast, if a seller induces a buyer to purchase unseen property on the false representation that the property is beach

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front, the buyer will recognize the fraud immediately when he sees the property. Here, however, the False Commitments generally concerned the Ski Corporation's ability and intent to obtain a certain result favorable to the Joint Venture. The Ski Corporation's mere failure to obtain that result, without more, was not evidence of its secret false intent. Until October 2004, this false intent was the critical missing evidence that enabled the Joint Venture to discover the Ski Corporation's deceit. See Nelson v. Gas Research Institute, 121 P.3d at 343 ("Such promises [of future performance] are actionable only where there is proof that the defendant had the present intention not to fulfill the promise."). Such evidence of false intent could only be obtained by questioning Kingsbury and Davey Pitcher under oath and by obtaining documents in discovery.5 Accordingly, viewing the factual record and drawing all reasonable inferences most favorably to the Joint Venture, the Draft Letter does not clearly show that the Joint Venture knew or should have known of the Ski Corporation's duplicity so as to trigger the running of the limitations periods for either fraud or negligent misrepresentation. C. THE DRAFT LETTER HAS NO IMPACT ON DEFENSE.
THE

JOINT VENTURE'S

EQUITABLE TOLLING

In its Response, the Joint Venture argued that the Ski Corporation's continued reassurances tolled the statutes of limitations. See Response p. 42. This Court has already determined that "there are genuine material questions of fact as to...whether or not the Joint

Furthermore, and as argued in the Response, the Ski Corporation took steps to actively conceal its fraud by, among other things, (1) not informing the Joint Venture that Colorado Wild had appealed the June 1999 Decision Notice, (2) not informing the Joint Venture of Davey Pitcher's private meetings with Colorado Wild in Vail after the appeal had been filed but before it had been resolved, (3) not informing the Joint Venture of the upcoming disposition conference with the Forest Service's Calvin Joyner and Colorado Wild, (4) not allowing the Joint Venture to participate in the EA review process, (5) initially informing the Joint Venture only that Colorado Wild had dropped the appeal but not that the Ski Corporation had made reciprocal promises detrimental to the Joint Venture, and (6) not sending the Joint Venture a copy of the Joyner Letter until two weeks after the disposition conference. See Response ¶¶ 36-38 and 41-42.

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Venture reasonably relied on Wolf Creek's assurances to the Joint Venture's detriment." This finding applies equally to the Joint Venture's fraud and misrepresentation claims and is unaffected by the Draft Letter. IV. CONCLUSION In summary, the December 4, 2001 Draft Letter has no impact on the statute of limitations issues raised by Plaintiff's Motion and should be disregarded. Respectfully submitted this 23rd day of October, 2006.

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

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CERTIFICATE OF SERVICE I hereby certify that on October 23, 2006, I electronically filed the foregoing DEFENDANTS' RESPONSE TO COURT'S REQUEST FOR FURTHER BRIEFING ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT REGARDING FRAUDULENT INDUCEMENT AND NEGLIGENT MISREPRESENATION CLAIMS with the Clerk of the Court using the CM/ECF system which will send notification to such filing to the following e-mail addresses: 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] Kathleen M. Morgan 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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