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WSHB Colorado Newsletter: June 2013

June 13, 2013

IN THE NEWS

Colorado Premises Liability Act May Limit Claims in Aurora Theater Shooting

In the wake of the tragic Aurora movie theater shooting, there were many lawsuits filed.  Several survivors and relatives of those killed sued the theater, owned by Cinemark USA.  However, as a result of the application of Colorado Premises Liability Act (“CPLA”), the Plaintiffs’ negligence claims have been dismissed.

 While the cases were brought in federal court, there is no such thing as federal personal injury law. That means the court has to rely on the state law where the court is located.  In this case, that means Colorado law is applied. 

According to Colorado law, the CPLA applies to any civil action against a landowner by a person who alleges injury occurring while on the real property of another and by reason of the condition of circumstances existing on such property.

The allegations are that Cinemark’s poor security is what allowed alleged shooter James Holmes to attack.  Since the case involves claims against a landowner (Cinemark) which are directly related to the land, in particular, the means of direct access from the outside into the theater, the Court ruled the CPLA applies to the exclusion of Plaintiffs’ common law negligence claims.

Plaintiffs’ claims pursuant to the CPLA as well as claims pursuant to Colorado’s Wrongful Death Act will still go forward, but the court’s reliance on the CPLA underscore the importance of understanding premises liability law in Colorado.

Denver Poised for Construction Related Job Growth

According to a January 16, 2013 report from the Denver Metro Chamber of Commerce, a total of 1400 new jobs were announced by Fidelity Investments, Visa, and Redwood Trust.  Moreover, Forbes named Colorado as the fifth-best state in the country in which to do business. A pro-growth agenda and favorable economic conditions are contributing to a growing optimism among real estate experts, construction companies and others.

Denver Mayor Michael B. Hancock has laid out an ambitious agenda to create 105,000 new jobs and add 34 million square feet of commercial and housing space over the coming years. The net economic impact is $5.4 billion, according to Hancock’s “Smart Jobs Development” report delivered at the Denver Business Journal’s “State of the Cities — Mayor’s Economic Forecast” event.

Construction Spending Topped $1 Billion in 2012

In a positive sign for the local economy, construction spending in the Colorado Springs area topped $1 billion in 2012 for the first time since slumping six years ago, reports Rich Laden in the Colorado Springs Gazette.

Last year’s figure was a nearly one-third increase over 2011, and it was the first time the annual figure surpassed the billion-dollar mark since permits totaled $1.08 billion in 2006.

FIRM NEWS

Congratulations to Our Newest Partner

Wood, Smith, Henning & Berman, LLP welcomes Christina Utley Gilbertson as a Partner.  Christina, who is in Denver but also handles cases for the firm’s Nevada office, has excelled at representing builders, developers, general contractors, and design professionals in complex multi-party construction defect matters.  She has also represented clients in product liability class actions, general liability, premises liability, mold and toxic torts, and bodily injury claims.

Her broad experience and dedication to her clients earned her a partnership at WSHB.  Way to go, Christina!

Favorable Defense Verdict

Senior Associate Michael Knauf completed a five day jury trial in the District Court for the County of Boulder on July 20, 2012. 

 WSHB represented a senior vice president of one of the world’s leading providers of correctional detention and residential treatment services against claims of negligence, civil conspiracy and extreme and outrageous conduct.  After declining Plaintiff’s demand $500,000, the case proceeded to trial.  Ultimately, our client was found liable for only $12,000 in damages.  Congratulations, Michael, for a job well done.

Welcome D. Sean Smith

WSHB is pleased to announce the newest member or our legal team in Denver, D. Sean Smith.  His practice is multi-faceted with concentrations in Medicare Compliance, Construction Defense, and General Liability Defense.  Welcome aboard, Sean!

CASE LAW UPDATE

Colorado Supreme Court Requires that Privacy Interests be Considered in Discovery Disputes and Motions to Compel

Why This Case Is Important

The Colorado Supreme Court has added a privacy expectation limitation that must be considered in evaluating the scope of allowable discovery that mirrors Federal law.  Specifically, the Colorado Supreme Court now explicitly requires that privacy claims be considered in determining motions to compel regarding the production of records and documents, as well as requests for inspection of personal computers, phones, tablets, etc.

Overview

Plaintiff sued former employee Christopher Smay for breach of loyalty, breach of fiduciary duty, and misappropriation of trade secrets, claiming that Smay had contacted Plaintiff’s customers before he resigned and had taken documents containing Plaintiff’s price lists and customer contact information.  In the course of the litigation, Plaintiff served Smay with discovery requests seeking to inspect the following: (1) Smay’s personal and business computers, and any other electronic storage devices including smartphones, tables, USB drives and discs; (2) Smay’s non-party wife’s computers and electronic storage devices; and (3) the telephone records of Smay and his wife for approximately three years.  Smay objected to the discovery requests on privacy grounds, and refused to provide the requested information.  Smay further asserted that because Smay’s wife was not a party to the case, her computer and electronic storage devices were not discoverable.  Plaintiff filed a motion to compel.

Without holding a hearing, the trial court issued an order on various discovery matters ordering in pertinent part that “Plaintiff’s Motion to Compel is GRANTED” and directed Smay to provide the requested information to be “best of his ability.”  Smay petitioned the Colorado Supreme Court, who granted the petition and remanded the matter.

Holding

The Colorado Supreme Court held that the trial court had grossly abused its discretion by granting Plaintiff’s motion to compel discovery without making findings of fact balancing Smay’s asserted privacy interest with the need for the information sought as required by In re District Court, 256 P.3d 687 (Colo. 2011).  Colorado has recognized privacy interests in electronically stored information as well as in telephone records.  Thus, there was no question that Smay’s alleged rights to privacy triggered the balancing test as required by In re District Court.  In its ruling, the Colorado Supreme Court reiterated that “it must be apparent from the order that the trial court performed the required balancing test,” and the failure to do so is an abuse of discretion. 

The Colorado Supreme Court made absolute the ruling in In re District Court that requires a trial court, when a party asserts a valid privacy interest, to determine (1) whether the information is relevant, (2) whether there exists a compelling need for the information, and if there is, (3) whether that information can be obtained elsewhere.  Id. 256 P.3d at 692.  Importantly, the burden of proof in conducting the balancing test shifts back and forth between the requesting party and opposing party.  While the initial burden of establishing relevance falls upon the party requesting the information, the opposing party must necessarily show that it has a legitimate privacy interest in the information requested.  From there, the requesting party must establish a compelling need for the information, as well as demonstrate that the information is not available from other sources and the efforts utilized are the least intrusive means to obtain the information.  Id. at 691-92.

Smay’s wife’s nonparty status was cause for additional concern to the Colorado Supreme Court.  Ultimately, the Court adopted the reasoning of the applicable Federal cases that state that “a person’s nonparty status as a factor that weighs against disclosure because the nonparty does not have an interest in the outcome of the litigation.”  Katz v. Batavia Marine & Sporting Supplies, Inc., 984 F.2d 422, 424 (Fed. Cir. 1993). 

Lessons to be Learned from this Case 

The lesson to be learned from In re Gateway Logistics is that privacy concerns in discovery disputes cannot be ignored.  If a valid privacy interest exists in information sought to be obtained by an opposing party, any such objection should be raised.  Conversely, potential privacy interests of opposing parties must be kept in mind, and attempts should always be made to obtain the information by other means if possible. 

LEGISLATIVE UPDATES

With the 2013 legislative session underway, there are a number of new bills which, if they become law, may affect our clients.  Here are several new bills WSHB will be keeping an eye on in the months to come:

Transit-Oriented Development Claims Act of 2013

In an effort to spur development along the newly constructed light rail lines, Transit-Oriented Development Claims Act of 2013 (SB 13-052) was introduced.

This legislation, introduced on January 16, 2013, defines a “Transit-Oriented Development” as construction and development of multi-family, mixed-use projects within one-half mile of any commuter rail stop, light rail stop or bus stop. 

Among other things, the proposed bill institutes a right to repair for construction professionals who receive a notice of a potential construction defect claim related to a transit-oriented development.  It also institutes a binding arbitration requirement for claims against construction professionals with respect to transit-oriented development, and makes construction professionals immune to suit for environmental conditions including noise, odors, light, temperatures, humidity, vibrations, and smoke or fumes casually related to transit, commercial, public, or retail use.  These provisions are intended to increase the rights construction professionals currently have under Colorado’s Construction Defect Action Reform Act (“CDARA”), which may incentivize some builders to develop property near public transportation.

This bill also clarifies the language of CDARA’s 6 year statute of repose unrelated to transit-oriented projects. 

This bill passed the senate on February 11, 2013, and is currently under review by a House committee.

Regulation of Public Adjusters

Public adjusters negotiate with insurance companies on behalf of policyholders to settle claims for loss or damage usually on a contingency basis. In Colorado, there are 256 licensed public adjusters that are currently regulated to a limited extent.   

HB 13-1062 increases the regulatory authority of the Commissioner of Insurance over public adjusters by adding them to the definition of insurance producers, which makes them subject to license suspension or revocation, as well as ethical standards, continuing education, and financial responsibility requirements.

This bill was signed into law by Governor Hickenlooper on March 22, 2013.

Construction Contractor Prompt Payment

This bill, HB 13-1090, would have required certain provisions in public and private construction contracts regarding payment, such as the owner and contractor must make regular progress payments approximately every 30 days to contractors and subcontractors for work actually performed, to receive the progress payments, the contractor and subcontractor must submit a progress payment invoice plus any required documents, and an owner or contractor may only retain five percent of each progress payment to ensure work is done properly.

However, some construction professionals expressed concerns that the language in the bill would have compromised potential claims owners or contractors may have when they paid retained amounts.

Perhaps as a result of these concerns, on February 28, 2013, HB 30-1090 was postponed indefinitely by a House committee.

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