HomeMy WebLinkAbout2021-cv-2063 - City of Fort Collins v. Open International, et al. - 354 - City Response R 50b MotionsIN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No.: 21-cv-02063-CNS-SBP
CITY OF FORT COLLINS,
Plaintiff/Counterclaim Defendant,
v.
OPEN INTERNATIONAL, LLC
Defendant/Counterclaim Plaintiff,
and
OPEN INVESTMENTS, LLC,
Defendant.
CITY OF FORT COLLINS’ RESPONSE TO DEFENDANTS’ RULE 50(B) MOTIONS
[ECF NOS. 302 AND 347]
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INTRODUCTION
The City of Fort Collins (the “City”) prevailed in this case and there has been no
error. This Court should deny Defendants Open International, LLC and Open
Investments, LLC (jointly, “Open”) continued arguments that judgment should enter in
Open’s favor and against the City in this action.1
First, Open is not entitled to judgment as a matter of law on the City’s fraudulent
inducement claim. Open never raised and long waived any argument that “Open
Investments” is not liable under the elements of the claim and cannot now seek to cut out
the entity it chooses from the jury verdict. There was more than sufficient evidence at trial
supporting the jury’s finding of Open’s fraud (together and for both entities) and this Court
should decline to set aside the verdict. Moreover, as repeatedly denied by this Court
throughout the case and at trial, the City’s claim is not barred by the economic loss rule
or the Master Professional Services Agreement’s (“MPSA”) integration clause and the
City did not waive its claim (or “rescission remedy”) as determined by the jury.
Second, Open is not entitled to judgment as a matter of law on the competing
breach of contract claims. As Open acknowledges in its recent motion, there is no contract
1 Contrary to the Court’s directive that a Rule 50(b) motion is “a one-shot deal” and that
the Court “d[id]n’t expect to see that in another motion later after judgment is entered”
(ECF No. 320-1. at 130:6-131:4), Open has filed three such motions: the first on
December 1, 2023 (ECF No. 302), the second on December 8, 2023 (improperly styled
as a Rule 52(c)) (ECF No. 314), and the third on April 23, 2024 (ECF No. 347). This Court
should strike the Rule 50(b) arguments included in Open’s April 23rd submission
especially since, in its Order on rescission damages, dated March 21, 2024, the Court
ruled on those same 50(b) issues (despite acknowledging that Rule 52(c) was for nonjury
trials) “in hopes of obviating the need to address these matters in the future . . . .” ECF
No. 328 at 5. Open now attempts to get a third shot and the Rule 50 arguments in ECF
No. 347 should be struck and denied for this reason alone.
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for which this Court could enter judgment on as “this case ceased to involve any breach
of the MPSA, or anything else to do with that Agreement, when the City elected to rescind
it following the jury’s verdict on its fraudulent inducement claim.” ECF No. 347 at 20. In
any event, judgment cannot enter as a matter of law since the City complied with the
notice-and-cure provision of the MPSA and, notwithstanding that, any such notice would
have been futile.
Finally, Open is not entitled to judgment as a matter of law on any mitigation
defense as Open failed to raise any such arguments prior to the jury verdict and the
defense fails to apply here.
The City respectfully requests that this Court deny Open’s multiple Rule 50(b)
motions and preserve the jury verdict.
LEGAL STANDARD
Judgment as a matter of law under Fed. R. Civ. P. 50(b) “should be cautiously and
sparingly granted.” E.E.O.C. v. Prudential Fed. Sav. & Loan Assoc., 763 F.2d 1166, 1171
(10th Cir. 1985). “Unless the proof is all one way or so overwhelmingly preponderant in
favor of the movant as to permit no other rational conclusion . . . judgment as a matter of
law is improper.” Greene v. Safeway Stores, Inc., 98 F.3d 554, 557 (10th Cir. 1006)
(internal citations omitted); Stroup v. United Airlines, Inc., No. 15-cv-01389-DDD-STV,
2019 U.S. Dist. LEXIS 230102, at *6 (D. Colo. Sept. 4, 2019). In considering a Rule 50(b)
motion, the Court must construe the evidence and inferences from it in favor of the non-
moving party. Tyler v. RE/MAX Mountain States, Inc., 232 F.3d 808, 812 (10th Cir. 2000).
In resolving a Rule 50(b) motion, the Court “will not weigh evidence, judge witness
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credibility, or challenge the factual conclusions of the jury.” Deters v. Equifax Credit Info.
Servs., Inc., 202 F.3d 1262, 1268 (10th Cir. 2000). Indeed, “it is the sole province of the
jury to appraise credibility, draw inferences, determine the weight to be given testimony
and to resolve conflicts in the facts.” Kenworthy v. Conoco, Inc., 979 F.2d 1462, 1468
(10th Cir. 1992) (quotation omitted).
ARGUMENT
I. Open Is Not Entitled to Judgment As a Matter of Law in Its Favor on the City’s
Fraudulent Inducement Claim.
Despite the jury’s verdict, Open seeks judgment in its favor on the City’s fraudulent
inducement claim. Open claims that (A) “Open Investments” is not liable under the
elements of fraudulent inducement though it only raised this issue after the verdict, (B)
that there was nonetheless no evidence at all supporting the jury’s finding of fraud, (C)
that the claim is barred by the economic loss rule and the MPSA’s integration clause, and
(D) that the City’s claim was otherwise waived and untimely. As discussed below, each
of these arguments lacks merit.
A. Open Long Waived Any Argument that “Open Investments” Cannot Be
Liable on the City’s Fraudulent Inducement Claim and, In Any Event, the
Evidence Supports the Finding Against “Open Investments.”
In its December 1st Rule 50(b) motion, Open seeks judgment in its favor on the
City’s fraudulent inducement claim, noting “[t]hat is doubly true as to Open Investments.”
ECF No. 302 at 8. In a footnote, Open referred to its related Rule 52(c) motion seeking
judgment on Open Investments’ liability under the City’s fraudulent inducement claim. In
its April 23rd Rule 50(b) motion, Open once again raised this issue, arguing that the
judgment as to Open Investments could not stand either under Rule 50 or 59. ECF No.
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347 at 20-21. For the reasons set forth below, and as already found by the Court in its
March 21st Order (ECF No. 328), this Court should decline to disturb the jury’s finding of
Open Investments’ liability—as a collective part of “Open”—on the City’s fraudulent
inducement claim for four reasons.
First, Open cannot raise an issue in a Rule 50(b) motion that was not made in a
Rule 50(a) motion. See M.D. Mark, Inc. v. Kerr-McGee Corp., 565 F.3d 753, 762 (10th
Cir. 2009). Open never claimed in either its oral or written Rule 50(a) motion that Open
Investments’ only potential liability under the fraudulent inducement claim (or any other
claim), was based on the guarantee provision of the MPSA. See generally Trial Tr. at
1225:24-1232:23, 1988:23-1990:19, 1993:8-1994:23 (lacking any such argument); ECF
No. 282; see also ECF No. 328 at 9 (finding that “Open never once raised this issue at
trial or in its oral Rule 50(a) arguments” or “in its written Rule 50(a) motion”). Rather, Open
first raised this issue in its written Rule 50(b) motion, post-jury verdict. ECF No. 328 at 9
n.6 (“Indeed, Open only advanced a full-throated argument on this issue for the first time
in its written Rule 50(b) motion.”) (emphasis in original).
But, “[t]o preserve issues under Rule 50(b), a party must have moved for judgment
as a matter of law under Rule 50(a) at trial.” Live Face On Web, LLC v. Integrity Sols.
Grp., Inc., 421 F. Supp.3d 1051, 1060 (D. Colo. 2019) (citing United Int’l Holdings, Inc. v.
Wharf (Holdings) Ltd., 210 F.3d 1207, 1228 (10th Cir. 2000) (“A party may not circumvent
Rule 50(a) by raising for the first time in a post-trial motion issues not raised in an earlier
motion for directed verdict.”)); see also Home Loan Inv. Co. v. St. Paul Mercury Ins. Co.,
827 F.3d 1256, 1266 (10th Cir. 2016) (“[A] party may only pursue a ground for relief in a
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post-verdict Rule 50(b) motion if that same ground for relief was first asserted in a pre-
verdict Rule 50(a) motion.”). That is, a party waives and forfeits the right to challenge an
issue that was not previously raised in a pre-verdict Rule 50(a) motion. Knowlton v.
Teltrust Phones, Inc., 189 F.3d 1177, 1183 (10th Cir. 1999) (holding that issue not raised
until post-verdict motion is waived); Stroup, 2019 U.S. Dist. LEXIS 230102 at *25 (finding
that movant “forfeited its right to challenge th[e] award in its Rule 50(b) motions since it
did not raise the issue in its pre-verdict Rule 50(a) motion”); Brillhart v. Philips Elecs. N.
Am. Corp., 179 F.3d 1271, 1275 (10th Cir. 1999) (“Failure to so move precludes a post-
trial motion . . . for judgment as a matter of law . . . .”).
This Court acknowledged Open’s waiver of this argument based on its failure to
raise the same in a Rule 50(a) motion pre-verdict. ECF No. 328 at 9 n.6 (“this argument
is probably already waived as unraised at the Rule 50(a) stage”). This Court should
confirm the waiver and deny Open’s arguments outright for failure to raise any arguments
about the liability of Open Investments (much less distinguish Open Investments from
Open International) in a pre-verdict Rule 50(a) motion.
Second, Open separately waived any affirmative defense that Open Investments
is not liable under the City’s fraudulent inducement claim through its actions and
arguments. As the Court already found based on the City’s response to Open’s purported
Rule 52(c) motion, Open’s argument “disclaiming any liability of Open Investments comes
far too late.” ECF No. 328 at 9. The jury found “Open” liable for fraudulent inducement.
ECF No. 296. Since the beginning of this action in July 2021 and throughout the entirety
of the case over a 2.5-year period, Open repeatedly represented itself “collectively” or
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“together” as “Open” or “Defendants,” including in the Notice of Removal (ECF No. 1),
Answer 2 (ECF No. 13), Partial Motion for Summary Judgment (ECF No. 125), Amended
Answer (ECF No. 194), Final Pretrial Order (ECF No. 230), Motion in Limine (ECF No.
240), Trial Brief (ECF No. 256), and written Rule 50(a) motion (ECF No. 282). At trial,
Open similarly chose to present itself as one collective entity. Open’s counsel affirmed
this treatment in both Opening Statements and Closing Arguments, asking the jury to find
for “Open” because “Open” was honest. Trial Tr. at 117:13-119:2, 2029:21-2041:7.
Even though it could have, Open did not seek separate liability instructions for each
defendant for any of the claims, nor did it object to the Court’s proposed opening jury
instructions provided prior to trial or to the final opening instructions filed on October 23rd,
which stated: “The defendants are Open International LLC and Open Investments LLC,
known as Open” and further provided “Open submitted its response to the RFP.” ECF
No. 275 at 8 (emphasis added). Open also failed to object during the Court’s live opening
instructions, stating: “The defendants are Open International, LLC and Open Investments,
LLC. We will now just refer to them as Open or Open International.” Trial Tr. at 20:1-
3 (emphasis added). Open failed to object to the closing jury instructions’ use of “Open,”
as defined in the opening instructions, including in Instruction No. 15 (Elements of
Liability—Fraudulent Inducement). See Final Jury Instructions, ECF No. 285; see also
Trial Tr. at 1941:3-1970:20 (charging conference).3
2 Despite Open’s misrepresentation, the City’s Complaint (and Amended Complaint)
referred to the Open defendants “jointly” as “Open” and asserted the Fraudulent
Inducement claim against “Open.” See Compl., ECF No. 6; Am. Compl., ECF No. 192.
3 Open agreed to the City’s request that element 5 for Instruction No. 15 on Fraudulent
Inducement be clarified to state “Open’s representation” (attributable to both Open
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Most importantly, Open did not object to the verdict form, which applied liability
jointly to the entities. ECF No. 296. Open presumably hoped both entities would be found
not liable, but now there is a verdict against both Open entities and Open cannot “undo”
the verdict against one of them here. See Farm Bureau Life Ins. Co. v. Am. Nat’l Ins. Co.,
408 F. App’x 162, 172 (10th Cir. 2011) (“[A] party waives its right to present a legal
argument on appeal by failing to object to [the] jury instruction[s] which authorized the
verdict.”) (quotations omitted); see also Glass Containers Corp. v. Miller Brewing Co., 643
F.2d 308, 312 (5th Cir. 1981) (“[A] litigant cannot strategically lie behind the log until after
the trial and receipt of evidence, argument, and charge to the jury before raising an issue
not found in the pleadings nor included in the pretrial order and then raise it when it is too
late for his opponent to do anything about it. The manifest prejudice of such tactics would
make a shambles of the efficacy of pretrial orders and a fair trial.”) (quotation omitted).
The Court already agreed that it was “not at leisure to ‘undo’ the verdict against one of
[the Open entities], or to order restitution from only one of them,”4 (ECF No. 328 at 10),
and this Court should once again decline to enter judgment in favor of Open Investments
based on argument that was never raised at any point in the case or trial prior to the
verdict and has long been waived. See Knowlton, 189 F.3d at 1183.
Third, Open’s explanation as to why it never raised this defense or issue until after
the verdict makes no sense and has no legal support. Open is currently seeking a
judgment, as a matter of law, that Open Investments is not liable under the elements
entities) rather than just “the representation.” Trial Tr. at 1943:4-10; ECF No. 285 at 16.
4 As Open acknowledges, the Court agreed with each of the City’s points on Open’s
waiver. See ECF No. 347 at 20 (citing to ECF No. 328 at 9-10).
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of the City’s fraudulent inducement claim because “Open Investments made no
misrepresentations to the City, had no intent to defraud the City, and received no benefit
from the City” but was “merely serv[ing] as the guarantor of a contract.” ECF No. 347 at
20, 21. But, if liability of Open Investments could not possibly be based on meeting the
elements of fraudulent inducement, but only as a “contractual guarantor” of Open
International, Open should have (and could have) asserted that argument long ago, at
least at the Rule 50(a) stage. Instead, Open now confusingly argues that “this point [about
Open Investments’ lack of liability for fraud] did not ripen until there was an election of
remedies with the City choosing rescission.” ECF No. 347 at 21. Under Open’s logic, it
would mean that had the City affirmed the contract after the jury’s fraud finding, this “point”
would not have been ripe and Open Investments would be liable for fraudulent
inducement. That makes no sense. Put differently, the remedy that the City elected does
not and cannot retroactively change the jury’s verdict on liability.
The issue of Open Investments’ liability was always at play and did not depend
solely on the contractual guarantee.5 Open cannot blame its own forfeiture and failure to
distinguish the two entities on the City’s election of remedies after the jury verdict on
Open’s liability. Were the Court to accept Open’s reasoning, it would mean that no
defendant would be required to raise any affirmative defense to liability (much less
present any evidence on the same) until after a verdict on liability confirmed that a specific
5 Indeed, the jury’s finding of Open’s liability for fraud had nothing to do with any provision
in the MPSA. See ECF No. 285 at 16 (Instruction No. 15, “Elements of Liability—
Fraudulent Inducement”). Rather, it required that “Open made a false representation of a
past or present fact to the City,” among other things. See id. (lacking any element about
guarantee under a contract).
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affirmative defense came “into play,” leaving the plaintiff with no opportunity to respond
to that defense either before or during trial. Open cites no authority for this novel argument
and, of course, Open never sought to bifurcate any liability of Open Investments from the
jury trial. Simply put, Open Investments’ liability is not absolved by rescission.
Finally, notwithstanding all of the above, Open’s belated argument that “Open
Investments was made a party-defendant solely because of its role as the guarantor of
Open International” (ECF No. 347 at 20-21) incorrectly guesses at the City’s purported
litigation strategy6, is contrary to extensive record evidence, and contrary to the jury
verdict. Despite Open’s rewriting of (and ignoring) the evidence at trial, there was clear
and significant evidence that “Open”—consisting of both Open entities as agreed to by
the parties and as instructed by the Court—made intentionally false statements to the City
in order to induce it into entering into a contract with Open that was signed by both Open
entities. The evidence demonstrated that the two Open entities acted together as one.
Specifically, the representations made to the City in T.E. 5 (including the fraudulent
representations) were made by “Open” as a whole. The RFP response expressly included
representations about Open Investments that Open International could not have made
alone. See generally T.E. 5. For example, Open’s representations asserted “30 years of
experience developing and implementing customer information, billing and field services
solutions in worldwide recognized comparable utility & telecommunications companies”
with a “reputation for agility and innovation,” along with decades of OSF development
and implementation. T.E. 5 at 8 (emphasis added). William Corredor, the CEO of Open
6 Open Investments was named as a party-defendant because it participated in the fraud.
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Investments, testified and admitted that Open International was only founded in 2015—
just 3 years prior to the RFP Response in 2018—and was set up to pursue the U.S.
market in which Open had no customers. Trial Tr. at 1681:12-14, 1694:6-20. In other
words, Open’s representations about its 30+ years of experience in the industry, its
capabilities, and the capabilities of Open’s OSF (which had been in existence since 1988
or 1989) could not solely be made by (or about) Open International, which had only been
in existence for 3 years. Rather, the representations were about “Open” as a whole, with
the decades of experience referring to Open Investments, which was in existence since
1987 (first as C-NIX and then as Open since 1997). Id. at 1685:12-1687:3; 1695:16-22.
Mr. Corredor admitted that Open Investments was in 19 countries and the RFP notes that
“Open” had built an impressive portfolio of clients “throughout 18 countries” over the
course “of our 30 years serving the utility and telecommunications sectors.” T.E. 5 at 11.
Further, despite Open’s current attempts to direct liability to Open International and
shield Open Investments, Open Investments was involved in the misrepresentations to
the City in the RFP Response. Mr. Corredor, as Open Investments’ CEO, testified that he
worked on various parts of the RFP to the City and further reviewed it for “historical
accuracy.” Trial Tr. at 1710:21-25, 1711:1-17, 1712:11-1713:15; see also id. at 1778:12-
19. W ith respect to representations about OSF, he stated “I’m the party responsible for
checking it.” Trial Tr. at 1784:11-1785:4. Likewise, Mr. Corredor testified that he met with
the City for a couple of days during the RFP response process and prior to the parties
signing the contract where he discussed “where we were as Open.” Id. at 1713:19-
1714:24. Open never tried to distinguish between representations made to the City by
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Open International versus Open Investments and cannot start now. To the contrary, even
Open’s trial counsel treated Open’s experience collectively in both opening statements
and closing arguments, choosing to refer to them together, “as a whole,” after only once
identifying the two entities in opening statements (and never even uttering the words
“Open Investments” in closing arguments):
There are two companies here. Open Investments LLC, a U.S. based
company from Florida, that’s the parent company. And then Open
International LLC, that’s the child, the subsidiary company also based in the
U.S. that services Open’s U.S. customers. Now, Open as a whole was
founded 36 years ago by William Corredor . . . . In its 36 years, Open
has implemented OSF in 19 countries for more than 100 different
utilities that serve millions of end-user customers like you and me.
. . .
For you to find that Open defrauded the City or negligently
misrepresented facts in its RFP response, you’re going to have to find
several farfetched things. . . . You would have to believe that Open was
going to launch in its 19th country after more than 30 years of success
and do so on false pretenses.
Trial Tr. at 118:12-17, 118:24-119:2, 2029:23-2030:1, 2034:11-14 (emphasis added).7
Simply put, the misrepresentations that defrauded the City were made by “Open,” jointly,
and were about “Open,” jointly.
This Court should deny Open’s request to undo the verdict against Open
Investments as fully waived and contrary to the evidence.
B. There was More Than Sufficient Evidence Supporting the Jury’s Verdict
on the City’s Fraudulent Inducement Claim.
7 Even Juan Corredor, the son of William Corredor and the Chief Technology Officer of
Open, did not know whether or how Open International and Open Investments were
legally related or whether one was the parent of the other. Trial Tr. at 1602:16-1603:7.
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Open asks the Court to overturn the verdict on the City’s fraudulent inducement
claim because “there was no evidence of a misrepresentation of material fact.” ECF No.
302 at 5. Open chose to ignore rather than reckon with the copious evidence admitted at
trial showing Open’s fraudulent representations and the City’s reliance on them. This
Court should deny Open’s motion as it did repeatedly at trial (and at the summary
judgment stage) as more than sufficient evidence supports the jury’s verdict finding Open
liable for fraudulent inducement.8
1. Open Ignores Significant Admitted Evidence of Fraud.
The most striking example of Open’s false representation was its fraudulent
grading of it software, which was not fully uncovered until discovery in this case and was
presented (and largely unrebutted by Open) at trial. When talking to the City, responding
to the City’s RFP and grading the functionalities of its OSF product into the functional
matrix, Open graded approximately 89.7% of the required functionalities “A”—or as
already existing in the current system. See generally T.E. 5 at 508-784; see also Trial Tr.
at 945:18-946:6 (the City’s expert’s quantification of the grading). Indeed, the RFP
required that “A” be used to grade those functionalities that are “part of base system” and
8 The misrepresentation evidence presented by the City was not just regarding promises
to perform in the future, as Open asserts. Indeed, the jury was required to (and did) find
that “Open made a false representation of a past or present fact to the City during the
request for proposal process.” ECF No. 285 at 16 (Instruction No. 15, Element #1)
(emphasis added). In any event, the jury was properly instructed that a promise to do
something in the future was still a false representation “if the person making the promise
did not intend to keep the promise when the promise was made” and similarly that “a
statement of intent to do something in the future is a false representation if the person
making the statement did not intend to do it when the statement was made.” Id. at 19.
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for which “No Modification is required,” while “B” be used for functionalities still “In
Development” at the time of the response and which are “Not Currently in the system….”:
T.E. 5 at 508.9 Yet, here, despite having graded almost 90% of the required functionalities
as “A,” evidence at trial showed that Open’s March 7, 2018 internal assessments (which
took place before Open’s submission of the RFP response and were never disclosed to
the City) confirmed that Open’s OSF actually only met 59.4% of the City’s required
functionalities as “Current functionalities,” with 24.9% simply “Planned for 2018,” 6.1%
being other “Future developments” (beyond 2018), and so on:
9 Grades C through F indicated additional levels of development, modification and coding,
and Grade G indicated that the functionality would not be possible. See T.E. 5 at 508.
Consistent with the language in the RFP, the sole industry expert at trial, Jon Brock,
testified that “[i]ndustry standard is to provide factual and accurate responses of [the
vendor’s] product or solution at that time, at the time of response,” which means the
“then-current functionalit[ies].” Trial Tr. at 938:25-939:7 (emphasis added); see also id.
at 940:3-942:6. This is important and valuable to a utility because it provides “the ability
to differentiate across bidders” and otherwise plan for the project. Id. at 939:8-20.
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T.E. 74. In fact, Mr. Parrott admitted that the percentage of OSF’s then-current
functionalities was 59.4% (should be graded A) and that the planned functionalities for
OSF was another 24.9% (should be graded B or lower) (with the two adding up to 84.3%).
Trial Tr. at 1414:5-12. This was consistent with other internal Open documents that
confirmed OSF only had 59.4% of the functional requirements as current functionalities,
with 24.9% of the required functionalities in product development (“desarollo producto”)
for 2018:
T.E. 741; see also Trial Tr. at 1415:7-1417:23 (admissions as to the same by Mr. Parrott).
Mr. Parrott provided no contrary testimony or explanation on re-direct. See generally Trial
Tr. at 1243:11-1376:24 and 1463:13-1476:7 (lacking the same).
This intentional, bold, fraudulent grading by Open was the heart of the City’s fraud
case and was only fully discovered once the City obtained these documents during this
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litigation. Open chose to ignore, rather than account for this compelling evidence, in its
multiple Rule 50(b) motions.
The City also identified significant other misrepresentations which the jury could
have also considered to support its verdict on the City’s fraud claim. See Johnson v. Ablt
Trucking Co., 412 F.3d 1138, 1144 (10th Cir. 2005) (“If there is any plausible theory that
supports the verdict, the reviewing court must affirm the judgment.”). In any event, “the
mere existence of contrary evidence does not itself undermine the jury’s findings as long
as sufficient other evidence supports the findings.” Stroup v. United Airlines, Inc., 26 F.4th
1147, 1157 (10th Cir. 2022) (quotations omitted). Moreover, the Court previously denied
Open’s Rule 50 motion at trial, finding:
With respect to the fraud, I find the plaintiff has presented sufficient
evidence from which a jury could conclude that there was a
misrepresentation on a current fact. While defendant, I realize, has called it
a typo, it is in there, and I think the jury needs to be able to reach its decision
based on that, and it is not proper for me to take that from them.
I would also note that I don’t – I don’t think the evidence even aside from
that typo is clear that they were not representing a current product. Again,
there’s the dispute about what is A versus what B means. To me, that is
completely a jury decision to conclude whether defendant was making those
representations as to a current fact or a fact in effect at the time the product
went live, so that will go to the jury.
Trial Tr. at 1235:20-1236:9; see also Trial Tr. at 1999:10-13 (denying renewed Rule 50
motion finding: “With respect to the remainder of the Rule 50, it will be denied. The fraud
negligence claim, I find there’s sufficient evidence on that. I find there’s sufficient evidence
for the jury to conclude that.”). Open’s other misrepresentations include at least
misrepresentations regarding the “portal,” the version of OSF, the nature of the software
and the schedule.
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Portal: Open graded its portal as all A’s (with one G grade). See generally T.E. 5
at 508-784. Juan Corredor testified that Open’s RFP response described Open’s
“homegrown” portal. ECF No. 266-1 (deposition designation of J. Corredor, Vol. 1)10 at
113:9-13; see also ECF No. 266-2 (deposition designation of J. Corredor, Vol. 2)11 at
125:15-17. But, as William Corredor admitted, Open had decided on March 1, 2018—
prior to its submission of the RFP response to the City—to stop developing its
purported “homegrown” portal and go with Milestone’s portal. Trial Tr. at 1795:17-24; see
also id. at 1797:1-4. That is, Open intentionally provided the City with grades for an
alleged “homegrown” portal it had already decided not to use (and of which Open never
provided any evidence about its purported capabilities or even its actual existence at trial)
and thus knew it would not use, while falsely representing to the City that almost all of the
required portal functionalities were grade A. William Corredor confirmed that Open knew
that it was grading its homegrown portal in the functional matrix. Trial Tr. at 1796:4-11.
Juan Corredor testified that Open never provided the City with a functional matrix grading
the functionalities of the Milestone portal. ECF No. 266-2 (deposition designation of J.
Corredor, Vol. 2)12 at 125:15-22. Indeed, even after Open finally received the source code
for the Milestone portal in late July 2018, it did not update the grading in the functional
matrix to reflect the functionalities of the Milestone portal at any time before the parties
executed the MPSA. Id. at 126:10-127:14. Mr. Corredor further testified that he did not
recall anyone at Open providing the City with any supplement saying that it was actually
10 See also ECF No. 270 and 270-1 (Order on deposition designations of J. Corredor).
11 See also ECF No. 270 and 270-1 (Order on deposition designations of J. Corredor).
12 See also ECF No. 270 and 270-1 (Order on deposition designations of J. Corredor).
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using a different portal than the one it had made representations about in its RFP
response. ECF No. 266-1 (deposition designation of J. Corredor, Vol. 1)13 at 120:10-16.
Likewise, Mr. Corredor confirmed that no one at Open told the City that it did not grade
the Milestone portal in the RFP response or that it graded a different “homegrown” portal.
Trial Tr. at 1632:17-1633:12.
Version: While Open argued that it graded a future release of version 8.0, the
RFP Response further misrepresented that Open’s “version 8 was released in 2017”:
T.E. 5 at 312.
Nature of the Software: Open misrepresented that its product had “out-of-the-
box” functionality and was highly configurable and flexible—all past or present material
facts about its OSF. Mr. Brock, the unrebutted technical expert, did not see any evidence
supporting such representations. Trial Tr. at 955:7-958:14. Testimony by both Mr. Keane
and Dr. Frey (also an expert) confirmed Mr. Brock’s opinions. See Trial Tr. at 394:24-
395:4, 398:2-20, 425:6- 427:20 (Mr. Keane’s testimony that Open represented its system
as “out of the box” and as “very flexible, easy-to-configure” but that it was revealed that
the system often required complete rebuilds of the product and was not easy to work
13 See also ECF No. 270 and 270-1 (Order on deposition designations of J. Corredor).
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with); see id. at 683:1-18, 699:24-702:2 (Dr. Frey’s testimony about configurability and
her experience with the lack of configurability of Open’s OSF, which was cumbersome).14
Schedule: Open represented a 13-month schedule with a 4-month post go-live.
See T.E. 5 at 156 (describing two rollouts). Contrary to Open’s assertion that it
represented the schedule to the City as “very aggressive,” Open represented that this
timeframe was “quite adequate, based on [its] experience” of over 30 years and its view
of the functional scope:
Id. (emphasis added). But Open (and only Open) knew it did not meet 90% of the
functionalities out of the box, as set forth above. Mr. Parrott testified that Open had (1)
not done an implementation that included the five utilities at issue in over a decade, (2)
had never done an installation of this version of the software before, and (3) never done
an implementation in North America or in English. ECF No. 268-1 (deposition designation
of H. Parrott, Vol. 1)15 at 212:16-213:9. Mr. Parrott also testified that utility billing
installation projects can typically take up to 30 months. Id.16 at 210:11-17. Despite all of
the above, Open misrepresented the 13-month timeframe to go-live as “quite adequate”
based on its experience.
14 Contrary to Open’s arguments that the City knew it was “beta” customer or the first U.S.
customer, Open never represented its OSF as a “beta” product. See generally T.E. 5
(lacking any such assertion). Rather, Open represented that it had 30 years of experience
developing OSF and had implemented the same all across numerous countries. See id.;
see also Trial Tr. at 963:4-10 (Mr. Brock testimony on the same).
15 See also ECF No. 270 and 270-3 (Order on deposition designations of H. Parrott).
16 See also ECF No. 270 and 270-3 (Order on deposition designations of H. Parrott).
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Importantly, the Court need not determine which of these misrepresentations the
jury may have determined constitute fraud (and were not waived) and which constitute
negligent misrepresentation (and were found to be waived). There is adequate evidence
supporting the verdict and “[i]f there is any plausible theory that supports the verdict, the
reviewing court must affirm the judgment.” Romero v. Helmerich & Payne Int’l Drilling Co.,
768 F. App’x 838, 844 (10th Cir. 2019). As set forth herein, the jury had sufficient evidence
that Open misrepresented past or present material facts about the current functionalities
of its OSF to the City and this Court should deny Open’s motion.
2. Substantial Evidence Shows the City’s Justifiable Reliance on
Open’s Misrepresentations.
The jury was instructed that the City must have relied on Open’s representation
and that the City’s reliance must have been justified. ECF No. 285 at 16 (Instruction No.
15). There was more than substantial evidence supporting the jury’s verdict and finding
of City’s justifiable reliance on Open’s misrepresentations.
The City’s Reliance: As to reliance, the jury instruction defined this as: “The City
relied on Open’s representation if it believed it was true, and based on that representation
took an action it otherwise would not have taken.” ECF No. 285 at 20 (Instruction No. 19).
Here, the City believed the false grading in the RFP response (T.E. 5) to be true
because the key piece of evidence, Open’s internal grades (T.E. 74), was never shared
with the City. Ms. Walder testified that it was the vendor’s responsibility under the RFP
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“to ensure that that functional matrix is completed as accurately as possible.” Trial Tr. at
613:3-20.17 The City thus believed the false grading.
The City further relied on Open’s false grades and took action it otherwise would
not have by selecting Open as the winning bidder and entering into a contract with Open.
Several witnesses for the City testified that the misrepresentations about the then-existing
functionalities of OSF impacted their decision to select Open and that had they known
that OSF only had 59.4% of the required functionalities at the time of the RFP response,
they would not have selected Open. See Trial Tr. at 396:3-399:13 (testimony of Mr. Keane
regarding the importance of the portal, the functional matrix grades, and the configurability
of OSF represented by Open in selecting Open as the vendor); id. at 467:10-468:1,
473:11-475:11 (testimony of Ms. Rosintoski). In fact, Ms. Rosintoski explained that had
Open stated to the City that it only had 59.4% of the required functionalities existing in
OSF at the time of the RFP response, it would have “[a]bsolutely” impacted her decision
in the RFP process, explaining: “when you’re going through the RFP process, you have
a grading system, and you look at what the vendor is describing as being available, and
if it’s not available as you look at the other vendors, you grade it appropriately.” Trial Tr.
at 473:24-475:11. Ms. Walder similarly explained that had Open actually disclosed its
internal 59% assessment of current functionalities, it would have greatly impacted her
17 City witnesses testified as to the importance of the distinction that an A grade (indicating
that the system met the City’s requirements “as it existed”) and a B grade (indicating that
more development would be required) provided and how “[t]here wouldn’t be a difference”
between those grades if a vendor could grade functionalities not currently in the system
as grade A simply because the vendor thought it could build it by go-live. Trial Tr. at
662:15-664:4.
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evaluation of Open because “that would have told me that they did not have a current
system in production to meet the requirements that we needed and the system that we
wanted to implement.” Id. at 617:12-619:2; see also id. 642:18-643:8 (explaining that the
expectation was for Open to fill out the functional matrix based on current functionalities
of OSF).
The City’s Reliance was Justified: As to the element of justifiable reliance, the
jury was instructed that the City would be justified in assuming that a representation was
true if: (1) a similar situated entity, with similar experience, would rely on that
representation and (2) the City was under no duty to investigate that representation—
unless the City knew specific facts that would cause a similar entity to be suspicious and
investigate and the City had reasonable opportunity to investigate. ECF No. 285 at 21
(Instruction No. 20).
Here, Open was the expert and the City lacked experience in these type of projects
and similarly situated entities with similar experience would rely on the vendor in such
circumstances. Indeed, as Mr. Brock explained, these types of projects come around
every 10 to 20 years for utilities and therefore they are not something that utilities have
experience in doing often and it was appropriate for the City to rely on the RFP response.
Trial Tr. at 939:21-940:2; 970:3-12. Dr. Frey similarly testified that “a complete redo of a
customer information system is very rare” and that it is “a generational change, so like
every 20 or 30 years” or even longer. Trial Tr. at 705:17-23. In line with this, numerous
witnesses at trial confirmed that Open, as the vendor, was the expert in not only its
software but implementation projects. See Trial Tr. at 395:5-10 (testimony of Colman
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Keane); 791:16-23 (testimony of Greg Galluzzi); ECF No. 261-1 (deposition designation
submission of D. Bishop)18 at 75:22-25, 139:2-140:7, 167:10-15; ECF No. 268-2
(deposition designation of H. Parrott, Vol. 2)19 at 442:12-25. In fact, Mr. Parrott admitted
that he expected the City to rely on Open’s representations made in the RFP response:
“I would expect them to do that, yeah.” ECF No. 268-1 (deposition designation of H.
Parrott, Vol. 1)20 at 151:25-152:6 (emphasis added).
Likewise, the City’s reliance on Open’s misrepresentations was justified because
it was under no duty to investigate those representations as the City had no knowledge
of any specific facts to be suspicious of and no reasonable opportunity to investigate.
Indeed, Mr. Parrott admitted that no one at Open told the City about Open’s internal
grading which was an Open document. Trial Tr. at 1419:2-4. Several City witnesses also
confirmed that no one at Open told the City the truth about its misrepresentations. See
Trial Tr. at 397:15-24 (Mr. Keane testifying that based on Open’s grading, he believed
that the portal broadband-specific functionalities were ready to go and out of the box and
that no one at Open ever told him that the functionalities graded as A were not actually
currently existing in OSF but were in development); id. at 473:20-23 (Ms. Rosintoski
confirming that no one at Open told her that OSF only had 59% of the functionalities ready
to go at the time of the RFP response); id. at 617:22-24 (Ms. Walder confirming that she
did not receive Open’s internal assessment while she was evaluating Open’s RFP
response). Ms. Walder also testified that Edith Mercado of Milestone, acting as her
18 See also ECF No. 263 (Order on deposition designations for D. Bishop).
19 See also ECF No. 270 and 270-3 (Order on deposition designations of H. Parrott).
20 See also ECF No. 270 and 270-3 (Order on deposition designations of H. Parrott).
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counterpart on Open’s side, referred to the functional matrix as “our bible,” further
supporting the City’s justifiable reliance on the same. Trial Tr. at 619:6-17. She also
explained that there was no opportunity for the City to investigate the representations. Id.
at 613:21-614:2. Mr. Parrott further confirmed that there was no way, based on the
functional matrix Open submitted to the City, for the City to tell what was going to be new
functionality versus what was an existing functionality. Id. at 1419:5-10. The City justifiably
relied on Open’s misrepresentations and substantial evidence supports the same.
3. Evidence at Trial Showed that Open Made Fraudulent Statements
With the Intent that the City Would Rely on Them.
Evidence showed that Open had a significant stake in getting the City as its
customer in the U.S. and was highly motivated. In February 2018, Mr. Parrott sent an
internal email making clear that the RFP for the City was “the most important
opportunity we have in North American” and that “[n]ot having a winning [RFP]
proposal cannot be an option for us!!”:
T.E. 88 (emphasis added).
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To that end, Open even wrote its own customer reviews that were being submitted
as “references” to the City. In a May 10, 2018 email, Jesus Sanchez of Open drafted and
sent answers for Open’s customers to use and send to the City in response to the City’s
questions, with the following instruction: “Please remember that the only valid answer
for the USA people is that everything is excellent, because when you say there is
something that can be improved, they interpret it as if everything was wrong.” T.E. 101 at
1 (emphasis added). In circulating the draft internally at Open, others (including Mr.
Parrott) raised the alarm that Open should make sure that its draft of answers for
customer reviews to the City “don’t sound similar” in order to avoid “rais[ing] the alarms
of Fort Collins.” Id. In fact, Mr. Parrott warned that they sounded similar and Open should
hit the brakes:
Id. (emphasis added). Mr. Parrott admitted at trial that Open did not tell the City that it
was getting involved in the customer reviews to be sent to the City. Trial Tr. at 1405:20-
22.
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All of this was done by Open with the intent to deceive the City to rely on those
false statements, select Open as the winning bidder, and induce the City into the contract.
As set forth at trial and confirmed by the jury verdict, that is exactly what happened and
this Court should deny Open’s motion.
C. As Repeatedly Denied by this Court, the City’s Fraudulent Inducement
Claim was Not Barred by the Economic Loss Rule or the MPSA’s
Integration Clause.
The Court has repeatedly denied Open’s arguments that the City’s fraudulent
inducement claim was barred by the economic loss rule and the integration clause,
including in its order denying Open’s summary judgment motion and in denying Open’s
Rule 50 motions at trial. Trial Tr. at 1235:12-14, 1236:10-11; ECF No. 225 at 10. For the
same reasons, this Court should deny Open’s Rule 50(b) motion on the same.
Economic Loss Rule: As the City previously noted in responding to Open’s
summary judgment motion, the economic loss rule “does not bar . . . claims . . . premised
on pre-contractual misrepresentations” which are made “to induce the formation of the
contract itself.” Levin v. Five Corners Strategies, 541 F. Supp. 3d 1262, 1270 (D. Colo.
2021). “The critical question in this case, then, is not whether . . . tort claims are related
to the promises that eventually formed the basis of the contract,” but whether a software
provider “wrongfully induced him into entering a contractual relationship knowing that it
did not have the capability to perform any of the promised web-related services.” Van
Rees v. Unleaded Software, Inc., 373 P.3d 603, 607 (Colo. 2016).
Open intentionally misrepresented its software functionalities to the City when it
submitted its RFP response in March 2018. These misrepresentations “wrongfully
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induc[ed] a contract,” that was not signed until August 2018 and arose “independent from
[the duties] created by the contract.” See id. Because Open’s misrepresentations
predated, and induced, the MPSA, the City’s claims were not barred by the economic loss
rule. The Court agreed and previously denied Open’s same arguments on the exact same
facts in its summary judgment motion and at trial. ECF No. 225 at 10 (“[N]otwithstanding
the RFP Responses’ incorporation into the parties’ contract, . . . the economic loss rule
does not bar claims ‘based on pre-contractual misrepresentations’ which are made ‘to
induce the formation of the contract itself.’”); Trial Tr. at 1236:10-11 (“The economic loss
rule I’ve already dealt with in the summary judgment order, and I won’t add anything new
to that.”). Open identifies no new facts and it cites to cases where a party’s tortious
conduct arises out of a contractual duty or related to allegations that are post-contractual
do not support judgment barring the City’s fraudulent inducement claim post-judgment.21
Integration Clause: Likewise, the integration clause in the MPSA does not impact
whether the economic loss rule applies as the clause presents reliance on prior
misrepresentation claims only when it contains “clear and specific language” concerning
such prior misrepresentation claims. See Pensford Fin. Grp. LLC v. 303 Software Inc.,
2019 U.S. Dist. LEXIS 79436, *5-6 (D. Colo. May 10, 2019) (integration clause was not
“clear and specific” enough to trigger economic loss rule). The Court previously found that
21 Indeed, the only new case Open now cites is 1055 Inv. LLC v. 1055 E. 45th Ave. II LLC,
2018 Colo. Dist. LEXIS 4697, at *20-23 (Denver Dist. Nov. 2, 2018). That case involved
a fraudulent inducement claim that relied on fraud and misleading acts “that occurred
during or after the contract was formed,” there were “no allegations that prior to the
formation of the contract, [the defendant] was incapable of performing his contractual
duties,” and “several of the allegations . . . [we]re post-contractual and not pre-
contractual.” Id. at *22-23.
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the clause at issue failed to contain any “‘clear and specific language’ concerning the
subject of the misrepresentation” and thus did not prevent the City’s reliance on the prior
misrepresentations. ECF No. 225 at 10. Accordingly, the Court declined to enter judgment
as a matter of law and further denied the related Rule 50 motion at trial. There are no new
facts or issues now and this Court should similarly deny Open’s Rule 50(b) motion on the
same arguments.
D. Likewise, the City’s Fraudulent Inducement Claim was Not Untimely or
Waived.
Neither of Open’s waiver arguments—including waiver of the fraudulent
inducement claim and the waiver of the “rescission remedy”—justify overturning the jury
verdict to enter judgment as a matter of law against the City. As previously noted in
response to Open’s “Rule 52(c)” motion, the jury found, based on a myriad of evidence,
that the City did not waive its right to rescind. Moreover, these same arguments were
already denied and rejected by this Court in summary judgment and on Open’s “Rule
52(c)” motion. The Court should once again deny Open’s waiver arguments.
First, the issue of waiver is not “governed by different tests”—with one for waiver
of the “claim” and one for waiver of the “remedy”—as Open asserts. As Open
acknowledges, this Court has already denied Open’s very same arguments in its
purported Rule 52(c) motion (ECF No. 314), finding “no reason to disturb the jury’s clear
verdict on the waiver issue by passing separately upon the City’s right to rescind.” ECF
No. 328 at 5-8. This Court should once again deny Open’s unsupported arguments.
Indeed, “rescission” is not a separate “claim” but merely the remedy the City was
entitled to and elected after prevailing on its fraudulent inducement claim and with the
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knowledge that the remedy remained available. Under Colorado law, a party’s “right to
rescind and sue [is] waived [only if] the defrauded party with full knowledge, intentionally
condoned the fraud,” and that “whether fraud has been waived involves questions of fact,
particularly the fact of intent . . . properly for the jury.” Bankers Trust Co. v. International
Trust Co., 108 Colo. 15, 31 (1941) (internal citations omitted) (emphasis added). This
Court already rejected Open’s assertion “that Gladden’s purported ‘rescission waiver’ test
is for the Court to apply” and “that, under Gladden, the City’s duty to rescind is tied to a
lower threshold—i.e. its discovery of problem with Open’s software, rather than its
discovery that Open’s defective software was a product of its fraud.” ECF No. 328 at 7
(citing ECF No. 314 at 3-5). The Court explained:
The trouble for Open, however, is that Colorado courts do not treat
fraudulent inducement waiver and rescission waiver as separate claims,
governed by different tests, and decided by different factfinders. Indeed,
courts in this district have treated the language in Gladden and Elk River as
consistent, if not wholly equivalent. See e.g., In re Mascio, 454 B.R. 146,
151 (D. Colo. 2011) (“To sustain the defense [of waiver], ‘it must appear that
the defrauded party, with full knowledge of the truth respecting the false
representations, elected to continue to carry out the agreement.’ Elk River
Assocs. V. Huskin, 691 P.2d 1148, 1154 (Colo. App. 1984) (emphasis
added). Full knowledge entails ‘knowledge of the substantial and material
facts constituting the fraud.’ Gladden v. Guyer, 162 Colo. 451, 426 P.2d
953, 955 (1967).”).
Id. Indeed, Gladden and Elk are not in conflict, do not provide for a “lower threshold” for
rescission, and Open once again fails to cite to any case recognizing the existence of two
separate tests.
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Second, notwithstanding the above, any “rescission waiver” was already tried to
and decided by the jury.22 Open previously conceded this point by arguing “rescission
waiver” in its oral Rule 50(a) motion during trial.23 See Trial Tr. at 1227:22-1228:24.
Specifically, Open’s counsel argued:
I will not go through with that recitation again, but note that as to rescission,
waiver applies even more strongly. That as soon as a party has
knowledge of fact sufficient to seek rescission, so knowledge of facts
sufficient to claim fraud in the inducement, that’s when they have to
rescind. They can’t step back and say, hey, we’re going to go forward with
the contract and then if we don’t like how it’s playing out, then we’ll go back
and seek rescission.
Id. at 1228:12-19 (emphasis added). In denying Open’s oral Rule 50(a) motion, this Court
made clear that waiver of rescission was for the jury to decide:
The waiver claim . . . I find those to be questions of fact. . . . I find that to be
within the realm of the jury’s decision. . . . [T]here’s evidence from which
they could determine that the City should have moved for rescission or said
they were rescinding earlier and didn’t. . . . I find that to be a question for
the jury.
22 To the extent that Open insists on arguing that “rescission waiver” is a separate
affirmative defense, Open never actually pled waiver of a rescission remedy, another
waiver fatal to its argument. See ECF No. 194, Open’s February 14, 2023 Answer to the
City’s Amended Complaint, (“Seventh Affirmative Defense: The City’s claims are barred
by the doctrines of waiver and estoppel.”) (emphasis added); see also Rudd v. Rogerson,
162 Colo. 103, 106-07, 424 P.2d 776, 778-79 (1967) (Defendant abandoned affirmative
defense that the plaintiff waived right to rescind because “the question of waiver of that
right was not placed in issue by the pleadings in the action.”). In fact, this Court
acknowledged in its March 21st Order that “if, as Open maintains, waiver of fraudulent
inducement (as a claim) and waiver of rescission (as a remedy) constitute separate
defenses, it would appear that Open specifically pleaded the former as an affirmative
defense, but never the latter.” ECF No. 328 at 5, n.4 (emphasis added).
23 Open conceded the point again by filing both a written Rule 50(a) and a Renewed Rule
50(b) Motion asserting the same waiver arguments. See ECF No. 282 at 13; ECF No.
302 at 12, n.5 (asserting waiver of rescission).
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Trial Tr. at 1236:14-22. The Court confirmed the same in denying Open’s prior Rule 52(c)
motion: “Here, the action was tried to a jury—including Open’s affirmative defense of
waiver.” ECF No. 328 at 4. As to what the Court would decide, the Court explained that
it would determine any rescission damages following the verdict and election. Trial Tr.
at 1238:12-1239:4.
Moreover, the Court made clear that the issue of “waiver” would be included as
“part of the first set of instructions” to the jury prior to the City’s election of remedies and
clarified—upon Open’s counsel’s specific request—that the waiver instruction would be
the CJI instruction and would encompass waiver of rescission. Id. at 1239:8-1240:5.
Despite knowing that the Court had determined all waiver defenses (whether of fraud or
rescission) went to the jury under a single waiver instruction, Open failed to timely object
to the waiver instruction—Instruction No. 23 (ECF No. 285 at 24)—at the charging
conference and waived the issue.24 Trial Tr. at 1944:24-1945:13; see Farm Bureau Life
Ins. Co. v. Am. Nat’l Ins. Co., 408 F. App’x 162, 172 (10th Cir. 2011) (“[A] party waives its
right to present a legal argument on appeal by failing to object to [the] jury instruction[s]
which authorized the verdict.”) (quotations omitted). On November 3rd, the jury rejected
any waiver defense.25 ECF No. 296 at 2.
24 Open never even proposed any additional or different “rescission waiver” instruction
and did not submit one in its “tendered and rejected” instructions. See ECF Nos. 284,
289, 290, 294.
25 The waiver defense was appropriately sent to the jury because it is a fact issue and
appropriately handled with a single instruction. In fact, all of the purported facts relied on
in Open’s Rule 50(b) motions to assert a waiver of rescission are the same facts that the
jury considered when denying Open’s affirmative defense of waiver. See ECF No. 302 at
11-13 and ECF No. 347 at 12 (alleging what the City knew and when, despite purportedly
continuing to use the product). The same facts were also the basis of Open’s prior
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Third, even if Open had not waived the issue at every possible juncture, the jury’s
verdict finding that Open failed to prove its affirmative defense of waiver (ECF No. 296 at
2) is supported by more than sufficient evidence precluding any judgment as a matter of
law that the City either waived the claim or failed to promptly seek rescission. The City
only obtained “full knowledge” of the false representations in discovery during the
litigation, therefore it was impossible for the City to waive the claim (or remedy) prior to
filing suit. Like at the summary judgment stage, Open again argues that because it knew
there were problems with OSF, the City’s decision to continue with the project, including
by signing the First Amendment and PCR 29, meant that the City waived its claim for
Open’s fraud and the ability to rescind.26 ECF No. 302 at 11-13; ECF No. 347 at 12.
Again, Open conflates discovery of problems with its software performance with the
discovery that those problems were caused by its false representations. See e.g., United
States Welding, Inc. v. Tecsys, Inc., 2016 U.S. Dist. LEXIS 193130, *10-11 (D. Colo. Sept.
6, 2016) (party discovered software flaws and requested additional resources, but did not
discover the “misrepresentations tied to th[o]se events”). Additionally, “[t]o sustain the
defense of the ratification and waiver, it must appear that the defrauded party, with full
arguments to the Court related to both waiver of rescission and its equitable defenses
precluding the City’s right to rescission. See Trial Tr. at 1227:22-1228:24, 1989:17-22.
26 Contrary to Open’s assertion that the City claimed “that only 58% of the bargained-for
functionalities had been successfully delivered” for the software (ECF No. 347 at 12), the
58% assessment only concerned one of the City’s interim assessments on the “delivery
of Broadband” functionalities (T.E. 76 at 1 (emphasis added)) and did not encompass the
full set of functionalities represented in the functional matrix for broadband and utilities.
As noted above, the City did not fully know that Open defrauded the City with its fraudulent
representations in the RFP response until discovery of Open’s internal grading (T.E. 74)
which Open had in hand (but did not disclose) at the time it was responding to the City’s
RFP with fraudulent, inflated grades in March 2018.
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knowledge of the truth respecting the false representations, elected to continue to .
. . the agreement.” Gronewoller v. DM Capital, Inc. (In re Mascio), 2007 U.S. Dist. LEXIS
86690, *16 (D. Colo. Nov. 13, 2007) (quotations omitted) (emphasis added); Ewing v.
Colorado Farm Mutual Casualty Co., 133 Colo. 447, 451-52 (1956) (waiver is the
intentional relinquishment of a known right and can only occur where a party has full
knowledge of all the relevant facts and an express intent to relinquish its right).
There was more than sufficient evidence at trial supporting the jury’s verdict and
finding that Open failed to prove its affirmative defense of waiver. Indeed, as Travis Storin
testified, it was not until the parties’ functional matrix assessment in May 2021 (following
the TMG report mid-April 2021) that showed that some 12% of the system was functioning
as intended that the City began realizing that Open defrauded it. Trial Tr. at 182:24-
183:14, 201:5-10 (testifying that his realization that Open made a misrepresentation about
its product “was a gradual process” and that “the TMG report and functional matrix work
was the point in time where [he] said I think we may have gotten swindled”); see also id.
at 633:7-634:10 (Ms. Walder’s description of the functional matrix review and testimony
that the results of that review were “[a]stonishing” because after years of working with
Open, “only several hundred [functionalities] . . . were accepted and passed in testing”
and “the system was not working” and “could not bill”). At subsequent meetings with
Open, Mr. Storin confirmed that the City also learned from Juan Corredor that the e-
commerce functionality represented as being part of the portal never actually existed.
Trial Tr. at 185:8-187:1. After the meeting, the City promptly sent its notice to Open, on
May 28, 2021, raising Open’s misrepresentations about its existing product and raising
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rescission of the agreements. T.E. 66. Subsequently, the City received Open’s June 2021
reset proposal which showed the results of the functional matrix audit and confirmed that
only 240 of the 2,000+ functional requirements (i.e. below 12%) had been accepted, and
thus further raised Open’s fraud in previously grading the functionalities of OSF:
T.E. 323 at 10 (emphasis added); Trial Tr. at 183:15-185:7 (Mr. Storin’s testimony on the
same); id. at 634:11-636:8 (Ms. Walder’s testimony explaining the results). In fact, the
reset proposal required millions of additional dollars and over a year to provide the
required functionalities—90% of which Open had previously misrepresented as grade A—
in addition to managed services, further supporting Open’s fraud. See generally T.E. 323;
Trial Tr. at 195:23-199:25. Shortly after, the City terminated the agreement and filed suit
on July 2, 2021. Trial Tr. at 199:20-25; ECF No. 6. The City would only learn the full nature
of the fraud and its roots in the RFP when it received T.E. 74 in discovery and asked
Open about it in depositions.
Mr. Storin testified that upon terminating the agreement, the City acted promptly to
look for a second billing system for broadband and implemented the replacement
broadband system as fast as the City possibly could, ceasing the use of Open’s product
immediately upon that completion. Trial Tr. at 200:1-201:1. However, because the City
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had broadband customers and still had to collect and continue the operation of
broadband, it used Open’s broadband billing “solution” for that period of time. Id. Aaron
McClune of TMG testified that the City began the implementation project for the
replacement with GLDS—because the City had no other option as it did not want to start
a new lengthy RFP process—in August 2021, which was completed in a mere four
months. Trial Tr. at 885:18-887:21. Greg Galluzzi of TMG similarly testified that after the
completion of the implementation with GLDS, which was as fast as the City could have
possibly implemented an alternative broadband billing provider, the City did not use the
OSF system. Trial Tr. at 808:2-13. The City moved as quickly as possible to obtain a
replacement and Open cannot argue that the City did not seek to rescind promptly. See,
e.g., America’s Collectibles Network, Inc. v. Sterling Commerce (Am.), Inc., 2016 U.S.
Dist. LEXIS 195369, at *56 (E.D. Tenn., Sept. 7, 2016) (continued use of software did not
waive rescission because returning it would have damaged party’s business). In fact,
neither party treated the contract as continuing, with Open immediately stopping support
for its software or adding updates. Trial Tr. at 881:4-5.
Because (1) the City did not have knowledge of the truth respecting the false
representations until discovery in this case; (2) the City acted promptly to notify Open,
rescind the contract, and look for a replacement system for broadband after it suspected
the fraud beginning in spring of 2021; and (3) the City thereafter ceased any use of Open’s
system, Open failed to prove its waiver defense at trial.27 As to the “evidence” Open points
27 For the same reasons set forth in this section, Open’s argument that the 3-year statute
of limitations bars the City’s fraudulent inducement claim (ECF No. 302 at 11) also fails.
The fraud was not suspected until Spring/Summer of 2021, upon which time the statute
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to in support of its motion, this Court cannot now “weigh evidence, judge witness
credibility, or challenge the factual conclusions of the jury.” Deters, 202 F.3d at 1268. In
any event, “the mere existence of contrary evidence does not itself undermine the jury’s
findings as long as sufficient other evidence supports the findings.” Stroup, 26 F. 4th at
1157 (quotations omitted).
Fourth, Open argues that the jury was not asked to determine whether the City
returned Open’s software, the retention of which could have unjustly enriched the City.
ECF No. 347 at 11. This argument is waived.28 In any event, the jury instruction on waiver
did encompass this issue as Open’s affirmative defense required a finding that “The City
continued the project with Open with full knowledge of the actual facts when a reasonable
person under the same or similar circumstances would not have done so.” ECF No. 285
at 24 (Instruction No. 23). The jury, however, found that Open failed to prove this
affirmative defense—i.e. the City did not continue the project with Open and keep using
the software causing a waiver. This instruction fit the evidence as it was presented.
Indeed, the jury had a question for William Corredor about whether the City kept Open’s
of limitations began to run. C.R.S. § 13-80-101(1) (action for fraud “shall be commenced
within three years after the cause of action accrues”) (emphasis added). Indeed, the jury
was expressly instructed on the affirmative defense of statute of limitations (ECF No. 285
at 25 – Instruction No. 24) and determined that Open did not prove its affirmative defense
of statute of limitations. ECF No. 296 at 1-2 (Section I, Question 2). Again, the jury verdict
should not be disturbed.
28 Open failed to seek the inclusion of a separate element concerning the return of the
software to the jury instruction for fraudulent inducement (which Open now argues should
have been included as an element of liability (ECF No. 347 at 11)) during the charging
conference. Trial Tr. at 1946:1-15 (only raising the issue of laches and unclean hands).
Open also failed to submit a fraudulent inducement claim instruction requiring the element
at issue as one in its “tendered and rejected” instructions. See ECF Nos. 284, 289, 290,
294 (lacking the same). Open waived this issue.
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software without returning it. Trial Tr. at 1853:8-10. The Court asked the question to Mr.
Corredor who simply confirmed that the City used the software during the transition to the
new service provider. Id. at 1855:13-20. With respect to the time following the City’s
transition to the new service provider, Mr. Corredor did not have the knowledge to testify
as to whether the City continued using or continued having Open’s software. Id. at 1856:3-
7. But, upon the Court’s further questioning, Mr. Corredor confirmed that it was “agreed”
that the City was no longer using the software. Id. at 1856:17-19. Indeed, as set forth
above, the City promptly stopped using Open’s software after its implementation with
GLDS. And, in any event, continued use or failure to return software does not necessarily
bar rescission. See America’s Collectibles Network, Inc., 2016 U.S. Dist. LEXIS 195369
at *56 (continued use of software did not waive rescission); Tigerdirect, Inc. v. Manhattan
Assocs., 2006 U.S. Dist. LEXIS 114699, *10-11 (S.D. Fla. Nov 6, 2006) (failure to return
software did not bar rescission).
The City did not fail to return the software, but even if it had, it was not working
software. In ruling that Open was not entitled to any setoff for its fraud, this Court
acknowledged that Open had not even provided the City with a working system: “This is
especially true in light of testimony at trial suggesting that . . . the City never received a
fully functional version of Open’s software.” ECF No. 328 at 14, n.10 (emphasis in
original); see also Trial Tr. at 183:11-14 (Mr. Storin’s testimony that the results of the
functional matrix indicated that “[s]ome 12 percent of the system was functioning as
intended”); id. at 918:15-17 (Mr. McClune’s confirmation that the system was not nearly
functioning or fully functioning). That is, there was not even a fully functioning system that
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would have “unjustly enrich[ed] a plaintiff,” as Open argues, if there was not a prompt
return. ECF No. 347 at 10. To the extent that Open is arguing that this Court needs to
determine the waiver issue based on the requirement that a plaintiff return to a defendant
“anything the retention of which would unjustly enrich” a plaintiff (id. at 11), this Court has
already made its determination that the City did not receive a fully functioning software.
ECF No. 328 at 14, n.10. Accordingly, this Court should deny Open’s motion.
Finally, Open’s argument that the jury’s finding of waiver with respect to the
negligent misrepresentation claim makes the jury’s rejection of waiver of the fraudulent
inducement claim “not at all clear” (ECF No. 347 at 10) fails to require any judgment as a
matter of law undoing the jury verdict as to fraud. As this is more fully addressed in Open’s
Rule 59 arguments, the City incorporates its responses to those arguments set forth in
the City’s response to Open’s Rule 59 motion pursuant to Fed. R. Civ. P. 10.
As set forth herein, this Court should deny Open’s motion on the City’s fraudulent
inducement claim.
II. Open Is Not Entitled to Judgment As a Matter of Law in Its Favor on the
Contract Claims Which Were Based on the Rescinded Contract.
Open asks this Court to enter judgment on the parties’ prior dueling contract claims
because the City allegedly unlawfully terminated parties’ contract and thereby prevented
completion of the project. ECF No. 302 at 12-14. But judgment cannot enter as a matter
of law as the City rescinded the contract and no contract exists, extinguishing the prior
contract claims. Indeed, Open admits in its April 23rd Rule 50(b) motion that “this case
ceased to involve any breach of the MPSA, or anything else to do with that
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Agreement, when the City elected to rescind it following the jury’s verdict on its fraudulent
inducement claim.” ECF No. 347 at 20 (emphasis added).
Even if the Court were to ignore the jury verdict, Open is not entitled to a judgment
as a matter of law on its contract claims (especially when viewing the facts in a light most
favorable to the City, as non-movant) because the City followed the notice-and-cure
provision. Section 13.2 of the MPSA provided:
T.E. 1 at § 13.2. The City provided a notice of the nature of Open’s default, listed and
itemized the acts Open needed to correct to cure its material breaches, and provided
Open with more than 30 days to do so. T.E. 66. Instead of curing, Open provided a reset
proposal that would have required significantly more money (i.e. over $3 million) and well
over the 30-day period (i.e. 15 additional months) to complete. Trial Tr. at 191:10-199:25
(Mr. Storin confirming the same); Trial Tr. at 1826:5-1836:25 (Mr. Corredor confirming the
same). Open did not cure (and admittedly could not have cured) the defaults “within thirty
(30) days” as required and following the 30-day period, the City filed suit. Trial Tr. at
1999:23-25. Following all of the evidence, the Court even acknowledged that despite its
prior ruling on Section 13.2 at the summary judgment stage, “the evidence at trial has
been even more sufficient,” stating:
The evidence as developed, it has really – would have supplemented my
summary judgment ruling, and I’m not sure I would have ruled the same
way. I don’t know that there’s a conclusive breach [by the City] based on
the testimony of the effect of the meetings with the executives and the 30
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days, et cetera. That wasn’t necessarily how it was presented in summary
judgment. Regardless, that will go to the jury to decide.
Id. at 1999:20-2000:8.
Even if the City did not allow the full cure period (it did), Open’s response shows
that any efforts to cure within the 30 days would also have been futile. “In Colorado, notice
of default and right to cure is not required if it would be futile.” Hoppe v. Percheron
Assocs., LLC, No. 11-cv-03233, 2012 WL 3135378, at *6 (D. Colo. Aug. 1, 2012). Futility
requires a showing either that (i) the defaulting party has clearly communicated its intent
not to perform its contract obligations, or (ii) the defaulting party would be clearly unable
to timely perform its contract obligations even if the requisite notice of default is given.
See id.; see also Highlands Ranch Univ. Park v. Uno of Highlands Ranch, 129 P.3d 1020,
1024 (Colo. App. 2005). These requirements were clearly met as Mr. Corredor testified
at length that the reset proposal would have required numerous months, significant
additional funds, and a change in the project terms to complete the project. See T.E. 323;
T.E. 406; Trial Tr. at 1826:5-1836:25 (Mr. Corredor confirming the same). Finally, as to
waiver, the City did not waive any contract claim as already set forth above with respect
to the fraudulent inducement claim.
This Court should deny Open’s motion on the parties’ breach of contract claims.
III. Open Is Not Entitled to Judgment As a Matter of Law on any Mitigation
Defense.
Open’s arguments regarding the applicability of any mitigation defense should be
rejected because the argument raised in the Rule 50(b) motion was not raised in its Rule
50(a) motion. Similarly, Open did not renew the mitigation of damages argument it made
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in its rule 50(a) motion. In its November 2nd Rule 50(a) motion, Open argued that the
City’s breach of contract damages were limited by the City’s failure to mitigate (i.e. in favor
of Open’s mitigation of damages defense). ECF No. 282 at 19-20. Then, in its December
1st Rule 50(b) motion, Open argued that judgment should be entered against the City on
the City’s mitigation of damages defense. ECF No. 302 at 14-15. These are simply not
the same argument and any attempt by Open to reconcile the two at this stage should be
rejected.
Further, Open misrepresents the instruction concerning a mitigation of damages
defense. The instruction that Open quotes in its December 1st Rule 50(b) motion relates
to waiver, not mitigation of damages (which only applies to the parties’ contractual
claims). The jury was never provided instructions as to the contract specific claims and
defenses after they entered verdict against Open for fraudulent inducement. Simply, the
defense is not relevant.
Even assuming that Open’s argument(s) are applicable, a failure to mitigate
defense applies when a plaintiff has failed to exercise reasonable care and diligence to
minimize or lessen damages occasioned by defendant’s conduct. Valley Development
Co. v. Weeks, 364 P.2d 730, 733 (Colo. 1961); Martin v. Porak, 638 P.2d 853, 855 (Colo.
App. 1981). A plaintiff’s failure to mitigate damages is excused, however, if there were
reasonable grounds for the failure, including defendant’s assurances that the wrong will
be remedied. See C. McCormick, Law of Damages § 38 (1935); 22 Am. Jur.2d Damages
§ 504 (1988).
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Here, the City took sufficient steps to mitigate. As discussed above, the City
promptly sought a replacement system and only used Open’s software until it could
implement a new billing system for Broadband through GLDS. See Trial Tr. at 808:2-13.
The City also had to wait before bringing suit because of the requirements under the
MPSA. Additionally, there was ample testimony that Open would not complete the project
without being paid an additional $3 million dollars and working on the project for an
additional 18 months (15 months to go-live and 3 months of hypercare). See T.E. 406;
Trial Tr. at 196:6-11, 884:8-10. Especially when viewed through an equitable lens, Open
failed to mitigate its own damages by providing the City false information and failing to
disclose accurate information to the City throughout the course of the project. Simply put,
there is no mitigation of damages defense that is either relevant or applicable to the
judgment and accordingly, the Court should reject Open’s Rule 50 motion altogether.
CONCLUSION
For all of the reasons set forth herein, this Court should deny Open’s Rule 50(b)
motions set forth in ECF Nos. 302 and 347.
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Respectfully submitted this 14th day of May, 2024.
DORSEY & W HITNEY LLP
s/ Case Collard
Case Collard
Andrea Ahn Wechter
Maral J. Shoaei
1400 Wewatta Street, Suite 400
Denver, Colorado 80202-5549
Telephone: (303) 629-3400
Fax: (303) 629-3450
E-mail: collard.case@dorsey.com
E-mail: wechter.andrea@dorsey.com
E-mail: shoaei.maral@dorsey.com
Attorneys for Plaintiff City of Fort Collins
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CERTIFICATE OF SERVICE
I hereby certify that on May 14, 2024 I caused the foregoing document to be electronically filed via CM/ECF system which will send notification of such filing to all counsel of record.
s/ Stacy Starr
DORSEY & W HITNEY LLP
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