HomeMy WebLinkAbout2021-cv-2063-CNS-MEH - City Of Fort Collins V. Open International, Et Al. - 112 - Stip Mot Restrict Access
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 2021-cv-02063-CNS-MEG
CITY OF FORT COLLINS,
Plaintiff,
vs.
OPEN INTERNATIONAL, LLC,
OPEN INVESTMENTS, LLC.
Defendants.
STIPULATED MOTION TO RESTRICT ACCESS
Pursuant to D.C.COLO.LCivR 7.2(c) and consistent with the Court’s August 12, 2022
provisional order sealing other filings (the “Provisional Sealing Order,” Dkt. 96 at 2), Plaintiff
City of Fort Collins (the “City”) and Defendants Open International, LLC and Open Investments,
LLC (together, “Open”) respectfully request that the Court maintain Level 1 restriction over the
Plaintiff City of Fort Collins’s (the “City”) Motion to Amend brief (the “Brief,” Dkt. 101) and
exhibits 2 through 9 and 11 through 12 to the Brief (the “Exhibits,” Dkts. 105, 105-1, 105-2,
105-3, 105-4, 105-5, 106, and 106-1, 106-3, 106-4) because the Exhibits were designated
“Confidential” under the Stipulated Protective Order (Dkt. 32) and, along with the Brief, reflect
sensitive information and internal discussions regarding Open’s business operations, strategy,
and planning, as well as the City’s appropriations process, and this information is of the kind the
Court ordered to be provisionally sealed. In support of this Motion, the parties state that:
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STATEMENT REGARDING CONFERRAL UNDER LOCAL RULE 7.1
Counsel for the parties conferred by email on November 17 and 18, 2022 regarding the
relief sought by this stipulated motion and agreed to the provisional relief requested herein.
1. Through six motions to restrict filed in June and July 2022, the City sought to
maintain Level 1 restriction over materials the parties had designated “Confidential” under the
Stipulated Protective Order (Dkts. 50, 53, 66, 69, 79, 85).
2. The City argued that the documents it sought to restrict consisted of, among other
things, “confidential strategic and business information” (e.g., Dkt. 53 ¶ 5), “confidential,
internal discussions” about the project in this case (id. ¶ 6), and “internal discussions and policy
recommendations” that had been made available to Open (id. ¶ 7).
3. Open opposed those motions on the grounds that confidentiality designations
under the Stipulated Protective Order are not dispositive of sealing and that the City had failed to
overcome the presumption of open court records by articulating a real and substantial interest in
sealing that, if not honored, would work a clearly defined and serious injury (e.g. 57 at Dkt. 2-6).
See also D.C.COLO.LCivR 7.2(c)(3); United States v. Walker, 761 F. App’x 822, 834 (10th Cir.
2019); Sacchi v. IHC Health Servs., Inc., 918 F.3d 1155, 1160 (10th Cir. 2019).1
4. At a discovery hearing on August 12, 2022, the Court “provisionally granted” the
City’s motions to restrict, which the parties understand to mean that the Court will hold final
sealing rulings in abeyance until matters of sealing can be resolved uniformly and efficiently.
1 Open does not waive these arguments as they apply to any final determination regarding
sealing at a later date.
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5. In keeping with that Provisional Sealing Order, the parties seek to maintain
provisional Level 1 restriction over:
a. the Brief, substituting in its place the attached redacted version of the Brief
(attached hereto as Exhibit A) that removes references to confidential
information reflecting Open’s internal business operations, strategy, and
planning;
b. Exhibit 2 to the Brief, which was designated “Confidential” under the
Stipulated Protective Order and reflects Open’s sensitive internal strategy and
planning;
c. Exhibits 3 through 8 to the Brief, which are excerpts of deposition transcripts
designated “Confidential” under the Stipulated Protective Order and
addressing Open’s confidential internal strategy, planning, and operations, as
well as addressing documents marked “Confidential” under the Stipulated
Protective Order;
d. Exhibit 9 to the Brief, which is the City’s proposed Amended Complaint and
which refers to the content in Exhibits 2-8; and
e. Exhibits 11 and 12 to the Brief, which are records and deposition excerpts
regarding the City’s appropriations process that have been designated
“Confidential.”
For the forgoing reasons, the parties request that the Court maintain provisional Level 1
restriction over Dkts. 101, 105, 105-1, 105-2, 105-3, 105-4, 105-5, 106, and 106-1, 106-3, and
106-4.
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Dated: November 18, 2022
Respectfully submitted,
s/ Case Collard
Case Collard
collard.case@dorsey.com
Andrea Ahn Wechter
wechter.andrea@dorsey.com
Maral J. Shoaei
shoaei.maral@dorsey.com
Nora O. Cooke
cooke.nora@dorsey.com
Dorsey & Whitney LLP
1400 Wewatta Street, Ste. 400
Denver, Colorado 80202
Telephone: (303) 629-3400
Attorneys for Plaintiff City of Fort Collins
s/ Paul D. Swanson
Paul D. Swanson
pdswanson@hollandhart.com
Alexander D. White
adwhite@hollandhart.com
Anna van de Stouwe
acvandestouwe@hollandhart.com
Alexandria E. Pierce
aep@hollandhart.com
Holland & Hart LLP
555 17th Street, Suite 3200
Denver, Colorado 80202
Telephone: 303-295-8000
Attorneys for Defendants Open International,
LLC and Open Investments, LLC
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CERTIFICATE OF SERVICE
I hereby certify that on the 18th day of November, 2022, the foregoing was electronically
filed with the Clerk of Court using the Court’s electronic filing system and that a copy of the
foregoing was sent to all counsel of record via same in compliance with the Federal Rules of
Civil Procedure and the Local Rules of this Court.
/s/ Anne Tupler
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Exhibit A
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No.: 21-cv-02063-CNS-MEH
CITY OF FORT COLLINS,
Plaintiff/Counterclaim Defendant,
v.
OPEN INTERNATIONAL, LLC
Defendant/Counterclaim Plaintiff,
and
OPEN INVESTMENTS, LLC,
Defendant.
PLAINTIFF’S MOTION FOR LEAVE TO AMEND COMPLAINT AND, IF NECESSARY,
AMEND ITS AFFIRMATIVE DEFENSES TO DEFENDANTS’ COUNTERCLAIMS
Plaintiff the City of Fort Collins (the “City”), by and through its undersigned counsel,
hereby submits this Motion for Leave to Amend Complaint and, if Necessary, Amend its
Affirmative Defenses to Defendants’ Counterclaim (the “Motion”):
CERTIFICATE OF COMPLIANCE WITH D.C.COLO.L.CIV.R. 7.1
Defendant opposes the relief requested herein.
INTRODUCTION
Open was hired by the City to handle a once-in-a-generation software upgrade and
implementation. They signed their contract in August 2018. Before that, in February 2018, the
City issued a detailed request for proposal as a part of its diligence. In March 2018, Open provided
a 1,128 page response. Open’s response paints a picture of a completed product that Open would
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provide and implement. In reality, Open’s completed product did not exist yet (it would not be
released until February 2019).
The City brought suit for fraudulent inducement based on these misrepresentations.
However, during discovery, Open has pointed to conversations with the City and a few sentences
in the 1000+ page RFP response to claim that it did inform the City of the true state of its product.
Even if Open’s claims were true, Open was still negligent in its responses because their disclosures
did not meet the industry standard for a response to a RFP. In light of Open’s arguments,
developed through discovery, the City seeks to amend its Complaint to add a claim for negligent
misrepresentation based on information that it obtained during discovery. The negligent
misrepresentation claim is based on the same subject matter as that in the original Complaint, but
is based on facts of which Plaintiff was not aware and could not have learned until the parties had
engaged in extensive discovery. The negligent misrepresentation claim is closely related to the
fraudulent inducement claim, meaning Open has had ample opportunity to conduct discovery into
all essential facts that would be necessary to defend against a negligent misrepresentation claim.
Additionally, the City seeks guidance from the Court as to whether amendment is required
to the City’s Reply to Open’s Counterclaims to maintain its argument that any further payments to
Open are limited to what was previously appropriated by the Fort Collins City Council and not
spent, encumbered, or lapsed. For municipalities like Fort Collins, all payments are subject to
appropriations under the Colorado Constitution and City Charter and Code. Article V, § 8 and 11
of Fort Collins City Charter; Fort Collins City Code § 8-186; Colo. Const. Art. X, Section 20.
Here, these appropriations requirements were specifically incorporated into the City’s contracts
with Open. The City contends that Open’s potential damages are therefore contractually limited
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to what has been appropriated. Open claims this is an unpled affirmative defense. The City seeks
a finding from the Court that this argument is not required to be pled as an affirmative defense.
Should the Court find otherwise, the City requests that the Court find that the City has already
adequately pled it, or that the City be allowed to amend its Reply to Open’s Counterclaims to add
that affirmative defense.
BACKGROUND
A. Open’s Negligent Misrepresentations to the City.
1. In March 2018 the City issued a Request for Proposal 8697 for “Vendor Selection
and Implementation of a Comprehensive Solution for Utilities/Broadband Billing (CIS/OSS)” (the
“RFP”) for a software implementation project. Through the RFP, the City sought to partner with
a vendor who could deliver and implement a billing system product that would consolidate and
handle billing services for both (1) the City’s new Broadband service, Connexion, and (2) its
existing utilities, electric, water, wastewater, and stormwater. Compl. [Dkt. 1-1] ¶¶ 19-20. Open
submitted its proposal in response to the RFP (the “RFP Response”) on March 12, 2018 and
claimed it had a ready-for-implementation product—Open Smartflex—that complied with the vast
majority of the RFP’s functional and technical requirements. Id. at ¶¶ 22-27.
2. In its RFP Response, Open responded to the approximately 2,000 functional
requirements included in a “Functional Matrix” to represent to the City what functionalities were
part of its base Smartflex product and what functionalities may require additional development.
Id. at ¶ 28. Open responded by grading the functionalities required with letters:
a. “A” for those “[p]rovided as part of the base system” with Open Smartflex,
b. “B” for those currently “In Development” but which would be fully tested and
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included in the product,
c. “C” for those that “will require some enhancements,”
d. “D” for those that “will require minor software coding,”
e. “E” for those that “will have to be modified,”
f. “F” for those requiring “[e]xtensive modification to base code,” and
g. “G” for those where “[s]oftware can not be enhanced or modified.” Id.
3. In grading its Smarflex product against the functional requirements in the
Functional Matrix, Open marked the vast majority of the items as “A” (representing that almost
all functionalities were already part of the Open Smartflex base product), a few as “B,” and almost
none as “C” or below. Id.
4. Relying on Open’s representations, the parties executed the Master Professional
Services Agreement (the “MPSA”) on August 9, 2018, incorporating the RFP, Open’s RFP
Response, and a “Statement of Work” (“SOW”) containing a “Functional Requirements Matrix”
representing similar information as the Functional Matrix Open had in its RFP Response. Id. at ¶¶
30-33.
5. Contrary to Open’s representations, during the Project the City came to find that
much of the Smartflex product was not yet built. Id. at ¶ 37. For example, the City learned that the
self-service portal, represented as category “A” and “part of the base system”, did not even exist
when the City and Open entered into the Agreements and that Open expended 30,000 hours of
development effort on it. Id. at ¶ 38.
6. On July 2, 2021, the City brought this case and asserted claims for fraudulent
inducement, breach of contract, breach of the implied covenant of good faith and fair dealing, and
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for declaratory judgment. That is, the City alleged that Open made fraudulent representations in
its RFP Response, including the Functional Matrix, to induce the City to enter into the MPSA.
7. Per the initial Scheduling Order, the deadline to amend the complaint was
November 21, 2021 [Dkt. 21]. After that time had passed, the parties obtained two extensions of
fact discovery [Dkt. Nos. 37 and 96], exchanged hundreds of thousands of documents, and
conducted dozens of depositions, including the depositions of key Open personnel in Miami during
the last week of September 2022 as part of Open’s Rule 30(b)(6) deposition.
8.
Nonetheless, in its RFP Response, it
represented that 89.7%—or 1,899 of 2,116 functional requirements—were an “A” grade because
they were part of Open’s current base product and were not currently in development. See Exhibit
1, Dep. Ex. 385, Functional Matrix submitted in Open’s RFP Response;
. Open
listed its overall fulfillment of the functional matrix as 96.6%
9.
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a.
b.
c.
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10. Despite Open’s purported disclosures to the City, the City had Open’s written
responses in the Functional Matrix and relied on those when considering and selecting Open as
the winning bidder, leading to the execution of the MPSA.
11.
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12.
13. In light of the above evidence obtained during discovery, the City seeks to amend
its Complaint to add a claim for negligent misrepresentation based on Open’s representations made
prior to the execution of the MPSA. A copy of Plaintiff’s proposed First Amended Complaint is
attached hereto as Exhibit 9. The proposed First Amended Complaint is in compliance with
D.C.COLO.LCivR 15.1(b) and “strikes through (e.g., strikes through) the text to be deleted and
underlines (e.g., underlines) the text to be added).
B. Payments Under the Parties’ Agreements Were Explicitly Subject to Appropriation.
14. In connection with the Counterclaims, Open seeks $3,826,719.14 in damages.
Exhibit 10, Open’s Second Supplemental Disclosures.
15. But, Section 13.4 of the MPSA reads: “To the extent this Agreement or any
provision in it constitutes a multiple fiscal year debt or financial obligation of the Customer, it
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shall be subject to annual appropriation by City Council as required in Article V, Section 8(b) of
the City Charter, City Code Section 8-186, and Article X, Section 20 of the Colorado Constitution.
The Customer shall have no obligation to continue this Agreement in any fiscal year for which no
such supporting appropriation has been made.” See Ex. 1 to Compl., [Dkt. 1-1].
16. Likewise, the First Amendment explicitly stated that “[t]he funding for Payment
Milestones #2 (Appropriation) and #3 (Utilities Test Complete) is subject to appropriation of funds
by the City Council.” See Ex. 4 to Compl., [Dkt. 1-1].
17.
18. Accordingly, prior to Open’s 30(b)(6) deposition of the City on the topic of Open’s
damages, counsel for the City sent a letter to counsel for Open on October 3, 2022 outlining the
City’s position that Open’s damages are limited to the remaining unspent, unencumbered, and un-
lapsed amounts that were appropriated. See id.
19.
20. Counsel for Open has taken the position that this is an unpled affirmative defense.
The City disagrees, but attaches as Exhibit 13 its proposed amended Reply to Open’s
Counterclaims should the Court find that such is an affirmative defense that must be pled
separately from the affirmative defenses already pled by the City. The proposed Amended Reply
to Open’s Counterclaims is in compliance with D.C.COLO.LCivR 15.1(b) and “strikes through
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(e.g., strikes through) the text to be deleted and underlines (e.g., underlines) the text to be added).
LEGAL STANDARD
When a motion for leave to amend is made after the deadline for amendments established
in the scheduling order has passed, a party must satisfy the standards under both Fed. R. Civ. P.
16(b)(4) and 15(a)(2). Birch v. Polaris Indus., Inc., 812 F.3d 1238, 1247 (10th Cir. 2015); Pumpco,
Inc., the Concrete Pumping Co. v. Schenker Int'l, Inc., 204 F.R.D. 667, 668 (D. Colo. 2001)
(granting motion for leave to amend complaint approximately nine months after scheduling order’s
deadline had passed).
Pursuant to Rule 16(b)(4), a party must demonstrate “good cause” for seeking
modification. Id.; Fed. R. Civ. P. 16(b)(4) (“A schedule may be modified only for good cause and
with the judge’s consent.”). Good cause requires showing that the scheduling deadline could not
be met despite a party’s diligent efforts, and the party must provide an “adequate explanation” for
any delay, though “rigid adherence to the Scheduling Order is not advisable.” Deneffe v. Skywest,
Inc., Civil Action No. 14-cv-00348-MEH, 2015 U.S. Dist. LEXIS 5517, at *4 (D. Colo. Jan. 16,
2015) (J. Hegarty) (granting in part motion for leave to amend complaint for claims that relied on
factual allegations plaintiff did not know and reasonably should not have known of before deadline
passed). Good cause exists justifying an extension of a deadline to amend if a party learns new
information through discovery that underlies the amendment. Pumpco, Inc., 204 F.R.D. at 668.
Once a court is satisfied the Rule 16(b) standard is met, Rule 15(a)(2) states that after the
deadline for amending a pleading as a matter of course, “a party may amend its pleading only with
the opposing party’s written consent or the court’s leave” and that “[t]he court should freely give
leave when justice so requires.” Fed. R. Civ. P. Rule 15(a)(2); see also Minter v. Prime Equip.
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Co., 451 F.3d 1196, 1204 (10th Cir. 2006) (the purpose of the Rule is to provide litigants “the
maximum opportunity for each claim to be decided on its merits rather than on procedural
niceties.”) (quoting Hardin v. Manitowoc-Forsythe Corp., 691 F.2d 449, 456 (10th Cir. 1982)).
Refusing leave to amend is “generally only justified upon a showing of undue delay, undue
prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by
amendments previously allowed, or futility of amendment.” Pumpco, Inc., 204 F.R.D. at 669;
Maloney v. City of Pueblo, 323 F.R.D. 358, 360 (D. Colo. 2018) (quoting Frank v. U.S. West, Inc.,
3 F.3d 1357, 1365 (10th Cir. 1993).
ARGUMENT
A. This Court Should Grant Leave for Plaintiff to File the First Amended Complaint.
The City requests that this Court grant the instant Motion for Leave to Amend Complaint
because the requirements of Rules 16(b)(4) and 15(a)(2) have been satisfied.
1. Good Cause Exists to Permit the Requested Amendment.
Good cause exists to permit the amendment under Rule 16(b)(4). The good cause
requirement under Rule 16(b)(4) may be satisfied “if a plaintiff learns new information through
discovery or if the underlying law has changed.” Here, the City may add a negligent
misrepresentation claim based on evidence that it obtained during recent discovery.
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Negligent misrepresentation requires showing that: “(1) one in the course of his or her
business, profession or employment; (2) makes a misrepresentation of a material fact, without
reasonable care; (3) for the guidance of others in their business transactions; (4) with knowledge
that his or her representations will be relied upon by the injured party; and (5) the injured party
justifiably relied on the misrepresentation to his or her detriment.” Allen v. Steele, 252 P.3d 476,
482 (Colo. 2011). Additionally, there is a duty to ascertain and to communicate the veracity of
information when making misrepresentations to a party that you intend to enter into a contract
with. Ebrahimi v. E.F. Hutton & Co., 794 P.2d 1015, 1017 (Colo. App. 1989).
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Up until obtaining this evidence, the City only had the final functional matrix and had not
been aware of how Open had graded the Functional Matrix or come to represent that Smartflex
covered 96.6% of functionality. The City only knew, based on how the Project unfolded, that the
grading was inaccurate and believed that Open had intentionally misrepresented the functionality.
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2. There Is No Undue Delay, Undue Prejudice to Open, Bad Faith or Dilatory
Motive, Failure to Cure Deficiencies by Prior Amendments, or Futility of
Amendment to Preclude the Requested Amendment.
Having shown good cause to permit modification of the deadline to amend, justice requires
that leave to amend be freely given under Rule 15(a)(2).
First, there is no undue delay in seeking the amendment. Like Rule 16(b), amendments
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based on the discovery of new information that a party could not have known of earlier shows that
a party did not unduly delay. See Deneffe, 2015 U.S. Dist. LEXIS 5517 at *4-6. Because the
analyses for good cause under Rule 16 and undue delay under Rule 15 are similar, there is no
undue delay to preclude amendment. Nor is there bad faith or dilatory motive for the City’s
requested amendment. Since this is the City’s first request to amend its Complaint (based on recent
discovery), there was no failure to cure any deficiencies by any prior amendments.
Second, Open will not be unduly prejudiced by the requested amendment. Courts usually
only find prejudice if an amendment would unfairly affect a defendant’s ability to prepare their
defense to the amendment. Id. at *6. “Most often, this occurs when the amended claims arise out
of a subject matter different from what was set forth in the complaint and raise significant new
factual issues.” Minter, 451 F.3d at 1208. Additionally, courts have found that to the extent there
is a risk a late amendment could prejudice a party, when a trial date has not been set, “any prejudice
which might arise . . . is thus capable of being cured” because discovery could be reopened and
other deadlines could be altered if necessary. See Pumpco, Inc., the Concrete Pumping Co., 204
F.R.D. at 669. The City’s negligent misrepresentation claim is based on the same subject matter
as that in the original Complaint and does not raise significant new factual issues. Specifically,
the Complaint has already alleged that Open fraudulently misrepresented its product’s
functionalities and that those misrepresentations fraudulently induced the City to execute the
MPSA. This is the basis for its fraudulent inducement claim.
Open is not prejudiced in defending this claim. Because a fraudulent inducement claim
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requires showing intentional misrepresentations and a negligent misrepresentation claim requires
showing that the defendant lacked reasonable care in making misrepresentations, Open previously
had to defend against a claim regarding whether Open knew that its representations were inaccurate
and misleading, whereas now it has to defend against whether Open knew or should have known
they were inaccurate or misleading. See Allen, 252 P.3d at 482; Granite Southlands Town Ctr.,
LLC v. Provost, 445 F. App'x 72, 75 (10th Cir. 2011) (reciting the elements for fraudulent
inducement). The defense to the negligent misrepresentation claim was essentially encompassed
within the defense to a fraudulent inducement claim, so Open is not prejudiced in having to defend
against this new claim. Additionally, a trial date has not yet been set in this action, so the Court
may alter deadlines or even extend discovery (currently set to close on November 14, 2022) should
any discovery be necessary to avoid any risk of prejudice to Open.
Finally, the amendment to add the negligent misrepresentation claim would not be futile.
A claim is not futile if it would survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6).
Dorough v. Am. Family Mut. Ins. Co., Civil Action No. 15-cv-02388-MSK-KMT, 2016 U.S. Dist.
LEXIS 49086, at *6 (D. Colo. Apr. 11, 2016) (granting plaintiff’s motion to amend). When
conferring, Open’s counsel suggested that the claim was futile because the economic loss rule
would bar recovery.
The
economic loss rule does not bar claims based on misrepresentations that are made prior to the
formation of the contract and that induce a party to enter into a contract, and it is not fatal to a
claim if the misrepresentation claims are related to promises that eventually form the basis of the
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contract. Van Rees v. Unleaded Software, Inc., 373 P.3d 603, 606-07 (Colo. 2016) (overturning
dismissal of fraud, fraudulent concealment, and negligent misrepresentation claims because such
claims were based on promises that induced plaintiff to enter into the contract, rather than promises
made within the contract itself); see also Dream Finders Homes Ltd. Liab. Co. v. Weyerhaeuser
NR Co., 506 P.3d 108, 120 (Colo. App. 2021) (applying Van Rees and stating that negligent or
fraudulent misrepresentations that are post-contractual may be barred by the economic loss rule,
but that pre-contractual conduct is not because “there was no contract that could have subsumed
identical tort duties.”).
B. The Limit on Open’s Potential Damages are Due to a Contractual Appropriations
Clause, Not an Affirmative Defense That the City Had to Plead.
Open has brought counterclaims alleging that the City was the cause of the project failure,
seeking $3,826,719.14 in damages under the contracts. See Answer and Counterclaim [Dkt. 13];
Ex. 10, Open’s Second Supplemental Disclosures.
The City has asserted to Open that pursuant to Section 13.4 of the MPSA, payments under
the MPSA were subject to appropriation by the Fort Collins City Council and that certain payment
milestones under the First Amendment to the MPSA were similarly made explicitly subject to
appropriation. See Ex. 11. These provisions brought the contract into conformity with the
Colorado Constitution, the City Charter, and Colo. Rev. Stat. § 29-1-110(1), all of which prohibit
multiple-year financial obligations that are not made subject to appropriation. Accordingly, Open
can only recover money that was appropriated and not otherwise spent, encumbered, or lapsed.
See Town of Alma v. Azco Constr. Inc., 985 P.2d 56, 58 (Colo. App. 1999) (“Section 29-1-110(1),
C.R.S. 1998, prohibits municipalities from spending any funds in excess of amounts appropriated
in the adopted budget, and renders any contract entered in violation of this section void.”).
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Prior to the Rule 30(b)(6) deposition of the City concerning Open’s damages, the City sent
notice of its position to Open. See Ex. 11. During conferral on this issue, Open claimed that the
City’s position is an affirmative defense that the City had failed to plead. But the City’s position
is not an affirmative defense, it is a contractual requirement because the limiting language was
incorporated into the parties’ contracts. Even if this were an affirmative defense, the City has
already pled affirmative defenses that put Open on notice include this “defense.” At the very least,
if necessary the City should be allowed to amend its Answer to Open’s Counterclaims to add an
affirmative defense because Open was on notice that payments under the agreements were subject
to appropriation.
First, the City is aware of no case law (and Open has provided none during the parties’
conferrals) supporting Open’s contention that the City’s argument that the parties comply with the
provision of their contracts is an affirmative defense. Both agreements—the MPSA and the First
Amendment—contain explicit language that make it clear that payments are subject to
appropriation by the City Council. See Exs. 1 and 4 to Compl. [Dkt. 1-1]. Therefore, this is not an
affirmative defense, it is a contractual requirement similar to a limitation of liability clause. Open
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has failed to allege or provide any evidence that the money it seeks as damages were appropriated
by the City Council (and not otherwise spent, encumbered, or lapsed) as required by both contracts.
Second, even if the limitations of the provisions could be interpreted as an “affirmative
defense,” the City has already raised as affirmative defenses that Open’s counterclaims “seek
damages that Open is not entitled to” (First Affirmative Defense) and that “Open failed to satisfy
conditions precedent or other requirements of the contracts” (Eighth Affirmative Defense). See
City’s Reply to Defendant Open International, LLC’s Counterclaims [Dkt. 30] at 34-35. This
contractual limitation on damages is clearly encompassed by both of those defenses: the City is
alleging that Open is not entitled to recover money beyond amounts appropriated by the City
Council, and that money beyond that amount are not available because a requirement of the
contract is not satisfied for those amounts—they were not appropriated as required by the
agreements.
Finally, even if this Court finds that the limitations of the contractual provisions are
affirmative defenses and that they were not pled, the City should be permitted to amend its Reply
to Open’s Counterclaims in order to add the same.
Therefore, even if the Court were to
find that this is an affirmative defense and that it needs to be pled separately, the Court should
allow the City to add this as an affirmative defense. A copy of Plaintiff’s Proposed Amended
Reply to Defendant Open International, LLC’s Counterclaims is attached hereto as Exhibit 13 for
the Court’s consideration.
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CONCLUSION
The City seeks to have this dispute evaluated on its merits and respectfully requests that
the Court grant the City’s leave to amend its Complaint and find that the City’s contention
regarding appropriation issues is not an affirmative defense. Should the Court find that such is an
affirmative defense and that it is not encompassed by the affirmative defenses the City has
already pled, the City respectfully requests that it be allowed to amend its Reply to Open’s
Counterclaims to add it as an affirmative defense.
Respectfully submitted this 4th day of November, 2022.
DORSEY & WHITNEY 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 November 4, 2022, I caused the foregoing document to be electronically filed via CM/ECF system which will send notification of such filing to the following:
Alexander D. White
Paul D. Swanson
Hannah E. Armentrout
Anna C. Van de Stouwe
HOLLAND & HART LLP
555 17th Street, Suite 3200
Denver, CO 80202
Telephone: (303) 295-8578
adwhite@hollandhart.com
pdswanson@hollandhart.com
hearmentrout@hollandhart.com
acvandestouwe@hollandhart.com
Attorneys for Defendants
s/ Stacy Starr .
Dorsey & Whitney LLP
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