HomeMy WebLinkAbout2021-cv-2063-CNS-MEH - City Of Fort Collins V. Open International, Et Al. - 237 - City's Response To Motion To CompelIN 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.
PLAINTIFF CITY OF FORT COLLINS’ RESPONSE TO OPEN’S MOTION TO
COMPEL ELECTION OF REMEDIES AND LIMIT JURY DEMAND
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INTRODUCTION
After their unsuccessful summary judgment motion, Open International, LLC and Open
Investments LLC (collectively “Open”) seek to leverage the election of remedies process to escape
liability by seeking the premature dismissal of the City’s valid claims before the City has a chance
to try them. Their request must be denied.
First, Open claims a party cannot seek inconsistent relief. This is incorrect—the City
cannot obtain inconsistent recovery. The City’s case is fully consistent, not confusing, and should
be tried to a jury: Open misrepresented the capabilities of its product and its team, inducing the
City to select Open in the RFP process and sign a contract. Open then failed to deliver the promised
product. Even if Open’s pre-contract conduct does not rise to the level of fraud or negligent
misrepresentation, the materials from the pre-contract diligence period (the functional matrix and
Open’s RFP response) were incorporated into the parties’ contract and Open’s failures to meet the
product’s contractual functional requirements, were the first breach of the contract by Open. The
City is entitled to pursue all available theories against a wrongdoer like Open throughout this
litigation. The Court should reject Open’s effort to fashion a trial in which it can avoid liability
even if it is found to have committed fraud and breached its contract with the City.
Second, Open asks the Court to conduct a bench trial before a jury trial in violation of clear
Supreme Court precedent and the City’s constitutional right to a jury trial. The City is entitled to
the jury’s determination of the factual issues underlying all of the claims (while reserving the
fashioning of any rescission remedy for the Court). This Court already noted that “if there was an
issue for [the Court], it’s related to a remedy versus a finding of liability. So the jury will be
hearing, in my mind, all of the evidence, and there would be a limited portion that I’m doing if I
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conclude that’s in my purview.” Ex. 1, Final Pretrial Conference, at 25:21-24. Because the claims
and defenses address overlapping factual topics, the jury trial must proceed first so that it may hear
the evidence and determine all factual issues.
Finally, Open makes a generalized assertion that, if the City elects rescission, the trial will
be streamlined. However, because of the overlapping claims and defenses in this case, the most
efficient approach will be a well-curated jury trial and for the City to elect before judgment.
ARGUMENT
I. Open’s Proposals are Intended to Allow it to Escape Liability but the City Has a
Right to Fully Pursue its Claims.
The City has every right to plead and litigate in the alternative—it simply cannot obtain an
inconsistent recovery. The Court’s goal should be to preserve the City’s right to elect a preferred
remedy for as long as possible because the City was injured by Open. See H & K Automotive
Supply Co. v. Moore & Co., 657 P.2d 986, 988 (Colo. App. 1982) (“the choice of remedies belongs
to the one who has been defrauded, and may not be forced upon him by the wrongdoer”) (citing
Altergott v. Yeager, 37 Colo. App. 23, 28 (1975). Because it favors efficiency over potential harm
to the injured party, election of remedies is a “harsh doctrine which should not be unduly
extended.” Stewart v. Blanning, 677 P.2d 1382, 1383 (Colo. App. 1984).
Kline and Whatley, cited by Open, do not hold that a party should always be required to
elect its remedy pre-trial. For instance, the Kline Court required a pretrial election of remedies
based on its facts after it also emphasized that this was an issue of discretion and Colorado had no
rule governing the timing of an election. Kline Hotel Partners v. Aircoa Equity Interests, Inc., 729
F. Supp. 740, 742 (D. Colo. 1990). Similarly, Whatley dealt with the consequences of an election—
not the timing at which it would be required. Whatley v. Crawford & Co., 15 Fed. Appx. 625, 629
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(10th Cir. 2001) (“because plaintiffs proceeded on an affirmance theory [] they should not have
been permitted to pursue additional claims based on rescission and restitution”). Unlike the
plaintiff in Whatley, the City has not yet elected its remedy and, as the Kline Court emphasized,
the Court must exercise its discretion to evaluate whether a premature election makes sense in this
case. This case is well suited for a later election because the legal and factual claims, and in
particular Open’s counterclaim, mean that bifurcation will not be efficient and because Open has
attempted to raise election of remedies as an unpled affirmative defense which, if successful, would
require that the City be allowed to recover damages as an alternate remedy. This may cause several
inequitable outcomes.
For example, Open argues that the City waived rescission by electing to affirm the contract.
Mot. at 2.1 But if Open is allowed to pursue this position and force the City into an early election
of remedies, it would create a deeply unjust outcome. The City does not know today what evidence
Open will present and if Open’s defense will be successful with the jury. If the City must elect
now and elects to pursue fraud and rescission, under Open’s proposed course of action, it would
also be dismissing its damages remedies. If the City proceeds under a fraud and rescission claim
and Open’s affirmative defense is allowed and successful, Open’s position is that, even if it
committed fraud, the City’s allegedly imperfect election of rescission as a remedy could allow
Open to avoid compensating the City in any way for Open’s fraud. Not only this, but Open
1 Open is wrong because it was required to raise this issue as an election of remedies affirmative
defense and it failed to do so. See generally, e.g., Eli Lilly & Co. v. Emisphere Techs., Inc., 408 F.
Supp. 2d 668, 695 (S.D. Ind. 2006) (noting that party abandoned affirmative defense of waiver
and instead pursued “unpled” affirmative defense of election of remedies). Open is also incorrect
factually (for the same reason it lost its summary judgment motion) because the City did not
understand the scope of Open’s misrepresentations until very late in the process.
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suggests that, in addition to avoiding liability for its wrongdoing, Open will actually be able to
force compliance with the terms of the contract it fraudulently induced the City to sign. Open does
not cite any support for this outcome and, unsurprisingly, it has no legal basis.
Instead, if Open successfully argues that the City did not rescind on time, then the City can
still pursue a claim for fraud or contract damages. See Gordon-Tiger Mining & Reduction Co. v.
Brown, 56 Colo. 301, 312 (Colo. 1914) (“When, however, he elects to waive the fraud such
election is irrevocable and his remedy thereafter is an action for damages.”), see also, e.g., Derma
Pen, LLC v. 4EverYoung Ltd., 2014 U.S. Dist. LEXIS 108355, *19 (D. Utah Aug 4, 2014) (“[t]he
right to recover damages for the fraud upon the affirmance of the contract is not [as] easily lost [as
the right to rescind], for the defrauded party, who does not discover the fraud until he has partly
performed, may go forward with the contract, keep what he has received, and still maintain his
action for damages”) (punctuation omitted). Even if the City is compelled to make a premature
election of remedies and it elects rescission, if Open’s putative affirmative defense were
successful, then City must then be allowed to pursue damages for its fraud and negligent
misrepresentation claims.
Open’s approach will also have the negative outcome of leaving the City without a remedy
at contract even as Open sues the City for breach of contract. If the City elects rescission and is
unsuccessful in proving its fraud claim, the City would not be able to subsequently pursue its claim
for damages based on Open’s breach of contract. This will be true even though the trial will need
to include evidence of the City’s injuries (which the jury may set off from any recovery it
concludes Open could obtain) and evidence of whether Open met its contractual obligations to the
City (which is a prerequisite to Open’s recovery). There is no justification for prematurely
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curtailing the City’s right to redress where the jury will still need to consider all of the facts and
evidence necessary to adjudicate it, regardless of the City’s election of remedies.
These examples illustrate an important point: trial would not be streamlined by an election
of remedies. If the City elected rescission, and Open successfully argued that the City did not make
a timely election during a trial to the Court or otherwise prevailed, the City would thereafter be
entitled to a jury trial on its fraud and negligent misrepresentation damages claim. Open
attempts to circumvent this argument by asserting that the City has not sought damages for its
misrepresentation claims. Mot. at 5. Open is wrong (and never moved for summary judgment on
this issue). The City has separately asserted these claims. For example, the Amended Complaint
[Dkt. 192] at 23, Prayer for Relief D sought “compensatory and general damages according to
proof” separately from the rescission and restoration and breach of contract remedies it sought.
Similarly, the City’s expert report was broken into two categories—based on rescission,2 and the
other based on the affirmance of the contract. See Ex. 2, Seigneur Report, Schedule A. The City
can pursue the damages under the “affirmance of the contract” theories whether under fraud,
negligent misrepresentation, or breach of contract.
II. The Seventh Amendment Requires that a Jury Trial Precede any Bench Trial
Open wrongly seeks to try equitable claims first because it wants to avoid a jury.3 Based
on clear Supreme Court precedent, if there are common issues of fact between the portion of a case
2 Expert testimony on rescission damages may be reserved for the Court following the jury trial.
3 During conferral, Open stated that the City would have no right to a jury on its Counterclaim.
Now, realizing the City is entitled to a jury on all issues so triable, including Open’s remaining
counterclaim, Open states that if the City chooses rescission, “Open would agree to the City’s
withdrawal of its jury demand as to Open’s counterclaim[]” (Mot. at 7, n.2). The City has not and
will not waive its right to a jury. There will not be a situation where an early election of remedies
“may prevent the need to impanel a jury at all” (id. at 7).
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triable to the jury and the portion triable to the Court, then the “legal claims involved in the action
must be determined by a jury prior to any court determination of the equitable claims.” Kline Hotel
Partners v. Aircoa Equity Interests, Inc., 729 F. Supp. 740, 744 (D. Colo. 1990) (citing Dairy
Queen v. Wood, 369 U.S. 469, 479 (1962)); see also, e.g., 8 MOORE’S FEDERAL PRACTICE - CIVIL
§ 38.43 (“if legal and equitable claims containing common issues are bifurcated for trial, absent
extraordinary circumstances, the legal claims must be tried first, in order to avoid depriving the
parties of their right to a jury trial as to the common questions”).
Despite Open’s broad generalizations that “the volume of fact and expert witnesses and
exhibits will be reduced” (Mot. at 1), no such actual showing has been made, and there are
significant overlapping issues of fact between all claims and defenses.4 In fact, the overlapping
fact issues would make separate trials unnecessarily duplicative. All of the City’s arguments
regarding Open’s pre-contract misrepresentations in the functional matrix and RFP that support
fraud and negligent misrepresentation are also relevant to breach of contract since those documents
were ultimately incorporated into the contract. Regardless of any election of remedies, the
evidence regarding Open’s grading of its software and the material differences between the product
it actually had and the one it promised (both pre-contract to induce the City to enter the contract
and in the contract and incorporated documents) will be relevant and must be considered by the
jury. When responding to Open’s counterclaim that the City failed to meet its staffing obligations,
the City will present evidence related to the functional matrix and RFP (which were incorporated
into the contract) to show what the City understood the staffing needs would be based on Open’s
4 As to Open’s assertions of “more complicated jury instructions” and “more in limine issues”
(Mot. at 7), this Court already informed the parties that it will require simple instructions and made
clear the types of issues that would even be considered in pre-trial motions.
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product represented to be “out-of-the-box” (as compared to the staffing required for a product that
needed custom development). Put simply, the claims and affirmative defenses rely on overlapping
facts that require a jury trial before any putative bench trial.
Indeed, even Open’s argument that the City’s election of rescission would prevent it from
asserting fraud as an affirmative defense is unsupported. Open cites Colorado Civil Jury
Instruction 30:18, Defense – Fraud in the Inducement at Sources and Authorities Sources and
Authority Section 3.c for the proposition that, if a party has fully performed a contract, they cannot
rescind and then use fraud as an affirmative defense. Ex. 3, at 3.a-4.b. But Open claims the City
did not fully perform, which means section 4, not section 3, would apply. Id. And based on Section
4.a-4.c, the City can either tender back what it received (in this case, nothing) or use fraud as a
defense to any claim based on future performance. Either way, a fraud defense is available. Id.
III. A Well-Curated Jury Trial is the Most Efficient Way to Resolve this Litigation
Given the overlapping facts and the City’s constitutional right to a jury before any bench
trial, a full jury trial is the most effective way of resolving this dispute. The jury can resolve
disputed facts underling Open’s waiver arguments (if allowed) and, if necessary, award fraud
damages in lieu of fraud rescission. It can address the City’s various affirmative defenses and its
claim for fraud simultaneously (without needing a separate consideration of fraud-rescission as a
claim and fraud as an affirmative defense). If the jury “determine[s] that” Open committed fraud
and “did not waive the remedy of rescission,” then the Court can thereafter decide how to best
implement it. Humphrey v. Escalera Res. Co., 2018 U.S. Dist. LEXIS 92688, *17-18 (D. Colo.
May 31, 2018) (applying rescission as a remedy after jury verdict). On the other hand, because a
bench trial would need to occur after a jury trial and would delay the resolution of affirmative
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defenses, forcing an early election of remedies would significantly increase the cost and
complexity of this dispute. As a consequence, splitting this litigation into a bench and jury portion
through an early election of remedies is inappropriate. See Commercial Iron & Metal Co. v. Bache
Halsey Stuart, Inc., 581 F.2d 246, 249-50 (10th Cir. 1978) (“even if it were assumed that its claims
were purely equitable, its claims for relief and its defense against the counterclaim were factually
identical, so that bifurcation into an equitable action and a legal action would be undesirable,
duplicitous and virtually impossible, and could well have deprived Commercial of its right to a
full jury trial on [defendant]’s counterclaim”). Juries routinely consider relief in the alternative,
and they routinely address fraud and breach of contract claims.5 The most efficient resolution of
this litigation will be for the jury to address the parties’ claims and affirmative defenses which, in
turn, will indicate whether an election of remedies is necessary or available. The Court can then
enact rescission as a remedy as appropriate.
CONCLUSION
Due to the extensive overlapping facts, claims, and defenses, this case is better suited for a
later election of remedies. The City respectfully requests that Open’s motion to require the City to
make an early election of remedies be denied.
5 See Ex. 4, Pattern Jury Instruction 9:4, Negligent Misrepresentation causing Financial Loss in a
Business Transaction; Ex. 5, Pattern Jury Instruction 19:1, False Representation – Elements of
Liability. Jurors also routinely address instances where parties seek to recover the same or
overlapping damages based on alternative claims for relief. See Ex. 6, Pattern Jury Instruction
6:14, Multiple Recovery Prohibited (when Plaintiff Suing on Alternative but Duplicative Claims
for Relief). Even if the Court must enact rescission as a remedy, the jury can decide the City’s
claims without being prejudiced or awarding duplicative relief.
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Respectfully submitted this 31st day of July, 2023.
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 July 31, 2023 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
Alexandra E. Pierce
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
aepierce@hollandhart.com
Attorneys for Defendants
s/Stacy Starr
DORSEY & WHITNEY LLP
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Exhibit 1
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 21-cv-02063-CNS-SP
CITY OF FORT COLLINS,
Plaintiff,
vs.
OPEN INTERNATIONAL, LLC, and OPEN
INVESTMENTS, LLC,
Defendants.
REPORTER'S TRANSCRIPT
Final Pretrial Conference
Proceedings before the HONORABLE CHARLOTTE N. SWEENEY, Judge,
United States District Court for the District of Colorado,
commencing on the 10th day of July, 2023, in Courtroom A702,
United States Courthouse, Denver, Colorado.
APPEARANCES
For the Plaintiff:
CASE L. COLLARD and ANDREA A. WECHTER and MARAL SHOAEI, Dorsey
& Whitney LLP, 1400 Wewatta St., Ste. 400, Denver, CO 80202
JOHN R. DUVAL, Fort Collins City Attorney's Office, P.O. Box
580, Fort Collins, CO 80522
For the Defendants:
PAUL D. SWANSON and ALEXANDRIA E. PIERCE and ALEXANDER D.
WHITE, Holland & Hart LLP, 555 17th St., Ste. 3200, Denver, CO
80201
Sarah K. Mitchell, RPR, CRR, 901 19th Street, Room A252,
Denver, CO 80294, 303-335-2108
Proceedings reported by mechanical stenography;
transcription produced via computer.
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21-cv-02063-CNS-SP Pretrial Conference 07/10/2023
push if you're taking too much time in your case that I feel
the defendant's are going to be prejudiced by it. So there's
kind of a secret hidden clock, and hopefully we don't have to
talk about it much because things are going so smoothly.
MR. COLLARD: It's on the record now the secret
hidden clock. I have one other issue that I feel like I need
to raise to make sure our position is clear. Mr. Swanson
raised the issue of a split trial. That is not a live issue,
his idea. This is a jury case. It's a jury trial. We've
requested a jury. They agreed to a jury in their pretrial
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one of the case management statements. It's a jury trial.
There's been no waiver of the jury trial. This is a jury
case. No matter what we elect, even if there's some aspect of
a rescission remedy that needs to be fashioned by the Court,
this is a jury case, and that's our position. So I wanted to
make that clear on the record.
THE COURT: Yeah, I understand, and that's my
knee-jerk reaction, but who knows what's going in this magical
eight-page brief we're going to get on July 24th, so we'll
reserve ruling on that. But that's my feeling about it is
that if there was an issue for me, it's related to a remedy
versus a finding of liability. So the jury will be hearing,
in my mind, all of the evidence, and there would be a limited
portion that I'm doing if I conclude that's in my purview.
MR. COLLARD: Thank you.
Sarah K. Mitchell, RPR, CRR
Case No. 1:21-cv-02063-CNS-SBP Document 237-1 filed 07/31/23 USDC Colorado pg 3
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Exhibit 2
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City of Ft. Collins v. Open International, LLC et al Schedule A
Economic Damages Summary
Date of Value: 4/14/2023
CFC's Economic Damages Summary
Scenario:Repudiating/Rescinding
The Contract
Enforcing the
Contract/Contract
Valid
Economic Damages Economic Damages
1 Broadband System Replacement Costs
GLDS (Broadhub) Implementation/System Costs Schedule E -$ 2,112,438$
2 Utilities System Replacement Costs
Implementation/System Costs Schedule D1 - 12,818,265
Contingencies for Add-ons & Complexities Schedule D1 - 2,251,452
RFP for Replacement Utilities CIS Schedule D3 401,094
3 Lost Staffing Efficiencies Due to Separate Billing Systems
Broadband Schedule B - 548,960
Utilities Schedule C - 1,072,075
4 Overhead Utility Expenses that Would Not Exist w/ OSF Schedule I - 3,620,892
5 Payments to Consultants for Project Management Schedule K1 537,508 897,730
6 Lost Net Revenue Schedule F 4,148,036 4,148,036
7 Recission/Amount Already Paid to Open Intl.Schedule H 11,382,465 -
Less: Amount that CFC Benefitted from Software in Use 12.08%[a](1,375,381) -
8 CFC Labor Costs For OSF Implementation Schedule M 5,718,383$ -$
Total Economic Damages as of April 14, 2023 20,411,011$ 27,870,941$
Notes:
[a]CFC used OSF for 29 months divided by management's expected useful life of the Software 240 months (20 years times 12 months)
= 12.08% Utilization Rate.
Seigneur Gustafson LLP
October 24, 2022 see accompanying report Confidential
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30:18 DEFENSE — FRAUD IN THE INDUCEMENT
The defendant, (name), is not legally responsible to the plaintiff, (name), on the
plaintiff’s claim of breach of contract if the affirmative defense of fraud is proved. This
defense is proved if you find all of the following:
1. The plaintiff (concealed a past or present fact) (failed to disclose a past or present
fact that the plaintiff had a duty to disclose) (made a false representation of a past or
present fact);
2. The fact was material;
3. The defendant entered into the (claimed) contract relying on the assumption that
the ([concealed] [undisclosed] fact did not exist or was different from what it actually was)
(falsely stated fact was true);
4. The defendant’s reliance was justified;
5. The defendant’s reliance caused (him) (her) (damages) (losses); and
6. The defendant has returned or offered to return to plaintiff (describe what, if
anything, the defendant would be legally obligated to return to the plaintiff in order to prevent
the defendant from being unjustly enriched).
Notes on Use
1. For cases involving contracts for the sale of goods, see section 4-2-721, C.R.S.
2. Use whichever parenthesized portions are appropriate in light of the evidence in the
case.
3. Omit any numbered paragraphs, the facts of which are not in dispute.
4. If the contract is wholly executory, paragraph 6 of this instruction should be omitted.
Also, in certain cases, the defendant may not be under a duty to return what he or she has
received from the plaintiff or its value. In those cases, paragraph 6 should be omitted or modified
appropriately, depending on the evidence in the case.
5. When this instruction is given, those instructions in Chapter 19 as would be
appropriate in the light of the evidence in the case should also be given, including Instruction
19:3 (defining false representation).
Source and Authority
1. This instruction is supported by Trimble v. City & County of Denver, 697 P.2d 716
(Colo. 1985); Sears v. Hicklin, 13 Colo. 143, 21 P. 1022 (1889); and RESTATEMENT (SECOND)
OF CONTRACTS §§ 159-173 (1981). See also Ice v. Benedict Nuclear Pharm., Inc., 797 P.2d
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757 (Colo. App. 1990) (unless damages resulted from alleged misrepresentation, plaintiff’s fraud
is not a defense to a breach of contract claim).
2. For a discussion of rescission of insurance contract by reason of fraud in an insurance
application, see Silver v. Colorado Casualty Insurance Co., 219 P.3d 324 (Colo. App. 2009).
3. When one has been induced to enter into a contract because of a material
misrepresentation on the part of the other party, that person may have several courses of action
open to him or her, depending on the particular facts. See generally W. PAGE KEETON, ET AL.,
PROSSER & KEETON ON THE LAW OF TORTS § 105 (5th ed. 1984). Among other courses of action
where both sides have fully performed the contract, the one defrauded may:
a. As a plaintiff, affirm the contract, and sue at law for damages in a tort action for deceit,
see, e.g., Club Matrix, LLC v. Nassi, 284 P.3d 93 (Colo. App. 2011), or
b. As a plaintiff, disaffirm the contract, tender back what the plaintiff has received, and
sue to recover what he or she gave as performance (rescission and restitution), or
c. As a defendant in a breach of contract action, he or she may take course a or b above as
a counterclaim. If the defendant chooses to rescind and seek restitution as a counterclaim,
the defendant may also use the fraud as a defense to the plaintiff’s claim for breach of
contract. If the defendant chooses to counterclaim for deceit, the fraud may not be used as
a defense to the damage claim (except as a counterclaim), since by suing for deceit the
defendant affirms the contract and is liable to render to the plaintiff what is due under the
contract.
4. Where the one defrauded has not fully performed, he or she may:
a. As a plaintiff, disaffirm any obligation to perform the contract further, but affirm the
contract to the extent he or she has performed it and sue for damages (if any) in a
common law action for deceit, see, e.g., Ackmann v. Merchants Mortg. & Trust
Corp., 659 P.2d 697 (Colo. App. 1982), rev’d on other grounds sub nom. Kopeikin v.
Merchants Mortg. & Trust Corp., 679 P.2d 599 (Colo. 1984), or
b. As a plaintiff, disaffirm the contract, tender back what he or she has received, and sue
for rescission and restitution as above, or
c. As a defendant in a breach of contract action, counterclaim for a or b above, or, if the
contract is totally executory, simply use the fraud as a defense to any damages for breach.
5. Many cases have recognized the defrauded person’s basic alternative remedies of
rescission and restitution. See W. Cities Broad., Inc. v. Schueller, 849 P.2d 44 (Colo. 1993);
Martinez v. Affordable Housing Network, Inc., 109 P.3d 983 (Colo. App. 2004), rev’d on
other grounds, 123 P.3d 1201 (Colo. 2005); Sims v. Sperry, 835 P.2d 565 (Colo. App. 1992);
Colo. Interstate Gas Co. v. Chemco, Inc., 833 P.2d 786 (Colo. App. 1991), aff’d on other
grounds, 854 P.2d 1232 (Colo. 1993); see also Trimble, 697 P.2d at 723; Neiheisel v. Malone,
150 Colo. 586, 375 P.2d 197 (1962); Aaberg v. H.A. Harman Co., 144 Colo. 579, 358 P.2d 601
(1960). On many occasions, the courts have also stated the rule that the defrauded person, having
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9:4 NEGLIGENT MISREPRESENTATION CAUSING FINANCIAL LOSS IN A
BUSINESS TRANSACTION — ELEMENTS OF LIABILITY
For the plaintiff, (name), to recover from the defendant, (name), on (his) (her) claim
of negligent misrepresentation, you must find all of the following have been proved by a
preponderance of the evidence:
1. The defendant gave false information to the plaintiff;
2. The defendant gave such information to the plaintiff in the course of (the
defendant’s [business] [profession] [employment]) (a transaction in which the defendant
had a financial interest);
3. The defendant gave the information to the plaintiff for the (guidance) (use) of the
plaintiff in a business transaction;
4. The defendant was negligent in obtaining or communicating the information;
5. The defendant gave the information with the intent or knowing that (the plaintiff)
(a limited group of persons of which the plaintiff was a member) would (act) (or) (decide
not to act) in reliance on the information;
6. The plaintiff relied on the information supplied by the defendant; and
7. This reliance on the information supplied by the defendant caused damage to the
plaintiff.
If you find that any one or more of these (number) statements has not been proved,
then your verdict must be for the defendant.
On the other hand, if you find that all of these (number) statements have been
proved, (then your verdict must be for the plaintiff) (then you must consider the
defendant’s affirmative defense(s) of [insert any affirmative defense that would be a complete
defense to plaintiff’s claim]).
If you find that (this affirmative defense has) (any one or more of these affirmative
defenses have) been proved by a preponderance of the evidence, then your verdict must be
for the defendant.
However, if you find that (this affirmative defense has not) (none of these
affirmative defenses have) been proved, then your verdict must be for the plaintiff.
Notes on Use
1. This instruction rather than Instruction 19:1 should be used when the plaintiff’s claim
is that, while the defendant may have had an honest belief in the truth of what the defendant
represented, the defendant was negligent in arriving at such belief or was negligent in the manner
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in which the defendant communicated it, thus creating a false impression of the true facts in the
mind of the plaintiff. When the negligently given false information results in physical harm to
the plaintiff’s person or property, rather than causing a financial loss to the plaintiff in a business
transaction, Instruction 9:3 should be used rather than this instruction. In several respects, the tort
covered by this instruction is more akin to the tort of “fraud” or intentional deceit (Instruction
19:1) than it is to the tort of negligent misrepresentation resulting in physical harm (Instruction
9:3). See RESTATEMENT (SECOND) OF TORTS § 311 cmts. a–c (1965); RESTATEMENT (SECOND) OF
TORTS § 552 cmt. a (1977).
2. Omit any numbered paragraphs, the facts of which are not in dispute.
3. Use whichever parenthesized words are most appropriate and omit the last two
paragraphs if the defendant has put no affirmative defense in issue or there is insufficient
evidence to support any defense.
4. In cases where the defendant did not give the information directly to the plaintiff, the
first three numbered paragraphs of this instruction must be appropriately modified.
5. Whenever the defense of contributory negligence has been properly raised in the form
of unreasonable reliance or in any other form, the beginning unnumbered paragraph as well as
the numbered paragraphs of this instruction should be substituted for the beginning unnumbered
and numbered paragraphs in Instruction 9:22 and that Instruction should then be used in accord
with its Notes on Use. For the definition of the claimed negligence of the defendant, Instruction
9:6 should be used. For the definition of the claimed contributory negligence of the plaintiff,
Instruction 9:5 should be used if that claimed negligence is in the form of unreasonable reliance.
If the claimed contributory negligence is in any other form, Instruction 9:6 should be used to
define the negligence of both parties.
6. Though mitigation of damages is an affirmative defense, see Instruction 5:2, only
rarely, if ever, when established will it be a complete defense. For this reason, mitigation should
not be identified as an affirmative defense in the concluding paragraphs of this instruction.
Instead, if supported by sufficient evidence, Instruction 5:2 should be given along with the actual
damages instruction appropriate to the claim and the evidence in the case.
7. This instruction, appropriately modified, may also be used in cases in which it is
claimed the defendant was under a public duty to give information and did so negligently.
RESTATEMENT (SECOND) OF TORTS § 552(3) (1977).
8. This instruction should not be used when liability has been admitted, see Instruction
2:4, or when the court has directed a verdict as to liability, see Instruction 2:6.
Source and Authority
1. This instruction is supported by First National Bank in Lamar v. Collins, 44 Colo.
App. 228, 616 P.2d 154 (1980) (applying RESTATEMENT (SECOND) OF TORTS § 552 (1977));
Robinson v. Poudre Valley Federal Credit Union, 654 P.2d 861 (Colo. App. 1982); and
Fitzgerald v. Edelen, 623 P.2d 418 (Colo. App. 1980). See also Van Winkle v. Transamerica
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Title Ins. Co., 697 P.2d 784 (Colo. App. 1984) (no liability for negligent failure to disclose in
absence of duty to disclose); W. PAGE KEETON ET AL., PROSSER AND KEETON ON THE LAW OF
TORTS §107, at 745-48 (5th ed. 1984); 2 F. HARPER ET AL., HARPER, JAMES, AND GRAY ON TORTS
§ 7.6 (3rd ed. 2006). The decisions of the court of appeals in Collins and Fitzgerald were cited
by analogy with approval by the supreme court in Bloskas v. Murray, 646 P.2d 907 (Colo.
1982). Later cases also provide support. See Keller v. A.O. Smith Harvestore Prods., Inc., 819
P.2d 69 (Colo. 1991); Hildebrand v. New Vista Homes II, LLC, 252 P.3d 1159 (Colo. App.
2010) (affirming judgment on negligent misrepresentation claim against builder and its principal
arising from misrepresentation that basement was suitable as a finished living space without a
structural floor); Mullen v. Allstate Ins. Co., 232 P.3d 168 (Colo. App. 2009) (affirming
summary judgment on claim for negligent misrepresentation by omission because insurer was
not obligated to provide information about other types of coverage); Platt v. Aspenwood
Condo. Ass’n, Inc., 214 P.3d 1060 (Colo. App. 2009) (allegations of misrepresentations of
status of homeowners vote sufficient to withstand motion to dismiss); Fluid Tech., Inc. v. CVJ
Axles, Inc., 964 P.2d 614 (Colo. App. 1998) (allegation that information was provided in course
of defendant’s business was sufficient to withstand motion to dismiss); Messler v. Phillips, 867
P.2d 128 (Colo. App. 1993); Burman v. Richmond Homes Ltd., 821 P.2d 913 (Colo. App.
1991); Ebrahimi v. E.F. Hutton & Co., 794 P.2d 1015 (Colo. App. 1989) (distinguishing
between the tort of negligent misrepresentation and tort of deceit).
2. A claim for negligent misrepresentation can be based only on misrepresentation of an
existing fact. Branscum v. Am. Cmty. Mut. Ins. Co., 984 P.2d 675, 680 (Colo. App. 1999)
(claim for negligent misrepresentation “cannot be based solely on the nonperformance of a
promise to do something at a future time” (citing High Country Movin’, Inc. v. U.S. W. Direct
Co., 839 P.2d 469 (Colo. App. 1992))); see also Colo. Pool Sys., Inc. v. Scottsdale Ins. Co.,
2012 COA 178, ¶ 72, 317 P.3d 1262 (while expressions of opinion cannot support a negligent
misrepresentation claim, liability for negligent misrepresentation may arise when a statement of
opinion involves mixed statements of law and fact); Colo. Coffee Bean, LLC v. Peaberry
Coffee, Inc., 251 P.3d 9 (Colo. App. 2010); Bedard v. Martin, 100 P.3d 584 (Colo. App. 2004).
3. A claim for negligent misrepresentation can be based on false information that the
defendant gave the plaintiff for use in a business transaction between the plaintiff and the
defendant. See, e.g., Keller, 819 P.2d at 72 (contracting party’s negligent misrepresentation of
material facts prior to execution of agreement may provide basis for independent tort claim);
Collins, 44 Colo. App. at 230, 616 P.2d at 155-56 (allegations that plaintiff relied on negligent
misrepresentations of representative of defendant in entering into contract with the defendant
stated claim for negligent misrepresentation in a business transaction).
Manufacturer’s Liability
4. For a discussion of a manufacturer’s liability to a buyer for negligent
misrepresentations made during the course of a sale of its product, see Keller, 819 P.2d at 72-74
(clause in integrated sales agreement that specifically disclaimed reliance on representations
made prior to agreement’s execution did not preclude finding that buyer relied on such
representations). Accord A.O. Smith Harvestore Prods., Inc. v. Kallsen, 817 P.2d 1038 (Colo.
1991).
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Attorney Liability
5. For a discussion as to when an attorney may be liable to a non-client for negligent
misrepresentation, see Baker v. Wood, Ris & Hames, P.C., 2016 CO 5, ¶ 35, 364 P.3d 872
(attorney’s liability to non-client is limited to narrow circumstances in which attorney committed
fraud or a malicious or tortious act, including negligent misrepresentation). See also Allen v.
Steele, 252 P.3d 476 (Colo. 2011) (attorney who negligently misrepresented statute of
limitations to non-client was not liable because an initial consultation for a potential civil lawsuit
is not a “business transaction,” a necessary element of the claim); Mehaffy, Rider, Windholz &
Wilson v. Central Bank Denver, N.A., 892 P.2d 230 (Colo. 1995) (attorney who issues an
opinion letter to client for purpose of inducing non-client to rely thereon in business transaction
may be liable to non-client for negligent misrepresentation); Zimmerman v. Dan Kamphausen
Co., 971 P.2d 236 (Colo. App. 1998) (attorney owed duty to third party to whom he issued
opinion letter); First Interstate Bank of Denver, N.A. v. Berenbaum, 872 P.2d 1297 (Colo.
App. 1993).
Information Given to Third Party
6. A defendant may be liable for negligent misrepresentation even though the defendant
did not give the information directly to the plaintiff. It is sufficient if the defendant gave the
information to a third person knowing that the third person intended to supply it to and use it to
influence the plaintiff or a limited group of persons of which the plaintiff was a member.
Hildebrand, 252 P.3d at 1168 (“‘direct communication of the information to the person acting in
reliance upon it is not necessary’” (quoting RESTATEMENT (SECOND) OF TORTS § 552 cmt. g
(1977))); see also Jimerson v. First Am. Title Ins. Co., 989 P.2d 258 (Colo. App. 1999)
(recognizing rule, but holding that to impose liability on supplier of information, third-party’s
reliance on that information must have been justifiable); DCB Constr. Co. v. Cent. City Dev.
Co., 940 P.2d 958 (Colo. App. 1996) (privity not required as element of negligent
misrepresentation claim), aff’d on other grounds, 965 P.2d 115 (Colo. 1998); Galie v. RAM
Assocs. Mgmt. Servs., Inc., 757 P.2d 176 (Colo. App. 1988) (privity between plaintiff and
defendant not required); Wolther v. Schaarschmidt, 738 P.2d 25 (Colo. App. 1986) (same); see
generally Campbell v. Summit Plaza Assocs., 192 P.3d 465 (Colo. App. 2008) (reaffirming
Jimerson, 989 P.2d 258, and holding that because title insurer owes no contractual obligation to
a vendor of real property by virtue of the title commitment or title insurance policy issued to the
buyer, vendor may not enforce obligations established by the title commitment and claim
negligence in title insurer’s performance).
Reasonable Reliance
7. The unreasonable reliance of the plaintiff on the misrepresentation of the defendant
constitutes contributory negligence for which, because it is an affirmative defense, the defendant
has the burdens of pleading and proof. See RESTATEMENT (SECOND) OF TORTS § 552A (1977). In
addition, the defense requires the application of an objective test. Robinson, 680 P.2d at 243.
Thus, the defense applies even though the plaintiff’s unreasonable reliance may otherwise have
been “justifiable” in terms of what a person of comparable intelligence, education and experience
to that of the plaintiff would have done. Id.; C.R.C.P. 8(c); RESTATEMENT § 552A.
8. Although unreasonable reliance may be considered a form of contributory or
comparative negligence and treated as an affirmative defense, in a number of cases, the Colorado
Court of Appeals has indicated that “justifiable” reliance is an element of a plaintiff’s claim. See,
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e.g., Colo. Pool Sys., Inc., 2012 COA 178, ¶¶ 59-63 (insured cannot justifiably rely on oral
statement of insurance agent about insurance coverage if the insured has a copy of the policy and
can see that the oral misrepresentation contradicts express, unambiguous terms of the policy, but
case remanded for further proceedings because the policy term was ambiguous); Colo. Coffee
Bean, LLC, 251 P.3d at 19 (reliance on franchisor’s general description of business model not
justifiable in light of exculpatory clauses in transactional documents and the absence of any
specific affirmative misrepresentation); Sheffield Servs. Co. v. Trowbridge, 211 P.3d 714
(Colo. App. 2009) (analyzing inquiry notice, the sophistication of the investor, and the parties’
relative access to the facts to determine whether reliance was justifiable), overruled on other
grounds by Weinstein v. Colborne Foodbotics, LLC, 2013 CO 33, 302 P.3d 263; Campbell v.
Summit Plaza Assocs., 192 P.3d 465 (Colo. App. 2008); Nelson v. Gas Research Inst., 121
P.3d 340 (Colo. App. 2005); Balkind v. Telluride Mtn. Title Co., 8 P.3d 581 (Colo. App.
2000); Branscum v. Am. Cmty. Mut. Ins., 984 P.2d 675 (Colo. App. 1999).
Damages
9. Damages are an essential element of a claim for negligent misrepresentation causing
financial loss in a business transaction. W. Cities Broad., Inc. v. Schueller, 849 P.2d 44 (Colo.
1993); DC-10 Entm’t, LLC v. Manor Ins. Agency, Inc., 2013 COA 14, ¶ 7, 308 P.3d 1223.
10. The proper measure of damages for a negligent representation causing financial loss
is the “out of pocket” rule rather than the “out of bargain” rule. Ballow v. PHICO Ins. Co., 878
P.2d 672 (Colo. 1994); W. Cities Broad., Inc., 849 P.2d at 49; Harrison v. Smith, 821 P.2d
832 (Colo. App. 1991); Robinson, 654 P.2d at 863 (citing with approval § 552B(1) of
RESTATEMENT (SECOND) OF TORTS (1977)). A damage instruction based on section 552B(1)
should therefore be given with this instruction rather than Instruction 19:17. See also
RESTATEMENT § 552B(2) (specifically excluding from the recoverable damages “the benefit of
the plaintiff’s contract with the defendant”).
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19:1 FALSE REPRESENTATION — ELEMENTS OF LIABILITY
For the plaintiff, (name), to recover from the defendant, (name), on (his) (her) claim
of deceit based on fraud, you must find all of the following have been proved by a
preponderance of the evidence:
1. The defendant made a false representation of a past or present fact;
2. The fact was material;
3. At the time the representation was made, the defendant:
(a) knew the representation was false; or
(b) was aware that (he) (she) did not know whether the representation was
true or false;
4. The defendant made the representation with the intent that (the plaintiff) (a
group of persons of which the plaintiff was a member) would rely on the representation;
5. The plaintiff relied on the representation;
6. The plaintiff’s reliance was justified; and
7. This reliance caused (injuries) (damages) (losses) to the plaintiff.
If you find that any one or more of these (number) statements has not been proved,
then your verdict must be for the defendant.
On the other hand, if you find that all of these (number) statements have been
proved, (then your verdict must be for the plaintiff) (then you must consider the
defendant’s affirmative defense(s) of [insert any affirmative defense that would be a complete
defense to plaintiff’s claim]).
If you find that (this affirmative defense has) (any one or more of these affirmative
defenses have) been proved by a preponderance of the evidence, then your verdict must be
for the defendant.
However, if you find that (this affirmative defense has not) (none of these
affirmative defenses have) been proved, then your verdict must be for the plaintiff.
Notes on Use
1. When the alleged deceit is based on the concealment or nondisclosure of a material
fact, rather than an overt misrepresentation, Instruction 19:2 should be used rather than this
instruction. See Ballow v. PHICO Ins. Co., 875 P.2d 1354 (Colo. 1993); Colo. Interstate Gas
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Co. v. Chemco, Inc., 833 P.2d 786 (Colo. App. 1991), aff’d on other grounds, 854 P.2d 1232
(Colo. 1993).
2. In cases involving multiple defendants or designated nonparties where the pro rata
liability statute, § 13-21-111.5, C.R.S., is applicable, see the Notes on Use to Instruction 4:20
(model unified verdict form).
3. Omit any numbered paragraphs, the facts of which are not in dispute.
4. Use whichever parenthesized words are most appropriate and omit the parenthesized
clause of the last two paragraphs if the defendant has put no affirmative defense in issue or there
is insufficient evidence to support any defense.
5. Though mitigation of damages is an affirmative defense, see Instruction 5:2, only
rarely, if ever, when established will it be a complete defense. For this reason, mitigation should
not be identified as an affirmative defense in the concluding paragraphs of this instruction.
Instead, if supported by sufficient evidence, Instruction 5:2 should be given along with the actual
damages instruction appropriate to the claim and the evidence in the case.
6. Other appropriate instructions defining the terms used in this instruction, for example,
Instruction 19:4, defining “material fact,” must be given with this instruction, and, when
necessary, an appropriate instruction or instructions relating to causation must be given. See
Instructions 9:18 to 9:21.
7. In common-law actions for deceit or in statutory actions under what is now section 42-
6-204, C.R.S., based on a misrepresentation in the mileage disclosure statement required by
section 42-6-202(5), C.R.S., or created by concealing the actual mileage of a motor vehicle as
prohibited by section 42-6-202(1), there is a rebuttable presumption that a purchaser who
received the mileage representation justifiably relied on the representation and that the
representation was material to the transaction. Lurvey v. Phil Long Ford, Inc., 37 Colo. App.
11, 541 P.2d 114 (1975). In those cases, Instruction 3:5, incorporating this presumption, must be
given with this instruction or, in a concealment case, with Instruction 19:2.
Source and Authority
1. This instruction is supported by and was cited with approval by the Colorado Supreme
Court in Bristol Bay Productions, LLC v. Lampack, 2013 CO 60, ¶ 26, 312 P.3d 1155, 1160
(“For ease of understanding, Colorado’s Model Jury Instructions unpack the fifth element into its
three discrete sub-parts, requiring the plaintiff to prove separately actual reliance, the
reasonableness of that reliance, and that the plaintiff’s reliance caused its damages.”). This
instruction is also supported by Knight v. Cantrell, 154 Colo. 396, 390 P.2d 948 (1964);
Morrison v. Goodspeed, 100 Colo. 470, 68 P.2d 458 (1937); Colorado Springs Co. v. Wight,
44 Colo. 179, 96 P. 820 (1908); and Sellar v. Clelland, 2 Colo. 532 (1875). See also Vinton v.
Virzi, 2012 CO 10, ¶ 15, 269 P.3d 1242; Concord Realty Co. v. Cont’l Funding Corp., 776
P.2d 1114 (Colo. 1989); Alzado v. Blinder, Robinson & Co., 752 P.2d 544 (Colo. 1988);
Kinsey v. Preeson, 746 P.2d 542 (Colo. 1987); Trimble v. City & County of Denver, 697 P.2d
716 (Colo. 1985); Just in Case Bus. Lighthouse, LLC v. Murray, 2013 COA 112M, ¶ 46, aff’d
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in part, rev’d in part on other grounds, 2016 CO 47; Barfield v. Hall Realty, Inc., 232 P.3d 286
(Colo. App. 2010) (citing this instruction); Platt v. Aspenwood Condo. Ass’n, 214 P.3d 1060
(Colo. App. 2009); Nelson v. Gas Research Inst., 121 P.3d 340 (Colo. App. 2005); Robert K.
Schader, P.C. v. Etta Indus., Inc., 892 P.2d 363 (Colo. App. 1994); Pittman v. Larson
Distrib. Co., 724 P.2d 1379 (Colo. App. 1986); Forsyth v. Associated Grocers of Colo., Inc.,
724 P.2d 1360 (Colo. App. 1986) (citing with approval the elements as set out in this
instruction); Club Valencia Homeowners Ass’n v. Valencia Assocs., 712 P.2d 1024 (Colo.
App. 1985); 2 F. HARPER ET AL., HARPER, JAMES, AND GRAY ON TORTS § 7.1 (3d ed. 2006); W.
PAGE KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS §§ 105-110 (5th ed. 1984).
2. Paragraph number 3 is supported by Meredith v. Ramsdell, 152 Colo. 548, 552, 384
P.2d 941, 944 (1963) (“[a] person who misleads another by word or act to believe a fact exists,
when he knows it does not, is guilty of fraud, notwithstanding he entertains a belief and
expectation that it will come into existence”); Denver Business Sales Co. v. Lewis, 148 Colo.
293, 365 P.2d 895 (1961) (trial court reversed in a deceit case based on nondisclosure for
instructing the jury that the defendant was liable if he failed to disclose a fact which “by the
exercise of reasonable prudence” he should have known); Pattridge v. Youmans, 107 Colo.
122, 126, 109 P.2d 646, 648 (1941) (“[h]e who makes a representation as of his own knowledge,
not knowing whether it is true or false, and it is in fact untrue, is guilty of fraud as much as if he
knew it to be untrue”); Otis & Co. v. Grimes, 97 Colo. 219, 221-22, 48 P.2d 788, 789 (1935)
(actual knowledge of falsity not required and it is enough if the representation is made “with
reckless ignorance of its truth or falsity” or “made . . . recklessly, careless [of] whether it be true
or false,” or is made with “no knowledge whether his assertion is true or false”); and Lahay v.
City National Bank of Denver, 15 Colo. 339, 25 P. 704 (1891) (same). See also Overland Dev.
Co. v. Marston Slopes Dev. Co., 773 P.2d 1112 (Colo. App. 1989); HARPER, JAMES AND GRAY
ON TORTS, supra, § 7.3; PROSSER AND KEETON ON THE LAW OF TORTS, supra, § 107. The
language of paragraph 3 was cited with approval in Sodal v. French, 35 Colo. App. 16, 531 P.2d
972 (1974), aff’d on other grounds sub nom. Slack v. Sodal, 190 Colo. 411, 547 P.2d 923
(1976).
3. Numbered paragraph 5 is specifically supported by Huston v. Ohio & Colorado
Smelting & Refining Co., 63 Colo. 152, 165 P. 251 (1917) (plaintiff denied relief for damages
caused by his reliance which was other than that intended by the defendant). See also Nielson v.
Scott, 53 P.3d 777 (Colo. App. 2002) (summary judgment proper where no evidence that
reliance on false representation was justified); Soneff v. Harlan, 712 P.2d 1084 (Colo. App.
1985) (no evidence of detrimental reliance); Blinder, Robinson & Co. v. Alzado, 713 P.2d
1314 (Colo. App. 1985), aff’d in part, rev’d in part on other grounds, 752 P.2d 544 (Colo.
1988).
4. The cases cited above in general support of this instruction do not use the phrase
“justifiable reliance” as set out in numbered paragraph 6. In a deceit action, however, while the
plaintiff’s reliance need not be “reasonable” in the sense of the objective standard of the
reasonably prudent man, Foster v. O’Farrell, 75 Colo. 170, 225 P. 217 (1924), it may not be
wholly unwarranted. See Instructions 19:8, 19:9, 19:10, and 19:11; see also Fasing v. LaFond,
944 P.2d 608 (Colo. App. 1997) (element of claim is “reasonable reliance” on the alleged
misrepresentation); Frontier Expl., Inc. v. Am. Nat’l Fire Ins. Co., 849 P.2d 887 (Colo. App.
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1992) (false representation requires justifiable reliance by the one to whom the representation is
made).
5. In a deceit action, actual damages must be proved as an element of the tort. W. Cities
Broad., Inc. v. Schueller, 849 P.2d 44 (Colo. 1993); Black v. First Fed. Sav. & Loan Ass’n,
830 P.2d 1103 (Colo. App. 1992), aff’d on other grounds sub nom. La Plata Med. Ctr. Assocs.
v. United Bank of Durango, 857 P.2d 410 (Colo. 1993); Harrison v. Smith, 821 P.2d 832
(Colo. App. 1991); Dann v. Perrotti & Hauptman Dev. Co., 670 P.2d 448 (Colo. App. 1983);
Greenleaf, Inc. v. Manco Chem. Co., 30 Colo. App. 367, 492 P.2d 889 (1971).
6. In Williams v. Boyle, 72 P.3d 392 (Colo. App. 2003), the court held that expert
testimony and a certificate of review were required to establish plaintiff’s fraudulent
misrepresentation and fraudulent concealment claims against a physician who had allegedly
misinformed plaintiff regarding the effects of a medication that the physician had prescribed.
7. For fraud as a defense to a breach of contract action, see Instruction 30:18. For an
excellent discussion of the various remedies and defenses which may be based on fraud, see
PROSSER AND KEETON ON THE LAW OF TORTS, supra, § 105.
8. Under section 13-25-127, C.R.S., the plaintiff’s burden of proof is by a preponderance
of the evidence, rather than by “clear and convincing” evidence, as was the earlier rule. See
Wiley v. Byrd, 158 Colo. 479, 408 P.2d 72 (1965) (evidence of “fraud” must be clear and
convincing); Wallick v. Eaton, 110 Colo. 358, 363, 134 P.2d 727, 729 (1943) (proof of fraud
must be “clear, precise and indubitable”).
9. For recovery for financial losses arising out of a business relationship caused by a
negligently made misrepresentation on which the plaintiff relied, see Instruction 9:4. Also, for
the tort of negligent misrepresentation resulting in physical harm, see Instruction 9:3.
10. In certain cases, the usual common-law requirements for the tort of deceit may have
been changed by statute. See, e.g., § 13-21-109, C.R.S. (damages recoverable for writing checks
or other instruments when no account or insufficient funds). See also First Nat’l Bank of
Durango v. Lyons, 2015 COA 19, ¶ 28, 349 P.3d 1161, 1166 (a fraud claim under the Colorado
Securities Act could lie in tort for purposes of the Colorado Governmental Immunity Act
because section 11-51-604 (3) provides that “[a]ny person who recklessly, knowingly, or with an
intent to defraud sells or buys a security in violation of [this section] . . . is liable to the person
buying or selling such security”); Barfield, 232 P.3d at 291 (section 12-61-807, C.R.S.,
expressly provides that agent acting as real estate “transaction broker” has no duty to investigate
whether property could be used as RV park or to verify accuracy of seller’s representations, and
failure to do so could not be basis for negligent misrepresentation or fraud claim); Nelson, 121
P.3d at 344 (elements to establish action for fraud under section 8-2-104, C.R.S., prohibiting
obtaining workers by misrepresentation, are the same as those for common-law fraud). In other
cases, common-law fraud requirements remain the same. See, e.g., In re Estate of Gattis, 2013
COA 145, ¶ 16, 318 P.3d 549, 554 (“home sellers’ common law duty to disclose known but
latent defects in the property has long been recognized”).
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11. Where a plaintiff has been induced fraudulently to enter into two related contracts as
part of the same general transaction, the plaintiff need not elect the same remedy for both
contracts. The plaintiff may elect to affirm one and sue for damages in deceit, and rescind the
other and seek restitution for any consideration paid. Plaintiff should not be required to elect the
same remedy for both contracts unless necessary to prevent double recovery or because the
assertion of different remedies would be so inconsistent that the assertion of one would
necessarily be a repudiation of the other. Stewart v. Blanning, 677 P.2d 1382 (Colo. App.
1984).
12. Lack of privity with a remote purchaser does not insulate a seller of property from
liability for false representation arising out of a failure to disclose a latent defect which
materially affected the desirability of the property. Iverson v. Solsbery, 641 P.2d 314 (Colo.
App. 1982); Schnell v. Gustafson, 638 P.2d 850 (Colo. App. 1981).
13. A disclosed principal may be held liable in deceit for a misrepresentation made by an
agent within the scope of a transaction the agent was authorized to effect. Erickson v. Oberlohr,
749 P.2d 996 (Colo. App. 1987).
14. A fraud claim based on only vicarious liability is insufficient. Just in Case Business
Lighthouse, 2013 COA 112M, ¶ 64.
15. There is authority for the proposition that if the plaintiff has access to information that
would have led to the discovery of the true facts and such information was equally available to
both parties, then plaintiff’s reliance is not justified or reasonable as a matter of law. See Colo.
Coffee Bean, LLC v. Peaberry Coffee, Inc., 251 P.3d 9 (Colo. App. 2010); Balkind v.
Telluride Mtn. Title Co., 8 P.3d 581 (Colo. App. 2000); see also Vinton, 2012 CO 10, ¶ 17;
M.D.C./Wood, Inc. v. Mortimer, 866 P.2d 1380 (Colo. 1994). However, for a different test, see
the authority cited in the Source and Authority to Instructions 19:8 to 19:10.
16. The “economic loss rule” bars recovery on post-contractual claims for fraudulent
concealment and fraudulent misrepresentation which arise out of contract rather than tort duties.
Hamon Contractors, Inc. v. Carter & Burgess, Inc., 229 P.3d 282 (Colo. App. 2009); see also
Top Rail Ranch Estates, LLC v. Walker, 2014 COA 9, ¶ 39, 327 P.3d 321 (economic loss rule
barred fraud claims); In re Estate of Gattis, 2013 COA 145, ¶ 14 (economic loss rule does not
bar a nondisclosure claim against a home seller for latent defects known to the seller); Makoto
USA, Inc. v. Russell, 250 P.3d 625 (Colo. App. 2009) (economic loss rule bars fraud and theft
claims that are dependent on contractual duty).
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C. MULTIPLE RECOVERY
6:14 MULTIPLE RECOVERY PROHIBITED (WHEN PLAINTIFF SUING ON
ALTERNATIVE BUT DUPLICATIVE CLAIMS FOR RELIEF)
The plaintiff, (name), has sued for the same (injuries) (damages) (losses) on (number)
different claims for relief. The claims for relief on which the plaintiff has sued and on
which you have been instructed are: (insert appropriate description of each of the plaintiff’s
claims).
If you find for the plaintiff on more than one claim for relief, you may award (him)
(her) damages only once for the same (injuries) (damages) (losses).
Notes on Use
1. This instruction applies only to multiple claims that are duplicative in terms of their
recoverable damages. The court should instruct the jury on each claim for relief, provided there
is sufficient evidence on each such theory in the case. In such circumstances, however, this
instruction must be given. Schuessler v. Wolter, 2012 COA 86, ¶ 64, 310 P.3d 151; Rusch v.
Lincoln-Devore Testing Lab., Inc., 698 P.2d 832 (Colo. App. 1984). Also, the verdict forms
submitted to the jury should be so phrased that the jury is not misled. See Am. Furniture Co. v.
Veazie, 131 Colo. 340, 281 P.2d 803 (1955); see also Andrews v. Picard, 199 P.3d 6 (Colo.
App. 2007); Colo. Homes, Ltd. v. Loerch-Wilson, 43 P.3d 718 (Colo. App. 2001); DeBose v.
Bear Valley Church of Christ, 890 P.2d 214 (Colo. App. 1994), rev’d on other grounds, 928
P.2d 1315 (Colo. 1996).
2. When the plaintiff is suing for the same physical injuries to person or property and
basing his or her claims on alternative theories of relief (for example, breach of implied warranty
of merchantability and strict liability in tort), but is also suing for other or additional damages
based on one of these or yet a different theory (for example, commercial damages caused by
breach of express warranty), this instruction must be appropriately modified.
3. Where damages are the same for each of multiple claims for relief, clarifying
instructions and a special verdict form should be used so that the jury will award the same
damages only once for all successful claims. Steward Software Co. v. Kopcho, 275 P.3d 702
(Colo. App. 2010), rev’d on other grounds, 266 P.3d 1085 (Colo. 2011).
4. For a verdict form addressing multiple claims and parties, see Instruction 4:20, the
model unified verdict form.
Source and Authority
1. This instruction is supported by American Furniture Co., 131 Colo. at 346, 281 P.2d
at 806. In that case, the court noted in dictum that the confusion of the verdict forms could have
been avoided by requiring the plaintiff to elect his remedy before the case was submitted to the
jury. However, the court did not state that such necessarily should have been done, and other
authority clearly indicates that in the absence of unusual circumstances, the plaintiff is entitled to
go to the jury on alternative theories, if there is sufficient evidence supporting each theory. See
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Carpenter v. Donohoe, 154 Colo. 78, 388 P.2d 399 (1964) (when remedies are consistent, a
party is entitled to pursue either or both until satisfaction of one is obtained); see also C.R.C.P.
18(a), 318(a); Stewart v. Blanning, 677 P.2d 1382, 1384 (Colo. App. 1984) (requiring election
of remedies not appropriate unless the “remedial rights sought in a given situation are so
inconsistent that the assertion of one necessarily repudiates the assertion of the other”).
2. The rule prohibiting double recovery for the same injury on multiple claims for relief
also applies in cases involving multiple defendants. Quist v. Specialties Supply Co., 12 P.3d
863 (Colo. App. 2000).
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