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HomeMy WebLinkAbout2021-cv-2063-CNS-MEH - City Of Fort Collins V. Open International, Et Al. - 230 - Final Pretrial Order 5 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No.: 21-cv-02063-CNS-SP CITY OF FORT COLLINS, Plaintiff/Counterclaim Defendant, v. OPEN INTERNATIONAL, LLC Defendant/Counterclaim Plaintiff, and OPEN INVESTMENTS, LLC, Defendant. FINAL PRETRIAL ORDER 1. DATE AND APPEARANCES Plaintiff City of Fort Collins (the “City”) and Defendants Open International, LLC and Open Investments, LLC (collectively, “Open”) (collectively the “Parties”) are scheduled for a pretrial conference before Judge Sweeney on July 10, 2023 at 1:00 p.m. Appearing as counsel on behalf of the City are Case Collard, Andrea Ahn Wechter, and Maral J. Shoaei 1 of Dorsey & Whitney LLP, 1400 Wewatta Street, Suite 400, Denver, CO 80202, (303) 629-3450 and John Duval, Deputy City Attorney for the City of Fort Collins, 300 LaPorte Avenue, Fort Collins, CO 1 The City may seek for Ms. Shoaei to appear telephonically due being out of the state at the time of this conference. Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 1 of 41 6 80521, (970) 221-6520. Appearing as counsel on behalf of Open are Paul D. Swanson, Alexander White, and Alexandria Pierce of Holland & Hart LLP, 555 17th Street, Suite 3200, Denver, CO 80202, (303) 295-8578. 2. JURISDICTION Pursuant to 28 U.S.C. §§ 1332, 1367(a), 1441, and 1446, this Court has subject matter jurisdiction over all claims asserted by the Parties because this matter has been removed from Colorado state court, the Parties are citizens of different states, and the total amount in controversy exceeds $75,000.00 for each Party. Subject matter jurisdiction is not contested by either Party. 3. CLAIMS AND DEFENSES SUMMARY OF THE CITY’S CLAIMS AND DEFENSES: This case arises out of Open’s misrepresentations and failure to implement a fully functional integrated utilities and broadband billing system as required under the parties’ Master Professional Services Agreement (the “MPSA”) and Software License Agreement, as well as a “Scope of Work” (”SOW”) (collectively “the Agreements”). Instead of designing and implementing a reliable, functioning integrated billing system as required by the MPSA, and as Open represented it was uniquely capable of providing, Open delivered a delayed, sub-standard billing system for the City’s broadband services, replete with major flaws that failed to meet the City’s needs and still in development at the time the Agreements were entered into despite Open’s representation to the contrary. Further, Open similarly failed to deliver a functioning billing system for the City’s other utilities altogether. The City attempted to address these delays and performance issues amicably with Open, including entering into multiple project change requests and the First Amendment to the MPSA (“First Amendment”). Ultimately, after nearly three years Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 2 of 41 7 of empty promises and despite receiving over $8.7 million from the City, Open failed to deliver a fully functioning product. Accordingly, after following the termination procedures set forth in the MPSA, the City brought this action for fraudulent inducement, negligent misrepresentation, breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory judgment. Notwithstanding its lack of performance and failure to meet its obligations under the Agreements and First Amendment, Open asserted counterclaims against the City for breach of contract, breach of the implied covenant of good faith and fair dealing and declaratory judgment seeking to recover over $3.8 million in purported damages. Open’s claims for breach of implied covenant of good faith and fair dealing and declaratory judgment have been dismissed by this Court’s Order on the parties’ summary judgment motions. The City is a home rule municipality organized under Article XX of the Colorado Constitution. In 2017, the City’s voters approved an amendment to Fort Collins Municipal Charter to allow the City to provide telecommunication facilities and services, including the transmission of voice, data, graphics and video using broadband internet facilities, to its residents. On February 10, 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”) to implement a comprehensive and integrated solution providing functionality to its utility Customer Information System (“CIS”), its field services, and to serve the range of needs both for current City utilities and for Connexion—the City’s new municipal broadband service. Open responded to the City’s RFP, acknowledging that the City sought an integrated solution, specifically claiming that its product “complies with the vast majority of the functional and technical requirements of this RFP with one single and uniform product: Open Smartflex.” Open graded 89.7% of the City’s Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 3 of 41 8 functionalities as “A” and indicated that it was an “out-of-the-box” solution. Open also stated that the requested implementation would occur in two phases—the first would take “12 months with a three month post-go-live support period” and the second would “occur one month later [and] have four months post-go-live support.” Open understood the importance of representing its product accurately in the RFP Response, yet it intentionally concealed facts or made misrepresentations about its product in order to induce the City into entering into the relationship. For instance, the base system Open actually had available at the time of the RFP response, OSF V7, did not have a self-service portal to allow utility customers to access their accounts and purchase services. Open was developing a portal, but it was not ready. Nonetheless Open proposed using OSF V8 which would need to have a portal created to meet the City’s needs. Like the other functionalities, Open represented that its portal met almost all of the required portal functionalities (grading them as “A”), repeatedly representing that its “Customer Self-Service Portal” was part of the fully integrated OSF product. However, Open knew, at the time it responded to the RFP, that it was abandoning its homegrown portal and purchasing a portal from Milestone, but it did not update its RFP Response. In fact, portal functionalities did not exist in the base product at the time of the RFP Response because the graded “homegrown” portal was scrapped and terminated that month. And Open did not even have the code for Milestone’s portal until late July 2018 to grade that portal’s functionality accurately. Based on Open’s misrepresentations in the RFP and during the RFP process, the City selected Open as the vendor to perform this critical project. The City and Open engaged in substantial negotiations regarding the contract, spanning several months, and the parties ultimately executed the MPSA and Software License Agreement on August 9, 2018, incorporating the RFP, Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 4 of 41 9 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 Under the SOW, Open agreed to deliver its SmartFlex product by June 2019 for Connexion (known as “Go Live for Broadband”) and by mid-September 2019 for the City’s other utilities (known as “Utilities Go Live”). In turn, the City agreed to pay Open a fixed-price for the project based on six milestones and conversion services, subject to retainage due upon completion of the entire project, as well as travel expenses, based on specific invoicing processes set forth in the MPSA. The parties also understood that payments by the City were “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.” By July 17, 2018, the City appropriated $10,959,893 for the entirety of the implementation project, including for services performed by third-parties on the project. Over the course of the project and pursuant to the terms of the MPSA, the parties negotiated and executed multiple written project change requests (“PCRs”) concerning additional costs or resources and extension of the project schedule. Additionally, the parties entered into the First Amendment dated June 2, 2020, for new milestone dates for Utilities and payments thereof, subject to retainage amounts by the City. Under the First Amendment, the parties also agreed to share the additional costs for the project, with the City responsible for “55% of the total additional cost or $1,686,364.68” and Open responsible for “45% or $1,379,752.90 of the additional cost”. 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 Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 5 of 41 10 Council.” In turn, City Council appropriated an additional $1,900,000 on June 16, 2020. In total, the City appropriated $12,859,893.00 for the project, including to pay other third-parties. Relatedly, the First Amendment required that any “future changes to the Project Cost and/or Project Schedule shall be subject to mutual agreement by the Parties and documented in accordance with Section 6, Project Changes, of the [MPSA].” Subsequently, the parties entered and executed PCR No. 29 to cover an extension of the project regarding Connexion until January 31, 2021. The City paid $450,560 upon formalization of PCR No. 29 and agreed to pay the remaining $450,560 as a second milestone based on completion of Connexion deliverables. In early 2021, the Parties undertook a comprehensive review of the functional matrix to evaluate whether OSF was performing as represented. It was not. Instead, the City confirmed that Open’s software lacked significant functionalities Open had represented as pre-existing. In June 2021 (over three years after Open had submitted the RFP Response), Open agreed that only 240 out of 2,205 requirements—or approximately 11.8%—were accepted by the City as of June 2021. During and after this review, Open and the City engaged in high-level discussions concerning the future of the project, and the City articulated the issues it had with Open’s software and its concerns that Open had made misrepresentations. Direct meetings between Open and City executives failed to resolve the disputes or cure Open’s breaches. At this time the City began to understand the full extent of Open’s misrepresentations prior to and throughout the project. Open sent the City a default notice. The City accepted this letter as a notice pursuant to § 13.2 of the MPSA, participated in an in-person executive-level meeting, and then Open prepared and submitted a responsive cure proposal. Also, on May 28, 2021, the City served its Notice of Dispute and Notice of Termination pursuant to Section 13 and 17 of the MPSA. As of that time, Utilities system Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 6 of 41 11 testing had not been completed, Utilities Go-Live had not occurred, and Utilities stabilization had not been successfully completed. Moreover, the second milestone under PCR No. 29 was not completed. When Open failed to cure the issues raised in the City’s Notice the City initiated this lawsuit on July 2, 2021. As of the filing of the Complaint, the City had paid Open $8,756,659.16 from appropriated funds for the project and retained $1,086,033.00 in retainage amounts under the parties’ agreements, which would be due to Open if the project was successfully completed. The City discovered further misrepresentations throughout the discovery process. The City seeks to rescind the Agreements and First Amendment between the City and Defendants due to Open’s breach of contract, fraudulent inducement, and negligent misrepresentation. Rescission would require Open International to return the amounts the City has previously paid, approximately $8.7 million, as well as internal and external labor costs that the City would not have incurred but-for Open’s actions, and its lost net revenue. The City alternatively seeks to recover its actual damages suffered as a result of Open’s breach of the Parties’ agreements. These actual damages include: (1) payments made to Open for services and product that the City did not receive; (2) the costs the City has incurred and will continue to incur to implement and maintain a functional, replacement billing system for Connexion, (3) the costs the City has incurred and will continue to incur to implement a functional, replacement billing system for its other utilities, (4) overhead expenses that the City has incurred as a result of Open’s failure to implement a functional billing system, and (5) lost efficiencies and net revenue as a result of Open’s failure to implement an integrated billing system. Further, the City seeks damages stemming from losses caused by Open’s breach of the implied duty of good faith and fair dealing to be proven at trial and a declaration in the City’s Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 7 of 41 12 favor. The City also seeks an award of reasonable costs, expenses, and attorneys’ fees incurred in this action; pre- and post-judgment interest in accordance with law; and such other relief as this Court deems just and proper. Separately, the City is not liable on Open’s remaining counterclaim for breach of contract because of Open’s own fraud, misrepresentations, or prior breaches of the Parties’ agreements, as further described above. During the course of this lawsuit, Open claimed to be entitled to damages totaling $3,826,719.14. From this total amount, Open seeks to recover monies for services for which it never invoiced the City, thus waiving or estopping any right to payment, and milestones that were never achieved or amounts that were never agreed to by the Parties or their agreements, all failing conditions precedent to payment. Further, the Court already reduced Open’s claimed damages by $551,901.15 during summary judgment. Open is not entitled to any amount and in any event, should Open obtain any judgment against the City, the City would have to appropriate funds to satisfy the judgment and Open does not have the ability to force such appropriation. SUMMARY OF OPEN’S CLAIMS AND DEFENSES: This case is the City of Fort Collins’s attempt at rewriting the narrative of its own manifest failure to perform its obligations under the parties’ Agreements. The City failed to keep its promises to Open from the outset—the City did not provide the required documentation of its business processes for its nascent broadband offering to Open prior to the start of the implementation or the business cases and test cases required for the software implementation; the City did not supply the necessary staffing and resources required under the Agreements; and the City never put in place effective project management capable of making the implementation of Open’s Open SmartFlex product (“OSF”) the success it should have been. Though the City fell Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 8 of 41 13 short, Open went above and beyond to make up for the gaps in the City’s performance and, ultimately, delivered a billing system for broadband that City officials touted as a success. But the City’s problems persisted, leaving Open no choice but to notify the City of its multiple breaches of its obligations under the Agreements. In its May 19, 2021 notice letter to the City, Open warned that if the City did not cure these defaults within 30 days, Open would terminate the Agreements. Rather than attempt to cure its own defaults, the City breached the Agreements again when it responded to Open’s notice of default by sending a “Notice of Dispute and Notice of Termination” without providing Open with an opportunity to cure and when it withheld payment from Open for services Open already performed. Despite the City’s improper notice, Open attempted to reach an amicable solution, presenting the City with a proposal to reach project completion by which Open could take over a significant part of the City’s responsibilities that the City had failed to live up to. Rather than respond to Open’s proposal, the City commenced this action, bypassing the process required by the Agreements and seeking to point the finger at Open. The City alleges claims of fraudulent inducement, negligent misrepresentation, breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory judgment. But it is the City’s breach that has harmed Open. Accordingly, Open filed counterclaims against the City for breach of contract and seeks to recover approximately $3.3 million in damages for work it performed but the City did not pay for, which does not account for the millions of dollars in additional harm to Open from lost time, wasted investments, and tarnished reputation. Open is an international software provider with over 35 years of experience implementing its proprietary customer information system, Open SmartFlex, for utilities and telecommunication service providers, including municipalities like Fort Collins. With its decades of success Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 9 of 41 14 implementing its software for customers in North, Central, and South America, Open sought to enter the U.S. market and, in 2015, began extensive preparation to do so. Open was therefore ready for the opportunity that arose in February 2018, when the City published a request for proposal (“RFP”) for a software system to support its traditional utilities—water, wastewater, stormwater, and electricity—and a brand new broadband service the City planned to launch. In March 2018, Open submitted a proposal that pitched its forthcoming 8th-generation software, Open Smartflex (“OSF”) Version 8.0, which Open explained it was still developing and would deliver during the course of the project. The RFP included a functional matrix that outlined thousands of functional requirements for the City’s needs. Open filled out this matrix based on this same Version 8.0 of OSF, indicating with “A” grades the functionalities that were going to be “part of the base system” in Version 8.0, and noting the City would be the first customer for this new version if it selected Open. After months of in-depth due diligence by the City, during which Open demonstrated the functionalities of its future generation of OSF to the City at multiple workshops, the City chose Open, and in August 2018, the parties executed the MPSA, Software License Agreement, and SOW which governed the software project. The City chose to bifurcate the implementation project. It initially planned to launch the broadband software solution in summer 2019 and the utilities portion in fall 2019. The City knew and agreed that achieving this multi-year, multimillion-dollar project would require substantial collaboration between, and dedication of substantial resources and effort by, the City and Open. Indeed, a CIS implementation project is not something that a vendor can do on its own, since customer-side work and input are needed for almost every deliverable throughout the project. Further, the City knew and accepted that it was Open’s first U.S. customer and the first anywhere Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 10 of 41 15 for which Open would implement Version 8.0 of OSF, and that this groundbreaking project could not move forward without extensive and effective participation by City personnel. Accordingly, in the MPSA, the City made three major promises to Open, the performance of which were necessary to ensure that the project would be a success. First, the City promised to provide documentation of its specifications, definitions, product catalogs, business cases, test cases, and other requirements for the configuration of the system. At the time the parties executed the MSPA, the City’s broadband offerings were unknown. The City was still building the necessary infrastructure and identifying vendors to provide broadband services to its customers. OSF is a configurable software that can be shaped to fit the needs of its user. However, without necessary information about the services the City would be offering, the pricing for those services, and the vendors for those services, OSF could not be configured to fit the as-yet unknown needs of the City. And, the City was required to provide information on the business processes for its utilities offerings so that Open and the City could configure OSF to meet those needs. Second, the City promised to provide adequate staffing and support to facilitate the project. Importantly, the MPSA laid out specific staffing and support requirements that Open required, and that the City agreed to provide, for each stage of the project. Third, the City promised to provide project management and leadership for its staff and its project obligations. Open, which has over thirty years of experience implementing its software, advised the City that both the City and Open should each provide a project manager for their side of the work needed on the project, and the MPSA required this mirrored management approach. The City agreed to provide management and administration for the project to ensure a software implementation of this scale would be a success. Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 11 of 41 16 But the City did not live up to these express promises. From the start, the City failed to provide necessary documentation for its broadband processes—delaying Open’s ability to begin work. Moreover, as the project continued, the City constantly moved the ball—shifting its priorities and adding all-new, unscoped functionalities to the project that injected further complexity that the parties had not agreed to. The City failed to assign adequate staff, consistently falling drastically below the required staffing levels. The City abdicated its role in project leadership and administration, employing a cast of project managers and vendor managers incapable of sustained, focused performance of the City’s MPSA obligations. Without properly defining the project, staffing it, or leading its own team, the City breached the MPSA and blocked timely implementation. Despite the City’s failings, Open remained steadfastly committed to the project, going beyond what was required in the MPSA to ensure the implementation would be a success. Open provided more-than-adequate staffing on its end and, eventually, through change orders that the parties executed, agreed to provide additional staffing beyond what the MPSA required to help fill the gaps on the City’s side. And, Open delivered a product that the City and its outside consultants approved. Particularly, in August 2019, Open delivered the broadband solution, which the City accepted, paid for, and touted to the marketplace as a “successful launch.” Open’s staff supported the City throughout its implementation efforts thereafter. And, throughout the lifetime of the project, Open promptly addressed any issues with the system as required by the contract. Even so, Open could not complete the project without the City’s contractually-required participation and cooperation, which was discussed at length with City in almost every project meeting, including meetings in March and April 2021 in which the City accepted its shortcomings Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 12 of 41 17 and again promised to cure its defaults. After striving to get the City to meet its obligations and to plug the holes in its staffing, leadership, and deliverables, as it became evident that the City could not or would not comply, Open decided to notify the City of its multiple breaches of its express obligations under the MPSA that prevented completion of the project. In its May 19, 2021 notice, sent pursuant to the parties’ contract, Open allowed the City 30 days to cure these defaults and warned the City that, otherwise, Open would have to terminate the MPSA and seek payment for the work it had performed. Although the City had repeatedly admitted responsibility for project delays and other problems, rather than attempt to cure its defaults the City materially breached the MPSA again when it responded to Open’s notice of default by immediately terminating the MPSA without proper notice to Open or an opportunity to cure, and by withholding payment from Open for services it already performed. Notice and cure were clearly not futile because, despite the City’s failure to specify alleged breaches and the means by which Open could cure them, the parties met after the City’s purported unilateral termination and agreed that Open would propose options for completing the project that involved Open taking over the City’s main responsibilities in light of the City’s self-acknowledged shortcomings as to staffing and decision-making, which the City and Open would then analyze together to build a plan for project completion. Open then worked on and presented the City with a proposal detailing what work remained to be accomplished and providing a method by which Open could complete the project with minimal participation from the City. Rather than respond to Open’s proposal, only two days later and without even providing analysis of or feedback on Open’s proposal, the City commenced this action, bypassing the processes required under the MPSA and seeking to rewrite the narrative to portray Open as the Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 13 of 41 18 breaching party. Rather than engage in good faith, the City apparently was preparing a lawsuit all while inducing Open to work diligently on a proposal that Open thought was an agreed-upon solution to the parties’ dispute. It is the City’s breaching conduct that has harmed Open. By failing to provide the staffing, governance, scoping, and numerous prerequisites and deliverables that it promised to deliver, the City breached its duties and scuttled the project. Further, the City has withheld millions of dollars for work that Open already performed, and the City has misappropriated funds in an apparent attempt to short-change Open. Although the City’s procurement director, Gerry Paul, confirmed the City’s contract obligations with Open were fully funded in June 2021, the City then siphoned funds away from the Open project account in an effort to insulate itself against a judgment in Open’s favor. Accordingly, Open seeks “full payment” for the “Services performed” pursuant to section 13.6(a) of the MPSA. Specifically, Open seeks the $1,086,032.59 in retainage that the City has withheld, $375,230.40 in past-due invoices for work Open already performed and invoiced to the City, and the $2,129,561.77 owed to Open for the services it performed and for which the City approved payment but that were not invoiced or paid for prior to the City’s termination. Open also seeks its fees and costs, plus interest, as provided by the MPSA. On the other hand, Open is not liable to the City on any of its claims. The City asserts claims of fraudulent inducement, negligent misrepresentation, breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory judgment. These claims fall short. First, the City’s claims of fraudulent inducement and negligent misrepresentation are unsupported by the evidence. Open did not misrepresent OSF’s functionality. Open’s response to the City’s RFP expressly states that it was formulated based on the functionality that would be Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 14 of 41 19 included in Open’s forthcoming release of Version 8.0 of OSF, for which the City would be the first customer. And, in response to each of the thousands of functionalities listed in the City’s functional matrix, Open made clear that it formulated its response based on “Version 8.0” of OSF. Further, Open’s frank responses to the RFP undercut the City’s allegations that Open had any intent to mislead. Additionally, the City cannot demonstrate materiality or reasonable reliance, because, after Open’s initial response to the City’s RFP, the parties repeatedly revised the functional matrix—descoping hundreds of items that the City determined it did not need and refining and revising the remaining requirements through the solution scope process. Moreover, the City cannot demonstrate materiality or reasonable reliance on any alleged misrepresentation made prior to the execution of the MPSA, because it claims that it knew about the alleged misrepresentations early on in the project timeline, yet continued to work with Open, even agreeing to extend its contractual relationship with Open for years after it supposedly learned of any “misrepresentation.” In addition to the lack of evidence sufficient to support fraudulent inducement and negligent misrepresentation, the economic loss doctrine bars the City from asserting these claims because the functional matrix, and the rest of Open’s response to the City’s RFP, were expressly incorporated into the MPSA as a contractual obligation. All other proposals and representations made prior to the execution of the MPSA were disclaimed. Accordingly, the City cannot seek any remedy under these claims—rather, the MPSA provides an avenue for relief solely through a claim sounding in contract. Second, the City’s breach of contract claim fails on multiple levels. At the outset, the Court has already ruled that the City never provided Open with notice and an opportunity to cure any Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 15 of 41 20 alleged breach as required under the MPSA. Under Colorado law, there cannot be a material breach of a contract unless and until a party provides notice of the breach to the other party and that other party does not cure said breach. Because Open was never afforded such an opportunity, it cannot have materially breached. Moreover, notice and an opportunity to cure would not have been futile. Despite the City’s failure to specify a cure, Open demonstrated its intent to work with the City to solve the project’s problems, preparing a robust proposal to the City that outlined the work remaining on the project and how Open could, by itself, complete the outstanding work notwithstanding the City’s persistent deficiencies. Despite Open’s good faith efforts to “right the ship,” the City impermissibly terminated the Agreements. Even so, Open fully performed its obligations under the MPSA and did not do anything that would sustain a proper notice of default. Open staffed the project to the level required, it delivered a product which the City and its outside consultants approved, and it promptly addressed any issues that arose with the system as the contract required. Rather, any delays and issues with the City’s billing system are attributable to the actions—or inactions—of the City. The City failed to adequately resource the project, provide adequate project management, and deliver specifications, definitions, product catalogs, business cases, test cases, and other requirements for the configuration of the system as required by the MPSA. In June 2020, the City admitted that it was responsible for the majority of project delays and additional costs incurred for the project. Put simply, Open performed its end of the bargain; the City did not. Accordingly, the City cannot prevail on its breach of contract claim. Even if the City is entitled to any remedies for its claims, that relief is limited. The City’s claimed rescission damages include amounts that are not properly included as a rescission remedy, Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 16 of 41 21 including lost profits and payments to third parties. The proper measure, should the City overcome the steep factual hurdles to its fraud and negligent misrepresentation claims, would be to restore the status quo ante, which requires restitution on both sides of the MPSA under Colorado law. Open’s outlay on the project for the benefit of the City far outweighs the City’s, nullifying any potential rescission damages for the City. The City’s contract damages are limited under the MPSA to only the amounts it paid Open in the twelve months preceding the event giving rise to Open’s alleged liability. This limitation further illustrates why notice of breach and an opportunity to cure are necessary conditions precedent to a claim of breach, for it would be a failure to cure that would constitute the event giving rise to liability. Because the City failed to give Open notice or an opportunity to cure—and, instead, improperly terminated and filed suit—the event giving rise to the liability of Open, if any, would be the July 2, 2021 complaint filed in this case. In the twelve months preceding that event, the City paid Open $2,354,003.74. As such, any damages available to the City are strictly limited to that amount. Moreover, the City’s damages are limited to direct damages—it is not entitled to any consequential, incidental, or other damages. Those direct damages are further limited by the MPSA to 110% of the contract price. Accordingly, the City cannot recover anywhere close to the nearly $28 million it claims in contract damages. Finally, Open is not liable to the City for its claims because the City failed to satisfy conditions precedent under the Agreements, any of the City’s alleged damages are the result of the breach of its own obligations under the Agreements, the City’s material breaches of the Agreements preceded any allegedly breaching conduct by Open, the City failed to mitigate or Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 17 of 41 22 otherwise act to lessen or reduce its alleged damages, and the City’s claims are barred by the doctrine of impracticability, impossibility, hindrance of contract, or unclean hands. Additionally, the City’s claims are barred in whole or in part by the applicable statute of limitations, the doctrine of laches, the doctrines of waiver and estoppel, and the doctrines of recoupment and setoff. Further, the Court has now twice ruled that the City’s appropriations defense does not apply. See City of Fort Collins v. Open Int’l, No. 1:21-cv-2063-CNS-SP, 2023 U.S. Dist. LEXIS 89154, at *33 (D. Colo. May 22, 2023) (Sweeney, J. Order Granting in Part and Denying in Part Plaintiffs’ Motion for Summary Judgment) (Dkt. #225); 2023 U.S. Dist. LEXIS 99344, at *12 (D. Colo. June 7, 2023) (“[T]he City’s Appropriations Defense is barred, unless and until the City persuades Judge Sweeney to reconsider that ruling.”) (Prose, J. Order on Discovery Dispute) (Dkt. # 227). Accordingly, Open’s damages are not limited by the City’s appropriations. 4. STIPULATIONS FACTS: The following facts are undisputed by the Parties: 1. The City is a home rule municipality organized under Article XX of the Colorado Constitution. 2. In 2017, the City’s voters approved an amendment to Fort Collins Municipal Charter to allow the City to provide telecommunication facilities and services, including the transmission of voice, data, graphics and video using broadband internet facilities, to its residents. 3. On February 10, 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”) to implement a comprehensive and integrated solution providing functionality to its utility Customer Information System (“CIS”), its field services, and to serve a Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 18 of 41 23 range of needs both for current City utilities and for Connexion—the City’s new municipal broadband service. 4. The Parties entered into a Master Professional Services Agreement (the “MPSA”) and Software License Agreement, both executed August 9, 2018, as well as a “Scope of Work” (“SOW”) incorporated by the MPSA. 5. Under the MPSA, the parties agreed that the City’s RFP and Open’s Response were incorporated by reference therein. The parties also agreed that the MPSA, including all exhibits, was fully integrated. 6. The MPSA further included a Change Request procedure which governed changes to the SOW. 7. Additionally, the parties entered into the First Amendment dated June 2, 2020. 8. On May 19, 2021, Open sent a letter titled “Notice of Default pursuant to Section 13.2 of the Master Professional Services Agreement.” 9. On May 28, 2021, the City sent a “Notice of Dispute and Notice of Termination pursuant to Sections 13 and 17 of the Master Professional Services Agreement” to Open International. 5. PENDING MOTIONS None. 6. WITNESSES a. List the nonexpert witnesses to be called by each party. List separately: (1) Witnesses who will be present at trial (see Fed. R. Civ. P. 26(a)(3)(A)); City of Fort Collins: The City anticipates that the following witnesses will testify at trial: Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 19 of 41 24 1. Travis Storin, Chief Financial Officer at the City. Mr. Storin is expected to testify regarding the general background and relationship between the City and Open, Open’s work, promises, failure to provide as-promised functionalities, and discussions with Open to resolve disputes, as well as the City’s claims and defenses in this matter, including but not limited to any and all damages the City has suffered as a result of Open’s actions, the City’s appropriation of funds, and facts relevant to Open’s counterclaims. 2. Coy Althoff, Program Lead/Utilities Asset Manager at the City. Mr. Althoff is expected to testify regarding the relationship between the City and Open, Open’s roles and representations before and during the project, various change requests, outstanding functionalities never delivered by Open to the City, the City’s claims and defenses in this matter, and facts relevant to Open’s counterclaims. 3. Greg Galluzzi, Executive Vice President at TMG Consulting. Mr. Galluzzi is expected to testify regarding his assessment of Open SmartFlex, including witness interviews, grading, and recommendations; involvement with the City’s utilities RFP released in August 2022 due to Open’s failure to implement an integrated billing system, as well as facts relevant to the City’s claims and defenses in this matter, and Open’s counterclaims. 4. Aaron McClune, Project Manager for the City, TMG Consulting. Mr. McClune is expected to testify regarding the Parties’ relationship beginning as of March 2021, Open SmartFlex’s capabilities, testing, and releases on the project, including Open’s failure to provide functionalities, as well as facts relevant to the City’s claims and defenses in this matter, and Open’s counterclaims. 5. Lisa Rosintoski, former City Deputy Director: Utilities Customer Connections. Ms. Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 20 of 41 25 Rosintoski is expected to testify regarding the background and general knowledge on the project, the RFP process for the project, relationship between the City and Open entry of various change requests, the City’s staffing on the project, Open’s system testing, the City’s claims and defenses in this matter, and facts relevant to Open’s counterclaims. 6. Michelle Frey,2 PhD, former Project Manager for the City. It is anticipated that Dr. Frey is expected to testify regarding her communications with Open, Open’s representations and failures to provide promised functionalities, outstanding issues on the project, troubleshooting, and City staffing. She is also expected to testify regarding the topics set forth in the City’s Supplemental Disclosure of Hybrid/Non-Retained Witness pursuant to F.R.C.P. 26(a)(2)(C). 7. Hernando Parrott, President at Open. Mr. Parrott is expected to testify regarding the general background of the project and relationship between the Parties before, during, and after the project, Open’s response to the City’s RFP, negotiations with the City, including but not limited to entering of the MPSA, First Amendment, various change orders, Open’s purported damages, Open’s relationship and interactions with Milestone, as well as facts relevant to the City’s claims and defenses in this matter, and Open’s counterclaims. 8. William Corredor, Chief Executive Officer at Open. Mr. Corredor is expected to testify regarding the relationship between the Parties, negotiations with the City, including but not limited to the execution of MPSA and First Amendment, as well as attempts to resolve the Parties’ disputes, Open SmartFlex capabilities, as well as facts relevant to the City’s claims and defenses in this matter, and Open’s counterclaims. 2 Due to Dr. Frey living out of state and currently experiencing health issues, the City may seek to have her testify remotely under FRCP 43 and this Court’s Practice Standards. Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 21 of 41 26 9. Juan Corredor, Chief Technology Officer at Open. Mr. Corredor is expected to testify regarding the general background of the project and relationship between the Parties, Open’s development and implementation of the web portal, including those by Milestone, and functionalities promised by Open on the project. 10. Diego Lopez, Project Management Officer Director at Open. Mr. Lopez is expected to testify regarding Open’s representations to the City, Open’s SmartFlex’s capabilities and functionalities before and after the RFP process with the City, Open’s functional matrix as part of Open’s Response to the City’s RFP as well as one incorporated in the MPSA, Open’s communications with the City during the project, Open’s staffing, as well as facts relevant to the City’s claims and defenses in this matter, and Open’s counterclaims. 11. Any witnesses identified by Open. 12. Any witnesses necessary for impeachment, rebuttal, or authentication. Open: Open anticipates that the following witnesses will testify at trial. 1. Michael Beckstead. Mr. Beckstead is expected to testify about the City’s planning for the project; negotiation, due diligence, and execution of the relevant contract, the First Amendment, and the change orders; the City’s negotiation of the allocation of responsibility for costs associated with project delays and other issues that culminated in the First Amendment; the City’s failure to complete prerequisites to testing and launch of the utilities billing system; and the City’s other project shortcomings and breaches of City obligations. 2. Jairo Contreras. Mr. Contreras is to testify about the implementation process and project documentation from the perspective of Open’s project management office; negotiation of the First Amendment; implementation and the parties’ project activities while he was project Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 22 of 41 27 manager for Open in spring and summer 2021; the City’s termination of the contract; Open’s performance of its contractual obligations; and Open’s damages for services performed but not paid for by the City. 3. Juan Corredor. Mr. Juan Corredor is expected to testify about OSF, including the self-service portal; Open’s delivery of promised portal functionality; Open’s work with Milestone and the City to deliver the portal; and related aspects of the RFP and the due diligence process with the City. 4. William Corredor. Mr. William Corredor is expected to testify about the history and experience of Open International and Open Investments; OSF and its history; Open’s preparation for and entry to the U.S. market; the RFP and negotiation and execution of the relevant contract, the First Amendment, and the change orders; executive-level meetings about the project in spring and summer 2021; Open’s notice of default to the City; the City’s improper termination of the contract; and Open’s milestone deliveries and payments (or lack thereof) from the City. 5. Tom Hickmann.3 Mr. Hickmann is expected to testify about the selection of and implementation process for OSF at Tualatin Valley Water District and Clean Water Services from 2019 through 2022; the performance of Open’s project team and OSF; and the post-go-live experience with OSF and Open. 6. Diego Lopez. Mr. Lopez is expected to testify about the implementation process and OSF from the perspective of Open’s project management office and as Open’s project manager; the RFP, negotiations, and due diligence prior to the parties’ contract; Open’s delivery 3 Due to Mr. Hickmann living out of state and being a non-party, Open may seek to have him testify remotely. Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 23 of 41 28 of broadband go-live; negotiations in late 2019 and the first half of 2020 regarding responsibility for delays and other issues as between Open and the City, which culminated in the First Amendment; the City’s failure to complete prerequisites to testing and launch of the utilities billing system; negotiation and execution of change orders in 2020 and 2021; the parties’ activities in conjunction with the implementation of OSF during his tenure as project manager from late 2019 through early 2021; and Open’s performance of its contractual obligations. 7. Hernando Parrott. Mr. Parrott is expected to testify about Open’s preparation for and entry to the U.S. market; OSF; Milestone as a subcontractor and supplier of base code for the self-service portal; the preparation and submission of Open’s RFP response; due diligence, negotiations, and execution of the project contract, First Amendment, and change orders; Open’s performance, and the City’s breach(es), of the contract from August 2018 through July 2021; joint presentations with Colman Keane related to the City’s implementation of OSF; the City’s failure to meet its obligations as to staffing, project management and governance, and implementation activities set forth in the contract; the successful implementation of OSF for Tualatin Valley Water District and Clean Water Services; Open’s milestone deliveries and payments (or lack thereof) from the City; Open’s services performed that the City has not paid for; the self-service portal; Open’s work to address City concerns throughout the project and after the City’s improper termination of the contract; Open’s notice of default and the City’s improper termination of the contract; and Open’s performance of its contractual obligations. 8. Any witnesses identified by the City. 9. Any witnesses necessary for impeachment, rebuttal, or authentication. (2) Witnesses who may be present at trial if the need arises (see Fed. R. Civ. P. Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 24 of 41 29 26(a)(3)(A)); City of Fort Collins: The City may present the following witnesses via in person testimony at trial: 1. Darin Atteberry, former City Manager. It is anticipated that Mr. Atteberry may testify regarding the Parties’ relationship, as well as regarding the general background and initiation of the project and the City’s Broadband/Connexion. 2. Gerry Paul, Purchasing Director at the City. It is anticipated that Mr. Paul may testify concerning the Parties’ relationship, including but not limited to the agreements between the Parties, change requests, purchase orders exchanged, appropriation of funds, attempts to resolve outstanding disputes, and facts relevant to Open’s counterclaims. 3. Colman Keane,4 former Broadband Executive Director at the City. It is anticipated that Mr. Keane may testify regarding the general background and initiation of the project, the City’s Broadband/Connexion, and the City’s claims and defenses in this matter, including Open’s failure to deliver promised functionalities. 4. Mike Beckstead, former Chief Financial Officer at the City. Mr. Beckstead is expected to testify regarding general background and knowledge regarding the project, including but not limited to the RFP process for the project, initial appropriations for the project, the relationship between the Parties, negotiation and execution of the First Amendment, the City’s claims and defenses in this matter, and facts relevant to Open’s counterclaims. 4 To the extent the City calls Mr. Keene or Open seeks to call Mr. Keene, the City may seek to have his testimony be remote as he lives out of state on a different project and is not a City employee. Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 25 of 41 30 5. Mona Walder, Business Systems Supervisor at the City. It is anticipated that Ms. Walder may testify regarding the general background of the project and relationship between the Parties, Open SmartFlex’s capabilities, web portal, systems testing, and the City’s claims and defenses in this matter, including Open’s failure to deliver promised functionalities. 6. Juan Pablo Nunez, VP of Professional Services at Open. It is anticipated that Mr. Nunez may testify regarding the Parties’ relationship, Open’s response to the City’s RFP, negotiations between the Parties, including but not limited to Open’s representations as part of the MPSA, Open SmartFlex’s capabilities, as well facts relevant to Open’s counterclaims. 7. Pedro Ordonez, Sales Solution Architect at Open. It is anticipated that Mr. Ordonez may testify regarding Open’s SmartFlex product, including but not limited to pre-existing functionalities prior to the Parties’ relationship and subsequent functionalities developed, the City’s RFP and Open’s Response, as well facts relevant to Open’s counterclaims. 8. Diego Correa, Product Consultant at Open. It is anticipated that Mr. Correa may testify regarding Open’s response to the City’s RFP, various change requests, Open’s relationship with Milestone, including functionalities developed by Milestone and their role on the project. 9. Anthony Sanchez, former IT Architect and Database Administrator for Utilities. It is anticipated that Mr. Sanchez may testify regarding the general background of the project and Open’s SmartFlex’s capabilities, including communications with Open, as well as facts relevant to the City’s claims and defenses in this matter and Open’s counterclaims. 10. Any person necessary to rebut any of Open’s witnesses. Open: Open may call the following witnesses to testify at trial. 1. Coy Althoff (including 30(b)(6) testimony). If called, Mr. Althoff is expected to Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 26 of 41 31 testify about the parties’ activities in conjunction with the implementation of OSF in the second half of 2020 and through 2021; his project leadership role during that period; the City’s consideration of alternatives to working with Open; the City’s testing-related delays; the assessment conducted by TMG Consulting in 2021; and the City’s project shortcomings and breaches of City obligations from the second half of 2020 through 2021. 2. Dwayne Bishop. If called, Mr. Bishop is expected to testify about the parties’ activities in conjunction with the implementation of OSF in late 2018 and 2019 and the City’s project shortcomings and breaches of City obligations during that timeframe. 3. Lori Clements. If called, Ms. Clements is expected to testify about the City’s planning for the project; the due diligence of and negotiation with Open prior to the parties’ contract; her understanding of Open’s proposal; the parties’ activities in conjunction with the implementation of OSF from late 2018 through 2021; the City’s project shortcomings and breaches of City obligations during that timeframe; her internal memoranda regarding the project; her role and performance as project manager for the City in 2018 and 2019; and the preparation and completion of broadband go-live in 2019. 4. Theresa Connor. If called, Ms. Connor is expected to testify about the parties’ activities in conjunction with the implementation of OSF from mid-late 2020 through 2021; her project leadership role during that period; and the City’s project shortcomings and breaches of City obligations during and preceding that period. 5. Diego Correa. If called, Mr. Correa is expected to testify about Open’s delivery of OSF functionality to the City. 6. Michelle Frey. If called, Dr. Frey is expected to testify about the parties’ activities Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 27 of 41 32 in conjunction with the implementation of OSF in late 2019 and early 2020; her role as project manager for the City during that time; her assessment of the project and the City’s breaches of its obligations while serving as project manager; the City’s waiver of misrepresentation claims; and negotiations with Open regarding responsibility for project delays, other issues, and related costs. 7. Greg Galluzzi. If called, Mr. Galluzzi is expected to testify about his assessment of the project and of OSF for the City in 2021; his interviews with City personnel; TMG’s activities with the City after the City terminated Open. 8. Aaron McClune (including 30(b)(6) testimony). If called, Mr. McClune is expected to testify about his assessment of the project and of OSF for the city in 2021; the parties’ activities in conjunction with the implementation of OSF in spring and summer of 2021; his role and performance as project manager for the City during that timeframe; the City’s efforts to complete the prioritization of a broadband-issues backlog list for delivery to Open; the City’s launch of Release 25 of OSF; and the City’s project shortcomings and breaches of City obligations. 9. Edith Mercado. If called, Ms. Mercado is expected to testify about Milestone’s role as a subcontractor for Open on the project; Milestone’s collaboration with Open on a self- service portal; the parties’ activities in conjunction with the implementation of OSF from August 2018 through mid-2021; her role as functional lead for Open during that timeframe; and the City’s project shortcomings and breaches of City obligations during that timeframe. 10. Juan Pablo Nunez. If called, Mr. Nunez is expected to testify about Open’s response to the City’s RFP, including the grading of the functional matrix for Version 8 of OSF; the delivery of the portal for broadband to the City; and the delivery of broadband functionalities to the City in August 2019. Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 28 of 41 33 11. Pedro Ordonez. If called, Mr. Ordonez expected to testify about Open’s response to the City’s RFP, including the grading of the functional matrix for Version 8 of OSF; the demonstrations of OSF that Open did for the City during the due diligence process prior to the City’s selection of Open, including Open’s representation to the City that it would be using Milestone’s portal and Open’s demonstration of the Milestone portal to the City; and portal functionality. 12. Gerry Paul (including 30(b)(6) testimony). If called, Mr. Paul is expected to testify about the negotiation and execution of the project contract, amendments, and PCRs; the City’s budgeting, appropriation, and spending on CIS/OSS systems before, during and after the City’s contract with Open; payments to Open related to the project; retainage amounts held by the City; and correspondence with Open during the project regarding milestones, payments, and contract obligations. 13. Lisa Rosintoski (including 30(b)(6) testimony). If called, Ms. Rosintoski is expected to testify about the City’s planning for the project; the due diligence of and negotiation with Open prior to the parties’ contract; her understanding of Open’s proposal; her project leadership role(s) for the City from 2018 through 2021; the parties’ activities in conjunction with the implementation of OSF from late 2018 through summer 2021; the preparation, completion, and approval of broadband go-live; Dr. Frey’s assessment of the project in early 2020; negotiations with Open for the allocation of responsibility for delays, other issues, and costs that culminated in the First Amendment; the City’s waiver of misrepresentation claims; the City’s failure to perform its obligations as to system testing and other prerequisites to the launch of the utilities billing system; and the City’s shortcomings and breaches of City obligations from late 2018 through Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 29 of 41 34 summer 2021. 14. Travis Storin (including 30(b)(6) testimony). If called, Mr. Storin is expected to testify about his project leadership role for the City as CFO and as executive sponsor in 2020 and 2021; the parties’ activities in conjunction with the implementation of OSF during that period; negotiations with Open for the allocation of responsibility for delays, other issues, and costs that culminated in the First Amendment; the City’s waiver of misrepresentation claims; the City’s awareness of alleged misrepresentations by Open; the City’s consideration of more comprehensive product-offerings from Open; the parties’ negotiation, execution, and performance of PCR 29; the assessment of the project and of OSF performed for the City by TMG Consulting; the City’s consideration of and decision to engage another CIS provider; executive-level meetings and negotiations in spring and summer 2021 regarding the project; Open’s notice of default to the City; the City’s improper termination of the parties’ contract; the City’s post-termination activities with respect to CIS both with Open and with third parties; and the City’s shortcoming and breaches of City obligations in 2020 and 2021. 15. Jeff Valadez. If called, Mr. Valadez is expected to testify only as necessary for rebuttal of testimony by witnesses called by the City. 16. Cyril Vidergar. If called, Mr. Vidergar is expected to testify only about his declaration filed in this action. 17. Kevin Wilkins. If called, Mr. Wilkins is expected to testify about the parties’ activities in conjunction with the implementation of OSF during his tenure as an executive sponsor in 2020 and 2021; the City’s consideration of more comprehensive product-offerings from Open; the parties’ negotiation, execution, and performance of PCR 29; and the City’s shortcoming and Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 30 of 41 35 breaches of City obligations in 2020 and 2021. 18. Any person necessary to rebut any of the City’s witnesses. (3) Witnesses where testimony is expected to be presented by means of a deposition and, if not taken steno graphically, a transcript of the pertinent portions of the deposition testimony. See Fed. R. Civ. P. 26(a)(3)(B). City of Fort Collins: The City states that it may designate the deposition testimony of Edith Mercado, Colman Keene, Dwayne Bishop,5 and Thomas Hickmann. Open: Open may designate and present at trial the deposition testimony of Dwayne Bishop, Michelle Frey, Greg Galluzzi, Aaron McClune, and Edith Mercado. b. List the expert witnesses to be called by each party. List separately: (1) Witnesses who will be present at trial (see Fed. R. Civ. P. 26(a)(3)(A)); City of Fort Collins: The City intends to call the following experts at trial, whose contact information is available in the respective expert disclosures: 1. Jon Brock, as the City’s affirmative and rebuttal expert. Mr. Brock is an expert in U.S. utility billing systems, the nature and frequency of implementation projects, the RFP process (including the industry standards for RFPs, RFP responses, and the RFP process), the role of the vendor and the expectations of a customer in this industry based on the vendor’s representations (including the circumstances in which customers hire outside system integrators), the creation and use of the functional matrix, customer portals, software implementation projects (including staffing, timelines, schedules, and costs), software products (including configuration of products), and U.S. market vendor contracts. It is anticipated that Mr. Brock will testify consistently with his 5 Due to Mr. Bishop living out of state and the City’s understanding of his prior health issues, the City may seek to have him testify remotely or may designate his deposition. Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 31 of 41 36 October 24, 2022 affirmative report and his November 29, 2022 rebuttal report, as well as the City’s expert disclosures and deposition testimony regarding the utility industry as it relates to customer service and billing systems, selection of such systems, and implementations of selected systems. 2. Ronald Seigneur, as the City’s affirmative damages expert. Mr. Seigneur specializes in economic loss valuations. Mr. Seigneur is expected to testify consistently with his October 24, 2022 report, as well as the City’s expert disclosures, concerning the damages sustained by the City in this matter. Open: Open intends to call the following experts to testify at trial. Their contact information is disclosed in the applicable expert disclosures. 1. John Hutchinson, as Open’s affirmative and rebuttal expert. Mr. Hutchinson is expected to testify consistently with his October 24, 2022 affirmative expert report, November 29, 2022 rebuttal expert report, December 16, 2022 erratum to rebuttal expert report, and May 26, 2023 supplement to expert reports. 2. Peter Schulman, as Open’s rebuttal damages expert. Mr. Schulman is expected to testify consistently with his December 1, 2022 rebuttal expert report and May 26, 2023 supplement to rebuttal expert report. (2) Witnesses who may be present at trial (see Fed. R. Civ. P. 26(a)(3)(A)); City of Fort Collins: None. Open: None. (3) Witnesses where testimony is expected to be presented by means of a deposition and, if not taken steno graphically, a transcript of the pertinent portions of the deposition Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 32 of 41 37 testimony. See Fed. R. Civ. P. 26(a)(3)(B). City of Fort Collins: None. Open: None 7. EXHIBITS (1) City of Fort Collins: See Exhibit A. (2) Open: See Exhibit B. The parties have not yet undertaken the process of identifying exhibit stipulations. The parties agree to work together to do so in advance of submitting their final joint exhibit list no later than seven days before the Trial Preparation Conference, per CNS Civil Standing Order III.G.2 & 4.e. Copies of listed exhibits must be provided to opposing counsel and any pro se party no later than 30 days before trial. The objections contemplated by Fed. R. Civ. P. 26(a)(3) shall be filed with the clerk and served by hand delivery or facsimile no later than 14 days after the exhibits are provided. 8. DISCOVERY Open is permitted to take a half-day, 3.5 hour deposition of the City on appropriations. 9. SPECIAL ISSUES City of Fort Collins: The City does not have any affirmative special issues. Rather, it provides the following responses to Open’s raised special issues for the Court’s consideration. First, as to Open’s mandate that the City “must make an election of remedies”, Open waived its ability to force the City to elect remedies as Open failed to raise this issue as an affirmative defense. Additionally, the City states that this issue should be briefed by the parties Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 33 of 41 38 because it requires discretion by the Court and should not be ruled upon based on statements in this pretrial order. The City requests that the briefing includes a 5-page sur-reply so that the parties have equal pages on this important issue. Open is improperly using this pretrial order to preview and raise arguments that should be set forth per this Court’s Practice Standards. However, to preserve its position, the City states that Open has not identified a sufficient reason for a discretionary election, especially since Open seeks to force the City to elect claims, not just remedies. Further, the purported inefficiencies and prejudice that Open will suffer, as provided below, are vague and conclusory. Additionally, and in any event, forcing the City to elect a remedy as to its claims will not simplify the issues because the City has fraud and prior breach of contract affirmative defenses to Open’s counterclaim. In other words, whatever remedy the City “chooses”, it still needs to prove the “unchosen” theory of fraud or prior breach of contract as a defense to Open’s counterclaim. Finally, contrary to Open’s conclusory assertions, any double recovery or inconsistent verdict can easily be avoided with jury instructions. Second, with respect to the City’s appropriations affirmative defense, the Court ruled that the City may not use appropriations as a bar to limit Open’s damages. However, as discussed with Open and addressed above, appropriations are necessary factual issues to the case including how Open was paid during the course of the Project, why some payments were or were not made and when, and it is relevant to Open’s ability to force the City to pay a judgment should there be one in Open’s favor. Third, as to the City’s other affirmative defenses, the City disagrees that it needs to remove any of its defenses at this time especially since Open is trying to essentially seek untimely summary judgment relief. Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 34 of 41 39 Open: Open states that there are several special issues to be resolved at or soon after the Final Pretrial Conference scheduled for July 10. First, as summarized below, the City must make an election of remedies between rescission and damages for breach of contract. The City’s election will affect the type of trial (jury, bench, or both) and the course and scope of trial. Second, the City should be precluded from presenting its Tenth Affirmative Defense (“Appropriations Defense”) at trial. Finally, the City should be precluded from presenting several other of its affirmative defenses at trial, either because they are not affirmative defenses or because they do not apply here. a. The City must make an election of remedies before trial, which election will affect the type and course of trial. After the Court denied summary judgment against the City, on June 16, Open notified the City that it would need to elect between the remedial theories underlying its claims for contract damages, on the one hand, and for rescission based on fraudulent and negligent misrepresentation, on the other hand. See Cross Country Land Servs. v. PB Telecomms., Inc., 276 F. App’x 825, 830-33 (10th Cir. 2008) (affirming dismissal under Colorado law of contract- based claims when party sought contract rescission for fraudulent inducement and observing: “It is inconsistent, under Colorado law, to claim that a contract should be rescinded and then attempt to recover damages under that same contract.”); see also Whatley v. Crawford & Co., 15 F. App’x 625, 629-30 (10th Cir. 2001) (affirming trial court’s determination that party “can’t seek rescission and then also seek damages on the contract as if it had been fully performed in the same case” and holding that “election to affirm [contract also] precluded plaintiffs from pursuing negligent misrepresentation”). Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 35 of 41 40 As to the timing of the City’s election, a pretrial decision is necessary to prevent prejudice to Open, confusion of the jury, and inefficiency for the parties and the Court. See Whatley, 15 F. App’x at 832 (affirming post-discovery, pretrial election of remedies where election facilitated smoother and more efficient trial); see also Kline Hotel Partners v. Aircoa Equity Interests, Inc., 729 F. Supp. 740, 743 (D. Colo. 1990) (assessing burden, costs, and prejudice implicated by post-trial election and ordering pre-trial election between damages and rescission theories). These rationales apply doubly here because the City’s claims for rescission based on fraudulent inducement and negligent misrepresentation are equitable and therefore, if elected, would be tried to the Court. See Kline, 729 F. Supp. at 472. Open would be prejudiced by the presentation of fraud and negligent misrepresentation claims to the jury at a combined jury/bench trial if those claims will be resolved by the Court and the jury will resolve only contract claims. Whatley, 15 F. App’x at 631 (presenting rescission and damages theories to jury was prejudicial and required wholesale reversal); Kline, 729 F. Supp. at 743. The jury also would be confused by the presentation of a City claim to enforce contract obligations that the City simultaneously seeks to rescind. As to efficiency, a pretrial election would permit a single trial either to the jury (if the City elects to affirm the contract) or to the Court (if the City elects rescission, since Open has not demanded a jury on its contract counterclaims). Even if the City elects to pursue rescission before the Court and seeks a jury trial on Open’s contract counterclaims, the initial bench trial on rescission would either resolve the case (if the Court finds for the City and awards rescission) or would allow for a simplified subsequent jury trial only on Open’s contract claims. In view of these dynamics, state and federal courts in Colorado generally require a pretrial election of remedies. The Court should require the City to elect before trial here. If the Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 36 of 41 41 Court is not prepared to require an election without briefing, Open proposes expedited briefing with a 10-page motion due July 17, a 10-page response due July 26, and a 5-page reply due July 31. b. The City should be precluded from presenting its Tenth Affirmative Defense (“Appropriations Defense”) at trial. In its order resolving the parties’ respective motions for summary judgment (Dkt. 225), the Court rejected the City’s argument attempting to limit Open’s recoverable damages based on appropriations-related laws and the City’s alleged amount of remaining appropriated funds. Dkt. 225 at ECF pp. 22-23. In doing to, the Court necessarily rejected the City’s Appropriations Defense as a matter of law. Magistrate Judge Prose acknowledged this result repeatedly in her subsequent order limiting Open’s ability to conduct further discovery on the Appropriations Defense. See, e.g., Dkt. 227 at ECF p. 8 (“[T]he Summary Judgment Order rules against the City on the Appropriations Defense.”); id. at ECF p. 10 (“In light of the situation here, where the Appropriations Defense has been eliminated from the case, the court declines to compel [the City] to undertake this burdensome task [of reviewing and producing appropriations-related documents to Open].”). The City did not timely seek reconsideration of the Court’s summary judgment order on the Appropriations Defense or otherwise. Open has requested that the City formally withdraw the Appropriations Defense. The City has refused to do so, and it expressly incorporates the Appropriations Defense in its summary of its claims and defenses for trial in Section 3 above. The City should be precluded from pursuing and presenting evidence related to the Appropriations Defense at trial. c. The City should be precluded from presenting at trial its “affirmative defenses” that are not affirmative defenses or that do not apply in this case. Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 37 of 41 42 On June 22, Open requested that the City withdraw and not raise at trial the below-listed affirmative defenses, for the below-listed reasons. The City replied that it would provide Open its position on withdrawing these defenses in its portion of Section 3 of this Proposed Final Pretrial Order, by including the defenses it did not agree to withdraw and omitting the defenses it agreed to withdraw. However, the City’s portion of Section 3 above does not, in Open’s estimation, sufficiently clearly state the City’s position on the affirmative defenses. Accordingly, Open intends to raise these defenses at the Final Pretrial Conference. i. City’s First Affirmative Defense (failure to state a claim). This is not an affirmative defense; it is a pleading defense, and its trial corollary is a Rule 50 motion. See, e.g., A1 Garage Door Serv., LLC v. West, 2022 U.S. Dist. LEXIS 58676, *8 (D. Colo. Mar. 30, 2022) (“Failure to state a claim is not an affirmative defense.”). ii. City’s Fourth and Fifth Affirmative Defenses (proximate cause). These also are not affirmative defenses; they are denials of causation, which is an aspect of Open’s prima facie burden. See Malibu Media, LLC v. Butler, 2014 U.S. Dist. LEXIS 129314, *6–7 (D. Colo. Aug. 13, 2014) (striking defense of intervening cause and stating “[s]uch a denial of Plaintiff’s prima facie case is not a proper affirmative defense”). a. Open recognizes that it pleaded a similar affirmative defense (#4), and Open will likewise withdraw that defense if the City withdraws its Fourth and Fifth defenses. iii. Seventh Affirmative Defense (assumption of risk). Assumption of risk is an Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 38 of 41 43 affirmative defense applicable only to tort claims, and Open has pleaded no tort claims. See Malibu Media, 2014 U.S. Dist. LEXIS 129314, at *6. iv. Ninth Affirmative Defense (laches, waiver, estoppel, acceptance, acquiescence, unclean hands). These are equitable affirmative defenses only applicable to claims seeking equitable remedies; Open asserts only a legal claim for legal damages. See, e.g., In re Sender, 423 F. Supp. 2d 1155, 1167 (D. Colo. 2006) (stating defense of unclean hands “applies only to equitable remedies”). 10. SETTLEMENT a. The parties met in person in December 2021 to discuss settlement and continued those discussions throughout early 2022. Counsel for the parties conferred by telephone and email multiple times in 2022 to discuss in good faith the settlement of the case. b. The parties were promptly informed of all offers of settlement. c. Counsel for the parties do not intend to hold future settlement conferences. d. It appears from the discussion by all counsel that there is little or no possibility of settlement at this time. e. Counsel for the parties and any pro se party considered ADR in accordance with D.C.COLO.LCivR.16.6. 11. OFFER OF JUDGMENT Counsel and any pro se party acknowledge familiarity with the provision of Rule 68 (Offer of Judgment) of the Federal Rules of Civil Procedure. Counsel have discussed it with the clients against whom claims are made in this case. 12. EFFECT OF FINAL PRETRIAL ORDER Hereafter, this Final Pretrial Order will control the subsequent course of this action and the trial, and may not be amended except by consent of the parties and approval by the court or Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 39 of 41 by order of the court to prevent manifest injustice. The pleadings will be deemed merged herein. This Final Pretrial Order supersedes the Scheduling Order. In the event of ambiguity in any provision of this Final Pretrial Order, reference may be made to the record of the pretrial conference to the extent reported by stenographic notes and to the pleadings. 13.TRIAL AND ESTIMATED TRIAL TIME; FURTHER TRIAL PREPARATION PROCEEDINGS A ten-day Jury Trial is set for October 23, 2023 at 8:00 a.m. in Courtroom 702, Alfred A. Arraj U.S. Courthouse, 901 19th Street, Denver, CO 80294. A Trial Preparation Conference is set for September 29, 2023 at 9:00 a.m. The City’s Position: The jury trial shall be conducted before the Honorable Judge Charlotte Sweeney at the United States District Court for the District of Colorado, Alfred A. Arraj United States Courthouse, in Courtroom A702, 901 19th Street, Denver, CO 80294. It is estimated that a trial will take up to 10 days. Open’s Position: The trial shall be conducted before the Honorable Judge Charlotte Sweeney at the United States District Court for the District of Colorado, Alfred A. Arraj United States Courthouse, in Courtroom A702 901 19th Street, Denver, CO 80294. It is estimated that a trial will take up to 10 days. As noted above, Open contends that the City must elect between the remedial theories underlying its contract- and misrepresentation-based claims, and this election will determine whether the trial proceeds before a jury, before the Court, or in successive bench and jury trials. 44 Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 40 of 41 45 DATED this 10th day of July 2023. BY THE COURT _________________________________ Charlotte N. Sweeney United States District Judge APPROVED: DORSEY & WHITNEY LLP HOLLAND & HART LLP s/ Case Collard Case Collard collard.case@dorsey.com Andrea Ahn Wechter wechter.andrea@dorsey.com Maral J. Shoaei shoaei.maral@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 Alexandria E. Pierce aepierce@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 Case No. 1:21-cv-02063-CNS-SP Document 230 filed 07/10/23 USDC Colorado pg 41 of 41