HomeMy WebLinkAbout2021-cv-2063-CNS-MEH - City Of Fort Collins V. Open International, Et Al. - 230 - Final Pretrial Order
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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/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.
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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
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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
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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,
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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
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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,
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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
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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
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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:
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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.
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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.
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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
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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.
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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.
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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.
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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
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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
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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.
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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
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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
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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.
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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
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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
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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.
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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”).
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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
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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.
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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
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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
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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.
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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
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