HomeMy WebLinkAbout2021-cv-2063-CNS-MEH - City Of Fort Collins V. Open International, Et Al. - 255 - Order1
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Charlotte N. Sweeney
Civil Action No. 1:21-cv-02063-CNS-SBP
CITY OF FORT COLLINS, a Colorado home rule municipality,
Plaintiff,
v.
OPEN INTERNATIONAL, LLC, a Florida limited liability company and
OPEN INVESTMENTS, LLC, a Florida limited liability company,
Defendants.
ORDER
This matter comes before the Court on a Motion to Compel Election of Remedies and Limit
Jury Demand (ECF No. 232). For the reasons explained below, the Court DENIES the motion.
I. BACKGROUND
This is a breach-of-contract case arising from Open International, LLC and Open
Investments, LLC’s (collectively, “Open’s”) alleged failure to deliver a software product intended
for use in administering the City of Fort Collins’ (“the City’s”) broadband utility services. This
Court set forth the facts underlying this action in a recent Order resolving the parties’ respective
motions for summary judgment (see ECF No. 225 at 1–8). In light of the Court’s summary
judgment ruling, the City’s remaining claims include breach of contract, fraudulent inducement,
negligent misrepresentation, breach of the implied duty of good faith and fair dealing, and
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declaratory judgment (see ECF No. 230 at 7–8). Open’s sole remaining counterclaim is for breach
of contract (see id. at 14).
At the parties’ final pretrial conference, Open argued that before the trial’s commencement,
the City “would need to elect between the remedial theories underlying its claims for contract
damages, on the one hand, and for recission based on fraudulent [inducement] and negligent
misrepresentation, on the other hand” (see ECF No. 230 at 35–37). The Court ordered the parties
to submit supplemental briefing on the issue of pretrial election of remedies (see ECF No. 229).
The matter is now fully briefed, and oral argument would not materially assist the Court’s
resolution of this issue.
II. LEGAL STANDARD
“In a diversity case, the doctrine of election of remedies is an element of state substantive
law which [a federal district court is] bound to apply.” Whatley v. Crawford, 15 F. App’x 625, 628
(10th Cir. 2001) (citation omitted). Under Colorado law, the election of remedies doctrine exists
for several reasons: “to prevent a plaintiff from recovering twice for the same wrong, to prevent
jury confusion and promote judicial efficiency, and to preclude the assertion of mutually
inconsistent remedial theories on the same set of facts.” Cross Country Land Servs., Inc. v. PB.
Telecomms., Inc., 276 F. App’x 825, 830 (10th Cir. 2008) (internal citations omitted). However,
“[e]lection of remedies is a harsh doctrine which should not be unduly extended.” In re Centrix
Fin., LLC, No. 09-cv-00088-PAB-CBS, 2019 WL 4242667, at *2 (D. Colo. Sept. 6, 2019); see
also Est. Couns. Serv., Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 303 F.2d 527, 530
(10th Cir. 1962) (cautioning that the election of remedies doctrine is “disfavored,” and that “the
court should be sensitive to equitable principles” in applying the doctrine).
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The election of remedies doctrine “applies only when different remedies are provided for
a given wrong and based upon one and the same set of facts.” Cross Country Land Servs., 276 F.
App’x at 830 (citing Kalish v. Brice, 315 P.2d 829, 831 (Colo. 1957) (emphasis in original)).
“Inconsistency of the remedies mandates election—if one remedy necessarily negates the assertion
of another, then a single remedy must be chosen.” Id. at 830–31 (citing Stewart v. Blanning, 677
P.2d 1382, 1384 (Colo. App. 1984)). A court, however, may exercise its discretion to determine
when to require an election of remedies, which given the circumstances may occur either pretrial
or post-verdict (but before entry of judgment). Oilman Int’l, FZCO v. Neer, No. 10-cv-02810-
PAB-BNB, 2012 WL 1059987, at *2 (D. Colo. Mar. 29, 2012) (citing Cross Country Land Servs.,
276 F. App’x at 832–33).
III. ANALYSIS
Open’s motion raises two key issues: (i) whether the election of remedies doctrine applies,
and, if so, (ii) whether the City’s election must occur pretrial.
As to the doctrine’s application, the City does not appear to dispute that it must, at some
point, elect among its proposed remedies. Nor could it. In bringing this action, the City contends
that it is entitled either to rescind the contract due to Open’s alleged fraudulent inducement and
negligent misrepresentation or, in the alternative, to recover damages under the contract due to
Open’s alleged breach (see ECF No. 230 at 7). It is well settled that these remedial theories are
inconsistent under Colorado law. See Cross Country Land Servs., 276 F. App’x at 830–32; see
also Elliot v. Aspen Brokers, Ltd., 825 F.Supp. 268, 269 (D. Colo. 1993) (a “classic situation”
requiring election of remedies “occurs when a plaintiff asserts two claims for relief, one based on
affirmance of a contract and the other based on recission”); Trimble v. City & Cnty. of Denver, 697
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P.2d 716, 723 (Colo. 1985) (“One seeking to remedy fraudulent inducement of a contract must
elect either to rescind the entire contract to restore the conditions existing before the agreement
was made, or to affirm the entire contract and recover the difference between the actual value of
the benefits received and the value of those benefits if they had been as represented.”), superseded
by statute on other grounds, as recognized in Colo. DOT v. Brown Grp. Retail, Inc., 182 P.3d 687,
690 (Colo. 2008); Holscher v. Ferry, 280 P.2d 655, 657 (Colo. 1955) (“Where a party has
alternative remedies of recission and of damages for breach, he must elect which remedy he will
base his action upon.”).
The only issue left for the Court’s consideration, then, is when the City’s required election
must occur. Colorado law appears to leave this timing question up to the sound discretion of the
trial court. See Cross Country Land Servs., 276 F. App’x at 832 (citing Kline Hotel Partners v.
Aircoa Equity Interests, Inc., 729 F.Supp. 740, 742–43 (D. Colo. 1990)). On this point, the Court
notes the majority rule on the timing question—namely, that where a particular set of facts gives
rise to alternative causes of action, and where a plaintiff requests multiple, legally inconsistent
remedies, the plaintiff need not elect among them until entry of final judgment. See Guidance
Endodontics, LLC v. Dentsply Int’l, Inc., No. Civ 08-1101 JB/RLP, 2010 WL 4054115, at *16
(D.N.M. Aug. 10, 2010) (collecting cases); accord Rahemtulla v. Hassam, No. 3:05-0198, 2008
WL 2247195, at *2 (M.D. Pa. May 30, 2008) (collecting cases). However, in the minority of cases
in which requiring an election of cases is proper, a court may require a party to make an election
pretrial “where the evidence concerning the inconsistent remedies would be confusing to the jury
or the remedies are so fundamentally inconsistent that only an earlier election will suffice,” or
where “substantial prejudice” to the defendant would result. See Rahemtulla, 2008 WL 2247195,
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at *2; see also Kline Hotel Partners, 729 F.Supp. at 743 (concluding, on the facts presented, that
if an election of remedies were deferred, “trial preparation would be unnecessarily complicated,
trial procedures awkward, trial would be unduly protracted, and the time and resources of the
parties, Court, and jurors wasted”).
Here, in support of its request for pretrial election, Open contends that it will suffer
prejudice if the jury hears evidence on the City’s recission-based claims for fraudulent inducement
and negligent misrepresentation that, under the Seventh Amendment, it cannot decide, “but that
would surely color its view of the [damages-based] contract claims that it can decide” (ECF No.
232 at 2; see id. at 5–6). See also Kline Hotel Partners, 729 F.Supp. at 743 (concluding pretrial
election was appropriate where “[t]he defense would be prejudiced by the jury hearing evidence
irrelevant to any jury question”). Under the circumstances, the Court disagrees.
Based on the claims and affirmative defenses remaining in the case, the City will be
required to produce essentially the same evidence regardless of whether the Court compels an early
election and correspondingly dismisses some of the City’s claims. More specifically, as the City
points out, “Open has a remaining counterclaim for breach of contract, . . . and the City has
affirmative defenses of fraud and prior material breach that mirror its affirmative claims of fraud
and breach of contract” (ECF No. 233 at 5). As such, even if the City is forced to elect among its
proposed recission- and damages-based remedies now, it will, in any event, have to present
evidence of Open’s alleged fraud and misrepresentations to defend against Open’s breach-of-
contract counterclaim. Accordingly, that the City’s various claims against Open sound in both law
and equity does not pose a threat of substantial prejudice to Open. See Dring v. Ariel Land Owners,
Inc., No. 3:15-cv-00478, 2016 WL 6599971, at *2 (M.D. Pa. Nov. 8, 2016) (finding no substantial
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prejudice where, “[a]lthough legal contract damages and recission are ‘fundamentally inconsistent
remedies,’ succeeding on either claim requires proving substantially similar facts”); see also
Rahemtulla, 2008 WL 2247195, at *2 (finding no indication that the jury would hear evidence
irrelevant to any jury question where there was “no distinction in the facts which [would] be
presented in support of the legal claims, as opposed to the potential equitable claims”); cf. Com.
Iron & Metal Co. v. Bache Halsey Stuart, Inc., 581 F.2d 246, 249–50 (10th Cir. 1978) (concluding
that bifurcation of trial would be “undesirable, duplicitous and virtually impossible, where “even
if it were assumed that [plaintiff’s] claims were purely equitable, its claims for relief and its defense
against the counterclaim were factually identical”).
Other factors similarly counsel against compelling a pretrial election of remedies. For
instance, Open argues that without a pretrial election, the parties’ trial will be more burdensome
to prepare and present, as well as more confusing to the jury (see ECF No. 232 at 6–9). Open’s
proposed solution, however—compelling an early election, dismissing claims for non-elected
remedies, and limiting the City’s jury demand (see id. at 2)—is arguably worse. At this juncture,
it would be unreasonable to force the City to choose among its proposed remedies before trial and
verdict, since, if its chosen remedy corresponds with a claim which the jury later finds
unsupportable, the City may recover nothing. By contrast, applying the majority rule and
compelling an election of remedies post-verdict would avoid limiting the City’s claims
prematurely and, by extension, prevent an unjust result. See Olympia Hotels Corp. v. Johnson Wax
Dev. Corp., 908 F.2d 1363, 1371–72 (7th Cir. 1990); see also Malvino v. Delluniversita, 840 F.3d
223, 234 (5th Cir. 2016) (the election of remedies doctrine “operates to prevent a plaintiff from
recovering twice for the same wrong, not to prevent a plaintiff from recovering once”).
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Furthermore, Open’s concern regarding the potential for jury confusion or an award of duplicative
remedies may be mitigated with the submission of appropriate, carefully crafted jury instructions.
See Wood v. Houghton Mifflin Harcourt Pub. Co., 589 F.Supp.2d 1230, 1252 (D. Colo. 2008)
(“[A]s long as the jury is instructed that it may not award [plaintiff] duplicative damages for the
same injury, there is no requirement that [plaintiff] make an election of remedies . . . .”); see also
Specialty Beverages, L.L.C. v. Pabst Brewing Co., 537 F.3d 1165, 1180 & n.12 (10th Cir.2008);
Youren v. Tintic Sch. Dist., 343 F.3d 1296, 1306 (10th Cir.2003).
In sum, under the facts presented, the Court finds that the City is entitled to proceed to a
jury trial on its multiple theories of recovery derived from multiple causes of action. While the
Court agrees with Open that the City eventually will have to elect among its proposed, inconsistent
remedies, the Court disagrees that the City’s election must occur pretrial.
IV. CONCLUSION
Consistent with the foregoing analysis, Open’s Motion to Compel Election of Remedies
and Limit Jury Demand (ECF No. 232) is DENIED.
DATED this 27th of September 2023.
BY THE COURT:
___________________________________
Charlotte N. Sweeney
United States District Judge
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