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Home My WebLink About2021-cv-2063-CNS-MEH - City Of Fort Collins V. Open International, Et Al. - 325 - Dfs' Reply To Closing BriefExhibit 1 Case No. 1:21-cv-02063-CNS-SBP Document 325 filed 01/04/24 USDC Colorado pg 1 of 7 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No.: 21-cv-02063-CNS-SBP CITY OF FORT COLLINS, Plaintiff/Counterclaim Defendant, v. OPEN INTERNATIONAL, LLC, Defendant/Counterclaim Plaintiff, and OPEN INVESTMENTS, LLC, Defendant. DEFENDANTS’ [PROPOSED] REPLY TO CITY’S RESPONSIVE CLOSING BRIEF (DKT. 320) Case No. 1:21-cv-02063-CNS-SBP Document 325 filed 01/04/24 USDC Colorado pg 2 of 7 I. DEFENDANTS’ RESCISSION-WAIVER ARGUMENT WAS NOT, AND COULD NOT HAVE BEEN, WAIVED PRIOR TO THE REMEDIAL BENCH TRIAL. Under the Court’s rulings, the equitable remedy of rescission is before the Court, Hrg. (Oct. 13, 2023) at 4:14-21, so whether the City waived that remedy is likewise before the Court, just like other equitable defenses on which the Court already found facts and made conclusions of law, TR (Nov. 2, 2023) at 1992:6-22 (“that issue is with me”). Contrary to the City’s argument, Dkt. 320 at 2-6, since the rescission-waiver defense is only now ripe for resolution by the Court, it was not resolved or waived. In the absence of a pretrial election between the City’s inconsistent legal and equitable claims, the delineation between legal, jury-triable issues and equitable, bench- triable issues was not clear. During the October 13, 2023 hearing regarding jury instructions, the Court clarified that it would decide which equitable claims and defenses it would resolve when it issued provisional jury instructions. Hrg. (Oct. 13, 2023) at 5:12-6:23. The Court had yet to issue provisional jury instructions by the time Defendants presented their mid-trial Rule 50(a) arguments, so out of caution, they presented arguments on waiver of fraudulent inducement and waiver of rescission . TR (Oct. 30, 2023) at 1227:22-1228:24. Defendants also requested clarification whether the rescission-waiver instruction, in particular, would be included in the Court’s instructions, and the Court responded that it was not sure, but forthcoming provisional instructions would resolve whether a rescission-specific waiver instruction would go to the jury. Id. at 1239:21-1240:5. When the Court subsequently issued its provisional closing instructions that omitted any equitable defenses—including a rescission-waiver instruction—the Court stated that the jury would “reach just a finding of liability on fraud Case No. 1:21-cv-02063-CNS-SBP Document 325 filed 01/04/24 USDC Colorado pg 3 of 7 2 or negligent misrepresentation to then force the election,” meaning that no questions bearing on rescission would be presented to the jury. TR (Nov. 2, 2023) at 1955:17-19. Defendants acknowledged the issue would be resolved by the Court and, in their Rule 50(b) motion, explained they would therefore present rescission-waiver for findings and conclusions by the Court. Dkt. 302 at 12 n.5 (reserving rescission-waiver argument for remedial phase of trial because “Court did not instruct the jury on rescission”). Defendants did not waive their defense of rescission-waiver, which is governed by a different standard than waiver of fraudulent inducement. Dkt. 314 at 2 (collecting cases). The jury was not instructed on rescission-waiver—an equitable defense— because that defense is before the Court under its division of trial issues in lieu of a pretrial election of remedies. Thus, the Court must now issue findings and conclusions on that defense. Because the City continued with the Agreements for years after learning its claimed basis for rescission, including by accepting use of OSF and the benefits of contractual escrow rights in that software long after filing suit, id. at 2-4 (citing record), the Court should determine the City waived the remedy of rescission. II. BEFORE THE REMEDIAL PHASE OF TRIAL, DEFENDANTS COULD NOT WAIVE A REMEDIAL ARGUMENT ARISING AFTER THE CITY RESCINDED. To award a monetary rescission judgment against Open Investments, the Court would have to find that Open Investments unjustly enjoys a benefit from the City. But the evidence showed benefit only to Open International, and the City rescinded Open Investments’ obligation to backstop Open International’s obligations. In its waiver arguments, Dkt. 320 at 6-10, the City confuses the lack of evidence to support a finding of fraudulent inducement against Defendants and, in particular, Open Investments— Case No. 1:21-cv-02063-CNS-SBP Document 325 filed 01/04/24 USDC Colorado pg 4 of 7 3 which Defendants raised in Rule 50(a) and Rule 50(b) motion practice, Dkt. 282 at 4-8; Dkt. 302 at 4-8—with this separate lack of evidence showing a benefit to Open Investments that could be disgorged through rescission, Dkt. 314 at 5-7. It is for that latter reason the Court should enter judgment for Open Investments under Rule 52(c). The postponement of an election of the City’s inconsistent legal and equitable remedies prevented Defendants from raising this argument earlier. Until the City chose to rescind, the guarantee in the Agreements obligated Open Investments to backstop Open International entirely in the event of a breach of contract finding or a fraud finding upon which the City elected to affirm the Agreements. With the Agreements in place, Open Investments’ legal obligations neatly tracked with Open International’s, which is why—for the jury’s purposes—the two sides could be discussed as one. But in the absence of the Agreements, the evidence shows their distinct roles. See Ex. 522 (payments to Open International); see also Ex. 5 at 9 (RFP response by Open International); Ex. 1 at 4 (guarantee by Open Investments). Upon the City’s election of rescission, Open Investments promptly raised the lack of evidence to support an equitable monetary award through rescission against Open Investments. TR (Nov. 17, 2023) at 129:11-130:5. Open Investments did not waive, and could not have waived, a remedial issue that the Court still must resolve and that, in any event, could not be raised until after the City’s election to rescind. Because Open Investments received no benefit from the City, the Court’s findings of fact and conclusions of law cannot include a monetary rescission award against Open Investments, and judgment should be entered in its favor. Case No. 1:21-cv-02063-CNS-SBP Document 325 filed 01/04/24 USDC Colorado pg 5 of 7 4 Dated: January 4, 2024 Respectfully submitted, s/ Paul D. Swanson Paul D. Swanson, pdswanson@hollandhart.com Kevin C. McAdam, kcmcadam@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 Open International, LLC and Open Investments, LLC Case No. 1:21-cv-02063-CNS-SBP Document 325 filed 01/04/24 USDC Colorado pg 6 of 7 CERTIFICATE OF SERVICE I hereby certify that on the 4th day of January, 2024 the foregoing was electronically filed with the Clerk of Court using the Court’s electronic filing system and that a copy of the foregoing was sent to all counsel of record via same in compliance with the Federal Rules of Civil Procedure and the Local Rules of this Court. s/ Paul D. Swanson 31176925 Case No. 1:21-cv-02063-CNS-SBP Document 325 filed 01/04/24 USDC Colorado pg 7 of 7