Lawrence v. People

486 P.3d 269

Shaun David Keller LAWRENCE, Petitioner

v. The PEOPLE of the State of Colorado, Respondent.

Supreme Court Case No. 19SC556

Supreme Court of Colorado.

May 10, 2021

Rehearing Denied June 1, 2021

Attorneys for Petitioner: Megan A. Ring, Public Defender, Jessica A. Pitts, Deputy Public Defender, Denver, Colorado

Attorneys for Respondent: Philip J. Weiser, Attorney General, Brittany L. Limes, Assistant Attorney General, Denver, Colorado

Attorneys for Amicus Curiae Tung Chang, Securities Commissioner for the State of Colorado: Philip J. Weiser, Attorney General, Robert W. Finke, First Assistant Attorney General, Jordanna L. Haskins, Senior Assistant Attorney General, Janna K. Fischer, Assistant Attorney General, Denver, Colorado

Attorneys for Amicus Curiae North American Securities Administrators Association, Inc.: Ballard Spahr LLP, Theodore J. Hartl, Denver, Colorado

En Banc

JUSTICE GABRIEL delivered the Opinion of the Court.

¶1 This prosecution for securities fraud and theft requires us to address three questions. First, we must decide whether the agreement entered into by defendant Shaun Lawrence and the victim, D.B., was an investment contract and therefore a security for purposes of the Colorado Securities Act (the "Act"), §§ 11-51-201(17), - 501(1), C.R.S. (2020). Second, we must consider the limits of expert testimony offered by the Colorado Securities Commissioner in a case like this one. And third, we must decide the proper remedy when the trial court incorrectly instructs the jury regarding the value of the property taken and that value was disputed at trial.¹

¶2 We now conclude first that an investment contract is a contract, transaction, or scheme whereby people invest their money in a common enterprise and are led to expect profits derived substantially from the entrepreneurial or managerial efforts of others, on whose honesty and skill the investors have relied to manage their money. Applying this definition here, we conclude that the agreement at issue was an investment contract and therefore a security.

¶3 Next, we conclude that in assessing the proper scope of the expert testimony at issue under C.R.E. 702 and 704, we must consider, among other things, the four factors set forth in People v. Rector, 248 P.3d 1196, 1203 (Colo. 2011), namely, whether (1) the expert's testimony was clarified on cross-examination; (2) the expert expressed an opinion as to the applicable law or legal standards, thereby usurping the function of the court; (3) the jury was properly instructed on the law and that it may accept or reject the expert's opinion; and (4) the expert opined that the defendant committed the crime or that a particular likelihood existed that the defendant did so. Applying those factors here, although we perceive the issue to be close, we conclude that the Commissioner's testimony was admissible, and even if one could perceive error, any error by the trial court in admitting that testimony was harmless.

¶4 Finally, we conclude that when, as here, the trial court erroneously instructs the jury as to the value of the property taken and that value was disputed at trial, the proper remedy is to remand the case with instructions that the prosecution may elect to retry the theft charge as a whole or to agree to the entry of judgment based on the lowest degree of theft supported by the jury's verdict (here, a class 1 misdemeanor).

¶5 Accordingly, we affirm the judgment of the division below.

I. Facts and Procedural History

¶6 Lawrence met D.B. at a casino, where she worked as a cashier. During their conversations, Lawrence told D.B. that he ran several successful businesses and that he was looking for people to work for him and for investors to help grow a private investigations business called Advert Investigations ("Advert"). D.B. was interested and asked Lawrence if he was hiring and what the pay would be. Lawrence responded that the pay was anywhere from $18 to $22.50 per hour but that D.B. would have to complete three hundred hours of training without pay before she would be paid. The two then discussed a possible investment by D.B., including how much D.B. would be willing to invest and the interest in the company that she would receive.

¶7 Several weeks later, Lawrence and D.B. met again, and the two signed an "Investment and Business Agreement." This agreement provided that D.B. would invest $6,000 in exchange for a twenty percent ownership interest in Advert. The agreement further provided that Lawrence would (1) have an annual independent audit performed and provide the results to D.B.; (2) send to D.B. week-end revenue reports; and (3) notify D.B. of any matter that might affect the business or its revenue flow. And the agreement stated that Lawrence, D.B., and two others would have decision-making authority as to any matter concerning the business, subject to D.B.'s twenty percent voting power. Upon signing this agreement, Lawrence instructed D.B. to deposit her $6,000 investment into his personal bank account, and D.B. did so.

¶8 A little over three weeks later, Lawrence told D.B. that an investor had dropped out and that an additional ten percent ownership interest in the business had become available. Lawrence indicated that the cost for the additional share of the company would be $3,000, and D.B. agreed to invest that additional amount. The parties thus signed a second "Investment and Business Agreement." This agreement voided the prior agreement that the two had signed. In addition, the agreement provided that, in exchange for an additional equity investment of $3,000, D.B. would obtain a total ownership interest of thirty percent of the business. And the agreement contained the same disclosure and reporting terms as the prior agreement and substantially the same provision regarding decision-making authority (the only difference being that the language was changed to indicate D.B.'s thirty percent voting power). Again, Lawrence asked D.B. to deposit the investment amount in his personal bank account, and D.B. did so.

¶9 Notably, at no time prior to D.B.'s investments did Lawrence tell her that he would use the money to pay for personal and gambling expenses. Nor did he ever advise her that he had outstanding civil judgments against him totaling over $100,000.

¶10 At some point after the parties signed the second agreement, Lawrence showed D.B. two options for office space, D.B. selected one of them, and Lawrence rented that space and brought in some cameras and computers. In addition, Lawrence registered "Advert Investigations" with the Secretary of State and purchased a series of domain names for the business.

¶11 During this early phase of the parties' business relationship, D.B. and Lawrence had occasional communications about the business. Lawrence even allowed D.B. to complete one service of process job. And D.B. visited the office several times. Thereafter, however, Lawrence stopped communicating with D.B., after which D.B. went to the office to see if she could find anything related to the business there. She found the office empty, except for some random paperwork on the desk, a filing cabinet, and a single dusty computer. As it turned out, Lawrence had withdrawn all of the money that D.B. had invested and spent it on gambling and personal expenses.

¶12 In light of the foregoing, D.B. filed a complaint with the State Division of Securities, which subsequently referred the case to the district attorney's office for prosecution. The People then charged Lawrence with (1) two counts of securities fraud under sections 11-51-501(1)(b) and 11-51-603(1), C.R.S. (2020) (one count was based on Lawrence's failure to disclose that he would use D.B.'s investment money for personal expenses, including gambling, and the other was based on Lawrence's failure to disclose the outstanding civil judgments against him), and (2) one count of theft under the version of the theft statute in effect at the time of the crimes at issue, which classified theft of $1,000 or more but less than $20,000 as a class 4 felony. § 18-4-401(2)(c), C.R.S. (2012). Notably, however, after Lawrence committed the alleged offenses but before his case got to trial, the legislature amended the theft statute to re-classify the levels of theft offenses. See § 18-4-401(2), C.R.S. (2020). Under the amended statute, a conviction for theft of $1,000 or more but less than $20,000 could, depending on the precise value of the thing taken, be classified as anywhere from a class 1 misdemeanor to a class 5 felony. § 18-4-401(2)(e)-(g).

¶13 Lawrence's case proceeded to trial, and at trial, the parties disputed, among other things, the extent of control that D.B. had exercised in connection with the business. In particular, the prosecution argued that D.B. had no experience running a business, that she was relying completely on Lawrence to do so, and that she had no authority to control Advert's business. Lawrence, in contrast, contended that D.B., in fact, had some ability to control the business, as evidenced by her ownership interest, her role in deciding the office's location, the communications and disclosures that were required under the parties' agreement, and the fact that the agreement contained a provision regarding D.B.'s decision-making authority.

¶14 The parties also disagreed as to the extent of the alleged theft. The prosecution argued that Lawrence had stolen all $9,000 of D.B.'s investment, which he then used for personal and gambling expenses. Lawrence, in contrast, asserted that he had used at least some of the money for legitimate business purposes.

¶15 And, as pertinent to the issues now before us, the prosecution called Gerald Rome, then the Securities Commissioner for the Colorado Division of Securities, to testify as an expert witness. Among other things, Commissioner Rome testified regarding the general purposes of the securities laws, what qualifies as a security (including an investment contract), and the obligation...