Stroh Ranch Dev., LLC v. Cherry Creek S. Metro. Dist. No. 2

STROH RANCH DEVELOPMENT, LLC, a Colorado limited liability company, Plaintiff,

v. (1) CHERRY CREEK SOUTH METROPOLITAN DISTRICT NO. 2,(2) CHERRY CREEK SOUTH METROPOLITAN DISTRICT NO. 3,(3) CHERRY CREEK SOUTH METROPOLITAN DISTRICT NO. 4,(4) CHERRY CREEK SOUTH METROPOLITAN DISTRICT NO. 5,(5) CHERRY CREEK SOUTH METROPOLITAN DISTRICT NO. 6,(6) CHERRY CREEK SOUTH METROPOLITAN DISTRICT NO. 7,(7) CHERRY CREEK SOUTH METROPOLITAN DISTRICT NO. 8,(8) CHERRY CREEK SOUTH METROPOLITAN DISTRICT NO. 9,(9) CHERRY CREEK SOUTH METROPOLITAN DISTRICT NO. 10,(10) CHERRY CREEK SOUTH METROPOLITAN DISTRICT NO. 11,(11) THE PIVOTAL GROUP, INC.,(12) PIVOTAL PARKER INVESTMENTS, LLC, a Delaware limited liability company a/k/a(13) PARKER INVESTMENTS 2009, LLC,(14) PIVOTAL COLORADO II, LLC,(15) NORTH PARKER INVESTMENTS, LLC,(16) KURT WOLTER,(17) KIMBERLY JENSEN,(18) GREG MCILVAIN,(19) MARK EAMES,(20) GREG EPP,(21) BILLY HARRIS, and(22) JOHN DOES 1 through 8, Defendants.

Civil Action No. 10-cv-02216-WJM-KLM

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Dated: March 18, 2013

Judge William J. Martínez

ORDER DENYING JOINT MOTION FOR SUMMARY JUDGEMENT ECF NO. 165

This matter is before the Court on the Defendant Cherry Creek South Metropolitan District No. 2's et al. ("Defendants") Joint Motion for Summary Judgment ("Motion"). (ECF No. 165.) Plaintiff Stroh Ranch Development, LLC ("Plaintiff" or"SRD") has filed a Response, (ECF No. 184) and Defendants have filed a Reply. (ECF 196.) At the Court's request, the parties filed Schematics and Chronologies outlining the contract and equitable claims. (ECF Nos. 217-218 and ECF Nos. 219-222.) The Plaintiff's Schematic is illustrative and appended to this Order as Schedule A. In addition to these materials, the parties filed supplemental briefing for Oral Argument that was heard on February 25, 2013. (ECF Nos. 226-227.)

Having reviewed and considered the extensive written and oral arguments made by the parties, the Court denies Defendants' Motion for Summary Judgment. Denial of summary judgment is ordered only to the extent that it applies to the interpretation of the Reimbursement Agreements, and to the related issue of the implied covenant of good faith and fair dealing. The Court holds that extrinsic evidence is required to inform and discern the intent and reasonable expectations of the parties with respect to the Reimbursement Agreements. (ECF No. 165.) The Court makes no findings with respect to the Reserved Powers Doctrine; nor on the issues related to notice and breach of contract.

I. INTRODUCTION

The case is complex because of its multiple contract, equitable and constitutional claims. Due to the private/public divide in which the claims are set, the case presents questions of first impression in the District of Colorado. This context has been well-documented. See Janice G. Local Government Contracts: Escaping from the Governmental/Proprietary Maze, 75 Iowa L.Rev. 277, 290-299 (1990).

Notwithstanding this, what lies at the core of this dispute is reimbursement monies—i.e. an advance made by Plaintiff to the Defendant Districts between 1985 through 2004. The purpose of that advance was to provide funding for public works on public land. The advance made by Plaintiff to Defendants amounts to $3,507,817. (ECF No. 165-15 at 6). The advance was initially owed by District 2, which was subsequently divided into Districts 3-11. (ECF No. 165-15 at 6). The amount owing with respect to each District, including District 2, is accounted for in the Reimbursement Agreements. (ECF No. 165-15.) Schedule A of this Order is illustrative.

To resolve the instant Motion, a central issue involves interpretation of the Reimbursement Agreements. The battle lines drawn over interpretation are primarily directed at the Discretionary Clause (Section 1) and Covenant Clause (Section 4), respectively. (ECF No. 165-15 at 2.) The parties have competing interpretations of how these clauses should be construed. Based on Defendants' position, many of Plaintiff's contract claims 'rise and fall' on whether these clauses can be construed as a matter of law based on Defendants' preferred position. Resolving the interpretation issue effectively resolves Defendants' Motion. It is for this reason why the Court addresses this issue, coupled with related issue of good faith and fair dealing.¹

II. STANDARD OF REVIEW

A. Summary Judgement in the Context of Contract Interpretation

Summary judgment is warranted under Rule 56(a) of the Federal Rules of Civil Procedure when "the movant shows that there is no genuine dispute as to any material fact, and the movant is entitled to judgment as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986). A fact is "material" if under the relevant substantive law it is essential to proper disposition of the claim. Wright v. Abbott Labs., Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). An issue is "genuine" if the facts are such that they might lead a reasonable jury to return a verdict for the nonmoving party. Allen v. Muskogee, 119 F.3d 837, 839 (10th Cir. 1997). A court must resolve factual ambiguities in favor of the nonmoving party, thus favoring the right to a trial. Houston v. Nat'l Gen. Ins. Co., 817 F.2d 83, 85 (10th Cir. 1987); Bausman v. Interstate Brands Corp., 252 F.3d 1111, 1115 (10th Cir. 2001)

In a contract case, a motion for summary judgment allows for contract interpretation as a matter of law. Lake Durango Water Co., Inc. v. Pub. Utils. Comm'n, 67 P.3d 12, 20 (Colo. 2003). If, however, a contract is determined to be ambiguous, as here, the meaning of its terms are generally an issue of fact to be determined in the "same manner" as other factual disputes. East Ridge of Fort Collins, LLC v. Larimer and Weld Irr. Co., 109 P.3d 969, 974 (Colo. 2005); Dorman v. Petrol Aspen, Inc., 914 P.2d 909, 912 (Colo. 1996). As such, and before a moving party can attack a contract claim on summary judgment, the moving party must first show that the contract is unambiguous and can be construed as a matter of law. If not, interpretation becomes a question of fact requiring extrinsic evidence to clarify the meaning of the contract. Id.

Once the matter raises a "genuine issue" of fact, this effectively defeats a motion for summary judgment. That is precisely the outcome here as extrinsic evidence is required in this case to dispose of the interpretation and the good faith issues. See Milk 'N' More, Inc. v. Beavert, 963 F.2d 1342, 1345-6 (10th Cir. 1992); Malasky v. Dirt Motor Sports, 2008 WL 2095528 *2 (D. Colo. May 16, 2008) (Kane J.) (discussing contract interpretation in the summary judgment context.) Cf. Boston Five Cents Sav. Bank v. Department of Hous. & Urban Dev., 768 F.2d 5, 8 (1st Cir. 1985) (Breyer, J.) (setting out the "fact/law dichotomy in the context of this summary judgment" and noting that summary judgment is appropriate only when the language is unambiguous or the supporting evidence is sufficiently one-sided"); GenCorp, Inc. v. Am. Int'l Underwriters, 178 F.3d 804, 818 (6th Cir. 1999); Torres Vargas v. Santiago Cummings, 149 F.3d 29, 33 (1st Cir. 1998).

III. BACKGROUND FACTS

The Court must view the facts in the light most favorable to Plaintiff. McBeth v. Himes, 598 F.3d 708, 715 (10th Cir. 2010). Facts relevant to the instant Motion are extensive—they can be summarized as follows:

A. The Parties

Plaintiff SRD is a limited liability company authorized to do business under the laws of the State of Colorado. (ECF No. 165 at 7.) Gary Hunter is the manager of SRD, and his job responsibilities have included managing and developing property in Colorado. (Id.) Prior to December 2004, SRD was the owner and developer of a real estate project in Douglas County, Colorado, known at various times as "Stroh Ranch,"and/or "SunMarke." (Id.)

Defendants Cherry Creek South Metropolitan Districts Nos. 2-11 (collectively, the "Districts") are special districts organized pursuant to Title 32 of the Colorado Revised Statutes. (Id.) Typically, a special district provides "infrastructure and services to a specific area, with the cost being borne by the property owners and residents of the area." (ECF 165-1 at 8.) Once formed, a special district is governed by an elected board of directors, in whom rests the authority to manage and supervise all the business and affairs of the special district. (Id.) Defendants Kurt Wolter, Kimberly Jensen, Greg McIlvain, Mark Eames, Greg Epp, and Billy Harris are all individuals who serve, or have served, as members for the Board of Directors for the Districts between January 1, 2005 to present (collectively, the "Directors"). (ECF No. 165 at 8.)

Defendant Pivotal Group, Inc. ("PGI") is an Arizona corporation, with its principal place of business in Phoenix, Arizona. (Id.) Defendant Pivotal Parker Investments, LLC, a/k/a Parker Investments 2009, L.L.C., ("PPI") is a Delaware limited liability company authorized to do business in the State of Colorado, with its principal place of business in Scottsdale, Arizona. Defendant Pivotal Colorado II, LLC ("PCII") is a Delaware limited liability company authorized to do business in the State of Colorado, with its principal place of business in Scottsdale, Arizona. These defendant-entities are referred to as the "Pivotal Buyers." Defendant North Parker Investments, LLC ("NPI") is an Arizona limited liability company authorized to do business in the State of Colorado. (Id.)

B. District 2, Prior to 2004: The Reimbursement Resolution

As of 1999, District 2 covered a five-acre parcel of land at the northwest corner of the property that later became SunMarke. (Id.) In or about December 2003, District 2 was expanded to include additional property, bringing the total acreage of District 2 to approximately 2,918.5 acres. (Id.) (See also ECF No. 184 at 2.)

On or about December 19, 2003, SRD and District 2 executed a Reimbursement Resolution ("Reimbursement Resolution"). The Reimbursement Resolution memorialized District...