STATE OF COLORADO

OFFICE OF ADMINISTRATIVE COURTS

633 17'h Street, Suite 1300 Denver, Colorado 80202

IN THE MATTER OF THE COMPLAINT FILED BY COLORAD,Q ETHICS WATCH REGARDING ALLEGED CAMPAIGN AND POLITICAL FINANCE VIOLATI,ONS BY CLEAR THE BENCH COLORADO

A. COURT USI= ONLY A

CASE NUMBER:

OS 201 O~0009

ORDER AWARDIN,G ATTORNEY FEES AND COSTS

This matter is before the ALJ to determine the amount af attorney fees and costs to be awarded Clear the Bench Colorado (CTBG) for defending against that portion of the case that involuntarily dismissed. Hearing as to this issue was held at the Office of Administrative Courts December 3, 2010. CTSC was represented at the hearing by Steven A. Klenda, Esq., Hackstaff Gessler LLC. CEW was represented at the hearing by Aaron Goldhammer, Esq., Sherman and Howard LLC.

Background

CTBC is ail organization that advocated the defeat of three Colorado Supreme Court justices seeking retention in the November 2010 general election. On May 5, 2010, CEW filed a complaint with the Colorado Secretary of State, pursuant to Colo. Const. art. XXVIII, § 9(2)(a), alleging that CTBC violated Colorado's fair campaign practice laws by failing to register as a political committee (First Claim). and by accepting contributions that exceeded the limits applicable to a political committee (Second Claim).

Prior to trial, the parties filed cross-motions for summary judgment. After a motions hearing held July 21, 2010, the ALJ denied CEW's motion but granted CTBC's motion. Dismissal was predicated upon the fact that as of the date CEW's complaint Was filed, none of the justices targeted by CTBC for non-retention hac! yet filed an intent to run for retention, and therefore were not "candidates" as defined in the law. Because, as of the date of the complaint. the justices were not candidates, CTBC was not a political committee as defined by the Colorado constitution and was not subject to the registration requirements and contribution limitations imposed on political committees.

Because CEW's claim was not supported by the undisputed evidence or by the plain language of the law, the ALJ found CEW's complaint substantially groundless and frivolous. The ALJ therefore granted CIBe's request for attorney fees and costs

pursuant to § 1-45-111. 5(2), C. R. S., which mandates an award of reasonable attorney fees and costs against any attorney or party who brought an action "in whole or in part" that lacked substantial justification. Order Granting Motion for Summary Judgment of Clear the Bench Colorado> dated July 23,2010" pp. 6-7.

Although CEW's initial complaint was dismissed upon summary judgment; CEW moved to file a C.R.C.P. 15(d) supplemental complaint, based upon evidence that several justices had subsequently filed an intent to run for retention, and thus were now candidates within the meaning of fair campaign practice law. Because CTBC continued to advocate against these justices without registering as a political committee,a viable claim that CTBC was now in violation of the law could be made. The AU therefore granted CEW's motion to file a supplemental complaint. Because some portion of CTBC's pleading and discovery efforts incurred prior to dismissal of the first complaint was likely to be directly applicable to its defense of the supplemental complaint, the ALJ deferred determination of the attorney fee award pending the resolution of CEW's supplemental complaint.

CEW filed its supplemental complaint August 2, 2010. The supplemental complaint alleged a single claim - that ClBC violated the fair campaign practice law by failing to register as a political committee as of May 28,2010. the first date a justice filed an intent to seek retention.' Hearing of the supplemental complaint was held September 15,2010. On September 22,2010, the ALJ issued a Final Agency Decision finding that. as alleged, CrBC should have registered as a political committee as of May 28, 2010. Because only the original claim, and not the supplemental claim. lacked substantial justification, the ALJ declined to award ClBC any attorney fees or costs that were "reasonably necessary to defend against the supplemental complaint." Final Agency Decision, p. 13. The ALJ directed CTBC to file an itemization of the fees and costs it incurred in defense of the dismissed claim.

On October 11, 2010, CTBC filed an Affidavit- of Respondent's Attorney Fees supported by billing records for the months of May, June, and July 2010. CTBC sought a total award of $23,712.00, Which included $23,542.00 in attorney fees and $170 in costs for the period of May 5, 2010 (when CEW's original complaint was filed), through July 21.2010 (when CTBC's motion for summary judgment was granted). In arriving at this claim, CTBC deducted $1,733.50 it attributed to preparing for and attending the deposition of elBC's executive director, Mr. Arnold. CTBC says it deducted this amount to comply with th.e ALJ's directive that fees would not be awarded for effort incurred prior to dismissal of the original complaint, but which was reasonably necessary to defend against the supplemental cornplaint'

CEW disputes the claim of $23,712. Though it does not dispute the

reasonableness of CTBC's attorneys' rates, it contends that most of the effort needed to defend against the dismissed complaint would have been necessary in any event to defend against the supplemental complaint and therefore should not be part of the

1 Because there was no evidence that CTBC accepted excess contributions after the date that it became a political committee, CEW did not reassert its excess contribulionclaim.

2 The AU cited Mr. Arnold's deposition as one "example" of activity that might be apportioned to the defense of the supplemental complaint.

2

award. Furthermore, CEW argues that CTBC failed to provide sufficient evidence to support a reasonable apportionment of its fees, and therefore its claim should be denied in its entirety. At the fees hearing, ClBC met CEW's objection by offering the testimony of t e two attorneys who billed time to this case, plus a color-coded billing record that grouped the fees incurred into several categories of effort. Based upon this evidence; ClSC argues that almost everything except the defense of Mr. Arnold's deposition should be apportioned to the dismissed claim.

CTBe also argues that the ALJ erred in determining that its fees should be apportioned at all. elBC contends that, under the relevant case law, it is entitled to all fees and costs incurred prior to dismissal of the original complaint, regardless of whether that effort was reasonably necessary to defend the valid supplemental complaint.

For reasons explained below, the ALJ finds that apportionment is appropriate, and awards CTBC $12,987.20 in attorney fees' and $60 in costs.

Dlscussion

The Fee Award Should Include Only Those Fees That Are Reasonably Apportioned to the Defense of the Dismissf;Jd Complaint

Fee awards in fair campaign act cases are governed by § 1-45-111.5(2) of the

Fair Campaign Practices Act. That section reads, in pertinent part:

A party in any action brought to enforce the provisions of article XXVIII of the state constitution or of this article shall be entitled to the recovery of the party's reasonable attorney fees and costs from any attorney or party who has brought or defended the action, either in Whole or in part, upon a determination by the [ALJ] that the action, or any part thereof, lacked substantial justification ...

In this case, "the action" includes both the original complaint, which lacked substantial justification and was dismissed, and the supplemental complaint, which had merit and prevailed. Applying § 1-45-111.5(2), only the attorneys fees incurred to defend the part of the action that lacked substantial justification should be awarded. This interpretation is consistent with the rule stated in Bergeson v. Midway Development Co. No.3, 817 P.2d 606 (Colo. App, 1991), wherein the court said, "In an action involving multiple claims in which it is determined that some of the claims are frivolous, a defendant may be awarded attorney fees pursuant to § 13-17-101 which may then be apportioned to the defense of the frivolous claims." Id. at 607 (citing Alessi v. Hogue, 689 P.2d 649 (Colo. App. 1984)).3 Following this rule, attorney fees should he awarded to the extent they can be reasonably apportioned to the defense of the frivolous claim, but not to the extent they are more appropriately apportioned to the defense of the valid claim. To do otherwise would create an unjustified windfall; especially where, as here,

3 Although the AU is applying § 1-45-111.5(2) rather than § 13-17-102(4), C.R.S., the two statutes are similar in that they entitle a party to an award of fees for defending against any part of an action that lacks substantial justification. In applying § 1-45-111.5(2}, it is appropriate to consider the case law interpreting § 13-17-102. Colorado Ethics Watch v. Senate Majority Fund, LLC, _ P.3d _ (Colo. App. 2010), Nos. 08CA2689 & 09CA0384 (Colo. App. March 18, 2010).

3

the valid claim was ultimately successful.

In arguing against apportionment, CTBC relies on Bd. of County Comm'rs of Boulder County v. Kraft Bldg. Contrectors, 122 P.3d 1019 (Colo. App. 2005). In Kraft, the court was dealing with the defendants' claim for attorney fees attributable to work on a counterclaim, prior to removal of the case to federal court and plaintiff's voluntary dismissal of its claim against the defendants. Defendants argued that they were entitled to the fees attributable to the counterclaims because those claims were purely defensive and were "inextricably bound up with" their affirmative defenses to the frivolous claims. Id. at 1023. With no explanation other than noting that the plaintiff did not dispute defendants' claim for these fees, the court stated, "we perceive no basis for separating out the work done on the counterclaims [during the "brief period" prior to removal] from the work done in defense against the [plaintiff's] complaint." CTBC relies upon this language to support its argument that apportionment of the fees incurred prior to the dismissal of CEW's frivolous complaint tS improper.

The ALJ finds CTBC's argument unpersuasive for at least two reasons. First, the court in Kraft offered little rationale for its decision to award fees for defendants' initial work on the counterclaim, other than the fact that this portion of the fee claim was not disputed. Second, the facts of Kraft are quite different from the present case. In Kraft, the court noted that, according to defendants, their counterclaims were purely defensive and "inextricably bound up with" their affirmative defenses. Id. at 1023. In other words, defendants would not have incurred the counterclaim fees but for the frivolous claim. In the present case, however, some of CTBC'seffort in defending' the dismissed claim was directly transferrable to its defense of the supplemental complaint, and would have been incurred even if the dismissed complaint had never been filed. The ALJ therefore concludes that Kraft is not binding authority for the issue at hand."

Apportionment of CTBC's attorney fees is also consistent with the purpose of a fee award provision, such as § 1-45-111.5(2). In discussing the purpose of the analogous fee award provisions of § 13-17-102, C.R.S., the Colorado Supreme Court observed that fee awards serve the purpose of deterring frivolous litigation by punishing the party Or attorney who improperly instigated the litigation, and serves the remedial purpose of compensating the opposing party for unnecessary expense. In re Marriage of Aldrich, 945 P.2d 1370, 1378 (Colo. 1997). Prorating the fee award so that CTBC is compensated only for the effort necessarily spent in defending the frivolous claim, but not for the time that would have been spent in any event defending the valid claim, serves both af these purposes. CTBC receives compensation only for the expense it unnecessarily incurred, and CEW is penalized only to the extent that it caused unnecessary expense. To do otherwise would provide a windfall to CTBC and would unfairly penalize CEW for prosecution of a valid claim.

4 The ALJ has considered Crandall v. City and County of Denver, 238 P.3d 659 (Colo. 2010), which held that fees awarded pursuant to § 13-17-201, C.R.S. should not be apportioned even though the work might be useful in companion' federal litigation. Crandall, however; is not applicable because § 13-17-201 app I ies ani y to tori cases where the enf re case is dis missed under Ru Ie 12 (b). The present case is not a tori case, did hoi result in dismissal of the entire case, and was dismissed upon motion for summary judgment, not Rule 12(b).

4

Burden of Proving Apportionment

CEW cites Fountain v. Mojo, 687 P.2d 496 (Colo. App. 1984), for the proposition that, where one of several claims is found to be frivolous, the party seeking fees bears the burden of presenting "sufficient evidence to enable [the court] to apportion" the fees between the frivolous and non-frivolous claims. Id. at 502. Accepting Mojo as binding law, the ALJ nonetheless finds that CTBC, through its billing statements and testimony at the fees hearing, provided sufficient evidence to make an apportionment determination. As noted by the court in Alessi, supra, although the interrelationship of claims or defenses may make proof at apportionment difficult,"such factor alone will not suffice to deny an award and deprive a prevailing party of an opportunity to establish a reasonable proration of attorney fees incurred relative to the defense of a frivolous or groundless claim." Id. at 651. Therefore, the fact that CTBC was not able to provide precise details regarding the allocation of its billed time is not reason to deny its entire claim, Evidence sufficient to allow "reasonable proration" is all that is required.

Apporl1onment

CEW does not challenge the reasonableness of the rates charged by CTBC's attorneys. Moreover, the ALJ finds no persuasive evidence that CTBC failed to mitigate its fees, that the effort by its attorneys was excessive, or that it failed to receive value for its attorneys' services. The ALJ will therefore award the full amount claimed by CTBC, subject to apportionment of that amount between the effort necessary to defeat the frivolous complaint, and the effort that was directly related to the defense of the valid supplemental complaint.

In its brief opposing CTBC's claim for fees, CEW identifies four categories of activity set forth in CTBC's billing statements that CEW claims should be apportioned, at least in part, to the defense of the supplemental claim. Those four categories are: 1) discovery; 2) general case strategy and a motion to quash; 3) an entry of appearance; and 4) other pleadings, including the answer, cross-motion for summary judgment, and reply in support of the cross-motion. CEW's Opposition to Reiiei, pp. 4-9. Each category will be addressed in turn.

At the fees hearing, CTBe provided a color-coded summary of its fees attributable to each category. Exhibit A. Because CTBC's attorneys block-billed and did not provide a detailed breakdown of the time spent on each task within the block, the summary is an approximation of the amount of time spent on each category of activity, with effort taken to avoid duplication of the same time in more than one category. Except as noted below. the ALJ adopts CTBC's summarization for the purposes of the apportionment.

1) Discovery

CTBC claims $1,786.50 in fees related to discovery." CEW objects to this category of fees to the extent it pertains to Mr. Arnold's deposition, or to discovery from the Secretary of State, all of which CEW contends would have been necessary in any event for the defense of the supplemental complaint.

5 Highlighted in yellow on Exhibit A. This amount does not include $1,733.50 to prepare for and attend Mr. Arnold's deposition, which CTBC had deducted from its fee claim.

5

The ALJ agrees that a significant portion of the effort in this category relates to defending Mr. Arnold's deposition, and to discovery from the Secretary of State related to CTBC's affirmative defense of collateral estoppel. Both of these activities are apportioned to the defense of the supplemental complaint. CEW would have taken Mr. Arnold's deposition in connection with the supplemental complaint even if the original complaint had not been filed. Similarly, much of the discovery from the Secretary of State related to the issue of CTBG's affirmative defense of collateral estoppel, which was a significanffeature of CTBC's defense of the supplemental complaint.

Not all of the discovery, however, can be apportioned to the supplemental complaint. Notably, CTBC obtained ali affidavit from a Secretary of State employee, Paris Nelson, which directly supported the theory upon which the motion for summary judgment was granted. CTBC also attached Secretary of State records in support of its statute of limitations defense, which was argued only in connection with the dismissed

cornptaint.f .

Having considered the activities as described in CTBC's billing statements, and the testimony taken at the fees hearing, the AU apportions 75 percent ($1,339.88.) of the amount billed for discovery to the defense of the supplemental claim, and allows the remaining 25 percent ($446.62) for the defense of the dismissed complaint.

2) General Case Strategy and Motion to Quash

CTBG claims $1,557.00 in fees related to general case strategy and $2,035.50 in fees to prepare and present the motion to quash Mr. Arnold's deposition," CEWobjects to these categories because it says that CTBC's defense strategy of the supplemental complaint was the same as that for the dismissed complaint, and that the motion to quash Mr. Arnold's deposition would have been made in any event.

The ALJ agrees that the fees incurred to prepare and present the motion to quash Mr. Arnold's deposition should be apportioned to the supplemental complaint. Because of its concern that CEW was on a "fishing expedition" into CTBC's campaign strategy, it is highly probable that CTBC would have made the motion to quash Mr. Arnold's deposition even if the dlsrnissed complaint had never been flied. Thus, all fees spent prosecuting that motion are apportioned to the defense of the supplemental complaint, and no fees are apportioned to the dismissed complaint.

The fees incurred for general case strategy are subject to a. different analysis.

Although CTBC raised a number of affirmative defenses in its original answer, CTBC's primary defenses, as set forth in its Cross-Motion for Summary JUdgment, were: 1) statute of limitations; 2) lack of a "candidate," and 3) the bar of collateral estoppel. In addition, CTBC included discussion of a somewhat collateral issue involving independent expenditure committees, and argued its claim for attorney fees. Of these issues, most related only to the dismissed col11plaint. The statute of limitations defense became moot after the original complaint was dismissed and was not argued again. The issue regarding lack of candidacy was the basis upon which summary judgment was granted,

6 Although CTBC included the statute of llmitatlons defense again in Its answer to the supplemental complaint. IT did not pursue it.

7 Highlighted in blue and pink, respectively. on Exhibit A.

6

and was not applicable to the supplemental complaint. Furthermore, the issue regarding independent expenditure committees was not raised again, and the motion for an award of attorney fees was applicable only to the dismissed complaint. Only the evidence and argument supporting the defense of collateral estoppel was directly involved in CTBC's defense of the supplemental claim.

Although the affirmative defense of collateral estoppel was only one of several issues CTBC raised in connection with the original complaint, it occupied the greatest share of CTBC's effort, judging by the number of pages devoted to it in the cross-motion for summary judgment, and the number of exhibits supporting the argument. Therefore, of the $1,557 in the cate.gory of general case strategy, the ALJ apportions 40 percent ($622.80) to the supplemental claim, and the remaining 60 percent ($934.20) to the dismissed complaint.

3) Entry of Appearance

CTBC claims $618.50 in fees related to drafting and filing an entry of appearance." CEW objects to this claim as an entry of appearance by CTBC's counsel would have been necessary for the supplemental complaint in any event.

The ALJ agrees that time to prepare and file an entry of appearance should not be awarded against the dismissed claim, as the entry of appearance would have been necessary for the supplemental complaint. However, CTBC's billing records indicate that severa! other activities are included in this fee block other than simply drafting and filing an entry of appearance. Also included is time for drafting a letter asking CEW to dismiss the original complaint, and time for drafting a motion to reschedule the hearing of that complaint, among other things. These activities are uniquely related to the dismissed complaint.

Because a significant portion of this category is actually devoted to efforts related only to the dismissed complaint, the ALJ apportions 75 percent ($463.88) to that complaint. The remaining 25 percent ($154.62) is apportioned to the entry of appearance, and as such is not allowed as part of the fee award.

4) Other Pleadings

The other pleadings at issue are the answer, cross-motion for summary judgment, and reply in support of the cross-motion. CTBC claims a total of $16,005 for these combined efforts." As noted in the discussion related to the category of general case strategy, approximately 40 percent of CTBC's effort in arguing for dismissal of the original complaint was invested in its collateral estoppel defense. This defense, though not addressed in the dismissal of the original complaint, was raised again and figured prominently in CTBC's defense of the supplemental claim. The ALJ therefore apportions 60 percent of the fees incurred for drafting the answer, cross-motion for summary judgment, and reply to the dismissed complaint ($9,603.00), and 40 percent to the supplemental complaint ($6,402.00).

8 Highlighted in green on Exhibit A.

9 Highlighted in purple, orange, and red, respectively, on Exhibit A.

7

5) Not Specifically Challenged

In addition to the categories of effort discussed above, CTBC claims another $1,539.50 in fees that aren't specifically included in any of the above described categories. CEW makes no specific objection to these fees and the AU attributes the entirety to the defense of the dismissed complaint.

Summary of Fee Apportionment The following table summarizes the fee apportionment:

Category Claimed Allowed Disallowed
Discovery $ 1,786.50 $ 446.62 $ 1,339.88
General strategy $ 1,557.00 $ 934.20 $ 622.80
Motion to Quash $ 2,035.50 $ -0- $ 2,035.50
Entry of Appearance, etc. $ 618.50 $ 463.88 $ 154.62
Other pleadings - Answer, Cross- $16,005.00 $ 9,603.00 $ 6,402.00
Motion for Summary Judgment,
Reply
Not specifically categorized $ 1,539.50 $ 1,539.50 $ -0-
Total $23,542.00 $12,987.20 $10,554.80 Costs

CTBC also seeks an award of $170 in costs for the service of subpoenas upon three employees of the Secretary of State. The ALJ apportions the cost of the subpoena to Paris Nelson ($60) to the defense of the dismissed claim. The cost of the subpoenas to the other two employees (Walegur and Reynolds) appears related to the development of the collateral estoppel defense, and is apportioned to the supplemental complaint. The ALJ therefore awards a total of $60 in costs.

Order

crac is awarded $12,987.20 in attorney fees and $60 in costs, to be paid by CEW to CTBC within 30 days of the mailing of this order.

Done and Signed December 9, 2010

8

Hearing digitally recorded in CR #1 Exhibits admitted

For CTBC: Exhibit A For CEW: Exhibit 20

CERTIFIC,ATE OF SERVICE

I certify that I have served a true and correct copy of the above ORDER AWARDING ATTORNEY FEES AND COSTS by depositing same in the U.S. Mail, postage prepaid, at Denver, Colorado addressed to:

Luis Taro, Esq.

1630 Welton Street, #415 Denver, CO 80202

Aaron Goldhamer, Esq. Sherman & Howard, LLC

633 Seventeenth Street, Suite 3000 Denver, CO 80202

Steven A. Klenda, Esq. Hackstaff Gessler, LLC

1601 Blake Street, Suite 310 Denver, CO 80202

William A. Hobbs

1700 Broadway, Suite 270 Denver ~O 80290

this ~ day of July, 2010.

Court Clerk

9

Sign up to vote on this title
UsefulNot useful