You can collect for damaged gear you rented to customers if your agreements are correct. This snowmobile outfitter recovered $27,000 for $220.11 in damages.
Posted: May 13, 2019 Filed under: Colorado, Contract, Release (pre-injury contract not to sue) | Tags: admissible, attorneys' fees, cases, collection, collector, credit card, debt collection, debt collector, demand letter, demand letters, discovery, disputed, documents, Email, engaging, entity, genuine, law firm, letters, machine, matters, missing, Mountain Law Group, nonmoving, nonmoving party, opposing, owed, parties, practice of law, preface, principal purpose, regularity, regularly, Rental, Rental Agreement, ride, signature, Snowmobile, Summary judgment, summary judgment motion 1 CommentIt helps to get that much money if the customer is a jerk and tries to get out of what they owe you. It makes the final judgment even better when one of the plaintiffs is an attorney.
Citation: Hightower-Henne v. Gelman, 2012 U.S. Dist. LEXIS 4514, 2012 WL 95208
State: Colorado; United States District Court for the District of Colorado
Plaintiff: Tracy L. Hightower-Henne, and Thomas Henne
Defendant: Leonard M. Gelman
Plaintiff Claims: Violation of the Fair Debt Collections Act
Defendant Defenses: They did not violate the act
Holding: For the Defendant
Year: 2012
Summary
The plaintiff’s in this case rented snowmobiles and brought one back damaged. The release they signed to rent the snowmobiles stated if they damaged the snowmobiles they would have to pay for the damage and any lost time the snowmobiles could not be rented (like a car rental agreement).
The plaintiffs damaged a snowmobile and agreed to pay for the damages. The Snowmobile outfitter agreed not to charge them for the lost rental income.
When the plaintiff’s got home, they denied the claim on their credit card bill. The Snowmobile outfitter sued them for the $220.11 in damages and received a judgment of $27,000.
The plaintiff then sued the attorney representing the snowmobile outfitter for violation of the federal fair debt collection’s act, which is the subject of this lawsuit. The plaintiff lost that lawsuit also.
This case shows how agreements in advance to pay for damages from rented equipment are viable and can be upheld if used.
Facts
Although this is described as a debt collection case, it is a case where an outfitter can recover for the damages done to his equipment that he rented to the plaintiffs. The facts are from this case, which took them from an underlying County Court decision in Summit County Colorado.
Mrs. Hightower-Henne, a Nebraska attorney, rented two snowmobiles from Colorado Backcountry Rentals (“CBR”) for herself and her husband, signing the rental agreement for the two machines and declining the offered insurance to cover loss or damage to the machines while in their possession. While at the CBR’s office, the Hennes were shown a video depicting proper operation of snowmobiles in general and were also verbally advised on snowmobile use by an employee of CBR. Plaintiffs, a short while thereafter, met another employee of CBR, Mr. Weber, at Vail Pass and were given possession of the snowmobiles after an opportunity to inspect the machines. Plaintiffs utilized their entire allotted time on the snowmobiles and brought them back to Mr. Weber as planned. Mr. Weber immediately noticed that the snowmobile ridden by Mr. Henne was missing its air box cover and faring, described as a large blue shield on the front of the snowmobile, entirely visible to any driver. At the he returned the snowmobile, Mr. Henne told Mr. Weber that the parts had fallen off approximately two hours into the ride and that he had tried to carry the faring back, but, as he was unable to do so, he left the part on the trail.3 Mr. Henne signed a form acknowledging the missing part(s) and produced his driver’s license and a credit card with full intent that charges to fix the snowmobile would be levied against that card. Mr. Henne signed a blank credit card slip, which the parties all understood would be filled-in once the damage could be definitively ascertained.4 Although CBR, pursuant to the rental agreement signed by Mrs. Hightower-Henne, was entitled to charge the Hennes for loss of rentals for the snowmobile while it was being repaired, CBR waived that fee and charged Mr. Henne a total of only $220.11.
…one of the rented snowmobiles suffered damage while in the possession of Mr. Henne. Although agreeing to pay for the damage initially, Mr. Henne later disputed the charges levied by CBR against his credit card, resulting in a collection lawsuit brought by CBR against Mr. and Mrs. Henne in Summit County Court. This court takes the underlying facts from the Judgment Order of Hon. Wayne Patton in the Summit County Case as Judge Patton presided over a trial and therefore had the best opportunity to assess the witnesses, including their credibility and analyze the exhibits. The defendant in this case, Leonard M. Gelman, was the attorney for CBR in the Summit County case.
This story changed at trial in the Summit County case, where Mr. Henne reported that the parts fell off the machine about 5-10 minutes into the ride. Mr. Henne also testified that he did not know he was missing a part – he claimed a group of strangers told him that his snowmobile was missing a part and he thereafter retraced his route to try to find the piece but could not find it. Judge Patton found that “Mr. Henne’s testimony does not make sense to the court.” The court found that the evidence indicated the parts came off during the ride and that since the clips that held the part on were broken and the “intake silencer” was cracked, Judge Patton indicated, “The court does not believe that the fairing just fell off.”
Mr. Henne’s proffered credit card was for a different account that Mrs. Hightower-Henne had used to rent the snowmobiles.
CBR’s notation on the Estimated Damages form states, “Will not charge customer for the 2 days loss rents as good will.”
At trial in the Summit County case, Mr. and Mrs. Henne maintained that Mr. Henne’s sig-nature on the damage estimate and the credit card slip were forgeries. The court found that Mr. Weber, CBR’s employee who witnessed Mr. Henne sign the documents, was a credible witness and found Mr. Henne’s claim that he had not signed the documents was not credible. The court also found that there was no incentive whatsoever for anyone to have forged Mr. Henne’s signature on anything since “[CBR] already had Ms. Hightower-Henne’s credit card information and authorization so even if Mr. Henne had refused to sign the disputed documents it had recourse without having to resort to subterfuge.”
After deciding in favor of CBR on the liability of Mr. and Mrs. Henne for the damage to the snowmobile in the total amount of $653.60, Judge Patton considered the issue of attorney’s fees and costs incurred in that proceeding. Finding that the original rental documents signed by Mrs. Hightower-Henne contained a prevailing party award of attorney fees pro-vision, the court awarded CBR $25,052.50 in attorney’s fees against Mrs. Hightower-Henne plus $1,737.92 in costs.6 The court stated that even though the attorney fee award was substantial considering the amount of the original debt, the time expended by CBR’s counsel was greatly exacerbated by Mrs. Hightower-Henne’s “motions and threats” and that it was the Hennes who “created the need for [considerable] hours by their actions in filing baseless criminal complaints, filing motions to continue the trial and by seeking to have phone testimony of several witnesses who had no knowledge of what took place while Defendant’s (sic) had possession of the snowmobiles.”
As a result of groundless criminal claims, baseless counterclaims, perjured testimony and over-zealous defense, instead of owing $220.11 for the snowmobile’s missing part, after the dust settled on the Summit County case, the Hennes became responsible for a judgment in excess of $27,000.00.
Analysis: making sense of the law based on these facts.
The facts set forth in the underlying damage recover case, are the important part. In this case, the attorney for the snowmobile outfitter was found not to have violated the federal fair debt collections act.
In awarding judgment to the defendant in this case, the judge also awarded him costs.
Defendant Leonard M. Gelman’s Motion for Summary Judgment is GRANTED and this case is dismissed with prejudice. Defendant may have his cost by filing a bill of costs pursuant to D.C.COLO.LCivR 54.1 and the Clerk of Court shall enter final judgment in favor of Defendant Gelman in accordance with this Order.
Adding insult to injury. Sometimes it be better to quit while you are behind.
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Hightower-Henne v. Gelman, 2012 U.S. Dist. LEXIS 4514
Posted: May 1, 2019 Filed under: Colorado, Contract, Legal Case, Release (pre-injury contract not to sue) | Tags: admissible, attorneys' fees, collection, collector, credit card, demand letters, discovery, disputed, Email, engaging, entity, genuine, law firm, machine, missing, Mountain Law Group, nonmoving party, opposing, owed, practice of law, preface, principal purpose, regularity, regularly, Rental, rental agree-ment, ride, signature, Snowmobile, Summary judgment Leave a commentHightower-Henne v. Gelman, 2012 U.S. Dist. LEXIS 4514
Tracy L. Hightower-Henne, and Thomas Henne, Plaintiffs, v. Leonard M. Gelman, Defendant.
Civil Action No. 11-cv-01114-KMT-BNB
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO
2012 U.S. Dist. LEXIS 4514
January 12, 2012, Decided
January 12, 2012, Filed
CORE TERMS: collection, collector, snowmobile, summary judgment, discovery, credit card, rental, Mountain Law Group, demand letters, email, entity, law firm, preface, missing, nonmoving party, principal purpose, regularity, regularly, disputed, opposing, genuine, rental agreement, signature, machine, ride, admissible, engaging, owed, practice of law, attorney’s fees
COUNSEL: [*1] For Tracy L. Hightower-Henne, Thomas J. Henne, Plaintiffs: Daniel Teodoru, Erin Colleen Hunter, West Brown Huntley & Hunter, P.C., Breckenridge, CO.
For Leonard M. Gelman, Defendant: Rusty David Miller, Thomas Neville Alfrey, Treece Alfrey Musat, P.C., Denver, CO.
JUDGES: Kathleen M. Tafoya, United States Magistrate Judge.
OPINION BY: Kathleen M. Tafoya
OPINION
ORDER
This matter is before the court on Defendant Leonard M. Gelman’s Motion for Summary Judgment [Doc. No. 17] (“Mot.”) filed August 12, 2011. Plaintiffs, Tracy Hightower-Henne and Thomas Henne (collectively “the Hennes”), responded on September 14, 2011 [Doc. No. 23] (“Resp.”) and the defendant filed a Reply on October 3, 2011 [Doc. No. 25]. Also considered is Plaintiffs’ “Motion to File Sur-Reply” [Doc. No. 26], which is denied.1
1 Neither the Federal Rules of Civil Procedure nor the Local Rules of Practice in the District of Colorado provide for the filing of a surreply. Additionally, the court’s review of the proposed surreply reveals it is nothing more than an attempted unauthorized additional bite at the proverbial apple and adds nothing of merit to the summary judgment analysis.
Background
On February 8, 2010, Nebraska residents Tracy L. Hightower-Henne [*2] and her husband Thomas Henne joined a small group of friends and family for a snowmobile ride in Vail, Colorado. Mrs. Hightower-Henne, a Nebraska attorney, rented two snowmobiles from Colorado Backcountry Rentals (“CBR”) for herself and her husband, signing the rental agreement for the two machines and declining the offered insurance to cover loss or damage to the machines while in their possession. (Mot., Ex. H, Judgment Order of County Court Judge Wayne Patton, April 21, 2011, hereinafter “Judgment Order” at 1.)2 While at the CBR’s office, the Hennes were shown a video depicting proper operation of snowmobiles in general and were also verbally advised on snowmobile use by an employee of CBR. (Id.) Plaintiffs, a short while thereafter, met another employee of CBR, Mr. Weber, at Vail Pass and were given possession of the snowmobiles after an opportunity to inspect the machines. (Id. at 2.) Plaintiffs utilized their entire allotted time on the snowmobiles and brought them back to Mr. Weber as planned. Mr. Weber immediately noticed that the snowmobile ridden by Mr. Henne was missing its air box cover and faring, described as a large blue shield on the front of the snowmobile, entirely [*3] visible to any driver. (Id. at 3.) At the he returned the snowmobile, Mr. Henne told Mr. Weber that the parts had fallen off approximately two hours into the ride and that he had tried to carry the faring back, but, as he was unable to do so, he left the part on the trail.3 (Id. at 2.) Mr. Henne signed a form acknowledging the missing part(s) and produced his driver’s license and a credit card with full intent that charges to fix the snowmobile would be levied against that card. Mr. Henne signed a blank credit card slip, which the parties all understood would be filled-in once the damage could be definitively ascertained.4 (Id.) Although CBR, pursuant to the rental agreement signed by Mrs. Hightower-Henne, was entitled to charge the Hennes for loss of rentals for the snowmobile while it was being repaired, CBR waived that fee5 and charged Mr. Henne oa total of only $220.11. (Mot., Ex. B.)
2 As will be discussed in more detail herein, one of the rented snowmobiles suffered damage while in the possession of Mr. Henne. Although agreeing to pay for the damage initially, Mr. Henne later disputed the charges levied by CBR against his credit card, resulting in a collection lawsuit brought by [*4] CBR against Mr. and Mrs. Henne in Summit County Court, Case Number 10 C 255 ). (See Mot., Ex. G; hereinafter, the “Summit County case.”) This court takes the underlying facts from the Judgment Order of Hon. Wayne Patton in the Summit County Case as Judge Patton presided over a trial and therefore had the best opportunity to assess the witnesses, including their credibility and analyze the exhibits. The defendant in this case, Leonard M. Gelman, was the attorney for CBR in the Summit County case.
3 This story changed at trial in the Summit County case, where Mr. Henne reported that the parts fell off the machine about 5-10 minutes into the ride. Mr. Henne also testified that he did not know he was missing a part – he claimed a group of strangers told him that his snowmobile was missing a part and he thereafter retraced his route to try to find the piece but could not find it. Judge Patton found that “Mr. Henne’s testimony does not make sense to the court.” (Judgment Order at 3.) The court found that the evidence indicated the parts came off during the ride and that since the clips that held the part on were broken and the “intake silencer” was cracked, Judge Patton indicated, “The court [*5] does not believe that the fairing just fell off.” (Id.)
4 Mr. Henne’s proffered credit card was for a different account that Mrs. Hightower-Henne had used to rent the snowmobiles.
5 CBR’s notation on the Estimated Damages form states, “Will not charge customer for the 2 days loss rents as good will.” (Mot., Ex. B.)
Upon their return to Nebraska, however, Mr. and Mrs. Henne apparently decided they did not want to pay for the damage to the snowmobile, even with the waiver of the rental loss, and contested the charge to Mr. Henne’s credit card resulting in a reversal of the charge by the credit card issuer. Further, the Hennes leveled criminal forgery accusations against CBR’s employee with the Frisco, Colorado Police Department (id. at 4), alleging that the acknowledgment of damage form and the credit card slip were not signed by Mr. Henne. The police department investigated, but no charges were filed.
Mr. Henne’s ultimate cancellation of his former acquiescence to payment caused CBR to contact their corporate lawyer, Defendant Gelman, and ask that he attempt to obtain payment from the Hennes, authorizing a law suit if initial requests for payment failed. Obviously, CBR was no longer willing [*6] to waive the fee for loss of rental which was part of the contract Mrs. Hightower-Henne signed. (Id. at 2.)
At trial in the Summit County case, Mr. and Mrs. Henne maintained that Mr. Henne’s signature on the damage estimate and the credit card slip were forgeries. (Id. at 4.) The court found that Mr. Weber, CBR’s employee who witnessed Mr. Henne sign the documents, was a credible witness and found Mr. Henne’s claim that he had not signed the documents was not credible. (Id.) The court also found that there was no incentive whatsoever for anyone to have forged Mr. Henne’s signature on anything since “[CBR] already had Ms. Hightower-Henne’s credit card information and authorization so even if Mr. Henne had refused to sign the disputed documents it had recourse without having to resort to subterfuge.” (Id.)
After deciding in favor of CBR on the liability of Mr. and Mrs. Henne for the damage to the snowmobile in the total amount of $653.60, Judge Patton considered the issue of attorney’s fees and costs incurred in that proceeding. Finding that the original rental documents signed by Mrs. Hightower-Henne contained a prevailing party award of attorney fees provision, the court awarded CBR [*7] $25,052.50 in attorney’s fees against Mrs. Hightower-Henne plus $1,737.92 in costs.6 The court stated that even though the attorney fee award was substantial considering the amount of the original debt, the time expended by CBR’s counsel was greatly exacerbated by Mrs. Hightower-Henne’s “motions and threats” and that it was the Hennes who “created the need for [considerable] hours by their actions in filing baseless criminal complaints, filing motions to continue the trial and by seeking to have phone testimony of several witnesses who had no knowledge of what took place while Defendant’s (sic) had possession of the snowmobiles.” (Mot., Ex. I, June 22, 2011 Order of Hon. Wayne Patton, hereinafter “Atty. Fee Order” at 3.) The court also found that “although this was a case akin to a small claims case, Mrs. Hightower-Henne defended the case as if it were complex litigation.”7 (Id. at 1.) Judge Patton stated, with respect to the counterclaim filed by the Hennes, that “[a]lthough Mrs. Hightower-Henne did not pursue that claim at trial it shows the lengths she was willing to go to avoid payment of what was a fairly small claim.” (Id. at 1.)
6 Costs were awarded against both Mr. and Mrs. Henne [*8] jointly and severally.
7 In December 2010, the Hennes hired outside counsel to defend them in the county court action. (Id. at 4.)
As a result of groundless criminal claims, baseless counterclaims, perjured testimony and over-zealous defense, instead of owing $220.11 for the snowmobile’s missing part, after the dust settled on the Summit County case, the Hennes became responsible for a judgment in excess of $27,000.00.
In a prodigiously perfect example of throwing good money after bad, the Hennes now continue to prosecute this federal action against the lawyer representing CBR in the Summit County case, alleging violations of the federal Fair Debt Collection Practices Act (“FDCPA”).8 Unfortunately, even though the issue was raised at some point in the county court case, (see id. at 3, “Mrs. Hightower-Henne also made allegations that Plaintiff was violating fair debt collection laws”), these particular allegations were not resolved by the county court. Therefore, this court is now compelled to reluctantly follow the Hennes down this white rabbit’s hole to resolve the federal case.
8 This case was originally filed against CBR’s lawyer by the Hennes in Summit County on March 31, 2011, suspiciously [*9] a mere one week before commencing trial on the underlying case before Judge Patton. Defendant Gelman removed the case to federal court post-trial on April 27, 2011, one week subsequent to Judge Patton’s ruling against the Hennes. Between April 27, 2011 and August 12, 2011, the Hennes could have revisited the wisdom of continuing with this case had they been so inclined. However, the Hennes have not sought to even amend their Complaint in this matter, even though the findings call into question many of the arguments embodied in the federal complaint. (See, e.g., Compl. ¶ 26.)
Analysis
A. Legal Standard
Summary judgment is appropriate if “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.” Fed. R. Civ. P. 56(a). The moving party bears the initial burden of showing an absence of evidence to support the nonmoving party’s case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). “Once the moving party meets this burden, the burden shifts to the nonmoving party to demonstrate a genuine issue for trial on a material matter.” Concrete Works, Inc. v. City & County of Denver, 36 F.3d 1513, 1518 (10th Cir. 1994) (citing [*10] Celotex, 477 U.S. at 325). The nonmoving party may not rest solely on the allegations in the pleadings, but must instead designate “specific facts showing that there is a genuine issue for trial.” Celotex, 477 U.S. at 324; see also Fed. R. Civ. P. 56(c). A disputed fact is “material” if “under the substantive law it is essential to the proper disposition of the claim.” Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir.1998) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986)). A dispute is “genuine” if the evidence is such that it might lead a reasonable jury to return a verdict for the nonmoving party. Thomas v. Metropolitan Life Ins. Co., 631 F.3d 1153, 1160 (10th Cir. 2011) (citing Anderson, 477 U.S. at 248).
When ruling on a motion for summary judgment, a court may consider only admissible evidence. See Johnson v. Weld County, Colo., 594 F.3d 1202, 1209-10 (10th Cir. 2010). The factual record and reasonable inferences therefrom are viewed in the light most favorable to the party opposing summary judgment. Concrete Works, 36 F.3d at 1517. At the summary judgment stage of litigation, a plaintiff’s version of the facts must find support in the record. Thomson v. Salt Lake Cnty., 584 F.3d 1304, 1312 (10th Cir. 2009). [*11] “When opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment.” Scott v. Harris, 550 U.S. 372, 380, 127 S. Ct. 1769, 167 L. Ed. 2d 686 (2007); Thomson, 584 F.3d at 1312.
B. Request for Additional Discovery
As an initial matter, Plaintiffs request the court grant them further discovery in order to fully explore the matters raised by Defendant Gelman’s affidavit, attached to the Motion. [Doc. No. 17-1, hereinafter “Gelman Affidavit.”]
The party opposing summary judgment and who requests additional discovery must specify by affidavit the reasons why it cannot present facts essential to its opposition to a motion for summary judgment by demonstrating (1) the probable facts are not available, (2) why those facts cannot be presented currently, (3) what steps have been taken to obtain these facts, and (4) how additional time will enable the party to obtain those facts and rebut the motion for summary judgment. Valley Forge Ins. Co. v. Healthcare Mgmt. Partners, Ltd., 616 F.3d 1086, 1096 (10th Cir. 2010)(internal quotations omitted); Been v. O.K. Indust., Inc., 495 F.3d 1217, 1235 (10th Cir. 2007)(The [*12] protection under Rule 56(d) “arises only if the nonmoving party files an affidavit explaining why he or she cannot present facts to oppose the motion.”)
As noted above, the instant motion and the Gelman Affidavit were filed on August 12, 2011. The discovery cut-off date in this case was not until October 3, 2011. (Scheduling Order, [Doc. No. 10] at 6.) Therefore, written discovery could have been timely served any time prior to August 31, 2011. When Defendant filed his motion and the affidavit, Plaintiffs still had nineteen days to compose and serve interrogatories and requests for production of documents in order to obtain substantiation – or lack thereof – of the matters contained in the Gelman Affidavit. Additionally, Plaintiffs had 49 days remaining within which to notice and schedule the deposition of Mr. Gelman, or any other person. Apparently, Plaintiffs did not avail themselves of these opportunities, or, for that matter, any other attempt to obtain discovery during the entirety of the discovery period. There is no reason for the court to now accredit Plaintiffs’ professed need for discovery at this late date when they did not undertake any discovery within the appropriate time [*13] frame even though the issues were then squarely before them. The request for further discovery is denied.
C. Defendant Gelman’s Status as Debt Collector
The court has been presented with the following: the testimony through affidavit of Leonard M. Gelman; the testimony through affidavit of Tracy Hightower (Resp., Ex. 3 [Doc. No. 23-3] “Hightower Affidavit”); the Judgment Order and the Atty. Fee Order of Judge Wayne Patton referenced infra; the Complaint filed in the Summit County case – case number 10 C 255 (Mot., Ex. G); a letter from Lee Gelman to Thomas Henne dated April 1, 2010 (Mot., Ex. D; Resp., Ex. 1, “Demand Letter”); a letter to Lee Gelman from Tracy L. Hightower-Henne dated April 5, 2010 (Mot., Ex. E); an email exchange between Lee Gelman and Tracy Hightower dated April 13, 2010 (Resp., Ex. 4); an undated internet home page of Mountain Law Group (Mot., Ex. F); a document purporting to be a “Colorado Court Database” listing seven cases involving as plaintiff either Summit Interests Inc., Back Country Rentals, or Colorado Backcountry Rentals for the time period March 25, 2009 through November 18, 2010 (Resp., Ex. 7); three letters signed by “Lee Gelman, Esq.” drafted on letterhead [*14] of a law firm named Dunn Keyes Gelman & Pummell with origination dates of March 10, 2008, March 19, 2009 and December 19, 2008 (Resp., Ex. 8); and, the snowmobile rental agreements and other documents relevant to the Summit County case (Mot., Exs. A – C).
The FDCPA regulates the practices of “debt collectors.” See 15 U.S.C. § 1692(e). If a person or entity is not a debt collector, the Act does not provide any cause of action against them. Plaintiffs’ Complaint alleges only violations of the FDCPA (See Compl. [Doc. No. 2]) by Defendant Gelman; therefore, if Defendant is not a debt collector, Plaintiffs’ action must fail.
The FDCPA contains both a definition of “debt collector” and language describing certain categories of persons and entities excluded from the definition.9 Thus, an alleged debt collector may escape liability either by failing to qualify as a “debt collector” under the initial definitional language, or by falling within one of the exclusions. The plaintiff in an FDCPA claim bears the burden of proving the defendant’s debt collector status. See Zimmerman v. The CIT Group, Inc., Case No. 08-cv-00246-ZLW-KMT, 2008 U.S. Dist. LEXIS 108473, 2008 WL 5786438, at *9 (D. Colo. October 6, 2008) (citing Goldstein v. Hutton, Ingram, Yuzek, Gainen, Carroll & Bertolotti, 374 F.3d 56, 60 (2d. Cir.2004).
9 None [*15] of these enumerated exceptions are alleged to be applicable in this case.
The Act defines “debt collector” as:
[A]ny person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.
15 U.S.C. § 1692a(6). See Allen v. Nelnet, Inc., Case No. 06-cv-00586-REB-PAC, 2007 WL 2786432, at *8-9 (D. Colo. Sept. 24, 2007). The Supreme Court has made it clear that the FDCPA applies to attorneys “regularly” engaging in debt collection activity, including such activity in the nature of litigation. Heintz v. Jenkins, 514 U.S. 291, 299, 115 S. Ct. 1489, 131 L. Ed. 2d 395 (1995). The FDCPA establishes two alternative predicates for “debt collector” status – engaging in such activity as the “principal purpose” of an entity’s business and/or “regularly” engaging in such collection activity. 15 U.S.C. § 1692a(6). It is clear from the evidence that debt collection is not Defendant Gelman’s or his law firm’s principal purpose, nor is debt collection the principal purpose of non-defendant CBR. Goldstein, 374 F.3d at 60-61. Therefore [*16] the court must examine the issue from the regularity perspective. The Goldstein court directed
Most important in the analysis is the assessment of facts closely relating to ordinary concepts of regularity, including (1) the absolute number of debt collection communications issued, and/or collection-related litigation matters pursued, over the relevant period(s), (2) the frequency of such communications and/or litigation activity, including whether any patterns of such activity are discernable, (3) whether the entity has personnel specifically assigned to work on debt collection activity, (4) whether the entity has systems or contractors in place to facilitate such activity, and (5) whether the activity is undertaken in connection with ongoing client relationships with entities that have retained the lawyer or firm to assist in the collection of outstanding consumer debt obligations. Facts relating to the role debt collection work plays in the practice as a whole should also be considered to the extent they bear on the question of regularity of debt collection activity . . . . Whether the law practice seeks debt collection business by marketing itself as having debt collection expertise [*17] may also be an indicator of the regularity of collection as a part of the practice.
Id. at 62-63.
1. Defendant Gelman’s Practice of Law at Mountain Law Group
The testimony of Mr. Gelman provided through his affidavit is considered by the court to be unrefuted since Plaintiffs failed to avail themselves of any discovery which might have provided grounds for contest.
After recounting his background as an environmental lawyer for the Department of Justice, Mr. Gelman describes his practice of law with the Mountain Law Group as an attorney and through the Colorado Office of Dispute Resolution as a mediator. (Gelman Aff. ¶¶ 1, 3.) Mr. Gelman also acts as the manager of his wife’s medical practice. (Id. ¶ 5.) Because of his responsibilities as a mediator and an administrator, Mr. Gelman only spends approximately 25% of his working time engaged in the practice of law through Mountain Law Group. (Id. ¶ 8.) If one considers a normal business day to be nine hours, Mr. Gelman then spends approximately 2.25 hours a day practicing law at the Mountain Law Group. Of that time at the law firm, Mr. Gelman devotes approximately 30% to “Business/Contracts,” the only area of his practice which generates any [*18] debt collection activity. (Id. ¶¶ 8, 22.) Extrapolating, then, Mr. Gelman spends approximately .67 of an hour, or approximately 45 minutes, out of each day pursuing business matters of all kinds for his clients.
One of Mr. Gelman’s business clients is CBR to which he provides legal assistance “with all of CBR’s corporate needs . . . [including] a) contract drafting and consultation on rental agreements, waivers, and other forms; and b) representation concerning regulatory and enforcement matters between the U.S. Forest Service and CBR.” (Id. ¶ 19.) Of all the clients of the Mountain Law Group’s seven lawyers, CBR is the only one who generates any debt collection work at all. (Id. ¶¶ 7, 22, 23.) Additionally, of the seven lawyers, Mr. Gelman, through his client CBR, is the only lawyer to have ever worked on, in any capacity, any debt collection matter.10 (Id.)
10 As noted in the Hightower Affidavit, it is not disputed that, as part of CBR’s employment of Mr. Gelman as their corporate attorney, they requested that he attempt to collect the Henne’s debt.. (Id. ¶ 2.)
Over a forty (40) month period, Mr. Gelman states that he sent only 18 demand letters on behalf of CBR to renters of snowmobiles [*19] who did not pay for damages they caused to CBR’s equipment. (Id. ¶ 20.) This averages out to one demand letter every 2.5 months.11
11 Of course, this does not mean that the demand letters are actually sent on such a regular basis.
In connection with Mr. Gelman’s practice of law with the Mountain Law Group, the court reviewed what is purportedly the law firm’s internet home page. (Mot., Ex. F.) This submission contains no date or retrieval or publication. Therefore, the court can give it little weight. However, as part of the analysis, the court notes that at the time of the internet display – whenever that was – the Mountain Law Group’s home page did not include any advertisement suggesting they provided debt collection services or as had any expertise in the collection of debt.
Mr. Gelman otherwise states that the Mountain Law Group neither owns nor uses any specialized computer software designed to facilitate debt collection activity. (Gelman Aff. ¶ 12.) Further, his unrefuted testimony is that the firm employs no paralegal or other staff to assist in debt collection for the firm. (Id. ¶ 5.)
Plaintiffs, however, assert that Mr. Gelman regularly and frequently pursues debt collection matters [*20] on behalf of CBR, pointing the court’s attention to a document entitled “Colorado Court Database” (“CCD”). The CCD may indicate that CBR or Summit Interests, Inc.12 was involved in seven13 case filings in 2009 and 2010. (Resp., Ex. 7.) None of the cases contained on the CCD indicate whether or not Defendant Gelman represented the named entity, nor do any of the cases identify the other parties. The CCD is in the form of a table with columnar headings, “Name,” “Case,” “Filed,” “Status,” “Party” and “County.” Under the column “Party,” six of the cases indicate “Money” and one indicates “Breach of Contract”; both of these terms are undefined. The court does not begin to understand how “Breach of Contract” for instance, can be a “party ” to a lawsuit. The court is completely unable to ascertain the relevance of this document or what bearing it has on whether or not Mr. Gelman is a debt collector since it does not reference Mr. Gelman or debt collection. The CCD, unintelligible as it stands, is therefore inadmissible and will not be considered for any purpose in the summary judgment proceeding. See Johnson v. Weld County, Colo., 594 F.3d at 1209-10.
12 In the April 1, 2010 demand letter from [*21] Mr. Gelman to Mr. Henne, Mr. Gelman professes to represent “Summit Interests, Inc., d/b/a/ Colorado Backcountry Rentals.” (Resp, [Doc. No. 23-1].)
13 The documents references more than ten items, but several have the same case number.
2. Mr. Gelman’s Debt Collection Methodology
This case involves essentially two communications from Mr. Gelman: the April 1, 2010 letter to Mr. Henne and the April 13, 2010 email from Mr. Gelman to Mrs. Hightower-Henne following her letter professing to represent Mr. Henne. (Compl. ¶¶ 21-23, 25, re: Demand Letterl and id. ¶ 24, re: April 13, 2010 email.)
a. Debt Collector Preface
In the April 1, 2010 letter, Mr. Gelman represented that “[t]his firm14 is a debt collector” and in the April 13, 2010 email, under his signature block, was the notation, “This is from a debt collector . . .” The court notes that the warning on the bottom of the April 13, 2010 email does not appear to be part of the normal signature block of Mr. Gelman, because it does not appear on the short transmission at the beginning of the email string wherein Mr. Gelman advised “Tracy,” that he just left her a voice mail as well. (Resp. at Doc. No. 23-4.) This email warning, therefore, appears [*22] to have been specifically typed in for inclusion in the lengthy portion of the email.
14 The letterhead on the communication is “Mountain Law Group.” Mountain Law Group is not a defendant in this action.
Mr. Gelman states he has mediated a large number of debt collection disputes and is therefore “relatively familiar with the collection industry.” (Gelman Aff. ¶ 11.) While the court considers the language used by Mr. Gelman – commonly referred to as a “mini-Miranda” or the “debt collector preface” – as “some” evidence to be considered in the debt collector determination, it is not particularly persuasive standing alone. First, setting forth such a debt collector preface does not create any kind of equitable estoppel. Equitable estoppel requires a showing of a misleading representation on which the opposing party justifiably relied which would result in material harm if the actor is later permitted to assert a claim inconsistent with the prior representation. Plaintiffs have offered no evidence to support a claim that they detrimentally relied upon the debt collector preface. See In re Pullen, 451 B.R. 206, 210 (Bkrtcy. N. D. Ga. 2011).
When attempting to collect a debt, the court applauds [*23] a practice whereby the sender recognizes itself as a debt collector in a mini-Miranda warning regardless of any legal requirement and considers such an advisement prudent and in the spirit of the FDCPA. This course of action would be expected of an attorney such as Mr. Gelman who frequently is in a position to mediate debt collection disputes. However, calling oneself a rose, does not necessarily arouse the same olfactory response as would a true rose.
b. Use of Form Letters
Plaintiffs argue that Mr. Gelman communicates as a debt collector through the use of form letters. For this proposition, they attach Exhibit 8, three letters apparently authored by Mr. Gelman when he was associated with the law firm of Dunn Keyes Gelman & Pummell, LLC. Each of the three letters appear to be what is commonly known as a demand letter – an attempt to collect money from persons who allegedly owed CBR as a result of damage done to a snowmobile. Each letter begins with a one line salutation introducing the lawyer as representing Colorado Backcountry Rentals, Inc. Thereafter, each letter proceeds for several paragraphs to outline specific and unique facts concerning the alleged debtor’s obligation for damages [*24] to CBR. (Id.) Each letter then contains a paragraph, in bold typeface, stating that the debtor can submit a sum certain in settlement of the matter in bold typeface. Each of the three letters contain a summary paragraph at the end which states the letter is a settlement offer and that court proceedings may be instituted if payment is not made. This general format is consistent with the April 1, 2010 demand letter sent to Mr. Henne. Two of the letters in Exhibit 8 contain the debt collector preface at both the beginning and end of the letter; one of the letters contains the legend only at the beginning, similar to the format of the April 1, 2010 demand letter sent to Mr. Henne by Mr. Gelman.
The court finds that these letters are not “form” collection letters such as those which would be utilized by a business engaged primarily in the business of debt collection. Although there is some boilerplate language common to all, each letter is personally authored and the main body of the text is a unique recitation of the facts and circumstances peculiar to that case. These three letters, viewed against the April 1, 2010 letter Mr. Gelman sent to Mr. Henne, are similar only in the boilerplate [*25] language at the beginning and end of the letter and do not persuade the court that they are form letters indicating that Mr. Gelman is in the regular business of collecting debts.
c. Pattern of Litigation Activity
Mrs. Hightower-Henne states, without any evidentiary foundation, that Defendant has filed “several suits for collections for CBR” which indicate “a pattern of escalating fees for nominal claims.” (Hightower Affidavit ¶ 4.) She does not further describe or attach any of the cases to which she refers, although one might assume they may be among those cases sketchily mentioned in rejected Exhibit 7 to the Plaintiffs’ Response. Mrs. Hightower-Henne blithely asserts that she has spoken to several persons who were “parties in these suits” but does not state what significance anything they may have told her was, or for that matter, what they even said. (Id.) Although the court will recognize this testimony as admissible, it is wholly unpersuasive as to the issue to which it is apparently directed.
d. Summary
Considering the undisputed testimony of Mr. Gelman and Mrs. Hightower-Henne together with the admissible documentary evidence submitted by the parties, this court finds that there [*26] are no material facts in dispute relevant to the determination of whether Mr. Gelman is a debt collector as defined in the FDCPA. For all the reasons set forth above, the court finds that Mr. Gelman is not a debt collector pursuant to the FDCPA and therefore, summary judgment in his favor is appropriate.
Given that the determination that Mr. Gelman is not a debt collector is dispositive of the case, the court declines to address further Mrs. Hightower-Henne’s standing to sue or whether any of the actions undertaken by Mr. Gelman would have violated the FDCPA had he been found to be a debt collector under the Act.
Wherefore, it is ORDERED
1. Defendant Leonard M. Gelman’s Motion for Summary Judgment [Doc. No. 17] is GRANTED and this case is dismissed with prejudice. Defendant may have his cost by filing a bill of costs pursuant to D.C.COLO.LCivR 54.1 and the Clerk of Court shall enter final judgment in favor of Defendant Gelman in accordance with this Order.
2. Plaintiffs’ “Motion to File Sur-Reply,” [Doc. No. 26] is DENIED.
3. The Final Pretrial Conference set for January 19, 2012 at 10:45 a.m. is VACATED
Dated this 12th day of January, 2012.
BY THE COURT:
/s/ Kathleen M Tafoya
Kathleen M Tafoya
United [*27] States Magistrate Judge
Stockdale v. Ellsworth, 2017 CO 109; 2017 Colo. LEXIS 1092
Posted: December 19, 2017 Filed under: Colorado, Legal Case | Tags: alter ego, attorneys' fees, checking account, corporate entity, corporate veil, entity, equitable, final judgment, frivolous, heirs, individual liability, individually liable, interpleader, join, joinder, joined, jointly, mineral deeds, Notice, oil, opportunity to contest, Personal jurisdiction, Personal Liability, pierce, piercing, post-judgment, properly joined, severally liable, shareholder, substituted service Leave a commentStockdale v. Ellsworth, 2017 CO 109; 2017 Colo. LEXIS 1092
Petitioners: Ruby D. Stockdale; Clara Cardwell, individually and as personal representative of Kenneth Ray Cardwell; Jennifer Lynn Lake; and Patricia Ann Rider Jones, a/k/a Patricia Ann Jones, v. Respondent: Chester J. Ellsworth. and Concerning: XTO Energy, Inc.
Supreme Court Case No. 16SC798
SUPREME COURT OF COLORADO
2017 CO 109; 2017 Colo. LEXIS 1092
December 18, 2017, Decided
NOTICE:
THIS OPINION IS NOT THE FINAL VERSION AND SUBJECT TO REVISION UPON FINAL PUBLICATION
PRIOR HISTORY: [**1] Certiorari to the Colorado Court of Appeals. Court of Appeals Case No. 15CA1114.
DISPOSITION: Judgment Reversed.
CORE TERMS: heirs, alter ego, corporate veil, attorneys’ fees, joinder, piercing, shareholder, mineral deeds, entity, corporate entity, personal jurisdiction, jointly, notice, individual liability, severally liable, personal liability, individually liable, post-judgment, interpleader, frivolous, pierce, join, oil, substituted service, opportunity to contest, final judgment, properly joined, checking account, equitable, joined
HEADNOTES
Stockdale v. Ellsworth–Corporations–Piercing the Corporate Veil–Attorneys’ Fees–Joinder
SYLLABUS
The supreme court reverses the court of appeals’ opinion vacating the trial court’s judgment awarding attorneys’ fees. The supreme court holds that the trial court properly pierced the corporate veil to impose joint and several liability on a limited liability company’s managing member for attorneys’ fees. The supreme court also holds that the managing member was properly joined as a party to the litigation, and that imposing such liability did not violate the managing member’s due process rights under the circumstances of this case.
COUNSEL: For Petitioners Ruby D. Stockdale, Clara Cardwell and Patricia Ann Jones: Law Office of John C. Seibert, LLC, John Seibert, Durango, Colorado.
For Petitioner Jennifer Lynn Lake: Law Office of David Liberman, LLC, David Liberman, Durango, Colorado.
No appearance on behalf of Respondent.
JUDGES: JUSTICE MÁRQUEZ delivered the Opinion of the Court.
OPINION BY: MÁRQUEZ
OPINION
en banc
JUSTICE MÁRQUEZ delivered the Opinion of the Court.
[*1] In 2009, XTO Energy, Inc., filed an interpleader action, seeking to resolve [**2] competing claims to oil and gas proceeds held by XTO. XTO named several potential claimants as defendants in the interpleader action, including Seawatch Royalty Partners, LLC (managed by Chester J. Ellsworth) and several alleged heirs of the record owner of the relevant oil and gas interests. After a bench trial, the court concluded that a group of individuals–deemed the true heirs of the record owner–were entitled to the proceeds. Pertinent here, the trial court also ruled that Seawatch’s claims and defenses were frivolous; that Seawatch was an alter ego of Ellsworth; and that Seawatch and Ellsworth were jointly and severally liable for any future award of attorneys’ fees. Ellsworth was subsequently joined as a party under C.R.C.P. 21 and served via substituted service. The post-judgment sanctions proceedings continued for another several years. During that time, Ellsworth contested his individual liability, arguing that the court lacked personal jurisdiction over him; that he had been improperly served; and that Seawatch was not, in fact, his alter ego. The trial court rejected these arguments and entered judgment jointly and severally against Seawatch and Ellsworth for approximately $1 million [**3] in attorneys’ fees. Ellsworth appealed pro se.
[*2] In an unpublished opinion, the court of appeals vacated the judgment against Ellsworth, holding that the district court lacked jurisdiction to hold him jointly and severally liable for the attorneys’ fee award because, as a nonparty, Ellsworth did not have notice and opportunity to contest his individual liability. XTO Energy, Inc. v. Ellsworth, No. 15CA1114, 2016 Colo. App. LEXIS 1205, slip op. at 1 (Colo. App. Aug. 25, 2016). Because we conclude that Ellsworth had adequate notice and opportunity to challenge the alter ego findings that established his individual liability, we reverse the judgment of the court of appeals.
I. Facts and Procedural History
[*3] In 2009, XTO Energy, Inc., a producer of oil and natural gas, filed an interpleader action to determine the rights to certain oil and gas proceeds held by XTO. At the time of filing, XTO operated two natural gas wells that were extracting gas from an area of pooled mineral interests in the Fruitland Formation in La Plata County. One of the record owners of a mineral interest within the pooled area was Roy P. Cardwell, who had recorded his title in 1938. Because Cardwell and his heirs could not be located in the 1990s when the Colorado Oil and Gas Conservation [**4] Commission authorized the pooling of interests in the area, the proceeds attributable to Cardwell’s interest were held in suspense as the natural gas wells were developed. When XTO filed the interpleader action in 2009, the proceeds attributable to Cardwell’s interest totaled approximately $2.7 million.
[*4] In its interpleader complaint, XTO sought a declaratory judgment as to who should receive the proceeds of Cardwell’s interest. XTO identified as potential claimants the heirs of a Roy P. Cardwell who died in California in 1971 (“California Heirs”); the heirs of a Roy P. Cardwell who died in Kansas in 1980 (“Kansas Heirs”); and two business entities managed by Chester Ellsworth: CEMPCO, Inc. and Seawatch Royalty Partners, LLC. CEMPCO and the Kansas Heirs withdrew their claims to the proceeds prior to trial, and the remaining parties–Seawatch and the California Heirs–stipulated that the California Heirs were the true heirs of the record owner. Seawatch claimed that it was entitled to the proceeds because it had obtained mineral deeds from the California Heirs. The California Heirs, however, claimed that they were entitled to the proceeds because Seawatch had obtained the mineral deeds [**5] from them through fraud or deceit.
[*5] After a seven-day bench trial, the trial court (Judge Dickinson) issued its Findings, Order, and Judgment on November 10, 2011. The trial court granted the California Heirs’ claims for rescission of the mineral deeds and assignments to Seawatch, concluding that Ellsworth had obtained them on behalf of Seawatch through fraud and misrepresentation. Specifically, Ellsworth told the California Heirs that there was no oil and gas production in the Cardwell interest and that there may be no minerals to extract, even though Ellsworth (or entities he controlled) had already received over $1 million in proceeds from mineral interests in adjoining lands. Ellsworth also falsely represented to the California Heirs that they could be liable for any costs of production or accidents associated with their interests.
[*6] The trial court found that Seawatch failed to produce any credible evidence to support its assertion that Ellsworth did not make material misstatements or unjustifiably conceal material facts; the court therefore ruled that Seawatch’s claims and defenses were frivolous and groundless. Pertinent here, the trial court also concluded that “Seawatch was at [**6] all material times an alter ego of Ellsworth,” thus piercing the corporate veil and rendering Seawatch and Ellsworth jointly and severally liable for attorneys’ fees incurred by XTO and the California Heirs in responding to Seawatch’s frivolous claims and defenses.
[*7] Seawatch appealed, raising several arguments. During this first appeal, Seawatch argued, among other things, that the trial court’s order holding Ellsworth individually liable for attorneys’ fees must be vacated because the court did not have personal jurisdiction over Ellsworth. The court of appeals affirmed the judgment against Seawatch in a unanimous, unpublished decision, but did not address the argument regarding Ellsworth because the trial court had not yet entered final judgment on attorneys’ fees. We denied certiorari review. XTO Energy, Inc. v. Seawatch Royalty Partners LLC, Nos. 11CA2388 & 12CA1159, 2013 Colo. App. LEXIS 312, (Colo. App. March 7, 2013), cert. denied, No. 13SC453 (Feb. 18, 2014).
[*8] While that appeal was pending, XTO and the California Heirs filed motions seeking attorneys’ fees and costs from Seawatch and Ellsworth. XTO and the California Heirs also filed a joint motion to join Ellsworth to the post-judgment proceedings pursuant [**7] to C.R.C.P. 21. The trial court granted the motion to join Ellsworth as a party “as authorized by C.R.C.P. 21 and City of Aurora v. Colorado State Engineer, 105 P.3d 595 (Colo. 2005).” After unsuccessful attempts to serve Ellsworth personally, XTO and the California Heirs moved for an order authorizing substituted service, which the trial court granted.
[*9] In 2013, Ellsworth, making what he called a “limited appearance,” filed numerous objections and motions in which he argued that the court lacked personal jurisdiction over him and that substituted service had been improper.
[*10] In an order dated April 10, 2014, the trial court denied several pending motions, including Ellsworth’s motion to dismiss for lack of personal jurisdiction. Judge Herringer, who presided over the case following Judge Dickinson’s retirement, held that Judge Dickinson’s corporate veil-piercing findings in his November 10, 2011 ruling were “law of the case.” Judge Herringer therefore incorporated the earlier findings into the April 2014 order–specifically, that “Seawatch was at all material times an alter ego of Ellsworth”; that Ellsworth, as Seawatch’s agent, “engaged in civil conspiracy” and “made material omission[s]”; and that Ellsworth’s statements “constitute[d] fraud.” The court articulated several [**8] additional findings relevant to whether piercing the corporate veil was necessary to achieve an equitable result. The court found, for example, that Seawatch’s sole business function was to acquire the mineral deeds from the California Heirs for Ellsworth’s benefit; that Seawatch had no business dealings outside the facts that gave rise to this litigation and was controlled entirely by Ellsworth; that Seawatch was apparently insolvent and had no assets, such that limiting liability to Seawatch would foreclose any meaningful opportunity for injured parties to recover for conduct for which Ellsworth was responsible; and that there was no indication that Seawatch’s litigation strategy was controlled by anyone other than Ellsworth.
[*11] Ultimately, the court held that Ellsworth was liable for attorneys’ fees after concluding that “[t]he only respect in which Ellsworth has treated Seawatch as a corporate entity, independent of him personally, is as a barrier to his personal liability.” As a result, “[t]o the extent that Seawatch advanced frivolous argument and made groundless claims,” the court ruled, “Ellsworth is the person who should ultimately be held responsible for that conduct.”
[*12] About [**9] a year later, in an April 8, 2015 order, the trial court awarded fees and costs to XTO and the California Heirs under section 13-17-102, C.R.S. (2017), holding Ellsworth and Seawatch jointly and severally liable. The court instructed XTO and the California Heirs to prepare proposed judgments consistent with its order. Notice of the proposed final judgments was served on Ellsworth. Ellsworth did not file any objections. The court entered separate judgments for XTO and the California Heirs in May 2015.
[*13] Ellsworth appealed pro se, arguing, in relevant part, that when Judge Dickinson initially determined that Seawatch was an alter ego of Ellsworth, he had not been made a party to the case, and therefore, to hold him jointly and severally liable for attorneys’ fees violated his right to due process. In a unanimous, unpublished opinion, the court of appeals agreed with Ellsworth and vacated the attorneys’ fee judgment with respect to him. XTO Energy, Inc. v. Ellsworth, No. 15CA1114, 2016 Colo. App. LEXIS 1205 (Colo. App. Aug. 25, 2016).
[*14] Despite his victory in the court of appeals, Ellsworth filed a petition for a writ of certiorari with this court, seeking “relief of manifest injustice to include $200,000,000 in exemplary damages pursuant to [**10] § 13-17-101 [C.R.S. (2017)] to punish the trial court’s and Respondent’s acts of frivolous, groundless and vexatious litigation in [the underlying cases] and the appellate courts [sic] acts of applying an incorrect standard of review and failure to order as adjudicated.”
[*15] XTO filed an opposition to Ellsworth’s petition, and the California Heirs filed a cross-petition for certiorari review, arguing that Ellsworth had been properly joined in the litigation under this court’s decision in City of Aurora ex rel. Utility Enterprise v. Colo. State Engineer, 105 P.3d 595 (Colo. 2005). Ellsworth subsequently filed several documents on behalf of Seawatch and CEMPCO, which this court struck under section 13-1-127(2), C.R.S. (2017). Finally, Ellsworth filed a “Motion to Declare . . . C.R.S. § 13-1-127 . . . Unconstitutional,” which this court denied.
[*16] Ultimately, we denied Ellsworth’s petition for a writ of certiorari, but granted the California Heirs’ cross-petition to review the court of appeals’ ruling on whether Ellsworth was properly joined in the case.1
1 We granted certiorari review of the following issues:
1. Whether the petitioner was properly joined in the sanctions proceedings pursuant to City of Aurora ex rel. Utility Enterprise v. Colorado State Engineer, 105 P.3d 595, 621-24 (Colo. 2005).
2. Whether piercing an entity’s corporate veil is a form of vicarious liability supporting joinder pursuant to City of Aurora ex rel. Utility Enterprise v. Colorado State Engineer, 105 P.3d 595 (Colo. 2005).
3. Whether service of a summons and an opportunity to be heard before entry of the sanctions [**11] judgments afforded the petitioner due process.
The California Heirs filed their opening brief on July 3, 2017. Pursuant to our May 22 scheduling order, Ellsworth had until August 7 to file an answer brief. On August 23, having not received an answer from Ellsworth, we ordered him to notify the court by August 30 whether he intended to file an answer brief, warning that if he did not comply, we would presume that he did not intend to file an answer brief, and the case would proceed. Ellsworth did not thereafter file any response.
II. Analysis
A. Piercing the Corporate Veil
[*17] We address first the merits of the trial court’s decision to pierce the corporate veil and hold Ellsworth individually liable for Seawatch’s litigation conduct. “Piercing the corporate veil involves a mixed question of law and fact.” Lester v. Career Bldg. Acad., 2014 COA 88, ¶ 42, 338 P.3d 1054, 1062. Accordingly, “[w]e defer to the trial court’s findings of fact if they are supported by the record, but review the trial court’s legal conclusions de novo.” See People v. Marquardt, 2016 CO 4, ¶ 8, 364 P.3d 499, 502.
[*18] A duly formed corporation is a legal entity distinct from its shareholders. Connolly v. Englewood Post No. 322 Veterans of Foreign Wars of the United States, Inc. (In re Phillips), 139 P.3d 639, 643 (Colo. 2006). This separate status normally insulates a corporation’s shareholders from personal liability for the debts of the corporation. Indeed, such “[i]nsulation from individual liability is an inherent purpose of incorporation; only extraordinary circumstances justify disregarding the corporate entity to impose personal liability.” Leonard v. McMorris, 63 P.3d 323, 330 (Colo. 2003).
[*19] However, in certain circumstances, a court will “pierce the veil of corporate entity” to expose the individuals “hiding behind” it. I.M. Wormser, Piercing the Veil of Corporate Entity, 12 Colum. L. Rev. 496, 515, 497 (1912); Phillips, 139 P.3d at 644. For instance, a shareholder may be individually liable for the corporation’s actions [**12] “when the corporation is merely the alter ego of the shareholder, and the corporate structure is used to perpetuate a wrong.” Phillips, 139 P.3d at 644 (citation omitted). “In such extraordinary circumstances, the courts may ignore the independent existence of the business entity and pierce the corporate veil to achieve an equitable result.” Id.; see also Griffith v. SSC Pueblo Belmont Operating Co. LLC, 2016 CO 60M, 381 P.3d 308, 313 (“The case law governing corporate veil-piercing applies to disregarding the LLC form as well.”)
[*20] A corporation is the alter ego of its shareholder or shareholders when it is a “mere instrumentality for the transaction of the shareholders’ own affairs, and there is such unity of interest in ownership that the separate personalities of the corporation and the owners no longer exist.” Id. (quoting Krystkowiak v. W.O. Brisben Co., 90 P.3d 859, 867 n.7 (Colo. 2004)). To determine whether a corporation is an alter ego, a court should consider a number of factors, including whether “(1) the corporation is operated as a distinct business entity, (2) funds and assets are commingled, (3) adequate corporate records are maintained, (4) the nature and form of the entity’s ownership and control facilitate misuse by an insider, (5) the business is thinly capitalized, (6) the corporation is used as a ‘mere shell,’ (7) shareholders disregard [**13] legal formalities, and (8) corporate funds or assets are used for noncorporate purposes.” Id. As we explained in Phillips, “[t]hese factors reflect the underlying principle that the court should only pierce when the corporate form has been abused.” Id.
[*21] Next, if the corporation is found to be merely the alter ego of a shareholder, the court must consider “whether justice requires recognizing the substance of the relationship between the shareholder and corporation over the form because the corporate fiction was used to perpetrate a fraud or defeat a rightful claim.” Id. (quotation marks omitted). “Only when the corporate form was used to shield a dominant shareholder’s improprieties may the veil be pierced.” Id.
[*22] Finally, “the court must evaluate whether an equitable result will be achieved by disregarding the corporate form and holding the shareholder personally liable for the acts of the business entity.” Id. “Achieving an equitable result is the paramount goal of traditional piercing of the corporate veil.” Id.
[*23] A claimant seeking to pierce the corporate veil must make a clear and convincing showing that each of the foregoing factors has been satisfied. Id. If a claimant satisfies [**14] this burden and the corporate veil is pierced, the court may ignore the independent existence of the corporate entity and hold the shareholder liable for the corporation’s actions. See id.
[*24] Here, the trial court held that Seawatch “was at all material times” the alter ego of Ellsworth. In its November 10, 2011 order, the trial court adopted XTO’s proposed findings of fact and conclusions of law, as well as portions of the California Heirs’ post-trial briefing. Specifically, the trial court found that Ellsworth was the sole managing partner of Seawatch, which he owned with his wife and two adult children; Ellsworth’s payments to the California Heirs for the mineral deeds were made from Ellsworth’s personal checking account or were cash; Seawatch did not have its own checking account, its own cash, or any loan agreements with Ellsworth; Seawatch did not own other property, had never received any income, and did not file tax returns; and Ellsworth used these alter ego entities to perpetuate a wrong.
[*25] Subsequently, after Judge Herringer took over the case for Judge Dickinson, the trial court incorporated these findings as law of the case in its April 10, 2014 order. In that order, the trial [**15] court also revisited the third requirement for piercing the corporate veil–i.e., whether piercing the veil is necessary to achieve an equitable result. On that point, the court found that “Seawatch was used by Ellsworth as an instrumentality for committing fraud” and that Seawatch’s “sole business function was to acquire mineral deeds from the California Heirs for the benefit of Ellsworth.” Indeed, according to the trial court, “Seawatch had no business dealings outside the facts that give rise to this litigation and it was entirely controlled by Ellsworth.” Moreover, the court found, “Seawatch is apparently insolvent and has no assets, not even its own checking account” and “when Ellsworth was purportedly conducting business on behalf of Seawatch, he used his personal checking account for transactions made by Seawatch.” Additionally, “there [was] no indication that Seawatch’s litigation strategy was controlled or dictated by anyone other than Ellsworth.”
[*26] Thus, the court reasoned, “if liability was limited to Seawatch, it would foreclose any meaningful opportunity for the injured parties to recover for conduct [for] which Ellsworth is responsible.” Because “[t]he record is devoid of [**16] any meaningful evidence that Seawatch was operated as a separate corporate entity apart from Ellsworth,” and “[t]he only respect in which Ellsworth has treated Seawatch as a corporate entity, independent of him personally, is as a barrier to his personal liability,” the court concluded, holding Ellsworth “liable for the actions of Seawatch is required to achieve fairness and reach a just result.”
[*27] As noted above, we “defer to the trial court’s findings of fact if they are supported by the record.” Marquardt, ¶ 8, 364 P.3d at 502. Here, the trial court’s findings are amply supported by the record. During the 2011 bench trial related to the mineral deeds, Ellsworth testified that he owned Seawatch with his wife and two children. Ellsworth testified that he had been the sole manager of Seawatch since its inception in 2007 and that he makes all the decisions for Seawatch. Ellsworth further testified that Seawatch did not have a checking account when he obtained the mineral deeds from the California Heirs; indeed, at least one California Heir testified that Ellsworth paid for the mineral deeds with a personal check. Ellsworth also testified that Seawatch had not received any income and had not filed tax [**17] returns.
[*28] Based on the above factual findings, and reviewing the trial court’s legal conclusion de novo, id., we conclude that the trial court did not err by piercing the corporate veil.
B. Joinder and Due Process
[*29] The court of appeals vacated the judgment against Ellsworth, holding that the trial court lacked personal jurisdiction over him because Ellsworth had not yet been joined as a party (and therefore had no notice or opportunity to contest personal liability) when the trial court entered the November 2011 order holding him individually liable. XTO Energy, slip op. at 1, 5-6. Consequently, the court of appeals reasoned, the initial order was void with respect to Ellsworth, and all subsequent orders and judgments based on the initial order were void as well. Id. at 14. The court of appeals rejected XTO’s argument that joinder “cured” this jurisdictional defect, because (1) joinder was improper; and (2) Ellsworth did not have a chance, after the joinder motion was filed, to contest the trial court’s alter ego findings or its imposition of joint and several liability. Id. at 10-14.
[*30] It is true that a person is not bound by a judgment if he was not “designated as a party or . . . made a party by service of process.” Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 110, 89 S. Ct. 1562, 23 L. Ed. 2d 129 (1969). But here, we conclude [**18] that Ellsworth was a party to the post-judgment proceedings. The court of appeals’ conclusion that Ellsworth was not properly joined because there was no pleaded “claim for relief” against Ellsworth, XTO Energy, slip op. at 10-12, is contrary to our decision in City of Aurora. There, after the trial court entered its order of dismissal following an eight-week trial, the prevailing party sought attorneys’ fees and costs under section 13-17-102(4), and moved to join Aurora solely “for purposes of collecting attorney fees and costs.” City of Aurora, 105 P.3d at 605. The court granted joinder, and we affirmed.
[*31] As we explained, under the Colorado Rules of Civil Procedure, “[p]arties may be dropped or added by order of the court on motion of any party . . . at any stage of the action and on such terms as are just.” Id. at 623 (emphasis in original) (quoting C.R.C.P. 21). Rules 20 and 21, which should be “liberally construed,” specifically “authorize joinder in situations where one party seeks to join a person who may be liable for the same debt or conduct that is already before the court.” Id. These rules “indicate clearly a general policy to disregard narrow technicalities and to bring about the final determination of justiciable controversies without undue delay.” Id. (quoting Swan v. Zwahlen, 131 Colo. 184, 280 P.2d 439, 441 (Colo. 1955)). Thus, we held, [**19] joinder of Aurora was not an abuse of discretion, even though the court had already entered judgment on the merits, “[b]ecause C.R.C.P. 20 allows joinder at any stage of the proceedings and because C.R.C.P. 21 anticipates joinder where there are joint liabilities, as well as common questions of law and fact,” and Aurora “was potentially liable for conduct that was already before the court.” Id.
[*32] Nor were XTO and the California Heirs required to amend their pleadings to add a “claim for relief” against Ellsworth, or file additional pleadings to the same effect, to join Ellsworth. Such a rule would be antithetical to the policy behind Rules 20 and 21, and would make little sense in situations where, like here and in City of Aurora, the trial court has already entered judgment on the underlying dispute. Additionally, in light of the unique factual circumstances of this case, any failure to amend the complaint to add Ellsworth as a party to the post-judgment sanctions proceedings would be, at most, harmless error. “The court at every stage of the proceeding must disregard all errors and defects that do not affect any party’s substantial rights.” C.R.C.P. 61. “[A]n error affects a substantial right only if it can be said with fair [**20] assurance that the error substantially influenced the outcome of the case or impaired the basic fairness of the trial itself.” Laura A. Newman, LLC v. Roberts, 2016 CO 9, ¶ 24, 365 P.3d 972, 978 (quotation marks omitted). By the time Ellsworth was joined as a party, he had already been heavily involved with the case for several years as Seawatch’s sole managing member. Indeed, he spent much of the trial at counsel’s table and also testified. He was then properly served with the joinder motion and summons. On this record, Ellsworth cannot establish that any error regarding amending the complaint substantially influenced the outcome of the case or impaired the basic fairness of the trial.
[*33] Furthermore, contrary to the court of appeals’ assertion, Ellsworth had an opportunity to contest his individual liability once he was joined as a party. The trial court found that Seawatch was Ellsworth’s alter ego in November 2011 and that, accordingly, Ellsworth would be jointly and severally liable for any award of attorneys’ fees. In December 2011, XTO and the California Heirs moved for judgment on attorneys’ fees and to join Ellsworth as a party to the post-judgment proceedings. The court granted the joinder motion in August 2012, and Ellsworth was served via [**21] substituted service in January 2013. The court did not enter final judgment awarding attorneys’ fees against Ellsworth, however, until May 2015. During the three years after Ellsworth was joined as a party and before the entry of final judgment, Ellsworth had ample opportunity to challenge the alter ego findings.
[*34] In fact, Ellsworth did offer arguments, however unartful, regarding the propriety of piercing the corporate veil. In 2013, Ellsworth, making what he called a “limited appearance,” argued that the court lacked personal jurisdiction over him and that the substituted service had been improper. In his motion to dismiss, Ellsworth, represented by the same attorney who represented Seawatch, “object[ed] to the validity of the Summons served by substitute service . . . and also on the basis that the Court lacks personal jurisdiction over Ellsworth.” Ellsworth’s motion to dismiss went on to address “the elements of ‘piercing the corporate veil,'” arguing that the trial court’s order holding Ellsworth individually liable “contains no record that [the relevant] elements were evaluated” and that the record was “also completely void of the analysis showing all elements satisfied a standard [**22] of ‘clear and convincing’ proof.” (citing Phillips, 139 P.3d at 644).
[*35] In a subsequent filing, Ellsworth argued against piercing the corporate veil under a section entitled “CEMPCO AND SEAWATCH ARE NOT AGENTS OR ALTER EGOS OF ELLSWORTH.” Ellsworth asserted that the “alter-ego theory of the trial court cannot be applied here” for various reasons, including that “the failure of a limited liability company to observe the formalities or requirements relating to the management of its business and affairs is not in itself a ground for imposing personal liability on the members for liabilities of the limited liability company.” (quoting § 7-80-107, C.R.S. (2017)). Ellsworth went on to address the “[c]ommon law Alter Ego elements,” reiterating that the trial court made, in his view, insufficient findings on the record. Based on this record, we disagree with the court of appeals that “Ellsworth did not have a chance, after the joinder motion was filed, to contest the court’s alter ego finding or its imposition of joint and several liability.” XTO Energy, slip op. at 13.
[*36] The court of appeals’ focus on the 2013 hearing on the motions for attorneys’ fees was misplaced. That hearing, the court of appeals asserted, was limited to “whether XTO could recover fees it [**23] had incurred by participating in the litigation more actively than a traditional interpleader plaintiff” and thus “did not provide any kind of belated opportunity for Ellsworth to challenge the court’s alter ego finding.” Id. However, this conclusion is belied by the transcripts of the hearing; it also discounts the time after joinder before the hearing, and the years after the hearing but before final judgment entered.
[*37] It is true that Judge Herringer ruled that Judge Dickinson’s findings were “law of the case.” But that doctrine did not prevent Ellsworth from challenging those findings. Generally speaking, the law of the case doctrine “provides that prior relevant rulings made in the same case are to be followed unless such application would result in error or unless the ruling is no longer sound due to changed conditions.” People v. Dunlap, 975 P.2d 723, 758 (Colo. 1999). However, the law of the case doctrine recognizes that “a trial court is not inexorably bound by its own precedents.” Brodeur v. Am. Home Assur. Co., 169 P.3d 139, 149 (Colo. 2007). That is, the law of the case doctrine does not “prevent[ ] a trial court from clarifying or even revisiting its prior rulings.” In re Bass, 142 P.3d 1259, 1263 (Colo. 2006). To the contrary, “[a] trial court has discretion to apply the law of the case doctrine to its own prior rulings.” [**24] San Antonio, Los Pinos & Conejos River Acequia Pres. Ass’n v. Special Improvement Dist. No. 1, 2015 CO 52, ¶ 31, 351 P.3d 1112, 1120. Thus, Judge Herringer was not bound by Judge Dickinson’s findings. And indeed, here, before addressing the merits of the trial court’s decision to pierce the corporate veil, Ellsworth argued that “the trial court always possesses the power to correct or re-direct a prior Order and . . . is ‘not’ to be trapped by the ‘law of the case’ doctrine while its case remains pending.” (emphasis in original) (citing Bass, 142 P.3d at 1263).
[*38] Ellsworth also could have filed a Rule 59(e) motion to alter or amend the judgment after the trial court entered judgment against him in May 2015. He did not do so. Nor did he move under Rule 60(b) to ask the court to relieve him from the final judgment. See Link v. Wabash R.R. Co., 370 U.S. 626, 632, 82 S. Ct. 1386, 8 L. Ed. 2d 734 (1962) (recognizing that “the availability of a corrective remedy such as is provided by Federal Rule of Civil Procedure 60(b)–which authorizes the reopening of cases in which final orders have been inadvisedly entered–renders the lack of prior notice of less consequence.”); see also Am. Sur. Co. v. Baldwin, 287 U.S. 156, 168, 53 S. Ct. 98, 77 L. Ed. 231 (1932) (“Due process requires that there be an opportunity to present every available defense; but it need not be before the entry of judgment.”). In sum, we disagree with the court of appeals that Ellsworth lacked notice and opportunity to contest his liability.
III. Conclusion
[*39] We conclude that the trial court [**25] properly pierced the corporate veil to hold Ellsworth individually liable for Seawatch’s, his alter ego, frivolous claims and defenses. Additionally, we hold that Ellsworth, who was properly joined to the post-judgment proceedings, had notice and opportunity to contest his individual liability. We therefore reverse the court of appeals and remand with instructions to reinstate the judgment awarding attorneys’ fees and costs.
Recreation Law 