Tisch v. Tisch

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
March 21, 2019
2019COA41
No. 17CA1591, Tisch v. Tisch — Corporations — Officers and
Shareholders — Piercing the Corporate Veil — Dividends and
Distributions — Derivative Suits — Direct Suits; Civil Theft —
Rights in Stolen Property
In this individual and shareholder derivative suit, a division of
the court of appeals decides two issues of first impression in
Colorado. First, the division holds that a majority shareholder’s use
of corporate profits for personal and other business reasons can be
submitted to a fact finder and found to constitute “corporate
distributions” available to all shareholders when no formal
distribution is declared. Second, the division concludes that a
minority shareholder has a proprietary interest in undeclared
distributions sufficient to support an individual civil theft claim
against the majority shareholder.
The division also concludes that (1) appellant waived the
expert witness issue; (2) the trial court properly decided the alter
ego issue; (3) the trial court properly directed a verdict on the
statute of limitations affirmative defenses; and (4) sufficient
evidence supports damages. In the cross-appeal, the division
concludes that (1) expert fees were properly capped; (2) a contingent
fee multiplier for attorney fees is not justified; and (3) the trial court
properly entered summary judgment for appellant on the
declaratory judgment claim. The division remands the case for the
trial court to determine and award appellee reasonable appellate
attorney fees related to civil theft.
COLORADO COURT OF APPEALS 2019COA41
Court of Appeals No. 17CA1591
Jefferson County District Court No. 16CV30697
Honorable Laura A. Tighe, Judge
Honorable Stephen M. Munsinger, Judge
Daniel E. Tisch and Eva R. Tisch,
Plaintiffs-Appellees and Cross-Appellants,
v.
Gary D. Tisch and The Liquor Barn, Ltd.,
Defendants-Appellants and Cross-Appellees.
JUDGMENT AFFIRMED AND CASE
REMANDED WITH DIRECTIONS
Division III
Opinion by JUDGE FREYRE
Webb and Román, JJ., concur
Announced March 21, 2019
Aitken Law, LLC, Sharlene J. Aitken, Denver, Colorado; Mills Schmitz Halstead
& Zaloudek, LLC, Michael F. Mills, Denver, Colorado, for Plaintiffs-Appellees
and Cross-Appellants
Stinson Leonard Street LLP, Perry L. Glantz, Ryan M. Sugden, Anna Day,
Greenwood Village, Colorado, for Defendants-Appellants and Cross-Appellees
¶1 In this individual and shareholder derivative action involving a
closely held corporation, defendants — the Liquor Barn, Ltd.; and
Gary D. Tisch as the officer, director, and controlling shareholder
(collectively Gary) — appeal the jury’s verdict in favor of plaintiffs
and minority shareholders, Daniel E. Tisch and Eva R. Tisch (Tisch
siblings). The jury found that Gary had committed civil theft
against the Tisch siblings individually and against the Liquor Barn
by using the Liquor Barn profits for his private use. It awarded the
Tisch siblings $300,000 in damages for civil theft and the Liquor
Barn, on whose behalf the Tisch siblings brought a derivative
action, zero damages for civil theft. The jury also found that Gary
had violated his fiduciary duty to the Liquor Barn and the Tisch
siblings. It awarded $150,000 in damages to the Tisch siblings and
zero damages to the Liquor Barn for breach of fiduciary duty. The
trial court entered judgment against Gary and the Liquor Barn.
The court then awarded the Tisch siblings treble damages, totaling
$900,000 for the civil theft claim, under section 18-4-405, C.R.S.
2018; $43,837.40 in costs; and $150,000 in attorney fees.
¶2 This case asks us to decide two issues not previously resolved
by Colorado appellate courts. First, can corporate profits, not
1
formally declared as distributions but used by the controlling
shareholder for personal and other business matters, be found by a
fact finder to constitute “distributions” to which minority
shareholders are entitled a portion? We answer that question “yes”
and in doing so affirm the trial court’s decision to submit this issue
to the jury. Second, can undeclared distributions provide a basis
for a minority shareholder to bring an individual claim for civil theft
against the majority shareholder? We again answer this question
“yes” and hold that minority shareholders have a proprietary
interest in undeclared distributions that can form the basis for an
individual civil theft claim.
¶3 Gary raises five claims of error on appeal, and the Tisch
siblings raise three claims of error in their cross-appeal. We affirm
the jury’s damages awards for the Tisch siblings and the trebling of
damages under the civil theft statute. We also affirm the trial
court’s costs and attorney fees awards. Finally, we conclude that
the Tisch siblings are entitled to their reasonable appellate attorney
fees related to the civil theft claim and remand the case for that
determination.
2
I. Background
¶4 This is a dispute over a family business ― the Liquor Barn ―
that was incorporated in 1975 by the parties’ father, Rudolph Tisch
(father). In 1982, father gave each of his three children 1600 shares
of the Liquor Barn stock and kept the remaining 10,500 shares of
stock for himself. Between 1982 and 1991, Gary was the Liquor
Barn’s floor manager, and after 1991, Gary assumed responsibility
for the company’s books and for managing the inventory. The Tisch
siblings worked sporadically at the business between 1991 and
1997, but they were never involved in the business’ operations.
¶5 Father divorced in 1991 and a domestic court entered a
dissolution decree that required him to transfer an additional 10%
ownership in the Liquor Barn — 1530 shares — to each of his three
children. The children knew of this order, but father never
transferred the additional shares. On November 17, 1997, father
amended the articles of incorporation — without notice to his
children and without a shareholder vote — to recapitalize the
business. This amendment exchanged one share of common stock
for 7/10 of a class A voting share and 3/10 of a class B nonvoting
share. Consequently, each of the children’s 1600 shares of
3
common voting stock were cancelled, and each child was re-issued
1500 shares of class B nonvoting common stock, while father
retained all the class A voting stock.
¶6 In December 2000, father assigned his stock in the Liquor
Barn to Gary, and Gary managed the business. Gary held 10,500
class A voting shares and 1500 class B nonvoting shares, while the
Tisch siblings each held 1500 class B nonvoting shares.
¶7 On November 19, 2003, Gary’s attorney received a letter from
the Tisch siblings’ attorney with an offer to sell each siblings’ 10%
nonvoting shares of stock. No sale occurred.
¶8 Approximately one year later, the Tisch siblings, through
counsel, demanded access to the Liquor Barn’s financial and
corporate records in connection with a dispute over father’s estate.
Gary made the records available, but the Tisch siblings never
examined them because they could not afford to hire an
accountant. They made similar inspection requests for the purpose
of valuing their shares between 2004 and 2014, but they never
examined the records because of financial constraints. After Eva
Tisch received funds in connection with an estate dispute in 2011,
4
the Tisch siblings had the financial means to determine the value of
their stock.
¶9 So, on April 3, 2015, the Tisch siblings made another request
to examine the Liquor Barn’s records, and this time they hired an
accountant, Matthew Lausten, to conduct that examination. On
April 29, 2016, they filed a complaint that asserted eight causes of
action: (1) declaratory judgment; (2) accounting; (3) alter ego; (4)
fraud; (5) an individual claim for civil theft; (6) a shareholder
derivative claim for civil theft; (7) an individual claim for breach of
fiduciary duty; and (8) a shareholder derivative claim for breach of
fiduciary duty.
¶ 10 Before trial, the court partially granted Gary’s motion for
summary judgment and dismissed the declaratory judgment and
fraud claims as barred by applicable statutes of limitations. At a
case management conference, the trial court capped expert fees at
$35,000, and capped recoverable costs at $7000 under C.R.C.P.
16(b)(11). It permitted either side to seek relief from the caps by
motion.
¶ 11 The Tisch siblings presented their case primarily through Mr.
Lausten, who by then had reviewed all of the Liquor Barn’s financial
5
records. Mr. Lausten noted that the Liquor Barn’s gross revenues
steadily increased between 2004 and 2016, but that these revenues
had not translated into increased profits. After further
examination, Mr. Lausten identified several other businesses owned
by Gary and found that the Liquor Barn had paid for many of these
other business’ expenses over the years. He opined that the Liquor
Barn profits, which had been used by Gary personally or for his
other businesses, should be reclassified as shareholder
distributions and booked as retained earnings or distributed as
dividends.
¶ 12 In particular, Mr. Lausten noted that insufficient receipts
supported the QuickBooks expense entries and that the receipts
that existed often did not identify the entity for which the expense
had been incurred. He further noted that the Liquor Barn’s records
conflicted with the supporting documentation for intercompany
transactions, expense reimbursements, and general operating
expenses. Moreover, Mr. Lausten testified to strong indications that
some of the Liquor Barn’s inventory had been sold “off-book,” and
he said that Gary would have been able to do this. In the end, he
opined that Gary had received between $600,000 and $1.1 million
6
beyond his reported salary from 2010-2016 and that this additional
income should be reclassified as shareholder distributions. After
conducting a comparative analysis, he opined that the Liquor Barn
lost profits of $2,172,436 over a fifteen-year period.
¶ 13 Gary testified and provided explanations for the discrepancies
observed by Mr. Lausten. He said that as the sole director and
majority shareholder, he had never made a distribution or declared
a dividend; instead, he had focused his efforts on growing the
business. He disputed Mr. Lausten’s profit figures and described
his efforts to remain competitive when laws changed that allowed
retail liquor sales in grocery stores. The court precluded him from
presenting his endorsed accounting expert, Catherine Moeller,
because she admitted having altered the Liquor Barn’s records after
Mr. Lausten’s initial review and had based her opinions on those
altered records.
¶ 14 Gary raised the statute of limitations as an affirmative defense
to civil theft and breach of fiduciary duty in his pleadings and in a
motion for a directed verdict at the close of the evidence. He argued
that the Tisch siblings either knew or reasonably should have
known of their injuries in connection with previous requests to
7
inspect the Liquor Barn’s records. The trial court disagreed and
entered a directed verdict for the Tisch siblings, finding that no jury
would conclude that the suit was filed outside the statute of
limitations. The court also ruled against Gary on the alter ego
claim, which had been tried to the court, finding that Gary and the
Liquor Barn were alter egos of one another. 1
¶ 15 After the jury’s verdict, the court awarded the Tisch siblings
treble damages on the civil theft claim and entered judgment
against Gary and the Liquor Barn on April 20. 2 Gary moved to
amend the judgment, contending that the court erred in piercing
the corporate veil and that this error would prejudice the Liquor
Barn’s creditors. He then filed a combined motion for new trial and
relief from judgment, arguing, as relevant here, that the trial court
erred in disqualifying his expert witness and in piercing the
corporate veil.
———————————————————————
1 The accounting claim was dismissed as moot after the jury
returned a verdict for damages.
2 Prior to final judgment being entered, on April 7, 2017, Gary filed
for bankruptcy (Chapter 11 reorganization).
8
¶ 16 After receiving relief from a stay in Gary’s bankruptcy, the trial
court held a hearing and denied the postjudgment motions. 3 It also
ordered the Tisch siblings to submit a lodestar amount for attorney
fees. The court awarded costs of $43,837.50 ($35,000 in expert
fees and $8837.50 in general litigation costs), and $150,000 in
attorney fees, which exceeded the lodestar.
II. Gary’s Direct Appeal
¶ 17 Gary challenges the judgment on five grounds: (1) the court
erroneously excluded his accounting expert; (2) the court
erroneously found that the Liquor Barn and Gary were alter egos;
(3) the court erroneously directed a verdict on his statute of
limitations affirmative defense and wrongfully imposed treble
damages for civil theft beyond the one-year statute of limitations; (4)
the court erroneously submitted the individual civil theft claim to
the jury because the Tisch siblings failed to show a sufficient
property interest in undeclared distributions; and (5) insufficient
evidence supported the jury’s damage award. We reject his
contentions and affirm the judgment.
———————————————————————
3 The bankruptcy court’s stay relief order encompasses this direct
appeal.
9
A. Exclusion of Expert Witness
¶ 18 Gary first contends that the trial court erroneously excluded
his expert accountant’s testimony based on her alteration of the
Liquor Barn’s financial records. He argues that the court was
required to hold a hearing, under People v. Shreck, 22 P.3d 68, 70
(Colo. 2001), to assess the reliability of her testimony. He reasons
that any inconsistencies went to the weight of her testimony and
not to its admissibility.
¶ 19 Gary never asked the court for a Shreck hearing and he
conceded in closing argument that the court had “properly ruled”
that she should not be allowed to testify. Under these
circumstances, we conclude that these issues were not preserved
for our review. Vititoe v. Rocky Mountain Pavement Maint., Inc.,
2015 COA 82, ¶ 60 (failure to raise issues waives them on appeal);
see also In re Marriage of Robbins, 8 P.3d 625, 630 (Colo. App.
2000) (A party affects an express waiver “when [that] party states its
intent to abandon an existing right.”).
B. Piercing the Corporate Veil
¶ 20 Gary next contends that the trial court erroneously found that
he, as an individual, and the Liquor Barn were “alter egos.” He also
10
argues that the court improperly employed “inside reverse veil
piercing” to hold the Liquor Barn liable for Gary’s debts. We
discern no error in the court’s alter ego determination, and we
conclude that his inside reverse veil piercing argument was not
preserved for our review. Vititoe, ¶ 60.
1. Additional Facts
¶ 21 Before trial, the parties agreed to try the alter ego claim to the
court. At the end of the evidence, the court found as follows:
Well, I don’t think it really matters, because
whether it’s an ex – if it’s an alter ego, or it’s
not an alter ego, the claim’s against this
gentleman [Gary]. And he’s the – the
president, managing shareholder, whole – sole
shareholder of any voting stock. So he is the
alter ego, realistically. So I find he is the alter
ego. Is there any – do you want to argue that
with me?
¶ 22 Gary’s counsel responded, “it – it’s moot, Your Honor.”
Counsel for the Tisch siblings disagreed it was moot, so the court
made further findings:
I find the elements of alter ego. I find he is the
alter ego, they’re one and the same for the
purp – for this purpose.
....
11
He still has corporate shield and everything
else. The corporation is a valid corporation.
But he’s – he is the sole controller of the
corporation. . . . I’m – you know, as to the
purposes of this case, and given the parties in
this case, and the way it’s lined up, I am
piercing the corporate shield as to him, in – as
[to] these claimed damages.
¶ 23 Gary moved to amend the judgment, but he only argued that
the alter ego determination was erroneous because an equitable
result would not be achieved by piercing ― he never argued the
court’s ruling constituted inside reverse veil piercing.
2. Standard of Review and Relevant Law
¶ 24 Piercing the corporate veil and imposing liability for corporate
obligations on the shareholders is an equitable remedy. Gorsich v.
Double B Trading Co., 893 P.2d 1357, 1362 (Colo. App. 1994).
Whether to exercise the equitable remedy and pierce the corporate
veil is a mixed question of law and fact. See Stockdale v. Ellsworth,
2017 CO 109, ¶ 17. “We defer to the trial court’s findings of fact if
they are supported by the record, but [we] review the trial court’s
legal conclusions de novo.” Id. (quoting People v. Marquardt, 2016
CO 4, ¶ 8).
12
¶ 25 Generally, a duly formed corporation is a separate legal entity,
distinct from its officers and shareholders. Micciche v. Billings, 727
P.2d 367, 372 (Colo. 1986). However, the corporate form may be
disregarded by piercing the corporate veil when the corporation is
merely the alter ego of the shareholder. In re Phillips, 139 P.3d 639,
644 (Colo. 2006). Traditional piercing of the corporate veil imposes
liability on individual shareholders for the obligations of the
corporation. Id. Reverse piercing of the corporate veil holds the
corporation liable for the debts of a corporate insider. Id. at 645.
¶ 26 To determine whether sufficient unity of interest exists to
establish alter ego, courts consider several 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 legal
formalities, and (8) corporate funds or assets
are used for noncorporate purposes.
Id. at 644.
13
¶ 27 A court may reverse pierce the corporate veil only upon a clear
showing by the requesting party of all the following factors: (1) the
controlling insider and the corporation are alter egos of each other;
(2) justice requires recognizing the substance of the relationship
over the corporate form because the corporate form is used to
perpetuate a fraud or to defeat a rightful claim; and (3) an equitable
result is achieved by piercing. Id. at 646.
3. Application
¶ 28 We perceive no error in the trial court’s decision to pierce the
corporate veil because ample record evidence supports that
decision. First, the record shows that (1) Gary commingled his
personal funds with the Liquor Barn’s funds and with his other
companies’ funds in a way that made it unclear which funds
belonged to whom; (2) Gary’s individual position as the controlling
and sole voting shareholder facilitated his misuse of the Liquor
Barn’s funds (as evidenced by the Liquor Barn paying his personal
expenses, personal loans, and the expenses of his other companies);
(3) Gary kept inadequate corporate records, including insufficient
receipts and insufficient descriptions in QuickBooks; (4) the Liquor
Barn was thinly capitalized because it had little to no retained
14
earnings; (5) Gary routinely disregarded the legal formalities of
declaring shareholder distributions and filing taxes related to
payments made to himself; and (6) corporate funds and assets were
used for noncorporate purposes, such as inventory for a different
company, a trip to Belize, and dinners.
¶ 29 Second, the record shows that Gary used the corporate fiction
to defeat the Tisch siblings’ rightful claims to distributions and,
thus, that justice requires recognizing the substance of the
relationship between Gary and the Liquor Barn over the corporate
form. Indeed, the evidence demonstrates that Gary paid personal
loans with corporate funds, and that he diverted the Liquor Barn’s
profits to his other companies. By classifying these payments from
the Liquor Barn to himself as nondistributions, he avoided paying
the Tisch siblings their 20% interest.
¶ 30 Third, we conclude that piercing the corporate veil achieves an
equitable result. Because Gary commingled his funds with the
Liquor Barn’s, it is unclear which funds belong to Gary individually
and which belong to the Liquor Barn. Therefore, the Tisch siblings
should be able to collect from both. Further, there are no innocent
shareholders who would be harmed by enforcing the judgment
15
against the Liquor Barn because Gary and the Tisch siblings are
the only shareholders. Cf. id. (stating that an equitable result is not
achieved if innocent shareholders are harmed); see generally Kurtis
A. Kemper, Annotation, Acceptance and Application of Reverse
Veil-Piercing — Third-Party Claimant, 2 A.L.R. 6th 196 (2005) (noting
that the corporate entity will not be disregarded if it would result in
“prejudice to the rights of innocent third parties”). And, although
creditors may be impacted, we conclude the trial court properly
considered creditors when it held that alternate adequate remedies
were not available and that equity for the Tisch siblings and
creditors required piercing the corporate veil. See In re Phillips, 139
P.3d at 646-47.
C. Time Bars and Basis for Direct Civil Theft
¶ 31 Gary next contends that the statute of limitations bars the
civil theft and breach of fiduciary duty claims. Alternatively, as to
civil theft, he argues that, even if not barred, the Tisch siblings had
no “proprietary interest” in the diverted funds since he never
declared a distribution. Therefore, he reasons, no basis for civil
theft exists. We are not persuaded.
16
1. Statute of Limitations and Excluded Evidence
¶ 32 Gary argues three errors related to the statute of limitations:
(1) excluding letters from 2003 and 2004; (2) directing a verdict on
his affirmative defense; and (3) awarding treble damages for civil
theft that occurred outside the one-year statute of limitations. We
perceive no error in the court’s rulings.
a. Standard of Review and Preservation
¶ 33 We review a trial court’s decision to exclude evidence for an
abuse of discretion. In re Estate of Fritzler, 2017 COA 4, ¶ 6. A
court abuses its discretion if its decision is manifestly arbitrary,
unreasonable, or unfair, or if it misapplies the law. Id.
¶ 34 We review a trial court’s ruling on a directed verdict de novo.
MDM Grp. Assocs., Inc. v. CX Reinsurance Co., 165 P.3d 882, 885
(Colo. App. 2007). Such a motion can be granted only if the
evidence compels the conclusion that reasonable jurors could not
disagree because no evidence received at trial, or inference
therefrom, could sustain a verdict against the moving party. Id.
The trial court must view the evidence in the light most favorable to
the nonmoving party. Id.
17
¶ 35 Similarly, we review statutes de novo. Miller v. Hancock, 2017
COA 141, ¶ 24. We give words and phrases their plain and
ordinary meanings. Id. “If a statute is clear and unambiguous on
its face, then we need not look beyond the plain language, and ‘we
must apply the statute as written.’” Vigil v. Franklin, 103 P.3d 322,
327 (Colo. 2001) (citations omitted).
¶ 36 Initially, we reject the Tisch siblings’ contention that the
directed verdict and treble damages issues were not preserved. The
record reflects that the trial court directed a verdict on the statute
of limitations affirmative defense over Gary’s objection. And, it
shows that Gary raised the statute of limitations as an affirmative
defense to treble damages in his amended answer and in the
proposed case management order. Therefore, we address these
issues.
b. Analysis
¶ 37 We begin with Gary’s contention that the statute of limitations
barred submission of the civil theft claim to the jury because our
resolution of this issue necessarily resolves the evidentiary issue.
Gary relied on the Tisch siblings’ previous requests to inspect the
Liquor Barn’s books and, in particular, letters from 2003 and 2004,
18
to show that the Tisch siblings either knew or reasonably should
have known of their injuries from his alleged breach of fiduciary
duty and civil theft at the time of those requests. 4 Gary’s counsel
attempted to introduce the letters written by the Tisch siblings’
attorney to support his claim that the Tisch siblings filed this suit
beyond the two-year statute of limitations for tort claims, § 13-80-
102(1)(a), C.R.S. 2018, and the three-year statute of limitations for
a breach of fiduciary duty claim, § 13-80-101(1)(f), C.R.S. 2018.
Both letters concerned settlement negotiations related to father’s
estate in which the Tisch siblings offered to sell their shares to Gary
and neither letter mentioned Gary’s management of the Liquor
Barn. Both siblings testified that their inspection requests related
to determining the value of their shares for possible sale and that
they could not afford to retain an accountant to review the records
until 2015.
¶ 38 Even considering the contents of the two letters, we conclude
that no evidence establishes that the Tisch siblings knew or
reasonably should have known of Gary’s alleged mismanagement or
———————————————————————
4 Gary also relied on an inspection request from 2012, and the jury
received evidence of this request.
19
of their injuries before Mr. Lausten’s inspection. Gary asks us to
infer knowledge of mismanagement from the existence of a family
dispute over estate matters; however, he does not identify the
record evidence from which we could draw this inference since the
letters do not allege or even mention mismanagement. Indeed, the
Tisch siblings unequivocally testified that they never suspected
Gary’s mismanagement until Mr. Lausten’s inspection. And Gary
did not refute this with his own testimony of any prior accusations
of mismanagement.
¶ 39 Moreover, Gary has not cited, nor are we aware of, any
Colorado authority holding that a minority shareholder has an
affirmative duty to examine corporate records to discover potential
violations by a majority shareholder. Cf. Left Hand Ditch Co. v. Hill,
933 P.2d 1, 5 (Colo. 1997) (“Shareholders have a common law right
to inspect the books and records of the corporation.”) (emphasis
added); Van Schaack Holdings, Ltd. v. Van Schaack, 867 P.2d 892,
897-98 (Colo. 1994) (explaining that majority shareholders have an
affirmative duty to disclose material facts relating to the value of
stock to minority shareholders, but saying nothing about a minority
shareholder’s duty to discover information independently).
20
Therefore, we agree with the trial court that the timing of the Tisch
siblings’ knowledge of their injuries was not subject to reasonable
debate. And by filing their complaint on April 29, 2016, they were
well within the relevant two- and three-year statute of limitations
periods for both civil theft and breach of fiduciary duty. See MDM
Grp. Assocs., 165 P.3d at 885 (directed verdict appropriate where no
reasonable juror could disagree).
¶ 40 Because we conclude that the trial court properly directed a
verdict on the statute of limitations affirmative defense, we need not
decide whether it erred in precluding the admission of the letters
under CRE 408. Even if we assumed the court erred, Gary has not
explained how the letters were relevant, except to the statute of
limitations, an argument that we have already rejected. See CRE
402 (“Evidence which is not relevant is not admissible.”); Neher v.
Neher, 2015 COA 103, ¶ 33 (“An appellate court can affirm a trial
court’s ruling for any reason supported by the record, even if that
reason was not argued to, or addressed by, the trial court.”).
¶ 41 Finally, we conclude that the treble damages award was not
barred by the one-year statute of limitations. As relevant here, a
party who prevails on a civil theft claim “may recover two hundred
21
dollars or three times the amount of the actual damages sustained
by him, whichever is greater, and may also recover costs of the
action and reasonable attorney fees.” § 18-4-405. But section 13-
80-103(1)(d), C.R.S. 2018, provides as follows:
(1) The following civil actions, regardless of the
theory upon which suit is brought, or against
whom suit is brought, shall be commenced
within one year after the cause of action
accrues, and not thereafter:
(d) All actions for any penalty or forfeiture of
any penal statutes[.]
¶ 42 Gary argues that Mr. Lausten’s receipt of the corporate
records on April 15, 2015, started the one-year limitations period
and required the Tisch siblings to file their civil theft claim by April
15, 2016, in order to seek treble damages. He reasons that this
undisputed evidence conclusively establishes that the Tisch siblings
knew or reasonably should have known of the facts underlying their
civil theft claim on April 15, and that their claim, filed on April 29,
2016, was time barred. See § 13-80-108(1), C.R.S. 2018 (A cause of
action accrues “on the date both the injury and its cause are known
or should have been known by the exercise of reasonable
diligence.”); Miller v. Byrne, 916 P.2d 566, 582 (Colo. App. 1995)
22
(same). We disagree because the record shows that Gary failed to
elicit any evidence concerning when the Tisch siblings either knew
or reasonably should have known the facts underlying their civil
theft claim and, thus, that he did not meet his burden of proof. See
W. Distrib. Co. v. Diodosio, 841 P.2d 1053, 1057 (Colo. 1992) (“The
burden of proving an affirmative defense rests upon the defendant
asserting the defense.”); see also Wagner v. Grange Ins. Ass’n, 166
P.3d 304, 307 (Colo. App. 2007) (noting that whether a claim is time
barred is a question of fact unless the undisputed facts show the
plaintiff had or should have had the requisite information on a
particular date).
¶ 43 Mr. Lausten testified that he received the corporate records in
April 2015, but Gary’s counsel never asked timing-related questions
on cross-examination, such as when Mr. Lausten began reviewing
the records, when he first noticed evidence of mismanagement, or
when he first discovered evidence to support civil theft. Further,
although Gary’s counsel attempted to elicit the Tisch siblings’
suspicions of Gary’s mismanagement during the prior estate
proceedings, both siblings denied any suspicions of
mismanagement and said they first learned of mismanagement
23
following Mr. Lausten’s review. Notably, neither sibling was
impeached on this issue. See Salazar v. Am. Sterilizer Co., 5 P.3d
357, 363 (Colo. App. 2000) (finding that mere suspicion “does not
necessarily put a reasonable person on notice of the nature, extent,
and cause of an injury”). Indeed, Gary testified that he provided all
records to Mr. Lausten on April 15, 2015. But, he never described
any conversations or disagreements with the Tisch siblings
concerning his management of the business over the years.
¶ 44 On this record, we conclude that Gary failed to produce
sufficient evidence of a period during which the Tisch siblings knew
or reasonably should have known “of the general nature of damage
and that the damage was caused by [Gary’s] wrongful conduct.”
Colburn v. Kopit, 59 P.3d 295, 297 (Colo. App. 2002). Gary does not
cite, nor are we aware of, any authority holding that an expert’s
mere receipt of records establishes reasonable knowledge or begins
the running of the statute of limitations.
¶ 45 Accordingly, we discern no error in the trial court’s award of
treble damages.
24
2. Sufficient Evidence Supports Individual Civil Theft Claim
¶ 46 Gary next contends that the Tisch siblings never had a
property interest in the Liquor Barn’s profits — because he never
declared a shareholder distribution — and that they, therefore, had
no valid civil theft claim against him. He reasons that because a
shareholder is entitled only to a corporation’s profits and not its
divisible assets, the Tisch siblings had no standing to assert civil
theft. We disagree and, instead, conclude that whether Gary’s
payments to himself and his other entities constituted a
“distribution of profits” payable to all shareholders — from which he
wrongfully withheld the Tisch siblings’ share — was a factual
question for the jury.
a. Standard of Review
¶ 47 Although the parties briefed the issue based on denial of
Gary’s partial summary judgment motion, “[a] denial of a motion for
summary judgment is not a final determination on the merits and,
therefore, is not an appealable order.” Karg v. Mitchek, 983 P.2d
21, 25 (Colo. App. 1998). Nor is such a denial appealable after a
final judgment. Id.
25
¶ 48 Instead, to preserve an issue raised in a denied motion for
summary judgment, a party must raise the issue in a motion for a
directed verdict or judgment notwithstanding the verdict during
trial. See Feiger, Collison & Killmer v. Jones, 926 P.2d 1244, 1249
(Colo. 1996). Put differently, the party must give the trial court an
opportunity to rule on the issue as a matter of law at trial.
See generally Bd. of Cty. Comm’rs v. Rodgers, 2015 CO 56, ¶ 14
(summary judgment and directed verdict employ the same standard
— judgment as a matter of law).
¶ 49 Here, Gary preserved this argument when he reraised it during
trial and sought a directed verdict on the civil theft claim. The
court denied the motion and the question whether the Tisch
siblings alleged a sufficient basis for civil theft was submitted to the
jury.
¶ 50 Directed verdicts are disfavored. Langlois v. Bd. of Cty.
Comm’rs, 78 P.3d 1154, 1157 (Colo. App. 2003). A directed verdict
should be entered only where the evidence, considered in the light
most favorable to the nonmoving party, “compels the conclusion
that reasonable people could not disagree and that no evidence, or
legitimate inference from the evidence, has been presented upon
26
which a jury verdict against the moving party could be sustained.”
Id. We review rulings on directed verdict motions de novo. Park
Rise Homeowner’s Ass’n v. Res. Constr. Co., 155 P.3d 427, 431
(Colo. App. 2006).
b. Relevant Law
¶ 51 Section 18-4-405 provides independent civil remedies to an
owner of stolen property and requires that all property obtained by
theft, robbery, or burglary be returned to the owner. See In re
Marriage of Allen, 724 P.2d 651, 658 (Colo. 1986). Civil theft
requires the proof of two elements: (1) the defendant knowingly
obtained control over the plaintiff’s property without authorization
and (2) the defendant did so with the specific intent to permanently
deprive the plaintiff of the benefit of the property. Huffman v.
Westmoreland Coal Co., 205 P.3d 501, 509 (Colo. App. 2009); see
§ 18-4-401(1), C.R.S. 2018 (theft); § 18-4-405 (rights in stolen
property). Property or money belongs to another if anyone other
than the defendant has a possessory or proprietary interest in it.
§ 18-4-401(1.5).
¶ 52 A “proprietary interest” is an ownership interest in the subject
property. See Webster’s Third New Int’l Dictionary 1819 (2002)
27
(“proprietary” means “held as the property of a private owner”);
Black’s Law Dictionary 934, 1280 (10th ed. 2014) (“interest” is a
legal or equitable claim to or right in property; “ownership” implies
the right to possess a thing, regardless of any actual or constructive
control).
¶ 53 On the one hand, an alleged victim’s status as a creditor of a
debtor defendant, without more, does not establish that such
person has a proprietary interest in any specific property. See, e.g.,
People v. Rotello, 754 P.2d 765 (Colo. 1988) (landlord did not own
money that represented payment for beverages sold to others, even
though rent was calculated based on gross income tenant allegedly
had failed to report); Kelley v. People, 157 Colo. 417, 419, 402 P.2d
934, 935 (1965) (where the defendant was not an employee for the
collection of funds and was not obligated to hold specific funds for
the purpose of paying the gasoline company for gasoline he sold,
the defendant merely owed money to the company and his
nonpayment did not constitute theft).
¶ 54 But on the other hand, once a dividend is declared, a
shareholder has the right to that money in his or her individual
capacity. Erdman v. Yolles, 233 N.W.2d 667, 669 (Mich. Ct. App.
28
1975); see Cowin v. Bresler, 741 F.2d 410, 415 (D.C. Cir. 1984)
(“Wrongful withholding of dividends, for example, gives rise to an
individual cause of action. . . . Because dividends are an incident of
stock ownership, an action to compel the payment of dividends will
not inure to the benefit of the corporation . . . .”); 12B Fletcher
Cyclopedia of the Law of Corporations § 5922, Westlaw (database
updated Sept. 2018) (“A shareholder may sue the corporation or its
officers to recover a dividend after it has been declared, since the
shareholder then has a right to the money in an individual
capacity.”). But what is a shareholder’s interest in corporate profits
misappropriated by a person who could have declared a
distribution?
¶ 55 Of course, a corporate shareholder may not bring a direct
action against a director or other third party whose action causes
harm to the corporation. Instead, either the corporation itself, or a
shareholder acting on behalf of the corporation in a derivative
action under C.R.C.P. 23.1, must pursue such a claim. See Box v.
Roberts, 112 Colo. 234, 238, 148 P.2d 810, 812 (1944); River Mgmt.
Corp. v. Lodge Props. Inc., 829 P.2d 398, 403 (Colo. App. 1991).
Still, in limited circumstances, a shareholder may bring a personal
29
action against a corporation where the shareholder has sustained
an injury separate and distinct from that of the corporation or the
other shareholders. For example, a division of this court implicitly
recognized that a breach of fiduciary duty allegation against
majority shareholders who distributed corporate profits in the form
of a “bonus” to a majority shareholder, rather than as a “dividend”
to all shareholders, created a question of fact. See Polk v. Hergert
Land & Cattle Co., 5 P.3d 402, 405 (Colo. App. 2000) (reversing
summary judgment on breach of fiduciary duty claim). But no
Colorado case has considered whether profits, misused by a
controlling shareholder in a closely held corporation, can be
reclassified as “distributions” to form the basis for a minority
shareholder’s individual civil theft claim. So, we look for guidance
to cases in other jurisdictions that have addressed this issue.
¶ 56 In Erdman, 233 N.W.2d at 668, four hairdressers each owned
a 25% interest in their corporation. The plaintiff stopped working
at the business, but he retained his 25% interest in it. Id. After the
plaintiff’s departure, the other three shareholders liquidated
corporate investments, which had been made during the plaintiff’s
active service, and distributed the proceeds among themselves as
30
retroactive pay increases and bonuses. Id. The plaintiff filed suit
seeking damages for the defendants’ alleged wrongful depletion of
corporate assets. Id. Following a bench trial, the trial court
awarded the plaintiff 25% of the proceeds and found that “the
conduct of the three principal defendants ‘in cashing in previously
acquired assets, and then distributing them, amounts to the
payment of a dividend, from which the plaintiff was denied his one-
fourth (1/4) share.’” Id. at 669. The court of appeals affirmed the
trial court’s finding that corporate profits had been distributed
through salary increases and bonuses and held that the
distribution of profits in this manner “constituted a dividend,
whether denominated such or not.” Id.
¶ 57 Similarly, in Lengsfield v. Commissioner, 241 F.2d 508, 509
(5th Cir. 1957), an income tax deficiency case involving majority
shareholders who were close relatives and drew large salaries from
the corporation, the tax court was tasked with deciding whether
monthly payments from the corporation to these shareholders
constituted “distributions of corporate earnings,” taxable to the
recipients, or whether they were “gratuities paid with donative
intent,” not subject to taxation. Id. at 509-10. The tax court
31
concluded the payments constituted dividends subject to taxation.
Id. The appellate court agreed and found that “whether or not a
corporate distribution is a dividend or something else . . . presents
a question of fact to be determined in each case.” Id. at 510. It
rejected the shareholders’ argument that the corporation’s
characterization of the payments as a “gratuity” for past services
rendered was determinative and, instead, concluded that “there is
no requirement that a particular distribution be termed a dividend,
or that there be a formal dividend declaration . . . .” Id. at 511.
¶ 58 As well, in Murphy v. Country House, Inc., 349 N.W.2d 289,
292 (Minn. Ct. App. 1984), the Minnesota Court of Appeals relied in
part on Erdman to hold that corporate profits paid as bonuses to
select shareholders of a closely held corporation in years of surplus
profits constituted dividends to which all shareholders were entitled
their proportionate share. Noting the absence of record evidence
establishing any link between performance and the payment of the
alleged bonuses, the court found that “the corporation instead
distributed ‘bonuses’ only when fiscal reports showed sufficient
income in the prior years.” Id. It held that “[a]lthough the Board
neither classified the payments as dividends nor distributed the
32
monies ratably according to each shareholder’s interest, it
effectively paid dividends to some of its shareholders during its
years of surplus profits.” Id. at 293.
¶ 59 Courts in other jurisdictions have similarly held that
distributed corporate profits not formally declared as dividends in
fact constituted dividends and formed the basis for a direct claim.
See, e.g., Hanson v. Kake Tribal Corp., 939 P.2d 1320, 1322 (Ala.
1997) (payments under a financial security plan to select
shareholders constituted a “dividend” to which all shareholders
were entitled); Alliegro v. Pan Am. Bank, 136 So. 2d 656, 659-61
(Fla. Dist. Ct. App. 1962) (“[T]he mere fact that the distributions are
not called ‘dividends’ by the board of directors of the corporation
does not detract from such distributions being dividends.”); see also
Stephenson v. Plastics Corp. of Am., 150 N.W.2d 668, 676 (Minn.
1967) (“In determining whether a transaction constitutes a
‘dividend,’ consideration must be given to the context in which the
term dividend is used; the consequences that turn upon the answer
to the question; and the facts of the particular case.”).
33
c. Application
¶ 60 In their complaint, the Tisch siblings alleged that Gary had
drained the Liquor Barn’s profits through unauthorized loan
payments, payments on personal credit cards, and payments to
himself as an hourly employee, vendor, and officer. They asserted
that Gary exercised complete control over these distributions, that
these funds constituted profits that Gary distributed to himself
although they were entitled to a 20% share, and that Gary acted
with the intent to permanently deprive them of their interest in
these profits.
¶ 61 First, we reject Gary’s contention that civil theft was not
cognizable because he had the sole discretion, as the majority
shareholder, to authorize distributions, but he never did so.
Instead, we agree with the trial court and the authorities cited
above that whether the diversion of corporate profits constitutes a
distribution is a question of fact. Here, the court instructed the
jury that a distribution was a “direct or indirect transfer by [a]
corporation of money or other property, . . . to or for the benefit of
any of its shareholders in respect of any of its shares” that could be
“in any form, including a declaration or payment of a dividend; a
34
purchase, redemption, or other acquisition of shares; or
distribution of indebtedness.” It also instructed the jury that to find
civil theft, it had to conclude that Gary obtained control over the
Tisch siblings’ 20% share of distributions, which in turn required
the jury to find that the diverted profits constituted distributions to
which the Tisch siblings were entitled. In finding for the Tisch
siblings, the jury necessarily determined that the proceeds Gary
spent on his other businesses and personal expenses constituted
distributions in which the Tisch siblings were entitled to share.
¶ 62 We further conclude that the Tisch siblings had a distinct,
proprietary interest in their share of these undeclared distributions
that allowed them to bring an individual claim against Gary for civil
theft. Compare Rhino Fund, LLLP v. Hutchins, 215 P.3d 1186, 1195
(Colo. App. 2008) (“An action will lie for the conversion of money
where there is an obligation to return or otherwise particularly treat
specific money.”) (emphasis added), with Huffman, 205 P.3d at 509
(explaining that an employee with stock options has no presently
enforceable property right for a civil theft claim where the stock
options are not presently enforceable); Ladd v. Ladd Constr., LLC,
No. TTDCV074007051S, 2008 WL 4416048, at *1 (Conn. Super. Ct.
35
Sept. 15, 2008) (“If a member or manager of a limited liability
company commits a tortious act while on company business, he
may be personally liable to an injured party.”); Moore v. Me. Indus.
Servs., Inc., 645 A.2d 626, 630 (Me. 1994) (concluding that where
the majority shareholders paid dividends only to themselves and
excluded a minority shareholder from receiving dividends from a
line of credit, the minority shareholder had a direct cause of action
against the majority shareholders); Erdman, 233 N.W.2d at 669 (the
failure to share distributions of profits constituted a proper basis
for a direct action by the minority shareholder).
¶ 63 “The distinction between derivative and direct claims turns
primarily on whether the breach of duty is to the corporation or to
the shareholder(s) and whether it is the corporation or the
shareholder(s) that should appropriately receive relief.” In re
Ionosphere Clubs, Inc., 17 F.3d 600, 605 (2d Cir. 1994).
Particularly for closely held corporations, it is important for the fact
finder to determine whether diverted funds are actually
distributions, because if only a derivative suit is permitted, the
damages recovered simply revert to the wrongdoer. See Lynch v.
Patterson, 701 P.2d 1126, 1130 (Wyo. 1985) (awarding damages to
36
a minority shareholder individually on a shareholder derivative
claim and explaining that courts should permit direct recovery “to
prevent an award from reverting to the wrongdoers who remain in
control of the corporation”).
¶ 64 Finally, we are not persuaded by Gary’s argument that no civil
theft occurred because his actions were done “with authorization.”
The Tisch siblings never disputed Gary’s authority to declare or not
declare dividends. They simply alleged that his decision to use the
Liquor Barn profits for personal and other business matters
constituted a distribution that entitled them to a share of the funds
distributed. Because a majority shareholder must share dividends
with minority shareholders, Gary was not authorized to keep 100%
of the distributions of the Liquor Barn’s profits, and his decision to
do so constituted civil theft. See Erdman, 233 N.W.2d at 669 (once
dividends are declared a shareholder has a right to his or her
portion of dividends).
¶ 65 In the end, and because Gary had the power to make
distributions and declare dividends, we conclude that whether the
diverted profits constituted a distribution in which the Tisch
siblings had a proprietary interest was a question for the jury.
37
Thus, we affirm the court’s denial of Gary’s motion for directed
verdict on the individual civil theft claim.
D. Sufficiency of Damages
¶ 66 Gary next contends that insufficient evidence supports the
jury’s total $450,000 damages award. Alternatively, he contends
that the civil theft claim should be modified so that the Tisch
siblings receive 20% of the $300,000 damage award. We discern no
error.
1. Standard of Review
¶ 67 Determining the amount of damages is within the jury’s
discretion. Palmer v. Diaz, 214 P.3d 546, 552 (Colo. App. 2009).
“[A]bsent an award so excessive or inadequate as to shock the
judicial conscience and to raise an irresistible inference that
passion, prejudice, corruption or other improper cause invaded the
trial, the jury’s determination of the fact is considered inviolate.”
Higgs v. Dist. Court, 713 P.2d 840, 860-61 (Colo. 1985) (quoting
Hurd v. Am. Hoist & Derrick Co., 734 F.2d 495, 503 (10th Cir.
1984)). An appellate court “will not disturb an award of damages
unless it is completely unsupported by the record.” Averyt v.
Wal-Mart Stores, Inc., 265 P.3d 456, 462 (Colo. 2011). That said, “a
38
damage award may not be based on speculation or conjecture.”
Logixx Automation, Inc. v. Lawrence Michels Family Tr., 56 P.3d
1224, 1227 (Colo. App. 2002).
¶ 68 We reject the Tisch siblings’ assertion that Gary did not
preserve this issue because “the reasonableness of an award is
always subject to judicial scrutiny in the post-trial and appellate
stages of a case.” Averyt, 265 P.3d at 462.
2. Analysis
¶ 69 Gary asserts that no evidence shows that he stole $300,000 in
distributions from the Tisch siblings because no evidence
established the portion of hypothetical lost profits that should have
been distributed as dividends. We disagree and conclude that he
misapprehends the jury’s findings. The jury found that Gary took
funds for himself and his other companies, which it concluded
constituted “distributions,” and that he failed to share 20% of those
distributions with the Tisch siblings.
¶ 70 Mr. Lausten performed a comparative analysis to estimate the
Liquor Barn’s total lost profits. Based on these comparisons, he
opined that the Liquor Barn experienced $2,172,436 in lost profits
over a fifteen-year period. Twenty-percent of that amount —
39
representing each Tisch siblings’ 10% share — is $434,487, which
is approximately $15,000 less than the jury’s award of $450,000.
In our view, this is not a gross deviation from an acceptable
amount, and it is not so excessive as to shock the judicial
conscience. See Higgs, 713 P.2d at 860-61.
¶ 71 Nor are we persuaded that the $300,000 award for civil theft
should be reduced to $60,000 — or 20% of the total award. We
disagree that the $300,000 award represents total distributions
because the record shows total lost profits of approximately $2.2
million. Therefore, the $300,000 award reasonably reflects the
portion of total profits that the jury believed the Tisch siblings
should have received as a distribution.5
III. Cross-Appeal
¶ 72 The Tisch siblings raise three contentions in their
cross-appeal: (1) the cap on expert witness fees was arbitrary; (2)
———————————————————————
5 Although not separately raised by Gary, we acknowledge the
discrepancy in the damages awarded for civil theft and breach of
fiduciary duty. This discrepancy is supported by the court’s
damages jury instruction for breach of fiduciary duty requiring the
jury to consider “[a]ny loss of profits or income which plaintiffs
could reasonably have expected to earn had the fiduciary duty not
been breached.”
40
the court should have based attorney fees on the trebled damages
amount rather than on the jury’s verdict; and (3) the court
erroneously granted summary judgment for Gary on their
declaratory judgment claim. We consider and reject each of these
contentions.
A. Expert Witness Fee Cap
¶ 73 The parties originally submitted a proposed case management
order that did not include a fee cap. According to the minute
orders, the trial court conducted a one-hour hearing on this
proposed order. However, the Tisch siblings did not designate this
hearing transcript as part of the record on appeal. See Colo. Dep’t
of Pub. Health & Env’t v. Bethell, 60 P.3d 779, 787 (Colo. App. 2002)
(concluding that the appellant is responsible for designating the
record on appeal, and if we do not receive a complete record we
presume it supports the trial court’s conclusions). Following the
hearing, the parties submitted a revised proposed case management
order containing a cap on expert witness fees and general litigation
costs. Without the hearing transcript, we cannot determine the
parties’ positions on this revision or whether the court or the
parties provided any justification for imposing these caps.
41
¶ 74 Be that as it may, the trial court adopted the revisions in its
revised case management order. As relevant here, paragraph 11 of
that order provides as follows:
Any limitations on awardable costs:
Expert fees are capped at $35,000.00 per side,
through trial. General litigation costs are
capped at a total of $7,000.00 per side,
including deposition and transcript costs,
filing fees, copy costs, exhibits, appearance
fees.
State the justifications for any modifications in
the foregoing C.R.C.P. 26(b)(2) limitations:
Ordered by the judge.
¶ 75 Although not reflected in the order, the parties agree that the
trial court orally told them that if either party sought to raise the
limits on awardable costs, that party should file a motion to do so.
Neither party requested an increase in the cap.
¶ 76 After the court entered judgment, the Tisch siblings submitted
a bill of costs requesting $52,670.60 for their expert witness,
without referencing the $35,000 cap or requesting relief from it.
The Tisch siblings now complain that the cap was arbitrary. We
conclude that they are not entitled to relief because they never
availed themselves of the remedy provided by the court.
42
1. Standard of Review and Law
¶ 77 Trial courts have “considerable discretion in determining
whether to award costs and what amount to award.” Valentine v.
Mountain States Mut. Cas. Co., 252 P.3d 1182, 1187 (Colo. App.
2011); see Novel v. Am. Guar. & Liab. Ins. Co., 15 P.3d 775, 780
(Colo. App. 1999). An order awarding costs will stand absent a
showing of a clear abuse of discretion. Gf Gaming Corp. v. Taylor,
205 P.3d 523, 526 (Colo. App. 2009). Similarly, as to expert
witness fees, whether to award expert fees and in what amount are
within the sound discretion of the trial court. Clayton v. Snow, 131
P.3d 1202, 1203 (Colo. App. 2006); Steele v. Law, 78 P.3d 1124,
1128 (Colo. App. 2003). We construe court rules de novo and,
absent ambiguity, apply the language therein as written. See
Northstar Project Mgmt, Inc. v. DLR Grp., Inc., 2013 CO 12, ¶ 12.
¶ 78 Under C.R.C.P. 54(d), costs are awarded to a prevailing party
based on relevant factors, which can include the needs and
complexity of the case and the amount in controversy. “Generally,
when costs are necessarily incurred by reason of the litigation and
for the proper preparation for trial, they may be awarded to the
prevailing party.” Mackall v. Jalisco Int’l, Inc., 28 P.3d 975, 977
43
(Colo. App. 2001). Section 13-16-122, C.R.S. 2018, lists categories
of costs that may be awarded, which include, among other items,
witness fees.
2. Analysis
¶ 79 The relevant portion of C.R.C.P. 16(b)(11) provides as follows:
The proposed [case management] order shall
state any modification to the amounts of
discovery permitted in C.R.C.P. 26(b)(2),
including limitations of awardable costs, and
the justification for such modifications
consistent with the proportionality factors in
C.R.C.P. 26(b)(1).
(Emphasis added.)
¶ 80 We begin with the rule’s plain language, which requires a
justification for limits placed on awardable costs consistent with the
proportionality factors in Rule 26(b)(1). The rule’s use of the word
“shall” indicates that a justification is mandatory. See Tubbs v.
Farmers Ins. Exch., 2015 COA 70, ¶ 10. Neither side identifies
whether or where this justification occurred. The better practice
would be to include the justification in the case management order.
Nevertheless, we presume it occurred at the case management
conference, given the statement “Ordered by the judge” and that
consideration of these proportionality factors produced a cap
44
consistent with the expected litigation. See Nelson v. Centennial
Cas. Co., 130 Colo. 66, 72, 273 P.2d 121, 123 (1954) (“That error
may have been committed by the trial court is never presumed, but
must affirmatively be made to appear.”); Tallman v. Aune, 2019 COA
12, ¶ 30 (“Indeed, ‘[t]here is no principle of law better settled, than
that every act of a court of competent jurisdiction shall be
presumed to have been rightly done, till the contrary appears[.]’”
(quoting Voorheis v. Jackson, 35 U.S. 449, 472 (1836))). For these
reasons, we cannot say that the caps were set arbitrarily.
¶ 81 Additionally, we find significant the court’s oral ruling
permitting either side to seek relief from the caps, which recognizes
the reality that estimates are not always correct and that the caps
may be insufficient. Even so, the Tisch siblings never requested
relief from the expert witness cap, either before judgment or in their
bill of costs. Therefore, we discern no abuse of discretion in the
trial court’s refusal to award expert witness fees beyond the
$35,000 cap. See Hallenbeck v. Granby Ditch & Reservoir Co., 160
Colo. 555, 573, 420 P.2d 419, 429 (1966) (“The record fails to reveal
that the objector filed any such motion or that one was ever filed by
anyone. After having been given the opportunity by the trial court
45
to pursue his request further in this action, the objector cannot
now complain before this court when it appears that he failed to
accept the trial court’s offer . . . .”).
B. Contingent Fee Multiplier
¶ 82 The Tisch siblings next contend that the trial court should
have based the attorney fees award on the treble damages amount,
rather than on the jury’s verdict, and they urge us to adopt a
contingent fee multiplier. We decline their invitation to mandate a
contingent fee multiplier and affirm the court’s attorney fees award.
1. Standard of Review and Law
¶ 83 We review the reasonableness of an attorney fee award for an
abuse of discretion. Planning Partners Int’l, LLC v. QED, Inc., 2013
CO 43, ¶ 12. A court abuses its discretion when its ruling is
manifestly arbitrary, unreasonable, or unfair, and we will not
overturn a trial court’s determination of a reasonable attorney fee
award unless it is patently erroneous and unsupported by the
evidence. Id.
¶ 84 An award of attorney fees must be reasonable. Tallitsch v.
Child Support Servs., Inc., 926 P.2d 143, 147 (Colo. App. 1996). In
awarding attorney fees, the trial court may consider (1) the amount
46
in controversy; (2) the length of time required to represent the client
effectively; (3) the complexity of the case; (4) the value of the legal
services to the client; and (5) and awards in similar cases. Id.; see
also Colo. RPC 1.5. To determine reasonable “prevailing party”
attorney fees, the court calculates a “lodestar” amount, which
represents the number of hours reasonably expended by the
attorneys multiplied by a reasonable hourly rate. Tallitsch, 926
P.2d at 147. The court may then adjust the lodestar amount
upward or downward by applying factors set forth in Colo. RPC 1.5.
Id.
2. Application
¶ 85 Relying on Spensieri v. Farmers Alliance Mutual Insurance Co.,
804 P.2d 268, 270 (Colo. App. 1990), the trial court noted that the
existence of a contingent fee agreement was one factor to consider
in determining reasonable attorney fees. It also noted that the
lodestar amount “carries with it a strong presumption of
reasonableness.” Id. After considering the Tisch siblings’
contingent fee agreement, the lodestar amount of $133,223.22, and
“all other circumstances,” the court concluded that “the most
reasonable way to calculate an award of attorney’s fees here is to
47
apply the 1/3 contingency arrangement to the jury’s $450,000.00
calculation of damages.” It then increased the lodestar amount and
awarded $150,000 in attorney fees.
¶ 86 The Tisch siblings cite no Colorado case law, nor have we
found any, either requiring a trial court to give any greater effect to
a contingency agreement in setting a reasonable fee or to apply a
contingency percentage to a punitive award. Clearly, the trial court
considered the contingent nature of the representation when
increasing the lodestar amount. Thus, because the award is
supported by the record, we discern no abuse of discretion.
Tallitsch, 926 P.2d at 147.
C. Summary Judgment on Declaratory Relief
¶ 87 Finally, the Tisch siblings challenge the trial court’s ruling
granting Gary summary judgment on their declaratory judgment
claim. That claim alleged improprieties in the number of owned
shares and the division of voting and nonvoting stock stemming
from father’s failure to abide by the 1991 dissolution order and
father’s recapitalization of the business in 1997. The Tisch siblings
claim they never knew their shares were converted to nonvoting
48
shares or that they owned fewer shares than they were originally
granted.
¶ 88 The trial court concluded that this claim was barred by the
statute of limitations. It relied on language in a 2003 letter from
their attorney to Gary stating, “The parties recognize that the 10%
non-voting stock may be subject to a discount for lack of control,
lack of marketability, et cetera . . . .” We discern no error in the
court’s ruling.
1. Standard of Review and Law
¶ 89 We review a trial court’s ruling on a summary judgment
motion de novo. Gibbons v. Ludlow, 2013 CO 49, ¶ 11. Summary
judgment is appropriate when “there is no genuine issue as to any
material fact,” C.R.C.P. 56(c), and the “moving party is entitled to
judgment as a matter of law,” Gibbons, ¶ 11. Because summary
judgment denies a party a right to trial, a trial court should only
enter summary judgment “where there is no role for the fact finder
to play and where the controlling law entitles one party or the other
to a judgment in its favor.” Roberts v. Am. Family Mut. Ins. Co., 144
P.3d 546, 548 (Colo. 2006). “[T]he nonmoving party is entitled to
any favorable inferences that may reasonably be drawn from the
49
facts.” Clementi v. Nationwide Mut. Fire Ins. Co., 16 P.3d 223,
225-26 (Colo. 2001).
¶ 90 Any action to recover a liquidated debt or an unliquidated,
determinable amount of money and for enforcement of rights set
forth in any instrument must be commenced within six years of its
accrual date. § 13-80-103.5(1), C.R.S. 2018. A cause of action
accrues when the injury, loss, damage, or conduct giving rise to the
claim is discovered or should have been discovered through the
exercise of reasonable diligence. § 13-80-108(8).
2. Application
¶ 91 The parties do not dispute the contents of the letter or that the
Tisch siblings were copied on it. As well, Gary attached copies of
the original 1982 stock certificates to his summary judgment
motion. They show that the Tisch siblings each received 1600
shares of stock, and that each certificate was signed by Daniel as
secretary of the corporation.
¶ 92 The Tisch siblings also admitted, in their amended complaint,
that they knew about the 1991 separation agreement, which
entitled each of them to an additional 10% stock in the Liquor Barn.
Thus, the 2003 letter’s language identifying the Tisch siblings’
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shares as “10% non-voting stock,” notified them that their share
amounts had not increased an additional 10% in 1991, and it
placed them on notice of a share amount discrepancy. Had the
Tisch siblings exercised due diligence to investigate this discrepancy
in 2003, they would also have discovered the consequences of
father’s recapitalization in 1997 converting their voting stock to
nonvoting status. Accordingly, we conclude that the trial court
properly applied section 13-80-108(8) to find this claim time barred.
D. Appellate Attorney Fees
¶ 93 The Tisch siblings request their appellate attorney fees,
claiming that Gary’s appeal of the civil theft judgment was frivolous.
We disagree because, although we have affirmed the trial court’s
rulings, we do not find that Gary’s arguments are entirely without
legal merit. Nevertheless, the Tisch siblings are entitled to
reasonable appellate attorney fees under the civil theft statute.
§ 18-4-405; see Black v. Black, 2018 COA 7, ¶ 130 (concluding that
section 18-4-405 entitles party to appellate attorney fees).
Accordingly, we exercise our discretion under C.A.R. 39.1 and
remand the case to the trial court for a determination of reasonable
appellate attorney fees allocable to the civil theft claim.
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IV. Conclusion
¶ 94 The judgment is affirmed, and the case is remanded for the
determination of reasonable appellate attorney fees related to the
civil theft claim.
JUDGE WEBB and JUDGE ROMÁN concur.
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