23 LTD v. Herman

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
July 25, 2019
2019COA113
No. 18CA0950, 23 LTD v. Herman — Labor and Industry —
Employment Contracts — Noncompetition Agreements —
Nonsolicitation Agreements
In this case concerning the alleged breach of an employment
agreement’s noncompete and nonsolicitation provisions, the
division holds that parties to an employment, noncompete, or
nonsolicitation agreement cannot contractually obligate a court to
blue pencil noncompete or nonsolicitation provisions to render any
unenforceable terms enforceable. Thus, the district court did not
err or abuse its discretion when it declined to blue pencil a
nonsolicitation provision that is unenforceable under Colorado law.
COLORADO COURT OF APPEALS 2019COA113
Court of Appeals No. 18CA0950
City and County of Denver District Court No. 14CV34518
Honorable J. Eric Elliff, Judge
23 LTD, d/b/a Bradsby Group, a Colorado corporation,
Plaintiff-Appellant and Cross-Appellee,
v.
Tracy Herman,
Defendant-Appellee and Cross-Appellant.
JUDGMENT AFFIRMED, ORDER REVERSED,
AND CASE REMANDED WITH DIRECTIONS
Division VII
Opinion by JUDGE BERGER
Dunn and Navarro, JJ., concur
Announced July 25, 2019
Sherman & Howard, L.L.C., Tamir I. Goldstein, William R. Reed, Denver,
Colorado, for Plaintiff-Appellant and Cross-Appellee
McElroy, Deutsch, Mulvaney & Carpenter, LLP, Kristi L. Blumhardt, Lily
Ramirez, Englewood, Colorado, for Defendant-Appellee and Cross-Appellant
¶1 This case presents an employment law issue of first
impression in Colorado –– when, if ever, is a court required to blue
pencil a noncompete or nonsolicitation 1 agreement to conform it to
Colorado law?2
¶2 23 LTD, d/b/a Bradsby Group (Bradsby), sued former
employee Tracy Herman for breach of noncompete and
nonsolicitation provisions in her employment agreement. A jury
determined that Herman had not breached the noncompete
provision. The jury returned a verdict (and awarded nominal
damages of one dollar) in favor of Bradsby on the nonsolicitation
claim, but the district court set aside that verdict and entered
judgment in favor of Herman because the nonsolicitation provision
violates Colorado law and because the court declined to narrow the
1 This provision is also sometimes referred to as a noncontact or no-
contact agreement.
2 While some courts use the term “blue penciling” to refer only to
the removal of words from a noncompete or nonsolicitation
provision without modifying or adding any other terms, Ferrofluidics
Corp. v. Advanced Vacuum Components, Inc., 968 F.2d 1463, 1469
(1st Cir. 1992), others use the term to refer more generally to any
court modifications of such provisions, ADP, LLC v. Rafferty, 923
F.3d 113, 120 n.7 (3d Cir. 2019). We use the term “blue pencil” to
refer to any modification of a noncompete or nonsolicitation
provision by a court.
1
provision to render it enforceable. Despite entering judgment in
favor of Herman on both claims, the court denied her request for
attorney fees under the agreement’s fee-shifting provision. Bradsby
appeals the merits judgment, and Herman cross-appeals the denial
of attorney fees.
¶3 We conclude that the record supports the jury’s verdict on the
noncompete claim and that the court did not err or abuse its
discretion in declining to blue pencil the nonsolicitation provision.
Thus, we affirm the court’s merits judgment. We also conclude that
Herman is entitled to attorney fees because she prevailed on both
breach of contract claims, and we therefore reverse the court’s order
denying attorney fees and remand with directions.
I. Relevant Facts and Procedural History
¶4 Bradsby hired Herman in 2009 as a legal recruiter. When she
was hired, she signed an Account Executive Employment
Agreement that included noncompete and nonsolicitation provisions
(agreement). The noncompete provision states, in relevant part:
Upon termination of his/her employment with
Bradsby, Account Executive . . . shall not . . .
within the Restricted Area from a period of
twelve (12) months from the date of
termination of employment become an owner,
2
partner, investor, or shareholder in any entity
that competes with Bradsby without prior
written consent of Bradsby . . . .
¶5 The agreement defines the “Restricted Area” as any place
“within 30 miles of Bradsby’s principal place of business,” which is
in downtown Denver.
¶6 The nonsolicitation provision states, in pertinent part:
Upon termination of his/her employment with
Bradsby, Account Executive . . . shall not
within the Restricted Area, for a period of
twelve (12) months from the date of
termination of employment, contact or solicit
the business of any person, entity, applicant,
client, employer or prospective employer who
Bradsby has contacted or solicited during the
twelve (12) months prior to the Account
Executive’s termination . . . .
¶7 The agreement also includes provisions prohibiting Herman
from disclosing Bradsby’s confidential information or using it for
her own benefit (the confidentiality provisions) without the prior
written consent of Bradsby.
¶8 While employed by Bradsby, Herman worked with one of
Bradsby’s clients, the law firm Vranesh and Raisch, LLP, to fill
various hiring needs. She also worked with a lawyer applicant to
help him find a job. Her efforts included setting up an interview
3
with Vranesh. Vranesh offered the applicant a job in 2012, but the
applicant declined the offer.
¶9 For reasons not relevant to our analysis, Bradsby terminated
Herman’s employment in 2014. At termination, Bradsby reminded
Herman of her noncompete and nonsolicitation obligations.
Herman sought clarification as to the scope of those obligations and
requested that the Restricted Area be reduced from a thirty-mile
radius to a twenty-eight mile radius (Herman’s home at the time
was twenty-eight miles from Bradsby’s main office). Bradsby
refused to modify the terms of the agreement.
¶ 10 Not long after, Herman formed Touchstone Legal Resources,
LLC. She obtained a mailbox at a UPS store in Monument,
Colorado –– outside the Restricted Area –– and listed this as the
new company’s address in its organizational documents (though
she later testified that she did non-recruiting work for Touchstone
from her home). At trial, she described Touchstone’s business as
“10 percent” recruiting and “90 percent” everything else, including
law firm succession planning.
¶ 11 After starting her new business, she reached out to the prior
applicant to see if anyone in his network would be interested in an
4
open position with the City of Fort Collins (the applicant had
significantly more experience than the position required).
¶ 12 The applicant then inquired whether Vranesh still had a
position open. As a result of this inquiry, Vranesh ultimately hired
the applicant and paid Herman (or Touchstone) $12,000 for her role
in the hiring.
¶ 13 When Bradsby learned that Herman had played a role in
Vranesh’s hiring of the applicant, Bradsby sued her for breach of
the noncompete and nonsolicitation provisions, arguing that
enforcement of those provisions was necessary to protect its trade
secrets.
¶ 14 Both parties moved for summary judgment. The district court
granted Herman’s motion for summary judgment, concluding that
the nonsolicitation provision “effectively prevents [Herman] from
competing at all for a one year period unless she effectively removes
herself from the Denver metropolitan area” because it “prohibits
[Herman] from contacting any person or entity in any of the
industries to which [Bradsby] provides recruiting services if that
person or entity had contact with any Bradsby employee.” The
court further concluded that the nonsolicitation provision is so
5
broad that it renders the noncompete provision superfluous and
concluded, as a result, that both provisions are “void and in
violation of Colorado law.” The court “decline[d] to ‘blue pencil’ the
Agreement in order to bring it into compliance,” stating that the
agreement’s confidentiality provisions adequately protect Bradsby’s
trade secrets.
¶ 15 Bradsby appealed to this court. A different division held that
the enforceability of the noncompete provision turned on the
existence of Bradsby’s alleged trade secrets and remanded the case
for a determination of, among other things, whether Bradsby held
trade secrets. 23 LTD v. Herman, (Colo. App. No. 16CA1095, Aug.
3, 2017) (not published pursuant to C.A.R. 35(e)) (Bradsby I). The
division also held that the nonsolicitation provision is “fatally
overbroad” and directed the district court on remand to “revisit its
decision not to blue pencil [the nonsolicitation provision] based on
the trade secret findings.” Bradsby I, slip op. at ¶¶ 23, 28. Finally,
the division rejected the district court’s analysis that the
nonsolicitation and confidentiality provisions are coterminous with
respect to trade secret protection.
6
¶ 16 On remand, the jury determined that Bradsby possessed trade
secrets, but that Herman had not violated the noncompete
provisions. The jury also found that Herman had violated the
nonsolicitation provision and awarded Bradsby damages of one
dollar. On post-trial proceedings, the district court declined to blue
pencil the overly broad nonsolicitation provision (recall the district
court concluded and Bradsby I held that, without modification, the
nonsolicitation provision violates Colorado law) and entered
judgment in favor of Herman on all claims.
¶ 17 The court denied Herman’s request for attorney fees because it
concluded that Herman had violated the confidentiality provisions
of her employment agreement –– a violation that was not pleaded or
at issue in the case.
II. Analysis
¶ 18 Bradsby argues that the district court erred in declining to
blue pencil the “fatally overbroad” nonsolicitation provision because
the agreement required the court to do so. Bradsby I, slip op. at ¶
23. To the extent the agreement did not actually require the court
to blue pencil the agreement, Bradsby contends the court abused
its discretion in declining to do so. Finally, Bradsby argues that the
7
record does not support the jury’s verdict that Herman did not
violate the noncompete provision. We reject all these contentions. 3
¶ 19 On cross-appeal, Herman argues that the court abused its
discretion in declining to award her attorney fees under the
agreement’s fee-shifting provision. We conclude that the court’s
reasoning was improper and that, under these facts, Herman is the
prevailing party entitled to attorney fees under the fee-shifting
provision.
A. The District Court Did Not Err or Abuse Its Discretion in
Declining to Blue Pencil the Unenforceable Nonsolicitation
Provision
1. General Principles
¶ 20 As a general matter, “[a]greements not to compete, with some
narrow exceptions, are contrary to the public policy of Colorado.”
Saturn Sys., Inc. v. Militare, 252 P.3d 516, 526 (Colo. App. 2011).
“The core policy underlying the unenforceability of noncompetition
provisions is a prohibition on the restraint of trade or . . . the right
to make a living.” Phoenix Capital, Inc. v. Dowell, 176 P.3d 835, 844
3 Bradsby also asks that if it prevails on this appeal, we remand to
the district court for an award of liquidated damages. Because we
affirm the district court’s merits judgment, that question is moot.
8
(Colo. App. 2007). A nonsolicitation agreement is a form of
noncompete agreement. Saturn Sys., 252 P.3d at 526.
¶ 21 There are exceptions to the general rule. One such exception
is set forth in section 8-2-113(2)(b), C.R.S. 2018, which provides
that “[a]ny covenant not to compete which restricts the right of any
person to receive compensation for performance of skilled or
unskilled labor for any employer shall be void, but this [prohibition]
shall not apply to: . . . [a]ny contract for the protection of trade
secrets.” While section 8-2-113(2)(b) provides a trade secret
exception to the statutory prohibition on noncompete agreements,
any such limitations must be reasonable and narrowly drafted.
Saturn Sys., 252 P.3d at 526.
¶ 22 As explained in detail below, Colorado law provides little
guidance as to when, and to what extent, trial courts may blue
pencil unreasonable noncompete provisions, so we look to decisions
of courts in other jurisdictions.
¶ 23 In states that permit the enforcement of reasonable
noncompete agreements, courts have taken three different general
approaches to unenforceable noncompete provisions, described by
the First Circuit as follows:
9
(1) the “all or nothing” approach, which would
void the restrictive covenant entirely if any part
is unenforceable, (2) the “blue pencil”
approach, which enables the court to enforce
the reasonable terms provided the covenant
remains grammatically coherent once its
unreasonable provisions are excised, and
(3) the “partial enforcement” approach, which
reforms [(blue pencils)] and enforces the
restrictive covenant to the extent it is
reasonable, unless the “circumstances indicate
bad faith or deliberate overreaching” on the
part of the employer.
Ferrofluidics Corp. v. Advanced Vacuum Components, Inc., 968 F.2d
1463, 1469 (1st Cir. 1992) (quoting Durapin, Inc. v. Am. Prods., Inc.,
559 A.2d 1051, 1058 (R.I. 1989)); see also 6 Williston on Contracts
§ 13:24, Westlaw (4th ed. database updated May 2019) (same).
¶ 24 Though Colorado appellate courts have not explicitly endorsed
any of these three approaches, they have made clear that trial
courts have the discretion to blue pencil unenforceable noncompete
provisions, at least to some extent. 4
4 Though Bradsby asks this court to blue pencil the agreement,
Bradsby has not cited, and we are unaware of, any case in which a
Colorado appellate court has blue penciled the provisions of a
noncompete, or any authority that would permit us to do so. We
thus reject this request.
10
¶ 25 In National Graphics Co. v. Dilley, 681 P.2d 546, 547 (Colo.
App. 1984), the court recognized that a “trial court has the
discretion to reform an unreasonable territorial restriction set forth
in a covenant not to compete in order to make the scope of the
geographic area reasonable” but concluded that the trial court did
not abuse its discretion in “refusing to rewrite the parties’
agreement by supplying the limitations of both duration and
geographic scope.”
¶ 26 In Gulick v. A. Robert Strawn & Associates, Inc., 477 P.2d 489,
493 (Colo. App. 1970) (not published pursuant to C.A.R. 35(f)), on
the other hand, the trial court narrowed the geographic scope of an
overly broad noncompete provision, and the appellate court upheld
that judgment.
¶ 27 And in Management Recruiters of Boulder, Inc. v. Miller, 762
P.2d 763, 764 (Colo. App. 1988), the court considered a
nonsolicitation provision that prohibited the defendant from
contacting any “candidate or employer-client with whom the
[defendant] had contact with or access to.” The division upheld the
trial court’s decision to “narrowly construe[]” the provision to only
11
bar contact with candidates or employer-clients with whom the
defendant had “actual contact.” Id. at 766.
¶ 28 In this case, the district court declined to blue pencil the
overly broad nonsolicitation provision. Therefore, we do not need to
broadly decide when and to what extent a Colorado trial court may
blue pencil an overly broad noncompete or nonsolicitation
provision. We address only the questions of (1) whether the
agreement or the law of the case required the district court to blue
pencil the nonsolicitation provision; and (2) assuming the court had
no such obligation, whether the district court abused its discretion
in declining to do so.
2. The District Court Was Under No Obligation to Blue Pencil the
Overly Broad Nonsolicitation Provision
¶ 29 In its opening brief, Bradsby contends that the severability
section of the agreement obligated the district court to blue pencil
the agreement to conform it to Colorado law. We disagree.
¶ 30 It is not the function of a court to write or rewrite contracts for
parties to enable enforcement of a contract that, as written, violates
the public policy of the state. Bayly, Martin & Fay, Inc. v. Pickard,
780 P.2d 1168, 1175 (Okla. 1989). While, under certain
12
circumstances, a court may exercise its discretion to blue pencil an
otherwise offensive restrictive covenant, the trial court has broad
discretion whether and when to exercise that authority. Nat’l
Graphics, 681 P.2d at 547.
¶ 31 We squarely reject the proposition that contracting parties, by
inclusion of language in a contract, may compel a court to blue
pencil an agreement that violates the public policy of this state.
Though Colorado law provides little guidance in this area, Bayly,
Martin & Fay, 780 P.2d 1168, decided in a jurisdiction that permits
trial courts to modify overly broad noncompete provisions, is
instructive. In that case, the Oklahoma Supreme Court declined to
modify (or require its trial courts to modify) overly broad
noncompete provisions, even though the contracts at issue granted
that authority, because doing so would require the court to rewrite
an unlawful contract. Id. at 1175.
¶ 32 Several other courts have rejected the proposition that parties
may delegate to the courts the responsibility to contract for them.
In Rector-Phillips-Morse, Inc. v. Vroman, 489 S.W.2d 1, 4 (Ark. 1973),
for example, the court considered a provision similar to the one in
this case and stated: “We are firmly convinced that parties are not
13
entitled to make an agreement, as these litigants have tried to do,
that they will be bound by whatever contract the courts may make
for them at some time in the future.”
¶ 33 Simply put, the court is not a party to the agreement, and the
parties have no power or authority to enlist the court as their agent.
Thus, parties to an employment or noncompete agreement cannot
contractually obligate a court to blue pencil noncompete provisions
that it determines are unreasonable.
¶ 34 Moreover, even if private parties could enlist a court to correct
their contracts, the contract in this case does not do so. Bradsby
argues in its opening brief that the severability provision in the
agreement states that “if any portion of the Agreement is held
invalid or unenforceable because of unreasonable overbreadth,” the
agreement will still be enforceable to the extent determined by the
court. (Emphasis added.) But as Herman correctly points out in
her answer brief, that is not what the agreement says. The
agreement states:
In the event that any portion of this Agreement
shall be held unenforceable, it is agreed that
the same shall not affect any other portions of
this Agreement, and the remaining covenants
and restrictions or portions thereof shall
14
remain in full force and effect; further, if the
invalidity or unenforceability is due to the
unreasonableness of the time or geographical
area covered by a covenant and restriction, the
covenants and restrictions shall nevertheless
be effective for the period of time and for such
area as may be determined to be reasonable by
a court of competent jurisdiction.
¶ 35 As noted by the district court, any conceivable mandatory duty
(which we reject) to blue pencil this contract is limited to correcting
overbreadth in the agreement’s geographic and temporal
restrictions. Those restrictions are not at issue.
¶ 36 Apparently recognizing that its opening brief argument cannot
be sustained based on the plain language of the agreement,
Bradsby reframes its argument in its reply brief. There, it contends
that notwithstanding the specific language of the severability
provision quoted above, the provision, “read as a whole,”
demonstrates a “clear intent to cure any unreasonable overbreadth
of the restrictive covenants and enforce them to the extent allowed.”
That is a weaker argument than Bradsby presented in its opening
brief. Considering the provision as a whole, the fact that the
severability provision specifically authorizes a court to modify the
geographic and temporal restrictions suggests, if anything, that only
15
those two restrictions were intended to be subject to modification by
a court. Beeghly v. Mack, 20 P.3d 610, 613 (Colo. 2001) (“[T]he
inclusion of certain items implies the exclusion of others.”).
¶ 37 Finally, like the district court, we do not interpret Bradsby I’s
mandate to require the district court to blue pencil the agreement
on remand; rather, we read Bradsby I to afford the district court
discretion to determine whether to blue pencil the agreement,
consistent with the discretion provided by our case law. Nat’l
Graphics, 681 P.2d at 547.
¶ 38 In sum, contrary to Bradsby’s argument, the district court
violated neither the law of the case nor the mandate of Bradsby I.
See Thompson v. Catlin Ins. Co. (UK), 2018 CO 95, ¶¶ 21-22
(mandate rule); Jones v. Samora, 2016 COA 191, ¶ 47 (law of the
case doctrine).
3. The District Court Did Not Abuse Its Discretion in Declining to
Blue Pencil the Overly Broad Nonsolicitation Provision
¶ 39 We also reject Bradsby’s argument that even if the court was
not compelled to blue pencil the agreement, it abused its broad
discretion in declining to do so.
16
¶ 40 We review a court’s decision not to blue pencil a noncompete
agreement to conform it to the requirements of the law for an abuse
of discretion. Nat’l Graphics, 681 P.2d at 547. A court abuses its
discretion when its decision is manifestly arbitrary, unfair, or
unreasonable, or contrary to law. People v. Jackson, 2018 COA 79,
¶ 37.
¶ 41 Fundamentally, it is the obligation of a party who has, and
wishes to protect, trade secrets to craft contractual provisions that
do so without violating the important public policies of this state. 5
That responsibility does not fall on the shoulders of judges. Rector-
Phillips-Morse, 489 S.W.2d at 4; Bayly, Martin & Fay, 780 P.2d at
1175.
5 We note that protection for trade secrets is self-effectuating under
the Colorado Uniform Trade Secrets Act, section 7-74-103, C.R.S.
2018. This statute protects (under the circumstances stated) trade
secrets irrespective of whether the holder of the trade secrets also
requires noncompete or nonsolicitation agreements. For this
reason, and because the confidentiality and noncompete provisions
remained effective throughout their terms, any contention that our
conclusion here would permit Herman to engage in rampant abuse
of Bradsby’s trade secrets is unfounded.
17
¶ 42 Here, the district court gave substantial reasons why it
declined to exercise its discretion to blue pencil the agreement. The
district court
• cited the general Colorado public policy against
noncompete provisions;
• based on the absence of relevant Colorado case law,
reviewed authority in other jurisdictions counseling
restraint in blue penciling parties’ agreements,
particularly where the overbreadth of the initial
restriction renders it unfair;
• pointed out the significant overbreadth of the
nonsolicitation provision; and
• concluded that “significant modification would be
necessary to make it comport with the law.”
¶ 43 Bradsby proposes three separate ways in which a court could
blue pencil the nonsolicitation provision, which as written prohibits
Herman from soliciting any person or entity previously contacted by
Bradsby: (1) barring Herman only from soliciting individuals whom
she had contacted while in Bradsby’s employ; (2) barring Herman
only from soliciting Bradsby clients; or (3) barring Herman only
18
from soliciting Bradsby clients whom she had contacted. The
multiple blue pencil options supplied by Bradsby support the
district court’s observation that blue penciling would require
“significant modification.” The court would have to determine not
only which provisions to delete, but also which provisions to add,
essentially rewriting the nonsolicitation clause.
¶ 44 While we agree with Bradsby that Bradsby I concluded that
the confidentiality provisions are not coterminous with the
nonsolicitation provision, and therefore cannot render the
nonsolicitation provision superfluous, the district court’s other
reasons for declining to blue pencil the agreement constitute sound
reasons for the exercise of the court’s discretion.
¶ 45 Accordingly, we reject Bradsby’s argument that the district
court abused its discretion.
B. The Jury Verdict That Herman Did Not Form a Competing
Company Has Support in the Record
¶ 46 Bradsby next argues that the jury’s verdict that Herman did
not form a competing company in violation of the noncompete
provision is not supported by the evidence and asks that we
19
“reverse the jury’s verdict.” Because there is record support for the
jury’s verdict, we reject this argument.
¶ 47 “Appellate courts are bound by a jury’s findings and can only
disturb a jury verdict if clearly erroneous.” Murphy v. Glenn, 964
P.2d 581, 584 (Colo. App. 1998) (citation omitted). “It is within the
jury’s province alone to determine the weight of the evidence and
the credibility of witnesses, and to draw all reasonable inferences of
fact therefrom.” Id. Therefore, “a jury’s verdict will not be disturbed
if there is any support for it in the record.” Id.
¶ 48 The parties presented conflicting evidence to the jury as to
whether Herman formed a competing company in violation of the
noncompete provision. At bottom, Bradsby asks us to reweigh this
conflicting evidence. We do not have the authority to do so. Id.
¶ 49 Herman testified that Touchstone was not primarily a
recruiting company, that any recruiting work was undertaken
outside the Restricted Area, and that Touchstone maintained a
business address outside the Restricted Area. It was the jury’s sole
responsibility to determine whether this testimony was true.
20
C. As the Prevailing Party, Herman Is Entitled to Attorney Fees
¶ 50 Herman argues that she is the prevailing party because the
court entered judgment in her favor as to both the noncompete and
nonsolicitation claims. We agree.
¶ 51 We review determinations of which party is the prevailing
party under a fee-shifting provision for an abuse of discretion.
Anderson v. Pursell, 244 P.3d 1188, 1193-94 (Colo. 2010).
¶ 52 Applying this standard, we first conclude that the district
court’s rationale cannot support its conclusion that Herman is not
the prevailing party. Second, we conclude that Herman is the
prevailing party because she prevailed on both breach of contract
claims litigated. Klun v. Klun, 2019 CO 46, ¶ 31.
1. The District Court’s Determination That Herman Breached the
Unlitigated Confidentiality Provision Cannot Support the
Conclusion that Herman Is Not the Prevailing Party
¶ 53 The district court concluded that Herman was not the
prevailing party because,
while [Herman] may not legally have breached
those relevant provisions of her contract
litigated in this case, she nevertheless
breached her obligations not to use [Bradsby’s]
information for her own benefit. Thus, she
cannot be considered the ‘prevailing party’
21
under Spencer’s reasoning and is not entitled
to her attorney fees.
¶ 54 For several reasons, we cannot sustain the district court’s
attorney fee order on this basis. First, Bradsby did not allege in its
complaint that Herman had violated the confidentiality provision.
Second, one or both of the parties demanded a jury trial on all
issues pleaded. Third, and most importantly, the question of
whether the confidentiality provision was violated was never tried
before the jury or litigated in any sense (at least until the court
made its own finding). Finally, Herman had no opportunity to
defend herself against this allegation.
¶ 55 The district court did not cite, and we have not found, any
authority authorizing a court to deny recovery under a prevailing
party attorney fee clause when the court finds contractual
violations not alleged or tried in the case. Thus, despite the
significant discretion afforded the district court in determining
which party is the prevailing party, Whiting-Turner Contracting Co. v.
Guarantee Co. of N. Am. USA, 2019 COA 44, ¶ 56, the district
court’s finding that Herman violated the unlitigated confidentiality
22
provision cannot sustain its conclusion that Herman was not the
prevailing party.
2. Herman is the Prevailing Party
¶ 56 “[W]here a claim exists for a violation of a contractual
obligation, the party in whose favor the decision or verdict on
liability is rendered is the prevailing party for purposes of awarding
attorney fees.” Dennis I. Spencer Contractor, Inc. v. City of Aurora,
884 P.2d 326, 327 (Colo. 1994).
¶ 57 Bradsby alleged that Herman breached two provisions of the
agreement: the noncompete provision and the nonsolicitation
provision. Herman indisputably prevailed on each of these claims,
as evidenced by the judgment entered in her favor (and which we
affirm). Thus, she is the prevailing party.
¶ 58 Relying on Archer v. Farmer Bros. Co., 90 P.3d 228, 230-31
(Colo. 2004), Bradsby argues Herman is not the prevailing party
because Bradsby prevailed on the “significant issue” of whether
Bradsby held trade secrets and obtained “some of the benefits
sought by the litigation.” Archer, however, is inapposite for multiple
reasons.
23
¶ 59 First, as two divisions of this court have opined, “Spencer
articulated the test for a ‘prevailing party’ under a contract, whereas
Archer was a tort case and involved a cost award to a prevailing
party under C.R.C.P. 54(d).” Extreme Constr. Co. v. RCG Glenwood,
LLC, 2012 COA 220, ¶ 55 (citing Pastrana v. Hudock, 140 P.3d 188,
190-91 (Colo. App. 2006)). Second, in Archer, “either party could
arguably [have been] considered the ‘prevailing party’” because each
party prevailed on one or more of the claims at issue. 90 P.3d at
231. That is not the case here because Bradsby did not prevail on
either breach of contract claim. 6
¶ 60 Even if we were to apply the Archer test, Bradsby did not
obtain “some of the benefits sought by the litigation.” Id. at 230.
Bradsby did not sue Herman to obtain a ruling that it held trade
6 Anderson v. Pursell, 244 P.3d 1188 (Colo. 2010), does not require
a different result. Although the court in that case applied the
“significant issue” test articulated in Archer to determine which
party was the prevailing party under a fee-shifting agreement, that
case involved an application for adjudication of water rights, rather
than a breach of contract claim. Id. at 1193-95. Further, the
applicant in Anderson received some of the water rights requested,
but the water court denied other portions of the application, so
there was no clear-cut prevailing party. Id. at 1192.
24
secrets. It brought the litigation to enforce the noncompete and
nonsolicitation provisions and did not obtain the relief sought.
¶ 61 In addition, and contrary to Bradsby’s position, the fact that
the jury entered a verdict in Bradsby’s favor as to the
nonsolicitation claim is meaningless when that claim ultimately
failed, and judgment on that claim was rendered in Herman’s favor.
¶ 62 Bradsby’s final contention is that Herman is judicially
estopped from relying on the fee-shifting provision because Bradsby
argued at various points that the entire agreement was void. To
support this contention, Bradsby relies on New Hampshire v. Maine,
which states that when “a party assumes a certain position in a
legal proceeding, and succeeds in maintaining that position, he may
not thereafter, simply because his interests have changed, assume
a contrary position.” 532 U.S. 742, 749 (2001) (citation omitted).
¶ 63 Bradsby’s argument fails because Herman did not “succeed[]
in maintaining that position.” Id. The court only ruled that the
nonsolicitation provision was unenforceable, not that any other
portions of the agreement were unenforceable. Bradsby does not
contend, and we do not conclude, that the unenforceability of the
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nonsolicitation provision alone renders the fee-shifting provision
unenforceable.
¶ 64 Ordinarily, given the discretion afforded the trial court in
determining which party is the prevailing party, we would remand
to the district court for a prevailing party determination. Spencer,
884 P.2d at 328 n.6. But here, applying Spencer and considering
that Herman indisputably prevailed on both claims, the only
determination on remand that an appellate court could affirm is a
determination that Herman is the prevailing party. Given this, it
would be a waste of judicial resources to remand to the district
court for a prevailing party determination.
¶ 65 Because we affirm the district court’s merits judgment and
conclude that Herman was the prevailing party, we grant Herman’s
request for appellate attorney fees and costs under the fee-shifting
agreement and C.A.R. 39.
III. Conclusion
¶ 66 The merits judgment in favor of Herman is affirmed. The
district court’s order denying attorney fees to Herman is reversed.
On remand the district court is directed to enter an order awarding
Herman reasonable attorney fees in the amount previously
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requested (because Bradsby did not contest the reasonableness of
that amount) plus reasonable appellate attorney fees and costs, as
determined by the district court.
JUDGE DUNN and JUDGE NAVARRO concur.
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