Bermel v. BlueRadios, Inc.

• Decision Date: 23 February 2017
• Citation: Bermel v. BlueRadios, Inc., 442 P.3d 923 (Colo. App. 2017)
• Docket Number: 16CA0102
• Parties: Chris BERMEL, Plaintiff-Appellant, v. BLUERADIOS, INC., Defendant-Appellee.
• Court: Colorado Court of Appeals

442 P.3d 923

Chris BERMEL, Plaintiff-Appellant,

v.BLUERADIOS, INC., Defendant-Appellee.

Court of Appeals No. 16CA0102

Colorado Court of Appeals, Division VII.

Announced February 23, 2017

Kishinevsky & Raykin, LLC, Igor Raykin, Ian Griffin, Aurora, Colorado, for Plaintiff-Appellant

Brosseau Bartlett Seserman, LLC, David B. Seserman, Chad Lieberman, Greenwood Village, Colorado, for Defendant-Appellee

Opinion by JUDGE BOORAS

¶ 1 In Van Rees v. Unleaded Software, Inc. , 2016 CO 51, 373 P.3d 603, the supreme court granted certiorari review on the question whether the economic loss rule may bar a claim for civil theft under section 18-4-405, C.R.S. 2016 (the civil theft statute). Ultimately, the court did not answer that question because it was able to affirm on the narrower ground that the plaintiff had failed to prove one of the required elements of theft. Van Rees , ¶¶ 23-24.

¶ 2 This appeal raises the question left unanswered in Van Rees . Plaintiff, Chris Bermel, contends that the trial court erred when it denied his motion for summary judgment, in which he argued that the economic loss rule barred the claim of defendant, BlueRadios, Inc., for civil theft. Because the economic loss rule is a judicial construct, and because a civil theft claim is a statutory cause of action, we reject Bermel's argument and hold that the economic loss rule does not preclude a cause of action under the civil theft statute.

¶ 3 However, as to Bermel's Colorado Wage Protection Act (CWPA) claim, we conclude that summary judgment was improper, and we remand for further proceedings as to that claim.

I. Background

¶ 4 In 2009, Bermel entered into a "Contractor Agreement" with BlueRadios. Under the agreement, Bermel provided engineering services to BlueRadios. Contemporaneously with his execution of that agreement, Bermel also signed a "Proprietary Information and Inventions Agreement" (PIAA). The PIAA contained the following provision related to Bermel's removal, delivery, and return of "Company Materials":

All Company Materials shall be the sole property of the Company. I agree that during my employment and/or contracting arrangement with the Company, I will not remove any Company Materials from the business premises of the Company or deliver Company materials to any person or entity outside the Company, except as I am required to do in connection with performing the duties of my employment and/or contracting arrangement. I further agree that, immediately upon the termination of my employment and/or contracting arrangement by me or by the Company for any reason, or for no reason, or during my employment and/or contracting arrangement if so requested by the Company, I will return all Company Materials, apparatus, equipment and other physical property, or any reproduction of such property, excepting only (i) my personal copies of records relating to my compensation; (ii) my personal copies of any materials previously distributed generally to stockholders of the Company; and (iii) my copy of this agreement.

¶ 5 The parties renewed both agreements annually until July 2014. At that point, they were unable to agree on renewal terms, so the parties ended their relationship. However, anticipating that he might end up in litigation over unpaid wages, Bermel breached the PIAA by forwarding to his personal e-mail account (Gmail account) what he described as thousands of BlueRadios e-mails and attachments, some of which contained proprietary information.

¶ 6 Soon after the parties' contract expired, BlueRadios received a demand letter from Bermel requesting $5113.34, which consisted of unpaid wages and expenses he had incurred on behalf of BlueRadios. BlueRadios paid Bermel this amount approximately two months after he sent the demand letter.

¶ 7 Bermel filed the current lawsuit in August 2014, asserting claims for breach of contract, unjust enrichment, and violation of the CWPA, section 8-4-109(1)(a), (b), C.R.S. 2016.

¶ 8 During a subsequent deposition, Bermel revealed to BlueRadios that he had forwarded company e-mails to his Gmail account. As a result, BlueRadios filed counterclaims against him, including breach of contract; civil theft, under section 18-4-405 ; and conversion. BlueRadios also requested, and received, a preliminary injunction barring Bermel from "continuing to misappropriate [BlueRadios'] confidential information." Despite this injunction, Bermel continued to access, modify, and delete BlueRadios e-mails that he had forwarded to his Gmail account.

¶ 9 Both parties later filed motions for summary judgment. BlueRadios contended that Bermel was an independent contractor not entitled to the CWPA's protection, and Bermel argued that BlueRadios' civil theft and conversion claims were barred by the economic loss rule.

¶ 10 The court granted summary judgment in favor of BlueRadios on Bermel's CWPA claim, but it denied summary judgment on BlueRadios' civil theft and conversion claims. The parties then proceeded to trial on BlueRadios' counterclaims. After the close of evidence, Bermel moved for a directed verdict on BlueRadios' civil theft claim, again arguing that the economic loss rule precluded such a claim. And, again, the court rejected Bermel's argument, concluding that the economic loss rule does not bar a statutory cause of action.

¶ 11 Following trial, the court entered a written order finding Bermel liable on all of BlueRadios' counterclaims. Pursuant to the civil theft statute, the court awarded attorney fees and $200 in statutory damages on BlueRadios' civil theft claim. It awarded $1 in nominal damages on each of the other claims.

¶ 12 On appeal, Bermel contends that the trial court erred when it (1) denied his motion for summary judgment on BlueRadios' civil theft and conversion claims and (2) granted BlueRadios' motion for summary judgment on his CWPA claim. Before reaching their merits, we first address Bermel's preservation of these arguments.

¶ 13 Although in his motion for summary judgment Bermel raised the issue of the economic loss rule's application to BlueRadios' conversion counterclaim, he did not re-raise it in a motion for directed verdict or in a motion for judgment notwithstanding the verdict. Consequently, he failed to preserve that issue for appeal, so we will not address it. See, e.g. , Top Rail Ranch Estates, LLC v. Walker , 2014 COA 9, ¶ 44, 327 P.3d 321 (a district court's denial of a party's motion for summary judgment is not an appealable order unless the moving party preserves the issue by re-raising it in a later motion for directed verdict or judgment notwithstanding the verdict).

¶ 14 Bermel did, however, preserve his contentions regarding the application of the economic loss rule to a civil theft claim and the court's summary judgment on his CWPA claim. We address these two contentions in turn.

II. Standard of Review and Summary Judgment

¶ 15 We review de novo a trial court's ruling on a party's motion for summary judgment. Armed Forces Bank, N.A. v. Hicks , 2014 COA 74, ¶ 20, 365 P.3d 378. "Summary judgment is appropriate when the pleadings and supporting documents clearly demonstrate no issue of material fact exists, and the moving party is entitled to judgment as a matter of law." Olson v. State Farm Mut. Auto. Ins. Co. , 174 P.3d 849, 852 (Colo. App. 2007).

III. The Economic Loss Rule and Civil Theft

¶ 16 Bermel first contends that the trial court erred when it concluded that the economic loss rule does not bar BlueRadios' civil theft counterclaim. We are not persuaded.

A. The Economic Loss Rule

¶ 17 Under the economic loss rule, "a party suffering only economic loss from the breach of an express or implied contractual duty may not assert a tort claim for such a breach absent an independent duty of care under tort law." Town of Alma v. AZCO Constr., Inc. , 10 P.3d 1256, 1264 (Colo. 2000).

¶ 18 The Colorado Supreme Court adopted the economic loss rule in Town of Alma . In that case, the town contracted with a construction company for "improvements to [the town's] water distribution system." Id. at 1258. After discovering defects in the improvements to its water system, the town brought negligence claims against the construction company. Id.

¶ 19 The court held that the town's "negligence claim [wa]s based solely on the breach of a contractual duty resulting in purely economic loss, and thus [wa]s barred by application of the economic loss rule." Id. at 1266. In doing so, the court recognized that the rule was "originally born from products liability law," but the court held that its applicability was "broader, because it serves to maintain a distinction between contract and tort law." Id. at 1262.

¶ 20 In deciding whether the economic loss rule bars a particular claim, Town of Alma directs courts to focus on "determining the source of the duty that forms the basis of the action." Id. Not only must the duty arise from a source independent of the contract, it must also be a duty that is not memorialized in the parties' contract. BRW, Inc. v. Dufficy & Sons, Inc. , 99 P.3d 66, 74 (Colo. 2004).

B. Discussion

¶ 21 We agree with the trial court's conclusion that the economic loss rule does not bar a claim under the civil theft statute.

¶ 22 By its plain terms, the civil theft statute establishes both a cause of action and a remedy for victims of theft: an owner of stolen property "may maintain an action ... against the taker" to "recover two hundred dollars or three times the amount of the actual damages sustained ..., whichever is greater, and may also recover costs of the action and reasonable attorney fees." § 18-4-405. Indeed, in interpreting this statute in another context, our supreme court has concluded that "the General Assembly intended the [civil theft] statute to provide an owner with a private remedy against the taker that requires proof of a specified criminal act but not proof of a prior criminal conviction to recover treble damages, fees, and costs." Itin v. Ungar , 17 P.3d 129, 134 (Colo. 2000) (emphasis...