Chimney Rock Pub. Power Dist. v. Tri-State Generation & Transmission Ass'n, Inc.
| Decision Date | 03 March 2014 |
| Docket Number | Civil Action No. 10-cv-02349-WJM-KMT |
| Parties | CHIMNEY ROCK PUBLIC POWER DISTRICT, MIDWEST ELECTRIC COOPERATIVE CORPORATION, NORTHWEST RURAL PUBLIC POWER DISTRICT, PANHANDLE RURAL ELECTRIC MEMBERSHIP ASSOCIATION, and ROOSEVELT PUBLIC POWER DISTRICT, Plaintiffs, v. TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION, INC., Defendant. TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION, INC., Counterclaim Plaintiff, v. CHIMNEY ROCK PUBLIC POWER DISTRICT, MIDWEST ELECTRIC COOPERATIVE CORPORATION, NORTHWEST RURAL PUBLIC POWER DISTRICT, and PANHANDLE RURAL ELECTRIC MEMBERSHIP ASSOCIATION, Counterclaim Defendants. TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION, INC., Third-Party Plaintiff, v. RYAN REIBER, and JERRY UNDERWOOD, Third-Party Defendants. |
| Court | U.S. District Court — District of Colorado |
In this diversity action, Defendant and Counterclaim Plaintiff Tri-State Generation and Transmission Association, Inc. ("Tri-State") has filed Amended Counterclaims against Plaintiffs Chimney Rock Public Power District ("Chimney Rock"), Midwest Electric Cooperative Corporation ("Midwest"), Northwest Rural Public Power District ("Northwest"), and Panhandle Rural Electric Membership Association ("PREMA"). (ECF No. 84.) Tri-State also brings claims as a Third-Party Plaintiff against Jerry Underwood and Ryan Reiber (together the "Third-Party Defendants"). (Id.) This matter is before the Court on the Third-Party Defendants' Motions for Summary Judgment on Tri-State's Fifth and Sixth Counterclaims ("Motions"), which are the only claims asserted against them. (ECF Nos. 194 & 197.) For the reasons set forth below, the Motions are granted.
The relevant facts, viewed in the light most favorable to Tri-State, are as follows. Tri-State is a Colorado corporation, originally formed in 1965 by twenty-six electrical power distribution cooperatives and public power districts in the states of Colorado, Nebraska, and Wyoming for the purpose of furnishing long-term wholesale power and energy to the member cooperatives and districts, which in turn provide power to consumers in their separate geographical areas. (ECF No. 84 ¶¶ 10, 16.) Tri-State is now comprised of forty-four members located in the three original states plus New Mexico. (Id. ¶¶ 72, 74.) Plaintiffs Chimney Rock, Midwest, Northwest, and PREMA are all members of Tri-State, operating in Nebraska under contracts with Tri-State for theprovision of wholesale electric service. (Id. ¶¶ 2-5, 17.)
On September 28, 2009, Plaintiffs filed their Complaint in the District of Nebraska against Tri-State and various individual defendants1, alleging breach of contract and related claims arising from a dispute over the rates at which Tri-State sold electric power to Plaintiffs. (ECF No. 1-2.) After the District of Nebraska granted a Motion to Change Venue under 28 U.S.C. § 1404(a), the case was transferred to this Court on September 24, 2010. (ECF Nos. 1-71, 1-77.)
After the Court issued an Order granting in part and denying in part Tri-State's Motion to Dismiss (ECF No. 31), Tri-State filed its Answer on February 15, 2012, which included Counterclaims against Plaintiffs Chimney Rock, Midwest, Northwest, and PREMA. (ECF No. 39.) Tri-State's Counterclaims arise out of Plaintiffs' formation in 2007 of the Nebraska Power Supply Interest Group ("NPSIG"). Tri-State alleges that Plaintiffs, through NPSIG, sought to breach their contracts with Tri-State and pressure Tri-State to change its pricing rate, and planned and filed the instant lawsuit. (ECF No. 84 ¶¶ 34-35.) During discovery, Tri-State obtained information alerting it to additional claims, and consequently Tri-State filed a Motion to Amend the Scheduling Order and to Assert Additional Counterclaims on August 23, 2012. (ECF No. 65.)
Magistrate Judge Kathleen M. Tafoya granted Tri-State's Motion to Amend (ECF No. 83), and Tri-State filed its Amended Counterclaims on December 3, 2012, joining the Third-Party Defendants to this action. (ECF No. 84.) The Amended Counterclaimsincluded a new Fifth Counterclaim2 for breach of fiduciary duty against Wayne Cobb, a member of the board of directors of Northwest, and Jerry Underwood, a member of the board of directors of PREMA, both of whom were members of Tri-State's board of directors at all relevant times and allegedly failed to disclose material information about NPSIG's activities to Tri-State. (Id. ¶¶ 26-27, 47, 53, 87-91.) Tri-State also brought a Sixth Counterclaim for aiding and abetting Cobb's and Underwood's breach of fiduciary duty, asserted against Plaintiffs, as well as against Rolland Skinner, an employee of Northwest, and Ryan Reiber, an employee of PREMA. (Id. ¶¶ 8-9, 92-95.) The Court subsequently granted Motions to Dismiss by Cobb and Skinner, dismissing all claims against them. (ECF No. 252.)
On June 14, 2013, both Reiber and Underwood filed Motions for Summary Judgment.3 (ECF Nos. 194 & 197.) On July 5, 2013, Tri-State filed its Responses to the Motions. (ECF Nos. 206 & 207.) Reiber's and Underwood's Replies were filed on July 22, 2013. (ECF Nos. 230 & 232.)
Summary judgment is appropriate only if there is no genuine issue of material factand the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Henderson v. Inter-Chem Coal Co., Inc., 41 F.3d 567, 569 (10th Cir. 1994). Whether there is a genuine dispute as to a material fact depends upon whether the evidence presents a sufficient disagreement to require submission to a jury, or conversely, is so one-sided that one party must prevail as a matter of law. Anderson v. Liberty Lobby, 477 U.S. 242, 248-49 (1986); Stone v. Autoliv ASP, Inc., 210 F.3d 1132 (10th Cir. 2000); Carey v. U.S. Postal Serv., 812 F.2d 621, 623 (10th Cir. 1987).
A fact is "material" if it pertains to an element of a claim or defense; a factual dispute is "genuine" if the evidence is so contradictory that if the matter went to trial, a reasonable party could return a verdict for either party. Anderson, 477 U.S. at 248. The Court must resolve factual ambiguities against the moving party, thus favoring the right to a trial. Houston v. Nat'l Gen. Ins. Co., 817 F.2d 83, 85 (10th Cir. 1987).
The Third-Party Defendants make two arguments that summary judgment is warranted as to Tri-State's claims against them: (1) Tri-State has no valid theory of damages; and (2) Tri-State's fiduciary duty claims are barred by the statute of limitations. (ECF Nos. 194 & 197.) Because the Court finds the first argument dispositive of the Motion, the Court will analyze it first.
The Third-Party Defendants' Motions4 contend that summary judgment should begranted on Tri-State's claims against them because Tri-State has no valid theory of damages, and damages are a required element of a claim for breach of fiduciary duty. (ECF Nos. 194 at 8-13; 197 at 27-37.)
The parties agree that Colorado law governs Tri-State's Third-Party Claims. (See ECF Nos. 194 at 6; 197 at 19 n.8; 206 at 28.) Under Colorado law, a claim for a breach of fiduciary duty has four elements: (1) a fiduciary duty owed to plaintiff, (2) breach of the fiduciary duty, (3) damages, and (4) causation. Graphic Directions, Inc. v. Bush, 862 P.2d 1020, 1022 (Colo. App. 1993). Similarly, a claim for aiding and abetting a breach of fiduciary duty requires proof of (1) breach of a fiduciary duty owed to plaintiff, (2) knowing participation in and substantial assistance to that breach, and (3) damages. Nelson v. Elway, 971 P.2d 245, 249-50 (Colo. App. 1998). The Third-Party Defendants challenge only the damages element of each of these claims. Because both of Tri-State's Third-Party Claims—both the claim against Underwood for breach of his fiduciary duty, and the claim against Reiber for aiding and abetting Underwood's breach—depend on damages caused by Underwood's breach of fiduciary duty, both claims can be analyzed together. (See ECF No. 84 at 57-58.)
Tri-State seeks damages falling into three categories: (1) litigation costs incurred in defending against Plaintiffs' claims, under the "wrong of another" doctrine; (2) nominal damages based on harm to Tri-State's corporate governance model; and (3) injunctiverelief, prohibiting Underwood from committing any future breach of fiduciary duty against Tri-State.5 (ECF No. 206 at 34-43.) The Court will consider each damages theory in turn.
Tri-State argues that Underwood's breach of his fiduciary duty was a cause of the litigation Plaintiffs brought against Tri-State, and therefore Tri-State can recover the costs of the litigation under the "wrong of another" doctrine. (ECF No. 206 at 35-39.)
Colorado law permits a party to recover litigation expenses as an appropriate measure of damages against a third party in a separate action, where those expenses were caused by a wrongful act by the third party. Rocky Mountain Festivals, Inc. v. Parsons Corp., 242 P.3d 1067, 1071 (Colo. 2010). "When the natural and probable consequence of a wrongful act has been to involve a plaintiff in litigation with others, the general rule is that the reasonable expenses of the litigation may be recovered from the wrongdoer." Id. (citing Elijah v. Fender, 674 P.2d 946, 951 (Colo. 1984)) (brackets and internal quotation marks omitted).
The Third-Party Defendants argue that Tri-State cannot produce evidence establishing that Underwood's alleged breach of fiduciary duty caused Plaintiffs to file suit against Tri-State, and therefore cannot recover under this doctrine. (ECF No. 197 at 31.) Because the litigation expenses must be "the natural and probable consequence" of the wrongful conduct alleged, a failure to prove causation prevents recovery. (Id.)
Although Tri-State admits that Underwood's breach was not the sole cause ofPlaintiffs' litigation against it, Tri-State contends that...
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