Land Owners United, LLC v. Waters

• Decision Date: 06 September 2012
• Docket Number: No. 10CA1006.,10CA1006.
• Parties: LAND OWNERS UNITED, LLC, a Colorado limited liability corporation; and Land Owners United, Inc., a Colorado nonprofit corporation, Plaintiffs–Appellees, v. Marcia WATERS, Director of the Colorado Division of Real Estate; and the Colorado Board of Real Estate Appraisers, Defendants–Appellants.
• Court: Colorado Court of Appeals

293 P.3d 86

LAND OWNERS UNITED, LLC, a Colorado limited liability corporation; and Land Owners United, Inc., a Colorado nonprofit corporation, Plaintiffs–Appellees,

v.Marcia WATERS, Director of the Colorado Division of Real Estate; and the Colorado Board of Real Estate Appraisers, Defendants–Appellants.

No. 10CA1006.

Colorado Court of Appeals,

Div. VII.

Aug. 18, 2011.

As Modified on Denial of Rehearing Sept. 29, 2011.

Certiorari Denied as Improvidently Granted Sept. 6, 2012.

Law Office of Paul Zogg, Paul Zogg, Boulder, Colorado; Mark A. MacDonnell, Las Animas, Colorado, for Plaintiffs–Appellees.

John W. Suthers, Attorney General, Lisa Brenner Freimann, First Assistant Attorney General, Jack Wesoky, Senior Assistant Attorney General, Catherine Shea, Assistant Attorney General, Denver, Colorado, for Defendants–Appellants.

Opinion by Judge RICHMAN.

Defendants, Marcia Waters, director of the Colorado Division of Real Estate, and the Colorado Board of Real Estate Appraisers (collectively the Board), appeal from the district court order requiring disclosure of certain records under the Colorado Open Records Act (CORA), §§ 24–72–200.1 to –206, C.R.S.2010. We affirm.

I. Factual Background

In fall 2007, the Colorado Division of Real Estate (Division) began receiving complaints and documentation regarding alleged abuse of a statewide program permitting tax credits for conservation easements. At a press conference held on November 20, 2007, previous director of the Division of Real Estate, Erin Toll, announced that in order to “curb the alleged abuse” arising from improper valuations of conservation easements, the Division, operating through the Board, had launched a statewide investigation of “suspect transactions” and “will aggressively pursue appraisers whose valuations of conservation easements are not credible.” She stated that these investigations would be confidential under the Board's authorizing statute, § 12–61–710(7), C.R.S.2010, until the conclusion of the investigation.

On May 1, 2008, the Board issued a press release stating that, on an emergency basis to protect the public's “health, safety and welfare,” and without holding a hearing, it had summarily suspended the license of William Milenksi, an appraiser from Swink, Colorado. The press release noted that Milenski had conducted numerous appraisals of conservation easements for identified land trusts. On July 11, 2008, the Board and Milenski entered into a stipulation and final agency order, pursuant to which Milenski permanently surrendered his appraiser's license. The final order did not state a reason for terminating his license.

In 2006, the Board had entered into a similar stipulation and final agency order, where it imposed probation and a fine on southern Colorado appraiser John Stroh. Again, no reason for the probation was identified in the order.

On May 1, 2008, in a press release issued in connection with the Milenski license suspension, the Board noted that Colorado's conservation easement program had come under “intense scrutiny ... in recent months upon allegations of major abuse of the program.” According to a summary prepared by Director Toll for the Governor, a small group of appraisers performed hundreds of questionable conservation easement appraisals in areas including southern Colorado. According to Director Toll, up to $37 million in tax credits could be claimed by landowners who had used the questionable appraisers.

Plaintiffs, Land Owners United LLC and Land Owners United, Inc. (collectively Land Owners), comprise two nonprofit entities that together represent approximately eighty Colorado landowners whose conservation easement tax credits and deductions came under investigation by the Colorado Department of Revenue. Because of these investigations, between August and September 2009, Land Owners made a series of CORA requests seeking records pertaining to the Milenksi and Stroh proceedings, as well as information relating to the Board's investigation into allegations of abuse of Colorado's conservation easement program. The Board's responses to these requests led to this lawsuit.

II. Procedural Background

On August 19, 2009, Land Owners submitted their first CORA request, asking for information on the Board's basis for its emergency action to summarily suspend Milenski's license, and the basis for its decision to accept Milenski's permanent suspension, including investigations into certain appraisals. In response to this request, Land Owners were invited “to schedule a time to view the documents” they had requested. Land Owners made an appointment to view the documents the following day; however, the Board cancelled the appointment. On September 1, 2009, the Board wrote to Land Owners completely denying their request.

Land Owners submitted a second CORA request on September 8, 2009, seeking communications with third parties concerning the disciplining of appraiser Milenski. On September 22, 2009, having received no response, Land Owners brought this suit pursuant to CORA, challenging the Board's failure to produce any documents in response to their records request.

In their complaint, Land Owners alleged that the U.S. Internal Revenue Service and the Colorado Department of Revenue were challenging tax credits and deductions they took after donating conservation easements that were valued by the disciplined appraisers, and the tax agencies were basing their challenges on the Board's decisions to discipline the appraisers.

On October 2, 2009, the Board provided some responsive documents to the second request, but withheld others. Land Owners issued four more requests, as to which the Board again provided some, but not all responsive documents. In all, Land Owners issued six CORA requests. The Board justified its decision not to disclose the requested documents primarily by asserting three exemptions under CORA. The Board asserted that (1) most of the documents were exempt from disclosure under the investigatory files exemption, section 24–72–204(2)(a)(I); (2) six of the documents were exempt from disclosure pursuant to the deliberative process exemption, section 24–72–204(3)(a)(XIII); and (3) an unspecified number of documents was exempt from disclosure under the confidential information exemption, section 24–72–204(3)(a)(IV). The Board also asserted that e-mail addresses were exempt from disclosure under an express CORA exemption, § 24–72–204(2)(a)(VII), and some documents were protected by the attorney-client privilege.

On February 26, 2010, the district court held a show cause hearing, pursuant to the statute, as to all the requests submitted by Land Owners, and at which the burden was on the Board to show cause why the documents should not be produced. See§ 24–72–204(5). The court received testimony and heard arguments presented by the parties, and subsequently conducted an in camera review of the disputed documents under seal. The court ultimately concluded that the Board failed to show cause why most of the requested public records should not have been released to Land Owners, but the court specified that some confidential information should be redacted from the records. The court also ruled that two documents were protected by the attorney-client privilege.

III. Issues on Appeal

On appeal, the Board contends that the district court erred by holding that the three exemptions did not justify withholding disclosure of the records and by ordering redaction of specified information. We reject these contentions.

IV. Analysis

The Board asserts that its investigatory files “contain all the records at issue in this case” with the exception of one record subject to the deliberative process privilege. We understand the Board's assertion to mean that if we conclude the investigatory files exemption of CORA applies here, we need not reach the district court's determination as to the applicability of other exemptions, with the exception of the one record that is allegedly protected by the deliberative process privilege. Accordingly, we first turn to the investigatory files exemption.

A. Investigatory Files Exemption

For at least two reasons, the district court rejected the Board's contention that CORA's investigatory files exemption applies to the records sought by Land Owners.

First, it concluded that to the extent that there is a conflict between the investigatory files exemption in CORA and provisions in the Board's authorizing statute—section 12–61–704(1)(c)(I), C.R.S.2010, which addresses disclosure of the Board's records generally, and section 12–61–710(7), C.R.S.2010, which addresses complaints and results of investigations “during the investigatory period”—the latter provisions control “as the more specific applicable statute.” Thus, the district court concluded, under section 12–62–710(7), the Board may withhold disclosure of investigatory files only during the investigatory period. Because the investigations of both Milenksi and Stroh were completed and final orders entered, the court concluded section 12–62–710(7) provided for disclosure, the CORA exemption did not apply here, and the files must be disclosed.

Second, the district court concluded that, in any event, the CORA investigatory files exemption would not preclude disclosure here. The court interpreted that exemption to apply only to records that relate to criminal law enforcement or are kept by agencies that have criminal law enforcement powers.

The Board contends we should review this decision de novo. Land Owners contend that the correct standard of review is whether the district court abused its discretion because its conclusion is based on factual findings in an open records case. However, we disagree that the applicability of the investigatory files exemption requires an analysis of factual findings by the district court. Rather, the Board's contention requires us to review the district court's interpretation of CORA, and the interplay between CORA and...