People v. Shifrin

Decision Date27 February 2014
Docket NumberCourt of Appeals Nos. 11CA1853 & 11CA1881
PartiesThe PEOPLE of the State of Colorado, Plaintiff–Appellee and Cross–Appellant, v. Leonid SHIFRIN, a/k/a Leo Shifrin, Defendant–Appellant, and Mark Shifrin, Defendant and Cross–Appellee.
CourtColorado Court of Appeals

John W. Suthers, Attorney General, Alissa H. Gardenswartz, Assistant Attorney General, Jennifer Miner Dethmers, Assistant Attorney General, Denver, Colorado, for PlaintiffAppellee

Leonid Shifrin, Pro Se

No Appearance for Defendant and Cross–Appellee

Opinion

Opinion by JUDGE WEBB

¶ 1 In this action under the Colorado Consumer Protection Act (CCPA), sections 6–1–101 to –115, C.R.S.2013, defendant, Leonid Shifrin (defendant), appeals the judgment entered against him and in favor of the State of Colorado. The Attorney General cross-appeals the directed verdict entered in favor of Mark Shifrin, defendant's father (Shifrin). Shifrin has not entered an appearance on appeal.

¶ 2 The Attorney General brought this action against defendant, Shifrin, Jerry A. Johnson, and five companies with which defendant was involved. The complaint alleged a pattern of deceptive trade practices whereby defendants, acting in concert, placed consumers in high risk, “option” adjustable rate mortgage (ARM) loans.1

¶ 3 Before trial, Johnson settled, and the court entered default judgments against two of the companies. The case proceeded to a bench trial. At the conclusion of the Attorney General's case, the court granted Shifrin's motion for a directed verdict.

¶ 4 After trial, the court issued a detailed written order and judgment finding that the remaining defendants—except Mortgage Processing Group, Inc.—had violated the CCPA by perpetrating a pattern of deceptive trade practices. It entered judgment against defendant and the other corporate defendants for injunctive relief, civil penalties, restitution, disgorgement, and attorney fees.

¶ 5 As to the appeal, we conclude that consumer affidavits should not have been admitted, vacate a portion of the damages awarded, remand for damages to be recalculated, and otherwise affirm. As to the cross-appeal, we vacate the directed verdict for Shifrin and remand for the court to rule on the Attorney General's motion for default judgment as a discovery sanction. If default judgment is not entered, then the court shall reconsider Shifrin's motion for a directed verdict as a motion to dismiss under C.R.C.P. 41(b)(1).

APPEAL
I. Issues of First Impression

¶ 6 Although defendant's pro se briefs are unclear as to some contentions, he raises the following questions of first impression under the CCPA:

• Whether claims under CCPA section 6–1–110(1) are triable to a jury (Section III);
• Whether such claims can be proven by testimony of representative consumer witnesses, without testimony from all consumers who were harmed by the alleged violation (Section V);
• Whether consumer affidavits are admissible to prove damages (Section VI); and
• Whether defendant is entitled to a setoff for the settlement amount paid by Johnson (Section X).

Because we conclude that the affidavits were inadmissible hearsay, we need not decide whether consumer affidavits would ever be sufficient to prove restitution and disgorgement. Otherwise, we resolve these questions against defendant.

II. Background

¶ 7 Defendant did not designate a transcript of the trial. The Attorney General designated only a small portion of trial testimony relevant to the cross-appeal. The following information was derived from pretrial filings, the trial court's Order of Judgment, post-trial filings, and the court's ruling on those filings.

¶ 8 At trial, the Attorney General called thirteen representative consumers and presented affidavits from the remaining consumers. The court agreed with defendants that affidavits were insufficient to prove specific CCPA violations for those consumers. Yet, relying on CCPA section 6–1–112 (“for purposes of this paragraph (a), a violation of any provision shall constitute a separate violation with respect to each consumer or transaction involved”), the court concluded that if it found a violation, “the affidavits can be used to determine remedy.”

¶ 9 The Attorney General presented testimony that defendants, acting in concert, used print advertising promising low fixed rate mortgages to draw in consumers, who were then directed to companies owned, operated, or controlled by defendant. Those consumers were presented with option ARM loans that did not comply with the advertised terms. They were not provided with required disclosures and were charged fees different from what they had been told would be assessed. Some of them were lied to about the option ARM terms. Defendant did not assist consumers who complained about the terms of the loans that they had received. Those who were able to rectify the problems incurred considerable expense.

¶ 10 The trial court recognized lack of evidence that the advertised terms were not then available. But it credited the testimony of consumers that while they believed the ads were for a fixed rate loan,” which they requested, they “ended up in an option-ARM with a teaser rate either at or lower than the advertised rate and were unaware that that is what they were getting.” Then, “the teaser rate would change and do so rapidly after the term of the loan began.”

¶ 11 After summarizing the representative consumers' testimony, the court found that the Attorney General had proven a “scheme” that “in various stages violates C.R.S. 6–1–10[5](e), (g), (i), (u), and when the practice involved mortgage brokering, subsection (uu).” It also found that, “when an organization is made up of entities whose common purpose can be shown through pattern practice to nullify the individuality of the entities, liability can be found for the individual entities as a ‘person’ under the Act.”

¶ 12 The court enjoined defendant from engaging in a wide variety of real estate and financial activities. It awarded, jointly and severally:

• The statutory maximum civil penalty of $100,000, considering only “the testifying consumers and the ads directly testified about”;
• Restitution of $566,050.47, using “a simple mathematical calculation which compared the rates promised with the ones given and the difference thereof over the life of the relevant period of affect”; and
• Disgorgement of $246,723.74, limited to “the actual consumer complaints received by the State and offered to the Court through deposition, testimony and affidavit.”

The court also awarded attorney fees against defendants, jointly and severally, of $1,428,516.50, the amount requested by the Attorney General.

III. Jury Trial

¶ 13 Defendant first contends the trial court erred in ruling that he was not entitled to a jury. Based on the equitable nature of the relief sought under the CCPA, we discern no error.

A. Preservation and Standard of Review

¶ 14 Defendant preserved this issue by filing a jury demand, which the court struck on the Attorney General's motion. An appellate court reviews a party's right to a jury trial in a civil action de novo. Stuart v. N. Shore Water & Sanitation Dist., 211 P.3d 59, 61 (Colo.App.2009).

B. Law

¶ 15 In Colorado, the right to a civil jury trial is not constitutional. It exists by virtue of statutes and court rules. First Nat'l Bank of Meeker v. Theos, 794 P.2d 1055, 1058 (Colo.App.1990). The CCPA does not provide for trial by jury. Thus, the right to a jury trial in a CCPA action must be derived from C.R.C.P. 38(a).

¶ 16 Under that rule, a party has a right to a jury trial only in proceedings that are primarily legal, rather than equitable, in nature. See Zick v. Krob, 872 P.2d 1290, 1293 (Colo.App.1993). In deciding whether a proceeding is legal or equitable for this purpose, the “determinative issue is the characterization of the nature of the relief sought.” Watson v. Pub. Serv. Co. of Colo., 207 P.3d 860, 865 (Colo.App.2008) (internal quotation marks omitted); see First Nat'l Bank of Meeker, 794 P.2d at 1059 (“It is the character of the complaint ... that fixes the nature of the suit and determines whether it should be tried in equity or at law.”).

¶ 17 Generally, [a]ctions for money damages are considered legal.” Stuart, 211 P.3d at 62. But “not all forms of monetary relief need necessarily be characterized as legal relief for purpose of the jury trial requirement.” Watson, 207 P.3d at 865 (internal quotation marks and alterations omitted). Thus, even where a plaintiff seeks to recover money damages, a jury trial is not required “if the essence of the action is equitable in nature.” Id .

C. Application

¶ 18 Defendant argues that the character of the CCPA action was legal because the Attorney General sought to recover money damages and impose civil penalties, both of which are economic. Even so, the Attorney General sought monetary relief in the form of civil penalties and under the equitable principles of restitution and disgorgement. See Berger v. Dixon & Snow, P.C., 868 P.2d 1149, 1152 (Colo.App.1993) (“The remedy of restitution is based on the general principle that one should not be permitted to keep that which in equity and good conscience should be restored to another.”); see also United States v. Universal Mgmt. Servs., Inc., 191 F.3d 750, 760–61 (6th Cir.1999) (“Restitution and disgorgement are part of courts' traditional equitable authority.”); Lloyd A. Fry Roofing Co. v. State , 191 Colo. 463, 470, 553 P.2d 800, 806 (1976) (imposition of civil penalties alone does not mandate a jury trial).

¶ 19 The majority of courts in other jurisdictions have concluded that similar consumer protection actions are primarily equitable.2 Because we consider these cases well-reasoned, and several of them involve statutes similar to the CCPA, we follow them here.

¶ 20 State ex rel. Douglas v. Schroeder, 222 Neb. 473, 384 N.W.2d 626, 630 (1986), is illustrative. There, the court explained that although the Nebraska Consumer Protection Act “permits the...

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29 books & journal articles
  • Hearsay Rule
    • United States
    • James Publishing Practical Law Books Archive Is It Admissible? - 2017 Testimonial evidence
    • 31 July 2017
    ...trustworthiness, materiality, probative importance, interests of justice, and notice. 106 The People of the State of Colorado v. Shifrin , 342 P.3d 506 (Colorado Court of Appeals, 2014). In a consumer protection action alleging that the defendant engaged in a pattern of deceptive trade prac......
  • Overview
    • United States
    • James Publishing Practical Law Books Archive Is It Admissible? - 2018 Preliminary Sections
    • 2 August 2018
    ...fanciful, unreasonable or when no reasonable person would adopt the trial court’s view. The People of the State of Colorado v. Shifrin , 342 P.3d 506 (Colorado Court of Appeals, 2014). Evidentiary rulings are reviewed for an abuse of discretion, meaning that they are reversible only if they......
  • Overview
    • United States
    • James Publishing Practical Law Books Archive Is It Admissible? - 2019 Preliminary Sections
    • 2 August 2019
    ...fanciful, unreasonable or when no reasonable person would adopt the trial court’s view. The People of the State of Colorado v. Shifrin , 342 P.3d 506 (Colorado Court of Appeals, 2014). Evidentiary rulings are reviewed for an abuse of discretion, meaning that they are reversible only if they......
  • Overview
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    • James Publishing Practical Law Books Archive Is It Admissible? - 2020 Preliminary Sections
    • 2 August 2020
    ...fanciful, unreasonable or when no reasonable person would adopt the trial court’s view. The People of the State of Colorado v. Shifrin , 342 P.3d 506 (Colorado Court of Appeals, 2014). Evidentiary rulings are reviewed for an abuse of discretion, meaning that they are reversible only if they......
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