SG Interests I, Ltd. v. Kolbenschlag, Court of Appeals No. 18CA1316

• Decision Date: 25 July 2019
• Docket Number: Court of Appeals No. 18CA1316
• Citation: 452 P.3d 1
• Parties: SG INTERESTS I, LTD., a Texas limited partnership, and SG Interests VII, Ltd., a Texas limited partnership, Plaintiffs-Appellants, v. Peter T. KOLBENSCHLAG, a/k/a Pete Kolbenschlag, Defendant-Appellee.
• Court: Colorado Court of Appeals

452 P.3d 1

SG INTERESTS I, LTD., a Texas limited partnership, and SG Interests VII, Ltd., a Texas limited partnership, Plaintiffs-Appellants,

v.Peter T. KOLBENSCHLAG, a/k/a Pete Kolbenschlag, Defendant-Appellee.

Court of Appeals No. 18CA1316

Colorado Court of Appeals, Division VI.

Prior Opinion Announced June 27, 2019, WITHDRAWN

Announced July 25, 2019

Rehearing Denied July 25, 2019

Abadie & Schill P.C., Andrew D. Schill, William E. Zimsky, Durango, Colorado, for Plaintiffs-Appellants

Ballard Spahr, LLP, Steven D. Zansberg, Denver, Colorado, for Defendant-Appellee

Opinion by JUDGE FREYRE

¶ 1 In this libel action, plaintiffs, SG Interests I, Ltd., and SG Interests VII, Ltd., (collectively SGI) appeal the district court’s order granting summary judgment for defendant, Peter T. Kolbenschlag, also known as Pete Kolbenschlag. SGI challenges the court’s findings that Mr. Kolbenschlag’s online comments were substantially true and immaterial. It also challenges the court’s refusal to order Mr. Kolbenschlag’s deposition under C.R.C.P. 56(f). We affirm the court’s judgment and remand for the determination and award of reasonable appellate attorney fees.

I. Background

A. Prior Federal Actions and Settlement

¶ 2 SGI and a competitor, Gunnison Energy Corporation (GEC), separately acquired and developed oil and gas leases in the Ragged Mountain Area of western Colorado. SGI focused its efforts on the eastern side while GEC focused on the southern side. Eventually, their interests collided and resulted in litigation between an SGI affiliate and GEC in 2004. As part of settling this litigation, SGI and GEC agreed to collaborate in developing the Ragged Mountain Area.

¶ 3 In 2005, SGI and GEC executed a Memorandum of Understanding (MOU) concerning four leases offered by the Bureau of Land Management (BLM) in which they agreed that only SGI would submit a bid, and, if it won the bid, SGI would then assign 50% of the interest in the acquired leases to GEC. They further agreed to establish a business plan to develop the leases within ninety days of acquiring them.

¶ 4 SGI successfully bid on the four leases and certified that its bid was calculated "independently and without collusion for the purpose of restricting competition." It then assigned a 50% interest in the leases to GEC. After the assignment, SGI and GEC executed additional agreements to share 50% of any oil and gas interests acquired in the area at cost and to work together on permitting pipelines to service the area.¹ Neither SGI nor GEC informed the BLM of these agreements.

¶ 5 In October 2009, a former vice president of GEC (relator) filed a qui tam complaint under the False Claims Act (FCA) alleging that SGI and GEC had falsely certified to the BLM that the bids for the leases did not violate 18 U.S.C. § 1860 (2018), and that they were not for the purpose of restricting competition. The relator had drafted and executed all of the agreements on behalf of GEC.

¶ 6 The Department of Justice (DOJ) then initiated an investigation into SGI’s bidding practices with respect to federal oil and gas leases in the Ragged Mountain Area. It filed a complaint in February 2012 against SGI and GEC alleging that the companies had violated section 1 of the Sherman Act by executing the MOU on the eve of the auction and that, consequently, the United States had received less revenue than it would have received had SGI and GEC competitively bid for the leases. The DOJ offered to settle both the Sherman Act violation and the FCA violation for $550,000 and issued a press release stating:

The Department of Justice today announced that it has reached a settlement with Gunnison Energy Corporation (GEC), SG Interests I Ltd. and SG Interests VII Ltd. (SGI) that requires the companies to pay a total of $550,000 to the United States for antitrust and False Claims Act violations related to an agreement not to compete in bidding for four natural gas leases sold at auction by the U.S. Department of Interior’s Bureau of Land Management (BLM). Today’s action marks the first time the Department of Justice has challenged an anticompetitive bidding agreement for mineral rights leases.

¶ 7 The government received seventy-six public comments, and on December 12, 2012, a federal district court judge rejected the proposed settlement, finding "[t]here is no basis for saying that the approval of these settlements would act as a deterrence to these defendants and others in the industry, particularly as GEC considers ‘joint bidding’ to be common in the industry." The court concluded "the settlement of this civil action for nothing more than the nuisance value of this litigation is not in the public interest."

¶ 8 The parties then reached a second proposed settlement, which required SGI and GEC to each pay $275,000 in the Sherman Act case and SGI to pay $206,250 and GEC pay $245,000 in the FCA case. It also required SGI and GEC to provide advance notice to the government of any intention to bid for future leases with another company for a period of five years.

¶ 9 The agreement also stated that "[t]he United States contends that it has certain civil claims against SG arising from the Covered Conduct" and "[t]his Settlement Agreement is neither an admission of liability by SG nor a concession by the United States that its claims are not well founded." It also declared that the parties had entered the settlement agreement "[t]o avoid the delay, uncertainty, inconvenience, and expense of protracted litigation."

¶ 10 The DOJ’s motion for entry of final judgment stated:

The revised settlements constitute meaningful relief that compensate the United States for damages it incurred as a result of the alleged antitrust violations, serve as a deterrent to these Defendants from engaging in joint bidding that violates the antitrust laws, and put others in the industry on notice that such anticompetitive conduct will not be tolerated.

The DOJ explained that the antitrust suit was an issue of first impression and that it wanted to quickly resolve the litigation to "deter others from crossing the line from appropriate to illegal joint bidding at BLM auctions" and specifically to deter SGI and GEC from crossing this line in the future. It acknowledged that the AMIA and OPA agreements did not violate the Sherman Act because those agreements involved "a collaboration through which pro-competitive efficiencies arise." However, it found that the MOU "reflected a deviation from common industry practice, as the MOU was merely a naked restraint that allowed Defendants to avoid a bidding war." And the DOJ noted that under this second proposed settlement agreement, "SGI and GEC will have paid more than twelve times their original cost of acquisition of the four parcels," an amount exceeding actual damages. It acknowledged that the charges were not proven at trial and that "[t]he monetary amount is a product of settlement and accounts for litigation risk and costs."

¶ 11 The federal district court judge accepted this second proposed settlement on April 23, 2013. Thereafter, numerous publications reported that SGI had paid a fine to the federal government, and several stated that the fine was for violating antitrust laws. See, e.g. , Jon B. Dubrow, Natural Gas Companies Settle Antitrust Suit Stemming from Joint Bidding , Nat’l L. Rev. (Apr. 28, 2013) (noting that SGI and GEC "will each pay a fine of $275,000 to the DOJ to settle allegations of agreeing not to bid against each other in violation of antitrust law"); infra Part II.B n.2. SGI never brought a defamation action against these commentators.

B. Current Litigation

¶ 12 Mr. Kolbenschlag is an environmental activist from Paonia, Colorado, who manages Mountain West Strategies, Ltd., a website that "specializes in public outreach and community engagement" in western Colorado. In 2016, the BLM cancelled eighteen of SGI’s gas leases in Colorado. The Glenwood Springs Post Independent newspaper published an article about the cancellation. John Stroud, Divide Lease Decision Likely to Land in Court , Glenwood Springs Post Independent, Nov. 28, 2016, https://perma.cc/6WM9-GK9J. The article discussed how SGI vowed to take legal action "based on evidence it says points to collusion between the Obama administration and environmental interests to reach a ‘predetermined political decision.’ " Id.

¶ 13 Mr. Kolbenschlag posted a reader comment to the article on the newspaper’s website in which he noted the irony of SGI’s collusion allegation and stated:

While SGI alleges "collusion" let us recall that it, SGI, was actually fined for colluding (with GEC) to rig bid prices and rip off American taxpayers. Yes, these two companies owned by billionaires thought it appropriate to pad their portfolios at the expense of you and I and every other hard-working American.

The comment included a link to the DOJ press release describing the first settlement agreement for antitrust and FCA violations related to anticompetitive bidding by SGI and GEC.

¶ 14 Four months later, SGI filed this lawsuit. Mr. Kolbenschlag filed a motion to dismiss, contending that his comment was substantially true and that SGI had not pleaded actual malice. After SGI filed an amended complaint, Mr. Kolbenschlag renewed his motion to dismiss. The district court converted the motion to one for summary judgment under C.R.C.P. 56 and set an expedited briefing schedule. Mr. Kolbenschlag then withdrew the portion of his motion seeking judgment on actual malice. Thereafter, SGI filed a response and sought leave to take Mr. Kolbenschlag’s deposition under C.R.C.P. 56(f) concerning his factual basis for stating the comments were substantially true.

¶ 15 The district court granted the motion for summary judgment, denied SGI’s request to depose Mr. Kolbenschlag, and in a separate hearing not at issue here, awarded Mr. Kolbenschlag attorney fees finding that the lawsuit was frivolous and vexatious. This appeal followed.

II. Summary Judgment Properly Granted

¶ 16 SGI first...