Villas at Highland Park Homeowners Ass'n, Inc. v. Villas at Highland Park, LLC

• Citation: 394 P.3d 1144
• Decision Date: 22 May 2017
• Docket Number: Supreme Court Case No. 16SA212
• Parties: In re: VILLAS AT HIGHLAND PARK HOMEOWNERS ASSOCIATION, INC., a Colorado nonprofit corporation, Plaintiff, v. VILLAS AT HIGHLAND PARK, LLC, a Colorado limited liability company; CC Communities, LLC, a Colorado limited liability company f/k/a Century Communities, LLC; Century Communities, Inc., a Delaware corporation f/k/a Century Communities Colorado, LLC; Horizon Building Services, LLC, a Colorado limited liability company; Dale Francescon, individually; Amy L. Anders, individually; John Healy, individually; Joseph Huey, individually; Kathy Ellis, individually; and John Geary, individually, Defendants.
• Court: Supreme Court of Colorado

394 P.3d 1144

In re: VILLAS AT HIGHLAND PARK HOMEOWNERS ASSOCIATION, INC., a Colorado nonprofit corporation, Plaintiff,

v.VILLAS AT HIGHLAND PARK, LLC, a Colorado limited liability company; CC Communities, LLC, a Colorado limited liability company f/k/a Century Communities, LLC; Century Communities, Inc., a Delaware corporation f/k/a Century Communities Colorado, LLC; Horizon Building Services, LLC, a Colorado limited liability company; Dale Francescon, individually; Amy L. Anders, individually; John Healy, individually; Joseph Huey, individually; Kathy Ellis, individually; and John Geary, individually, Defendants.

Supreme Court Case No. 16SA212

Supreme Court of Colorado.

May 22, 2017

Attorneys for Plaintiff: Burg Simpson Eldredge Hersh & Jardine PC, Brian Keith Matise, Mari K Perczak, Englewood, Colorado

Attorneys for Defendants Villas at Highland Park, LLC; CC Communities, LLC; Century Communities, Inc.; Horizon Building Services, LLC; and Dale Francescon: Don, Galleher & Associates, Shelley B. Don, Watson W. Galleher, Denver, Colorado

Attorneys for Movants Burg Simpson Eldredge Hersh & Jardine PC and Mari Perczak: Fennemore Craig, P.C., Troy R. Rackham, Denver, Colorado, Burns Figa & Will PC, Alexander "Alec" R. Rothrock, Greenwood Village, Colorado

Attorneys for Amicus Curiae Colorado Trial Lawyers Association: Bachus & Schanker LLC, Scot C. Kreider, Denver, Colorado

No appearance on behalf of: Amy L. Anders, John Healy, Joseph Huey, Kathy Ellis, or John Geary.

En Banc

JUSTICE MÁRQUEZ delivered the Opinion of the Court.

¶1 This original proceeding arises in a construction-defect case filed by a homeowners' association against several real-estate developers. An attorney for the homeowners' association, Mari Perczak, previously represented one of the real-estate developers, Dale Francescon, when Francescon was a defendant in other construction-defect litigation. Based on Perczak's prior representation of Francescon, the developers in this case (including Francescon) moved to disqualify Perczak and her law firm under Rules 1.9 and 1.10 of the Colorado Rules of Professional Conduct.

¶2 Rule 1.9 provides that an attorney has certain ethical duties to former clients that persist even after the attorney-client relationship has concluded. Relevant here, Colo. RPC 1.9(a) prohibits an attorney from representing a party whose interests are materially adverse to those of a former client if the former and present matters are "substantially related" to one another such that there is a substantial risk that confidential information that normally would have been obtained in the prior representation would materially advance the current client's position in the present matter. People v. Frisco , 119 P.3d 1093, 1096 (Colo. 2005). If an individual attorney has a disqualifying conflict under Colo. RPC 1.9(a), that conflict may be imputed to the lawyer's firm and require disqualification of the entire firm. See Colo. RPC 1.10.

¶3 This is not the first time Francescon has sought to disqualify Perczak; indeed, Francescon has moved to disqualify her under Colo. RPC 1.9(a) in at least two other construction-defect cases in which she brought claims on behalf of a homeowners' association against Francescon and other real-estate developers. In one of these previous cases, Sawgrass at Plum Creek Community Association, Inc. v. Sawgrass at Plum Creek, LLC , the trial court denied the motion to disqualify because it concluded that the Sawgrass lawsuit was not "substantially related" to the prior matters in which Perczak represented Francescon. No. 2010CV3532 (Douglas Cty. Dist. Court Sept. 5, 2013).

¶4 In the present case, the trial court denied the developers' disqualification motion without meaningfully analyzing for purposes of Colo. RPC 1.9(a) whether this case is "substantially related" to the prior matters in which Perczak represented Francescon. Instead, the trial court relied on issue preclusion, the doctrine that bars relitigation of an issue that is "identical" to an issue that was previously litigated and decided, Stanton v. Schultz , 222 P.3d 303, 307 (Colo. 2010). Here, the trial court appeared to conclude that the Sawgrass ruling denying the motion to disqualify Perczak in that case had preclusive effect so as to bar the developers' motion under Colo. RPC 1.9(a) in this case. The developers filed a C.A.R. 21 petition in this court, seeking review of the trial court's order denying the disqualification motion on the basis of issue preclusion.

¶5 We issued a rule to show cause to determine whether the trial court erred in relying on the doctrine of issue preclusion to deny the developers' attorney-disqualification motion. The disqualification inquiry under Colo. RPC 1.9(a) asks whether an attorney's prior representation and current representation are "substantially related." This inquiry under Colo. RPC 1.9(a) is specific to the particular matter for which disqualification is sought. Therefore, we conclude that a motion to disqualify under Colo. RPC 1.9(a) will rarely, if ever, raise an "identical" issue to a disqualification motion in another case because the analysis under Rule 1.9(a) of whether the prior and current matters are substantially related will differ in each case.

¶6 The dispositive legal issue in the developers' attorney-disqualification motion—whether this case is "substantially related" to Perczak's prior representation of Francescon—is specific to the present dispute. Moreover, the nature of the claims asserted in this case differs from the nature of the claims asserted in Sawgrass . Thus, we conclude that the dispositive issue here is not "identical" to the issue decided in Sawgrass , and therefore, the doctrine of issue preclusion does not apply to the developers' motion in this case. Accordingly, the trial court abused its discretion by relying on issue preclusion to deny the developers' disqualification motion. We therefore make the rule absolute, vacate the trial court's order denying the developers' motion to disqualify Perczak and her law firm, and remand this case for the trial court to analyze the merits of the developers' motion under Colo. RPC 1.9.

I. Facts and Procedural History

¶7 The attorney at the center of this disqualification dispute, Mari Perczak, filed the present lawsuit ("Villas ") on behalf of Villas at Highland Park Homeowners Association, Inc., in November 2013. The lawsuit named as defendants Villas at Highland Park, LLC; CC Communities, LLC; Century Communities, Inc.; and Horizon Building Services, LLC; as well as six individuals, including Dale Francescon (collectively, the "developers"). Because the developers seek relief from the trial court's denial of their motion to disqualify Perczak and her law firm, we consider the allegations contained in the motion to disqualify.

¶8 According to the developers, Francescon has been involved in the residential construction business in Colorado since the 1990s. Francescon and his brother founded a number of companies through which they developed residential construction projects. Between July 1996 and November 1999, various plaintiffs filed six separate lawsuits against those companies; some of those lawsuits also asserted claims directly against the Francescons.

¶9 Perczak, then a partner at the law firm Godin & Baity, served as lead counsel for the Francescons and the corporate defendants in five of those cases. In those earlier matters, Perczak advised the Francescons and the corporate defendants on various topics, including litigation strategies (particularly the defense of alter-ego and construction-defect claims); the establishment and structure of special-purpose corporate entities for residential construction; settlement strategies and risk tolerance; and the nature and extent of the Francescons' involvement with the corporate entities. Among the defendants in the earlier cases, only Francescon is a defendant in the present litigation.

¶10 Perczak left Godin & Baity in 2005. In 2007, Perczak became a shareholder in the law firm then named Vanatta, Sandgrund, Sullan & Sullan, P.C. (the "Sullan Firm"), which merged in 2014 with the firm in the present case, Burg Simpson Eldredge Hersh & Jardine PC (the "Burg Firm"). As relevant to this case, Perczak and other attorneys with the Sullan Firm represented homeowners' associations in two construction-defect lawsuits against Francescon and some of the same corporate defendants in this case.

¶11 First, in December 2010, attorneys with the Sullan Firm filed Sawgrass at Plum Creek Community Association, Inc. v. Sawgrass at Plum Creek, LLC ("Sawgrass "), No. 10CV3532 (Douglas Cty. Dist. Court), and Perczak later appeared as counsel for the homeowners' association. The Sawgrass litigation alleged construction defects at a planned community in Castle Rock, Colorado. The operative complaint in Sawgrass asserted claims against Francescon and other defendants (including one of the defendants in this case, CC Communities, LLC) for negligence, breach of implied warranty, misrepresentation/nondisclosure, violation of the Colorado Consumer Protection Act ("CCPA"), breach of fiduciary duty, and promissory estoppel.

¶12 Second, in March 2011, attorneys with the Sullan Firm filed Highlands at Westbury Townhome Association, Inc. v. Highlands at Westbury, LLC ("Westbury "), No. 11CV333 (Adams Cty. Dist. Court), and Perczak later appeared as counsel for the homeowners' association. The Westbury litigation alleged construction defects at a community of townhomes in Westminster, Colorado. As in Sawgrass , the operative complaint in Westbury asserted claims against Francescon and several other defendants (including two of the defendants in this case, CC Communities, LLC, and Horizon Building Services, LLC) for negligence, breach of implied warranty, misrepresentation/nondisclosure, violation of the CCPA, breach of fiduciary duty, and promissory estoppel.

¶13 Perczak and other attorneys with the Sullan Firm filed the present case,...