Colorado Supreme Court sets the standard for establishing a professional negligence claim against a transactional real estate broker

Can a transactional broker be held liable to a seller when the seller sells the property for less than he or she otherwise would have because of the broker’s alleged negligence?  The Colorado Supreme Court answered the question of what proof is needed to establish such a claim in Gibbons v. Ludlow, Case No. 2013 CO 49, July 1, 2013. 

In Gibbons, the plaintiffs/sellers sued their transactional real estate broker¹ for alleged negligence in failing to tell them that a counteroffer included a credit to the buyer worth approximately $1.6 million.  The counteroffer was accepted, and the property was sold pursuant to the contract.  The Sellers later sued the attorney and the real estate broker for allegedly failing to tell them about the credit provisions in the contracts.

The Court held that a plaintiff suing a transactional broker for professional negligence must show that but for the alleged negligent acts of the broker, the plaintiff either: (1) would have been able to obtain a better deal in the underlying transaction (the “better deal” scenario), or (2) would have been better off by walking away from the underlying transaction (the “no deal” scenario).   In doing so, the Court used the same framework commonly used in professional negligence claims against lawyers which requires the plaintiff to prove a “case within a case” (i.e., that the plaintiff would have prevailed in the underlying case but for the attorney’s negligence).

The Court further held that the Sellers did not meet their burden in this case under either of the two potential scenarios.  First, the Sellers were unable to show that they would have gotten a “better deal” because the buyer testified that he would not have purchased the property for a higher amount.  Second, the Sellers were unable to show that they would have been better off with “no deal” because they were unable to show that they would have been able to sell to another buyer for a higher price beyond mere possibility or speculation. 

 

The Court offered potential ways of proving the “no deal” scenario: i.e., by expert testimony regarding the market conditions in the area at the time of the sale, and by evidence of comparable sales.  However, just showing that the property had appraised for the higher value or that others were interested in purchasing the property, without showing the price they were willing to pay, was insufficient. 

You can read the Court’s opinion here: http://www.courts.state.co.us/userfiles/file/Court_Probation/Supreme_Court/Opinions/2011/11SC899.pdf

Lee Katherine Goldstein is an appellate lawyer with the Denver law firm of Fairfield and Woods, PC.

¹  Colorado law defines a transactional broker as a broker who assists one or more parties throughout a contemplated real estate transaction with communication, interposition, advisement, negotiation, contract terms and the closing of such real estate transaction without being an agent or advocate for the interests of any party to such transaction.  C.R.S. §12-61-802(6).  A professional negligence claim against a transactional broker arises where the plaintiff alleges a breach of a duty of care in handling the various pieces of an underlying real estate business transaction. Opinion, ¶15.

Colorado Supreme Court clarifies the scope of the Colorado Premises Liability Act

In Larrieu v. Best Buy Stores, L.P., Case No. 2013 CO 38 (June 24, 2013), the Colorado Supreme Court rejected the argument that the premises liability statute applies only to those activities and circumstances that are “directly or inherently related to the land.” In response to a certified question from the U.S. 10th Circuit Court of Appeals, the Court held that the premises liability statute applies to conditions, activities, and circumstances on the property that the landowner is liable for in its legal capacity as a landowner.  The Court set out a two-part fact specific case-by-case inquiry for determining whether the premises liability act applies to a given circumstance: (a) whether the plaintiff’s alleged injury occurred while on the landowner's real property, and (b) whether the alleged injury occurred by reason of the property’s condition or as a result of activities conducted or circumstances existing on the property.

In this case, the plaintiff brought a truck with an attached trailer to a Best Buy store to pick up a freezer he had purchased the previous day.  The plaintiff and a Best Buy employee removed the trailer’s tailgate and began carrying it away from the trailer. As the plaintiff walked backwards, he tripped over a curb and fell when the employee carrying the tailgate kept carrying it forward towards the curb. The tailgate landed on top of the plaintiff causing a compression fracture of his lumbar spine.

The trial court granted summary judgment in favor of the defendant finding that even if the employee had an obligation to properly guide the plaintiff as he walked backwards with the heavy gate, his failure to do so was not an activity inherently related to the land so as to give rise to recovery under the premises liability statute.  The Supreme Court rejected this analysis finding that the premises liability statute is not restricted solely to activities and circumstances directly or inherently related to the land since that restriction does not appear in the statutory language. Instead, the statute uses the phrase "activities conducted or circumstances existing on such property."

The Court also rejected the contention that the premises liability statute covers essentially any tort that occurs on the property of another, finding that this broad interpretation would render much of the statute superfluous.  The statute contains language limiting its scope to injuries caused by “the condition of [the landowner’s] property, or activities conducted or circumstances existing on such property.” 

The Court held that the circumstances of this case fell squarely within the purview of the premises liability statute because the plaintiff alleged that the defendant, in its capacity as a landowner, was responsible for the activities conducted and conditions on its premises, including the process of assisting a customer with loading a freezer he had purchased from the retailer on to his truck.  Thus, the plaintiff alleged that he was injured by reason of the condition of defendant’s property or activities conducted or circumstances existing on such property.

The Court noted that its interpretation of the Premises Liability Act harmonizes the Legislature’s stated purposes of “promot[ing] . . . responsibility by both landowners and those upon the land” and “creat[ing] a legal climate which will promote private property rights and commercial enterprise and will foster the availability and affordability of insurance.”  At the same time, the interpretation of the statute does not interfere with the Legislature’s intent to “protect landowners from liability in some circumstances when they were not protected at common law.”  The Court gave examples of this protection including the statute’s requirement that landowners have actual knowledge of dangers on the land to be liable to licensees for injuries caused by the dangers. 

You can read the Court’s opinion here: http://www.courts.state.co.us/userfiles/file/Court_Probation/Supreme_Court/Opinions/2012/12SA213.pdf

Lee Katherine Goldstein is an appellate lawyer with the Denver law firm of Fairfield and Woods, PC. 

Colorado Court of Appeals rejects the use of “Lone Pine” orders requiring plaintiffs to provide evidence to support their case prior to conducting discovery

In Strudley v. Antero Resources, Corp., et al., Colorado Court of Appeals Case No. 12CA1251 (July 3, 2013), the Colorado Court of Appeals held that Colorado law prohibits the use of so called “Lone Pine” orders which require plaintiffs to present prima facie evidence supporting their claims prior to conducting discovery. 

The Strudleys sued four defendants for allegedly causing personal injuries to the Strudley family and property damage to their wells through the Defendants’ natural gas drilling operations near the Strudleys' home.   At the Defendants' request, the trial court ordered the Plaintiffs to provide expert reports and medical records demonstrating injuries and causation before they could conduct discovery.  When the Plaintiffs’ proofs fell short, the trial court dismissed their case with prejudice.   

On review, the Court of Appeals held that existing Colorado law prohibits the use of Lone Pine orders before allowing discovery on issues central to a plaintiff’s claim.  Strudley, ¶26. 

Lone Pine orders get their name from an unpublished decision by the New Jersey Superior Court in 1986 in which the court entered a case management order requiring the plaintiffs to provide facts to support their claims through expert reports, or risk having their case dismissed.  Lore v. Lone Pine Corp., 1986 WL 637507 (N.J. Super. Ct., 1986).  Since then, courts in other jurisdictions have used similar orders in exceptionally complex cases.  See discussion in Strudley, ¶¶14, 19-24.  The Colorado Court of Appeals held that such orders are contrary to Colorado law which favors broad discovery, and Colorado’s established system of pretrial rules and procedures designed to strike a balance between protecting defendants against frivolous claims, while allowing plaintiffs access to information which is central to their claims.  Strudley, ¶¶15-18, 38-39.

What do you think about Lone Pine orders?  Are they necessary to protect businesses against the expense of meritless litigation or an unwarranted denial of citizens’ access to courts? 

You can read the Court’s opinion here: http://www.courts.state.co.us/Courts/Court_of_Appeals/Opinion/2013/12CA1251-PD.pdf

Lee Katherine Goldstein is an appellate lawyer with the Denver law firm of Fairfield and Woods, PC.