10th Circuit upholds $60M breach of contract verdict in natural gas pricing dispute

Antero Resources Company entered an eight-year contract to sell natural gas from the Marcellus Shale formation to South Jersey Gas Company. They agreed that South Jersey would pay a price in accord with a gas price index published by a respected third party.

At some point, South Jersey came to believe that the composition of the index had changed, and tried to renegotiate the contract with Antero. South Jersey relied on a provision of the contract that allowed for renegotiation if the index was discontinued or unavailable, or if both parties agreed that a material change in the index had occurred.

Antero disagreed that renegotiation was required and South Jersey unilaterally started paying a lower price. Antero sued for breach of contract, and a jury awarded it $60 million.

In Antero Resources Corp. v. South Jersey Resources Group, LLC (opinion by Chief Judge Tymkovich), the Tenth Circuit upheld the verdict, holding that South Jersey’s interpretation of the contract turned on fact questions, which were for the jury to resolve. And sufficient evidence supported the jury’s resolution.

This case illustrates the problems that arise when parties to a contract agree to base a contractual term on an index or rules created by a third party. This can occur in a variety of contexts. For example, sometimes parties to a contract will agree to arbitrate any disputes before a third-party arbitrator, or in accord with arbitration rules created by a third-party organization. In many instances, however, the parties do not fully flesh out what will happen if the rules change in some way, or if the designated arbitrator decides it will no longer conduct arbitrations. This can lead to disputes about how to apply the contract in situations that the parties did not anticipate.

Here, while South Jersey’s contract contemplated that the index might change, its ability to renegotiate the contract depended on an agreement by both parties that a material change in the index had occurred. Here, Antero did not agree. This dispute might have been avoided if the contract had included language stating that renegotiation could occur if the index changed in some objectively-measurable way.

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10th Circuit: Prisoner who was victim of unprovoked assault by Denver sheriff’s deputy failed to allege Section 1983 municipal liability claim

Anthony Waller, a criminal defendant, was at a hearing in a courtroom inside the Denver city jail. He politely and calmly addressed the judge about his disagreement with the State’s case against him. Suddenly, a deputy sheriff spun Mr. Waller around and threw him into a glass wall and metal post, inflicting injuries on him. You can see footage of the incident in this story by Justin Joseph of KDVR in Denver.

Mr. Waller sued the deputy under Section 1983 and won an excessive force judgment against him. But the district court dismissed Mr. Waller’s municipal liability claims against Denver, based on its allegedly inadequate hiring practices and failure to train the deputy, because the complaint did not state sufficient facts to support those claims.

In Waller v. City and County of Denver (opinion by Judge McKay), the Tenth Circuit affirmed. First, it restated the bedrock principal that a municipality is not liable in respondeat superior for the acts of its employees. Instead, a municipality is only liable if the plaintiff shows that the government’s “policy or custom” caused the injury.

Here, Mr. Waller generally alleged that the City of Denver has inadequate hiring policies, and that the deputy who assaulted him was hired due to nepotism. But he failed to allege that if adequate hiring practices had been followed, they would have shown that hiring this particular deputy presented a known or obvious risk of harm.

As for Mr. Waller’s “failure to train” theory, the Court observed that it is usually hard to prove this sort of claim, and normally requires proof of a pre-existing, similar pattern of constitutional violations. Mr. Waller alleged only one similar assault by a Denver sheriff’s deputy, which was insufficient to show a “pattern.” He also alleged that a number of inmates died or were injured while in custody, but did not allege that these incidents were the result of any use of force by sheriff’s deputies. Finally, Mr. Waller’s complaint mentioned a number of excessive-force incidents that occurred after his injury, but those were insufficient to show a pre-existing pattern.

This case is a reminder that municipal liability claims under Section 1983 are hard to establish. If you are a plaintiff’s lawyer, it isn’t sufficient to generally allege the existence of a policy or custom. Instead, careful investigation of the municipality’s history of previous incidents is required to find those that might support your case.

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NM Court of Appeals to consider whether the state constitution bars police from opening a locked gun safe during a vehicle inventory search

On September 11, 2019, the New Mexico Court of Appeals will hear oral argument in Albuquerque in State v. Leo Jim. UPDATE: On August 6, 2019, the Court vacated the oral argument, and will reset the date.

At issue in this case is whether police may open a locked gun safe during a vehicle inventory search, and whether Article II, Section 10 of the New Mexico Constitution provides criminal defendants with greater protection than the federal constitution in the inventory-search context.

To my knowledge, this is the third oral argument that the Court of Appeals has set this year. I believe the unusually low number of oral arguments is a result of the Court’s focus on reducing its backlog of cases.

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10th Circuit: Albuquerque city clerk and lawyers are immune from suit by failed mayoral candidate

Stella Padilla wanted to run for mayor of Albuquerque in 2018, but the city clerk, Natalie Howard, rejected her nominating petition. Padilla filed a suit in state district court asking for declaratory judgment that her petition was proper.

During the lawsuit, Padilla’s daughter, Vanessa Benavidez, allegedly harrassed Ms. Howard on two occasions. On the first, Ms. Benavidez allegedly served Ms. Howard with the state-court lawsuit but then pursued her to demand that she sign an affidavit of service (which she was not required to do). On the second, Ms. Benavidez allegedly confronted Ms. Howard outside the courthouse with a “Stella for Mayor” sign and blocked her path while yelling at her about the case.

Ms. Howard, represented by city attorney Jessica Hernandez, and two of her colleagues, William Zarr and Nicholas Bullock, filed a motion for protective order in state court, which apparently was never ruled upon.

Ms. Benavidez and Ms. Padilla filed a Section 1983 lawsuit in federal court against Howard, Hernandez, Zarr, and Bullock, claiming that the filing of the motion for protective order was filed to retaliate against them for exercising their First Amendment rights. The district court dismissed the claims on immunity grounds.

In Benavidez v. Howard, in a per curiam opinion, the Tenth Circuit affirmed, holding that “a government defense attorney who, in the course of a civil adjudication, prepares a motion and arranges for the presentation of evidence on the court record by way of affidavit in support of the motion, is absolutely immune from a collateral § 1983 suit for damages based on the filing of such motion and affidavit.”

The Court further held that the claims against the city clerk were properly dismissed based on qualified immunity, since the complaint alleged only that the mere filing of the motion for protective order was in retaliation for the exercise of the plaintiffs’ First Amendment rights.

Judge Bobby Baldock filed a concurring opinion. He joined the opinion in full, except that he believed that the Court should have affirmed the judgment in the city clerk’s favor based on absolute immunity, not qualified immunity.

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NMCA: Wrongfully enjoined defendant cannot recover damages in the absence of an injunction bond

Norman Gaume filed a lawsuit claiming that the New Mexico Interstate Stream Commission had violated the Open Meetings Act, and asked for an injunction against a committee created by the Commission from taking any further action on certain matters related to the Gila River in southwestern New Mexico.

The district court granted a TRO, but did not require the plaintiff to post an injunction bond because he said he could only afford a $500 bond. A little over a month later, the TRO was dissolved. Later, after the Commission largely won on the merits, the district court awarded it over $35,000 in attorney’s fees for its efforts to dissolve the TRO.

In Gaume v. New Mexico Interstate Stream Commission (opinion by Judge Vanzi), the Court of Appeals held that a wrongfully enjoined defendant cannot recover damages in the absence of an injunction bond. The Court traced the history of injunctions, and explained that there is no common-law action for wrongful injunction. And no statute or rule provides for such a claim.

Therefore, if the district court has not required the plaintiff to post an injunction bond, then the wrongfully enjoined defendant’s sole recourse is to file an independent action against the plaintiff for malicious abuse of process. (Such claims are, however, exceedingly difficult to win in New Mexico).

Side note: My favorite appellate opinions are those which explain the historical and common-law backgrounds of principles of law, so I found this to be an enjoyable read.

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NMCA: Employer’s mistaken belief that worker was disabled supported discrimination claim

In Goodman v. OS Restaurant Services, LLC (opinion by Judge Hanisee), the Court of Appeals has held that sufficient evidence supported a jury’s verdict that an employer mistakenly “regarded” the plaintiff worker as disabled, and discriminated against him because of that belief.

The facts provide an object lesson in how not to handle a workers’ compensation claim: The plaintiff injured his ankle on the job at an Outback Steakhouse in Las Cruces, and it swelled to the size of a grapefruit. The plaintiff reported the injury to his supervisor, who allegedly told him that he didn’t need to file a claim, and that if he did so, he would be perceived as “unreliable” and would not be promoted to assistant manager. The supervisor then allegedly refused to make an accommodation because he did not think the plaintiff could perform that work, and then fired the plaintiff after thirty days because he did not show up to work. All of this led to a $95,000 jury verdict against the employer.

The Court of Appeals concluded that the evidence at trial was sufficient to support a jury conclusion that the employer discriminated against the plaintiff, in violation of the New Mexico Human Rights Act, because it regarded the plaintiff as being disabled. The jury’s conclusion was supported by (a) the supervisor’s testimony that he believed a sprained ankle was a disability; (b) the plaintiff testified that he could have worked if his requested accommodation had been given to him; and (c) medical records provided to the employer contained no restriction on the plaintiff’s ability to perform the work required by the requested accommodation.

The employer also argued that the jury instructions failed to provide adequate guidance on the Human Rights Act to the jury, and that the verdict form was defective because it only asked whether a violation of the Act occurred, but did not ask the jury to specify what the violation was. The employer, however, failed to provide an alternative jury instruction, and withdrew its objection to the verdict form.

Therefore, these claims were waived. This appears to be yet another situation where bringing in an appellate lawyer to review the instructions and verdict form might have helped.

Finally, in a pattern that we’re seeing more often this year, retired Judge Jim Wechsler is on the opinion as a judge pro tempore. In other recent opinions, retired Judges Cynthia Fry and Michael Bustamante, and retired Justice Ed Chavez, have also served as judges pro tempore on Court of Appeals panels. I believe they are doing so (presumably without pay) to help the Court overcome its backlog of cases. They should be commended for doing so!

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NMCA: Judgments Are Forever

The Cadle Company acquired a 1987 state-court judgment against the defendant, and filed suit on the judgment in 2002 and 2009, acquiring new judgments against the defendant each time. In 2016, the Cadle Company filed a suit on the 2009 judgment.

The defendant argued that this claim was barred by NMSA 1978, Sec. 37-1-2, which provides that “[a]ctions founded upon any judgment of any court of the state may be brought within fourteen years from the date of the judgment, and not afterward.” The district court agreed with the defendant that the 2009 and 2002 judgments were founded on the 1987 judgment, and that the 2016 lawsuit was therefore barred, since it was brought 29 years after the 1987 judgment.

In The Cadle Company v. Seavall, the Court of Appeals reversed. In an opinion by Judge Vargas, the Court held that Section 37-1-2 does not abrogate the common-law rule that an “action on a judgment” creates an entirely new judgment.

The upshot is that when a plaintiff obtains a judgment, it can be enforced for 14 years, but if the plaintiff files an “action on the judgment,” and obtains a new judgment, then that new judgment may be enforced for another 14 years. So in this case, the Cadle Company’s 2002 and 2009 judgments each created new 14-year periods in which the judgment can be executed, and therefore the 2016 action was not barred by Section 37-1-2.

The Court recognized that its ruling will effectively allow an original judgment to be enforced forever, but said that it is for the Legislature to decide whether the law should be changed.

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10th Circuit has posted recordings of oral arguments from July 19, 2019

A panel of the Tenth Circuit heard six oral arguments in Santa Fe last week. The court heard five criminal cases, and one civil case involving qualified immunity.

The Court has now posted recordings of those arguments here.

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10th Circuit revives lawsuit challenging Colorado’s Taxpayer Bill of Rights

Yesterday the Tenth Circuit added another chapter to the long-running saga of Kerr v. Hickenlooper, a lawsuit challenging Colorado’s Taxpayer Bill of Rights (TABOR). Colorado voters adopted TABOR via an initiative process in the early 1990s. TABOR requires voter approval of new taxes or increases in tax rates. So as you might expect, it’s not popular among politicians. Some Colorado politicians filed this lawsuit, claiming that TABOR violates the Guarantee Clause of the U.S. Constitution (Article IV, Section 4), which provides that “[t]he United States shall guarantee to every State in this Union a Republican Form of Government[.]”

I’ve previously written about this case here and here, noting problems with this lawsuit: (1) the meaning of the Guarantee Clause is uncertain; (2) it’s hard to see why TABOR is un-republican, since many states allow citizens to enact or repeal laws or state constitutional provisions; and (3) if this claim were successful it would open the door for federal courts to supervise and overrule the States’ legislative processes in previously unimagined ways.

In a 2016 decision in this case, the Tenth Circuit held that individual legislators lacked standing to challenge TABOR. On remand, several local government entities (i.e. school districts, a special district board, and a county commission) were added as plaintiffs. The district court, however, dismissed their claims because these plaintiffs lacked “political subdivision standing,” under which political subdivisions of a state lack standing to sue the state that created them, unless they are asserting a claim under a federal statute that specifically provides rights to political subdivisions.

But in yesterday’s opinion, written by Judge Stephanie Seymour, the Tenth Circuit held that it was error for the district court to reach this decision, because in doing so it had to construe the meaning of the Guarantee Clause, thereby “impermissibly delving into the merits of the case.” Thus, the standing question is so intertwined with the merits, that it cannot be reached on a Rule 12(b)(1) motion to dismiss.

Judge Jerome Holmes dissented. He would have held that it was proper for the district court to determine whether the Guarantee Clause specifically provides rights to the plaintiffs as part of a threshold standing analysis, and that the plaintiffs failed to show that it does. To my mind, Judge Holmes’ discussion of the relevant precedents seems convincing.

In addition, this case is being covered in the local news media. For example, Anna Staver has this story in the Denver Post.

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NMSC upholds commitment of Socorro man who killed his father with a pick axe

In State v. Baca, the New Mexico Supreme Court has upheld the criminal commitment of Manuel Baca, who killed his father in Socorro with a pick axe in 2016. The district court found him incompetent to stand trial and ordered him committed to the custody of the New Mexico Department of Health.

In an opinion by Justice Thomson, the Supreme Court held as follows:

  • The New Mexico Constitution (Article VI, section 2) gives the Supreme Court appellate jurisdiction over all judgments “imposing a sentence of death or life imprisonment,” and the Supreme Court has held that this provision extends its jurisdiction to interlocutory appeals in cases where a life or death sentence could be imposed. In this case, the Supreme Court held that Article VI, section 2 jurisdiction also extends to criminal commitment orders where, as here, they effectively subject the defendant to a life sentence.
  • The Supreme Court then went on to hold that substantial evidence supported the district court’s decision that the defendant acted with the deliberate intent of ending his father’s life without lawful justification or excuse. Among other things, the defendant used a deadly weapon and tried to deceive law enforcement about what happened.
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