Active Release Techniques, LLC v. Xtomic, LLC
2017 COA 14
Colo. Ct. App.2017Background
- ART (Active Release Techniques and related entities) provides training and software for a soft-tissue treatment technique; Xtomic provided ART with IT services and developed software for ART.
- Former ART employee Tulio Pena introduced Jay Ferguson (co-owner of Xtomic) to ART; years later Pena, Ferguson, and others formed S3 to market a competing seminar using software Xtomic developed (some of which ART also used).
- ART sued Xtomic and S3 asserting claims including misappropriation of trade secrets and sought injunctive relief; Xtomic counterclaimed, including for abuse of process.
- At trial, a jury found for Xtomic on its claims and awarded $1,530,000 in damages; ART appealed arguing, among other things, that the trial court should have granted a directed verdict on the abuse of process counterclaim.
- The Court of Appeals held that ART was entitled to a directed verdict on abuse of process because Xtomic failed to show an improper use of judicial process (as opposed to merely improper motive), vacated the abuse-of-process verdict and related damages, and remanded to adjust the damages award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court erred in denying ART's motion for directed verdict on Xtomic's abuse of process counterclaim | ART: Evidence did not show misuse of court processes; at most showed motive or pre-litigation conduct not amounting to abuse of process | Xtomic: ART pursued baseless litigation and used preservation/settlement tactics and aggressive letters to harass and drive Xtomic out of business, showing ulterior motive and improper use of process | Court: Reversed — directed verdict should have been granted because evidence showed no improper use of an actual court process; motives and pre-suit letters/settlement insufficient |
| Whether settlement with Pena and ART’s litigation reputation constitute abuse of process | ART: Settlement and reputation are not misuse of court processes | Xtomic: Nominal settlement and pattern of aggressive litigation indicate ulterior motive and abuse | Court: Rejected Xtomic’s view — settlement and reputation do not prove wrongful use of judicial process |
| Whether preservation letters sent by ART constituted a “legal” or “judicial proceeding” use of process | ART: Letters were pre-suit investigatory communications, not court processes | Xtomic: Letters were intended to harass/intimidate and part of improper litigation strategy | Court: Held letters were pre-filing communications, not court process; abuse of process tort inapplicable |
| Whether appellee (Xtomic) is entitled to appellate attorney fees | Xtomic: Should recover appellate fees because it prevailed at trial | ART: Appeal succeeded in part; appellee not entitled | Court: Denied Xtomic appellate fees because appeal was decided in part for ART |
Key Cases Cited
- Huntoon v. TCI Cablevision of Colo., 969 P.2d 681 (Colo. 1998) (directed-verdict standard; view evidence in light most favorable to nonmoving party)
- Bonidy v. Vail Valley Ctr. for Aesthetic Dentistry, P.C., 186 P.3d 80 (Colo. App. 2008) (directed-verdict standards)
- Bryant v. Cmty. Choice Credit Union, 160 P.3d 266 (Colo. App. 2007) (directed verdict guidance)
- Lauren Corp. v. Century Geophysical Corp., 953 P.2d 200 (Colo. App. 1998) (elements of abuse of process)
- Sterenbuch v. Goss, 266 P.3d 428 (Colo. App. 2011) (abuse of process requires improper use of legal proceeding)
- Mintz v. Accident & Injury Med. Specialists, PC, 284 P.3d 62 (Colo. App. 2011) (ulterior motive alone insufficient for abuse of process)
- Hewitt v. Rice, 154 P.3d 408 (Colo. 2007) (abuse of process does not require proof of malice)
- Cornelison v. TIG Ins., 376 P.3d 1255 (Alaska 2016) (abuse of process requires pressure unrelated to the suit)
- Weinstein v. Leonard, 134 A.3d 547 (Vt. 2015) (abuse of process requires misuse of specific court processes)
- Aztec Sound Corp. v. W. States Leasing Co., 510 P.2d 897 (Colo. App. 1973) (abuse of process requires improper use outside scope of action)
- Walker v. Van Laningham, 148 P.3d 391 (Colo. App. 2006) (distinguishing nonjudicial communications from court processes)
- Moore v. W. Forge Corp., 192 P.3d 427 (Colo. App. 2008) (objective evaluation of process use despite alleged motive)