Watson v. Cal-Three, LLC
2011 Colo. App. LEXIS 547
| Colo. Ct. App. | 2011Background
- This is an appeal from a bench trial in a receivership action over a real estate development project.
- Brandon Park, a project owner, assigned rights to Cal-Three during settlement negotiations at mediation in 2002.
- Watson guaranteed FUB's loan and agreed to a reduced guarantor fee from project proceeds.
- Cal-Three sued for breach of contract and related claims; Watson defended and raised a failure-to-mitigate damages defense.
- The trial court awarded Cal-Three profits-based damages and punitive damages, then recused prior to remand on damages; appellate review ensued.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Disqualification before judgment | Watson argues judge should have recused before judgment due to a report to Regulation Counsel. | Cal-Three contends no disqualification was required; bias not proven. | No reversible error; judge need not have recused before entering judgment. |
| Damages measure and evidence | Watson contends disgorgement/prop profits or expectancy damages are improper. | Cal-Three seeks lost profits or disgorgement as remedy under EarthInfo framework. | Damages must be remanded for proper assessment; disgorgement may be considered but not as decided. |
| Mitigation of damages | Watson asserts failure-to-mitigate was improperly ignored at trial. | Trial court erred by not addressing mitigation; remand to evaluate this defense. | |
| Punitive damages for contract breach | Punitive damages not available for breach of contract or covenant of good faith in Colorado. | Punitive damages vacated; only contract-based damages may be recoverable. | |
| Attorney fees on appeal | No prior award of fees on appeal; no basis to award on appeal. | No attorney fees awarded on appeal; remand for damages proceedings only. |
Key Cases Cited
- Spring Creek Ranchers Ass'n v. McNichols, 165 P.3d 244 (Colo. 2007) (disqualification standard; discretionary rulings reviewed for abuse of discretion)
- First Horizon Merchant Servs., Inc. v. Wellspring Capital Mgmt., LLC, 166 P.3d 166 (Colo. App. 2007) (judge impartiality; appearance of bias considerations)
- People v. Dist. Court, 560 P.2d 828 (Colo. 1977) (impartiality; recusal standards for judges)
- Liteky v. United States, 510 U.S. 540 (1994) (appearance of bias; final judgments unaffected by later bias claims)
- Smith v. Dist. Court, 629 P.2d 1055 (Colo. 1981) (impartiality; disqualification evaluating bias based on case context)
- EarthInfo, Inc. v. Hydrosphere Res. Consultants, Inc., 900 P.2d 113 (Colo. 1995) (disgorgement of profits; case-by-case, fairness considerations required)
- Belfor USA Group, Inc. v. Rocky Mountain Caulking & Waterproofing, LLC, 159 P.3d 672 (Colo. App. 2006) (restoration of profits; disgorgement analysis; not limited to rescission)
- EarthInfo, Inc. v. Hydrosphere Res. Consultants, Inc., 900 P.2d 113 (Colo. 1995) (disgorgement framework and apportionment guidance)
- Wright v. District Court, 731 P.2d 661 (Colo. 1987) (context of recusal and appearance of impropriety)
- 5-H Corp. v. Padovano, 708 So. 2d 244 (Fla. 1997) (judge reporting attorney misconduct; disqualification analysis in different context)