Free Brief in Support of Motion - District Court of Colorado - Colorado

Case 1:01-cv-00568-LTB-PAC

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 01-CV-00568-LTB-PAC CROSS COUNTRY LAND SERVICES, INC., a Texas corporation, Plaintiff, v. PB NETWORK SERVICES, INC., a Delaware corporation, PB TELECOMMUNICATIONS, INC., a Delaware corporation, LEVEL 3 COMMUNICATIONS, LLC, a Delaware limited liability company, KIEWIT NETWORK SERVICES CO., a Delaware corporation, and KIEWIT CONSTRUCTION CO., a Delaware corporation, Defendants, and PB NETWORK SERVICES, INC., a Delaware corporation, LEVEL 3 COMMUNICATIONS, LLC, a Delaware limited liability company, and KIEWIT NETWORK SERVICES CO., a Delaware corporation, Third-Party Plaintiffs, v. JAMES STEVENSON, WILLIAM STEVENSON, ED CROWSTON, and LARRY ORTH, Third-Party Defendants. _____________________________________________________________________________ REPLY BRIEF REGARDING MOTION FOR ATTORNEYS FEES PURSUANT TO D.C.COLO.LCivR 54.3 _____________________________________________________________________________ PB Network Services Co. ("PBNS") and Level 3 Communications, LLC ("Level 3"), through counsel, Grimshaw & Harring, P.C., hereby submit their reply brief regarding their motion for attorneys fees and state as follows:

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PBNS has already been determined to be a prevailing party and the determination that PBNS is a prevailing party was correct.

Cross Country Land Services, Inc. ("Cross Country") asks the Court to revisit its previous determination that PBNS is a prevailing party in this litigation. As quoted in PBNS' and Level 3's motion for attorneys fees, on January 27, 2006, the Court previously found that both PBNS and Level 3 are prevailing parties in this litigation and requested that PBNS and Level 3 submit their requests for attorneys fees. Even if the Court were to revisit that decision, the correct finding is that PBNS is a prevailing party.1 Cross Country argues that because PBNS and Cross Country each asserted seven counterclaims against one another, and because no judgment was entered in favor of the claiming party on any of these claims, neither PBNS nor Cross Country are prevailing parties. This conclusion is incorrect and is contrary to the Colorado case law regarding the determination of a prevailing party. PBNS agrees with Cross Country's assertion that the determination of which party prevailed is committed to the discretion of the trial court. See Dennis I. Spencer Contractor, Inc. v. City of Aurora, 884 P.2d 326, 328 (Colo. 1994); Wheeler v. T.L. Roofing, Inc., 74 P.3d 499, 503 (Colo. App. 2003). However, Cross County is incorrect when it argues that because both Cross Country and PBNS asserted multiple claims against one another and neither party prevailed on these claims, there is no prevailing party. "A `prevailing party' is one who prevails on a significant issue in the litigation and derives some of the benefit sought by the litigation. The number of claims upon which a party prevails or the amount awarded for those claims is not determinative." Archer v. Farmer Bros. Co., 90 P.3d 228, 230 (Colo. 2004), citing Grynberg v. Agri Tech, Inc., 985 P.2d 59 (Colo. App. 1999), aff'd on other grounds, 10 P.3d 1267 (Colo. 2000). In Wheeler, 74 P.3d at 504, the Colorado Court of Appeals affirmed the trial court's award of attorneys fees to defendant pursuant to a prevailing party fee-shifting clause when

Level 3's right to attorneys fees is based upon the indemnification clause of the PBNSCross Country Contract. Therefore, the prevailing party analysis does not apply to Level 3. 2

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defendant "prevailed on the central issue in dispute." The most informative statement on prevailing parties in multiple claim litigations is found in Archer, 90 P.3d at 231: "In multiple claim cases, where either party could arguably be considered the `prevailing party,' the trial court is in the best position to evaluate the relative strengths and weaknesses of each party's claims, the significance of each party's successes in the context of the overall litigation, and the time devoted to each claim."2 It is beyond dispute that the central focus of this litigation was whether the PBNS-Cross Country Contract should be affirmed or rescinded. Cross Country claimed that the PBNS-Cross Country Contract was the product of fraud, duress and theft, seeking its rescission and the award of several million dollars in additional compensation from PBNS. When required to make an election between affirming or attempting to rescind the contract, Cross Country elected to seek

Additionally, Cross Country's reliance on Grynberg v. Agri Tech, Inc., 985 P.2d 59 (Colo. App. 1999), aff'd on other grounds, 10 P.3d 1267 (Colo. 2000), is misplaced. Cross Country sites to Grynberg in support of its argument that the fee-shifting clause in the PBNS-Cross Country Contract is permissive, not mandatory. Rather, the more recent case of Brock v. Weidner, 93 P.3d 576 (Colo. App. 2004) should be followed by this Court. In Brock, the court refined the Grynberg analysis, addressing a "shall be entitled" fee-shifting clause, and stated as follows: We further conclude that because defendants are the prevailing parties, the trial court is required to award them reasonable attorney fees. Although it was not relied on by the trial court, we are aware that the provision in the covenants here that the prevailing party "shall be entitled" to recover reasonable attorney fees was previously construed in Grynberg v. Agri Tech, Inc., 985 P.2d 59, 65 (Colo. App. 1999) aff'd on other grounds,10 P.3d 1267 (Colo. 2000), to vest discretion in the trial court to refuse to award fees. However, we conclude that a departure from that holding is warranted. We agree with Grynberg insofar as it determined that the word "entitled," when standing alone, is not a mandatory directive. However, by focusing entirely on that word, the Grynberg analysis appears not to have given sufficient weight to the qualifying words "shall be." When the word "entitled" is viewed, not in isolation but in conjunction with the verb form "shall be," the phrase is more properly construed as requiring the trial court to award attorney fees to the prevailing party. Thus, under the provision in the covenants here, once the prevailing party has been identified, the trial court must award to it appropriate attorney fees. Because the PBNS-Cross Country Contract states that the prevailing party "shall be entitled" to attorneys fees, the Court must award attorneys fees to PBNS if PBNS is a prevailing party. 3

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rescission. After Cross Country's election to pursue rescission resulted in the dismissal of several of Cross Country's claims, and after a trial on the merits of its remaining claims, every claim asserted by Cross Country against PBNS was either dismissed or resolved in PBNS' favor and the existence of the PBNS-Cross Country Contract was affirmed. Of the seven claims that Cross Country lists on page 4 of its response, all but the claim for breach of contract were used to try to rescind the contract and recover additional compensation: the declaratory claim for duress was an attempt to establish a basis for rescission; the declaratory claim for promissory estoppel was an attempt to apply the MOU rates to the entirety of the project and avoid the contract rates; the breach of MOU claim became the main vehicle for Cross Country's duress theory at trial; the civil theft claim (rights in stolen property) was an attempt to recover what was "stolen" from Cross Country during the contract negotiations, i.e., the difference between the MOU rates and the contract rates and certain credits; and the two fraud-based claims were both used to try to rescind the contract. Cross Country has not prevailed on any of these claims and the contract was not rescinded. Furthermore, not only did Cross Country fail in its rescission efforts, but Cross Country's claim for breach of contract was also dismissed because the contract claim was inconsistent with Cross Country's rescission election. PBNS, on the other hand, has always asserted that the PBNS-Cross Country Contract was valid and, when required by the Court to make an election, elected to affirm the contract. The claims asserted by PBNS against Cross Country in this litigation (listed on page 4 of Cross Country's response) were responsive to Cross Country's claims: the rights in stolen property claim, unjust enrichment claim, fraud claim and constructive trust claim all sought to recover amounts that were paid to Cross Country pursuant to the contract and which should have been returned to PBNS to restore the pre-contract status quo if and only if Cross Country was successful in it efforts to rescind the contract. The breach of contract claim asserted against Cross Country (for failure to exercise good faith and deal fairly under the MOU) was tried and 4

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although PBNS did not prevail on this claim, the time spent on this claim throughout the litigation and at trial was insignificant compared to Cross Country's claims. PBNS voluntarily dismissed its third-party beneficiary breach of contract claim against Cross Country (alleging Cross Country's breach of the Cross Country-Capital Contract) because the potential for PBNS' double liability to Capital was eliminated once PBNS obtained a summary judgment on all claims asserted by Capital against PBNS. PBNS' breach of contract (indemnification) claim was dismissed at trial because Level 3 had paid all attorneys fees associated with PBNS' defense to the claims asserted by Capital, and Level 3 prevailed upon this identical claim at trial. Therefore, given that Cross Country failed and PBNS prevailed on the central issue of this litigation (the affirmance or rescission of the PBNS-Cross Country Contract), the Court should exercise its discretion, find that PBNS is the prevailing party and award PBNS its claimed attorneys fees pursuant to the contract. 2. PBNS and Level 3's allocation of fees and claimed attorneys fees are uncontested.

Cross Country's response does not contest the allocation of attorneys fees set forth in PBNS' and Level 3's motion and the exhibits thereto. With respect to the attorneys fees claimed by Level 3 pursuant to the indemnification clause of the PBNS-Cross Country Contract, Cross County offers no argument as to why Level 3 is not entitled to the claimed fees or the allocation of the fees. Therefore, the attorneys fees requested by Level 3 in the motion are uncontested and the Court should award Level 3 the entire $117,557.91 incurred for Level 3's and PBNS' defense to Capital Land Services, Inc.'s claims. With respect to the fees claimed by PBNS, Cross Country only challenges whether PBNS is a prevailing party and does not challenge the allocation of fees to PBNS. Therefore, the amount of the attorney fees requested by PBNS in the motion are uncontested and the Court should award PBNS $781,886.05 incurred in PBNS' defense to the claims of Cross Country.

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Dated this 4th day of May, 2006.

Respectfully submitted, GRIMSHAW & HARRING, P.C. s/ Philip M. Quatrochi Richard L. Harring Philip M. Quatrochi 1700 Lincoln Street, Suite 3800 Denver, Colorado 80203 Telephone: (303) 839-3800 Attorneys for Defendants PB Network Services, Inc., Level 3 Communications, LLC, Kiewit Network Services Co. and Kiewit Construction Co. CERTIFICATE OF SERVICE I hereby certify that on May 4th, 2006, I electronically filed the foregoing REPLY BRIEF REGARDING MOTION FOR ATTORNEYS FEES PURSUANT TO D.C.COLO.LCivR 54.3 using the CM/ECF system which will send notification of such filing to the following: Gregory C. Smith Fairfield and Woods, P.C. Wells Fargo Center, Suite 2400 1700 Lincoln Street Denver, CO 80203-4524 s/ Philip M. Quatrochi

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