Free Objection to Report and Recommendations - District Court of Colorado - Colorado

Case 1:01-cv-00693-LTB-BNB

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No: 01-B-693 (BNB) TY REX, LLC. Plaintiff, v. MARK NEWMAN JAPHETH B. BOYCE, individually and dba RJB ROCK SHOP TRANS UNION GEM & MINERAL, INC. KAREN NEWMAN JOHN C. BOLAN ROBERT L. STODDARD GAIL L. STODDARD, Defendants MARK NEWMAN JAPHETH B. BOYCE Defendants and Third Party Plaintiffs v. JEFFREY S. MILLER, Third-Party Defendant. ______________________________________________________________________________ PLAINTIFF'S and THIRD-PARTY DEFENDANT'S OBJECTIONS TO RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE (DOC 203 FILED 08/23/2005) ______________________________________________________________________________ COME NOW the Plaintiff Ty Rex LLC, and the Third-Party Defendant, Jeff Miller, through their attorneys Reece & Baker, LLC and hereby make the following objections to the Recommendation of the United States Magistrate Judge (Doc. 203, filed 08/23/05): STATEMENT OF FACTS A. History of Lawsuit Plaintiff is the owner of a Tyrannosaurus Rex fossil, purchased pursuant to a contract that also included a cast of an entire T-Rex, plus history of ownership and records of its discovery. Based upon representations made to Plaintiff's agent, Plaintiff believed that the seller of the fossil 1

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was Defendant Mark Newman ("Newman") and that he had full ownership and ability to enter into said contract. Plaintiff paid $69,600 in partial consideration for the fossil and other contract items and received a written bill of sale conveying title to the fossil to Plaintiff. Immediately after entering into the agreement, while the fossil was in the possession of Japheth Boyce ("Boyce") for restoration, Newman failed to produce the ownership records or records of the excavation, as agreed. Furthermore, Defendant Japheth Boyce ("Boyce") originally presented himself to Plaintiff as a disinterested third party paleontology expert who advised Ty Rex as to the condition, quality and value of the fossil and agreed to restore it. Plaintiff only learned much later that Boyce was one of the owners of the fossil and had deliberately withheld that fact from Plaintiff. Plaintiff also later learned that there could be claims of ownership made against the fossil by a former spouse of one of the persons in the chain of title, whom Newman refused to identify. Plaintiff commenced this action against Newman and Boyce for breach of contract and misrepresentation. (Complaint, Doc. 1, 04/17/01) Only after suit was commenced did Plaintiff learned the identity of the other owner, John Bolan ("Bolan"), and his former spouse and further learned that, contrary to the representations made to it by Newman and Boyce, there were photographs and other records of the excavation. Plaintiff also learned that, at the very same time of sale of the fossils to Plaintiff, the Tyrannosaurus Rex skeleton was the subject of a California divorce proceeding involving Bolan and his wife Christine and that the California court had explicitly awarded full ownership of the fossil to Christine. Plaintiff also learned that Bolan and Robert and Gail Stoddard, the persons on whose ranch the fossil was first found, had executed documents for use in the California divorce proceeding that supported the claim made by Bolan in that proceeding in which he denied the existence of any fossils. Plaintiff also learned of an agreement between Bolan, Boyce and the Stoddards that purported to be a joint venture agreement concerning the marketing and sale of the fossil, suggesting that each of these individuals has, at some time, or currently, been an owner of the fossil and furthermore suggesting that Newman had no authority to enter into an agreement purporting to transfer ownership of the fossil to Plaintiff. 2

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As a result of learning the identity of Christine Bolan, Plaintiff amended its complaint to add Trans Union Gem & Mineral, Inc., Karen Newman, John C. Bolan and Robert and Gail Stoddard as additional defendants. Plaintiff brought claims against Mark Newman and Japheth Boyce for fraud and misrepresentation, against Mark Newman, Trans Union, Boyce, Bolan and the Stoddards for breach of contract, against Mark Newman for tortious interference with business, against Mark Newman, Karen Newman (as CEO of Trans Union) and Trans Union for constructive fraud, against Bolan and the Stoddards for fraud and misrepresentation, claims against all defendants based on the Colorado Consumer Protection Act and for exemplary damages. The tortious interference claim seeks damages against Mark Newman for calling an auction house with whom Plaintiff was negotiating and telling them that Plaintiff did not own the fossil and had no right to sell it (which was in direct contradiction to the terms of the written agreement that explicitly conveyed title to Plaintiff.) (Amended Complaint, Doc. 41, 02/06/02)) B. Stipulation of Settlement. On June 10, 2003, following months of negotiations, the parties entered into a Stipulation of Settlement ("Stipulation")(Doc. 155) pursuant to which each side (Plaintiff and Third-Party Defendants identified collectively as the "Ty Rex Parties") and Defendants Mark Newman, Japheth Boyce, individually and dba RJB Rock Shop; Trans Union Gem & Mineral, Inc.; and Karen Newman identified collectively as "Trans Union Defendants") had six months to attempt to sell the Fossil Package privately and, if neither side were successful, then the Fossil was to be sold at public auction. The Stipulation set forth the formula pursuant to which each side was to be reimbursed in the event of sale. In all sales scenarios, the Ty Rex parties were to receive the first $250,000 from sale, the Trans Union Defendants to receive the next amount of proceeds up to the sum of $400,000, with the parties equally dividing all amounts beyond that. Further, in the event of public auction, the parties agreed that it would be sold without reserve.

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Pursuant to the Stipulation of Settlement, Defendant John Bolan was dismissed from the lawsuit. The action was dismissed, subject to being reopened for enforcement of the Stipulation. (Orders, Docs. 156, 157, 06/12/03) When the Fossils failed to sell privately through the efforts of both sides, it was publicly auctioned on May 16, 2004. C. The Auction Plaintiff and Third-Party Defendant respectfully disagree with portions of the Recommendation of the U.S. Magistrate Judge and his description of events following the auction, which is substantively incomplete and in certain key instances incorrect. a. The Recommendation of the Magistrate Judge fails to mention that the Ty Rex

parties sought the assistance of the Court several months prior to the auction to ensure that the auction proceeded smoothly and pursuant to the terms of the Stipulation. On January 14, 2004, the Ty Rex parties filed a Motion to Reopen Action and Request for Forthwith Hearing before Magistrate Regarding Stipulation of Settlement. (Doc. 158) Pursuant to this request, the Ty Rex parties pointed out certain significant problems confronting the parties that threatened to prevent the Stipulation from being fulfilled according to its terms. As stated in that Motion:
4. Certain conflicts, however, have arisen among the parties regarding issues that were either not addressed, or not addressed specifically enough in the Stipulation, to provide clear guidance to the parties how to proceed. Certain of these issues include the following: a. Whether the Ty Rex parties have full authority under the Stipulation to enter into a binding agreement with an auction house or whether any negotiated agreement must first be submitted to the Trans Union Defendants for final approval; b. Related to above, whether the Trans Union Defendants have any right to alter or dictate substantive terms of the listing agreement, such as the estimate of value to be placed upon the fossils and cast, contractually and customarily the right of the auction house; c. Whether the Trans Union Defendants have a duty under the Stipulation to act quickly to pay the Black Hills Institute ("BHI") in full for the cast (approximately $50,000) so that BHI will agree to release the cast for auction; d. The extent of responsibility of the Trans Union Defendants to assist in accomplishing tasks that need to be completed so that the fossils and cast can be auctioned in May, 2004, such as dealing with BHI concerning possible damage to the cast that has occurred in the time the cast has been in its

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5.

possession; obtaining digital photographs of the cast that can be used in the auction house's brochure; paying for packing and delivering the fossils and cast to the auction house pursuant to the terms of the Stipulation and related types of duties. Time is of the essence in dealing with these issues: the only opportunity for the parties to auction the fossils and cast in 2004 will be in May. In fact, due to the nature of the fossils and cast and the relative scarcity of auction houses that deal with such items, there may not be another opportunity to auction these items in the foreseeable future. (Doc.158, pp.2-3)

As a result of the Ty Rex parties' motion, the Magistrate Judge directed that the parties also file briefs regarding his power to enforce the Stipulation. The Ty Rex parties' Memorandum Brief Concerning the authority of the Magistrate Judge to Issue Orders re the Stipulation of Settlement was filed January 27, 2004. (Doc. 164) Although both the Ty Rex parties and the Trans Union Defendants agreed and consented to the Magistrate Judge's authority to enforce the Stipulation, (and in fact, the Stipulation specifically provided for it on page 11, ¶ 3), the Magistrate Judge determined that he did not have such power. Nonetheless, a hearing was held and as a result, agreements were reached to deal with the concerns raised in the Ty Rex parties' motion. The Motion to Reopen Action is significant to the present issue before the Court because it shows the intent and determination of the Ty Rex parties that the Stipulation be carried and enforced according to its terms. b. The Magistrate Judge has also failed to mention the Plaintiff's Verified Motion for

Enforcement of Terms of Stipulation of Settlement filed June 25, 2004 in which Plaintiff again sought the Court's assistance in enforcing the terms of the Stipulation. (Doc. 167) This motion, which was filed after the public auction was held on May 16, 2004, expressed Plaintiff's concern that the winning bid had been placed by Defendant Japheth Boyce, ostensibly on behalf of a colleague of his in South Dakota, Bruce Lien. This was a concern to Plaintiff for a number of reasons. One was the fact that Mr. Boyce had not disclosed his intention to bid on his or anyone else's behalf and also that Plaintiff learned after the fact counsel for Trans Union Defendants had

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advised his clients that they were free to bid at the auction, an action Plaintiff believed was prohibited by the explicit terms of the Stipulation. (Doc. 167, page 5, ¶ d). Plaintiff also believed and stated that Boyce had an inherent conflict of interest in acting both as agent for the parties to the Stipulation and as agent for the buyer, particularly when Plaintiff learned that Bruce Lien had authorized Mr. Boyce to bid up to $950,000 at auction and bidding ended at $80,000.
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Lastly Plaintiff argued that the Trans Union Defendants had an obligation under the terms of the Stipulation to disclose documentation relating to the Fossil that Mr. Boyce had apparently received from the British Museum. The significance of that motion for purposes of this Objection, again, is to point out that the Plaintiff and Third-Party Defendant have sought throughout the terms of the Stipulation to see it carried forward and enforced according to its terms and that this has been the sole intent and desire of these parties. As Plaintiff stated in its Reply Regarding the Recommendation of United States Magistrate Judge (Doc. 181, 11/18/04):
Plaintiff has spent years and a great deal of money attempting to mitigate its losses and salvage some benefit from this contract with the Defendants. The Stipulation of Settlement is all that stands between Plaintiff and complete financial loss. The issues Plaintiff raises regarding how the Stipulation is being interpreted and applied deserve full attention.

c.

The U.S. Magistrate Judge states that the Ty Rex parties rescinded the auction sale

without the consent of the defendants. (Recommendation, P. 5) This is at best an extremely narrow construction of "consent", because in fact the Defendants did not oppose rescission. As soon as the sale was over and the Plaintiff started hearing details of the sale: (i.e., that Mr. Boyce was the bidder; that bidding was made on behalf of associates or acquaintances of Mr. Boyce; that Mr. Boyce was authorized to bid up to $950,000 and bid only $80,000; that Mr.

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Plaintiff did not learn about this until Defendants filed their Response to Plaintiff's Verified Motion for Enforcement of Terms of Stipulation of Settlement. (Doc.169) Exhibit B to the Response, a letter from Mr. Boyce to Mr. Lien indicates that he was authorized to bid up to $950,000 at auction.

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Ramey had advised his clients that they were permitted to bid if they chose), both sides began to discuss rescission. Defendants were as much in favor of it as was Plaintiff:
[C]ounsel for Butterfields has conferred with undersigned counsel about the prospect of approaching [the Buyer] to inquire about the possibility of rescinding the auction purchase - a possibility that would be a godsend to all parties to this action. . .

(Defendants' and Third Party Plaintiffs' Response to Motion for Enforcement of Terms of Stipulation of Settlement, Doc. 169, p. 6, ¶10.)2 The fact that the Defendants were not signatories to the rescission agreement does not mean the Defendants were not in favor of rescission. They stated numerous times through counsel that they were. d. The Magistrate Judge incorrectly claims that Ty Rex did not explain its reasons for

rescission of the auction sale. On Page 9 of the Recommendation, the Magistrate Judge states "for reasons which are not explained, Ty Rex entered into an agreement of rescission of the auction sale with the purchaser and the auction house." (Emphasis added.) This is another reason why

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It is a curious result of events that the Defendants have behaved both as though they are signatories of the contract with the auction house and at the same time, that they have no obligation to abide by its terms, e.g. they have a right both (1) to approve the Master Consignment Agreement: 16. Plaintiff disagrees with Ed Ramey's opinion that Boyce was legally permitted to bid on the fossils. He was one of the persons expecting to make a profit from the sale. In fact, in January of 2004, when Ty Rex was negotiating the terms of the Master Consignment Agreement with the auction house and keeping Mr. Ramey informed, Ed Ramey specifically asserted in a letter dated January 13th that: Second, while we have agreed that you could communicate on behalf of our entire group with Butterfields for the purpose of pursuing a single negotiation with that auction house, we most certainly did not agree carte blanche that we would approve whatever you negotiated. Mr. Boyce and Mr. Newman will need to review and respond regarding the contractual documents you have enclosed with your letter, and you do not have the authority to bind us until they do. 17. It would therefore appear that, at least as of last January, Mr. Ramey believed his clients were parties to the Master Consignment Agreement, along with Ty Rex. Given that, and his knowledge of the above-cited terms of that Agreement, it is bewildering as to how he can now claim that Japheth Boyce had a right to be on both sides at once and bid as well. (Emphasis added.) (Verified Motion for Enforcement of Terms of Stipulation, pp.4-5, ¶¶16-17.) and (2) to bid on the Fossil Package, forbidden by both the Master Consignment Agreement and California law (and also forbidden by the terms of the Stipulation of Settlement.) See Plaintiff's Verified Motion for Enforcement of Terms of Stipulation of Settlement filed June 24, 2004, pages 2 and 3, ¶¶6 - 7.

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Plaintiff has cited herein its previous motions for enforcement of the Stipulation to the Court and its subsequent objection to the U.S. Magistrate's Recommendation denying said motion. It is

inconceivable that the Court cannot be aware of the reasons why Ty Rex sought rescission, when its reasons were so clearly explained in those previous filings. The Magistrate Judge does correctly point out in that same paragraph that the rescission did not harm the Defendants, since they would not have been entitled to receive anything had the sale not been rescinded. ARGUMENT A. The Plaintiff and Third-Party Defendant Did Not Abrogate the Stipulation. As support for his conclusion that the Plaintiff and Third-Party Defendant had abrogated the Stipulation of Settlement, the U.S. Magistrate twice quotes from their Response to the Defendants' Motion for Clarification and Enforcement of Terms of Stipulation of Settlement and Proposal of Third Alternative the statement that "it is neither possible nor desirable to attempt to revive this ill-fated transaction". While it is evident from the context that the Plaintiff and Third

Party Defendant are referring to the impossibility of reviving the auction sale to Bruce Lien, the implication is that it is the Stipulation of Settlement that is "ill-fated" and therefore rejected by Plaintiff. As shown in the above statement of facts, however, Plaintiff and Third-Party Defendant attempted numerous times to seek this Court's assistance in enforcing the Stipulation and ensuring that the goals set forth in it would be accomplished according to its terms. It has gone on record more than once as stating that the auction sale was NOT carried out according to either the clearly stated terms of the Stipulation or according to basic agency and fiduciary principles. See Anthony v. U.S., 987 F. 2d 670 (10th Cir. 1993) (settlement is a contract - construed using ordinary principles of contract interpretation.)

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If anything, the Plaintiff and Third-Party Defendant have been dedicated to the attempt to carry out the terms of the Stipulation as written, in the face of considerable effort by Defendants to re-interpret its terms according to some other design. Far from manifesting intent to abrogate the Stipulation, as the U.S. Magistrate Judge has suggested, Plaintiff and Third-Party Defendant have throughout the course of this matter manifested their intent that the Stipulation be properly carried out and enforced. The Magistrate Judge cannot construe otherwise from the objective actions of Plaintiff and Third-Party Defendant. Avemco Ins. Co. v. Northern Colorado Air-Charter, Inc., 38 P. 3d 555 (Colo. 2002) (subjective intent of the parties to a contract of rescission is immaterial; a mutual rescission is effected, if at all, on the basis of the parties' objective manifestation of intent). It cannot come as a surprise to anyone connected with this case to learn that the Plaintiff and Third-Party Defendant believe that the Defendants have not complied in good faith with the terms of the Stipulation. The remedy for that is not to erase the Stipulation and rule that the parties now have to go back to where they were two and a half years ago and litigate the case. To rule that all of the effort and expense of the last two and a half years is just so much water under the bridge. To reach that result would be to punish the Plaintiff and Third-Party Defendant for attempting in good faith to see the Stipulation through to the end pursuant to its terms and to reward the Defendants for ignoring its terms. See, e.g. Royal v. Colorado State Personnel, 690 P. 2d 253 (Colo. App. 1984)(later dissatisfaction with the terms of a compromise agreement is not sufficient grounds to set it aside). B. Plaintiff and Third-Party Defendant Cannot Be Returned to the Point They Were At Prior to the Stipulation. Even if it were proper to erase the Stipulation and all that has occurred since, the parties cannot be returned to the point they were at when the Stipulation of Settlement was first executed. For one thing, one of the parties (and a prime mover of events), John Bolan, was dismissed from the suit. Plaintiff can no longer look to him for compensation. See, e.g. Wheeler v. McNeil, 101 F.

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685, 41 C.C.A. 604 (Colo. 1900) (where status quo cannot be restored there can be no rescission). Additionally, the cast of Stan, also a part of the Fossil Package purchased by Plaintiff, was sold at auction and can no longer be offered for sale, limiting the pool of potential buyers. There is also the fact that the marketability of the Fossil has been seriously damaged by the auction sale, which arguably establishes its value at $80,000. First National Bank v. American State Bank of Brighton, 215 P. 473, 73 Colo. 254 (Colo. 1923) (price obtained at an auction sale is competent evidence of the value of the property). To assume that the parties can now go back to court and take up where they left off is to ignore the very real changes that have affected the parties and the properties as a direct result of the Stipulation. C. The Stipulation Was Fully Performed and Is Concluded - There is Nothing Further For the Court to Do. As stated in his Recommendation, the Magistrate Judge mentions that Plaintiff proposed in its Response to the Defendants' Motion for Clarification that the Court and the parties consider this matter concluded. (Doc. 191, 01-10-05) The terms of the Stipulation were accomplished, although not in the manner anticipated, at least by Plaintiff. The cast was sold at auction. The Fossil Barnum was also sold and, although that sale was rescinded six months later, the result to Defendants is no different than it would have been had the sale been consummated: the Defendants would not have received a penny. As for the Plaintiff, it has possession of a fossil that is now worth maybe $80,000, far less than the amount of money expended by either side throughout the course of this transaction and lawsuit. In the four and a half years since this suit was commenced, during which time everyone involved was constantly attempting to find a buyer, none such has emerged and it is a different economy and climate by far than it was in 2000 when the transaction was first made. Although the Magistrate Judge quotes the Defendants as being in opposition to this proposal, he does not provide his own assessment of it (except for his previously cited observation that `[i]t also is not clear to me what harm such an agreement of rescission caused the defendants,

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since they were not entitled to any of the sale proceeds from the auction because the winning bid was below the $250,000 initial threshold.") (Recommendation at page 9, ¶1) The Magistrate Judge has also stated unequivocally in post-auction hearings and settlement conferences his opinion that the Stipulation is concluded and there is no further relief that can be provided by the Court in this action. The Recommendation is silent as to why his opinion has changed to his present conclusion that the Stipulation was abrogated. CONCLUSION While the Stipulation has not resulted in a clean and tidy resolution of this complex dispute, it has resulted in a conclusion. The terms of the Stipulation have been accomplished. And while most likely both sides would have preferred a different result (e.g., a sale of the Fossil for hundreds of thousands of dollars), the fact that that was not the result reached is not the fault of the Stipulation, which was the end product of the only cooperative effort ever engaged in by these parties, but is the sad substance of the subject matter of the suit. The Plaintiff hereby objects to the Recommendation of the U.S. Magistrate Judge and requests that the Court deem the Stipulation, and this matter, are concluded. DATED: October 1, 2005. Respectfully submitted, REECE & BAKER, LLC __ _____s/ Joe Reece_________________ Joe Reece Reece & Baker LLC P.O. Box 6670 Denver, CO 80206 Telephone: 303-321-2222 FAX: 303-321-1456 E-mail: [email protected] Attorney for Plaintiff Ty Rex LLC and Third Party Defendant Jeffery S. Miller

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CERTIFICATE OF SERVICE The undersigned hereby certifies that on this 1st day of October, 2005, true and correct copies of the foregoing PLAINTIFF'S and THIRD-PARTY DEFENDANT'S OBJECTIONS TO RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE (DOC 203 FILED 08/23/2005) were electronically served and/or placed in the United States mails, postage prepaid and addressed as follows: Edward T. Ramey, Esq. Isaacson, Rosenbaum, Woods & Levy, P.C. 633 17th Street, Suite 2200 Denver, CO 80202 Luis A. Toro, Esq. Frank W. Visciano, Esq. Senn Lewis & Visciano, P.C. 1801 California Street, Suite 4300 Denver, CO 80202 Justin D. Cumming, Esq. Rothgerber Johnson & Lyons LLP 1200 17th Street, Suite 3000 Denver, CO 80202 ______________/s________

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