Free Response to Motion - District Court of Colorado - Colorado


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Case 1:04-cv-01876-RPM

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IN THE UNITED STATES DISTRICT COURT FOR THE STATE OF COLORADO

04-cv-01876-RPM-CBS

KIRK WARREN, Plaintiff, v. AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA, a Florida insurance company, Defendant.

PLAINTIFF'S RESPONSE TO DEFENDANT'S MOTION FOR FEES AND COSTS

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Table of Contents I. Procedural History ....................................................................................................................3 II. Defendant Is Not Entitled To Attorney's Fees For Any Claim. ...............................................4 A. Since Plaintiff's Amended Complaint Was Dismissed For Lack Of Subject Matter Jurisdiction Pursuant To Fed. R. Civ. P. 12(b)(1) Without Prejudice, Defendant Is Not Entitled To Attorney's Fees....................................................................................... 4 B. C.R.S. § 13-17-201 Does Not Apply To Plaintiff's Claims That Are Based In Contract, Statute, Or Equity. ............................................................................................ 6 C. C.R.S. § 13-17-201 Does Not Apply To Plaintiff's Claims That Are Not Entirely Based In Tort. ................................................................................................................... 7 D. The Colorado Consumer Protection Act Attorney's Fees Provision Applies to Plaintiff's Colorado Consumer Protection Act Claims. ................................................... 8 III. Defendant's Attorney's Fees Are Not Reasonable...................................................................9 IV. Defendant Is Not Entitled To Costs........................................................................................12 V. Conclusion. .............................................................................................................................14

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Plaintiff Kirk Warren, by and through his attorneys of record, The Carey Law Firm, responds to Defendant American Bankers' Motion for Fees and Costs, as follows: I. PROCEDURAL HISTORY

On May 31, 2005, Plaintiff filed his Amended Complaint in this action. In that Amended Complaint, Plaintiff brought claims based upon Defendant's failure to offer the statutorilyrequired enhanced PIP coverage, and also claims based upon Defendant's failure to offer the statutorily required UM/UIM coverages. With regard to the enhanced PIP coverage, Plaintiff brought claims for declaratory relief, breach of insurance contract, willful and wanton statutory bad faith, breach of the implied covenant of good faith and fair dealing, common law bad faith and violation of the Colorado Consumer Protection Act. With regard to the UM/UIM coverage, Plaintiff brought claims for declaratory relief, breach of insurance contract, breach of the implied covenant of good faith and fair dealing, common law bad faith and violation of the Colorado Consumer Protection Act. On May 18, 2006, the Colorado Court of Appeals issued its ruling in DiCocco v. National Gen. Ins. Co., ___ P.3d ___, 2006 Colo. App. LEXIS 698 (2006), pertaining to primary and excess PIP coverage. Id. at *2. The court held, in an enhanced PIP case, that damages claims against excess insurers are not ripe if it has not yet been determined that the insured's losses exceed the primary policy limits. Id. at 2. On May 26, 2006, Defendant American Bankers moved for dismissal for lack of subject matter jurisdiction based upon the DiCocco decision. (Doc. No. 114.) That motion did not address Plaintiff's UM/UIM claims. Id.

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On June 23, 2006, this Court dismissed Plaintiff's entire action, without prejudice, for lack of subject matter jurisdiction based upon the DiCocco decision. Lack of Subject Matter Jurisdiction. (Doc. No. 122.) On July 28, 2006, Plaintiff filed his Motion for Reconsideration of the court's order of dismissal, since DiCocco does not apply to Plaintiff's claims for UM/UIM coverage, and Plaintiff had in fact brought a claim for declaratory relief with regard to his enhanced PIP coverage in his Amended Complaint. (Doc. No. 128.) II. DEFENDANT IS NOT ENTITLED TO ATTORNEY'S FEES FOR ANY CLAIM. A. Since Plaintiff's Amended Complaint Was Dismissed For Lack Of Subject Matter Jurisdiction Pursuant To Fed. R. Civ. P. 12(b)(1) Without Prejudice, Defendant Is Not Entitled To Attorney's Fees. Order of Dismissal for

Defendant brings its motion for fees and costs pursuant to Fed. R. Civ. P. 54(d), D.C.ColoLCivR 54.3, and Colo. Rev. Stat. §§ 13-17-201, 13-16-107, 13-16-113, and 13-16-122. The attorney's fees statutes that Defendant contends are applicable to all of Plaintiff's claims are actually not applicable to any of them. In the Tenth Circuit, attorney fee statutes are considered substantive. Fed. R. Civ. P. 54(d)(2), "gives effect to the `American Rule' that each party must bear its own attorneys' fees in the absence of a rule, statute or contract authorizing such an award." MRO Communications, Inc. v. AT&T Co., 197 F.3d 1276, 1281 (9th Cir.1999) (citations omitted). As a general rule in diversity cases, if "state law does not run counter to a valid federal statute or rule of court, and usually it will not, state law denying the right to attorney's fees or giving a right thereto, which reflects a substantial policy of the state, should be followed." Garcia v. Wal-Mart Stores, Inc., 209 F.3d 1170, *1177 (10th Cir. 2000); Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S.

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240, 259 n. 31, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975) (quoting 6 MOORE'S FED. PRAC. § 54.77[2] (2d ed.1974)). Defendant's request is misplaced for several reasons. First, Defendant cites Barnett v. Denver Publishing Co.., 36 P.3d 145, 148 (Colo. App. 2001), cert. denied (D. Colo. 2001), arguing that an award of attorneys fees is mandatory when a trial court dismisses an action under Rule 12(b). (Def.'s Mot. at 2.) However, that case only provides that an award of attorneys' fees is mandatory when a trial court dismisses an action pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted, not pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction. Id. at 148; see also First Interstate Bank of Denver, N.A. v. Berenbaum, 872 P.2d 1297 (Colo. App. 1993); Wark v. Board of County Com'rs of County of Dolores, 47 P.3d 711 (Colo. App.2002), rehearing denied (2002). Second, Defendant's motion for attorney's fees is premature. There has been no final judgment entered in the within action, let alone a judgment entered on the merits. Also, there is a motion of reconsideration pending that will substantially impact Defendant's request for attorney's fees and costs. Third, the reason attorney fees even exist is because Defendant let them accrue despite claiming it had an absolute right to prevail. Defendant did not raise the issue of subject matter jurisdiction in its Answer, or its Amended Answer (Answer, pp. 3-4; Answer to Am. Compl. pp. 3-4), and did not move for dismissal for lack of subject matter jurisdiction prior to engaging in discovery and motion practice in the within action. Lastly, under the Colorado Consumer Protection Act, Defendant must establish that Plaintiff's action is groundless and in bad faith or brought for the purpose of harassment. For

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Plaintiff's remaining claims, Defendant must establish that Plaintiff's claims lack substantial justification. Defendant has not, and cannot, meet any of these standards. B. C.R.S. § 13-17-201 Does Not Apply To Plaintiff's Claims That Are Based In Contract, Statute, Or Equity.

Defendant basically assumes throughout its motion that each of Plaintiff's claims is based in tort and therefore an award of attorney's fees is mandatory under C.R.S. § 13-17-201. Def.'s Mot. p. 2-3. Here, Plaintiff has rights in contract and equity, and under the Colorado Consumer Protection Act, each of which provides a civil remedy for a violation; therefore, it is not necessary for the Court to fashion a separate tort right of action. Further, Restatement (Second) of Torts § 874A (1979) only provides that a court may fashion a remedy if a breach of a statutory duty is based in tort and the legislature did not provide a remedy for a breach of that duty. That does not mean that all statutory duties are based in tort. Statutory duties may also be contractual and equitable in nature, as Plaintiff's claims are. Second, Defendant argues in effect that Plaintiff's claims for declaratory relief are tortious in nature. Def's Mot. 2-3. C.R.S. § 13-17-102. Each of Plaintiff's claims, for which a more specific attorney's fees provision does not apply, is governed by C.R.S. § 13-17-102, which provides: in any civil action of any nature commenced or appealed in any court of record in this state, the court shall award, by way of judgment or separate order, reasonable attorney fees against any attorney or party who has brought or defended a civil action, either in whole or in part, that the court determines lacked substantial justification. ... "[l]acked substantial justification" means substantially frivolous, substantially groundless, or substantially vexatious. These claims are equitable in nature and thus fall within

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C.R.S. § 13-17-102 (emphasis added) Plaintiff's claims here are not frivolous, groundless or vexatious. Indeed, if they were frivolous, Defendant would have raised the obvious defense. The rule of DiCocco was not obvious to anyone, least of all to Defendant. Plaintiff has reasonable grounds and a good faith argument for each claim presented, see infra; therefore, an award of attorney's fees is not warranted. C. C.R.S. § 13-17-201 Does Not Apply To Plaintiff's Claims That Are Not Entirely Based In Tort.

[S]ection 13-17-201 requires courts to award defendants reasonable attorney fees whenever an entire tort action, but not a single tort claim, is dismissed before trial pursuant to C.R.C.P. 12(b), regardless of whether the action was brought in good faith. See First Interstate Bank v. Berenbaum, 872 P.2d 1297, 1302 (Colo. App. 1993). State v. Golden's Concrete Co., 962 P.2d 919, 925-926 (Colo. 1998), as modified on denial of rehearing (Colo. 1998).

By its terms, C.R.S. § 13-17-201 applies only when an entire tort action has been dismissed under C.R.C.P. 12(b). The Colorado General Assembly has made the distinction between an action and a single claim in other statutes and rules. See § 13-17-101 ("bringing or defense of an action, or part thereof (including any claim for exemplary damages)"); C.R.C.P. 11 ("any claim, action or defense"). First Interstate Bank, supra at 1302. In this case, Plaintiff brought only one tort claim, bad faith. Only one claim based in tort was dismissed under Rule 12(b), and not an entire action; and even then it was dismissed for lack of subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1) and not failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). An award of attorneys' fees would be contrary to the plain language of the statute.

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D.

The Colorado Consumer Protection Act Attorney's Fees Provision Applies to Plaintiff's Colorado Consumer Protection Act Claims.

Any person who brings an action under this article that is found by the court to be groundless and in bad faith or for the purpose of harassment shall be liable to the defendant for the costs of the action together with reasonable attorney fees as determined by the court. Colo. Rev. Stat. § 6-1-113. To be entitled to fees for defending the claim brought under the Colorado Consumer Protection Act ("CCPA"), Defendant must prove that (1) the claim was groundless and (2) either bad faith or to harass the Defendant. Here, Plaintiffs had a good faith argument that Defendant's conduct violated the CCPA. The CCPA declares unlawful the use of any "deception, deceptive act or practice, fraud, false pretense, false promise, [or] misrepresentation . . . with intent that others rely upon such . . . ." Defendant has violated the CCPA by making false representations with regard to its insurance products (by representing to prospective insureds that its insurance products comply with the Colorado No-Fault Act and with the Colorado uninsured motorist law), and by failing to disclose material information regarding its insurance products (by failing to explain and offer enhanced PIP coverage that complies with Colorado law, and by failing to explain and offer UM/UIM coverage at all). Defendant also had unlicensed customer service representatives selling, soliciting and negotiating insurance in direct violation of Colo. Rev. Stat. § 10-2-401. Moreover, Defendant has made no showing of bad faith or a purpose to harass on the part of Plaintiff in bringing his CCPA claims. Defendant fails to meet the standards of the CCPA attorney's fee provision and attorney's fees are therefore not warranted for this claim.

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III.

DEFENDANT'S ATTORNEY'S FEES ARE NOT REASONABLE.

It is settled that the fee applicant has the burden of proving the basic time/rate elements of a reasonable fee. More particularly, the fee applicant must prove prevailing rates and time actually expended on compensable activities. 1 Attorney Fee Awards 2d ed. § 4:3 (citations omitted). A district court may, in its discretion, deny a request for attorney's fees in its entirety when the request is so outrageously excessive it "shock[s] the conscience of the court." Sun Publishing Co., Inc. v. Mecklenburg News, Inc., 823 F.2d 181, 819 (4th Cir. 1987). First, Defendant's bills are heavily redacted. See Ex. A to Def.'s Mot for Fees and Costs. This violates D.C.Colo.LCivR54.3B which provides that a motion for attorneys' fees shall include a detailed description of the services rendered. It is not possible to determine the reasonableness of the fee if Defendant cannot even provide a description of the services rendered or the reasons for the services. Defendant's attorney's fees must be reasonable in relation to the work actually expended on this case. See Tallitsch v. Child Support Services, Inc. 926 P.2d 143, 147 (Colo. App. 1996). The burden is on the party petitioning for award of attorney's fees to demonstrate its entitlement to such an award, see Kinsey v. Preeson, 746 P.2d 542, 551-52 (Colo. 1987), and that the fees sought are reasonable. Altergott v. Modern Collection Techniques, Inc., 864 F.Supp. 778 (N.D. Ill. 1994). Illustrative of the process courts employ to assess attorney fee requests are the factors used in determining fees under the Federal FDCPA, where the Court must look at the factors generally applicable to fee awards under a federal statute, including (1) the time and labor required; (2) the novelty and difficulty of the legal questions; (3) the skill required to perform the

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legal service properly; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee for similar work in the community; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation and ability of the attorney; (10) the undesirability of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases. In re Martinez, 266 B.R. 523, 541 (S.D. Fla. 2001); see Norman v. Housing Authority of Montgomery, 836 F.2d 1292 (11th Cir. 1988) citing Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974). Under these standards, the total hours claimed by attorneys would be reduced, in a situation where excessive time was spent by attorneys on performing relatively simple tasks in straightforward and uncomplicated case. Altergott, supra at 781. These standards do not support the requested fees here. If the attorney fails to provide a reasonable and rational basis for the work done, limiting the award of attorneys' fees is appropriate. Dahl v. Young, 862 P.2d 969, 973 (Colo. App. 1993). Here, it is not discernible to which of Plaintiff's claims the time entries pertain. This is

important in a case such as this where some of Plaintiff's claims are the subject of a motion for reconsideration. "...[B]ecause of our conclusion that the declaratory and injunctive relief claim was wrongly dismissed, defendants cannot recover their attorney fees under § 13-17-201. See Sundheim v. Bd. of County Comm'rs, 904 P.2d 1337 (Colo. App. 1995) (§ 13-17-201 inapplicable because one of the claims had been restored in part), aff'd, 926 P.2d 545 (Colo. 1996)." Rector v. City and County of Denver, 122 P.3d 1010 (Colo. App. 2005). Also, the extraordinary amount of time spent conducting discovery and researching and drafting motions is unnecessary. Cf. Norton v. Wilshire Credit Corp., 36 F.Supp.2d 216, 221

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(D.N.J. 1999). Defendant's counsel's law firm is very familiar with defending these types of claims and the amount of time and effort expended was not in conformity with the simplicity of the claims and Defendant's counsel's familiarity with them. Furthermore, it is incongruous at best to generate billing totaling 766 hours to respond to an action that Defendant has continuously alleged is groundless and "frivolous." Here, Defendant's counsel Senter, Goldfarb & Rice, and Wells, Marble & Hurst, spent a total of 766 hours defending this action. See Ex. A to Def.'s Mot. for Fees and Costs. This is beyond excessive. Once there is a final judgment on the merits (which there has not yet been), Defendant has the burden of demonstrating the amount charged by attorneys of equivalent skill and experience performing work of similar complexity. Cf. Washington v. Court of Common Pleas, 89 F.3d 1031, 1035-36 (3d Cir. 1996) (addressing standards to be applied in calculating award of attorney fees in civil rights action). Plaintiff has serious concerns about the heavily redacted billing records submitted by Defendant in this matter, and the evidently duplicative billing of Defendant's co-counsel Wells, Marble & Hurst, especially when all time attributable to the case has been included, and not time reasonably spent. A realistic amount of time for the briefing filed with this Court would total no more than approximately one tenth of the amount that has been submitted by Defendant. The records submitted with the fee request in this matter are completely devoid of any evidence as to why such an extraordinary amount of time was needed in this case and in fact redacted approximately one-half of the entries. As a result, Defendant has not met its burden of proof, and its billing cannot be considered to be reasonable.

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Courts are not authorized to be generous with the money of others, and it is as much the duty of courts to see that excessive fees and expenses are not awarded as it is to see that an adequate amount is awarded. American Civil Liberties Union v. Barnes, 168 F.3d 423, 428 (11th Cir. 1999). IV. DEFENDANT IS NOT ENTITLED TO COSTS.

Since the merits of the controversy are undecided, a determination that Defendant should recover costs incurred respecting the merits is speculative and premature. Callicrate v. Farmland Industries, Inc., 139 F.3d 1336, 1342 (10th Cir. 1998). Defendant moves for costs pursuant to Colo. Rev. Stat. §§ 13-16-107, 13-16-113 and 1316-122. Each of these statutes provides for the award of costs if there has been a dismissal in a tort action and on the merits. This case is primarily based in contract and equity, and has only one claim that is based in tort. Even then, it has not been dismissed on the merits. Also, a court may assess costs only for items specifically authorized by statute. C.R.S. § 13-16-122. Defendant here is requesting reimbursement for telecopy charges, long distance telephone charges, postage, delivery charges, and fees for electronic filings. None of these is specifically authorized by statute and they should therefore be disallowed. There is no statutory authorization for long distance telephone charges or postage; therefore, those items are disallowed. Shultz v. Linden-Alimak, Inc., 734 P.2d 146 (Colo. App. 1986). For federal claims, computer assisted legal research is part of the attorney's fees and is not to be taxed separately. Beckford v. Irvin, 60 F.Supp.2d 85, 9 (W.D.N.Y. 1999); United States

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ex rel. Evergreen Pipeline Const. Corp. v. Merritt Meridian Const. Corp., 95 F.3d 153, 173 (2d Cir. 1996); Alnutt v. Cleary, 27 F.Supp.2d 395, 404 (W.D.N.Y. 1998); see also Coleman v. Dydula, 175 F.R.D. 177, 182 (W.D.N.Y. 1997). Under Colorado law, the recovery of costs for computer-assisted legal research is conditioned upon meeting three requirements: (1) the party seeking to recover such costs must show that the client was billed for computerized legal research expenses separate from attorney fees; (2) the computerized legal research must have been necessary for trial preparation; and (3) the costs requested for computerized legal research must be reasonable. Roget v. Grand Pontiac, Inc., 5 P.3d 341 (Colo. App. 1999), modified on denial of rehearing, certiorari denied. Defendant here is requesting reimbursement of a large amount for computer assisted legal research. (Doc. No. 123, pp. 5-6.) This appears to be excessive and unnecessary, in light of the fact that Defendant's law firm is extremely familiar with insurance defense litigation. Further, Defendant has not met its burden of establishing that these charges are reasonable. Under the CCPA, Plaintiffs are liable for costs only for an action found to be groundless and in bad faith or brought for the purpose of harassment. C.R.S. § 6-1-113. Since Defendant has not met this standard, Defendant is not entitled to any attorney's fees for time spent defending Plaintiff's CCPA claim. Lastly, D.C.Colo.LCivR 54.1 provides that each judgment or final order shall indicate which party or parties are entitled to costs. A bill of costs must be filed on the form provided by the court within ten days after entry of the judgment or final order. Here, there is no judgment or final order entered and the Court has not indicated that anyone is entitled to costs. Defendant's Bill of Costs was not filed separately, and was not in the form provided by

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the court. Fed. R. Civ. P. 54; D.C.Colo.LCivR 54.1. Defendant's motion for costs should be denied. V. CONCLUSION.

Defendant completely fails to set forth any grounds for an award of attorney's fees, including award under C.R.S. § 13-17-201. Plaintiff's Amended Complaint was dismissed without prejudice. Since there is no federal or state statute that provides for attorney's fees in this case, each party must bear its own attorneys' fees. Plaintiff possessed a good faith argument for each of his claims, and none of those claims were brought for purposes of harassment or in bad faith. None of Plaintiff's claims was

frivolous, groundless or vexatious. Plaintiff pursued good faith arguments that were wellgrounded in fact, and were warranted by the existing law and a good faith argument for the extension, modification or reversal of existing law. Defendant has not met its burden in showing with some reasonable degree of specificity ­ where one can ascertain how much was spent on individual case-related tasks and when. In addition, there is no dispute about what was presented to the court. On its face, this case should not require more than 700 hours for a "groundless" claim. Defendant has sought hours for all time expenses here, notwithstanding that the majority of the work was unnecessary and duplicative. This case was properly brought and done in good faith and under contract, statutory and equitable bases. Moreover, even if a basis in law existed, given Defendant's excessive and

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unwarranted approach in seeking fees, this Court should deny Defendant's request altogether. Consequently, there is no basis for awarding fees to Defendant.1 Wherefore, Plaintiff respectfully requests that Defendant's Motion for Fees and Costs be denied. s/Julie Cliff Robert B. Carey Julie Cliff The Carey Law Firm 2301 East Pikes Peak Avenue Colorado Springs, CO 80909 Telephone: (719) 635-0377 FAX: (719) 635-2920 E-mail: [email protected] Attorney for Plaintiff Kirk Warren

While Plaintiff would ask this court to decide the matter on the grounds in the motion, and are cognizant that fee requests should not become secondary litigation, if this court does not feel that Defendant's motion can be denied based on the authorities cited above, Plaintiff requests a hearing on this matter. When a party contests the reasonableness of a claim for attorney fees, a hearing must be held on the issue. See Fed. R. Civ. P. 78; Zarlengo v. Farrer, 683 P.2d 1208 (Colo. App. 1984).

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO CERTIFICATE OF SERVICE (CM/ECF) I hereby certify that on August 21, 2006, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following email address(es): Arthur Joel Kutzer [email protected]

Billy-George Hertzke [email protected]; [email protected] Walter D. Willson [email protected]

and I hereby certify that I have mailed or served the document or paper to the following non CM/ECF participant in the matter (mail, hand-delivery, etc) indicated by the non-participant's name: Kirk Warren 3589 S. Nucla Street Aurora, CO 80013 Mary R. Cullen, Esq. Department of Veterans Affairs Office of Regional Counsel 155 Van Gordon Street, Suite 25126 Denver, CO 80225

s/Julie Cliff Robert B. Carey Julie Cliff The Carey Law Firm 2301 East Pikes Peak Avenue Colorado Springs, CO 80909 Telephone: (719) 635-0377 Fax: (719) 635-2920 E-mail: [email protected] Attorney for Plaintiff Kirk Warren

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