F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
FEB 7 2005
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
COLORADO VISIONARY ACADEMY,
a Colorado non-profit corporation,
Plaintiff-Appellant,
v.
No. 02-1234
MEDTRONIC, INC., a Minnesota
corporation; TOBIN REAL ESTATE
COMPANY d/b/a CRESA PARTNERS-
MINNEAPOLIS/ST. PAUL, a Minnesota
corporation,
Defendants-Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 99-N-1628)
Miles M. Gersh (James S. Helfrich with him on the briefs) of Gersh & Helfrich, LLP,
Denver, Colorado, for Plaintiff -Appellant.
Stuart Pack (Kevin C. Paul and Todd P. Walker with him on the brief) of Gorsuch Kirgis
LLP, Denver, Colorado, for Defendant - Appellee Medtronic, Inc.
Before KELLY, HOLLOWAY and HARTZ, Circuit Judges.
HOLLOWAY, Circuit Judge.
In this diversity action arising from negotiations for the sale of a building, the district
court granted summary judgment for the defendant Medtronic, Inc. (Medtronic) on the
negligent misrepresentation claim of plaintiff Colorado Visionary Academy (Colorado
Visionary). Order and Memorandum of Decision (November 9, 2001) at 30. Judgment for
Medtronic was granted on Colorado Visionary’s promissory estoppel claim after a bench
trial. III Aplt. App. 993-94. Final judgment was entered and the appeal therefrom is timely.1
We first hold that the district court erred in concluding that Colorado Visionary’s
negligent misrepresentation claim could not be maintained under the circumstances of the
case, and we reverse that ruling. Because Colorado Visionary was entitled to a jury trial on
that claim, and because any explicit findings of the jury and any necessary inferences from
a general verdict would have been binding on the district court in the bench trial of the
promissory estoppel claim, we vacate the judgment for Medtronic on the promissory estoppel
claim with directions to reconsider that claim after the jury trial of the negligent
misrepresentation claim. We also vacate the district judge’s pretrial ruling which precluded
plaintiff from presenting evidence of lost profits on its promissory estoppel claim. The
remedies available, if that claim succeeds, must be determined in light of the specific facts
1
Appellant’s briefs list the second defendant, Tobin Real Estate Company d/b/a CRESA
Partners-Minneapolis/St. Paul, as an appellee, but not one word of the briefs purports to show
any error made by the district court in its rulings as to this defendant. No entry of appearance
was made on behalf of this defendant, and appellant’s silence in response indicates that appellant
probably never intended to appeal the judgement as to this defendant. In any event, whatever
appellant’s intention may have been, the failure to pursue the appeal as to the second defendant
constitutes a waiver of any error in the judgment as to that party.
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and circumstances as they are finally determined.
I
THE FACTUAL BACKGROUND
Only a very general overview of the background of this litigation is necessary for the
context of our analysis of the legal issues involved in this appeal. Because of our holdings
in Part II and Part III, infra, the relevant facts are stated in the light most favorable to
Colorado Visionary; we need not give deference to the findings of the district court.
Plaintiff Colorado Visionary Academy is a charter school. In the spring and summer
of 1999, it needed to find a new site for the upcoming school year. Although plaintiff had
explored other possibilities, it was very interested in a facility owned and operated by
Medtronic. Defendant Medtronic manufactures and sells health equipment. Medtronic had
a large building in Parker, Colorado, that it used for research and manufacturing. Medtronic
was interested in selling the facility to Colorado Visionary and leasing back a portion of the
space for its continued operations.
A proposal along those lines was made. Negotiations were quite serious and reached
the point where apparently at least some of those involved believed that a final deal would
be struck. Colorado Visionary had begun moving some administrators into the building and
was preparing to do some renovation. In the end, however, Medtronic’s management
decided against the sale, apparently over liability concerns about having schoolchildren in
the same building where it was conducting its operations. This decision was communicated
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to Colorado Visionary on August 4, 1999.
In June, 1999, however, Colorado Visionary had allegedly been given assurances that
the deal would close. Among the statements allegedly made by representatives of Medtronic
was that the deal “had been approved at the highest corporate level,” that the deal was “a
friendly transaction,” and that any problems would be worked out.
In reliance on these assurances, Colorado Visionary declined an opportunity to lease
a different site and began preparations for moving into Medtronic’s building. With
Medtronic’s consent, parents were invited to a meeting there. Medtronic began moving out
of the area that was to be used by the school. In early August 1999, contractors began
physical work at the facility, including some demolition. But on August 4, with school to
begin in September, word came that Medtronic would not go through with the deal. This
announcement came from Medtronic’s general counsel. About one hundred students who
had been expected to enroll did not, and this of course substantially reduced Colorado
Visionary’s revenues. After trying for a year to continue on a temporary campus, the school
lost its charter from the local school district.
This suit by Colorado Visionary against Medtronic and Tobin Real Estate Company
was commenced on August 20, 1999. On June 12, 2000, Medtronic moved for summary
judgment on Colorado Visionary’s amended complaint in that action. This amended
complaint had been accepted by a magistrate judge on March 30, 2000. In its motion for
summary judgment, Medtronic argued that Colorado Visionary’s promissory estoppel claim
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should be dismissed because Colorado Visionary did not rely on Medtronic’s representations
and because the proposed transactions between Colorado Visionary and Medtronic were
illegal and impossible to perform. See Order and Memorandum of Decision at 13.
Medtronic contended that Colorado Visionary’s negligent misrepresentation claim should be
dismissed because it was premised on a promise to act in the future; there was no third party
action to support the claim; negligent misrepresentation cannot properly be stated as a claim
between parties to a contract; and the economic loss rule barred Colorado Visionary’s
negligent representation claim.
Medtronic’s motion for summary judgment was granted in part and denied in part.
Summary judgment was granted with respect to Colorado Visionary’s negligent
misrepresentation claim and denied with respect to Colorado Visionary’s promissory estoppel
claim. Order and Memorandum of Decision at 30.
II
THE NEGLIGENT MISREPRESENTATION CLAIM
We will first determine whether the district court was correct in deciding that under
Colorado law, Colorado Visionary’s negligent misrepresentation claim against Medtronic
could not be maintained under the circumstances of this case. This is an issue of law that we
review de novo. See Lampkin v. Little, 286 F.3d 1206, 1210 (10th Cir. 2002).
Colorado has adopted the Restatement (Second) of Torts § 552 definition of a claim
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for negligent misrepresentation. That section provides:
Information Negligently Supplied for the Guidance of Others.
(1) One who, in the course of his business, profession or employment, or in
any other transaction in which he has a pecuniary interest, supplies false
information for the guidance of others in their business transactions, is subject
to liability for pecuniary loss caused to them by their justifiable reliance upon
the information, if he fails to exercise reasonable care or competence in
obtaining or communicating the information.
Restatement (Second) of Torts § 552 (1977).
The district judge characterized the heart of Medtronic’s argument for summary
judgment on the negligent misrepresentation claim as based on the contention that “the
economic loss rule prevents recovery because Colorado Visionary has not shown an
independent duty of care between two parties negotiating a contract at arm’s length.” Order
and Memorandum of Decision (Nov. 13, 2001) at 23. We note this succinct definition of the
economic loss rule: “As a general rule, no cause of action lies in tort when purely economic
damage is caused by negligent breach of a contractual duty.” Jardel Enterprises, Inc. v.
Triconsultants, Inc., 770 P.2d 1301, 1303 (Colo. App. 1988) (quoted in Town of Alma v.
AZCO Construction, Inc., 10 P.3d 1256, 1261 (Colo. 2000)).2 The parties devote
considerable attention in their appellate briefs to discussion of the economic loss rule,
disputing whether or not the district court applied the rule in its decision on Colorado
Visionary’s negligent misrepresentation claim.
Further discussion of the economic loss rule appears in Town of Alma, 10 P.3d at 1261-
2
63.
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The district judge clearly recognized that under Colorado law, the economic loss rule
has no application to a valid claim for negligent misrepresentation, stating: “Where a duty
independent of contractual obligation exists however, the economic loss rule is inapplicable
because the claim is not within the scope of the rule.” Order and Memorandum of Decision
at 24. The issue is whether or not Colorado Visionary’s negligent misrepresentation claim
is viable, and that in turn depends on whether Medtronic was under a duty to avoid
negligently misrepresenting facts on which Colorado Visionary might reasonably be expected
to rely.
The district judge held that the negligent misrepresentation theory does not apply to
negotiations for a contract, absent some special circumstances. After reviewing the Colorado
decisions, the judge concluded: “Colorado caselaw indicates that section 552 has not been
used to establish an independent duty of care between contracting parties without affirmative
action or expertise on the part of the party supplying information.” Memorandum and Order
of Decision at 25. The judge later observed that “[t]o the extent that Colorado law has
arguably not restricted liability for negligent misrepresentation to professional suppliers of
information, a situation beyond adversarial bargaining existed – i.e. the party making [the]
representation had a special expertise about the information conveyed.” Id. at 27 (citing First
Nat. Bank v. Collins, 616 P.2d 154 (Colo. App. 1980)). “Most importantly,” the judge said,
“in all cases where liability was found, the supplier of information was allegedly acting to
further the recipient’s economic interests, not the economic interests of the supplier.” Order
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and Memorandum of Decision at 27. This type of situation differs, the judge said, from “an
adversarial bargaining situation” in which “each party acts to further its own economic
interest.” Id.
Because we find no controlling Colorado authority on the issue as framed by the
district court, our task is to predict how the Colorado Supreme Court would rule if that court
were faced with this issue. See FDIC v. Schuchmann, 235 F.3d 1217, 1225 (10th Cir. 2000).
In doing so, we do not limit ourselves to the technical holdings of the cases. Instead, “[b]oth
the holdings and considered dicta of the State Courts should be applied.” Hardy Salt Co. v.
Southern Pac. Trans. Co., 501 F.2d 1156, 1163 (10th Cir. 1974) (citing Hawks v. Hamill, 288
U.S. 52, 59 (1933)); see also Curtis Publishing Co. v. Cassel, 302 F.2d 132, 135 (10th Cir.
1962). No deference is given to the federal district court’s views of state law, which we
review de novo. Wood v. Eli Lilly & Co., 38 F.3d 510, 512 (10th Cir. 1994) (citing Salve
Regina College v. Russell, 499 U.S. 225 (1991)).
We conclude that the weight of the precedents favors the position advanced by
Colorado Visionary as to the scope of negligent representation liability. At the outset we
note tension between the Restatement’s definition of the tort, which has been adopted in
Colorado, and the rule which the district court distilled from the Colorado cases. Section 552
on its face applies when a person supplies false information in a transaction “in which he has
a pecuniary interest . . . .” This contradicts the district court’s conclusion that the tort applies
only when the supplier of information “was allegedly acting to further the recipient’s
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economic interests, not the economic interests of the supplier.” Order and Memorandum of
Decision at 27.
In Keller v. A.O. Smith Harvestore Product, Inc., 819 P.2d 69 (Colo. 1991), the
State’s highest court answered two questions certified by the Tenth Circuit, the first of which
was whether a cause of action for negligent misrepresentation would lie against the
manufacturer of a product for representations made during the course of the sale despite the
execution of a fully integrated sales agreement. In answering “yes,” the Colorado court
spoke in broad terms: “It is thus clear that a contracting party’s negligent misrepresentation
of material facts prior to the execution of an agreement may provide the basis for an
independent tort claim . . . .” 819 P.2d at 72 (emphasis added). This broad language does
not suggest that the tort is inapplicable to the ordinary adversarial bargaining circumstances
prevalent in most cases. Nor do the circumstances of Keller necessarily support the district
court’s holding. The plaintiffs in Keller were a ranching couple who purchased two silos
from the defendant manufacturer. This on its face suggests an ordinary, adversarial
bargaining situation. Certain provisions of the written contract are of particular interest for
our present analysis. As noted, the district judge was of the opinion that “in all cases where
liability was found, the supplier of information was allegedly acting to further the recipient’s
economic interests, not the economic interests of the supplier.” But in Keller the supplier (of
both the silo systems and the information at issue) used an order form which required the
buyers to expressly disclaim that they were relying on the seller to supply information to
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further their (the buyers’) interests. Thus, the order form stated that the buyers were “not
relying on the skill or judgment of the Manufacturer or Seller . . . .” 819 P.2d at 71.
Moreover, it is instructive to examine the cases cited by the Colorado Supreme Court
in Keller. The state court in that case began its analysis by citing the definition of the tort of
negligent misrepresentation from the Restatement (as quoted supra) and noting a number of
cases from other jurisdictions recognizing the tort. 819 P.2d at 72. The first case cited is
Rosales v. AT&T Information Systems, Inc., 702 F.Supp. 1489 (D.Colo. 1988). In that case,
one of the plaintiffs had been an employee of one of the defendants and had also been
negotiating to acquire a dealership from his employer. As the negotiations proceeded,
plaintiff had been advised by authorized agents of the employer that he should resign because
his employment was seen as a conflict with his application for a dealership. The plaintiff
followed this advice but then his application was turned down.
In his action against his former employer, the plaintiff had pleaded a claim for
negligent misrepresentation (along with several other theories of relief). The defendant
employer moved to dismiss that count of the complaint under Fed. R. Civ. P. 12(b)(6),
contending that the tort of negligent misrepresentation could not be pursued under the
circumstances of that case. Defendant in that case argued, more specifically, that the tort of
negligent misrepresentation is limited “to persons and entities engaged in the business of
supplying information which their customers might rely upon in taking some additional
action.” 702 F.Supp. at 1500. The federal district judge in that case rejected the argument,
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noting that the contention was in conflict with the holding of First National Bank v. Collins,
616 P.2d 154 (Colo. Ct. App. 1980).3 More importantly for our purposes, the supplier of
information in that case was the agent of the defendant, but there is no indication that the
court perceived that the tort of negligent misrepresentation required that the supplier of
information purported to act in the interests of the recipient of the information, as the district
judge in the instant case held. Again, this case was cited with approval by the Colorado
Supreme Court and so is some indication of the state’s law on the issue.
In Keller, the Colorado Supreme Court also cited with apparent approval Wagner v.
Cutler, 757 P.2d 779 (Mont. 1988); and First Interstate Bank v. Foutz, 764 P.2d 1307 (N.M.
1988). The dispute in Wagner centered on the sale of a house, and the plaintiff alleged that
the seller failed to use reasonable care in describing the condition of the house. There is no
indication in the case that the negotiations were anything but the typical, arm’s length
process. In Foutz, the plaintiff was the guarantor on a loan made by the defendant bank who
sued the bank alleging that the bank had misrepresented the assets of the maker of the note.
Again, we see no indication that this case involved the type of special relationship or special
undertaking that the district judge in the instant case held was necessary to support a claim
for negligent misrepresentation.
Although other cases cited in Keller do involve defendants who provided information
3
We discuss Collins further infra.
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as part of their profession,4 the examples just discussed indicate rather strongly that the
Colorado Supreme Court did not consider this to be an element of the negligent
misrepresentation claim. Moreover, another case cited in Keller reinforces this inference.
Following its initial discussion of negligent misrepresentation, the portion of the opinion in
which the above discussed cases were cited, the Colorado court addressed the defendant’s
contention that the claim in that case was in any event precluded by an integration clause in
the contract. The details of this argument are not relevant here.
What is relevant, though, is that in its analysis rejecting the argument the Colorado
court cited specifically a footnote in a Maryland case that quite explicitly rejects the
contention that the tort of negligent misrepresentation is inapplicable in a case involving
adversarial, arm’s length negotiations. In that footnote, the Maryland court noted that the
defendants there had argued that the tort of negligent misrepresentation could never be
“applied to statements made in connection with consummation of an arm’s length
transaction” and rejected the argument categorically. Martens Chevrolet, Inc. v. Seney, 439
A.2d 534, 539 n.7 (Md. 1982). The footnote goes on to address the argument that the
integration clause of the contract at issue there shielded the defendants from liability and also
rejected that argument.
In this context, an argument could be made that the Colorado court was citing the
4
Defendants in Raritan River Steel Co. v. Cherry, Bekaert & Holland, 367 S.E.2d 609
(N.C. 1988), were accountants. Defendant in Hoffer v. State, 755 P.2d 781 (Wash. 1988), was an
auditor.
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Maryland court’s footnote only for the second point, not the first, but we do not think that
argument would be persuasive. The undeniable fact is that the Colorado court cited
specifically a footnote that explicitly rejects the argument made by Medtronic in this case and
accepted by the district judge. In light of the paucity of contrary expressions by the Colorado
courts,5 it was error for the district court to ignore this important indication of the views of
the Colorado Supreme Court.
And there is further support for the same view to be found in cases from the Colorado
courts. The Supreme Court of Colorado addressed issues concerning the damages
recoverable in a negligent misrepresentation case and the evidence required to establish
damages in Western Cities Broadcasting, Inc. v. Schueller, 849 P.2d 44, 49-51 (Colo. 1993)
(en banc). The dispute in that case was between a lessor and lessee, with no indication that
the circumstances involved anything other than arm’s length bargaining. The issue with
which we are concerned was not raised in that case, making it only a weak indication of the
views of the Colorado court. Nevertheless, the state’s highest court gave no indication of any
disapproval of the use of the negligent misrepresentation claim in the circumstances there,
and that is at least some indication of approval. We would be hesitant to draw a conclusion
from this bit of datum alone, but as we have shown this case hardly stands alone. Instead,
it adds to the weight of authority indicating that Colorado does not limit the reach of the tort
Admittedly, some language in Mehaffy, Rider, Windholz & Wilson v. Cental Bank
5
Denver, 892 P.2d 230, 236 (Colo. 1995) (en banc), lends weak support to the argument that the
tort liability is limited to professional purveyors of information. But that reed is much too weak
in view of the totality of the evidence that may be gleaned from the Colorado cases.
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in the way that the district court thought that it does.
The district judge relied upon First National Bank v. Collins, 616 P.2d 154 (Colo. Ct.
App. 1980). We do not agree that Collins conflicts with the analysis we make of the
negligent misrepresentation tort. In fact, the Colorado Court of Appeals there concluded that
the plaintiff Collins had sufficiently stated a claim for which relief could be granted, pointing
to Collins’ claim that he contacted the Western Auto Company regarding the possibility of
owning an associated store; that the auto company supplied an agent to assist him in setting
up the business; and that the auto company’s agent negligently made incorrect statements to
Collins regarding the organization of the store inventory to be supplied and projected profits;
that relying on the misrepresentations he became an owner of the store and the
misrepresentations of the company and its agents caused the damages prayed for.
Regarding those allegations as true, the Colorado Court of Appeals determined that
Collins sufficiently stated a claim for relief to be granted on the tort liability for negligent
misrepresentation, 616 P.2d 154-156. We do not feel that the opinion in Collins held the
expertise of a speaker as significant on the negligent misrepresentation case. This is because,
first, the court never said that, and second, the court seems to have viewed the relationship
as one that would ordinarily exist between strangers, i.e., an arm’s length bargain. We
therefore conclude that Collins supports our analysis and does not undermine it.
The district judge also said that his holding was in accord with our holding in United
Intern. Holdings, Inc. v. The Wharf (Holdings) Ltd., 210 F.3d 1207 (10th Cir. 2000), aff’d,
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532 U.S. 588 (2001). Again, we disagree. In that case, we held that the plaintiff’s claims
of negligent misrepresentation and breach of fiduciary duty were not barred by the economic
loss rule. 210 F.3d at 1226-27. The district judge characterized the pertinent part of Wharf
as holding that the economic loss rule did not bar the negligent misrepresentation claim
because the independent duty necessary for the basis of a tort claim in a contractual situation
was provided by the fiduciary relationship of the parties as joint venturers. Order and
Memorandum of Decision at 29. But our opinion clearly held that the plaintiff could pursue
both negligent misrepresentation and breach of fiduciary duty claims (as well as a fraud
claim). We find nothing in the discussion of the negligent misrepresentation claim that relies
on the fiduciary duties of the defendant. Accordingly, we must conclude that the district
judge in the instant case misread our precedential decision.
In sum, our review of Colorado law leads us to the conclusion that the tort of
negligent misrepresentation can arise from ordinary, arm’s length bargaining that was
expected to lead to a contractual relationship. We therefore reverse the holding of the district
court and order that the negligent misrepresentation claim be reinstated.
III
THE PROMISSORY ESTOPPEL CLAIM
After granting judgment as a matter of law on the plaintiff’s negligent
misrepresentation claim, the trial judge determined that plaintiff’s remaining claim, based on
the theory of promissory estoppel, would be tried to the court. On appeal, Colorado
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Visionary concedes that this claim is an equitable one on which it would not be entitled to
a jury trial if it had been the only claim involved in the case.6 Colorado Visionary contends,
however, that it was entitled to trial by jury on the negligent misrepresentation claim, and we
have decided that, indeed, the district court erred in deciding that claim as a matter of law.
It follows, Colorado Visionary argues, that the decision on the promissory estoppel claim
should be reversed or vacated because, but for the error in eliminating the negligent
misrepresentation claim before trial, the outcome of the trial of the equitable claim of
promissory estoppel might have been different. The argument is that Colorado Visionary
would have been entitled to the benefit of any jury findings in its favor on the legal claim of
negligent misrepresentation, findings which might have precluded the district judge from
making certain of the findings that he eventually did make on the equitable claim.
We conclude that Colorado Visionary is correct. Under well settled principles, when
a plaintiff brings both legal and equitable claims in the same action, the Seventh Amendment
right to jury trial on the legal claims must be preserved by trying those claims first (or at least
simultaneously with the equitable claims), and the jury’s findings on any common questions
of fact must be applied when the court decides the equitable claims. See Lytle v. Household
Mfg., Inc., 494 U.S. 545, 556 n.4 (1990).
We discussed the applicable principles at some length in Ag Services of America, Inc.
6
Because the issue as to whether the promissory estoppel claim is an equitable one has not
been presented to us, we express no opinion on whether this is correct as a matter of federal law,
which governs the right to a jury trial in diversity cases. Simler v. Conner, 372 U.S. 221 (1963).
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v. Nielsen, 231 F.3d 726, 730-31 (10th Cir. 2000). Following these principles in the instant
case means that after the legal claim has been tried to a jury, any special findings favorable
to plaintiff or a general verdict favorable to plaintiff will have to be analyzed by the trial
judge to determine their impact, if any, on the plaintiff’s equitable claim. This includes, as
more fully discussed in Nielsen, giving due effect to any findings necessarily implicit in a
general verdict, if the jury decides the legal claim in plaintiff’s favor.
We note that defendant contends that there are no common questions of fact on the
legal claim of negligent misrepresentation and the allegedly equitable claim of promissory
estoppel. On the other hand, plaintiff points out that defendant made assertions in the court
below that are quite at odds with this contention. In any event, this will be for the district
court to determine on remand.
Medtronic also argues that the district court’s ruling on this promissory estoppel claim
should not be disturbed because the district court assumed facts in favor of Colorado
Visionary before ruling as a matter of law that plaintiff was not entitled to recover even if the
facts were as assumed. We have given careful consideration to this argument because it
seems, at least at first blush, to be forceful. Nevertheless, out of an abundance of caution we
conclude that the decision below should be vacated nevertheless.
The trial judge made very detailed and careful findings after the close of the evidence.
Moreover, as Medtronic points out, after announcing these findings, which on the whole
were unfavorable to Colorado Visionary, the judge did ground his ultimate ruling on
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conclusions he thought would follow even if he had decided critical issues in Colorado
Visionary’s favor. The trial judge held that even if certain promissory statements had been
made (contrary to his factual findings), the statements were not of a type on which plaintiff
could have reasonably relied, given the context of the dealings. Moreover, he also held that
this was not a case in which injustice could be avoided only by enforcement of the promises.
We nevertheless conclude that the decision should be vacated so that the judge can
view the issue in the light of the evidence as it comes out in the jury trial of the negligent
misrepresentation claim. We cannot ascertain the likelihood that the ultimate result may
differ. But it is more in keeping with the right to trial by jury to leave open the opportunity
to decide this claim in light of the evidence, and especially the decision of the jury, after trial.
IV
DAMAGES RECOVERABLE ON THE PROMISSORY ESTOPPEL CLAIM
The third and last issue raised by plaintiff-appellant Colorado Visionary concerns the
damages recoverable under Colorado law on a claim for promissory estoppel. The district
court in the instant case ruled before trial that plaintiff was not entitled to recovery of lost
profits on the claim. Although the district court ultimately ruled that defendant was not liable
to plaintiff at all on this claim, because of our disposition of the previous issues we think it
proper for us to decide this issue for the guidance of the district court on remand.
At the beginning of the pretrial conference, the judge said: “I don’t understand how
lost profits are in this case at all. I’m not going to hear any evidence of lost profits. That’s
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not the law.” III App. 839. Thus, it seems fairly clear that the judge’s view was that lost
profits are not recoverable as a matter of law on a claim for promissory estoppel. But
although the judge said that the plaintiff’s position was contrary to Colorado law, he cited
no authority for that conclusion. The judge did refer to the leading Colorado case on point,
Kiely v. St. Germain, 670 P.2d 764 (Colo. 1983), but that case teaches that the issue must be
decided in light of the specific circumstances of the case and so does not support the court’s
ruling.
In Kiely, the court adopted section 139 of the Restatement (Second) of Contracts as
the statement of principles governing the remedies available in an action for promissory
estoppel when, as in this case, the defense raises a statute of frauds defense. The principles
require a careful balancing of several factors. Section 139 provides:
Enforcement by Virtue of Action in Reliance
(1) A promise which the promisor should reasonably expect to induce action
or forbearance on the part of the promisee or a third person and which does
induce the action or forbearance is enforceable notwithstanding the Statute of
Frauds if injustice can be avoided only by enforcement of the promise. The
remedy granted for breach is to be limited as justice requires.
(2) In determining whether injustice can be avoided only by enforcement of
the promise, the following circumstances are significant:
(a) the availability and adequacy of other remedies, particularly cancellation
and restitution;
(b) the definite and substantial character of the action or forbearance in
relation to the remedy sought;
(c) the extent to which the action or forbearance corroborates evidence of the
making and terms of the promise, or the making and terms are otherwise
established by clear and convincing evidence;
(d) the reasonableness of the action or forbearance; [and]
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(e) the extent to which the action or forbearance was foreseeable by the
promisor.
Kiely, 670 P.2d at 769 (quoting Restatement (Second) of Contracts § 139) (emphasis added).
Notably, this statement of principles includes an express command to limit remedies
as justice requires. Thus, it is clear that a plaintiff is not necessarily entitled to all remedies
that would have been available on a breach of contract claim. But for our purposes it is most
significant that the court in Kiely specifically said that the analysis must be done in light of
the evidence. Here, the district judge had previously ruled that material issues of fact
precluded summary judgment for the defendant on whether the plaintiff had relied on the
representations made by representatives of the defendant and whether plaintiff’s alleged
reliance was reasonable. II Aplt. App. 727-30. Yet, even though those disputed issues are
specifically identified as significant circumstances to be considered in determining the
appropriate remedy, the trial judge here ruled before any evidence had been presented.
Plaintiff cites a number of cases which, it contends, show that Colorado courts have
often awarded “benefit of the bargain” or “expectation” damages, as opposed to mere
restitutionary damages, on promissory estoppel claims. In one case, the state’s high court
said, “A promise that is binding pursuant to the doctrine of promissory estoppel is a contract,
and full-scale enforcement by normal remedies is appropriate.” Board of County
Commissioners v. DeLozier, 917 P.2d 714, 716 (Colo. 1996). Medtronic disputes Colorado
Visionary’s assertions and points out that the above quote from DeLozier is the entirety of
the discussion of remedies in that case and is, as Medtronic contends, “pure dictum.” We
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agree to the extent that we conclude that the more nuanced analysis of Kiely is a more
authoritative statement of Colorado law on the remedies available in this case.
In view of the analysis adopted by the court in Kiely, moreover, we do not think that
it is helpful to compare the number of cases awarding one type of remedy with the number
of cases awarding another type. The result depends on the particular circumstances of the
case, and the error by the district court in this case was that it ruled before the facts were
clear. As with the plaintiff’s promissory estoppel claim generally, these particular
circumstances may be shaped by the jury’s verdict on the legal claim of negligent
misrepresentation. Thus, the error in deciding the remedial issue before trial was not cured
by the fact that the district judge’s eventual findings eliminated the issue altogether.
We therefore do not reach the issue whether the plaintiff should be allowed to recover
for lost profits. If the plaintiff prevails at trial on its negligent misrepresentation claim, it will
then be the district court’s task to reconsider its rulings on the promissory estoppel claim,
both as to liability and as to damages, to ensure that it has given full deference to the jury’s
verdict and its findings, if any, in accord with the principles set out in Ag Services as
discussed supra.
V
CONCLUSION
The judgment of the district court in favor of defendant-appellee Medtronic is
REVERSED, and the case is REMANDED for further proceedings in accordance with this
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opinion.
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