Sonnenberg et al v. Sipf et al

Filing 271

ORDER granting in part 99 Motion for Summary Judgment; denying as moot 155 Motion to Exclude, 165 Motion for Summary Judgment, 170 Motion in Limine, 171 Motion in Limine, 172 Motion in Limine, 177 Motion to Exclude, 180 Motion for Joinder, 181 Motion for Joinder. Granting in part 254 Motion for Summary Judgment; granting in part 256 Motion for Joinder, as outlined in the attached order. Judgment to enter. By Judge Raymond P. Moore on 5/20/2015.(tscha, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Raymond P. Moore
Civil Action No. 1:12-cv-00441-RM-KMT
ERIC DAVID SIPF,
Third-Party Plaintiff,
v.
JOHN C. HERBERS,
THOMAS KELLER,
CRAIG MAGNUSON, and
MAGNUM ACTUARIAL GROUP, LLC,
Third-Party Defendants.
______________________________________________________________________________
ORDER
______________________________________________________________________________
THIS MATTER arises from Plaintiffs Carol Sonnenberg, Michael Sonnenberg, and
American Financial Securities Holdings, Inc.’s (collectively, the “Sonnenbergs”) alleged loss of
their investment in Imerica Administrative Services Corporation (“IASC”), a now defunct
holding company whose only asset was Imerica Life and Health Insurance Company
(“Imerica”). Invoking this Court’s subject matter jurisdiction based on diversity of citizenship,
the Sonnenbergs filed this action asserting state law claims based on alleged material
misrepresentations and omissions made in connection with the sale of IASC securities to the
Sonnenbergs. Some of the Defendants filed third-party claims against Third-Party Defendants.1

1

Third-Party Plaintiffs alleged the Third-Party Complaint was based on diversity jurisdiction because there was
complete diversity between the Sonnenbergs and Defendants and Third-Party Defendants. Assuming that is the
proper basis for jurisdiction, whether complete diversity existed is unclear as Third-Party Defendant Magnum
Actuarial Group, LLC is a limited liability company and its citizenship is determined by the citizenship of all its
members, Siloam Springs Hotel, L.L.C. v. Century Sur. Co., 781 F.3d 1233, 1238 (10th Cir. 2015), and their
identities and citizenships were not alleged in the Third-Party Complaint. Nonetheless, subject matter jurisdiction
exists over the third-party claims based on supplemental jurisdiction under 28 U.S.C. § 1367(a).

Subsequently, the Sonnenbergs settled all claims against all Defendants, and some of the thirdparty claims were settled. The issue before the Court is whether it should retain supplemental
jurisdiction2 over the remaining state law third-party claims in light of the dismissal of the
original state law claims upon which this Court’s subject matter jurisdiction was based. (ECF
Nos. 247, 248.) In addition, if the Court retains jurisdiction, the following substantive motions
are ripe for resolution:
1. Third-Party Defendants Thomas Keller, Craig Magnuson, and Magnum Actuarial
Group, LLC (collectively, “Magnum”):
(i)

Motion for Summary Judgment (ECF No. 99); and

(ii)

Motion for Summary Judgment (ECF No. 254); and

2. Third-Party Defendant John Herbers:
(i)

Motion for Summary Judgment (ECF No. 165);

(iii)

Brief Regarding Sipf’s Contribution Claims (ECF No. 252),3 which the Court
construes as a motion for partial summary judgment; and

(ii)

Joinder in Magnum Defendants’ Motion for Summary Judgment (ECF No.
256).

Herbers’ and Magnum’s papers also contain various joinders to each other’s arguments.
The Court has reviewed all pending matters, taken judicial notice of the court’s file,
analyzed the applicable statutes, rules and case law, and considered the arguments of counsel at
the hearing held on January 30, 2014, along with papers filed thereafter. Upon consideration of
all relevant matters, the Court finds: (1) the exercise of supplemental jurisdiction in this instance

2

There is no complete diversity between remaining Third-Party Plaintiff Sipf and the remaining Third-Party
Defendants.
3
The parties have argued the contribution issue as if it was ripe for summary judgment; therefore, the Court has
treated Herbers’ and Magnum’s papers accordingly.
2

is appropriate; (2) the shareholder standing rule applies to bar Sipf’s Fourth and Sixth Claims for
Relief for Breach of Fiduciary Duty and Aiding and Abetting Breach of Fiduciary Duties,
respectively, as the only injury alleged is Sipf’s loss of his investment in IASC; and (3) that
Sipf’s settlement with the Sonnenbergs without extinguishing the parties’ alleged common
liability or discharging the alleged common obligation bars Sipf’s claims for contributions under
the Uniform Contribution Among Tortfeasors Act, C.R.S. § 13-50.5-101 et seq. (“UCATA”),
and the Colorado Securities Act, C.R.S. § 11-51-604.
I.

PROCEDURAL AND FACTUAL BACKGROUND
The Sonnenbergs filed four complaints in this case, based solely on diversity jurisdiction.

Defendants filed Designations of Nonparties at Fault (ECF Nos. 32-34), identifying, among
others, John C. Herbers, Robert Ruiz-Moss, and Magnum as nonparties who are wholly or
partially at fault for the Sonnenbergs’ claims. Some Defendants also filed a Third-Party
Complaint against Herbers, Magnum, and others. (ECF No. 36.) Over time, the Sonnenbergs
settled their claims with all Defendants, with Sipf as the last Defendant to settle. (ECF No. 251.)
Although the Sonnenbergs never filed any claim against nonparties/Third-Party Defendants
Herbers and Magnum, those parties also entered into settlement agreements. (ECF No. 165,
Exhibit A; No. 255; No. 258.) The Sonnenbergs’ action was dismissed, leaving only the ThirdParty Complaint at issue.
As for the Third-Party Complaint, all third-parties settled except for Third-Party Plaintiff
Sipf and Third-Party Defendants Herbers and Magnum, with the following claims remaining for
resolution:4
First Claim for Relief – Against Herbers:
Contribution on Plaintiffs’ First Claim (Securities Violation);
4

During oral argument, Sipf advised that his claims are for contribution; therefore the Court considers the claims
based on indemnification withdrawn. The Fifth Claim for negligence was voluntarily dismissed. (ECF No. 183.)
3

Second Claim for Relief – Against Herbers:
Contribution on Plaintiffs’ Second Claim (Fraudulent Concealment);
Third Claim for Relief – Against Magnum Defendants:
Contribution;
Fourth Claim for Relief – Against Herbers:
Breach of Fiduciary Duty; and
Sixth Claim for Relief – Against Magnum Defendants:
Aiding and Abetting Breach of Fiduciary Duties.
II.

SUMMARY OF FACTUAL ALLEGATIONS5
According to the Sonnenbergs, the directors and management of IASC solicited investors

in IASC and, in connection with that solicitation, furnished an Offering Memorandum which
contained material misrepresentations and omissions. In 2009, the Sonnenbergs were solicited to
purchase securities of IASC by Sipf (the Chairman of Imerica), Ruiz-Moss (the CEO of Imerica),
and Herbers (the President of Imerica), and were furnished copies of the Offering Memorandum,
upon which the Sonnenbergs relied in making their investments in IASC. The Sonnenbergs
asserted two claims for relief: (1) Violation of Colorado Securities Act; and (2) Fraudulent
Concealment. They alleged the Defendants engaged in a number of acts or omissions in
violation of the Colorado Securities Act and were “control persons” under C.R.S. § 11-51604(5)(b), subject to joint and several liability with IASC. They sought to recover their
investment paid for the securities. In addition, the Sonnenbergs alleged that Defendants
fraudulently concealed a number of material facts for which actual damages were sought.
According to Sipf, Herbers is liable for contribution because he was a member of IASC’s
management, was a director of IASC, and directly communicated with the Sonnenbergs

5

This is a brief summary. To the extent any facts are required for any specific motion for summary judgment, they
are included in the section analyzing that specific motion. Magnum relied on various allegations of the Third-Party
Complaint for their Motion for Summary Judgment based on lack of standing. Herbers joined in the motion.
4

regarding investments in IASC. Thus, if Sipf is found liable to the Sonnenbergs, Herbers is
liable to Sipf for any damages which may be assessed against Sipf.
As for Magnum, Sipf asserts that Magnum entered into a Consulting Services Agreement
with IASC to provide Imerica with actuarial services. Imerica, with Magnum’s assistance, set
insurance premium rates at unreasonably low levels, which Magnum, Herbers and others
concealed from the board of directors of IASC, including Sipf. Magnum’s alleged participation
in setting rates too low and the concealment of this fact led to the financial problems which
caused Imerica’s and IASC’s financial collapse, causing the Sonnenbergs’ loss of investment.
Accordingly, Magnum is liable to Sipf for any liability he may have to the Sonnenbergs.
In addition, as to all Third-Party Defendants, Sipf contends they worked together to set
the premium rates unreasonably low and concealed this fact from Sipf, causing Sipf to lose his
own investments.
III.

LEGAL STANDARD
Summary judgment is appropriate only if there is no genuine dispute of material fact and

the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp.
v. Catrett, 477 U.S. 317, 322 (1986); Henderson v. Inter-Chem Coal Co., Inc., 41 F.3d 567, 56970 (10th Cir. 1994). Whether there is a genuine dispute as to a material fact depends upon
whether the evidence presents a sufficient disagreement to require submission to a jury or is so
one-sided that one party must prevail as a matter of law. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 251-52 (1986); Carey v. United States Postal Serv., 812 F.2d 621, 623 (10th Cir.
1987). Once the moving party meets its initial burden of demonstrating an absence of a genuine
dispute of material fact, the burden then shifts to the nonmoving party to demonstrate the
existence of a genuine dispute of material fact to be resolved at trial. See 1-800-Contacts, Inc. v.

5

Lens.com, Inc., 722 F.3d 1229, 1242 (10th Cir. 2013) (citation omitted). The nonmovant “must
set forth evidence sufficient for a reasonable jury to return a verdict in his favor.” Rice v. U.S.,
166 F.3d 1088, 1092 (10th Cir. 1999).
If a movant properly supports a motion for summary judgment, the opposing party may
not rest on the allegations contained in his complaint, but must respond with specific facts
showing a genuine factual issue for trial. Fed. R. Civ. P. 56(e); Scott v. Harris, 550 U.S. 372,
380 (2007) (holding that “[t]he mere existence of some alleged factual dispute between the
parties will not defeat an otherwise properly supported motion for summary judgment; the
requirement is that there be no genuine issue of material fact”) (citation omitted; emphasis in
original). A fact is “material” if it pertains to an element of a claim or defense; a factual dispute
is “genuine” if the evidence is so contradictory that if the matter went to trial, a reasonable jury
could return a verdict for either party. Anderson, 477 U.S. at 248. In considering whether
summary judgment is appropriate, the facts must be considered in a light most favorable to the
non-moving party. Cillo v. City of Greenwood Vill., 739 F.3d 451, 461 (10th Cir. 2013)
(citations omitted).
IV.

LEGAL ANALYSIS
A. SUBJECT MATTER JURISDICTION
This Court had diversity jurisdiction over the Sonnenbergs’ claims against Defendants,

and supplemental jurisdiction over Third-Party Plaintiffs’ Third-Party Complaint against ThirdParty Defendants. As the case currently stands, the Sonnenbergs have settled their case against
all Defendants. At issue now is whether this Court should retain supplemental jurisdiction over
Sipf’s remaining third-party claims against Herbers and Magnum. Upon consideration of all
relevant matters, and the facts and circumstances of this case, the Court finds it should exercise

6

its discretion and will retain supplemental jurisdiction over the remaining third-party claims. See
Barlow v. C.R. England, Inc., 703 F.3d 497, 511 (10th Cir. 2012) (“As all of [plaintiff’s] federal
claims have been dismissed, we leave it to the district court to decide in the first instance whether
it will continue to exercise supplemental jurisdiction over the state-law claim.”)
Pursuant to 28 U.S.C. § 1367(a), “in any civil action of which the district courts have
original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims
that are so related to claims in the action within such original jurisdiction that they form part of
the same case or controversy under Article III of the United States Constitution.” However, as
relevant to the issue at hand, “[t]he district courts may decline to exercise supplemental
jurisdiction over a claim under subsection (a) if: (1) the claim raises a novel or complex issue of
State law; [or] … (3) the district court has dismissed all claims over which it has original
jurisdiction.” 28 U.S.C. § 1367(c) (emphasis added).
The United States Court of Appeals for the Tenth Circuit has “generally held that if
federal claims are dismissed before trial, leaving only issues of state law, the federal court should
decline the exercise of jurisdiction by dismissing the case without prejudice.” Brooks v.
Gaenzle, 614 F.3d 1213, 1229 (10th Cir. 2010) (internal quotation marks, brackets, and citation
omitted); see Merrifield v. Board of Cnty. Comm’rs for the Cnty. of Santa Fe, 654 F.3d 1073,
1086 (10th Cir. 2011). However, the Tenth Circuit has stated “[t]he Supreme Court has
instructed that ‘a federal court should consider and weigh in each case, and at every stage of the
litigation, the values of judicial economy, convenience, fairness, and comity in order to decide
whether to exercise jurisdiction over a case brought in that court involving pendent state-law
claims.’” Merrifield, 654 F.3d at 1085 (quoting Carnegie–Mellon Univ. v. Cohill, 484 U.S. 343,
350 (1988)). The Carnegie decision further suggests that inflexibility, blanket prohibitions, and

7

categorical prohibitions on a district court’s discretion may not be warranted. See Carnegie, 484
U.S. at 350 n.7, 356 n.12, 357.
In this case, the Court’s diversity jurisdiction existed until nearly the eve of trial. A final
pretrial conference was held on December 16, 2013. A trial preparation conference was set for
January 13, 2014, with trial to begin on January 21, 2014. (ECF No. 220, 89.) Two days before
the trial preparation conference, and less than two weeks before trial, the Sonnenbergs notified
the Court they had settled with Sipf, then the remaining Defendant. (ECF No. 241.) In light of
the settlement, the Court vacated the trial date and asked the parties to brief various issues.
Many of the state law issues now before the Court were pending before the Sonnenbergs settled
with Sipf, and were fully briefed and ripe for determination.
The Sonnenbergs’ settlements resulted in the dismissal of state law claims, the only
claims asserted, leaving third-party state law claims for resolution. Before the settlements,
although only state law claims were –and are – at issue, no party asked the Court to consider
whether it could – and should – decline to exercise supplemental jurisdiction over the third-party
claims, or to certify any questions of state law to the Colorado Supreme Court. If the Court were
to dismiss the claims now, Sipf would be required to begin anew in state court, incurring
significant expense, time, and delay in developing his case once again. Therefore, the Court
finds it is appropriate to exercise its discretion and retain jurisdiction in this instance.
Herbers argues that Sipf’s contribution and breach of fiduciary duty claims raise complex
issues of Colorado law. The Court finds that while some of the contribution issues under the
circumstances of this case may arguably be complex, the parties have fully briefed these issues.
Further, the Court finds that the breach of fiduciary duty issues are not so complex, there is

8

sufficient Colorado law on the issue and, again, the parties have fully apprised the Court of the
state of the law.
The Court recognizes that the interest of comity is of considerable weight in evaluating
whether to retain state law claims. However, in this instance, there were only state law claims
before the Court, and the settlement which divested the Court of its original jurisdiction occurred
on nearly the eve of trial after all state law matters then at issue were fully briefed and the parties
were prepared for trial. Under the facts and circumstances of this case, the Court finds the
interests of judicial economy, convenience, and fairness weighs more heavily in favor of
exercising jurisdiction to decide the remaining claims. Accordingly, the Court will retain
jurisdiction over the remaining third-party claims.
B. SIPF’S STANDING TO SUE – THE SHAREHOLDER STANDING RULE
Magnum’s Motion for Summary Judgment (ECF No. 99) raises the sole issue of whether
Sipf has standing to sue Magnum.6 Herbers subsequently joined in Magnum’s argument, but
only as to the Fourth Claim for Relief for Breach of Fiduciary Duty. (ECF No. 260, page 3.)7
1. Magnum’s Motion for Summary Judgment (ECF No. 99)
a. Material Undisputed Facts8
Based on the papers and oral argument, the following material facts are undisputed. Sipf
was a director and chairman of the board of directors of IASC and Imerica, and a shareholder of
IASC. Magnum contracted with IASC to provide Imerica with actuarial services and insurance
consulting services.

6

Magnum raises that argument again in a subsequent motion for summary judgment. (ECF No. 254.)
Herbers originally argued that Sipf’s only alleged injury is the diminished value of his investment in IASC. (ECF
No. 256.) Now, Herbers acknowledges that Sipf’s original claims for contribution “sought contribution for any
liability imposed upon [Sipf] pursuant to Plaintiffs’ [the Sonnenbergs] claims,” and contends only Sipf’s breach of
fiduciary duty claim is barred by the shareholder standing rule. (ECF No. 260, pages 2, 3.)
8
Magnum’s Rule 56 motion also relies on a summary of allegations to provide background information.
7

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b. Analysis
In the Third-Party Complaint, Sipf asserted claims against Magnum for contribution
(Third Claim); and aiding and abetting breach of fiduciary duties (Sixth Claim). Magnum
contends that the only damages claimed by Sipf is the loss of his investment,9 and the
“shareholder standing rule” precludes Sipf – a shareholder – from bringing any claim against a
third-party vendor to the corporation, here, IASC. Sipf, however, argues the shareholder
standing rule does not apply as he is suing as a director and is seeking to recover for those
damages which Sipf may be liable to the Sonnenbergs. During oral argument, Sipf clarified that
because he has settled with the Sonnenbergs, his damages now are what he paid in settlement to
the Sonnenbergs, adjusted for any determination of proportionate fault. The Court agrees with
Sipf’s argument, but this only saves his contribution claim.
Under Colorado’s shareholder standing rule, “as a general rule, a stockholder cannot
maintain a personal action against a director or other third party whose action causes harm to the
corporation. Generally, it is the corporation, or the stockholder in a derivative action…who must
pursue such a claim.” Nicholson v. Ash, 800 P.2d 1352, 1356 (Colo. App. 1990); see also Combs
v. PricewaterhouseCoopers LLP, 382 F.3d 1196, 1200 (10th Cir. 2004) (quoting Nicholson). As
an exception to the general rule, “[a] stockholder may maintain a personal action in his capacity
as a stockholder only if the actions of the third party that injure the corporation result from a
violation of a duty owed to him as a stockholder and that cause him injury as a shareholder,
unique to himself and not suffered by the other stockholders.” Nicholson, 800 P.2d at 1357;
Combs, 382 F.3d at 1201.
In this case, Sipf is a shareholder of IASC, but his contribution claim is not based on his
status as a shareholder. Instead, Sipf brings that claim in his capacity as a director and chairman
9

A simple review of the Third-Party Complaint shows this assertion is incorrect.
10

of the board. Here, the Sonnenbergs sought to hold Sipf liable not because he was a shareholder
but because he was allegedly a part of “management” and a “control” person and, in such
capacity, allegedly made misrepresentations and omissions resulting in the loss of the
Sonnenbergs’ investments. Sipf’s alleged damages arise from his capacity as ISAC’s
director/chairman – Sipf is attempting to recover that which he paid to the Sonnenbergs not, as
Magnum argues, “only” for his loss of investment in IASC. Accordingly, Sipf’s suit in his
capacity as a director and his alleged damages show that his status as a shareholder does not,
without more, bring his contribution claim within the shareholder standing rules. See Nicholson,
80 P.2d at 1356-1357 (recognizing party may have more than one relationship with a
corporation, and that a distinction exists between a party’s status as a creditor versus a
stockholder).
Sipf’s aiding and abetting breach of fiduciary duties claim, however, is another matter.
In this claim, Sipf alleges that Magnum knew Herbers, and others, were breaching their fiduciary
duties to Sipf as a director and shareholder of IASC, and knowingly participated in that breach.
The breaches alleged are the setting of insurance premiums at rates lower than recommended and
at levels at which Magnum predicted “would cause losses to ISAC.” (ECF No. 36, ¶53.)
Magnum’s alleged aiding and abetting of Herbers’ breaches of fiduciary duty caused Sipf to lose
his investments in IASC. Such allegations, however, are essentially of mismanagement of the
corporation, and the aiding and abetting of the same, and they fail for two reasons. First, to the
extent Sipf is seeking to use his status as a director, his claimed loss of investment is
unassociated with such status. Secondly, to the extent that Sipf is seeking to use his status as a
shareholder, his claimed injury – the loss of his investment – is an injury suffered by all other
stockholders. The right of action against directors for mismanagement, and third-parties who aid

11

and abet such mismanagement, is owned by the corporation, ISAC, as the party damaged. See
Nicholson, 800 P.2d at 1354-55. “[A]ny damage resulting to the stockholder is merely
indirect[.]” Nicholson, 800 P.2d at 1356. Accordingly, Sipf lacks standing to assert a claim for
aiding and abetting breach of fiduciary duties (Sixth Claim) resulting in the loss of his
investment.
During oral argument, Sipf agreed he would not be entitled to recover his investment.
Nonetheless, Sipf argues that he could recover damages paid in settlement, adjusted by
proportionate fault, on his claim for aiding and abetting breach of fiduciary duties. That theory,
however, was neither pled in the Third-Party Complaint nor set forth in the Final Pretrial Order
(the “FPO”). Instead, in the FPO, Sipf stated that his third-party claims against Magnum was
“for aiding and abetting breach of fiduciary duties by … Herbers … by knowingly participating
in such breach by agreeing not to disclose, and not disclosing, to Sipf … that insurance premium
rates were being set at rates they considered to be actuarially unjustifiable at levels they
predicted would cause higher-than-projected losses to IASC.” (ECF No. 201, page 10.) The
FPO controls and may not be amended absent the need to “prevent manifest injustice.” Fed. R.
Civ. P. 16(e). Having never sought to amend the FPO to include this belated theory, the Court
will not consider it now in ruling on Magnum’s Motion for Summary Judgment. See Salazar v.
City of Commerce City, No. 12-1390, 535 F. App’x 692, 694-95 (10th Cir. Sept. 23, 2013)
(district court did not abuse discretion in declining to consider a hostile-work-environment claim
in its summary judgment ruling where such claim was not included in final pretrial order, was a
different theory of recovery with different requirements of proof, and where plaintiff had not
sought to amend the order to include the theory).

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In summary, Magnum’s Motion for Summary Judgment based on standing is denied as to
Sipf’s Third Claim for Contribution but granted as to Sipf’s Sixth Claim for Aiding and Abetting
Breach of Fiduciary Duties. The question remains, however, whether a right of contribution
exists under the facts and circumstances of this case. That question is addressed below.
2. Herbers’ Joinder in Magnum’s Motion for Summary Judgment (ECF No. 256)
Similar to Magnum, Herbers’ motion argues the only damages sought by Sipf against
Herbers are for the loss of Sipf’s investment in IASC and, therefore, Sipf’s claims are barred by
the shareholder standing rule. (ECF No. 256.) In response,10 Sipf argues his claim for
contribution is for any liability incurred by him to the Sonnenbergs. Now, having settled with
the Sonnenbergs, Sipf claims contribution for what he paid to the Sonnenbergs in settlement, “in
excess of any liability which may be allocated to him by the trier of fact in this case.” (ECF No.
259.) In Herbers’ Reply, he apparently acknowledges that Sipf seeks more than just the loss of
his investment in IASC. (ECF No. 260.) Again, as with Sipf’s claims against Magnum, the
Court finds merit in Sipf’s argument, but only as to his contribution claims against Herbers.
Specifically, Sipf brings three claims against Herbers – two for contribution (First and
Second Claim) and one for breach of fiduciary duty (Fourth Claim). As with Sipf’s contribution
claim against Magnum, and for the same reasons, Sipf has standing to bring his two claims for
contribution. Contrary to Herbers’ contention, and as apparently subsequently acknowledged, on
such claims Sipf sues not for loss of his investment but for his liability to (and, now settlement
with) the Sonnenbergs. And, for the same reasons why Sipf lacks standing to sue Magnum for
aiding and abetting breach of fiduciary duties, Sipf lacks standing to bring a claim for breach of
fiduciary duty against Herbers. In such claim, Sipf sues based on his status as a director and
10

Herbers viewed Sipf’s response (ECF No. 259) as directed not only to Magnum’s motion (ECF No. 254) but also
to Herbers’ joinder (ECF No. 256) in that motion. (ECF No. 260.)
13

shareholder, but the damages alleged are his loss of investments in IASC. (ECF No. 174, page 3;
No. 201, Final Pretrial Order, page 10; No. 36, ¶¶26, 43, 44.) Accordingly, the shareholder
standing rule bars Sipf’s Fourth Claim for Relief against Herbers, but not his First and Second
Claims for Relief.
C. SIPF’S CONTRIBUTION CLAIMS – FIRST, SECOND, AND THIRD
CLAIMS FOR RELIEF
Having found Sipf has standing to bring his First, Second, and Third Claims for Relief,
the issue is whether viable contribution claims remain where Sipf, Herbers, and Magnum have
settled with the Sonnenbergs. Initially, Herbers moved for summary judgment arguing that
because he has entered into a settlement agreement with the Sonnenbergs, no right to
contribution exists under the UCATA, C.R.S. § 13-50.5-105. (ECF No. 165.) After Sipf settled
with the Sonnenbergs, Herbers provided supplemental briefing, arguing Sipf’s settlement bars
contribution under not only the UCATA but also the Colorado Securities Act. (ECF No. 252.)
Herbers contends that under C.R.S. § 13-50.5-102(4), Sipf is not entitled to contribution because
his settlement with the Sonnenbergs did not extinguish Herbers’ and Magnum’s liability to the
Sonnenbergs. Similarly, after Magnum entered into a settlement agreement with the
Sonnenbergs, Magnum joined in Herbers’ arguments that Sipf’s contribution claims are barred.
(ECF Nos. 254, 261.) Having carefully considered the issues, the Court finds that Sipf has no
right to contribution because his settlement with the Sonnenbergs did not extinguish the alleged
common liability or discharge the alleged common obligation of the parties. Accordingly, the
issue of whether Herbers’ and Magnum’s settlement with the Sonnenbergs bars Sipf’s
contribution claim is moot.

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1. Factual Background
As previously stated, the Sonnenbergs filed this action against Sipf and others. Although
the Sonnenbergs filed four complaints, and Sipf (and others) filed a third-party complaint against
Herbers and Magnum and designated them as nonparties who may be at fault, the Sonnenbergs
never filed any claims against Herbers and Magnum. Instead, on November 1, 2013, Herbers
and the Sonnenbergs entered into a Settlement Agreement and Release of Claims (the “Herbers
Settlement”), signed by all parties to the agreement. (ECF No. 165, Ex. A.) Also, on November
1, 2013, the Sonnenbergs signed a Settlement Agreement and Release of All Claims (the
“Magnum Settlement”) in favor of Magnum. (ECF Nos. 255, 258.) Although that agreement
was signed by the Sonnenbergs on November 1, 2013, it was not signed by Magnum until
February 19, 2014. Magnum made some representations as to why the agreement was not
signed until such date, but none are supported by evidence competent under Fed. R. Civ. P. 56.
Meanwhile, on January 15, 2014, Sipf and the Sonnenbergs entered into a Mutual
Settlement, Compromise and Release Agreement (the “Sipf Settlement”). (ECF No. 252, Ex. 1.)
That agreement provides, in relevant part:
i)

That the parties were “desirous of settling all claims between the Parties [the
Sonnenbergs and Sipf]”;

ii)

That for the consideration of $500,000 by Sipf to the Sonnenbergs, the
Sonnenbergs released Sipf from all liability and claims in this action;

iii)

That the Sonnenbergs’ release “is not intended to and does not release any other
party named in the Lawsuit, and no other party named in the Lawsuit is an
intended beneficiary of this release or Agreement”;

iv)

That Sipf released the Sonnenbergs from all liability in this action; and

15

v)

That Sipf’s release “is not intended to and does not release any other party named
in the Lawsuit, and no other party named in the Lawsuit is an intended beneficiary
of this release or Agreement.”

By Order dated February 13, 2014, upon motion filed by the Sonnenbergs, their claims
against Sipf were dismissed with prejudice. (ECF No. 251.) As the Sonnenbergs had settled
earlier with the other defendants, there being no other claims or parties remaining from the
Sonnenbergs’ action, that action was dismissed in its entirety, leaving only Sipf’s claims against
Herbers and Magnum.11
2. Contribution under the UCATA – Herbers’ and Magnum’s Settlements with the
Sonnenbergs
Pursuant to C.R.S. § 13-50.5-105:
(1) When a release or a covenant not to sue or not to enforce judgment is given in
good faith to one of two or more persons liable in tort for the same injury or the
same wrongful death:
(a) It does not discharge any of the other tortfeasors from liability for their several
pro rata shares of liability for the injury, death, damage, or loss unless its terms so
provide; but it reduces the aggregate claim against the others to the extent of any
degree or percentage of fault or negligence attributable by the finder of fact,
pursuant to section 13-21-111(2) or (3) or section 13-21-111.5, to the tortfeasor to
whom the release or covenant is given; and
(b) It discharges the tortfeasor to whom it is given from all liability for
contribution to any other tortfeasor.
C.R.S. § 13-50.5-105. “[A] settlement is reached in ‘good faith’ in the absence of collusive
conduct.” Copper Mtn., Inc. v. Poma of Amer., Inc., 890 P.2d 100, 108 (Colo. 1995). “[T]he
party challenging the good faith of a settlement otherwise barring a claim for contribution has the
burden of establishing that the settlement was collusive.” Stubbs v. Copper Mtn., Inc., 862 P.2d
978, 984 (Colo. App. 1993), aff’d, 890 P.2d 100 (Colo. 1995). The duty of good faith “extend[s]
11

At that time, Ruiz-Moss was also a third-party defendant. He has subsequently been dismissed as a party. (ECF
No. 264.)
16

to the nonsettling defendant – the only party that could be the victim of such collusion.” Poma,
890 P.2d at 104 (discussing intent of the UCATA).
The parties agree the UCATA applies to both claims asserted by the Sonnenbergs;
therefore, the Court will assume, without deciding, that it does.12 The parties do dispute,
however, whether Herbers’ and Magnum’s respective settlements were entered into in good
faith. If the settlements were entered into in good faith, Sipf’s contribution claims are barred.
The Court finds, however, it need not decide whether Sipf’s contribution claims are barred by
Herbers’ and Magnum’s settlements, i.e., whether they were made in good faith, as it finds that
Sipf’s contribution claims are nonetheless barred by his own settlement with the Sonnenbergs.
3. Contribution under the UCATA – Sipf’s Settlement with the Sonnenbergs
Magnum argues that Sipf’s original contribution claims are now moot. Herbers argues
that Sipf’s original contribution claims were governed by C.R.S. § 13-50.5-102(1) & (2). Both
parties contend, however, that due to Sipf’s settlement his current contribution claims are
governed by C.R.S. § 13-50.5-102(4). None of the parties apparently dispute that if the UCATA
applies, a party who pays more than his pro rata share of the common liability may be entitled to
contribution. Upon consideration of C.R.S. § 13-50.5-102(4) and § 13-50.5-104(4), the Court
agrees.
C.R.S. § 13-50.5-102 provides, in relevant part:

12

It appears this issue has not been decided as to the Colorado Securities Act, see First Nat’l Bank of Durango v.
Lyons, No. 13CA1907, 2015 WL 795034, at *7 (Colo. App. Feb. 26, 2015) (discussing, but not deciding, whether a
statutory securities fraud claim is a tort claim), and it is questionable whether it applies to contribution based on the
fraudulent inducement claim. See C.R.S. § 13-50.5-102(3) (“There is no right of contribution in favor of any
tortfeasor who has intentionally, willfully, or wantonly caused or contributed to the injury or wrongful death.”). In
addition, the allegations under the contribution claim against Magnum are unclear, but the parties have argued, so
the Court will assume, that this claim is also for contribution under both of the Sonnenbergs’ claims.
17

(1) Except as otherwise provided in this article, where two or more persons
become jointly or severally liable in tort for the same injury to person or property
or for the same wrongful death, there is a right of contribution among them even
though judgment has not been recovered against all or any of them.
(2) The right of contribution exists only in favor of a tortfeasor who has paid more
than his pro rata share of the common liability, and his total recovery is limited to
the amount paid by him in excess of his pro rata share. No tortfeasor is compelled
to make contribution beyond his own pro rata share of the entire liability.
***
(4) A tortfeasor who enters into a settlement with a claimant is not entitled to
recover contribution from another tortfeasor whose liability for the injury or
wrongful death is not extinguished by the settlement nor in respect to any amount
paid in a settlement which is in excess of what was reasonable.
(Emphasis added.)
Concomitantly, C.R.S. § 13-50.5-104(4) provides, in relevant part:
(4) If there is no judgment for the injury or wrongful death against the tortfeasor
seeking contribution, his right of contribution is barred unless he has either:
(a) Discharged by payment the common liability within the statute of limitations
period applicable to claimant’s right of action against him and has commenced his
action for contribution within one year after payment; ….
(Emphasis added.)
Thus, in order for a settling tortfeasor to have a right of contribution, certain requirements
must be met. Among them are the requirements that the other joint tortfeasors’ common liability
has been extinguished “by the settlement” and their common obligation has been discharged by
the settling tortfeasor’s payment. This was recognized in Miller v. Jarrell, 684 P.2d 954 (Colo.
App. 1984), cited by the parties.
In Miller, the settling defendants settled with the injured parties, obtaining releases which
released not only the settling defendants but also the non-settling defendants after making
complete payment of the parties’ joint obligation, resulting in the dismissal of all claims by the

18

injured parties. The settling defendants then brought an action for contribution against the nonsettling defendants. In evaluating the settling defendants’ claim, the Miller court stated:
There are two prerequisites to be met before a tortfeasor is entitled to
contribution from a joint tortfeasor. First, two or more persons must be jointly or
severally liable in tort for the same injury to person or property or for the same
wrongful death. . . . Second, a tortfeasor must have paid more than his pro rata
share of the common liability. If so, the tortfeasor’s total recovery is limited to
the amount paid by him in excess of his pro rata share. Section 13-50.5-102(2),
C.R.S. (1983 Cum. Supp.).
Miller, 684 P.2d at 956. Thus, contribution is available because the settling tortfeasor has not
only extinguished the tortfeasors’ common liability but also discharged by payment that common
obligation. Only then may the settling tortfeasor seek to recover against the joint tortfeasors
whose alleged common liability he has discharged. The dispute then remaining is between the
settling tortfeasor and the alleged joint tortfeasors – as to the pro rata liability of each tortfeasor
for the common liability alleged by the settling tortfeasor and for the payment to discharge that
common obligation made by the settling tortfeasor.
Herbers and Magnum argue no right of contribution exists as Sipf’s settlement did not
extinguish their liability. They contend the settlement only releases Sipf and expressly preserves
their potential liability to the Sonnenbergs. Indeed, Herbers asserts Sipf could never have
extinguished Herbers’ potential liability to the Sonnenbergs because it was previously
extinguished by Herbers’ prior settlement agreement with the Sonnenbergs.13 The Court agrees
that the plain language of § 13-50.5-102(4) supports Herbers’ and Magnum’s position. That
provision states the liability of the tortfeasor from whom contribution is sought must be
extinguished “by the settlement,” i.e., by the Sipf Settlement. Here, Sipf’s settlement did not do
so. Instead, the only liability extinguished by that settlement is Sipf’s liability.
13

Magnum’s potential liability, however, had not been extinguished at the time Sipf settled. Although the
Sonnenbergs signed the Magnum Settlement on November 1, 2013, Magnum did not sign their settlement document
until February 19, 2014, after Sipf had signed his settlement agreement on January 15, 2014. (ECF Nos. 252, 258.)
19

Sipf argues there were no claims to extinguish because the Sonnenbergs never asserted
any against Magnum or Herbers despite knowing their involvement and their having been
designated as nonparties at fault; the Sonnenbergs’ entire action was dismissed; and the statute of
limitations had run on any potential claims. Sipf’s argument has appeal, especially in light of the
facts and circumstances of this case. Nonetheless, even assuming, arguendo, that any claims
(i.e., the common liability) had already been “extinguished” (or did not exist),14 there is still the
question of whether Sipf has by payment discharged that common liability by paying the
common obligation. Here, an examination of the Sipf Settlement shows he has not. The
settlement agreement shows Sipf made payment for only his liability – that his payment was
made to settle his obligation. Accordingly, Sipf’s contribution claims under the UCATA are
barred.
4. Contribution Under the Colorado Securities Act
The remaining issue is whether Sipf’s contribution claims based on any common liability
under the Colorado Securities Act are also barred. Under the Colorado Securities Act, “[a]ny
person liable under [C.R.S. § 11-51-604] may seek and obtain contribution from other persons
liable under this section, directly or indirectly, for the same violation. Contribution shall be
awarded by the court in accordance with the actual relative culpability of the various persons so
liable.” C.R.S. § 11-51-604(13). The Uniform Securities Act of 1985, upon which the Colorado
Securities Act is based, however, provides, in relevant part, that “[c]ontribution among the
several persons liable is the same as in cases arising out of breach of contract.” Uniform
Securities Act of 1985 § 605(d), 7C U.L.A. Master Edition 297 (2006). The Comment to

14

Sipf’s argument cuts both ways – he argues there is common liability but the Sonnenbergs never made any claim
against Herbers and Magnum, raising the issue of the existence of any common liability. Regardless, Sipf contends
there was common liability and it is that common liability which must be extinguished before there is a right to
contribution.
20

§ 605(d) states that “[t]he last sentence regarding contribution is intended to avoid the common
law rule which prohibits contribution among joint tortfeasors.” That common law rule also
applied in Colorado, until the adoption of the UCATA. Brochner v. Western Ins. Co., 724 P.2d
1293, 1295, 1297 (Colo. 1986).
The Colorado Securities Act provides no further direction as to how to apply its
contribution rule. The parties appear to agree that it should be read – and applied – in
conjunction with the UCATA. Therefore, the Court will assume, without deciding, that is the
proper method by which to determine whether Sipf’s contribution claim based on liability for the
Sonnenbergs’ Colorado Securities Act claim survives his settlement.
The parties’ arguments as to whether a right to contribution exists initially hinged on
whether Sipf must first be “found liable” in order to seek contribution. According to Herbers
and Magnum, because Sipf has settled, he cannot be “found liable.” They reached this
conclusion by analyzing the “[a]ny person liable” language under C.R.S. § 11-51-604(13) with
the “where two or more persons become jointly or severally liable in tort” language under C.R.S.
§ 13-50.5-102(1). But, nonetheless, they recognized that Sipf’s settlement rendered
§ 13-50.5-102(1) inapplicable. Instead, according to Herbers and Magnum, Sipf’s “new”
contribution claims based on his settlement with the Sonnenbergs are governed by § 13-50.5102(4). If, however, as the parties contend, contribution under the Colorado Securities Act is to
be construed in conjunction with the UCATA, then it follows that if contribution is not afforded
under the UCATA, then it may not be afforded under the other.15 Accordingly, Sipf’s claims for
contribution based on common liability for the Sonnenbergs’ Colorado Securities Act claim are

15

This result raises a question of whether statutory claims, such as those under the Securities Act, constitute a “tort”
under the UCATA, as doing so appears to render the provision for contribution under the Securities Act superfluous.
21

also barred by his settlement with the Sonnenbergs without extinguishing the common liability
or paying the common obligation.
V.

CONCLUSION
Based on the foregoing, it is ORDERED
1. That Third-Party Defendants Thomas Keller, Craig Magnuson, and
Magnum Actuarial Group, LLC’s Motion for Summary Judgment (ECF No. 99) is
GRANTED as to Third-Party Plaintiff Eric David Sipf’s Sixth Claim for Relief for
Aiding and Abetting Breach of Fiduciary Duties as stated herein and DENIED in all
other respects;
2. That Third-Party Defendants Thomas Keller, Craig Magnuson, and Magnum
Actuarial Group, LLC’s Motion for Summary Judgment Regarding Defendant Sipf’s
Contribution Claim (ECF No. 254) is:
(i)

DENIED AS MOOT as to their argument concerning shareholder standing in
light of this Court’s Order on ECF No. 99;

(ii)

GRANTED as to their argument that Third-Party Plaintiff Sipf’s Third Claim
for Relief for contribution is barred by his settlement with Plaintiffs Carol
Sonnenberg, Michael Sonnenberg, and American Financial Securities
Holdings, Inc.’s (collectively, the “Sonnenbergs”);

(iii)

DENIED AS MOOT as to their argument that Third-Party Plaintiff Sipf’s
contribution claims is barred under C.R.S. § 13-50.5-105 by Third-Party
Defendants Thomas Keller, Craig Magnuson, and Magnum Actuarial Group,
LLC’s settlement with the Sonnenbergs; and

22

(iv)

GRANTED as to their argument that Third-Party Plaintiff Sipf’s settlement
with the Sonnenbergs precludes him from seeking contribution under the
Colorado Securities Act;

3. That Third-Party Defendant John Herbers’ Brief Regarding Sipf’s Contribution
Claims (ECF No. 252), which the Court construes as a motion for partial summary
judgment, is GRANTED and Sipf’s First and Second Claims for Relief for
Contribution are dismissed;
4. That “Third-Party Defendant John Herbers’ Joinder in the Motion for Summary
Judgment (Docket #254) Filed By The Magnum Third-Party Defendants” (ECF No.
256) is GRANTED as to Third-Party Plaintiff Sipf’s Fourth Claim for Relief for
Breach of Fiduciary Duty and DENIED in all other respects;
5. That Third-Party Defendant John Herbers’ Motion for Summary Judgment (ECF No.
165) is DENIED AS MOOT in light of this Court’s granting, in part, of ECF No.
252 and No. 256;
6. That all remaining pending motions (ECF Nos. 155, 170, 171, 172, 177, 180, and
181) are DENIED AS MOOT;
7. That the Clerk of the Court shall enter JUDGMENT in favor of Third-Party
Defendants John Herbers, Thomas Keller, Craig Magnuson, and Magnum Actuarial
Group, LLC and against Third-Party Plaintiff Eric David Sipf in accordance with this
Order; and

23

8. That Third-Party Defendants John Herbers, Thomas Keller, Craig Magnuson, and
Magnum Actuarial Group, LLC are awarded costs and shall within 14 days of the
date of this Order file a bill of costs, in accordance with the procedures under Fed. R.
Civ. P. 54(d)(1) and D.C.COLO.LCivR 54.1, which shall be taxed by the Clerk of the
Court.
DATED this 20th day of May, 2015.
BY THE COURT:

____________________________________
RAYMOND P. MOORE
United States District Judge

24