Appellate Case: 24-1152 Document: 79-1 Date Filed: 07/23/2025 Page: 1 FILED United States Court of Appeals PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS July 23, 2025
Christopher M. Wolpert FOR THE TENTH CIRCUIT Clerk of Court _________________________________
CITY OF FORT COLLINS, a Colorado home rule municipality,
Plaintiff - Appellee,
v. No. 24-1152
OPEN INTERNATIONAL, LLC, a Florida limited liability company; OPEN INVESTMENTS, LLC, a Florida limited liability company,
Defendants - Appellants. _________________________________
Appeal from the United States District Court for the District of Colorado (D.C. No. 1:21-CV-02063-CNS-SBP) _________________________________
Laurie Webb Daniel (Jeffrey Keith Sandman, with her on the briefs), of Webb Daniel Friedlander LLP, Atlanta, Georgia, and New Orleans, Louisiana, for Defendants-Appellants.
Case L. Collard of Dorsey & Whitney LLP, Denver, Colorado (Maral J. Shoaei and Andrea Ahn Wechter, of Dorsey & Whitney LLP, Denver, Colorado, and Carrie Mineart Daggett, City Attorney, and John R. Duval, Senior Litigation Counsel, of the Fort Collins City Attorney’s Office, Fort Collins, Colorado, with him on the brief), for Plaintiff-Appellee. _________________________________
Before BACHARACH, PHILLIPS, and FEDERICO, Circuit Judges. _________________________________
PHILLIPS, Circuit Judge. _________________________________ Appellate Case: 24-1152 Document: 79-1 Date Filed: 07/23/2025 Page: 2
The City of Fort Collins and Open International, LLC, contracted for
software services, which ended with each party (including Open International’s
parent company, Open Investments, LLC) alleging breach-of-contract claims
against the other. 1 But the City also alleged that Open’s precontractual
statements were negligent or fraudulent misrepresentations—claims sounding in
tort law. Answering only the question of liability, a jury found that Open
fraudulently induced the City to enter the contract. The City elected to rescind
the contract, so the district court held a bench trial on restitution and ordered a
judgment of almost $20 million against Open.
Open appeals the jury’s verdict and the district court’s denials of its
motions for judgment as a matter of law. Because we find no error with the
district court’s rulings or the jury’s verdict, we affirm. 2
BACKGROUND
I. Factual Background
In February 2018, the City published a request for proposal (RFP) for a
billing software system for municipal utilities, including a new broadband
utility called Connexion. On March 12, 2018, Open submitted a proposal for
the project based on its forthcoming software, Open SmartFlex Version 8. Open
1 Except where the distinction matters, we refer to Open International and Open Investments collectively as “Open.” 2 On February 19, 2025, Open moved for leave to file a supplemental appendix. We deny that motion.
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claimed that its product “complie[d] with the vast majority of functional and
technical requirements of th[e] RFP with one single and uniform product[.]”
Supp. App. vol. 4, at 1011 (emphasis omitted).
The RFP included a functional matrix that listed all the functional
requirements needed for the product and that directed bidders to complete the
matrix “accurately and factually” according to the provided grading rubric.
Supp. App. vol. 8, at 2143. In its RFP response, Open graded about 90% of its
homegrown software’s functionalities with “A’s,” representing that the
functionality was “part of [its software’s] base system” and that “[n]o
[m]odification [was] required.” App. vol. 2, at 3.
The City selected Open International to be its vendor. And the parties
formalized their contract with a Master Professional Services Agreement, in
which Open Investments guaranteed Open International’s performance under
the contract but made no contractual representations of its own. The contract’s
introduction incorporates by reference the RFP and Open’s proposal, which
includes the detailed functionality matrix for the services that Open
International was to provide.
The project kicked off in late 2018 and suffered problems from the
beginning. One of the main sources of conflict was the customer self-service
portal for the City’s broadband-billing services. The service went live in
August 2019 and had “critical functionality missing.” App. vol. 7, at 68–69. In
November 2019, the City cited the portal as one of its primary concerns, stating
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that the “portal testing hours [have been] extensive” and that the “presented
portal was different than what got delivered[.]” App. vol. 9, at 26–27.
Despite these problems, the City continued its contractual relationship
with Open International. Throughout the project, the parties negotiated and
executed twenty-nine project change requests (PCRs), including PCR 19, which
addressed issues relating to the customer portal. In a March 2020 memorandum,
the City’s external project manager documented her concerns over problems
with Open International’s product, but still recommended that the City preserve
its relationship with Open International. And in June 2020, both parties agreed
to a formal amendment that extended project milestones into 2021 and assigned
most of the added project costs to the City. The parties again agreed to extend
the project in December 2020.
Prompted by this second amendment, the City hired a third-party
consultant to assess the project. In an April 2021 report, the consultant advised
the City to continue the project with Open International despite the project
delays and frustrations. Completing the project with Open International
remained “Plan A” for the City. App. vol. 7, at 120–21. The parties jointly
reviewed the functional matrix to evaluate whether the program was performing
as Open had represented it would. But during the review in April and May
2021, the City determined that Open’s precontractual assertions about its
software’s capabilities were false.
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Also during the review, Open International sent the City a notice of
default stating that it could not proceed with its work unless and until the City
cured certain deficiencies. From the City’s view, that default notice “was a
significant breach of trust.” Id. at 123. Then on May 28, 2021, the City served
its own notices—a notice of dispute and notice of termination. In June, Open
International provided a “Reset Proposal” that acknowledged the results of the
functional matrix audit—which showed that only 17.3% of the “[i]n scope”
requirements had been accepted—and sought additional funds to complete the
project. Supp. App. vol. 9, at 2473. But the proposal would not cure the issues
within the thirty days required by the contract, so the City initiated this lawsuit
on July 2, 2021. The City also promptly retained a second vendor and began
implementing that product, and it stopped all use of Open International’s
product as soon as the new platform was available in December 2021.
II. Procedural Background
On July 2, 2021, the City sued Open for breach of contract, negligent
misrepresentation, and fraud-in-the-inducement. The City based its tort claims
on misrepresentations about (1) the timing for executing the project and the
level of support Open International would provide, (2) Open International’s
software being “ready for implementation,” and (3) the fitness of Open
International’s software for the City’s needs. App. vol. 3, at 60–61 ¶¶ 70–73.
Open pleaded affirmative defenses and asserted a counterclaim for breach of
contract.
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During discovery, the City learned that despite Open grading almost 90%
of the required functionalities as an “A” in its March 2018 RFP response, Open
had internally assessed its software as meeting only 59.4% of the required
functionalities. Open’s internal assessment was dated in March 2018, before it
responded to the RFP. Also, the City learned that Open had not graded the
provided software—a third-party portal called “Milestone”—in the
functionality matrix but had instead graded its “homegrown” software. See
App. vol. 13, at 254–55.
Open moved for summary judgment on the City’s tort claims, arguing
that the claims were barred by the contract’s merger clause and Colorado’s
economic-loss rule, and that the City had waived the claims by repeatedly
affirming the contract. The district court denied the motion. See City of Fort
Collins v. Open Int’l, LLC, No. 1:21-CV-02063-CNS-MEH, 2023 WL 3585214,
at *1, *13 (D. Colo. May 22, 2023). Open then asked the court to require the
City to elect a remedy before trial—either affirming the contract and receiving
damages or rescinding the contract and receiving restitution. But the court
decided that the City would not have to select a remedy until the jury returned a
verdict on the tort claims. City of Fort Collins v. Open Int’l, LLC, No. 1:21-
CV-02063-CNS-SBP, 2023 WL 11868279, at *2, *4 (D. Colo. Sept. 27, 2023).
If the City elected damages, the jury would be instructed on the breach-of-
contract claims and counterclaims; if the City elected rescission, the jury would
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be dismissed, and the court would hold a bench trial on rescission and
restitution.
The trial started on October 23, 2023, and lasted ten days. At the close of
evidence, Open moved under Federal Rule of Civil Procedure 50(a) for
judgment as a matter of law on the breach-of-contract claim and the tort claims.
The court denied the motion. Then the court gave the jury “all of the general
closing instructions,” but only the fraud and negligent-misrepresentation
“claim-specific instructions.” App. vol. 5, at 58–59. For each of the tort claims,
the verdict form asked whether the City had proved the claim against “Open”
and whether “Open” had proved waiver or expiration of the statute of
limitations. App. vol. 6, at 4–6. The district court instructed the jury to find
waiver if:
1. The City learned the actual or true facts after it began the project with Open, but before it ceased the project with Open; and 2. The City continued the project with Open with full knowledge of the actual facts when a reasonable person under the same or similar circumstances would not have done so. App. vol. 5, at 165. Open objected to the City’s request that the instruction
specify, “full knowledge of all the actual facts,” but it did not otherwise object
to the waiver instruction. App. vol. 15, at 7 (emphasis added).
The jury determined that the City had proved fraudulent inducement and
negligent misrepresentation, but that the City had waived the negligent-
misrepresentation claim. The City elected to rescind the contract, so the court
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dismissed the jury. And because the City elected to rescind the contract, Open’s
counterclaim for breach of contract disappeared.
Open timely renewed its motion for judgment as a matter of law under
Rule 50(b). And as part of its rescission brief, it also moved under Rule 52(c)
for partial judgment, arguing (1) that the City’s evidence did not support a
restitution award and (2) that the City had waived rescission as a remedy. 3 The
court denied the Rule 52(c) motion, City of Fort Collins v. Open Int’l, LLC, No.
1:21-CV-02063-CNS-SBP, 2024 WL 1239934, at *11–12 (D. Colo. Mar. 21,
2024), and entered judgment against “Open” for just under $20 million. Open
again moved for judgment as a matter of law under Rule 50(b) and moved
under Rule 52(b) for amended or additional findings and Rules 59(a) and (e) for
amendment of the judgment or a new trial. The court orally denied those
motions and the earlier Rule 50(b) motion. Open timely appealed, and we have
jurisdiction under 28 U.S.C. § 1291. 4
3 The district court correctly noted that Rule 52 is reserved for nonjury trials, but nonetheless addressed Open’s arguments “in the hopes of obviating the need to address the[] matters in the future[.]” City of Fort Collins v. Open Int’l, LLC, No. 1:21-CV-02063-CNS-SBP, 2024 WL 1239934, at *2–3 (D. Colo. Mar. 21, 2024). 4 The district court had diversity jurisdiction under 28 U.S.C. § 1332. Open International and Open Investments are both Florida limited liability companies and their members are all Florida citizens. And Fort Collins is a city in Colorado, so it is a Colorado citizen. See App. vol. 3, at 47 ¶¶ 3–5.
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DISCUSSION
Open presents four arguments on appeal: (1) that Colorado’s economic-
loss rule and the parties’ contract bar the City’s tort claims; (2) that insufficient
evidence supports the jury’s finding of fraud; (3) that the City waived its
ability to rescind the contract; and (4) that Open Investments cannot be held
liable for the rescission award.
I. Tort Claims Not Barred
First, Open asserts that the district court erred by denying its motion for
judgment as a matter of law, which argued that the City’s tort claims were
barred by the economic-loss rule and the parties’ contract.
“We review de novo a district court’s denial of a motion for judgment as
a matter of law, applying the same standards as the district court.” Fresquez v.
BNSF Ry. Co., 52 F.4th 1280, 1295 (10th Cir. 2022). In reviewing the denial of
such a motion, “we draw all reasonable inferences in favor of the nonmoving
party,” and we reverse “only if the evidence points but one way and is
susceptible to no reasonable inferences supporting the nonmovant.” Id.
A. Colorado’s Economic-Loss Rule
“Under the economic loss rule, a party suffering only economic loss from
the breach of an express or implied contractual duty may not assert a tort claim
for such a breach absent an independent duty of care under tort law.” Mid-
Century Ins. Co. v. HIVE Constr., Inc., 567 P.3d 153, 158 (Colo. 2025)
(citation modified). Though it is termed the “economic loss rule,” a “more
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accurate designation . . . would be the ‘independent duty rule’” because the
“key to determining the availability of a contract or tort action lies in
determining the source of the duty that forms the basis of the action.” Town of
Alma v. AZCO Constr., Inc., 10 P.3d 1256, 1262 & n.8 (Colo. 2000).
To determine whether a tort duty arises independent of a contract,
Colorado courts ask: “(1) whether the relief sought in [tort] is the same as the
contractual relief; (2) whether there is a recognized common law duty of care in
[tort]; and (3) whether the [tort] duty differs in any way from the contractual
duty.” 5 BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66, 74 (Colo. 2004). After
examining each factor, we conclude that the City’s tort claims are not barred by
the economic-loss rule.
First, the City is seeking the same relief in tort that it is seeking under
the contract. In its complaint, the City sought rescission for both the tort and
contract claims, and alternatively sought damages for its contract claim. App.
5 Though the Colorado Supreme Court has never held as much, dicta in Colorado cases suggest that “the economic loss rule generally should not apply to intentional tort claims.” Mid-Century Ins. Co., 567 P.3d at 156–57; see, e.g., United Int’l Holdings, Inc. v. Wharf (Holdings) Ltd., 210 F.3d 1207, 1226 (10th Cir. 2000) (“It is settled in Colorado that the economic loss rule applies only to tort claims based on negligence[.]”); Bermel v. BlueRadios, Inc., 440 P.3d 1150, 1153, 1154 n.6 (Colo. 2019) (observing that previous cases had applied the economic-loss rule “to bar only certain common law negligence claims” and stating that “the economic loss rule generally should not be available to shield intentional tortfeasors from liability for misconduct that happens also to breach a contractual obligation”); Town of Alma, 10 P.3d at 1263 (citing Brody v. Bock, 897 P.2d 769, 776 (Colo. 1995), a case that involved a common-law fraud claim, as an example of a common-law tort that is independent of a breach-of-contract claim).
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vol. 3, at 62 ¶ 79 (rescission for tort claim), 64 ¶ 89 (rescission for contract
claim, alternatively damages); see also id. at 47 ¶ 2. So this factor supports
Open’s view that the economic-loss rule bars the City’s tort claims. See Dream
Finders Homes LLC v. Weyerhaeuser NR Co., 506 P.3d 108, 121 (Colo. App.
2021).
Second, because fraudulent inducement is a common-law tort claim,
“there is a recognized common law duty of care in [tort.]” BRW, 99 P.3d at 74;
see also Van Rees v. Unleaded Software, Inc., 373 P.3d 603, 607 (Colo. 2016).
So this factor supports the City.
Third, and most critically, “the [tort] duty differs . . . from the
contractual duty.” BRW, 99 P.3d at 74. Open claims that the parties’ contract
“set[s] out precisely the same duty on which the City’s fraud claim is based”—
“the grades Open assigned to thousands of software functionalities in its
response to the City’s RFP, and the City’s claim that some of the delivered
functionalities were inferior to those representations.” Op. Br. at 25–26. So
because the contract incorporated those grades and provided the requirements
for Open’s software service, Open concludes that the contract subsumes the
City’s fraud claim. We disagree.
Torts based on precontractual conduct are often found to be independent
of the contract. In re Bloom, 622 B.R. 366, 429 (Bankr. D. Colo. 2020)
(collecting cases). For example, in Van Rees v. Unleaded Software, Inc., the
Colorado Supreme Court found that the plaintiff’s allegation that the defendant
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had “wrongfully induced him into entering a contractual relationship knowing
that it did not have the capability to perform any of the promised [services]”
established “a violation of a tort duty that is independent of the contract.” 373
P.3d at 607. The court explained that “[t]here is an important distinction
between failure to perform the contract itself, and promises that induce a party
to enter a contract in the first place.” Id. It said that the “critical question” was
not whether the tort claims were “related to the promises that eventually formed
the basis of the contract,” but “whether the tort claims flow[ed] from an
independent duty under tort law.” Id.; cf. Keller v. A.O. Smith Harvestore
Prods., Inc., 819 P.2d 69, 73 (Colo. 1991) (“[C]laims of negligent
misrepresentation are based not on principles of contractual obligation but on
principles of duty and reasonable conduct.”).
Van Rees is on point with our case. There, the parties contracted for web-
related services and the development of new websites. 373 P.3d at 605. The
contract specified what services were to be provided and when. Id. Like our
case, the defendant “missed deadlines and failed to deliver the promised
services.” Id. That was the basis for the plaintiff’s breach-of-contract claim. Id.
But during contract negotiations, the defendant allegedly “knew that it lacked
sufficient staff to complete the website on time, and did not intend to provide
the [full services],” so it induced the plaintiff into a contractual relationship
“knowing that it did not have the capability to perform any of the promised
web-related services.” Id. at 606–07. Like our case, the defendant’s
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misrepresentation about its capabilities formed the basis for the tort claim. Id.
at 607. And that claim was “an independent duty that did not arise from the
contracts,” so it was “not barred by the economic loss rule.” Id. at 606–07. The
same is true here. 6
Notwithstanding Van Rees, Open asserts that the City’s claims are still
barred because the contract memorialized all precontractual representations,
which means that the contract subsumed any tort duty. See BRW, 99 P.3d at 74
(“If we conclude that the duty of care owed by [the defendants] was
memorialized in the contracts, it follows that the plaintiff has not shown any
duty independent of the interrelated contracts[.]”). But none of Open’s cited
cases involve precontractual representations. See id. at 75 (distinguishing its
facts—a misrepresentation “during performance” of the contract—from cases
involving misrepresentations “prior to the execution of an agreement” (citation
modified)); Dream Finders, 506 P.3d at 123 (finding no independent duty
6 Open criticizes Van Rees’s distinction between a failure to perform the contract and promises that induce a party to enter a contract. Reply Br. at 15– 16. It relies on HealthBanc Int’l, LLC v. Synergy Worldwide, Inc., a Utah Supreme Court decision in which the court rejected the plaintiff’s invitation to adopt a blanket rule that fraudulent inducement is “necessarily independent of the contract” and instead held that a fraudulent-inducement claim that “overlaps completely” with a breach-of-contract claim is barred by the economic-loss rule. 435 P.3d 193, 196–97 (Utah 2018). The court criticized the Colorado Supreme Court’s reasoning in Van Rees, calling its distinction between performance and inducement “illusory” when “the subject matter of the inducing promises [is] later negotiated for and included in the contract.” Id. at 197. But whatever the merits of the Utah Supreme Court’s reasoning, HealthBanc is not binding here because the parties’ contract is governed by Colorado law, not Utah law. So Van Rees still controls.
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because the relevant “conduct occurred after the parties entered into the
contract”). The closest Open gets is Smart v. Stropas, which involved a seller’s
precontractual nondisclosure of latent defects in the home. No. 24CA0614,
2025 WL 274726, at *2–3 (Colo. App. Jan. 23, 2025) (unpublished). There,
though the intermediate-appellate court found that the economic-loss rule
barred the home-buyer’s fraudulent-nondisclosure claim, the contract
provisions exactly tracked the alleged tort duty. Id. at *3. The parties’ contract
both (1) required the sellers to disclose any knowledge of methamphetamine
being “manufactured, processed, cooked, disposed of, used or stored at the
Property” and (2) represented that the sellers had no knowledge of such
methamphetamine use. Id. at *1. So the tort duty to disclose latent defects
(here, the methamphetamine use) did not “differ[] in any way from the
contractual duty” to disclose methamphetamine use. Id. at *4 (citation
modified). “Because the contract explicitly addressed the sellers’ obligation to
disclose methamphetamine,” the tort duty was subsumed by the contract and
barred by the economic-loss rule. Id. at *3.
The same is not true for our case; the parties’ contract warranted only the
quality of Open International’s performance, not the accuracy of Open’s
representations about its capabilities. Though Open claims that the parties’
contract “set out precisely the same duty on which the City’s fraud claim is
based”—to deliver software functionalities consistent with the representations
in the contract, Op. Br. at 25—we agree with the City that Open conflates “its
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ultimate failures to provide and deliver the software functionalities in breach of
its contractual obligations” with its “fraudulent representations about its
software which induced the City into” the contract, Resp. Br. at 29–30. See Van
Rees, 373 P.3d at 607 (“There is an important distinction between failure to
perform the contract itself, and promises that induce a party to enter into a
contract in the first place.”); see also Dream Finders, 506 P.3d at 120 (“The
economic loss rule does not apply to claims arising from a defendant’s pre-
contractual conduct because, at that time, there was no contract that could have
subsumed identical tort duties.”). Like the plaintiff in Van Rees, the City’s “tort
claims are based on misrepresentations made prior to the formation of the
contracts,” which fraudulently induced it to enter the contract “and therefore
violated an independent duty in tort to refrain from such conduct.” 373 P.3d at
607. So applying Van Rees, the third factor supports the City and finding that
“the claims are not barred by the economic loss rule.” Id.
As a final argument, Open claims that the economic-loss rule bars the
City’s claims because the City is recovering a remedy that is expressly
excluded under the contract. See Dream Finders, 506 P.3d at 125
(“Sophisticated commercial entities . . . may not circumvent the exclusion of
damages in their contracts by cloaking their claims in tort theories.”). The
contract states that “Open’s entire liability” for breaching any of the warranties
“will be for Open to correct or reperform any nonconforming [s]ervices[.]”
App. vol. 19, at 7 ¶ 2.1. And though the limitations-of-liability provision
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contemplates damages and limits the type and amount of damages that can be
recovered, recovery of damages is limited to (1) indemnification claims,
(2) intentional breaches of the confidentiality and personally-identifiable-
information provisions, and (3) unauthorized use of Open’s intellectual
property. See id. at 12–13 ¶¶ 12.1–12.2. Yet the City sought rescission and
alternatively damages, including attorneys’ fees and litigation costs.
But Open doesn’t cite any Colorado Supreme Court case that supports
that this is a relevant consideration for determining whether a tort duty is
independent of a contract. And the cases that Open does cite all involve tort
duties that were subsumed by the contract. See Dream Finders, 506 P.3d at
123–25 (concluding that the defendant’s “duty to not make misrepresentations
or engage in fraud after they entered into the contract” was “subsumed within
the contract through the implied duty of good faith and fair dealing,” and then
observing that the claimants sought to recover “the very category of damages”
that was barred by the contract); RE/MAX, LLC v. Quicken Loans Inc., 295 F.
Supp. 3d 1163, 1170 (D. Colo. 2018) (“[T]o the extent that Quicken Loans
alleges misrepresentations by RE/MAX that are memorialized in the [contract],
the parties allocated risk with respect to those obligations by contract, and tort
claims based on those obligations are barred by the economic loss rule.”
(emphasis added)). So though the City seeks to recover a type of relief that the
contract prohibits, the conduct warranting the relief is independent of, and
therefore not governed by, the contract.
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Thus, under Colorado law, the City’s tort claims are not barred by the
economic-loss rule.
B. Merger Clause and Other Provisions
Open also contends that the contract’s merger clause and limited-
warranty provisions bar the City’s tort claims.
Though a merger clause “limit[s] future contractual disputes to issues . . .
expressly set forth in the executed document,” misrepresentation claims “are
based not on principles of contractual obligation but on principles of duty and
reasonable conduct.” Keller, 819 P.2d at 72–73. So the “mere presence of a
general integration clause in an agreement does not bar a claim for negligent or
fraudulent misrepresentation.” Id. at 73. Instead, to “effect a waiver of a claim
of negligent [or fraudulent] misrepresentation,” the merger clause must
“specifically prohibit[]” the claim. Id.
Open asserts that the contract’s merger clause bars the City’s tort claims
because it “was quite specific with its integration of Open’s RFP response into
the contract and the parties’ disclaimer of extracontractual representations and
promises.” Op. Br. at 23. But the merger clause says nothing about precluding
claims for negligent or fraudulent misrepresentation. See App. vol. 19, at 19
¶ 18.15. Though Open is correct that the clause covers the SOW and
functionality matrix, the inclusion of those documents “does not specifically
preclude” a fraud claim. Keller, 819 P.2d at 73. So the mere fact of a merger
clause “does not effect a waiver of [the tort] claim.” Id. And unlike Steak n
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Shake Enterprises, Inc. v. Globex Co., LLC, in which the court found that a
merger clause precluded a fraudulent-inducement claim because it disproved
reliance “as a matter of law,” 110 F. Supp. 3d 1057, 1083 (D. Colo. 2015), the
merger clause here says nothing about reliance. Compare App. vol. 19, at 19
¶ 18.15, with Steak n Shake, 110 F. Supp. 3d at 1083 (merger clause stating that
the “Franchisees were entering into the agreement as a result of their own
investigation and not as a result of any representation by Plaintiffs”); see also
App. vol. 19, at 6 (contract introduction stating that “the City has proceeded
with reasonable reliance on Open’s representations”). So the merger clause
does not bar the City’s tort claim.
Open also asserts that the contract’s limited-warranty provisions bar a
tort claim because they “expressly disclaim[] reliance on precontractual
representations[.]” Op. Br. at 24. Even if that were true (it’s not), Open has
waived this argument by presenting it for the first time on appeal. 7 See
7 Open claims it preserved this argument by “ma[king] a cogent and complete argument . . . discussing the complete and specific integration of the functionality matrix [and the] specific merger clause” in its post-trial and summary judgment motions, and that circuit precedent does not “require a listing of every piece of evidence supporting an argument.” Reply Br. at 17–18 (citing Perez v. El Tequila, LLC, 847 F.3d 1247, 1256 (10th Cir. 2017)). But Open misreads Perez. In Perez, we determined that the appellant had preserved its issues on appeal because the “Rule 50(a) motions contained identical arguments” as the Rule 50(b) motion. 847 F.3d at 1255–56 (emphasis added). Though the Rule 50(b) motion “did not rely upon the exact same facts” as the earlier motions, we noted that such “technical precision [was] unnecessary.” Id. (emphasis added) (citation modified). But here, Open didn’t simply fail to include certain facts—it failed to include the argument itself. In its Rule 50(a) (footnote continued)
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Knowlton v. Teltrust Phones, Inc., 189 F.3d 1177, 1183 (10th Cir. 1999) (“By
failing to timely raise the issue to the district court, [the defendant] waived the
issue[.]”).
Neither the economic-loss rule nor the contract’s merger clause bar the
City’s tort claims, so we affirm the district court’s denial of Open’s motion for
judgment as a matter of law.
II. Sufficient Evidence of Fraud
Second, Open asserts that we should reverse the jury’s verdict because
“the record is devoid of any evidence of an actual and actionable material
misrepresentation.” Op. Br. at 21 (emphasis omitted).
“When a jury verdict is challenged on appeal, our review is limited to
determining whether the record—viewed in the light most favorable to the
prevailing party—contains substantial evidence to support the jury’s decision.”
Bangert Bros. Constr. Co., Inc. v. Kiewit W. Co., 310 F.3d 1278, 1292 (10th
Cir. 2002) (citation modified). “Substantial evidence is something less than the
weight of the evidence, and is defined as such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion, even if different
conclusions also might be supported by the evidence.” Id. (citation modified).
and (b) motions, Open argued only that “the economic loss rule and integration clause bar the City’s fraud and negligent misrepresentation claims[.]” App. vol. 5, at 126 (Rule 50(a) Motion) (citation modified); see also App. vol. 6, at 151 (Rule 50(b) Motion). The motions did not mention the limited-warranty provisions.
19 Appellate Case: 24-1152 Document: 79-1 Date Filed: 07/23/2025 Page: 20
“Because the jury has the exclusive function of appraising credibility,
determining the weight to be given to the testimony, drawing inferences from
the facts established, resolving conflicts in the evidence, and reaching ultimate
conclusions of fact, this standard of review is quite deferential to the jury’s
verdict.” Knowlton, 189 F.3d at 1183–84 (citation modified).
At trial, the City alleged three misrepresentations: (1) the projected
timing for deliveries, (2) the statement in the RFP response that Version 8 of
the software had been released in 2017, and (3) Open’s grading of the
functionality matrix and its use of a software portal other than its homegrown
portal. Because the parties and the district court focus on mainly the third
misrepresentation, and because we conclude that there is sufficient evidence
supporting that the third misrepresentation was fraudulent, we do not discuss
the other alleged misrepresentations.
A. The Functionality Matrix
The City contends that “[t]he most striking example of Open’s false
representation was its fraudulent grading of its software in response to the
City’s RFP in March 2018.” Resp. Br. at 15. In Open’s RFP response, Open
graded 89.7% of the required functionalities as “A,” or as already existing in
the current software system. But trial evidence showed that Open had internally
graded only 59.4% of its functionalities as the equivalent of an “A.” And
because the internal grading was never disclosed to the City, the City claims
that Open’s RFP response fraudulently represented its functionalities.
20 Appellate Case: 24-1152 Document: 79-1 Date Filed: 07/23/2025 Page: 21
Open claims that it accurately graded its functionalities based on the
RFP’s requirements. Below are the RFP’s requirements for an “A” and “B”
grade:
App. vol. 2, at 3. Open asserts (1) that “unrefuted trial testimony” showed that
Open’s grading was consistent with the RFP’s instructions and (2) that its
internal assessment cannot sustain the City’s fraud claim because it “sorted the
functionalities using different criteria [than the functional matrix] for a
different type of internal analysis.” Op. Br. at 39.
At trial, Open International’s president explained that Open’s grading
was consistent with the RFP’s instructions because the instructions asked about
functionalities in Open International’s base code, not functionalities in a
released version of the software. App. vol. 12, at 184–85, 189–95. And because
an “A” grade meant that the “[d]esired functionality is achieved through
configuration,” even an “A” grade required some level of additional work. App.
vol. 2, at 3; App. vol. 12, at 192–93; see also App. vol. 11, at 42 (the City’s
third-party consultant testifying that “configuration” involves “five-plus
21 Appellate Case: 24-1152 Document: 79-1 Date Filed: 07/23/2025 Page: 22
things”). Open claims that the City’s expert witness corroborated this testimony
by agreeing that Open could grade a functionality as an “A” if that
functionality was present in an earlier version of the software (but not the
unreleased Version 8) so long as Open stated that the functionality was in an
earlier version. See App. vol. 11, at 133–34. So Open concludes that the
representations were true and cannot support a finding of fraud.
Open also contends that its internal assessment “sorted the functionalities
using different criteria [than the functional matrix] for a different type of
internal analysis.” Op. Br. at 39. Below is a summary table of Open’s internal
assessment:
App. vol. 22, at 16. At trial, the City argued that the internal assessment
showed that only 59.4% of the functionalities (the “[c]urrent functionalities”
category) should have been given an “A” grade. But Open contends that its
internal assessment “merely broke down the RFP’s ‘A’ grade into two
subcategories”: “[c]urrent functionalities” and “[p]lanned for 2018.” Reply Br.
at 10. Open International’s president testified that both categories had the
required existing base code, but that the functionalities in the “[c]urrent
22 Appellate Case: 24-1152 Document: 79-1 Date Filed: 07/23/2025 Page: 23
functionalities” category were already integrated into Version 8 while the
functionalities in the “[p]lanned for 2018” category would be integrated later in
2018. App. vol. 12, at 191; see also id. at 194–95 (testifying that three of the
five categories corresponded with an “A” grade, one of the categories
corresponded with a “B” grade, and one of the categories corresponded with
multiple grades). Open acknowledges that the City “tried to impeach” its
witness on this subject but claims that “nothing contradicted his testimony.”
Op. Br. at 40.
But Open’s testimony was not unrefuted. On cross-examination, the City
showed the president’s lack of knowledge about the internal document. See
App. vol. 13, at 29, 31. The president’s deposition testimony differed from his
trial testimony, and the district court instructed the jury on inconsistent
statements after the jury asked for guidance. See id. at 261 (“I heard a lot of in-
person testimony today that was inconsistent with recorded deposition. What
are your instructions for us, the jury, how to deal with that?”). It was the jury’s
role to “give [the testimony] such credibility as [it] may think it deserves.”
App. vol. 14, at 5. Also, the City presented evidence that “[i]ndustry standard is
to provide factual and accurate responses of [the vendor’s] product or solution .
. . at the time of response.” App. vol. 11, at 84 (emphasis added). So we agree
with the district court that there was a “dispute about what is A [grade] versus
what [is] B [grade]” and that it was “completely a jury decision to conclude
whether [Open] was making those representations as to a current fact or a fact
23 Appellate Case: 24-1152 Document: 79-1 Date Filed: 07/23/2025 Page: 24
in effect at the time the product went live[.]” Resp’t Add. at 13. The jury made
its decision and “[w]e do not retry issues, second guess the jury’s decision-
making, or assess the credibility of witnesses and determine the weight to be
given their testimony.” Stroup v. United Airlines Inc., 26 F.4th 1147, 1157
(10th Cir. 2022) (citation modified).
Open also asserts that the grades given to the various functionalities in
the functionality matrix are not actionable misrepresentations because the
parties’ contract stated that the criteria for the matrix and RFP response were
“open to interpretation” and fraud claims cannot “rest on articulations of
opinion or belief.” Op. Br. at 38, 41. But Open did not present this argument in
the district court. See App. vol. 5, at 122–24 (Rule 50(a) Motion) (asserting
that the City had not proven a misrepresentation because “the functional matrix
instructions required those functionalities to be delivered at go-live,” not at the
time Open submitted its RFP response); App. vol. 6, at 147–48 (Rule 50(b)
Motion) (“Nothing in the RFP requested a vendor to grade its then-existing
software[.]”). So it is waived. See Knowlton, 189 F.3d at 1183.
Given the conflicting testimony about Open’s internal assessment and its
RFP response, the jury had sufficient evidence to find that Open fraudulently
represented its functionalities.
B. Grading a Different Portal
The City also asserts that the jury could have found fraudulent
inducement because of what Open graded. Despite allegedly knowing on March
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1, 2018, that it planned to stop developing its homegrown portal and instead
use the Milestone portal, Open still graded its homegrown portal for the RFP
response. Open argues that this cannot support a fraud claim because the City
admitted at trial that it knew before signing the contract that Open International
planned to use the Milestone portal and because the City had described an early
demonstration of the portal as being “exactly as expected when we selected
Open Smartflex.” App. vol. 18, at 177; see also App. vol. 9, at 88–89; App. vol.
12, at 196–97. Though the City knew that Open International was using the
Milestone portal for the contract, Open International’s president agreed at trial
that “[n]o one at Open told the City [that Open] did not grade the Milestone
portal in the RFP response[.]” App. vol. 13, at 254–55. Again, because there
was conflicting testimony on this issue, we defer to the jury’s finding. See
Knowlton, 189 F.3d at 1183–84 (“[T]he jury has the exclusive function of . . .
resolving conflicts in the evidence, and reaching ultimate conclusions of
fact[.]” (citation modified)). So we affirm the jury’s verdict finding Open liable
for fraudulent inducement.
III. Ability to Rescind
Third, Open asserts that because the City knew of multiple problems with
the software and its implementation by spring 2020, yet continued to affirm the
contract, the City waived its right to rescind the contract.
“A party must rescind a contract within a reasonable time, but what
constitutes a reasonable time depends upon the facts of a particular case and
25 Appellate Case: 24-1152 Document: 79-1 Date Filed: 07/23/2025 Page: 26
must be determined by the trier of fact.” Ralston Oil & Gas Co. v. July Corp.,
719 P.2d 334, 340 (Colo. App. 1985). We review “findings of fact for clear
error.” Roberts v. Colo. State Bd. of Agric., 998 F.2d 824, 826 (10th Cir. 1993).
A “finding of fact is not clearly erroneous unless it is without factual support in
the record, or if the appellate court, after reviewing all the evidence, is left with
the definite and firm conviction that a mistake has been made.” Mile High
Indus. v. Cohen, 222 F.3d 845, 854 (10th Cir. 2000) (citation modified).
A. The Waiver Rule
The district court instructed the jury to find that Open proved “the
affirmative defense of waiver” if the City “continued the project with Open
with full knowledge of the actual facts when a reasonable person under the
same or similar circumstances would not have done so.” App. vol. 5, at 166.
That instruction is based on Elk River Associates v. Huskin, in which a
Colorado appellate court explained that “[t]o sustain the defense of ratification
and waiver, it must appear that the defrauded party, with full knowledge of the
truth respecting the false representations, elected to continue to carry out the
agreement.” 691 P.2d 1148, 1153 (Colo. App. 1984).
But Open contends that “the ‘full knowledge’ requirement comes into
play only if one elects to affirm the agreement and thereafter continues to carry
it out and receive its benefits, which would then result in a remedy of damages,
not rescission.” Op. Br. at 36 (citation modified). Open asserts that to waive
rescission, “[i]t is not requisite that the defrauded party shall be acquainted
26 Appellate Case: 24-1152 Document: 79-1 Date Filed: 07/23/2025 Page: 27
with all the evidence constituting the fraud[.]” Id. at 35 (quoting Gladden v.
Guyer, 426 P.2d 953, 955 (Colo. 1967)). Instead, rescission is waived once a
party “has evidence sufficient to reasonably actuate him to rescind the
contract[.]” Id. (quoting Gladden, 426 P.2d at 955). So Open concludes that the
jury decided only whether the City had waived its ability to recover damages
for Open’s fraud, not whether the City had waived its ability to rescind the
contract. 8
We disagree. As the district court correctly stated, “Colorado courts do
not treat fraudulent inducement waiver and recission waiver as separate claims,
governed by different tests[.]” Open Int’l, LLC, 2024 WL 1239934, at *4;
accord Gerbaz v. Hulsey, 288 P.2d 357, 363 (Colo. 1955) (“If [it] was actually
the fact [that the plaintiff misrepresented the contract] then defendant was in a
position to elect, when he discovered the fact, either to rescind the contract, or
to sue for damages[.]” (emphasis added)); Bankers Tr. Co. v. Int’l Tr. Co., 113
P.2d 656, 664 (Colo. 1941) (“[T]he right to rescind and sue [is] waived” if “the
defrauded party, with full knowledge, intentionally condoned the fraud,
affirmed the contract and abandoned all right to recover damages.”). A party
waives the right to rescind when it has full knowledge of the material fact of
8 Open’s argument in the district court was a little different. Rather than separating the waiver rules based on two types of remedies (damages and rescission), it separated the waiver rules based on whether the plaintiff was pursuing a claim or seeking a remedy. See Open Int’l, LLC, 2024 WL 1239934, at *3.
27 Appellate Case: 24-1152 Document: 79-1 Date Filed: 07/23/2025 Page: 28
the fraud, even if it does not know all the underlying details of the fraud. See
Tisdel v. Cent. Sav. Bank & Tr. Co., 6 P.2d 912, 917 (Colo. 1931) (finding
waiver because the defendant had “full knowledge of the falsity of the
representations, and [] all the material facts respecting the same well in mind”
(emphasis added)); Gladden, 426 P.2d at 955 (“The duty of rescinding arises
immediately upon acquiring knowledge of the substantial and material facts
constituting the fraud” and “no subsequent discovery of cumulative evidence
can operate to execute waiver of the fraud if one has in the meantime occurred,
or to revise a once lost right of rescission.” (emphasis added) (citation
modified)); see also In re Mascio, 454 B.R. 146, 151 (Bankr. D. Colo. 2011)
(defining “full knowledge” as “the substantial and material facts constituting
the fraud” (emphasis added) (quoting Gladden, 426 P.2d at 955)). So a party
need not elect rescission until “he becomes aware of facts or circumstances that
entitle him to a rescission.” Young v. Leech, 240 P. 692, 693 (Colo. 1925); see
Gerbaz, 288 P.2d at 363 (“[T]he[] defendant was in a position to elect[] when
he discovered the fact[.]” (emphasis added)).
Open claims that it makes sense to have separate waiver rules for
rescission and claims for damages because it “prevent[s] a party from waiting
to see how their contract plays out before deciding whether to rescind or sue for
damages.” Reply Br. at 19–20. But Open never explains why “waiting to see
how the[] contract plays out” before suing for damages should be treated
differently than “waiting to see how the[] contract plays out” before rescinding.
28 Appellate Case: 24-1152 Document: 79-1 Date Filed: 07/23/2025 Page: 29
Id. Indeed, the point of waiver is to prevent the “waiting to see how the[]
contract plays out” part. See Stoner v. Marshall, 358 P.2d 1021, 1023 (Colo.
1961) (“[The] election [of rescission or damages] must be promptly made . . .
otherwise one might, with knowledge of fraud, speculate upon the advantages
or disadvantages of an agreement, receive its benefits, and thereafter repudiate
all its obligations.” (citation modified)). Though Open is correct that many
cases the City and the district court cite involve claims for damages instead of
rescission, it has not persuasively explained why that matters. Regardless of the
remedy, the question is whether the party waived its right to recovery by acting
like everything was okay under the contract and then turning around and
seeking recovery for the very conduct it chose to ignore.
So the district court properly instructed the jury on waiver, and we now
consider whether the finding that the City did not waive its right to rescind the
contract was clearly erroneous.
B. No Waiver
The jury found that the City did not waive its right to recover for Open’s
fraudulent inducement. And the district court accepted that factual finding. See
Open Int’l, LLC, 2024 WL 1239934, at *3–4. Because this finding has factual
support in the record, it was not clearly erroneous. See Cohen, 222 F.3d at 854;
cf. Ralston Oil & Gas Co., 719 P.2d at 340 (holding that the trial court’s
conclusion “that plaintiff did not unreasonably delay seeking rescission of the
contract” was “amply supported by the record”).
29 Appellate Case: 24-1152 Document: 79-1 Date Filed: 07/23/2025 Page: 30
Open contends that the City knew these facts by spring 2020: (1) that the
software was untested and had not been installed for any other customer,
(2) that the customer portal was not satisfactory and was not the portal
represented during the vendor-selection process, (3) that the software’s
functionalities were only 58% of the required functionalities, and (4) that there
were significant issues with Open International’s product. And Open asserts
that despite this knowledge, the City agreed to PCR 19, which was meant to
address the issues with the software and deliver complete functionality, and
thus affirmed the contract and waived rescission.
But Open continues to conflate the problems with its software with its
fraudulent precontractual representations; knowledge of these problems is not
the same as knowledge of fraud. Though the jury could have inferred
knowledge of fraud based on knowledge of the above facts, it was not required
to do so. The City’s CFO testified that realizing Open’s misrepresentations
“was a gradual process” and that the “functional matrix work was the point in
time where [the CFO] said I think we may have gotten swindled.” App. vol. 7,
at 108. And there was evidence that the City did not learn of Open’s internal
assessment of the functionality matrix until discovery. See App. vol. 13, at
254–55. So there was at least conflicting evidence about when the City
discovered the fraud.
Open criticizes the City’s CFO’s testimony as “conclusory, self-serving,
and self-contradictory[.]” Reply Br. at 21. But it was the jury’s role to assess
30 Appellate Case: 24-1152 Document: 79-1 Date Filed: 07/23/2025 Page: 31
the witnesses’ credibility and weigh the evidence. See Bankers Trust Co., 113
P.2d at 664 (“[Q]uestions as to the time when plaintiff first discovered the
fraud . . . are questions of fact for resolution by a jury.”); Ralston Oil & Gas
Co., 719 P.2d at 340 (“A party must rescind a contract within a reasonable
time, but what constitutes a reasonable time depends upon the facts of a
particular case and must be determined by the trier of fact.”). And “[w]e do not
retry issues, second guess the [factfinder]’s decision making, or assess the
credibility of witnesses and determine the weight to be given their testimony.”
Stroup, 26 F.4th at 1157 (citation modified)).
Because the court’s (and the jury’s) finding that the City did not waive
its right to recover had support in the record, the finding is not clearly
erroneous, and we affirm the rescission.
IV. Open Investments’ Liability
Finally, Open challenges the district court’s denial of its Rule 50(b)
motion that argued that Open Investments could not be liable for rescission (a
tort remedy) because it was only a guarantor of the contract and thus liable only
for contract damages. Alternatively, it argued that even if Open Investments
could be liable for rescission, there was insufficient evidence that Open
Investments made a fraudulent or negligent misrepresentation. 9 But we agree
9 Open complains that the City “eschewed” its burden to prove each defendant’s liability “by sleight-of-hand, using ‘Open’ as a trial shorthand to refer to both defendants collectively.” Op. Br. at 42. But in the district court, (footnote continued)
31 Appellate Case: 24-1152 Document: 79-1 Date Filed: 07/23/2025 Page: 32
with the district court that Open has long waived this argument. See Open Int’l,
LLC, 2024 WL 1239934, at *5 (“[T]his argument disclaiming any liability of
Open Investments comes far too late.”).
Open argued for the first time in its Rule 50(b) motion, one month after
the jury had been dismissed, that Open Investments could not be held liable for
the rescission remedy. See App. vol. 17, at 176 (Q: “Prior to your Rule 50[b]
motion, had this issue ever been brought up?” A: “Your Honor, I don’t think it
was brought up until the election of remedies[.]”). Because Open failed to make
this argument in its Rule 50(a) motion, and because the City objected to this
new argument, the issue is waived and we will not consider it on appeal. 10 See
all parties consistently referred to Open International and Open Investments collectively as “Open” or “Defendants.” See e.g., Supp. App. vol. 1, at 50–85 (Open’s Partial Motion for Summ. J.); App. vol. 2, at 184–224 (Final Pretrial Order); App. vol. 4, at 1–2 (Open’s Motion to Compel Election of Remedies); App. vol. 5, at 118–40 (Open’s Rule 50(a) Motion); App. vol. 7, at 25 (Open’s Opening Statement) (“Now, who is Open? Open is not just one company, as the judge mentioned.”). And Open never objected to the jury instructions or to the verdict form that referred to “Open” collectively. 10 Open asserts three reasons why its argument would not be waived. First, it repeats its earlier argument that “technical precision [between Rule 50(a) and Rule 50(b) motions] is unnecessary[.]” Op. Br. at 43 (quoting Perez, 847 F.3d at 1256). We reject that argument for the same reason we rejected it above—Open failed to make the argument in its motion. See Perez, 847 F.3d at 1255–56. Second, Open claims that its argument is not waived under Federal Rule of Civil Procedure 46, which provides that “[f]ailing to object does not prejudice a party who had no opportunity to do so when the ruling or order was made.” Fed. R. Civ. P. 46. But Open doesn’t assert that it had no opportunity to object; it asserts that “there was no reason for Open Investments to object[.]” Op. Br. at 47 (emphasis added). So Rule 46 does not save Open’s argument. Third, Open contends that Federal Rule of Civil Procedure 52(a)(5) preserves (footnote continued)
32 Appellate Case: 24-1152 Document: 79-1 Date Filed: 07/23/2025 Page: 33
Therrien v. Target Corp., 617 F.3d 1242, 1250 n.2 (10th Cir. 2010)
(“Ordinarily a party cannot raise in a Rule 50(b) motion an argument not
already raised in its Rule 50(a) motion. But on appeal we can consider such an
argument when the opposing party failed to object to the Rule 50(b) motion for
raising new arguments.” (citation modified)). So we affirm the district court’s
denial of Open’s Rule 50(b) motion on this issue.
CONCLUSION
We affirm the jury’s verdict and the district court’s denial of Open’s
motions for judgment as a matter of law.
its claim. But Rule 52(a)(5)’s directive that “[a] party may later question the sufficiency of the evidence supporting the [court’s] findings, whether or not the party . . . objected to them” is reserved for nonjury trials. See Fed. R. Civ. P. 52(a)(1) (“In General. In an action tried on the facts without a jury . . . the court must find the facts specially and state its conclusions of law separately.”); see also Johnson v. Raemisch, 779 F. App’x 507, 518 n.10 (10th Cir. 2019) (“Rule 52 governs bench trials[.]”). Though the restitution amount was decided by the court, the issue Open challenges here—its liability—was tried before a jury. See Open Int’l, LLC, 2024 WL 1239934, at *1–2. So Rule 52 offers Open no help either. Open waived its argument.