Red v. Vail

• Court: Colorado Court of Appeals
• Decided: May 22, 2025
• Docket: 24CA0433
• Status: Unpublished

Opinion

24CA0433 Red v Vail 05-22-2025

COLORADO COURT OF APPEALS

Court of Appeals No. 24CA0433 City and County of Broomfield District Court No. 22CV30131 Honorable Sean Finn, Judge

Red Sky Ranch Metropolitan District,

Plaintiff-Appellant,

v.

Vail Associates, Inc., a Colorado corporation, Vail Resorts, Inc., a Colorado corporation, VR Holdings, Inc., a Colorado corporation, Vail Resorts Development Company, a Colorado corporation, the Vail Corporation, a Colorado corporation, and Holland Creek Metropolitan District, a political subdivision,

Defendants-Appellees.

JUDGMENT AFFIRMED AND CASE REMANDED WITH DIRECTIONS

Division VII Opinion by JUDGE HAWTHORNE* Lipinsky and Johnson, JJ., concur

NOT PUBLISHED PURSUANT TO C.A.R. 35(e) Announced May 22, 2025

Fox Rothschild, LLP, Marsha M. Piccone, Risa D. Brown, Denver, Colorado; Ogborn Mihm LLP, Peter McClenahan, Denver, Colorado, for Plaintiff-Appellant

Brownstein Hyatt Farber Schreck, LLP, Jonathan G. Pray, David B. Meschke, Reilly E. Meyer, Denver, Colorado, for Defendants-Appellees Vail Associates, Inc., a Colorado corporation, Vail Resorts, Inc., a Colorado corporation, VR Holdings, Inc., a Colorado corporation, Vail Resorts Development Company, a Colorado corporation, and the Vail Corporation, a Colorado corporation Davis Graham & Stubbs, LLP, Brandee L. Caswell, Theresa Wardon Benz, Katharine M. McDermott, Denver, Colorado for Defendant-Appellee Holland Creek Metropolitan District, a political subdivision

*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art. VI, § 5(3), and § 24-51-1105, C.R.S. 2024. ¶1 Plaintiff, Red Sky Ranch Metropolitan District (Red Sky),

appeals a district court’s orders dismissing Red Sky’s claims for

declaratory relief against defendants, Vail Associates, Inc.; Vail

Resorts, Inc.; VR Holdings, Inc.; Vail Resorts Development

Company; and the Vail Corporation (collectively, Vail) and Holland

Creek Metropolitan District (Holland Creek), and denying Red Sky

leave to amend its claims. We affirm.

I. Background

¶2 This case involves the contractual relationship between two

metropolitan districts, Red Sky and Holland Creek (the districts).

Red Sky alleged that Vail entirely controls Holland Creek and that,

although Vail initially controlled Red Sky, the homeowners of the

Red Sky Ranch community now control it.

¶3 Vail began developing the districts in September 2000, after

the Eagle County Board of Commissioners approved forming the

districts and their “Consolidated Service Plan” (the Service Plan).

The Service Plan adopted a dual-district structure for funding the

needs of a new community to be known as Red Sky Ranch. Under

the Service Plan, Holland Creek was established as the “service

district” responsible for “managing the construction and operation

1 of facilities and improvements needed for Red Sky Ranch.” Holland

Creek would “own and operate the public facilities throughout Red

Sky Ranch.” Red Sky was established as the “financing district”

responsible for “providing the funding and tax base” needed to

support Holland Creek’s service district responsibilities. The

Service Plan also called for the newly created districts to enter into

intergovernmental agreements to define their respective obligations.

¶4 In June 2001, Red Sky and Holland Creek entered into a

“District Facilities Construction and Service Agreement” (the Master

IGA). The Master IGA required Red Sky to pay for the construction

and initial financing of the infrastructure for the development of

Red Sky Ranch, in addition to its financial obligations to Holland

Creek under the Service Plan. The Master IGA provides that it may

be terminated after Red Sky settles all remaining payments and

financial obligations to Holland Creek.

¶5 Red Sky filed its complaint in May 2022, seeking, as relevant

here, a declaratory judgment establishing the parties’ rights under

the Master IGA. Specifically, Red Sky sought declarations that (1) if

Red Sky’s debt obligations to Holland Creek under the Master IGA

are not paid in full within the thirty-year time limit that its voters

2 approved, then those debts would be extinguished and

uncollectable; (2) Red Sky’s debt obligations to Holland Creek under

a loan agreement are not enforceable; and (3) certain rights and

obligations in the Master IGA, including the service and financing

district structure and purported debts, are void and unenforceable

against Red Sky because they restrict Red Sky’s legislative powers.

¶6 Holland Creek separately filed a counterclaim against Red Sky,

seeking a declaratory judgment regarding the validity of Red Sky’s

obligations under the Master IGA and Holland Creek’s right to

pursue remedies against Red Sky for seeking to invalidate the

Master IGA. And Vail filed a C.R.C.P. 12(b)(5) motion to dismiss

Red Sky’s complaint.

¶7 In December 2022, the district court granted Vail’s motion to

dismiss (2022 Dismissal Order).1 The district court later denied

Red Sky’s motion to amend its complaint on the basis that the 2022

Dismissal Order was a final judgment and, therefore, Red Sky could

only file an amended complaint if it first sought relief from the

judgment under C.R.C.P. 59 or 60, which Red Sky had not done.

1 Red Sky does not appeal the district court’s dismissal of its second

claim, which concerned water rights for Red Sky Ranch.

3 Red Sky then filed a motion under C.R.C.P. 60 for relief from the

2022 Dismissal Order — again seeking leave to amend its

complaint — which the district court denied.

¶8 Red Sky appealed, and a division of this court concluded that

it lacked jurisdiction because no final, appealable judgment had

been entered; thus it remanded the case to the district court. On

remand, Red Sky again sought leave to amend its complaint. In

January 2024, the court granted the motion as to Red Sky’s third,

fifth, and sixth claims for relief but otherwise denied the motion

(2024 Order).

¶9 Red Sky now appeals the district court’s 2022 Dismissal Order

and the 2024 Order, contending that the court erred by (1)

dismissing Red Sky’s declaratory relief claim in which it alleged that

the Master IGA is unenforceable to the extent it limits Red Sky’s

legislative powers and denying Red Sky leave to amend that claim;

and (2) dismissing Red Sky’s declaratory relief claim in which it

alleged that Red Sky’s debt obligations under the Master IGA are

unenforceable to the extent they exceed the Taxpayer’s Bill of Rights

(TABOR) authorization and denying Red Sky leave to amend that

claim.

4 II. Standard of Review and Applicable Law

¶ 10 “We review a C.R.C.P. 12(b)(5) motion to dismiss de novo and

apply the same standards as the trial court.” Norton v. Rocky

Mountain Planned Parenthood, Inc., 2018 CO 3, ¶ 7. “We accept all

factual allegations in the complaint as true, viewing them in the

light most favorable to the plaintiff, but we are not required to

accept bare legal conclusions as true.” Id. We also review a district

court’s interpretation of a contract de novo. Rocky Mountain Health

Maint. Org., Inc. v. Colo. Dep’t of Health Care Pol’y & Fin., 54 P.3d

913, 919 (Colo. App. 2001).

¶ 11 While granting leave to amend is within the district court’s

discretion, we review that question de novo when a court denies

leave to amend on grounds that the amendment would be futile.

Benton v. Adams, 56 P.3d 81, 85 (Colo. 2002). A court may

properly deny leave to amend when the amendment would be futile.

Polk v. Denver Dist. Ct., 849 P.2d 23, 27 (Colo. 1993). “The doctrine

of futility justifies denying the amendment when the amendment

would not survive a motion to dismiss, merely restates the same

facts as the original complaint, or reasserts a claim already

5 dismissed by the trial court.” Bristol Co., LP v. Osman, 190 P.3d

752, 759 (Colo. App. 2007).

III. Delegation of Legislative Powers

¶ 12 Red Sky first asserts that the district court erred by (1)

improperly dismissing its claim to declare the Master IGA

unenforceable because it improperly delegated Red Sky’s legislative

powers and (2) denying leave to amend the claim. We disagree.

A. Relevant Facts

¶ 13 Under the Master IGA, Holland Creek issued a $12 million

bond (the 2001 Bond) to begin constructing Red Sky Ranch. And in

2002, Holland Creek and Red Sky entered into a loan agreement

with VR Holdings, Inc. (the 2002 Loan Agreement) to obtain more

funds needed to complete the Red Sky Ranch development. Red

Sky was responsible for all amounts due under the 2002 Loan

Agreement. Since then, Holland Creek and Red Sky have agreed to

numerous refinancing transactions, incurring substantial debt on

Red Sky’s behalf. Red Sky maintains that this has caused the

expected $35 million in debt to “balloon . . . to a projected $54-69

million . . . total debt service.”

6 ¶ 14 As relevant here, Red Sky’s original complaint specifically

sought declarations that its debt obligations under the 2002 Loan

Agreement are unenforceable and certain Master IGA provisions are

unenforceable because they restrict Red Sky’s legislative powers

and allow Holland Creek to control Red Sky’s basic governmental

functions. In its 2022 Dismissal Order, the court disagreed, finding

that the Master IGA could not reasonably be read to delegate Red

Sky’s core governmental powers to Holland Creek or Vail.

¶ 15 On remand, Red Sky renewed its motion to amend, seeking a

declaration that the Master IGA contained an unenforceable

delegation of legislative authority.2 Specifically, it claimed that the

Master IGA caused Red Sky to surrender or delegate its reserved

powers to Holland Creek, which Red Sky alleged was contrary to the

nondelegation doctrine, article V, section 35 of Colorado’s

Constitution, the reserved powers doctrine, and the Local

2 Red Sky also asserts that the Master IGA is unenforceable

because it was not the result of an “arms’ length transaction.” However, beyond arguing that Vail-appointed employees signed the Master IGA on behalf of both of the districts when Vail controlled both of their boards, this argument is underdeveloped, and we therefore decline to address it. See Antolovich v. Brown Grp. Retail, Inc., 183 P.3d 582, 604 (Colo. App. 2007) (declining to address underdeveloped arguments).

7 Government Budget Law of Colorado (LGBL), §§ 29-1-101 to -115,

C.R.S. 2024.

¶ 16 In its 2024 Order, the court denied Red Sky’s request to

amend the claim, again finding that the Master IGA could not

reasonably be read to improperly delegate Red Sky’s core

governmental functions, but instead that the agreement required

Red Sky to exercise its legislative functions to comply with its

obligations.

B. Analysis

¶ 17 We conclude that the district court did not err by dismissing

Red Sky’s claim that the Master IGA improperly delegated its

legislative powers or denying Red Sky’s request for leave to amend.

¶ 18 “The reserved powers doctrine rests on a fundamental inability

of sovereign governments to contract away essential attributes of

their sovereignty.” Wheat Ridge Urban Renewal Auth. v.

Cornerstone Grp. XXII, L.L.C., 176 P.3d 737, 743 (Colo. 2007).

However, the doctrine does not limit a government’s ability to enter

into contracts involving the exercise of its sovereign powers. Id.

¶ 19 Similarly, under the nondelegation doctrine, “the General

Assembly may not delegate its law-making power although it may

8 delegate rule-making and other limited legislative authority to

persons or entities within a proper statutory framework and with

appropriate safeguards.” Krupp v. Breckenridge Sanitation Dist., 1

P.3d 178, 183 (Colo. App. 1999), aff’d, 19 P.3d 687 (Colo. 2001).

¶ 20 Also, as relevant here, the Special District Act grants districts

the constitutional powers to enter into contracts and agreements, to

borrow money and incur indebtedness, to evidence such

indebtedness by notes, and to issue bonds. § 32-1-1001(1)(d)(I),

(1)(e), C.R.S. 2024.

¶ 21 In its original complaint, Red Sky alleged that the Master IGA

removed Red Sky’s rights to pass its own budget and delegated

those rights to Holland Creek, in violation of the reserved powers

and nondelegation doctrines.

¶ 22 However, the Master IGA requires Red Sky to exercise its

authority in certain ways rather than depriving it of authority.

Article IV, section 4.2 of the Master IGA obligates Red Sky to review

the preliminary budget and approve it or propose additions or

deletions to it. And section 4.3 mandates that Red Sky and Holland

Creek discuss and attempt to reach an agreement on a preliminary

budget. If Red Sky fails to engage in the budget process, section

9 4.4.a of the Master IGA contemplates that the preliminary budget

will be the final budget, but only as far as the amounts do not

exceed the allocations provided for in the Service Plan. Notably,

Red Sky executed the Service Plan and does not challenge its

enforceability on appeal. Also, article V defines Red Sky’s and

Holland Creek’s rights and obligations. None of these Master IGA

provisions divest Red Sky of its governmental powers but instead

outline the nature of the districts’ obligations under their respective

structures. As the court found, while Red Sky may be required to

impose fees or taxes to meet its Master IGA contractual obligations,

the Master IGA did not vest Vail and Holland Creek with authority

to take these actions on Red Sky’s behalf.

¶ 23 So Red Sky did not plausibly allege a claim for relief that the

Master IGA violates the reserved powers doctrine or the

nondelegation doctrine.

¶ 24 Red Sky also argues that the Master IGA improperly delegates

legislative functions in violation of article V, section 35 of the

Colorado Constitution. We disagree.

¶ 25 Article V, section 35 of the Colorado Constitution provides:

10 The general assembly shall not delegate to any special commission, private corporation or association, any power to make, supervise or interfere with any municipal improvement, money, property or effects, whether held in trust or otherwise, or to levy taxes or perform any municipal function whatever.

The Master IGA vested Holland Creek, a metropolitan district, and

not Vail, with municipal functions. See Carousel Farms Metro. Dist.

v. Woodcrest Homes, Inc., 2019 CO 51, ¶ 34 n.9 (“Metropolitan

districts, since they can offer multiple services, are often

established by developers to finance, through the issuance of

municipal bonds, the infrastructure necessary to support a new

subdivision.”) (citation omitted). And the presence of Vail

employees on Holland Creek’s board does not make Holland Creek a

private entity. See id. at ¶ 34 (noting that developer employees

frequently comprise the sole managers of special districts in the

districts’ early stages).

¶ 26 Finally, the LGBL requires that each local government adopt

an annual budget, and that no budget “shall provide for

expenditures in excess of available revenues.” § 29-1-103(1), (2),

C.R.S. 2024. The LGBL also requires that a local government hold

a hearing to consider adopting the proposed budget, and to enact

11 an ordinance or resolution adopting the budget and making

appropriations before any mill levy is certified. § 29-1-108(1), (2),

C.R.S. 2024. But Red Sky did not allege that it could not follow

these requirements under the Master IGA. And the Master IGA

does not provide for Red Sky’s internal processes under the LGBL.

Instead, the Master IGA mandates that Red Sky use its budgeting

powers, and that the districts hold a hearing to consider adopting

the proposed budget and may revise or alter that budget. And Red

Sky’s board of directors consistently holds public hearings on its

budget in compliance with the LGBL. Lastly, the Master IGA

expressly mandates Red Sky’s certification requirements to pass a

mill levy.

¶ 27 Because Red Sky’s theories fail as a matter of law, and no

additional factual allegations change the Master IGA’s plain

language, we conclude that the district court properly dismissed

Red Sky’s declaratory judgment claim that the Master IGA was

unenforceable because it delegated Red Sky’s legislative powers.

And because Red Sky’s proposed amendments to its complaint do

not change the arguments the district court properly rejected, any

12 amendment to this claim would be futile. See Bristol, 190 P.3d at

759.

IV. Violation of TABOR

¶ 28 Red Sky next contends that the district court erred by (1)

improperly dismissing its claim to declare that Red Sky’s financial

obligations under the Master IGA were unenforceable because they

exceed Red Sky’s TABOR authorization and (2) denying leave to

amend that claim. We disagree.

¶ 29 After Eagle County approved the Service Plan, Red Sky’s

electors voted to approve an increase in Red Sky’s debt under Ballot

Issue L. Ballot Issue L authorized Red Sky to incur debt in an

amount not to exceed $36,382,378 and permitted it to raise taxes to

pay financial obligations incurred under the Master IGA for thirty

years after entering into that contract.

¶ 30 As relevant here, Red Sky’s original complaint specifically

sought a declaration that Red Sky’s financial obligations under the

Master IGA are limited by its actual authorization under TABOR

through Ballot Issue L. And in the second claim in its proposed

amended complaint, Red Sky sought a declaratory judgment that

13 Red Sky’s financial obligations under the Master IGA to pay toward

the 2001 Bond and 2002 Loan Agreement are limited and

unenforceable under Red Sky’s TABOR authorization as it pertains

to Ballot Issue L’s intergovernmental-agreement thirty-year time

restriction provision. Red Sky claimed that the Master IGA sought

to require performance beyond the thirty-year time restriction

established by Ballot Issue L. Red Sky made this allegation in its

original complaint; however, it argued that the amended complaint

solved its deficiencies.

¶ 31 In its ruling on Red Sky’s proposed TABOR claim, the district

court pointed to its analysis in the 2022 Dismissal Order of the

similar claim pleaded in the original complaint. The court found

that the same analysis was relevant to the claim presented in the

proposed amended complaint because the amended complaint did

not resolve the deficiencies that the court identified in the 2022

Dismissal Order. Therefore, the court denied Red Sky’s motion to

amend under the futility of amendment doctrine.

¶ 32 We conclude that the district court properly determined that

the Master IGA expressly complies with TABOR and, therefore, that

14 the court properly dismissed Red Sky’s claim and properly denied

its motion for leave to amend.

¶ 33 TABOR requires voter approval of any proposed tax increase

and grants taxpayers the right to enforce its provisions. Colo.

Const. art. X, § 20; Bd. of Comm’rs v. City of Broomfield, 7 P.3d

1033, 1037 (Colo. App. 1999).

¶ 34 The Master IGA expressly states that “[t]he authorization for

issuance of debt, fiscal year spending, revenue collections and other

constitutional matters requiring voter approval for purposes of [the

Master IGA] . . . were approved at elections held for the Districts”

and that its terms therefore require no further electoral approval.

The Master IGA further provides:

To the extent that further voter authorization is required to give effect to any provision of [the Master IGA], [Red Sky] agrees to use best efforts to obtain voter approval for such additional authorization and, if necessary, obtain approval of an amendment to the Service Plan at the request of [Holland Creek].

¶ 35 Notably, it is undisputed that Red Sky’s financial obligations

are limited to a term of thirty years under Ballot Issue L. And to the

extent that Ballot Issue L does not authorize the full repayment

period, Red Sky retains control to hold a renewed TABOR vote, as

15 contemplated by the provision of the Master IGA requiring Red Sky

to use its best efforts to obtain voter approval for additional taxing

authorization. Also, the Master IGA provides that, if any of its

provisions are declared unenforceable due to a violation of TABOR,

the district involved in the violation is required to cure the violation,

including by obtaining voter approvals. Because the Master IGA

thus mandates compliance with TABOR, the district court properly

dismissed Red Sky’s claim for a declaratory judgment.

¶ 36 Finally, Red Sky’s proposed amended claim is futile because,

like the original claim, it failed to state a claim upon which relief

can be granted. Accordingly, because Red Sky’s proposed

amendment would not survive a motion to dismiss, the district

court properly denied amendment as futile.

V. Attorney Fees

¶ 37 Red Sky and Holland Creek each request awards of their

reasonable attorney fees and costs associated with this appeal,

citing the Master IGA, section 10.18.

¶ 38 That section provides that, in the event of litigation between

the districts regarding the Master IGA, the prevailing district “shall

be entitled to receive from the losing District . . . all reasonable

16 costs and expenses incurred by the prevailing District . . . ,

including attorney fees.” Because we conclude the district court did

not err, we grant Holland Creek’s request and remand the case to

the district court to determine Holland Creek’s reasonable attorney

fees, and to award such fees to Holland Creek. See C.A.R. 39.1;

Camelot Invs., LLC v. LANDesign, LLC, 973 P.2d 1279, 1281 (Colo.

App. 1999). Because Holland Creek has prevailed on appeal, we

deny Red Sky’s request for an award of attorney fees.

VI. Disposition

¶ 39 The district court’s orders dismissing Red Sky’s claims for

declaratory relief and denying Red Sky leave to amend its claims are

affirmed. The case is remanded with directions to calculate and

award Holland Creek its reasonable attorney fees.

JUDGE LIPINSKY and JUDGE JOHNSON concur.