The summaries of the Colorado Court of Appeals published opinions constitute no part of the opinion of the division but have been prepared by the division for the convenience of the reader. The summaries may not be cited or relied upon as they are not the official language of the division. Any discrepancy between the language in the summary and in the opinion should be resolved in favor of the language in the opinion.
SUMMARY May 17, 2018
2018COA71
No. 17CA0303, State of Colorado v. Robert J. Hopp and Associates, LLC — Bankruptcy — Attorney Fees — Colorado Consumer Protection Act — Colorado Fair Debt Collection Practices Act
A division of the court of appeals considers whether the trial
court erred when it imposed an award of attorney fees and costs
against a defendant who had filed for bankruptcy and received a
bankruptcy discharge before the underlying case in the trial court
was filed. Defendant argues that the trial court was precluded from
doing so by Bankruptcy Code § 727, which prohibits any attempt to
collect from the debtor a debt that has been discharged, because
the bankruptcy discharge applied to any claim for attorney fees and
costs that could have been fairly or reasonably contemplated during
the bankruptcy case. 11 U.S.C. § 727 (2012). Adopting the rationale set forth in In re Jensen, 395 B.R. 472,
480 (Bankr. D. Colo. 2008), the division concludes that, because
the attorney fees award in this case is a civil penalty imposed under
the Colorado Consumer Protection Act, it is not dischargeable
under 11 U.S.C. § 523(a)(7) (2012). Thus, the division concludes
that the trial court did not err when it awarded attorney fees and
costs against defendant. COLORADO COURT OF APPEALS 2018COA71
Court of Appeals No. 17CA0303 City and County of Denver District Court No. 14CV34780 Honorable Shelley I. Gilman, Judge
State of Colorado, ex rel. Cynthia H. Coffman, Attorney General for the State of Colorado; and Julie Ann Meade, Administrator, Uniform Consumer Credit Code,
Plaintiffs-Appellees and Cross-Appellants,
v.
Robert J. Hopp & Associates, LLC; The Hopp Law Firm, LLC; National Title, LLC, d/b/a Horizon National Title insurance, LLC; First National Title Residential, LLC; Safehaus Holdings Group, LLC; Lori L. Hopp; and Robert J. Hopp,
Defendants-Appellants and Cross-Appellees,
ORDER AFFIRMED
Division I Opinion by JUDGE ROTHENBERG* Taubman and Harris, JJ., concur
Announced May 17, 2018
Cynthia H. Coffman, Attorney General, Jennifer H. Hunt, First Assistant Attorney General, Erik R. Neusch, Senior Assistant Attorney General, Rebecca M. Taylor, Mark L. Boehmer, Assistant Attorneys General, Denver, Colorado, for Plaintiffs-Appellees and Cross-Appellants
Richards Carrington, LLC, Christopher P. Carrington, Ruth M. Moore, Denver, Colorado, for Defendants-Appellants and Cross-Appellees
*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art. VI, § 5(3), and § 24-51-1105, C.R.S. 2017. ¶1 Plaintiffs, the State of Colorado, ex rel. Cynthia H. Coffman,
Attorney General for the State of Colorado; and Julie Ann Meade,
Administrator, Uniform Consumer Credit Code, brought a civil law
enforcement action against defendants, foreclosure lawyer Robert J.
Hopp; Hopp’s wife, Lori L. Hopp; Hopp’s law firms, Robert J. Hopp
& Associates, LLC and The Hopp Law Firm, LLC (collectively, the
law firms); as well as Hopp’s affiliated title companies, National
Title, LLC, d/b/a Horizon National Title Insurance, LLC, and First
National Title Residential, LLC; and Safehaus Holdings Group, LLC,
a company owned by Hopp and Lori Hopp, which, through its
subsidiary, provided accounting and bookkeeping services for the
law firms and title companies. The State alleged that Hopp, the law
firms, and their affiliated companies violated the Colorado
Consumer Protection Act (CCPA) and the Colorado Fair Debt
Collection Practices Act (CFDCPA) by billing its mortgage servicer
clients title insurance premium charges for foreclosure
commitments when those full costs were not actually incurred,
despite knowing that these fraudulent costs would be assessed
against Colorado homeowners in foreclosure. The district court
agreed with plaintiffs and entered judgment in their favor, except it
1 concluded there was insufficient evidence to find Lori Hopp
personally liable for any alleged misconduct.
¶2 Defendants now appeal the district court’s award of plaintiffs’
attorney fees and costs. Lori Hopp further appeals the district
court’s denial of her request for her attorney fees.
¶3 We affirm the district court’s order.
I. Attorney Fees Orders
¶4 The trial court awarded plaintiffs most of their reasonable
attorney fees and costs incurred in bringing the enforcement action
under the CCPA and CFDCPA. See § 5-16-133, C.R.S. 2017; § 6-1-
113(4), C.R.S. 2017. The trial court’s order awarding fees cites to
the former location of the CFDCPA, section 12-14-135, C.R.S. 2014.
The CFDCPA was repealed and replaced in 2017 and section 12-14-
135 was replaced by section 5-16-133, C.R.S. 2017. Plaintiffs
requested attorney fees in the amount of $933,277 and $35,648 in
costs. The trial court made numerous reductions to plaintiffs’
requested award:
The court concluded it was unreasonable to employ more
than two attorneys and a paralegal at trial. It declined to
award fees for any fees requested for staffing at trial
2 exceeding that level. It subtracted those amounts from
the amount requested by plaintiffs, resulting in a lodestar
amount of $903,106.
Considering the factors set forth in Colo. RPC 1.5, the
trial court observed that plaintiffs recovered significantly
less than they sought at the outset at trial. The court
also noted its concern that plaintiffs did not realize that a
substantial portion of penalties imposed under the
FDCPA were not available until after trial. Thus, the
court reduced the lodestar amount by twenty-five percent
and awarded $677,329.50 for attorney fees.
Defendants challenged plaintiffs’ request for costs for
deposing Lori Hopp and Brian Howard. Plaintiffs did not
respond to defendants’ argument; therefore, the court
reduced the costs award to $33,685.97.
¶5 Lori Hopp requested her attorney fees and costs, arguing that
plaintiffs’ action against her was substantially groundless under
sections 13-17-101 to -106, C.R.S. 2017. She argued that,
alternatively, C.R.C.P. 11(a) required imposing a sanction against
plaintiffs by way of awarding her attorney fees. The court denied
3 her motion, concluding that, even though the state did not
ultimately prove the CCPA claim against her, it was not groundless,
nor were sanctions required against plaintiffs under C.R.C.P. 11(a).
II. Underlying Judgment
¶6 Defendants contend that, in the event the underlying
judgment against them is reversed on appeal, the award of fees and
costs against them should also be reversed because it depends on
the validity of the underlying judgment on the merits. Because we
affirm the underlying judgment in State v. Hopp, 2018 COA 69,
announced today, reversal of the attorney fees award is not required
on that basis.
III. Bankruptcy
¶7 Hopp contends the trial court erred when it imposed an award
of attorney fees and costs against him because it was precluded
from doing so by his discharge of debts in bankruptcy. We
disagree.
A. Preservation
¶8 Hopp filed for bankruptcy on January 25, 2013, and obtained
a discharge on February 10, 2014. Plaintiffs’ enforcement action
was filed ten months later, on December 19, 2014. Plaintiffs
4 contend Hopp failed to preserve the issue of the effect of his
bankruptcy discharge in the trial court because he raised this issue
“for the first and only time” in his C.R.C.P. 59 motion after trial.
Plaintiffs further argue that a C.R.C.P. 59 motion, which
contemplates amending a judgment or seeking a new trial, was not
the proper procedural avenue for raising a bankruptcy discharge.
¶9 Hopp argues that he preserved his bankruptcy argument at
numerous points in the proceedings. First, Hopp contends that he
asserted in his answer to plaintiffs’ complaint that his bankruptcy
discharge barred, at least in part, some of plaintiffs’ claims against
him. He did not provide any further details about his bankruptcy
in the answer. After trial, in his C.R.C.P. 59 motion to amend the
court’s findings and conclusions, Hopp argued that his bankruptcy
discharge precluded the trial court’s award of attorney fees against
him because they were awarded to compensate the state for its
actual pecuniary loss. The trial court declined to address this
argument in the context of Hopp’s C.R.C.P. 59 motion because it
held Hopp had presented no evidence of his bankruptcy at trial.
Hopp does not dispute the trial court’s finding that he presented no
evidence of his bankruptcy during the trial.
5 ¶ 10 After plaintiffs submitted affidavits of attorney fees and costs,
Hopp argued that the trial court, as part of its “punitive award” of
attorney fees, was required to consider his bankruptcy in the
context of his ability to pay. In light of his bankruptcy, Hopp
alleged he was unable to pay the underlying judgment of penalties
or plaintiffs’ requested attorney fees.
¶ 11 Even assuming that Hopp properly preserved the
consideration of the effect of his bankruptcy discharge on any
attorney fees award in the trial court, we reject Hopp’s arguments
on the merits.
B. Prepetition Liability
¶ 12 Hopp argues that the district court was precluded from
awarding fees and costs against him by Bankruptcy Code § 727,
which prohibits any attempt to collect from the debtor a debt that
has been discharged. 11 U.S.C. § 727 (2012). He contends that the
bankruptcy discharge applies to any claim for attorney fees and
costs that could have been fairly or reasonably contemplated during
the bankruptcy case. We are not persuaded.
¶ 13 Bankruptcy Code § 524(a)(1) voids any judgment at any time
obtained for a determination of a personal liability of the debtor for
6 a debt discharged, as relevant here, under § 727, 11 U.S.C.
§ 524(a)(1) (2012). A debt is not dischargeable, however, for “a fine,
penalty, or forfeiture payable to and for the benefit of a
governmental unit, and is not compensation for actual pecuniary
loss, other than a tax penalty.” 11 U.S.C. § 523(a)(7) (2012). The
fine, penalty, or forfeiture may be criminal or civil in nature. In re
Jensen, 395 B.R. 472, 480 (Bankr. D. Colo. 2008). We review
whether a particular debt meets the elements of § 523(a)(7), which
is a question of law, de novo. Id.
¶ 14 First, Hopp argues that, under In re Castellino Villas, A. K. F.
LLC, 836 F.3d 1028 (9th Cir. 2016), the attorney fees award
constitutes a prepetition debt which was fairly contemplatable prior
to the bankruptcy discharge, and therefore is subject to the
discharge. In Castellino Villas, the Ninth Circuit reasoned as
follows:
When parties engage in prepetition litigation that could lead to an award of attorneys’ fees, they may fairly contemplate that the prevailing party will be awarded those fees. Therefore, a creditor’s contingent claim to such fees is discharged in bankruptcy, even if some fees are incurred post-petition. But when the prepetition litigation is resolved in bankruptcy so that any claim (including a contingent claim
7 for attorneys’ fees) against the debtor would be discharged, we cannot say that the debtor’s affirmative action to commence what amounts to “a whole new course of litigation,” was in the fair contemplation of the parties when the debtor filed a bankruptcy petition. Rather, the debtor’s decision to eschew the fresh start provided by bankruptcy and engage in new litigation is more akin to post-petition conduct that, by definition, was not in the fair contemplation of the parties prepetition.
Id. at 1035-36 (quoting Siegel v. Fed. Home Loan Mortg. Corp., 143
F.3d 525, 534 (9th Cir. 1998)).
¶ 15 Castellino Villas is inapposite here. The claims underlying the
attorney fees award in Castellino Villas arose out of dischargeable
debts. That is not true in this case. Hopp concedes that the award
of penalties under the CCPA and CFDCPA is nondischargeable. The
United States Bankruptcy Court for the District of Colorado has
held that a civil penalty imposed under the CCPA is a
nondischargeable penalty within the meaning of § 523(a)(7).
Jensen, 395 B.R. at 482. Federal courts are divided on the issue of
whether an award of attorney fees and costs may be held
nondischargeable under § 523(a)(7). However, the bankruptcy
courts look to state law to reach this determination. Id. at 487.
8 ¶ 16 The Bankruptcy Court for the District of Colorado has
considered the CCPA’s attorney fees provision and noted that
Colorado cases hold it serves both punitive and deterrent purposes.
Id. (citing Hall v. Walter, 969 P.2d 224, 231 (Colo. 1998)). The fact
that such an award also serves to enable enforcement by defraying
the government’s expenses did not change the primary purpose of
the provision. Id. at 487-88. Accordingly, the Bankruptcy Court
concluded that an award of attorney fees made under the CCPA’s
mandatory provision was sufficiently penal to constitute a “fine,
penalty or forfeiture” under § 523(a)(7) and was not dischargeable.
Id. at 488. We are persuaded by the Bankruptcy Court’s
interpretation of the CCPA’s attorney fees provision and apply it
here.
¶ 17 We further note that there is no reason to believe that the
subsections of the CFDCPA allowing an award of attorney fees and
costs payable to the administrator do not serve the same penal
purposes as the CCPA. The CFDCPA serves a similar purpose as
the CCPA, namely consumer protection. See Flood v. Mercantile
Adjustment Bureau, LLC, 176 P.3d 769, 773 (Colo. 2008) (The
FDCPA has the “remedial purpose of protecting consumers against
9 debt collection practices that take advantage of gullible, unwary,
trustful, or cowed persons who receive a debt collection
communication.”). Thus, we conclude that the trial court’s attorney
fees awards made under the CCPA and the CFDCPA are not
dischargeable, and we decline to order that they be vacated as void
under 11 U.S.C. § 524.
IV. Attorney Fees for Unpursued or Unsuccessful Claims
¶ 18 Defendants contend the trial court erred when it failed to
reduce plaintiffs’ attorney fees award by the amount of any fees
incurred for their unpursued and unsuccessful claims. We
disagree.
¶ 19 “We review the reasonableness of a trial court’s award of
attorney fees for an abuse of discretion. The determination of
reasonableness of attorney fees is a question of fact for the trial
court, and its ruling will not be disturbed on review unless patently
erroneous and unsupported by the evidence.” Payan v. Nash Finch
Co., 2012 COA 135M, ¶ 16 (citation omitted).
¶ 20 Where a plaintiff brings multiple claims, but is only successful
on some claims, we apply a method of claim segregation to
determine to what extent an award of attorney fees can be awarded
10 under a fee-shifting statute. See Rocky Mountain Festivals, Inc. v.
Parsons Corp., 242 P.3d 1067, 1073 (Colo. 2010). Where a plaintiff
brought multiple claims involving a common core of facts or based
on related legal theories, counsel’s work on an individual claim
could not be distinguished from work on the entirety of the case.
Id. (citing Hensley v. Eckerhart, 461 U.S. 424, 435 (1983)).
Therefore, the court concluded that reducing the fee award for work
on unsuccessful claims would be inappropriate. Id. However,
where a plaintiff brought distinctly different claims for relief based
on different facts and legal theories, and “the litigation could be
justly conceived as a ‘series of discrete claims’ that had been ‘raised
in separate lawsuits,’” an award of fees only for the plaintiff’s
successful claims would be both practicable and appropriate to
effect the purpose of the fee-shifting statute. Id. (quoting Hensley,
461 U.S. at 434-35).
¶ 21 Defendants objected to portions of plaintiffs’ attorney fee
request. Defendants argued that plaintiffs failed to subtract from
their request fees incurred in the pursuit of the following claims:
The claim alleging Hopp and the law firms billed
incorrectly for foreclosure commitments that did not
11 result in title policies through LSI Default Title and
Closing, also known as LSI Title Agency, which was
unsuccessful at trial.
The claim alleging defendants misrepresented a fifteen
dollar “filing cost” in bids and cure statements, which the
trial court dismissed at summary judgment.
The claim, which plaintiffs withdrew prior to trial, that
the law firms misrepresented $275 as a title search
report fee on its files from servicer Fannie Mae.
The claim, which was also withdrawn prior to trial, that
the law firms charged a standard C.R.C.P. 120 filing fee
on foreclosure files for files even when the client was
exempt from court filing costs.
¶ 22 In its order, the trial court ruled as follows:
The unpursued and unsuccessful claims and the successful claims involved a common core of facts and were based on related legal theories. Since the legal work on the unpursued and unsuccessful claims could not be distinguished from the work done on the whole of litigation, a reduction of the fee would be inappropriate. . . . Moreover, these unpursued and unsuccessful claims represent a small fraction of the case.
12 We agree with the trial court’s reasoning. Plaintiffs’ claims involved
a common core of facts: namely, that the law firms submitted
unlawful and inflated charges for costs paid by homeowners. All of
plaintiffs’ claims were brought under the same legal theories,
applying provisions of the CCPA and CFDCPA. Even though the
unsuccessful and unpursued claims alleged different instances of
misrepresentation, plaintiffs’ theory on each claim was similar —
namely, that Hopp and the law firms, with the cooperation of their
affiliated title firms, engaged in a general practice in their
foreclosure work of billing loan servicers (and accordingly,
homeowners in default) for certain costs that were not actually
incurred.
¶ 23 On the LSI claim, which proceeded to trial, plaintiffs alleged
that Hopp and the law firms engaged in the same kind of
misrepresentation with foreclosure commitment billing as it alleged
in the claims in which it prevailed. The only difference between this
claim and the successful claims was that, in the acts underlying the
LSI claim, plaintiffs alleged that Hopp and the law firms ordered
title commitments through LSI, rather than through its own
affiliated title companies.
13 ¶ 24 As for the claims withdrawn prior to trial, plaintiffs alleged
that defendants similarly misrepresented other fees which they were
not authorized to collect. Plaintiffs alleged that defendants
routinely misrepresented the cost of a Fannie Mae title search
report by always charging clients the maximum cost allowed by
Fannie Mae, even though the routine market rate for the product
was less than half that amount. Plaintiffs further alleged that
defendants charged clients filing fees for standard Rule 120 cases,
even when the client for whom the law firm filed the motion to
authorize sale was exempt from filing costs by the state. Both of
these claims were based on plaintiffs’ theory that defendants, as a
routine practice in their foreclosure work, billed their loan servicer
clients (and, accordingly, homeowners in default) for costs that were
not actually incurred. The only difference between the unpursued
claims and the successful claims was the specific category of the
allegedly fraudulent costs being billed.
¶ 25 Accordingly, the trial court’s decision to decline to reduce the
attorney fees award on the basis of claim segregation was not
patently erroneous or unsupported by the evidence presented at
14 trial. We conclude the trial court did not abuse its discretion. See
Payan, ¶ 16.
V. Lori Hopp’s Fees Request
¶ 26 Lori Hopp contends the trial court erred in rejecting her
argument that she was entitled to her attorney fees and costs under
sections 13-17-101 to -106 for defending against plaintiffs’
eventually unsuccessful claims against her. We disagree.
¶ 27 We review a trial court’s decision whether to award attorney
fees under section 13-17-102, C.R.S. 2017, for an abuse of
discretion. Anderson v. Pursell, 244 P.3d 1188, 1193 (Colo. 2010).
“A trial court abuses its discretion if its decision is ‘manifestly
arbitrary, unreasonable, or unfair.’” Id. at 1194 (quoting Colo. Nat’l
Bank of Denver v. Friedman, 846 P.2d 159, 167 (Colo. 1993)).
¶ 28 A trial court is authorized to award “reasonable attorney fees
against any attorney or party who has brought or defended a civil
action, either in whole or in part, that the court determines lacked
substantial justification.” § 13-17-102(2). An action lacks
substantial justification if it is “substantially frivolous, substantially
groundless, or substantially vexatious.” § 13-17-102(4).
15 ¶ 29 Lori Hopp does not contend the claims against her were
substantially vexatious or frivolous; rather, she argues that the
claims were substantially groundless. A claim is groundless “if the
allegations in the complaint, while sufficient to survive a motion to
dismiss for failure to state a claim, are not supported by any
credible evidence at trial.” Stepanek v. Delta Cty., 940 P.2d 364,
369 (Colo. 1997). A claim is also considered groundless if there is
no evidence supporting an essential element of a claim, even if there
is evidence supporting other elements. See Ranta Constr., Inc. v.
Anderson, 190 P.3d 835, 847 (Colo. App. 2008). “A losing position
is not necessarily groundless for purposes of awarding attorney
fees, nor is a claim groundless solely because the plaintiff failed to
establish a prima facie case if there is some credible evidence to
support the claim.” In re Estate of Owens, 2017 COA 53, ¶ 50.
¶ 30 When granting an award of fees under section 13-17-102(2),
the trial court must consider the factors set forth in section 13-17-
103, C.R.S. 2017, which “give context and content” to the court’s
determination whether a fee award is appropriate. Munoz v.
Measner, 247 P.3d 1031, 1034 (Colo. 2011). These include, as
relevant here,
16 (a) [t]he extent of any effort made to determine the validity of any action or claim before [it] was asserted; (b) [t]he extent of any effort made after the commencement of an action to reduce the number of claims or defenses being asserted or to dismiss claims or defenses found not to be valid within an action; (c) [t]he availability of facts to assist a party in determining the validity of a claim or defense;
...
(f) [w]hether . . . issues of fact determinative of the validity of a party’s claim or defense were reasonably in conflict; [and] (g) [t]he extent to which the party prevailed with respect to the amount of and number of claims in controversy.
§ 13-17-103(1). A trial court is required to discuss
only those factors enumerated in section 13-17-103 that
are relevant to the case, and need not make specific findings with
respect to factors that are not specifically at issue. Anderson, 244
P.3d at 1197.
¶ 31 While the trial court concluded plaintiffs failed to prove their
CCPA claim against Lori Hopp by a preponderance of the evidence,
the court explicitly noted that it “did not find that the State failed to
present any credible evidence in support of the claim.” (Emphasis
added.) It further ruled:
17 The State’s claim against Ms. Hopp arose from a rational argument based on credible evidence and law; namely, as the 85 percent owner of National Title and an active participant in the entities’ businesses through her bookkeeping and accounting services at SafeHaus Financial, Ms. Hopp approved, directed, participated, or cooperated in its conduct. Further, the longtime executive vice president of National Title identified Ms. Hopp as a person of authority.
In its order, the court cited case law indicating that a losing
position is not necessarily groundless for the purpose of awarding
attorney fees.
¶ 32 The trial court considered whether plaintiffs contemplated the
validity of their claims before the commencement of the action, and
whether their claim was rational in light of the facts available at
that time. Lori Hopp’s position within the companies affiliated with
Hopp and his law firms, as well as her hands-on role in
bookkeeping and accounting for those entities raised the question
of her knowledge of the extent of the misrepresentations made in
billing in foreclosure files that were the basis of all claims in this
action. Lori Hopp’s knowledge determined, in large part, her
liability under the CCPA. See Crowe v. Tull, 126 P.3d 196, 204
(Colo. 2006) (to establish a violation of the CCPA, a plaintiff must
18 show the defendant knowingly engaged in a deceptive trade
practice). The extent of Lori Hopp’s knowledge was a question of
fact which plaintiffs could only fully develop through the
presentation of evidence at trial. Thus, the trial court’s decision
that plaintiffs’ CCPA claim against Lori Hopp was not substantially
groundless was not manifestly arbitrary, unreasonable, or unfair.
¶ 33 Accordingly, the trial court did not abuse its discretion when it
declined to award Lori Hopp’s attorney fees.
VI. Conclusion
¶ 34 The order is affirmed.
JUDGE TAUBMAN and JUDGE HARRIS concur.