v. Women's Professional Rodeo Association

2021 COA 105

• Court: Colorado Court of Appeals
• Decided: August 17, 2021
• Docket: 20CA0668, Walker
• Status: Published

Opinion

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 August 5, 2021

2021COA105

No. 20CA0668, Walker v. Women’s Professional Rodeo Association — Business Organizations — Nonprofit Corporations — Business Judgment Rule

A division of the court of appeals considers whether members of a

nonprofit corporation that is a membership association are entitled

to judicial review of the corporate board’s interpretation and

application of the corporation’s internal rules. The division

concludes that, in the absence of allegations of fraud, arbitrary

conduct, or bad faith, such judicial review is barred by the business

judgment rule. The division also determines that although the

district court correctly dismissed the appellants’ claims under

C.R.C.P. 12(b)(5) and awarded mandatory attorney fees to the

appellees under section 13-17-201, C.R.S. 2020, it erred by

declining to hold a hearing on the reasonableness of such fees when such a hearing was timely requested by the appellants. COLORADO COURT OF APPEALS 2021COA105

Court of Appeals No. 20CA0668 El Paso County District Court No. 19CV32217 Honorable Thomas K. Kane, Judge

Mary Walker and Carley Cervi,

Plaintiffs-Appellants,

v.

Women’s Professional Rodeo Association, Inc.; Doreen Wintermute, in her official capacity as Chief Executive Officer; and Sheridan-Wyo-Rodeo, Incorporated,

Defendants-Appellees.

JUDGMENT AFFIRMED, ORDER AFFIRMED IN PART, REVERSED IN PART, AND CASE REMANDED WITH DIRECTIONS

Division II Opinion by JUDGE LIPINSKY Harris and Davidson*, JJ., concur

Announced August 5, 2021

Kathie Troudt Riley, P.C., Kathie Troudt Riley, Loveland, Colorado, for Plaintiffs-Appellants

Burns, Figa & Will, P.C., Dana L. Eismeier, Erik K. Schuessler, Greenwood Village, Colorado, for Defendant-Appellee Women’s Professional Rodeo Association

Mulliken Weiner Berg & Jolivet P.C., Murray I. Weiner, Colorado Springs, Colorado, for Defendant-Appellee Doreen Wintermute

Sparks Willson, P.C., Eric V. Hall, Scott W. Johnson, Colorado Springs, Colorado, for Defendant-Appellee Sheridan-Wyo-Rodeo, Incorporated *Sitting by assignment of the Chief Justice under provisions of Colo. Const. art. VI, § 5(3), and § 24-51-1105, C.R.S. 2020. ¶1 Alexis de Tocqueville’s observation about Americans’

propensity to form associations rings just as true today as it did

more than 180 years ago:

Americans of all ages, all stations in life, and all types of disposition are forever forming associations. There are not only commercial and industrial associations in which all take part, but others of a thousand different types — religious, moral, serious, futile, very general and very limited, immensely large and very minute.

Alexis de Tocqueville, Democracy in America 513 (J.P. Mayer ed.,

George Lawrence trans., Anchor Books 1969). And many of our

nation’s associations have adopted rules to govern themselves.

¶2 Although associations have long been deeply ingrained in

American culture, in this case we decide a novel issue under

Colorado law: whether members of an association — here a

nonprofit corporation — may obtain a legal remedy against the

association’s board of directors when the board allegedly violates

the association’s rules to the members’ detriment.

¶3 Plaintiffs, Mary Walker and Carley Cervi, are professional

barrel racers. Barrel racing is a timed rodeo event in which the

participant, usually a woman, must guide her galloping horse

1 through a complete circle around each of three barrels, creating a

cloverleaf pattern, and back to the starting point. Cooper v.

Comm’r, No. 16331-04S, 2005 WL 1693673, at *1 n.3 (T.C. July 21,

2005) (unpublished opinion) (not precedential pursuant to I.R.C.

§ 7463(b)).

¶4 The Women’s Professional Rodeo Association, Inc. (the WPRA),

was founded in 1948 as a Colorado nonprofit corporation for,

among other purposes, organizing female professional rodeo

contestants and setting standards for “cowgirl events.” The WPRA

adopted approximately 200 pages of rules, including rules

addressing its internal governance and the procedures at rodeo

events in which its members participate. WPRA, 2019 Official Rule

Book for the Women’s Professional Rodeo Association (Dec. 2018),

https://perma.cc/MJU8-2EAV (the Rules).

¶5 Walker and Cervi — members of the WPRA — dispute the

WPRA’s interpretation of the Rules applicable when a majority of

contestants who registered for barrel racing at a rodeo do not

compete because of dangerous arena conditions. Walker and Cervi

are two of the riders who competed in barrel racing at the Sheridan,

Wyoming, rodeo (the Rodeo) in 2019. Most of the other contestants

2 did not compete in barrel racing at the Rodeo because, the day

before the official start date of the Rodeo, the judges declared the

arena conditions dangerous as a result of heavy rains.

¶6 Walker and Cervi filed this case against the WPRA; Doreen

Wintermute in her official capacity as chief executive officer of the

WPRA; and Sheridan-Wyo-Rodeo, Incorporated (Sheridan

Incorporated), the organizer of the Rodeo, after the WPRA did not

pay Walker and Cervi the prize money to which they claim they

were entitled after they finished in first and second place,

respectively, in barrel racing conducted at the Rodeo after the arena

conditions improved. They appeal the district court’s orders

dismissing their claims for failure to state a claim upon which relief

can be granted and awarding attorney fees to the WPRA and

Wintermute without a hearing.

¶7 We affirm the district court’s entry of judgment in favor of the

WPRA, Wintermute, and Sheridan Incorporated and its ruling that

the WPRA and Wintermute are entitled to recover attorney fees.

However, we reverse the court’s award of a specific amount of

attorney fees and remand the case to the district court to conduct a

3 hearing on the reasonable amount of attorney fees awardable to the

WPRA and Wintermute.

¶8 Before we turn to the facts underlying Walker and Cervi’s

claims, we review the Rules applicable to this case.

I. The Applicable Rules

¶9 Under the Rules, a barrel racer competing at a

WPRA-sanctioned rodeo may participate in either “barrel racing

slack” or regularly scheduled performances. See Rule 12.6. The

“slack” consists of barrel races scheduled before or after the

regularly scheduled performances. Rule 12.6.1. The record

indicates that a racer cannot compete in both the “slack” and the

regularly scheduled performances.

¶ 10 Rodeo organizers offer “added money” to attract contestants to

participate in their rodeos. See Rule 10.1.6-10. The prize money

“pot” awarded to barrel racers at a rodeo consists of the

contestants’ entry fees plus any added money. In addition to prize

money, a contestant in a WPRA-sanctioned barrel race can earn

points. Rule 15. Upon reaching specified point totals, a racer

qualifies for events at future rodeos. Rule 15.1.

4 ¶ 11 The Rules provide an alternate payout system for barrel racing

contestants when a barrel race is canceled due to dangerous

conditions. Under Rule 10.9, known as the “day money” rule,

if barrel race is cancelled after some have competed due to dangerous conditions, the event may be paid off using the day money system in order not to sacrifice money won at that rodeo or event.

....

In the case of cancellation of an event . . . if half or more of the contestants competed, then all added money plus applicable entry fees are to be paid out to those contestants and points will count. If less than half compete, a prorated portion of the added money plus applicable entry fees are to be paid out and only those points will count.

Rule 10.9.1, 10.9.3. If the day money rule applies, each contestant

who competed in “barrel race,” as that term appears in the day

money rule, receives the same payout, based on the formula in the

rule, regardless of her performance. Rule 10.9.2. The day money

rule does not specify whether “barrel race” refers to a single event or

all the barrel races conducted at a rodeo.

¶ 12 The Rules also contain a grievance procedure if a WPRA

member believes the WPRA, its board of directors, or an individual

5 director violated the Rules “due to an official act or failure to act.”

Rule 1.4.2. The Rules specify that a member must submit any

grievance in writing to the WPRA’s board of directors. Id. The

board will then “determine the correctness of the grievance” at its

next regular meeting, which the complaining member may attend.

Id.

¶ 13 The Rules also contain an appeal procedure. If a member is

dissatisfied with the board’s resolution of her grievance, she may

submit a written appeal to the board. Id. As part of her appeal, she

may present any “new data or evidence” and “any new witnesses” at

the board’s next regular meeting. Id. The Rules do not specify

every procedural step applicable to grievances and appeals.

¶ 14 Significantly, the Rules grant the WPRA board discretion in

operating the organization and applying the Rules. Rule 4.1.2

states that “[t]he Board of Directors shall have discretionary power

to conduct the business and affairs of the WPRA . . . .”

II. Background Facts

¶ 15 Walker and Cervi registered to compete in WPRA-sanctioned

barrel racing at the Rodeo, scheduled for July 10 through 13, 2019.

Because the WPRA sanctioned the event, contestants could earn

6 both prize money and points. Sheridan Incorporated contributed

$12,000 in “added money” to the “pot.” Nearly 150 barrel racers

registered to compete at the Rodeo. Approximately 100 of them

were slated to race in the “slack” and forty-eight were scheduled to

race in the regularly scheduled performances. The barrel racing at

the Rodeo was to take place in an open-air arena.

¶ 16 The “slack” took place the day before the official start date of

the Rodeo. The area had experienced heavy rains that day,

however, and the arena was muddy. Before the “slack,”

approximately forty-five of the contestants announced that they

would not compete.

¶ 17 Thirty-six other contestants showed up to compete in the

“slack.” But after only three contestants rode, the arena judges

declared the ground conditions too dangerous for further racing and

canceled the “slack.”

¶ 18 The regularly scheduled performances at the Rodeo took place

over the next several days; by then, the arena conditions had

improved. Walker took first place and Cervi took second in the

7 ¶ 19 Walker and Cervi alleged that, following the cancellation of the

“slack,” a WPRA executive consulted with a Sheridan Incorporated

representative and the arena judges and decided to refund the entry

fees paid by those barrel racers who were present and prepared to

compete at the Rodeo. Walker and Cervi further allege that the

WPRA directors on the WPRA’s Competition Committee voted not to

count the points earned by the barrel racers who competed at the

Rodeo and to reduce the “added money” awardable for participation

in the Rodeo from $12,000 to $4,000. This decision affected not

only the contestants who had been prepared to race in the “slack,”

but also the contestants who competed in the regularly scheduled

performance at the Rodeo.

¶ 20 A few days after the Rodeo, the WPRA published a “Payout

Update” advising its members that, rather than the original

advertised payout, which included the $12,000 “added money,” the

barrel racers who registered for the Rodeo would each receive an

equal sum of money pursuant to the day money rule. The Payout

Update also said that any points earned at the Rodeo would not be

counted.

8 ¶ 21 Walker and Cervi alleged this was the first time they learned

they would not be receiving the payouts and points they expected to

receive for their performances at the Rodeo. Under the reduced

payouts announced in the Payout Update, Walker and Cervi each

received $571.04, rather than $4,743.24 and $3,794.59, which they

respectively would have earned if the day money rule had not

applied. Neither received points they could apply towards

qualifying for future rodeos.

¶ 22 Walker and Cervi filed a grievance with the WPRA challenging

the decisions to apply the day money rule, to refund the

contestants’ entry fees, and not to count the points they otherwise

would have earned at the Rodeo.

¶ 23 The WPRA board of directors met telephonically to consider

Walker and Cervi’s grievance. Although the board allowed Walker

and Cervi to speak at the telephonic meeting, Walker and Cervi

alleged that the board limited their presentation to thirty minutes,

the board would not allow them to record the meeting, and the

WPRA kept no record of the meeting. The Rules are silent, however,

on whether a member who speaks at a meeting regarding a

9 grievance is subject to a time limit or whether she may record the

proceedings.

¶ 24 Following the telephonic meeting, the WPRA issued a “Payout

Update — Revised,” announcing that, while the barrel racing

contestants at the Rodeo would still be paid pursuant to the day

money rule, any points earned at the Rodeo would be counted.

¶ 25 Walker and Cervi filed an appeal with the WPRA board of

directors. Walker and Cervi allege that the board told them they

would not be allowed to call witnesses at, record the proceedings at,

or bring a court reporter to the meeting. Other than the references

to presenting “new data or evidence” and “new witnesses,” Rule

1.4.2, however, the Rules do not address the procedures for

reviewing an appeal.

¶ 26 Because of these restrictions, Walker and Cervi complained

that the WPRA was denying them a meaningful appeal. The WPRA

denied the appeal.

¶ 27 Walker and Cervi then filed suit against the WPRA,

Wintermute, and other defendants not relevant to this appeal. In

their complaint, Walker and Cervi alleged that the WPRA and

Wintermute had engaged in ultra vires acts, breached their

10 fiduciary duty to Walker and Cervi, and breached a contract with

them.

¶ 28 In their complaint, Walker and Cervi sought a declaratory

judgment stating, in relevant part, that

(1) the “Rodeo was not canceled”;

(2) the “[u]se of the day money system for payouts [at the

Rodeo] was not authorized under the Rules”;

(3) Walker and Cervi were entitled to payouts of $4,743.24

and $3,794.59, respectively;

(4) Walker “was unlawfully deprived of the opportunity to

compete at the Wrangler Pro Rodeo Tour Finale”;

(5) Cervi “was entitled to compete at the Mountain States

Circuit Finals Rodeo” based on the points she would have

received for her performance at the Rodeo; and

(6) Walker and Cervi “are entitled to an award of points

corresponding to the payout to which they are entitled . . . .”

¶ 29 They further sought a mandatory injunction requiring the

WPRA to credit Walker and Cervi with those points and to publicly

announce, and specifically advise the other major rodeo-sanctioning

association of, the corrected number of points awarded to Walker

11 and Cervi. They also asked the court to appoint a receiver to

manage the WPRA’s affairs.

¶ 30 The WPRA moved to dismiss Walker and Cervi’s complaint for

failure to state a claim upon which relief can be granted pursuant

to C.R.C.P. 12(b)(5). Together with their response to the dismissal

motion, Walker and Cervi filed an amended complaint in which they

added Sheridan Incorporated as a defendant and substituted a

claim for judicial dissolution of the WPRA in place of the ultra vires

acts claim. The WPRA filed a motion to dismiss the amended

complaint.

¶ 31 Wintermute and Sheridan Incorporated also filed motions to

dismiss. Wintermute’s motion raised similar arguments to those in

the WPRA’s dismissal motions. In its motion, Sheridan

Incorporated contended that it was not subject to personal

jurisdiction in Colorado. In their dismissal motions, the WPRA and

Wintermute sought an award of their attorney fees pursuant to

section 13-17-201, C.R.S. 2020.

¶ 32 The district court granted all three motions to dismiss and

awarded $18,748.00 in attorney fees to the WPRA and $11,445.50

12 in attorney fees to Wintermute without conducting a hearing on the

reasonableness of such fees. Walker and Cervi appeal.

III. Discussion

¶ 33 Walker and Cervi assert two principal errors on appeal. First,

Walker and Cervi contend that the trial court erred by granting the

motions to dismiss. For purposes of this appeal, Walker and Cervi

challenge the court’s determinations that

(1) the WPRA did not act in an oppressive or illegal manner

in applying the day money rule or in conducting the grievance

process;

(2) the WPRA does not owe fiduciary duties to its members;

(3) a breach of contract claim against a nonprofit

corporation cannot be based solely an alleged violation of its

internal rules;

(4) Walker and Cervi did not state a claim for injunctive

relief;

(5) they did not state a claim for dissolution of the WPRA or

for appointment of a receiver;

13 (6) they did “not allege any facts that raise a reasonable

inference” that the court could exercise personal jurisdiction

over Sheridan Incorporated;

(7) Sheridan Incorporated is an indispensable party to the

litigation;

(8) Walker and Cervi’s only claims pleaded against

Wintermute were those for breach of fiduciary duty and breach

of contract;

(9) the Rules did not constitute a contract between

Wintermute and the members of the WPRA; and

(10) although Wintermute owes fiduciary duties to the WPRA,

she does not owe such duties to the individual members of the

WPRA.

¶ 34 Second, Walker and Cervi assert that the district court erred

by (1) determining that their action sounded in tort and, thus, that

the WPRA and Wintermute were entitled to an award of attorney

fees under section 13-17-201 once the court dismissed Walker and

Cervi’s claims against them; and (2) declining to hold a hearing on

the reasonableness of the WPRA’s and Wintermute’s requested

attorney fees.

14 ¶ 35 We affirm the district court’s judgment in favor of the WPRA,

Wintermute, and Sheridan Incorporated. We specifically hold that

Walker and Cervi’s claims for breach of fiduciary duty, breach of

contract, injunctive relief, and declaratory judgment are barred

under the business judgment rule. In addition, we hold that their

claim for judicial dissolution fails because they did not allege the

type of oppressive conduct necessary to obtain that drastic remedy.

We conclude, however, that, while an award of attorney fees to the

WPRA and Wintermute is mandatory under section 13-17-201, the

district court erred by awarding fees without holding a hearing on

whether such fees were reasonable. Thus, we reverse the district

court’s award of a specific amount of attorney fees to the WPRA and

Wintermute, and remand with instructions for the district court to

conduct such a hearing.

A. Standard of Review

¶ 36 We review de novo an order dismissing claims for failure to

state a claim upon which relief can be granted under C.R.C.P.

12(b)(5). See Hess v. Hobart, 2020 COA 139M-2, ¶ 11, 477 P.3d

771, 774. “In doing so, we accept all factual allegations in the

15 complaint as true, viewing them in a light most favorable to the

plaintiff.” Id.

¶ 37 In Warne v. Hall, our supreme court adopted the United States

Supreme Court’s “plausibility standard” for determining whether a

plaintiff stated a claim upon which relief can granted. 2016 CO 50,

¶ 24, 373 P.3d 588, 595 (citing Ashcroft v. Iqbal, 556 U.S. 662

(2009)). Under that test, “the factual allegations of the complaint

must be enough to raise a right to relief ‘above the speculative level,’

and provide ‘plausible grounds’” to create an inference that the

allegations are true. Id. at ¶ 9, 373 P.3d at 591 (quoting Bell Atl.

Corp. v. Twombly, 550 U.S. 544, 591 (2007)). “To survive a motion

to dismiss for failure to state a claim, a plaintiff must state a claim

for relief that is plausible (not speculative) on its face.” Hess, ¶ 11,

477 P.3d at 774. If a claim does not satisfy the “plausible grounds”

test, it must be dismissed for failure to state a claim upon which

relief can be granted. Warne, ¶ 9, 373 P.3d at 591.

B. Interpretation of the WPRA’s Rules

¶ 38 Each of Walker and Cervi’s claims against the WPRA rests on,

among other allegations, their contention that the WPRA failed to

follow or misapplied certain of the Rules — most notably, the day

16 money rule and the Rules governing grievances and appeals.

Walker and Cervi contend that the day money rule was inapplicable

to the events at the Rodeo because the “barrel race” at the Rodeo

had not been “canceled,” as some of the contestants (including

Walker and Cervi) were able to compete in the regularly scheduled

performances. Under Walker and Cervi’s reading of the day money

rule, “barrel race” is canceled only if all barrel racing at a particular

rodeo is canceled. They reason that the cancellation of the “slack”

alone does not mean that “barrel race” at the Rodeo was “canceled.”

¶ 39 As explained below, however, because Walker and Cervi’s

allegations center on the board’s interpretation and application of

certain of the Rules, and they do not allege fraud, arbitrariness, or

bad faith, a court cannot interfere with the board’s decisions.

Accordingly, we agree with the district court that Walker and Cervi’s

claims against the WPRA do not meet the plausibility standard

articulated in Warne and must be dismissed under C.R.C.P.

12(b)(5).

1. The Business Judgment Rule

¶ 40 Under the business judgment rule, “[t]he good faith acts of

directors of profit or non-profit corporations which are within the

17 powers of the corporation and within the exercise of an honest

business judgment are valid.” Rywalt v. Writer Corp., 34 Colo. App.

334, 337, 526 P.2d 316, 317 (1974). “Courts will not, at the

instance of stockholders or otherwise, interfere with or regulate the

conduct of the directors in the reasonable and honest exercise of

their judgment and duties.” Id. Because fraud, self-dealing,

unconscionability, and similar conduct are “incompatible with good

faith and the exercise of honest judgment,” the business judgment

rule does not shield the actions of directors who engage in this type

of wrongful conduct. Fletcher v. Dakota, Inc., 948 N.Y.S.2d 263,

267 (App. Div. 2012); see Rywalt, 34 Colo. App. at 337, 526 P.2d at

317 (holding that “[t]here being no evidence that the directors acted

in bad faith or in fraud,” the court would not interfere with the

board’s decision).

¶ 41 The business judgment rule rests on the “reality that courts

‘are ill equipped and infrequently called on to evaluate what are and

must be essentially business judgments.’” Curtis v. Nevens, 31 P.3d

146, 151 (Colo. 2001) (quoting Hirsch v. Jones Intercable, Inc., 984

P.2d 629, 638 (Colo. 1999)). Courts presume that a corporation’s

18 directors possess the expertise and knowledge to make business

decisions.

¶ 42 This presumption applies to voluntary membership

associations, as well as to for-profit corporations. Bloom v. Nat’l

Collegiate Athletic Ass’n, 93 P.3d 621, 624 (Colo. App. 2004)

(“Courts are reluctant to intervene, except on the most limited

grounds, in the internal affairs of voluntary associations.”). “In the

absence of some clearly arbitrary and unreasonable invasion of a

member’s rights, courts will not review the internal operation and

affairs of voluntary organizations.” Jorgensen Realty, Inc. v. Box,

701 P.2d 1256, 1258 (Colo. App. 1985); see also NAACP v. Golding,

679 A.2d 554, 561 (Md. 1996) (acknowledging that the rule “limiting

courts’ intervention in the internal disputes of unincorporated

organizations absent misconduct like fraud is in essence analogous

to the business judgment rule applicable to incorporated

organizations”).

19 2. Because Walker and Cervi Did Not Allege that the WPRA Engaged in Fraudulent or Similar Wrongful Conduct, the Courts Will Not Override the WPRA’s Interpretation and Application of the Rules

¶ 43 Walker and Cervi did not plead that the WPRA engaged in the

type of wrongful conduct that would justify disregarding the

business judgment rule and would allow a court to second-guess

the WPRA’s internal decision-making. This is particularly true

because the Rules at issue are either vague or susceptible of more

than one interpretation and choosing one interpretation over

another would favor certain members of the WPRA over other

members.

¶ 44 In weighing the consequences of the judges’ determination

that the conditions for the “slack” at the Rodeo were dangerous, the

WPRA board interpreted and applied Rules that leave room for

interpretation. Specifically, the Rules do not state whether the day

money rule applies when (1) the “slack” is canceled after some, but

not all, registered competitors have raced in it; and (2) the regularly

scheduled performance at the same rodeo then proceeds as

scheduled. More generally, the Rules do not make clear whether

“barrel race” can mean the “slack” alone or means all the barrel

20 racing conducted at a single rodeo. As noted above, the WPRA

determined that the day money rule applies when, as here, the

“slack” at a rodeo is canceled but the regularly scheduled

performances at the same rodeo proceed.

¶ 45 Similarly, the board exercised its discretion when it decided

that Walker and Cervi were not entitled to speak indefinitely about

their grievance at the board meeting, receive a record of such

proceedings, or present their appeal at a meeting of the board.

Significantly, Walker and Cervi did not allege that the WPRA

violated their due process rights by making these decisions.

¶ 46 These are archetypical examples of corporate board decisions

that courts will not second-guess under the business judgment rule

in the absence of allegations of fraud, arbitrary conduct, or bad

faith. Moreover, although Walker and Cervi pleaded that, before the

regularly scheduled performances at the Rodeo, unnamed WPRA

board members advised unnamed “select competitors” — but not

Walker and Cervi — that the WPRA would not count the points

earned at the Rodeo, such vague allegations fall short of stating the

type of wrongful conduct that would justify circumventing the

business judgment rule. Notably, Walker and Cervi do not indicate

21 who disclosed this information, to whom the information was

disclosed, or how the disclosure to the “select competitors” caused

them damages. See Grieveson v. Anderson, 538 F.3d 763, 777-78

(7th Cir. 2008) (noting that “problematic for [the plaintiff was] his

failure to tie actions of the named defendants to the injuries he

allegedly suffered”).

¶ 47 Moreover, the business judgment rule is particularly

applicable to the WPRA board’s interpretation of the day money rule

because that interpretation benefited some of its members to the

detriment of others. Had the WPRA decided not to apply the day

money rule in connection with the Rodeo, Walker and Cervi would

have benefitted through a larger payout and the WPRA members

who did not compete at the Rodeo would have received nothing and

lost their entry fees. In contrast, the WPRA’s interpretation and

application of the day money rule meant that each member who

competed in barrel racing at the Rodeo received the same payout.

Thus, numerous members of the WPRA, other than Walker and

Cervi, benefitted from the WPRA’s application of the day money

rule. The Board decided, under its reading of the day money rule,

to provide some financial recompense to those WPRA members who

22 were unable to compete at the Rodeo through no fault of their own.

Jurists whose experience with barrel racing is limited to watching

from the stands lack the expertise the WPRA possesses in deciding

the appropriate payouts to the contestants who raced at the Rodeo

and to those whose expectations were dashed when the “slack” was

canceled.

¶ 48 We also note that, when they joined the WPRA, Walker and

Cervi agreed to be bound by the Rules. See Jorgensen Realty, Inc.,

701 P.2d at 1257 (holding that, by joining a voluntary membership

organization, “a member agrees to submit to its rules and

regulations and assumes the obligations incident to membership”).

Even if the business judgment rule did not apply here, as noted

above, Rule 4.1.2 granted the WPRA board “discretionary power to

conduct the business and affairs of the WPRA . . . .” Walker and

Cervi cannot now disavow that Rule 4.1.2 grants the WPRA board

the discretion to conduct the WPRA’s business and affairs without

judicial oversight in the ordinary course of business.

¶ 49 For the above reasons, we hold that the district court correctly

concluded that Walker and Cervi’s claims for breach of fiduciary

duty, breach of contract, injunctive relief, and declaratory judgment

23 — all of which challenge the WPRA board’s interpretation of the day

money rule and the WPRA’s internal procedures — fail to meet the

plausibility standard under Warne. See Colo. Homes, Ltd. v. Loerch-

Wilson, 43 P.3d 718, 724 (Colo. App. 2001) (applying the business

judgment rule in a case involving claims for breach of contract and

breach of fiduciary duty); Rywalt, 34 Colo. App. at 337, 526 P.2d at

317 (refusing to uphold an injunction because of the business

judgment rule); Romeo v. Barrella, 921 N.Y.S.2d 83, 87-88 (App.

Div. 2011) (affirming the dismissal of declaratory judgment claims

based on the business judgment rule).

C. Judicial Dissolution of a Nonprofit Corporation

¶ 50 Although we conclude that the business judgment rule

precludes judicial review of the WPRA board’s interpretation and

application of the Rules, we separately review Walker and Cervi’s

claim for judicial dissolution of the WPRA and appointment of a

receiver to conduct its affairs. We conclude that the district court

correctly dismissed their judicial dissolution and receivership

claims because Walker and Cervi did not plead the type of wrongful

board conduct that would justify granting such drastic relief.

24 1. Applicable Law

¶ 51 Under the Colorado Revised Nonprofit Corporation Act (NCA),

a member of a nonprofit corporation may seek judicial dissolution

of the corporation if the directors “have acted, are acting, or will act

in a manner that is illegal, oppressive, or fraudulent.”

§ 7-134-301(2)(b), C.R.S. 2020.

¶ 52 Dissolution of a corporation is “a drastic remedy and [is] rarely

imposed.” Pueblo Bancorporation v. Lindoe, Inc., 37 P.3d 492, 496

(Colo. App. 2001), aff’d, 63 P.3d 353 (Colo. 2003). Walker and

Cervi do not cite to any Colorado case applying the remedy of

judicial dissolution to an entity other than a closely held

corporation. The only published Colorado cases affirming the

judicial dissolution of an entity involved closely held corporations.

See Colt v. Mt. Princeton Trout Club, Inc., 78 P.3d 1115, 1118 (Colo.

App. 2003); Polk v. Hergert Land & Cattle Co., 5 P.3d 402, 404

(Colo. App. 2000). And even in the context of a closely held

corporation, oppression “should be deemed to arise only when the

majority conduct substantially defeats expectations that, objectively

viewed, were both reasonable under the circumstances and were

25 central to the [member’s] decision to join the venture.” Colt, 78

P.3d at 1120 (citation omitted).

2. The District Court Did Not Err by Concluding that Walker and Cervi Failed to State a Claim for Judicial Dissolution

¶ 53 Having concluded that the WPRA’s interpretation and

application of the Rules receives the protection of the business

judgment rule, we consider whether Walker and Cervi’s remaining

allegations regarding the WPRA’s failure to maintain records state a

plausible claim for judicial dissolution under section

7-134-301(2)(b). Even accepting these allegations as true, we agree

with the district court that the WPRA’s alleged record-keeping

deficiencies do not justify the extreme step of the WPRA’s

dissolution.

¶ 54 More fundamentally, Walker and Cervi do not point to a single

case in which a court, based on oppressive behavior, judicially

dissolved an entity that was not a closely held corporation. All the

judicial dissolution cases they cite concerned oppressive conduct by

majority shareholders of closely held corporations that harmed

minority shareholders. See Colt, 78 P.3d at 1118; Polk, 5 P.3d at

404.

26 ¶ 55 A closely held corporation is materially different from a

nonprofit corporation that is a membership association, such as the

WPRA, because, in the former, “the relationship between directors

and shareholders is akin to a relationship among partners,” such

that the directors and majority shareholders owe heightened

fiduciary duties to the minority shareholders. Colt, 78 P.3d at

1119; see In re Kemp & Beatley, Inc., 473 N.E.2d 1173, 1178 (N.Y.

1984) (“Unlike the typical shareholder in a publicly held

corporation, who may be simply an investor or a speculator and

cares nothing for the responsibilities of management, the

shareholder in a close corporation is a co-owner of the business and

wants the privileges and powers that go with ownership.” (quoting 1

F. Hodge O’Neal, Close Corporations: Law and Practice § 1.07 (2d

ed. 1971))).

¶ 56 Walker and Cervi do not allege that the WPRA is a closely held

corporation and do not cite any legal authority in support of their

argument that the board of a membership association owes its

members the same heightened duties as the majority shareholders

of a closely held corporation owe to the minority shareholders.

27 ¶ 57 In any event, we agree with the district court that, even if the

board of directors of the WPRA owed fiduciary duties to Walker and

Cervi, and even if the board’s failure to maintain adequate corporate

records could constitute a breach of fiduciary duty, a “simple

allegation of breach of fiduciary duty is not enough to dissolve a

corporation that is not closely-held.” Walker and Cervi do not cite

to any case, from any jurisdiction, holding that a corporation’s

deficient record-keeping is grounds for judicial dissolution. See

Pueblo Bancorporation, 37 P.3d at 496 (holding that the “drastic

remedy” of judicial dissolution is not justified absent allegations of

self-dealing, conflicts of interest, misapplication or diminishing of

corporate assets, or illegal behavior).

¶ 58 Accordingly, we hold that Walker and Cervi did not plead a

plausible claim for judicial dissolution. And, because the NCA only

contemplates the appointment of a receiver in the context of a

judicial dissolution claim, see §§ 7-134-302(3), 7-134-303(1), C.R.S.

2020, we need not separately consider whether Walker and Cervi’s

receivership claim stated a claim upon which relief can be granted.

28 D. Personal Jurisdiction Over Sheridan Incorporated

¶ 59 To the extent Walker and Cervi seek unique relief from

Sheridan Incorporated, such as an award of additional added

money, we must consider whether the district court erred by

concluding that it lacked personal jurisdiction over Sheridan

Incorporated. We undertake this analysis because the business

judgment rule does not apply to Walker and Cervi’s claims against

Sheridan Incorporated. As we understand those claims, they do not

challenge Sheridan Incorporated’s internal decision-making, but,

rather, Sheridan Incorporated’s actions taken at the behest of the

WPRA board.

1. Personal Jurisdiction Under the Long Arm Statute

¶ 60 In enacting the long arm statute, § 13-1-124, C.R.S. 2020, the

Colorado General Assembly “intended to extend the jurisdiction of

our courts to the fullest extent permitted by the due process

clauses of the United States and Colorado Constitutions.” Fleet

Leasing, Inc. v. Dist. Ct., 649 P.2d 1074, 1078 (Colo. 1982). “Due

process requires that a defendant have certain minimum contacts

with the forum state so that he may foresee being answerable in

court there. The quantity and nature of the minimum contacts

29 required depends on whether the plaintiff alleges specific or general

jurisdiction.” Archangel Diamond Corp. v. Lukoil, 123 P.3d 1187,

1194 (Colo. 2005) (citation omitted).

¶ 61 Under the concept of general jurisdiction, a court may exercise

jurisdiction over a defendant “for any cause of action arising from

the defendant’s activities, even if those activities occurred outside

the forum state.” Clean Energy Collective LLC v. Borrego Solar Sys.,

Inc., 2017 CO 27, ¶ 10, 394 P.3d 1114, 1117. For a nonresident

defendant to be subject to general jurisdiction in a particular state,

the defendant’s contacts with that state must be “so ‘continuous

and systematic’ as to render [it] essentially at home in the forum

State.” Magill v. Ford Motor Co., 2016 CO 57, ¶ 17, 379 P.3d 1033,

1037 (citation omitted). This is such a high bar, however, that a

“nonresident defendant’s contacts with the state will rarely justify

exercising general jurisdiction.” Id.

¶ 62 In contrast, “[s]pecific jurisdiction is properly exercised where

the injuries triggering litigation arise out of and are related to

‘activities that are significant and purposefully directed by the

defendant at residents of the forum.’” Archangel Diamond Corp.,

123 P.3d at 1194 (quoting Keefe v. Kirschenbaum & Kirschenbaum,

30 P.C., 40 P.3d 1267, 1271 (Colo. 2002)). The specific jurisdiction

analysis requires a two-part minimum contacts inquiry: (1)

“whether the defendant purposefully availed himself of the privilege

of conducting business in the forum state,” and (2) “whether the

litigation ‘arises out of’ the defendant’s forum-related contacts.” Id.

(citation omitted). To demonstrate “purposeful availment,” the

plaintiff “must show that the defendant deliberately ‘reached out

beyond’ its home — by, for example, ‘exploi[ting] a market’ in the

forum State or entering a contractual relationship centered there.”

Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 592 U.S. ___, ___, 141

S. Ct. 1017, 1025 (2021). Under the “arising out of” prong, “the

actions of the defendant giving rise to the litigation must have

created a ‘substantial connection’ with the forum state.” Archangel

Diamond Corp., 123 P.3d at 1194 (citation omitted).

¶ 63 “When a trial court decides [a] motion [to dismiss] on

documentary evidence alone, the plaintiff need only make a prima

facie showing of personal jurisdiction by raising a reasonable

inference that the court has jurisdiction over the defendant.”

Giduck v. Niblett, 2014 COA 86, ¶ 13, 408 P.3d 856, 862. Any

31 conflicts in the evidence “must be resolved in favor of the plaintiff.”

2. The District Court Did Not Err by Finding That Walker and Cervi Did Not Raise a Reasonable Inference of Jurisdiction Over Sheridan Incorporated

¶ 64 The district court concluded that Walker and Cervi’s factual

allegations and affidavits failed to establish that the court could

exercise general or specific personal jurisdiction over Sheridan

Incorporated. Specifically, the court found that

 Sheridan Incorporated is a Wyoming nonprofit

corporation with its principal place of business in

Wyoming.

 Sheridan Incorporated “does not have a registered agent,

an office, a place of business, any assets, or any

employees in Colorado.”

 Sheridan Incorporated does not recruit Colorado

residents, directly or through an intermediary in

Colorado, for employment inside or outside of Colorado.

 Sheridan Incorporated does not directly advertise in

Colorado.

32  Sheridan Incorporated’s sole purpose is to organize and

run the Rodeo, which takes place in Wyoming.

 Sheridan Incorporated does not oversee any rodeos

outside Wyoming and does not conduct any business

outside Wyoming.

¶ 65 The court further noted that Walker and Cervi did not allege

that Sheridan Incorporated does any business in Colorado or has

any connection with Colorado other than its contract with the

WPRA concerning the Rodeo. Thus, it determined that Walker and

Cervi’s allegations did not raise a reasonable inference that it had

specific or general jurisdiction over Sheridan Incorporated.

¶ 66 Applying the first step of the minimum contacts analysis for

specific jurisdiction, a nonresident defendant is not subject to

personal jurisdiction in Colorado solely because the defendant

entered into a contract with a Colorado resident. That singular

connection, particularly in relation to an event outside Colorado,

does not establish that the nonresident “reached out beyond” its

own state to enjoy the benefits of conducting business in Colorado.

See Ford Motor Co., 592 U.S. at ___, 141 S. Ct. at 1025.

33 ¶ 67 For this reason, Walker and Cervi’s contention that Sheridan

Incorporated subjected itself to specific personal jurisdiction in

Colorado by entering into the contract with the WPRA cannot be

squared with the minimum contacts analysis. Rather, “the

defendant’s conduct [must] connect[] him to the forum in a

meaningful way,” Giduck, ¶ 16, 408 P.3d at 863 (citation omitted),

such as by intentionally targeting the forum state market and its

consumers, see Ford Motor Co., 592 U.S. at ___, 141 S. Ct. at 1025.

A “defendant’s relationship with a plaintiff or third party, standing

alone, is an insufficient basis for jurisdiction.” Giduck, ¶ 16, 408

P.3d at 863 (citation omitted).

¶ 68 Thus, we conclude that Walker and Cervi’s allegations did not

create a reasonable inference that the district court could exercise

personal jurisdiction over Sheridan Incorporated. (Because we held

above that the district court properly dismissed Walker and Cervi’s

only claims against the WPRA involving Sheridan Incorporated —

their claims for a declaratory judgment and injunctive relief — we

do not need to consider whether Sheridan Incorporated is an

indispensable party to those claims.)

34 E. Walker and Cervi’s Claims Against Wintermute Fail to State Claims Upon Which Relief Can Be Granted

¶ 69 In considering whether the district court erred by dismissing

Walker and Cervi’s claims against Wintermute individually, we

initially consider Walker and Cervi’s contention that Wintermute

admitted the allegations underlying their claims for judicial

dissolution, declaratory judgment, injunctive relief, and

appointment of a receiver by not specifically responding to them.

We agree with the district court that Wintermute was not required

to respond to these claims because they were not directed to her in

an individual capacity. Rather, Walker and Cervi’s only claims

against Wintermute individually were those for breach of fiduciary

duty and breach of contract.

¶ 70 Neither of these claims stated a claim upon which relief can be

granted against Wintermute, however. The directors and officers of

a nonprofit corporation “are not, as such, personally liable for the

acts, debts, liabilities, or obligations” of the corporation.

§ 7-126-103, C.R.S. 2020. Although there are exceptions to this

rule, Walker and Cervi did not plead that any of these exceptions —

such as the alter ego doctrine — applies here. See Krystkowiak v.

35 W.O. Brisben Cos., Inc., 90 P.3d 859, 867 n.7 (Colo. 2004). And,

under the plausibility standard, we do not assume the truth of

Walker and Cervi’s conclusory statements that Wintermute acted in

an illegal and oppressive manner and in bad faith, and that she

breached a duty of loyalty to Walker and Cervi. Scott v. Scott, 2018

COA 25, ¶ 19, 48 P.3d 626, 632 (“[F]acts pleaded as legal

conclusions (i.e., conclusory statements) are not entitled to the

assumption that they are true.”).

¶ 71 Further, to the extent Walker and Cervi allege that Wintermute

misapplied the day money rule and the Rules concerning grievances

and appeals, the business judgment rule bars such claims, as

discussed above.

F. Attorney Fees

1. Mandatory Fee Awards Under Section 13-17-201

¶ 72 “Whether a statute mandates an award of costs or attorney

fees is a question of statutory interpretation and is thus a question

of law we review de novo.” Crandall v. City of Denver, 238 P.3d 659,

661 (Colo. 2010).

36 a. The Applicability of Section 13-17-201

¶ 73 Under section 13-17-201, an award of attorney fees to the

defendant is mandatory whenever a trial court dismisses a tort

action. § 13-17-201; Kreft v. Adolph Coors Co., 170 P.3d 854, 859

(Colo. App. 2007). “When a plaintiff has pleaded both tort and

non-tort claims, a court must determine, as a matter of law,

whether the essence of the action was one in tort, in order to

ascertain if section 13-17-201 applies.” Castro v. Lintz, 2014 COA

91, ¶ 16, 338 P.3d 1063, 1068.

¶ 74 In making this determination the court should

first apply the “predominance” test, assessing whether the “essence of the action” is tortious in nature (whether quantitatively by simple number of claims or based on a more qualitative view of the relative importance of the claims) or not. The Court would then turn to the question of whether tort claims were asserted to unlock additional remedies only where the predominance test failed to yield a clear answer, such as when the tort- and non-tort claims are equal in number or significance.

Gagne v. Gagne, 2014 COA 127, ¶ 84, 338 P.3d 1152, 1168. “[T]he

court should rely on the pleading party’s characterization of its

37 claims and should not consider what the party should or might

have pleaded.” Id. at ¶ 81, 338 P.3d at 1167.

b. Because Walker and Cervi’s Claims Against the WPRA and Wintermute Sound in Tort, the District Court Did Not Err by Applying Section 13-17-201

¶ 75 In its order awarding attorney fees to the WPRA and

Wintermute, the district court found that Walker and Cervi’s breach

of fiduciary allegations were “the essence” of their claims against

the WPRA and Wintermute. Because a breach of fiduciary duty

claim sounds in tort, Resol. Tr. Corp. v. Heiserman, 898 P.2d 1049,

1056 (Colo. 1995), the court reasoned that the WPRA and

Wintermute were entitled to an award of their attorney fees and

costs under section 13-17-201 upon the dismissal of all of Walker

and Cervi’s claims against them. We agree with the district court’s

conclusion.

¶ 76 According to Gagne, in determining whether the essence of

Walker and Cervi’s claims is in tort, we begin by evaluating the

number and type of claims they asserted against the WPRA and

Wintermute. We initially note that Walker and Cervi’s claims for

dissolution of the WPRA and appointment of a receiver are based on

their allegations that the WPRA and Wintermute breached their

38 alleged fiduciary duties to Walker and Cervi and engaged in

oppressive behavior. These claims sound in tort, regardless of how

Walker and Cervi characterize them.

¶ 77 Thus, together with the separate claim for breach of fiduciary

duty, the amended complaint contains three claims sounding in

tort. See Resol. Tr. Corp., 898 P.2d at 1056. The amended

complaint contains an equal number of tort and non-tort claims

because Walker and Cervi also asserted three non-tort claims —

their breach of contract, injunctive relief, and declaratory judgment

claims.

¶ 78 In this first step of the section 13-17-201 analysis, we may

also consider the “relative importance of the claims.” Gagne, ¶ 84,

338 P.3d at 1168 (citation omitted). Significantly, Walker and Cervi

acknowledge that all their claims and all the relief they sought

rested on the same allegations — that the WPRA and Wintermute

engaged in wrongful conduct by reducing the prize money

awardable to Walker and Cervi for their performances at the Rodeo.

As described above, these allegations sound in tort.

¶ 79 Further, even if the first step of the Gagne analysis does not

establish the essence of Walker and Cervi’s claims, through their

39 breach of fiduciary duty, dissolution, and receivership claims, they

attempted “to obtain relief beyond what was available solely under”

their non-tort claims. Crow v. Penrose-St. Francis Healthcare Sys.,

262 P.3d 991, 997 (Colo. App. 2011). Walker and Cervi pleaded

those claims to “unlock additional remedies,” including the

appointment of a receiver to supplant the WPRA’s board and the

most drastic possible remedy against a corporation — its

destruction through judicial dissolution. It is too late for Walker

and Cervi to contend that the essence of the case was merely their

claim for money damages premised on the WPRA’s alleged breach of

contract.

¶ 80 For these reasons, we agree with the district court that Walker

and Cervi’s action sounds in tort and, under section 13-17-201, the

WPRA and Wintermute are entitled to an award of their attorney

fees.

2. Hearing on Attorney Fees

a. When a Hearing on Attorney Fees Is Required

¶ 81 “If a party requests a hearing concerning an award of fees, the

trial court must hold a hearing.” Shyanne Props., LLC v. Torp, 210

P.3d 490, 493 (Colo. App. 2009); see C.R.C.P. 121, § 1-22(2)(c)

40 (“When required to do so by law, the court shall grant a party’s

timely request for a hearing.”). “When a hearing is requested to

determine the reasonableness and necessity of attorney fees, due

process requires that the trial court hold such a hearing.” Roberts

v. Adams, 47 P.3d 690, 700 (Colo. App. 2001); cf. Hendricks v.

Allied Waste Transp., Inc., 2012 COA 88, ¶ 36, 282 P.3d 520, 527

(holding that “a bare statement” that the fees at issue are

unreasonable does not entitle the party to a hearing).

b. The District Court Erred by Declining to Hold a Hearing on the WPRA’s and Wintermute’s Requests for Attorney Fees

¶ 82 We disagree with the district court’s conclusion that a hearing

on attorney fees was not necessary. Walker and Cervi timely

requested a hearing on the WPRA’s and Wintermute’s requests for

attorney fees and challenged the reasonableness of the amount of

the requested fees. Specifically, Walker and Cervi raised factual

issues concerning Wintermute’s attorney fees request, such as

whether Wintermute incurred attorney fees herself and whether

Wintermute was seeking to recover attorney fees attributable to

work for the WPRA or claims not applicable to Wintermute.

Because, in opposing the WPRA’s and Wintermute’s fee request,

41 Walker and Cervi made a timely request for a hearing supported by

more than a bare statement that the requested fees were

unreasonable, we hold that the district court erred by declining to

grant their request for a hearing on the reasonableness of the

requested attorney fees.

¶ 83 The WPRA argues that Walker and Cervi were not entitled to a

hearing because they did not submit an expert’s affidavit together

with their request for a hearing. We are not persuaded. Aside from

timeliness, C.R.C.P. 121, section 1-22(c) does not mention any

specific requirements for obtaining a hearing on the reasonableness

of attorney fees. The WPRA does not point us to any legal authority

for limiting hearings on fees to situations in which the nonmoving

party submitted an expert’s affidavit.

¶ 84 Even though C.R.C.P. 121, section 1-22(2)(b) states that an

attorney fee motion “shall be accompanied by any supporting

documentation,” including a fee agreement, this language does not

require that “a written fee agreement or other materials evidencing

the fee agreement . . . accompany a motion for attorney fees and

costs,” Nesbitt v. Scott, 2019 COA 154, ¶¶ 24-25, 30, 457 P.3d 134,

138-39. If such expressly listed documentary support is not

42 required to file an attorney fee motion, they are surely not required

to obtain a hearing on the motion. Moreover, such a requirement

would be inconsistent with the requesting party’s burden to “prove

and establish the reasonableness of each dollar, each hour, above

zero.” Payan v. Nash Finch Co., 2012 COA 135M, ¶ 35, 310 P.3d

212, 219 (quoting Mares v. Credit Bureau, 801 F.2d 1197, 1210

(10th Cir. 1986)). Thus, we conclude that the language of C.R.C.P.

121, section 1-22(2)(b) does not support the WPRA and

Wintermute’s contention that a request for a hearing on the

reasonableness of attorney fees requires supporting documentation

such as an expert’s affidavit.

¶ 85 Finally, although the WPRA and Wintermute contend that the

district court did not abuse its discretion by declining to hold a

hearing “in the midst of the Coronavirus pandemic,” the court did

not cite the pandemic as a reason for not conducting the hearing.

¶ 86 Thus, we hold that the court erred by not granting Walker and

Cervi’s request for hearing on the reasonableness of the WPRA’s

and Wintermute’s requested attorney fees.

43 IV. Appellate Attorney Fees

¶ 87 The WPRA, Wintermute, and Sheridan request the award of

their appellate attorney fees. Because we conclude that the district

court properly dismissed Walker and Cervi’s claims against each

party under C.R.C.P. 12(b), “we must award attorney fees for

successfully defending an appeal of those dismissed claims” under

section 13-17-201. Duke v. Gunnison Cnty. Sheriff’s Off., 2019 COA

170, ¶¶ 42-44, 456 P.3d 38, 46.

V. Conclusion

¶ 88 The judgment in favor of the WPRA, Wintermute, and Sheridan

Incorporated, and the district court’s ruling that the WPRA and

Wintermute are entitled to attorney fees, are affirmed. The WPRA,

Wintermute, and Sheridan are awarded their reasonable attorney

fees on appeal. The district court’s award of a specific amount of

attorney fees to the WPRA and to Wintermute is reversed. The case

is remanded for the district court to hold a hearing on the amount

of the WPRA’s and Wintermute’s reasonable attorney fees though

this appeal and on the amount of Sheridan’s reasonable attorney

fees on appeal.

JUDGE HARRIS and JUDGE DAVIDSON concur.