Autotech Technologies, LP v. Palmer Drives Controls and Systems, Inc.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Chief Judge Philip A. Brimmer
Civil Action No. 19-cv-00718-PAB-NRN
AUTOTECH TEHCNOLOGIES, LP, d/b/a EZAUTOMATION, an Illinois Limited
Partnership,
Plaintiff,
v.
PALMER DRIVES CONTROLS AND SYSTEMS, INC., a Colorado Corporation, and
LYNN WEBERG,
Defendants.
ORDER
This matter comes before the Court on Plaintiff’s Motion for Attorney Fees and
Interest [Docket No. 320]. On June 5, 2024, defendant Palmer Drives Controls and
Systems, Inc. (“Palmer”) filed a response. Docket No. 322.
I. 	BACKGROUND
Beginning on May 22, 2023, a five-day jury trial took place in this case. Docket
No. 298 at 1. At the conclusion of the trial, the jury found in favor of plaintiff Autotech
Technologies, LP d/b/a, EZAUTOMATION (“Autotech”). Id. Specifically, the jury found
in favor of Autotech on its claims for breach of contract, intentional interference with
prospective business relations, and breach of fiduciary duty arising from a confidential
relationship, finding that Autotech suffered damages in the amount of $195,000. Docket
No. 296 at 1-2. On July 10, 2023, Palmer filed for Chapter 11, Subchapter V,
bankruptcy. Docket No. 311. The Court administratively closed this case pending
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resolution of Palmer’s bankruptcy petition. Docket No. 314 at 2. On May 1, 2024, the
Court reopened the case upon the bankruptcy court granting Autotech’s motion for relief
from automatic stay so that it could refile its motion for attorneys’ fees. Docket No. 316.
In the present motion, Autotech requests $98,039 in attorneys’ fees for having
obtained a favorable judgment on its breach of fiduciary duty claim, as well as a
prejudgment interest award of $91,518.97 and a postjudgment interest award amount
that is to be determined. Docket No. 320 at 11. Palmer argues that Autotech is not
entitled to attorneys’ fees because it does not fall under the breach of trust exception to
the American Rule regarding attorneys’ fees. Docket No. 322 at 1–4. Even if Autotech
is entitled to attorneys’ fees, Palmer argues that the “$98,039 figure is completely
arbitrary and grossly inflated.” Id. at 4. Further, Palmer opposes an award of
prejudgment interest because it is not clear whether the damages awarded by the jury
were allocated for past, present, or future lost profits. Id. at 4–6.
II. 	ANALYSIS
A. Attorneys’ Fees for Breach of Fiduciary Duty Claim
Generally, Colorado follows the American Rule that a prevailing litigant cannot
recover an award of attorneys’ fees absent a statute, court rule, or private contract to
the contrary. 1 Bernhard v. Farmers Ins. Exch., 915 P.2d 1285, 1287 (Colo. 1996).
Colorado courts, however, have fashioned an exception to this rule in breach of trust
actions where a fiduciary holds funds in trust for the benefit of a party who is ultimately
injured by the breach. Heller v. First Nat’l Bank, 657 P.2d 992, 999 (Colo. App. 1982);
1 Both parties assume Colorado law applies to the issue of attorneys’ fees.
Moreover, Autotech’s claim for breach of fiduciary duty was brought under Colorado
state law. See Docket No. 121 at 13–18, ¶¶ 71–102.
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Buder v. Sartore, 774 P.2d 1383, 1390 (Colo. 1989). Although the exception to the
American Rule originated in breach of trust actions, Colorado courts have extended the
doctrine to breach of fiduciary duty actions. See, e.g., In re Estate of Shuler, 981 P.2d
1109, 1113 (Colo. App. 1999) (noting that a beneficiary in a breach of fiduciary duty
claim against his or her personal representative may recovery attorneys’ fees, but
declining an attorneys’ fee award); In re Conservatorship of Roth, 804 P.2d 265, 267
(Colo. App. 1990) (successful beneficiary in breach of fiduciary duty action against bank
custodian may recover attorneys’ fees). However, the breach of fiduciary duty
exception only “broadened the application of the breach of trust exception to breaches
of fiduciary duty that are closely analogous to a breach of trust.” In Int. of Delluomo v.
Cedarblade, 328 P.3d 291, 294 (Colo. App. 2014). There must be the “type of fund,
type of wrong, or type of wrongdoer at issue in Heller and Buder” for the exception to
apply and the injured party to be eligible to recover attorneys’ fees. Id.
The rationale underlying the breach of duty exception is that an award of
attorneys’ fees in a breach of duty action is necessary to make the injured party whole.
Heller, 657 P.2d at 999–1000. As the Colorado Court of Appeals noted in Moore v.
Edwards, 111 P.3d 572, 574 (Colo. App. 2005), the ability “to recoup funds
misappropriated by a fiduciary through a successful lawsuit would likely be a
meaningless exercise to a beneficiary without a rule allowing for an award of attorney
fees.”
Palmer and Autotech were partners on a project, whereby Palmer introduced the
project’s client to one of Autotech’s competitors, whose products the client ultimately
used rather than Autotech’s. Docket No. 121 at 3–11, ¶¶ 7–58. The jury found that
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Palmer breached its fiduciary duty to Autotech arising from a confidential relationship
between the Palmer and Autotech. Docket No. 296 at 1. Specifically, the jury found
that (1) Autotech had a confidential relationship with Palmer; (2) Autotech justifiably
placed trust and confidence in Palmer, or that Palmer invited, accepted, or appeared to
accept Autotech’s trust; (3) Palmer assumed a duty to represent Autotech’s interests in
the transaction at issue; (4) Palmer had a duty to represent Autotech’s interests by
reason of a confidential relationship; and (5) Palmer violated its duty, causing damage
to Autotech. Docket No. 292 at 20–21.
In Cedarblade, the defendant was a beneficiary of the plaintiff’s trust. 328 P.3d
at 292. The defendant unduly influenced the plaintiff to transfer real property from the
trust, resulting in the appointment of a guardian ad litem who sued the defendant on the
estate’s behalf for a breach of fiduciary duty. Id. at 292–93. The jury found that the
defendant breached her fiduciary duty, stemming from her confidential relationship with
the plaintiff. Id. at 293, 296. The appellate court, however, found that the defendant’s
“breach of fiduciary duty stemming from her confidential relationship with [the plaintiff]
did not closely resemble a breach of trust.” Id. at 296. In contrast to a “trustee's duty
[that] springs from the underlying legal agreement to manage property and is bounded
by the scope of that relationship . . . the duty of a confidential relation arises from
superiority and influence, is borne by the individual, is not expressly agreed upon, and
involves property only incidentally.” Id. Thus, the court reversed the ruling of the trial
court that the plaintiff was entitled to attorneys’ fees under the American Rule. Id. at
297
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Cedarblade is instructive regarding the facts of this case. Here, the jury found
that Palmer violated a fiduciary duty borne out of a confidential relationship. Docket No.
296 at 1. Although Palmer breached its fiduciary duties to Autotech by suggesting the
products of one of Autotech’s competitors to the client, Palmer did not violate a “legal
agreement to manage property.” See Cedarblade, 328 P.3d at 296. Like the defendant
in Cedarblade, Palmer “had no control over the funds until after [it] had completed [its]
wrongful act” and it “did not have a duty to manage the funds for a beneficiary who was
ultimately injured by [its] breach.” Id. at 296–297. Accordingly, the Court finds that
Autotech does not fit within an exception to the American Rule and is not entitled to
attorneys’ fees.
B. Prejudgment and Postjudgment Interest Award
Autotech requests prejudgment interest at the Colorado statutory rate of 8% per
annum compounded annually. Docket No. 320 at 10; see also Colo. Rev. Stat. § 5-12-
102(b). Palmer notes that prejudgment interest may not be awarded on future profits,
only on past profits. Docket No. 322 at 5, ¶ 11. Palmer argues that Autotech failed to
request interrogatories in the verdict form that would reflect whether that jury was
awarding past or future profits or both. Id., ¶ 13. As a result, Palmer claims that the
information in the general verdict form, which does not differentiate between past and
future profits, prevents the Court from determining whether an award of prejudgment
interest is appropriate because there is “no record upon which the Court may discern
what portion of the jury award consists of past lost profits.” Id. at 5–6, ¶ 14. Autotech
also requests a postjudgment interest award. Docket No. 320 at 11.
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“[P]rejudgment interest may not be awarded for future lost profits or earnings.”
Bennett v. Greeley Gas Co., 969 P.2d 754, 766 (Colo. App. 1998). “In the case of a
general verdict, the district court is required to make findings regarding the entitlement
to prejudgment interest, the rate of interest and the date from which interest accrues.”
Lowell Staats Mining Co. v. Pioneer Uravan, Inc., 878 F.2d 1259, 1269 (10th Cir. 1989).
While it is “incumbent on the court to keep in mind that difficulty in computation, as
opposed to impossibility of determination, does not weigh against an award of
prejudgment interest,” Harris Grp., Inc. v. Robinson, 209 P.3d 1188, 1208 (Colo. App.
2009), the plaintiff bears the burden of proving, based on uncontroverted facts, that the
damages were based on lost profits, not future lost profits, and that the jury did not
already account for prejudgment interest. Netquote, Inc. v. Byrd, No. 07-cv-00640-
DME-MEH, 2009 WL 902437, at *13 (D. Colo. Apr. 1, 2009) (applying Colorado state
law).
The jury found that Autotech suffered $195,000 in damages from Palmer’s
breach of contract, intentional interference with prospective business advantage, and
breach of fiduciary duty. Docket No. 296 at 2. The relevant jury instructions stated:
Instruction No. 16: If you find in favor of Autotech on its claim for breach of
contract . . ., then you must award it general or nominal damages . . . . Autotech
seeks general damages in the form of lost profits.
. . .
Instruction No. 17: If you find in favor of Autotech on its claim for intentional
interference with prospective business relations . . ., you must determine the total
amount of its damages, if any, that were caused by Palmer’s interference with
prospective business relations. In determining these damages, you shall
consider any economic losses that Autotech has had or probably will have in the
future, including any lost profits.
. . .
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Instruction No. 18: If you find in favor of Autotech on its claim breach of fiduciary
duty . . ., you must determine the total amount of its damages, if any, that were
caused by the breach of fiduciary duty by Palmer and/or Mr. Weberg. In
determining such damages, you shall consider any economic losses which
Autotech has had or probably will have in the future, including any lost profits
which Autotech could reasonably have expected to earn had the fiduciary duty
not been reached.
. . .
Instruction No. 21: Autotech has sued for the same damages, lost profits, on
three different claims for relief. If you find for Autotech on more than one claim
for relief, you may award it lost profit damages only once.
Docket No. 292 at 23, 25, 27, 31. Based on the jury instructions, the jury’s damages
award of $195,000 could have been based on lost profits stemming from any of
Autotech’s three claims and could have included “any economic losses that Autotech
has had or probably will have in the future,” damages for which Autotech is not entitled
to prejudgment interest. Id. at 25 (emphasis added). Therefore, Autotech fails to show
that its damages award was based on past lost profit and is entitled to prejudgment
interest. Autotech merely argues that “prejudgment [interest] begins to accrue from the
time of a breach of a contract” and that “[o]ne who is damaged by a breach of a
fiduciary duty may recover prejudgment interest from the date of the breach.’” Docket
No. 320 at 10 (quoting United Int’l Holdings, Inc. v. Wharf (Holdings) Ltd., 210 F.3d
1207, 1233 (10th Cir. 2000) (alteration omitted)). Because Autotech has not carried its
burden of proof, the Court finds that Autotech is not entitled to prejudgment interest.
Palmer does not address whether Autotech is entitled to postjudgment interest.
Docket No. 322 at 6. “The pre-judgment interest rate is set by state law, while the
postjudgment rate is set by federal law, see 28 U.S.C. § 1961(a).” Youngs v. Am.
Nutrition, Inc., 537 F.3d 1135, 1146 (10th Cir. 2008) (internal citation omitted). Thus,
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the Court finds that Autotech is entitled to postjudgment interest pursuant to 28 U.S.C.
§ 1961.
III. 	CONCLUSION
Therefore, it is
ORDERED that Plaintiff’s Motion for Attorney Fees and Interest [Docket No. 320]
is GRANTED in part and DENIED in part. It is further
ORDERED that postjudgment interest shall accrue pursuant to 28 U.S.C. § 1961.
DATED January 21, 2025.
BY THE COURT:
___________________________
PHILIP A. BRIMMER
Chief United States District Judge
___________________________
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