Under Colorado law, an action for misappropriation of a trade secret must be commenced within "three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered." C.R.S. sec. 7-74-107. Further, "a continuing misappropriation constitutes a single claim." Id.
In a newly published case, the Colorado Court of Appeals was faced with the following question with respect to accrual of this statute of limitations: "Where a plaintiff alleges more than one misappropriation of a trade secret or related trade secrets by the same party, is there a single accrual date coinciding with the first misappropriation, or are there separate accrual dates coinciding with the dates of each misappropriation?" Gognat v. Ellsworth, Case Nos. 08CA1158 & 08CA1745 (Colo App., Sept. 17, 2009). The Court held that the statute provides for a single accrual date where there are multiple misappropriations of a single trade secret or of multiple, related trade secrets, and not separate accrual dates for each of the misappropriations. The Court reasoned that the statutes explicit rejection of the "continuing violation" theory "evidences a clear legislative intent that multiple misrepresentations by the same party be treated as 'a single claim' for accrual purposes." Id.
In the Gognat case, the plantiff alleged that the defendants misappropriated a method for identifying and developing oil and natural gas reserves in western Kentucky. Shortly after acquiring this information from the plaintiff, the defendants began acquiring leases in a particular area in western Kentucky, referred to in the case as the "first area." Some time later, the defendants began acquiring leases in a different area in western Kentucky, referred to as the "second area." The Court concluded that the plaintiff had knowledge of the leases in the first area in or before 1999, and despite the fact that the plaintiff alleged to have become aware of the leases in the second area in 2005, the statute of limitations as to all claims of misappropriation accrued from the earlier date. Therefore, because the plaintiff's action was commenced in 2005, well after expiration of the three-year statute of limitations, the Court upheld the trial court's dismissal of the misappropriation claims based on the statute of limitations.
Posted By: Brent W. Houston, Esq.
Thursday, September 17, 2009
Tuesday, September 15, 2009
TEXAS S. CT. HOLDS THAT VIOLATING "AS SOON AS PRACTICABLE" CLAIM NOTICE REQUIREMENT IN D&O POLICY DOES NOT VOID COVERAGE
On March 27, 2009, the Texas Supreme Court issued a major ruling dealing with policy language applicable to many directors and officers’ liability insurance contracts. Many directors and officers (“D&O”) liability insurance contracts contain a requirement that the insurer must give written notice of any claim made during the policy period (or some related time period) “as soon as practicable”. Many policies refer to this “notice of claim” provision as a condition precedent to the insured’s rights under the policy. Normally, “conditions precedent” are events which must occur in order for a party’s rights to come into being.
Despite similar language in the policy at issue before the Texas Supreme Court, that court held in Prodigy Communications Corp. v. Agricultural Excess & Surplus Insurance Company, 52 Tex.Sup.Ct.J. 475 in favor of an insured who waited more than a year to report a claim. The parties admitted that the claim was not reported “as soon as practicable”. However, the Texas Supreme Court held that in the absence of prejudice to the insurer, “a claim which was reported within a claims cutoff period established in a claims-made policy was timely, even though it was not reported as soon as practicable.”
The Texas court reasoned that in claims-made policies, a notice provision requiring that a claim be reported to the insurer during the policy period defines the scope of coverage and failure can thus prevent coverage. The court reasoned that by this means a policy provides a certain date after which an insurer knows it is no longer liable under the policy. In contrast, a provision that a claim be reported “as soon as practicable” affects the insured’s duty to cooperate in assisting the insurer to investigate, set reserves, and participate in negotiations with the party asserting the claim against the insured. Thus, unless the insurer is prejudiced by notice which is not made as soon as practicable, there is no reason to negate coverage for late but non-prejudicial notice.
It is important to note that this holding deals with claims-made policies, not occurrence policies. Claims-made policy state that coverage is afforded during the policy period for claims made during the policy period. Thus, coverage is retroactive to dates before the policy period but not prospective coverage. In contrast, an occurrence policy provides unlimited prospective coverage, and no retroactive coverage. Most D&O policies and professional malpractice policies are claims-made policies, while CGL (commercial general liability) policies are occurrence policies.
In 2001, the Colorado Supreme Court adopted the notice-prejudice rule in Colorado as it applies to uninsured motorist (UIM) cases. In a lengthy opinion, the Colorado Supreme Court analyzed the evolution of the notice-prejudice rule throughout the country. In changing the rule the court observed that Colorado was one of only two states whose supreme court had considered the issue within the past twenty (20) years and not required a showing of prejudice to void coverage where notice is given late. The Colorado court observed that an insurer is prejudiced by delayed notice only when this delay compromises its ability to investigate or defend the claim. Clementi v. Nationwide Mutual Fire Insurance Company, 16 P.3d 223 (Colo. 2001). Under the Clementi rule, courts use a two-step process in late notice cases. First the courts determine whether the notice was untimely and the delay unreasonable. Second they determine whether the delay prejudiced the insurer. The insurer has the burden of proving it was prejudiced.
In 2005 the Colorado Supreme Court held that the notice-prejudice rule applies to liability policies as well. See Friedland v. Travelers Indemnity Co., 105 P.3d 639 (2005). Friedland dealt with a notice that was given after the insured had defended and settled its liability case. For such post-settlement notice cases, the court adopted a presumption of prejudice in favor of the insurer, placing the burden on the insured to show that the late notice did not prejudice the insurer.
Presumably, the Colorado Supreme Court would apply the notice-prejudice rule to a directors and officers’ liability policy, following Friedland. See, e.g., Board of Directors, Metro Wastewater Reclamation District v. National Union Fire Insurance Company of Pittsburg, PA, 105 P.3d 653 (Colo. 2005) (case sought advisory opinion and did not present actual case or controversy, where Wastewater Reclamation District had solicited a policy but had no intent of entering into it and filed case to obtain a declaratory judgment for future guidance).
Posted By: Wesley B. Howard, Esq.
Despite similar language in the policy at issue before the Texas Supreme Court, that court held in Prodigy Communications Corp. v. Agricultural Excess & Surplus Insurance Company, 52 Tex.Sup.Ct.J. 475 in favor of an insured who waited more than a year to report a claim. The parties admitted that the claim was not reported “as soon as practicable”. However, the Texas Supreme Court held that in the absence of prejudice to the insurer, “a claim which was reported within a claims cutoff period established in a claims-made policy was timely, even though it was not reported as soon as practicable.”
The Texas court reasoned that in claims-made policies, a notice provision requiring that a claim be reported to the insurer during the policy period defines the scope of coverage and failure can thus prevent coverage. The court reasoned that by this means a policy provides a certain date after which an insurer knows it is no longer liable under the policy. In contrast, a provision that a claim be reported “as soon as practicable” affects the insured’s duty to cooperate in assisting the insurer to investigate, set reserves, and participate in negotiations with the party asserting the claim against the insured. Thus, unless the insurer is prejudiced by notice which is not made as soon as practicable, there is no reason to negate coverage for late but non-prejudicial notice.
It is important to note that this holding deals with claims-made policies, not occurrence policies. Claims-made policy state that coverage is afforded during the policy period for claims made during the policy period. Thus, coverage is retroactive to dates before the policy period but not prospective coverage. In contrast, an occurrence policy provides unlimited prospective coverage, and no retroactive coverage. Most D&O policies and professional malpractice policies are claims-made policies, while CGL (commercial general liability) policies are occurrence policies.
In 2001, the Colorado Supreme Court adopted the notice-prejudice rule in Colorado as it applies to uninsured motorist (UIM) cases. In a lengthy opinion, the Colorado Supreme Court analyzed the evolution of the notice-prejudice rule throughout the country. In changing the rule the court observed that Colorado was one of only two states whose supreme court had considered the issue within the past twenty (20) years and not required a showing of prejudice to void coverage where notice is given late. The Colorado court observed that an insurer is prejudiced by delayed notice only when this delay compromises its ability to investigate or defend the claim. Clementi v. Nationwide Mutual Fire Insurance Company, 16 P.3d 223 (Colo. 2001). Under the Clementi rule, courts use a two-step process in late notice cases. First the courts determine whether the notice was untimely and the delay unreasonable. Second they determine whether the delay prejudiced the insurer. The insurer has the burden of proving it was prejudiced.
In 2005 the Colorado Supreme Court held that the notice-prejudice rule applies to liability policies as well. See Friedland v. Travelers Indemnity Co., 105 P.3d 639 (2005). Friedland dealt with a notice that was given after the insured had defended and settled its liability case. For such post-settlement notice cases, the court adopted a presumption of prejudice in favor of the insurer, placing the burden on the insured to show that the late notice did not prejudice the insurer.
Presumably, the Colorado Supreme Court would apply the notice-prejudice rule to a directors and officers’ liability policy, following Friedland. See, e.g., Board of Directors, Metro Wastewater Reclamation District v. National Union Fire Insurance Company of Pittsburg, PA, 105 P.3d 653 (Colo. 2005) (case sought advisory opinion and did not present actual case or controversy, where Wastewater Reclamation District had solicited a policy but had no intent of entering into it and filed case to obtain a declaratory judgment for future guidance).
Posted By: Wesley B. Howard, Esq.
Thursday, September 3, 2009
Assignability of Attorneys Fees Claim Under Colorado Law
The Colorado Court of Appeals rules that an attorneys' fees claim is assignable as a matter of law. Regency Realty Investors, LLC, v. Cleary Fire Protection, Inc. (Colo. Ct. App. No. 08CA1650, Sept. 3, 2009). The appeal concerned the assignability of a claim under an attorneys' fees shifting clause in a contract, a previously unresolved issue in Colorado. Typically, an attorneys' fees shifting clause provides that the prevailing party in an action between the contracting parties is entitled to an award of attorneys' fees.
In general, a claim is assignable under Colorado law if it "survives the death of the person originally entitled to assert the claim," and the claim does not arise from a matter of "personal trust or confidence, or personal services." Kruse v. McKenna, 178 P.3d 1198, 1200 (Colo. 2008); Roberts v. Holland & Hart, 857 P.2d 492, 495 (Colo. App. 1993). Under Colorado law, only claims for libel and slander do not survive a persons death. C.R.S. sec. 13-20-101(1).
In Regency, the Court reasoned that an attorneys' fee claim is not a matter of personal trust or confidence (e.g. a legal malpractice claim) and is not a claim for specific performance of personal services, and therefore conluded that a claim for attorneys' fees is assignable under Colorado law.
Posted By: Brent W. Houston, Esq.
In general, a claim is assignable under Colorado law if it "survives the death of the person originally entitled to assert the claim," and the claim does not arise from a matter of "personal trust or confidence, or personal services." Kruse v. McKenna, 178 P.3d 1198, 1200 (Colo. 2008); Roberts v. Holland & Hart, 857 P.2d 492, 495 (Colo. App. 1993). Under Colorado law, only claims for libel and slander do not survive a persons death. C.R.S. sec. 13-20-101(1).
In Regency, the Court reasoned that an attorneys' fee claim is not a matter of personal trust or confidence (e.g. a legal malpractice claim) and is not a claim for specific performance of personal services, and therefore conluded that a claim for attorneys' fees is assignable under Colorado law.
Posted By: Brent W. Houston, Esq.
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