UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

_________________________________ 

RICE’S LUCKY CLOVER HONEY, 

LLC., a Colorado limited liability 

company, 

 Plaintiff/Counterclaim 

 Defendant - Appellant, 

v. 

JAMIE HAWLEY, an individual 

 Defendant/Counterclaimant - 

 Appellee. 

No. 16-1186 

(D.C. No. 1:14-CV-00402-RPM) 

(D. Colo.) 

_________________________________ 

ORDER AND JUDGMENT*

_________________________________ 

Before BACHARACH, PHILLIPS, and McHUGH, Circuit Judges.

_________________________________ 

This appeal grew out of a confusing contract between a honey 

business (Rice’s Lucky Clover Honey, LLC) and its president (Mr. Jamie 

Hawley). Both parties sued one another for breach of contract, with Rice 

Honey also suing for breach of fiduciary duty.1

 

 *

 This order and judgment does not constitute binding precedent except 

under the doctrines of law of the case, res judicata, and collateral estoppel. 

But the order and judgment may be cited for its persuasive value under 

Fed. R. App. P. 32.1(a) and Tenth Cir. R. 32.1(A). 

1

 Rice Honey also asserted a claim for a declaratory judgment, but this 

claim is not involved in the appeal. 

FILED 

United States Court of Appeals

Tenth Circuit 

August 15, 2017

Elisabeth A. Shumaker 

Clerk of Court
2

The district court awarded judgment as a matter of law to Mr. 

Hawley on Rice Honey’s claims for breach of contract and breach of 

fiduciary duty. These rulings were correct. 

The district court also awarded judgment as a matter of law to Mr. 

Hawley on his counterclaim for breach of contract. In our view, the district 

court should have let the jury decide this claim. Accordingly, we reverse 

the judgment for Mr. Hawley on his counterclaim for breach of contract. In 

connection with this counterclaim, the district court also held as a matter 

of law that a liquidated-damages clause was enforceable. Under state law, 

the enforceability of this clause should have been left for the jury to 

decide. 

I. Background 

The parties negotiated over the contract terms and exchanged 

multiple drafts. Rice Honey wanted to hire Mr. Hawley for one year and 

see how the relationship worked before deciding whether to continue. Mr. 

Hawley wanted a term longer than one year. 

Rice Honey proposed a contract with a one-year term that could be 

renewed for up to three years. Mr. Hawley changed the language without 

alerting Rice Honey to the change. Rice Honey signed, thinking that it was 

signing its latest version. Rice Honey was wrong; the written contract 

contained indicia reflecting the wishes of both parties: 
3

[Mr.] Hawley’s term of employment under this 

Agreement (such term of employment, as it may be extended or 

terminated, is herein referred to as the “Employment Term”) 

shall be for a term commencing on the Effective Date and, 

unless terminated earlier as provided in Section 5 hereof, 

ending on the third anniversary of the Effective Date (the 

“Original Employment Term”) one (1) year period; unless, at 

least sixty (60) days prior to the end of the original 

employment term Rice [Honey] or [Mr.] Hawley has notified 

the other in writing that the Employment Term shall terminate 

at the end of that current term. If not so terminated, then the 

Employment Term shall be automatically extended, subject to 

earlier termination as provided in Section 5 hereof, for an 

additional two (2) year period (the “Additional Terms”). 

Appellant’s App’x, vol. V, at 846 (emphasis added). In one place, the 

contract stated that the employment term would end on “the third 

anniversary of the [e]ffective [d]ate.” Id. In the same sentence, however, 

the contract stated that the employment term would be a “one (1) year 

period.” Id.

Rice Honey soon became disenchanted with Mr. Hawley and notified 

him that the employment would not be renewed after one year. Mr. Hawley 

viewed this notification as a premature termination, theorizing that the 

base term was three years rather than one year. This disagreement led to 

the litigation. 

After Rice Honey presented its trial evidence, Mr. Hawley moved for 

judgment as a matter of law on Rice Honey’s claims. The district court 

granted the motion, awarding judgment to Mr. Hawley not only on Rice 

Honey’s claims but also on the counterclaim. On the counterclaim, the 
4

court awarded Mr. Hawley $412,000 ($250,000 for liquidated damages and 

$162,000 for actual damages). In these rulings, the court held for the first 

time that even if the contract had only a one-year term, Rice Honey would 

be obligated to pay the amount specified in the contract for a termination 

without cause. Rice Honey appealed. 

II. Standard of Review and the Applicable Substantive Law 

We engage in de novo review of a district court’s grant of judgment 

as a matter of law, applying the same legal standards that governed in 

district court. Elm Ridge Expl. Co. v. Engle, 721 F.3d 1199, 1216 (10th 

Cir. 2013). Under these standards, we can uphold the district court’s ruling 

only if all of the evidence points one way and precludes a reasonable 

inference supporting Rice Honey. See id.

In this diversity case, we consider the evidence based on Colorado’s 

substantive law. See McKissick v. Yuen, 618 F.3d 1177, 1184 (10th Cir. 

2010).2

 In defining Colorado’s substantive law, we are guided primarily by 

the opinions of the Colorado Supreme Court. Belnap v. Iasis Healthcare, 

844 F.3d 1272, 1294 (10th Cir. 2017). 

III. Rice Honey’s Claim for Breach of Contract 

Rice Honey argues that its contract claim should have been submitted 

to the jury. For this argument, Rice Honey theorizes that 

 2

 The parties agree on the applicability of Colorado’s substantive law.
5

 the jury could conclude that there was no meeting of the minds 

and 

 the contract was ambiguous. 

But these theories would not create a jury question on Rice Honey’s 

contract claim. 

 In district court, Rice Honey had based its contract claim on Mr. 

Hawley’s continued work for Liberty Institute, false representations to 

Walmart and Sam’s Club, and dishonest and disloyal conduct. But Rice 

Honey’s appellate arguments would not support these theories of liability. 

For example, in defending its contract claim, Rice Honey argues that the 

jury could have found that there was no meeting of the minds. But if there 

was no meeting of the minds, Rice Honey could not have prevailed on its 

contract claim. Similarly, Rice Honey argues that the alleged contract was 

ambiguous regarding the duration of the employment term and the effect of 

the “termination without cause” provision. But ambiguity of those terms 

would not have affected the viability of Rice Honey’s contract claim. In 

the absence of any other pertinent argument, we affirm the district court’s 

award of judgment as a matter of law to Mr. Hawley on Rice Honey’s 

contract claim. 

IV. Rice Honey’s Claim for Breach of Fiduciary Duty 

The district court also properly granted judgment as a matter of law 

to Mr. Hawley on Rice Honey’s claim for breach of fiduciary duty. 
6

A. Rice Honey had to establish four elements. 

On this claim, Rice Honey needed to show that (1) Mr. Hawley had 

acted as a fiduciary, (2) Mr. Hawley had breached a fiduciary duty, 

(3) Rice Honey had incurred damages, and (4) these damages had been 

caused by Mr. Hawley’s breach of a fiduciary duty. See Rupert v. Clayton 

Brokerage Co., 737 P.2d 1106, 1109-1100 (Colo. 1987) (en banc). 

B. Rice Honey alleges two theories of breach of fiduciary duty. 

Rice Honey alleges two theories of how Mr. Hawley breached a 

fiduciary duty: (1) by making material misrepresentations to Walmart and 

Sam’s Club, and (2) by continuing to work for Liberty after December 31, 

2012. 

C. The evidence did not support liability for breach of 

fiduciary duty based on Mr. Hawley’s alleged 

misrepresentations to Walmart and Sam’s Club. 

The first theory involves Mr. Hawley’s alleged misrepresentations to 

Walmart and Sam’s Club. This theory fails as a matter of law based on the 

absence of any resulting damages. 

The alleged misrepresentations appeared in a letter from Mr. Hawley 

to Walmart and Sam’s Club: “After an extensive review by an outside firm 

regarding our pricing and terms to existing customers in like classes of 

trade, it was brought to our attention that we are in violation of the federal 

law passed in 1936 to outlaw price discrimination.” Appellant’s App’x, 
7

vol. V, at 898.3

 Rice Honey presented evidence that this statement was 

false because there had not been an outside review of pricing. For the sake 

of argument, we may assume without deciding that Mr. Hawley acted as a 

fiduciary and that this misrepresentation breached a fiduciary duty to Rice 

Honey. Even with that assumption, this theory would fail as a matter of 

law because Rice Honey did not incur any damages. 

Under Colorado law, Rice Honey must prove “the fact of damages or 

injury” with “a reasonable degree of persuasiveness.” W. Cities Broad., 

Inc. v. Schueller, 849 P.2d 44, 48 (Colo. 1993) (en banc). This proof must 

go “beyond a mere possibility or speculation.” Gibbons v. Ludlow, 304 

P.3d 239, 246 (Colo. 2013) (en banc). Generalized opinions regarding lost 

sales are insufficient in the absence of an explanation. See Roberts v. 

Holland & Hart, 857 P.2d 492, 497 (Colo. App. 1993) (holding that an 

affiant’s projection of net profit was too speculative without an 

explanation for how the total had been calculated). 

At trial, the vice-president of operations for Rice Honey testified that 

there had been no injury from Mr. Hawley’s misrepresentations: 

Q. Let’s move down a little further. Did he--here’s the next 

question. It says here on Item B, “Intentionally engaged 

 3

 Rice Honey also alleges that Mr. Hawley engaged in other “actions 

and omissions that . . . caused [Rice Honey] to lose substantial sales at 

their biggest customer, WalMart/Sam’s Club.” Appellant’s Opening Br. 

at 12. But Rice Honey makes no further reference to other alleged actions 

and omissions. 
8

in conduct which is demonstrably and materially injurious 

to Rice.” Okay. Then it goes into various conditions and 

so forth like this, talking about fraud or dishonesty or 

theft against Rice, okay. And your testimony earlier, sir, 

had to do with this Robinson/Patmen [sic] communication 

on the pricing. And the question I have for you is: was 

there a demonstrable and material injury for Rice? 

A. No, sir. 

Q. Did you lose any sales because of that? 

A. No, sir. 

Q. Did you lose any profits? 

A. No, sir. 

Q. Okay. Did you lose a customer? 

A. No, sir. 

Q. Okay. So there really was no injury there, was there? 

A. You’re correct. 

Appellant’s App’x, vol. IV, at 593; see also id. at 562-63 (similar 

testimony by the same individual).4

 

The only contrary evidence consisted of testimony by a co-owner of 

Rice Honey, who expressed a thought or feeling that the company had 

incurred damages. The co-owner’s thought or feeling regarding lost sales 

constitutes speculation, which is insufficient under Colorado law to prove 

 4

 Rice Honey points out that this individual also testified regarding 

lost sales in 400 Walmart stores. But Rice Honey did not present any 

evidence tying the lost sales to Mr. Hawley’s alleged misrepresentations. 
9

the fact of damages. See Nevin v. Bates, 347 P.2d 776, 777-78 (Colo. 

1959). 

Considering the testimony in the light most favorable to Rice Honey, 

we conclude that no reasonable jury could have found damages from Mr. 

Hawley’s alleged misrepresentations to Walmart and Sam’s Club. Thus, 

Rice Honey’s first theory fails as a matter of law. 

D. The economic-loss rule prevents recovery for breach of 

fiduciary duty on Rice Honey’s second theory. 

Rice Honey’s second theory is based on Mr. Hawley’s alleged work 

for Liberty after December 31, 2012. At that point, Mr. Hawley was 

serving as the president of Rice Honey. For the sake of argument, we may 

assume without deciding that Rice Honey has satisfied each of the four 

elements for this theory. Nonetheless, this theory would fail as a matter of 

law under Colorado’s economic-loss rule. 

The economic-loss rule allows a tort recovery only if the underlying 

duty is independent of a duty arising out of a contract. See Haynes Trane 

Serv. Agency, Inc. v. Am. Standard, Inc., 573 F.3d 947, 962 (10th Cir. 

2009) (applying Colorado law); Town of Alma v. AZCO Constr., Inc., 

10 P.3d 1256, 1262-63 (Colo. 2000) (en banc). Here the alleged duty to 

stop working for Liberty was directly tied to the underlying contract. 

In district court, Mr. Hawley did not invoke the economic-loss rule. 

Thus, the threshold issue is whether we can consider Mr. Hawley’s newly 
10

presented argument as an alternative basis to affirm the ruling. We enjoy 

discretion to affirm on alternative grounds. Hernandez v. Starbuck, 69 F.3d 

1089, 1093-94 (10th Cir. 1995). 

In determining whether to exercise this discretion, we consider 

(1) whether the ground was fully briefed here and in district court, (2) 

whether our decision would involve only questions of law, and (3) whether 

the parties had a fair opportunity to develop the factual record. Elkins v. 

Comfort, 392 F.3d 1159, 1162 (10th Cir. 2004). The first factor cuts both 

ways, but the second and third factors support use of our discretion to 

consider Mr. Hawley’s new argument on the economic-loss rule. 

The first factor cuts both ways because the economic-loss rule is 

fully briefed on appeal but was not raised in district court. 

The second factor supports consideration of the issue, for the 

applicability of the economic-loss rule is a question of law. See Haynes 

Trane Serv. Agency, Inc. v. Am. Standard, Inc., 573 F.3d 947, 962 (10th 

Cir. 2009); accord Bohler-Uddeholm Am., Inc. v. Ellwood Grp., Inc., 247 

F.3d 79, 106 (3d Cir. 2001) (stating that the economic-loss doctrine 

involves a question of law); Grynberg v. Questar Pipeline Co., 70 P.3d 1, 

10 (Utah 2003) (“The district court’s interpretation and application of the 

economic loss doctrine is a question of law . . . .”). 

The third factor also supports consideration because the issue does 

not involve any factual questions. Without a factual component to the 
11

issue, Rice Honey would suffer no prejudice if we were to consider the 

issue in the first instance. 

In light of the second and third factors, we exercise our discretion to 

consider this issue. See United States v. Damato, 672 F.3d 832, 845 (10th 

Cir. 2012) (considering potential affirmance on an issue raised sua sponte 

based on the second and third factors). 

We ultimately conclude that the economic-loss rule applies. Under 

this rule, the underlying duty must arise from a source independent of the 

contract. Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256, 1262-63 

(Colo. 2000) (en banc). And even when the underlying duty would arise in 

the absence of the contract, the duty is not considered independent if it is 

memorialized in the contract. See Haynes Trane Serv. Agency, Inc. v. Am. 

Standard, Inc., 573 F.3d 947, 962 (10th Cir. 2009) (applying Colorado 

law).

In its reply brief, Rice Honey argues that the economic-loss rule does 

not apply to claims involving a breach of fiduciary duty. We disagree, for 

the Colorado Court of Appeals has applied the economic-loss rule to claims 

for breach of fiduciary duty. See Casey v. Colo. Higher Educ. Ins. Benefits 

All. Tr., 310 P.3d 196, 204 (Colo. App. 2012) (“Any tort claim for breach 

of fiduciary duty that the employees attempt to interject into this case 

concerning the trustees would be barred by operation of the economic loss 

rule.”); A Good Time Rental, LLC v. First Am. Title Agency, Inc., 259 P.3d 
12

534, 540 (Colo. App. 2011) (stating that a “fiduciary duty between 

contracting parties” does not necessarily create a special relationship that 

“trumps the economic loss rule”). 

Rice Honey argues that if the economic-loss rule applies to claims 

for breach of fiduciary duty, the Colorado Supreme Court must have 

missed the issue in Jet Courier Service, Inc. v. Mulei, 771 P.2d 486 (Colo. 

1989) (en banc), and Rupert v. Clayton Brokerage Co. of St. Louis, Inc., 

737 P.2d 1106 (Colo. 1987) (en banc). But Colorado appellate courts 

“[‘]normally decide only questions presented by the parties.’” Zeke Coffee, 

Inc. v. Pappas-Alstad P’ship, 370 P.3d 261, 269 (Colo. App. 2015) 

(quoting Greenlaw v. United States, 554 U.S. 237, 243-44 (2008)). Thus, 

the Colorado Supreme Court has expressly declined to consider an 

economic-loss argument that the parties had not presented. A.O. Smith 

Harvestore Prods., Inc. v. Kallsen, 817 P.2d 1038, 1039 (Colo. 1991) 

(en banc). 

We have no indication that the parties raised the economic-loss rule 

in Jet Courier Service, Inc. or in Rupert. Thus, we have no reason to think 

that the Colorado Supreme Court missed the issue. Instead, we can 

reasonably assume that none of the parties invoked the economic-loss rule 

in these cases. If they didn’t, the Colorado Supreme Court would not be 

expected to address the issue. Our case is different, for Mr. Hawley has 

raised the economic-loss rule on appeal. 
13

In our view, Mr. Hawley’s new argument is supported by Colorado’s 

treatment of the economic-loss rule. Colorado courts have identified 

certain special relationships that automatically trigger an independent duty 

of care that supports tort liability even when the parties have entered into a 

contract. Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256, 1263 (Colo. 

2000) (en banc). These special relationships often “entail a fiduciary 

relationship.” A Good Time Rental, LLC v. First Am. Title Agency, Inc., 

259 P.3d 534, 540 (Colo. App. 2011). But “not every fiduciary relationship 

implicates a risk of damages for which contract law cannot provide a 

remedy.” Id. Here the employment contract provided a suitable remedy for 

Mr. Hawley’s alleged work for Liberty after December 31, 2012. 

The contract arguably required Mr. Hawley to wrap up his consulting 

work for Liberty by December 31, 2012, and the jury could reasonably 

infer that continued consulting work for Liberty in 2013 would constitute a 

breach of contract. For the sake of argument, we can even assume that a 

contractual breach would also entail a breach of fiduciary duty. However 

the cause of action is framed, the contract would provide a perfectly 

suitable remedy. Thus, the economic-loss rule prevents recovery under 

Rice Honey’s second theory of a breach of fiduciary duty. 

 
14

V. Mr. Hawley’s Counterclaim for Breach of Contract 

The district court awarded judgment as a matter of law to Mr. 

Hawley on his counterclaim for breach of contract. For two reasons, this 

ruling was erroneous: 

1. A reasonable jury could have found that Mr. Hawley had 

materially breached the contract prior to Rice Honey’s alleged 

breach. 

2. The contract was ambiguous regarding the duration of the 

employment term.5

 

 5

 Rice Honey also argues that a jury could reasonably find that there 

was no meeting of the minds. We disagree. 

Rice Honey contends that it was unaware of Mr. Hawley’s revisions 

before signing the contract. If Rice Honey signed before the contract was 

altered, the alteration might arguably render the contract unenforceable. 

But Rice Honey does not suggest that it signed before the contract was 

altered. Instead, Rice Honey alleges that it signed the contract unaware 

that the latest draft had already been altered by Mr. Hawley. 

Even if Rice Honey signed the contract unaware of an alteration, the 

contract would not be vitiated, for the failure to read what one signs does 

not ordinarily prevent enforcement. See Rasmussen v. Freehling, 412 P.2d 

217, 219 (Colo. 1966) (stating that parties may not avoid enforcement of a 

contract just because they had failed to read the contract). An exception 

exists when the parties were mutually mistaken about the contract. Kuper 

v. Scroggins, 257 P.2d 412, 413-14 (Colo. 1953) (en banc); see Smith v. 

Whitlow, 268 P.2d 1031, 1035 (Colo. 1954) (en banc). But Rice Honey 

does not suggest that Mr. Hawley was mistaken about the contract terms. 

Thus, the signed contract would bind the parties even if Rice Honey had 

not read the latest version before signing. 
15

A. A reasonable jury could have found that Mr. Hawley had 

materially breached the contract. 

The district court erred in entering judgment as a matter of law to 

Mr. Hawley on his counterclaim for breach of contract, for a reasonable 

jury could have found that Mr. Hawley had materially breached the 

contract prior to Rice Honey’s alleged breach. 

Mr. Hawley alleges that Rice Honey breached the contract by 

prematurely terminating the employment without paying the amount 

specified in the contract for early termination. But Rice Honey could avoid 

performance if Mr. Hawley had previously failed to substantially perform 

his own contractual duties. See Kaiser v. Mkt. Square Disc. Liquors, Inc., 

992 P.2d 636, 641 (Colo. App. 1999). This principle would create a jury 

issue, for a reasonable jury could have found that Mr. Hawley had already 

committed a material breach by continuing to work for Liberty after 

December 31, 2012. 6

 

 Here the existence of a contractual breach by Mr. Hawley turns on 

two questions: 

1. Did the contract prevent Mr. Hawley from working for Liberty 

after December 31, 2012? 

2. If the contract prevented such work, did Mr. Hawley continue 

to work for Liberty after December 31, 2012? 

 6

 Rice Honey makes this argument on appeal with respect to Mr. 

Hawley’s counterclaim, but not with respect to Rice Honey’s own contract 

claim. 
16

The jury could reasonably answer “yes” to both questions, finding a 

contractual breach from Mr. Hawley’s continued work for Liberty after 

December 31, 2012. 

First, the jury could reasonably find that the contract prevented Mr. 

Hawley from working for Liberty after December 31, 2012. The contract 

did not generally prevent Mr. Hawley from working for another employer 

while working for Rice Honey.7

 But the contract arguably suggested that 

Mr. Hawley’s right to work for Liberty might be limited to approximately 

31⁄2 months. The contract was signed by the parties on September 13, 2012 

and stated: “[Rice Honey] recognizes that [Mr.] Hawley will need to spend 

modest amounts of time until December 31, 2012 at Liberty Institute 

completing the shutdown of the consulting aspects of his business.” 

Appellant’s App’x, vol. V, at 846. By stating that Mr. Hawley would need 

to continue working for Liberty until December 31, 2012, the contract 

could have been implying that Mr. Hawley was to stop working for Liberty 

by that date. 

 Second, the jury could reasonably find that Mr. Hawley had 

continued to work for Liberty after December 31, 2012. For example, Rice 

Honey presented evidence that in 2013, Mr. Hawley had organized 

 7

 Mr. Hawley could not work for another employer involved in the 

honey business. But Rice Honey does not suggest that Liberty was in the 

honey business. 
17

interviews and researched resumes for candidates hoping to land a position 

with Liberty as Chief Operating Officer. In addition, six emails between 

Mr. Hawley and Liberty management suggested that Mr. Hawley was 

continuing to work for Liberty in a managerial position after December 31, 

2012: 

1. One email (April 18, 2013) referred to Mr. Hawley as part of 

the management team and notified him of an upcoming 

meeting. 

2. A second email (April 19, 2013) contained Mr. Hawley’s 

response, which reflected help in planning the meeting and in 

giving input on the matters to be discussed. 

3. A third email (May 2, 2013) consisted of Mr. Hawley’s 

transmission of an offer to hire a Chief Operating Officer for 

Liberty. 

4. A fourth email (May 3, 2013) thanked Mr. Hawley for his hard 

work. 

5. A fifth email (May 13, 2013) referred to Mr. Hawley’s 

participation in a meeting to “review 2013 KPIs and create new 

ones for 2014.” Appellant’s App’x, vol. VI, at 970. 

6. A sixth email (May 15, 2013) referred to Mr. Hawley’s 

participation in a management meeting. 

 The resulting issue is whether a jury could reasonably find the fact of 

damage from Mr. Hawley’s alleged work for Liberty after December 31, 

2012. In our view, such a finding would have been reasonable. Rice Honey 

continued to pay Mr. Hawley after December 31, 2012. Part of these 

continued payments could constitute damages, for the jury could 

reasonably infer that Rice Honey had paid more than it would have if it had 
18

known that Mr. Hawley was continuing to serve Liberty in a managerial 

capacity. Thus, the existence of damages constituted a factual issue for the 

jury to decide.

In sum, a reasonable jury could find that Mr. Hawley had breached 

the contract and that this breach of contract had caused damages. Thus, the 

district court erred in entering judgment as a matter of law for Mr. Hawley 

on his counterclaim for breach of contract. In our view, the jury could 

reasonably find that Mr. Hawley had materially breached the contract 

before Rice Honey prematurely terminated the contract. Such a finding 

could have excused Rice Honey from continued performance under the 

contract. 

B. A jury could also have reasonably found that Rice Honey 

had not breached the contract. 

 A jury could also have reasonably found that Rice Honey had not 

breached the contract because the duration of the contract was ambiguous. 

 In interpreting the contract, we must determine whether it was 

ambiguous. See Boyer v. Karakehian, 915 P.2d 1295, 1300 (Colo. 1996) 

(en banc). The contract was ambiguous if it was susceptible to two or more 

reasonable interpretations. B&B Livery, Inc. v. Riehl, 960 P.2d 134, 136 

(Colo. 1998) (en banc). If the contract was ambiguous, interpretation 

would involve an issue of fact. See Ad Two, Inc. v. City & Cty. of Denver 

ex rel. Manager of Aviation, 9 P.3d 373, 381 (Colo. 2000) (en banc) 
19

(“Interpretation of the intent of the parties in an ambiguous contract 

becomes an issue of fact for the trial court to decide in the same manner as 

other disputed factual issues.”). 

 The district court ruled that the contract is ambiguous on how long it 

was to last. We agree based on Paragraph (1) of the contract. What is a 

term “ending on the third anniversary of the Effective Date . . . one (1) 

year period”? The phrase appears to be a nonsensical result of the parties’ 

failure to fully revise the contractual term of employment. Mr. Hawley 

wanted a three-year term; Rice Honey wanted a one-year term. At the end 

of the negotiation process, the parties apparently ended up with language 

suggesting a duration of both one year and three years. In this respect, the 

contract language was ambiguous.8

 

Resolution of that ambiguity turns on the parties’ intent, which is a 

question of fact. See Ad Two, Inc. v. City & Cty. of Denver ex rel. Manager 

of Aviation, 9 P.3d 373, 381 (Colo. 2000) (en banc). A jury might 

reasonably agree with Mr. Hawley, finding that the contract term was three 

years. Or, a jury might reasonably agree with Rice Honey, finding that the 

term was one year. 

Depending on whether the contract was one year or three years, Rice 

Honey could let the contract come to a natural end by timely exercising its 

 8

 The district court called the contract language “strange” and 

“meaningless.” Appellant’s App’x, vol. VII, at 1117-18. 
20

right not to renew the employment term. Or, Rice Honey could terminate 

the contract (with or without cause) by ending Mr. Hawley’s employment 

prior to expiration of the term. 

If the term was only one year, Rice Honey could have provided Mr. 

Hawley with notice of nonrenewal at least 60 days before the term was to 

end. Rice Honey provided such notice. So, if the term was only one year, 

there would not have been a “termination without cause” or a contractual 

breach by Rice Honey. Instead, the contract would simply have expired. 

But if the contract term was three years, Rice Honey’s notice of 

nonrenewal could be considered a termination without cause because the 

term would have had two more years. 

Mr. Hawley argues that even if the contract were one year, there 

would have been a “termination.” For this argument, Mr. Hawley points to 

a snippet of testimony by Rice Honey’s vice-president of operations: 

Q. (by Mr. Burg) But what I’m getting at is, you know, we 

construe contracts I think by what the words are that are 

used, okay, and this says “terminated.” Now, even if you 

were to terminate this thing, even if we construe this 

contract the way that Rice wants to construe it, which I 

suppose is that it is a contract terminable at the end of a 

one-year term with 60 days notice. I assume that’s your 

position, right? 

A. Correct. 

Q. That is a termination, right? 

A. Correct. 
21

Appellant’s App’x, vol. IV, at 585. But, as the district court explained, the 

vice-president’s understanding did not matter if the “termination without 

cause” provision had been unambiguous. See Appellant’s App’x, vol. VII, 

at 1119-20 (the district court’s explanation that the word “termination” is 

unambiguous and that “Rice’s understanding” is immaterial because the 

court could interpret the provision for “termination without cause” as a 

matter of law).9

 

 9

 The district court apparently changed its view of the case after 

hearing the testimony of Rice Honey’s vice-president of operations. On 

cross-examination, the vice-president testified that Rice Honey had 

terminated Mr. Hawley without cause. After excusing the jury, the district 

court told counsel that “in light of [the vice-president’s] testimony, I think 

he undercut your case entirely.” Appellant’s App’x, vol. IV, at 633. And 

when Rice Honey rested its case the next day, the district court 

commented, “Plaintiff rests, all right,” and turned to Mr. Hawley’s motion 

under Fed. R. Civ. P. 50. Appellant’s App’x, vol. VII, at 1115-16. In this 

motion, Mr. Hawley did not address his counterclaim, for he had not even 

presented a case. Nonetheless, the district court sua sponte granted 

judgment as a matter of law to Mr. Hawley on his counterclaim. See p. 3, 

above. In explaining this ruling, the district court noted that it was 

“somewhat taken aback by what [it had] heard is the evidence in this case 

and particularly, as respect to [Rice Honey’s attorney] and also as 

respecting [Rice Honey’s vice-president of operations].” Appellant’s 

App’x, vol. VII, at 1117. 

 

If the district court had intended to rely on its understanding of the 

vice-president’s testimony, this reliance would have been misguided. Rice 

Honey’s vice-president and co-owner testified extensively about the 

decision not to renew Mr. Hawley’s employment. For example, the vicepresident testified that in the days before nonrenewal, Mr. Hawley 

repeatedly asked if his employment term would be renewed. In addition, 

Rice Honey’s co-owner testified that he had told Mr. Hawley orally and in 

writing that his employment would not be renewed. Almost two weeks 
22

The district court was correct in viewing the vice-president’s 

testimony as immaterial in light of the unambiguous language in the 

contract. See Denver Found. v. Wells Fargo Bank, N.A., 163 P.3d 1116, 

1126 (Colo. 2007) (en banc) (stating that “intent must be determined from 

contract language itself, and an unambiguous document cannot be 

explained by extrinsic evidence so as to dispute its plain meaning”). But 

we disagree with the district court’s interpretation of the provisions for 

termination and nonrenewal. 

The contract unambiguously addresses payment obligations if Rice 

Honey were to terminate the contract before it would otherwise expire. 

These obligations would vary depending on whether the termination is with 

cause or without cause. But neither kind of termination took place if the 

contract term had been one year. If the term were only one year, Rice 

Honey would simply have exercised its contractual right not to renew the 

contract, letting it expire. Expiration of the contract would not have been a 

termination by either party. 

 

later, Mr. Hawley responded, expressing surprise at the reasons given “not 

to renew [his] contract.” Appellant’s App’x, vol. IV, at 570. 

The testimony by Rice Honey’s vice-president and co-owner could 

support a finding that the parties treated Mr. Hawley’s termination as a 

nonrenewal (a termination with at least 60 days’ notice and continued 

payment through the one-year term rather than an “early” termination 

under the contract). Thus, the district court could not grant judgment as a 

matter of law to Mr. Hawley based on a snippet of the vice-president’s 

testimony. 
23

As a result, the existence of a contractual breach turns on the 

duration of the term, one year or three years. Because the duration of the 

contract is ambiguous, the district court should have allowed the jury to 

decide whether Rice Honey had breached the contract.10 

VI. Guidance Regarding Damages for Mr. Hawley’s Counterclaim for 

Breach of Contract 

The parties disagree about issues related to the damages that Mr. 

Hawley could obtain if he prevails on his counterclaim for breach of 

contract. The disagreement involves the duty to mitigate damages, the 

enforceability of a liquidated-damages clause, and the availability of both 

liquidated damages and the sum specified in the contract. Because these 

issues may reappear on remand, we provide the district court with some 

guidance. See Fletcher v. United States, 730 F.3d 1206, 1214 (10th Cir. 

2013). 

A. Mr. Hawley had no duty to mitigate damages. 

The existence of a duty to mitigate damages involves a question of 

law. See Cherry v. A-P-A Sports, Inc., 662 P.2d 200, 202 (Colo. App. 

1983) (deciding the existence of a duty to mitigate as a matter of law). On 

this question, we conclude that Mr. Hawley did not bear a duty to mitigate 

damages. 

 10 On remand, Mr. Hawley could prevail on his counterclaim for breach 

of contract only if the jury determines that the duration is three years 

rather than one year. 
24

1. The common law did not require mitigation of damages. 

In urging a duty to mitigate damages, Rice Honey relies on the 

common law. Under Colorado’s common law, a party injured from a 

contractual breach must ordinarily make a reasonable effort to mitigate 

damages. Tull v. Gundersons, Inc., 709 P.2d 940, 946 (Colo. 1985) (en 

banc). Thus, when a contract is breached, the amount avoided through 

mitigation should ordinarily be deducted from the eventual award. Saxonia 

Mining & Reduction Co. v. Cook, 4 P. 1111, 1113 (Colo. 1884). But there 

is no duty to make a deduction when the contract specifies the amount 

owed to the injured party. See Drews v. Denver Recycling Co., 727 P.2d 

1121, 1124 (Colo. App. 1986); Cherry, 662 P.2d at 202. Here the amount 

owed was specified in the contract, precluding a common-law duty to 

mitigate. 

Rice Honey relies on Technical Computer Services, Inc. v. Buckley, 

844 P.2d 1249, 1255 (Colo. App. 1992). Buckley addressed mitigation in 

different circumstances. There an employee was terminated and 

successfully sued for breach of the employment contract. Buckley, 844 P.2d 

at 1249, 1251. On appeal, the employee argued that his award should not 

be reduced by the amount earned elsewhere. Id. at 1255. The Colorado 

Court of Appeals rejected this argument, reasoning that the employee could 

not (1) treat the employment contract as continuing and (2) sue for wages 

as they accrued. The court reasoned that recovery for continued wages 
25

would be contrary to the policy of mitigation and permit a multiplicity of 

lawsuits. Id at 1255-56. 

The court distinguished Cherry v. A-P-A Sports, Inc., 662 P.2d 200 

(Colo. App. 1983). Buckley, 844 P.2d at 1256. In A-P-A Sports, the 

mitigation doctrine did not apply because the employer had promised to 

pay a specific amount upon nonrenewal of the employment term. Id. That 

principle was inapplicable in Buckley because there the payment had not 

been guaranteed. Id. 

Our case closely resembles A-P-A Sports. Here the amount owed to 

Mr. Hawley had allegedly been guaranteed upon early termination without 

cause. Mr. Hawley’s theory is that he was entitled to the guaranteed 

payment regardless of whether he obtained employment elsewhere, for the 

contract called for payment of a set amount. As Mr. Hawley points out, the 

contract stated that Rice Honey’s early termination without cause would 

require payment of the base salary for one year ($162,000), along with 

$250,000 in liquidated damages. Thus, Buckley would not support a 

deduction from his potential recovery on the contract claim. 

In sum, Colorado’s common law did not create a duty for Mr. Hawley 

to mitigate damages. 

 
26

2. Rice Honey does not allege that the contract would 

independently create a duty to mitigate. 

A potential issue could have arisen about the effect of the contract. 

The contract stated that the measure of damages for Mr. Hawley was 

“subject to the mitigation provisions set forth below.” Appellant’s App’x, 

vol. V, at 851. But there were no mitigation provisions “set forth below.” 

 Rice Honey preemptively argues that this set of provisions did not 

vitiate the common-law duty to mitigate damages. This argument assumes 

that the common law created a duty to mitigate. But we have elsewhere 

concluded that no such duty existed at common law. As a result, the 

contract does not bear on the duty to mitigate.11 

B. The enforceability of the liquidated-damages clause involved 

a fact-issue for the jury to decide. 

 The contract contained a liquidated-damages clause that required 

Rice Honey to pay Mr. Hawley $250,000 upon a termination without 

cause.

12 The district court held that this clause was enforceable as a matter 

 11 Rice Honey does not argue on appeal that the contract independently 

created a duty to mitigate. 

12 If the “termination without cause” provision applied, it would also 

require Rice Honey to pay one year’s base salary ($162,000). One could 

reasonably view this payment as part of the liquidated damages. But both 

parties have treated the liquidated damages as $250,000, with the 

additional $162,000 as actual damages. We address below the related issue 

of whether Mr. Hawley might be able to recover both liquidated damages 

($250,000) and actual damages ($162,000). 
27

of law. In our view, however, the enforceability of the liquidated-damages 

clause involved a fact-issue for the jury to decide. 

 Liquidated-damages provisions are enforceable if they reasonably 

estimate the amount of actual damages and do not constitute a penalty. 

Rohauer v. Little, 736 P.2d 403, 410 (Colo. 1987) (en banc). Unless the 

contract “on its face establishes that the stipulated liquidated damages are 

so disproportionate to any possible loss as to constitute a penalty, the party 

challenging the liquidated damages provision bears the burden of proving 

that fact.” Id.; see also Chisholm v. Reitler, 352 P.2d 794, 796 (Colo. 

1960) (en banc) (stating that the burden of proof falls on the party 

characterizing a liquidated-damages clause as a penalty). 

The pertinent factors for the enforceability of a liquidated damages 

provision are 

1. whether the parties intended to liquidate damages, 

2. whether the amount of liquidated damages, when viewed as of 

the time that the contract was made, was a reasonable estimate 

of the presumed actual damages that the breach would cause, 

and 

3. whether it was difficult at that time to ascertain the amount of 

actual damages that would result from a breach. 

Rohauer, 736 P.2d at 410. The enforceability of a liquidated-damages 

clause involves a question of fact unless the contract shows on its face that 

the liquidated damages constitute a penalty. Klinger v. Adams Cty. Sch. 

Dist. No. 50, 130 P.3d 1027, 1034 (Colo. 2006) (en banc). 
28

 The district court decided as a matter of law that the liquidateddamages clause was enforceable without hearing any evidence on the issue. 

Rice Honey never had an opportunity to support its position with evidence. 

The district court erred by prematurely deciding this fact-issue prior to the 

presentation of evidence on the relationship between the liquidateddamages amount and the possible loss. 

C. If Mr. Hawley prevails on his counterclaim, he may be 

entitled to both liquidated damages and payment for a 

specified debt. 

Liquidated damages may be recoverable in lieu of actual damages. 

See 11 Joseph M. Perillo, Corbin on Contracts: Damages § 58.9, at 446 

(2005). Thus, an election between the two is ordinarily required. See

Stewart v. Blanning, 677 P.2d 1382, 1384 (Colo. App. 1984) (stating that 

the doctrine of election of remedies “is invoked where remedial rights 

sought in a given situation are so inconsistent that the assertion of one 

necessarily repudiates the assertion of the other”). But payment for a 

specified debt is treated differently, for it is awardable regardless of the 

employee’s opportunity to mitigate damages. See Drews v. Denver 

Recycling Co., 727 P.2d 1121, 1124 (Colo. App. 1986) (holding that no 

duty to mitigate existed to collect payments required under a terminated 

employment contract); Cherry v. A-P-A Sports, Inc., 662 P.2d 200, 202 

(Colo. App. 1983) (holding that no duty to mitigate existed when the 
29

employer had promised to pay a specified amount upon nonrenewal of the 

contract); see also Part VI(A)(1), above. 

Rice Honey lumps together the claims for liquidated damages and 

payment of a specified debt, pointing out that both are premised on a 

breach of contract. We disagree with this approach. If Mr. Hawley 

prevails, Rice Honey would owe money for a specified debt arising out of a 

contractual obligation. Thus, Mr. Hawley would be entitled to the 

contractual payment of the specified debt even if he were to receive 

liquidated damages. 

Because our case involves rights to payment of a debt and liquidated 

damages, Mr. Hawley could receive both if (1) the jury concludes that the 

liquidated damages do not constitute a penalty and (2) Mr. Hawley 

ultimately prevails on his counterclaim. 

VII. Conclusion 

The district court awarded judgment as a matter of law to Mr. 

Hawley on Rice Honey’s claims. We affirm this aspect of the district 

court’s ruling. But we reverse and remand for a new trial on 

 Mr. Hawley’s counterclaim for breach of contract and 

 the enforceability of the liquidated-damages clause. 

 Entered for the Court, 

 Robert E. Bacharach 

 Circuit Judge