Opinion ID: 163683
Heading Depth: 3
Heading Rank: 5

Heading: Willful and Wanton Breach of Contract

Text: The Board argues the district court improperly admitted hearsay evidence at trial in support of Mr. Walker’s and Mr. Salazar’s estate’s willful and wanton breach of contract claims. Absent this evidence, the Board believes there is no evidence in the record to support the court’s finding the Board acted willfully and wantonly. Even if the district court properly admitted this evidence, the Board still believes the evidence does not demonstrate the Board acted willfully and wantonly. We first address whether the district court properly admitted the challenged evidence. “Evidentiary decisions rest within the sound discretion of the trial court, and we review those decisions only for an abuse of that discretion. Our review is especially deferential when the challenged ruling concerns the admissibility of evidence that is allegedly hearsay.” United States v. Tome, 61 F.3d 1446, 1449 (10th Cir. 1995) (citation omitted). “[W]e consider the record as a whole in reviewing evidentiary rulings.” United States v. Cestnik, 36 F.3d 904, 907 (10th Cir. 1994). The government argues the district court erred in admitting tape recordings and transcripts of two Board meetings. At one meeting in 1995, the Board -22- reviewed an actuarial evaluation of the plan and discussed why the evaluation included, as an actuarial assumption, the change in an employee’s pay when he transferred between a covered Union position and a non-covered management position. At another meeting in 1998, the Board discussed in detail the reasons underlying its adoption of the 1991 and 1998 amendments and the consequences of applying the 1998 amendment to existing retirees like Messrs. Walker and Salazar. The district court admitted the tape recordings and transcripts of these meetings in part, despite the Board’s hearsay objection, because the excerpts and recordings “reflect[ed] knowledge on the part of identified named defendants,” and “knowledge, of course, is an integral factor of the willful, wanton analysis.” An out-of-court statement is not hearsay, and a district court may properly admit it “if the statement is offered not for the truth of the matter asserted in the statement but merely to show that a party had knowledge of a material fact or issue.” Echo Acceptance Corp. v. Household Retail Servs., Inc., 267 F.3d 1068, 1090 (10th Cir. 2001); see also Fed. R. Evid. 801(c). We agree with the district court that the tape recordings and transcripts discussed above are evidence of the Board’s knowledge of facts material to this case; as a result, we conclude the district court did not abuse its discretion in admitting the recordings and -23- transcripts for this purpose. The Board cites a specific portion of the district court’s decision to demonstrate the court erroneously admitted certain statements of the Board’s attorney (during a Board meeting) for the truth of the matter asserted. It quotes the following passage from the district court’s decision: And this was the meeting where Mr. Parsons advised the board to take comfort in the inability of these people to find a lawyer. “And even if they did, if there is a lawsuit, we’ll try to get every penny back that we paid them over and above what Amendment 9 would otherwise allow.” You know what that was? “I dare you to sue me.” The district court found the evidence quoted above, along with other evidence, demonstrated “willful and wanton conduct. It is probative of such conduct.” This portion of the district court’s decision paraphrases two separate statements. We will examine each statement individually and determine whether the court properly admitted it. The Board’s attorney made one of the statements at the Board meeting in 1998 during a discussion about whether to apply the 1998 amendment to existing retirees. He stated: And also, you know, from just the frankness of the economics of it, I think the participants are going to have a hell of a time finding an -24- attorney who’s going to take the case, because there is no fee shifting provision in Colorado. The district court did not abuse its discretion in admitting this statement as evidence of the Board’s knowledge of the consequences of its decision to apply the 1998 amendment to Messrs. Walker and Salazar. The district court did not admit the statement for the truth of the matter asserted: Mr. Walker and Mr. Salazar’s estate were not seeking to prove that Messrs. Walker and Salazar had a hard time finding an attorney; instead, they were seeking to prove that the Board acted willfully and wantonly in breaching its contract. The Board made the second statement in a letter it sent to both Messrs. Walker and Salazar informing them of its decision to apply the 1998 amendment to them. It read: Please be advised that, if you decide to file a lawsuit against the Board of Trustees, the Board of Trustees will file a counterclaim against you for recovery of the full amount of any overpayments of pension benefits. The district court did not abuse its discretion in admitting this statement. Mr. Walker and Mr. Salazar’s estate offered this statement against the Board, and the Board itself made the statement. It is therefore an admission by a party-opponent, and, as such, it is not hearsay. See Fed. R. Evid. 801(d)(2)(A). -25- We next address whether the evidence supports the district court’s finding the Board willfully and wantonly breached its contract with Messrs. Walker and Salazar. Under Colorado law, “a willful-and-wanton breach of contract [is] one that is intentional, and without legal justification or excuse.” Giampapa v. American Family Mut. Ins. Co., 64 P.3d 230, 244 (Colo. 2003) (quotation marks and citation omitted). The Board argues it “did not act willfully and wantonly because it acted with legal justification and lacked the requisite intent.” We review for clear error the district court’s factual findings. See Fed. R. Civ. P. 52(a). See also Giampapa, 64 P.3d at 243 (treating the willful and wanton conclusion as a finding of fact). “A finding of fact is clearly erroneous if it is without factual support in the record or if [we], after reviewing all the evidence, [are] left with a definite and firm conviction that a mistake has been made.” Manning v. United States, 146 F.3d 808, 812 (10th Cir. 1998) (quotation marks and citation omitted). The Board argues generally there is no evidence “in the record, either direct or circumstantial, that the Board intended to breach a contract.” The Board argues as significant it “went to great lengths to discuss, debate and consider its decision to adopt [the 1998 amendment].” The Board’s argument does not address, however, whether the Board intentionally breached its contract. The -26- district court made several findings of fact demonstrating the Board knew Messrs. Walker and Salazar had vested pension benefits under the definition of “final average earnings” in the 1991 amendment. The district court also made findings showing the Board knew it did not adopt the 1991 amendment in error, and, in spite of this knowledge, it applied the 1998 amendment to Messrs. Walker and Salazar and denied their appeals based on its non-credible claim the 1991 amendment was an error. These factual findings are supported by the record and further support the court’s finding that the Board’s breach was “purposeful[]” or intentional. The Board also argues there is no evidence in the record “demonstrating that the Board acted without legal justification or excuse.” It claims it “sought the advice of legal counsel, evaluated its options and acted in accordance with that advice.” We disagree. The Board’s attorney advised the Board that if the 1991 amendment was adopted in error, its application of the 1998 amendment to existing retirees may survive judicial scrutiny; however, the Board points to no evidence indicating its attorney advised the Board it adopted the 1991 amendment in error. Furthermore, the district court found the Board “knew [the 1991 amendment] was no mistake. And the claim that it was an error or mistake or that there were conflicts in provisions is not credible.” As a result of these -27- considerations, we conclude the district court correctly found the Board did not rely on its attorney’s advice, or act with legal justification, when it claimed the 1991 amendment was a mistake and applied the 1998 amendment to Messrs. Walker and Salazar. In sum, we conclude the district court did not abuse its discretion in admitting the evidence the Board objected to as hearsay. We also conclude the record supports the district court’s findings that the Board intentionally breached its contract and, in so doing, acted without legal justification or excuse. The district court therefore did not commit clear error in finding the Board’s breach of contract was willful and wanton.