Court Opinion

ID: 9349063
Source: CourtListenerOpinion
Date Created: 2022-12-20 22:00:33.097117+00
Date Added: 2024-06-11T16:41:46.952539
License: Public Domain

Appellate Case: 22-1116     Document: 010110786397      Date Filed: 12/20/2022   Page: 1
                                                                                 FILED
                                                                     United States Court of Appeals
                       UNITED STATES COURT OF APPEALS                        Tenth Circuit

                              FOR THE TENTH CIRCUIT                      December 20, 2022
                          _________________________________
                                                                        Christopher M. Wolpert
                                                                            Clerk of Court
  MESA UNDERWRITERS SPECIALTY
  INSURANCE COMPANY,

        Plaintiff - Appellee,

  v.                                                         No. 22-1116
                                                (D.C. No. 1:20-CV-03159-CMA-NRN)
  JOHN HENRY HESKETT,                                         (D. Colo.)

        Defendant - Appellant,

  and

  HAWK PRODUCTIONS, LLC,

        Defendant.
                          _________________________________

                              ORDER AND JUDGMENT*
                          _________________________________

 Before HOLMES, Chief Judge, HARTZ and ROSSMAN, Circuit Judges.
                    _________________________________

        John Henry Heskett appeals the district court’s award of summary judgment in

 favor of Mesa Underwriters Specialty Insurance Company (Mesa). The court granted

 Mesa a declaratory judgment that an insurance policy issued by Mesa to Hawk

        *
         After examining the briefs and appellate record, this panel has determined
 unanimously that oral argument would not materially assist in the determination of
 this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
 ordered submitted without oral argument. This order and judgment is not binding
 precedent, except under the doctrines of law of the case, res judicata, and collateral
 estoppel. It may be cited, however, for its persuasive value consistent with
 Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Appellate Case: 22-1116      Document: 010110786397     Date Filed: 12/20/2022    Page: 2

 Productions, LLC (Hawk) excluded coverage for Mr. Heskett’s injuries and damages

 resulting from his participation in an event produced by Hawk. Mr. Heskett argues

 the court erred in rejecting his contention that extrinsic evidence demonstrated the

 policy was ambiguous. Mesa asks this court to impose sanctions because

 Mr. Heskett’s appeal is frivolous.

        Exercising jurisdiction under 28 U.S.C. § 1291, we affirm the district court’s

 judgment and grant Mesa’s motion for sanctions.

 I.     Background

        The following facts are undisputed. Hawk produced an event called the “Big

 Dog Brag Mud Run” in Pueblo, Colorado, on June 25, 2016 (the Event). Aplt. App.

 at 11 (internal quotation marks omitted). Mesa had issued a Commercial General

 Liability Policy to Hawk for the period of June 4 to June 26, 2016 (the Policy). The

 Policy contained the following exclusion endorsement (the Participants Exclusion)

 relating to participants:

          THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ
                            CAREFULLY.
                             EXCLUSION – PARTICIPANTS

        This endorsement modifies insurance provided under the following:
               COMMERCIAL GENERAL LIABILITY COVERAGE FORM

        SECTION 1 – COVERAGE A BODILY INJURY AND PROPERTY
        DAMAGE, LIABILITY, 2. EXCLUSIONS, PERSONAL AND
        ADVERTISING INJURY, 2. EXCLUSIONS AND MEDICAL
        PAYMENTS, 2. EXCLUSIONS are amended and the following added:

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              It is understood and agreed that such insurance as is provided by this
              policy does not apply to, and the Company shall have no duty to
              defend any action brought to recover damages because of:
                     A. “Bodily injury”, “personal injury” or “advertising injury”
                     or “medical payments to “any person” while practicing for or
                     participating in any contest, demonstration, event, exhibition,
                     race or show.
                     B. “Property damage” to any personal property of the
                     persons described in the definition below.
              As used in this endorsement the definition of “any person” shall
              include but not be limited to participants, attendants, mechanics,
              stewards, timing officials, announcers, corner men, musicians,
              singers, stage hands, animal handlers, officials or any other person
              employed by or doing volunteer work for the named insured.
             All other terms and conditions of this policy remain unchanged.
 Aplt. App. at 63 (emphasis added).

       Mr. Heskett was injured while participating in the Event. In January 2017,

 Hawk gave Mesa notice of Mr. Heskett’s claim. Mesa denied coverage based on the

 Participants Exclusion. In July 2020 an arbitrator awarded Mr. Heskett

 $2,642,041.11 against Hawk. Mr. Heskett’s counsel then demanded that Mesa pay

 the arbitration award under the Policy.

       Mesa filed suit against Mr. Heskett and Hawk, seeking a declaratory judgment

 that it was not required to provide coverage for Mr. Heskett’s injury because the

 Participants Exclusion excluded coverage. Mesa moved for summary judgment,

 arguing the Policy language was unambiguous.

       In response, Mr. Heskett did not argue that any term in or provision of the

 Policy was ambiguous. He instead argued the Policy was ambiguous because Hawk

 intended to buy a policy from Mesa that covered the participants in the Event, had
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 asked for such a policy from its insurance broker, and believed it had bought such a

 policy. He presented an affidavit from a Hawk representative stating that “[t]he main

 reason for purchasing the insurance policy from Mesa . . . was to have generally [sic]

 liability coverage and to cover participants who may get injured at one of our

 events.” Aplee. Suppl. App. at 25. The Hawk representative said he believed that

 Hawk had purchased liability coverage for participants and that he was “shocked”

 when he learned, upon giving Mesa notice of Mr. Heskett’s claim, that the Policy did

 not cover participants. Id.

        Mr. Heskett contended that Hawk’s belief regarding the Policy’s coverage for

 participants was justified based on questions Mesa had asked about the obstacles and

 the ages of the participants in the Event. But in a January 2017 email Hawk’s

 insurance broker had clarified to Hawk that Mesa asked those questions because it

 would not offer any coverage for the Event if there were insufficient controls in

 place. And referring back to policies issued since 2013, the broker stated that Hawk

 “never had accident coverage for participants,” noting that this decision was based on

 availability and cost. Id. at 26.

        Applying Colorado law on contract interpretation, the district court granted

 summary judgment in favor of Mesa on its claim against Mr. Heskett.1 Noting he

 failed to identify any language in the Policy that was ambiguous, the court held that

        1
          Because Hawk failed to answer or otherwise defend Mesa’s complaint, the
 district court entered a default judgment against Hawk.

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 the Policy’s plain language unambiguously excluded coverage for Mr. Heskett’s

 injury sustained while a participant in the Event. It rejected as inconsistent with

 Colorado law Heskett’s contention that Hawk’s subjective belief about the Policy’s

 coverage rendered it ambiguous.2 The district court ultimately declared that (1) the

 Policy expressly excluded coverage for Mr. Heskett’s claim and injury, (2) Hawk was

 not entitled to a defense or indemnity under the Policy for Mr. Heskett’s claim, and

 (3) Mesa was not required to pay the amount of the arbitration award obtained

 against Hawk by Mr. Heskett.

       Mr. Heskett filed a postjudgment motion raising the same argument regarding

 ambiguity of the Policy. Construing the motion as seeking to alter or amend the

 judgment under Federal Rule of Civil Procedure 59(e), the court denied it because

 Mr. Heskett did not present new evidence, show a change in the controlling law, or

 demonstrate clear error in the summary judgment.

       Mr. Heskett appeals the district court’s summary-judgment order.3 Mesa

 moves for sanctions, arguing that Mr. Heskett’s appeal is frivolous.

       2
         The district court also held that the evidence did not support the premises of
 Mr. Heskett’s argument: that Hawk intended to purchase coverage for participants in
 the Event, had requested such coverage from its broker, and had only learned of the
 Participants Exclusion after Mr. Heskett submitted a claim. Thus, the evidence did
 not support Mr. Heskett’s alternative argument (not renewed on appeal) that there
 was no meeting of the minds between Hawk and Mesa, which, if true, would mean
 there was no valid insurance policy and Mr. Heskett’s claim would necessarily fail
 anyway.
       3
        Mr. Heskett also purports to appeal the district court’s denial of his
 Rule 59(e) motion. But he has not adequately invoked our appellate review because
                                                                             (continued)
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 II.      Mr. Heskett’s Appeal

          Mr. Heskett argues the district court erred in granting summary judgment in

 favor of Mesa by concluding that the Policy unambiguously excluded coverage for

 his injury sustained as a participant in the Event.

          A.    Standard of Review and Applicable Law

          Where, as here, jurisdiction was based on diversity of citizenship, we apply the

 substantive law of the forum state, Colorado. See Nat’l Union Fire Ins. Co. of

 Pittsburgh v. Dish Network, LLC, 17 F.4th 22, 29 (10th Cir. 2021). We review

 de novo the district court’s grant of summary judgment and its construction of

 Colorado law. See Mincin v. Vail Holdings, Inc., 308 F.3d 1105, 1108-09 (10th Cir.

 2002).

          The interpretation of an insurance policy is a question of law. See Allstate Ins.

 Co. v. Huizar, 52 P.3d 816, 819 (Colo. 2002). “An insurance policy is a contract,

 which should be interpreted consistently with the well-settled principles of

 contractual interpretation.” Id. We give the words used in a contract “their plain

 meaning according to common usage.” Id. “Written contracts that are complete and

 free from ambiguity express the intention of the parties and will be enforced

 according to their plain language.” May v. United States (In re Water Rights of May),

 756 P.2d 362, 369 (Colo. 1988).

 he advances no reasoned argument of error in that ruling; we will therefore not
 consider the denial of that motion. See Habecker v. Town of Estes Park, 518 F.3d
 1217, 1223 n.6 (10th Cir. 2008).
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       “A contractual term is ambiguous if it is susceptible on its face to more than

 one reasonable interpretation.” Am. Fam. Mut. Ins. Co. v. Hansen, 375 P.3d 115, 120

 (Colo. 2016) (internal quotation marks omitted). “The fact that the parties have

 different opinions about the interpretation of the contract does not of itself create an

 ambiguity.” May, 756 P.2d at 369. Importantly, “[a]n ambiguity must appear in the

 four corners of the document before extrinsic evidence can be considered. In other

 words, extrinsic evidence cannot create ambiguity; it is an aid to ascertaining the

 intent of the parties once an ambiguity is found.” Hansen, 375 P.3d at 121 (citation

 omitted).

       B.     Discussion

       The district court held that the Policy unambiguously excluded coverage for

 Mr. Heskett’s injury, which he sustained as a participant in the Event. The

 Participants Exclusion provided that “such insurance as is provided by this policy

 does not apply to, and the Company shall have no duty to defend any action brought

 to recover damages because of . . . [b]odily injury, personal injury, . . . or medical

 payments to any person while . . . participating in any contest, demonstration, event,

 exhibition, race or show.” Aplt. App. at 63 (internal quotation marks omitted). The

 Participants Exclusion defined “any person” as including “participants.” Id. (internal

 quotation marks omitted). Mr. Heskett does not argue that any of these terms is

 ambiguous on its face. He does not dispute that he was injured while participating in

 the Event. Nor does he dispute that the Policy excluded participants from coverage.

 See Aplee. Suppl. App. at 12 (Mr. Heskett stating in response to Mesa’s summary

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 judgment motion that “[t]here is no dispute about what the policy says, but there is a

 dispute about what [Hawk] believed it said”).

       Mr. Heskett criticizes the district court for considering solely the Policy

 language, characterizing that analysis as “very safe and simplistic.” Aplt. Opening

 Br. at 5. As he did in the district court, Mr. Heskett argues on appeal that there is a

 question of fact as to the ambiguity of the Participants Exclusion in the Policy

 because the evidence he presented shows that Hawk (1) intended to purchase a policy

 that covered the participants in the Event, (2) believed that the Policy provided such

 coverage, and (3) did not learn of the Participants Exclusion until Mr. Heskett made a

 claim. Mr. Heskett cites no authority for this contention that extrinsic evidence

 regarding Hawk’s intent and belief rendered the Policy’s terms ambiguous. This

 proposition is plainly without merit.

       Colorado law is clear that “extrinsic evidence cannot create ambiguity”; rather,

 “an ambiguity must appear in the four corners of the document before extrinsic

 evidence can be considered.” Hansen, 375 P.3d at 121. Thus, Mr. Heskett cannot

 rely on extrinsic evidence of Hawk’s intent in purchasing insurance for the Event or

 its belief regarding the Policy’s terms to create ambiguity where there is none. See

 USI Props. E., Inc. v. Simpson, 938 P.2d 168, 174 n.8 (Colo. 1997) (rejecting

 arguments based on extrinsic evidence of the parties’ intent that was contrary to the

 plain and unambiguous meaning of a contract). Mr. Heskett’s argument simply

 ignores the “fundamental principle of contract law that an unambiguous contract

 cannot be made ambiguous by extrinsic evidence.” Hansen, 375 P.3d at 121.

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        Colorado’s rule prohibiting reliance on extrinsic evidence is not without

 exception. See, e.g., Bailey v. Lincoln Gen. Ins. Co., 255 P.3d 1039, 1048, 1053

 (Colo. 2011) (discussing “the doctrine of reasonable expectations,” which “assists in

 establishing whether ambiguities exist at all”). But Mr. Heskett does not invoke any

 exception to the rule, and we will not craft an argument for him. See Perry v.

 Woodward, 199 F.3d 1126, 1141 n.13 (10th Cir. 1999).

        Finally, Mr. Heskett’s ambiguity contention would be meritless even if

 Colorado law permitted a court to consider his extrinsic evidence. The evidence he

 presented on Hawk’s alleged intent, understanding, and knowledge was not aimed at

 demonstrating ambiguity in the language of the Policy. It would not show that any

 Policy term was “susceptible . . . to more than one reasonable interpretation.”

 Hansen, 375 P.3d at 120 (internal quotation marks omitted). Rather, Mr. Heskett’s

 evidence was entirely contrary to the plain language of the Participants Exclusion.

        We conclude the district court did not err in granting summary judgment in

 favor of Mesa because the plain language of the Policy unambiguously excluded

 coverage for bodily or other personal injury to participants in the Event.

 III.   Mesa’s Motion for Sanctions

        Mesa asks this court to sanction Mr. Heskett and his counsel because

 Mr. Heskett’s appeal is frivolous.

        A.    Authority and Standard for Imposing Sanctions

        Federal Rule of Appellate Procedure 38 “authorizes a court of appeals to

 award just damages, including attorney’s fees, and single or double costs if the court

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  determines that an appeal is frivolous or brought for purposes of delay.” Braley v.

  Campbell, 832 F.2d 1504, 1510 (10th Cir. 1987) (en banc). “An appeal is frivolous

  when the result is obvious, or the appellant’s arguments of error are wholly without

  merit.” Id. (internal quotation marks omitted). Under 28 U.S.C. § 1927, “[a]ny

  attorney . . . admitted to conduct cases in any court of the United States . . . who so

  multiplies the proceedings in any case unreasonably and vexatiously may be required

  by the court to satisfy personally the excess costs, expenses, and attorneys’ fees

  reasonably incurred because of such conduct.” Rule 38, either alone or in

  combination with § 1927, authorizes sanctions against an attorney “for taking a truly

  frivolous appeal on behalf of [his] client.” Braley, 832 F.2d at 1511. We have

  imposed a sanction for a frivolous appeal, for example, where appellant’s “position

  [was] not warranted by existing law or a good faith argument for the extension,

  modification or reversal of existing law,” and where the appellant made “no effort”

  “to distinguish existing case law, to bring about a reasoned extension or change in the

  law, or to point out actual errors.” Casper v. Comm’r, 805 F.2d 902, 905 (10th Cir.

  1986), overruled on other grounds, Wheeler v. Comm’r, 521 F.3d 1289, 1291 n.1

  (10th Cir. 2008).

        B.     Discussion

        Mesa contends that Mr. Heskett’s appeal is frivolous and the result is obvious

  because the sole issue he raises is wholly without merit under settled Colorado law

  governing contract interpretation—in particular the rule in Hansen that extrinsic

  evidence cannot create ambiguity in a contract, 375 P.3d at 121. Mesa asserts that

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  Mr. Heskett has unnecessarily expanded these proceedings by pursuing an appeal in

  which he (1) fails to identify any language in the Policy subject to an alternative

  interpretation, (2) continues to ignore the relevant Colorado authorities, (3) fails to

  address the district court’s reasoning, and (4) does not attempt to distinguish the

  authority the district court relied upon or cite any contrary authority. Mesa

  represents that, before this appeal was filed, it raised with Mr. Heskett’s counsel the

  lack of any factual or legal basis for the appeal and its intent to seek attorney fees.

  Mesa asks this court to require Mr. Heskett to pay just damages and double costs

  under Rule 38, and to require Mr. Heskett’s counsel to pay the excess costs,

  expenses, and attorney fees it has incurred in defending this appeal under § 1927.

        In response to Mesa’s motion, Mr. Heskett and his counsel argue the appeal is

  not frivolous because it “is an attempt to protect [Mr. Heskett’s] rights” and he “had

  a right to file the appeal.” Resp. to Mot. at 3. Counsel maintains that he “made the

  appeal as simple as possible” by asserting a single issue regarding ambiguity, so as

  not to “waste the Court[’]s time with multiple claims.” Id. As to his decision to rely

  on extrinsic evidence in arguing ambiguity, counsel asserts “[t]his is a unique

  situation and there is no case that is directly on point.” Id. at 3-4. Counsel contends

  that a claim on appeal is not frivolous merely because it is unlikely to succeed. He

  asserts that an appellant may appropriately challenge the district court’s rulings by

  “point[ing] out how and why the lower tribunal incorrectly evaluated them.” Id. at 5

  (internal quotation marks omitted). And he maintains that “a lawyer may advance a

  claim or defense not recognized under existing law if it can be supported by a good

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  faith argument for an extension, modification, or reversal of existing law.” Id. at 4

  (internal quotation marks omitted).4

         We conclude that Mr. Heskett’s appeal is frivolous and vexatious. Contrary to

  the assertions of Mr. Heskett’s counsel, the facts of this case are governed by

  well-defined, existing law. He makes no attempt to distinguish that authority, nor has

  he explained how the district court erred in applying it to the facts in this case. See

  Casper, 805 F.2d at 905. Ignoring the pertinent legal authority does not constitute a

  good-faith argument for an extension, modification, or reversal of existing law. And

  an appeal raising a single frivolous issue is still a frivolous appeal.

         We conclude that the fault in filing a frivolous appeal lies with Mr. Heskett’s

  counsel, Edward Lomena. See Braley, 832 F.2d at 1511 (“If the fault lies with the

  attorneys, that is where the impact of the action should be lodged.” (internal

  quotation marks omitted)). We see nothing in the record suggesting Mr. Heskett

  understands that his counsel has repeatedly raised a frivolous contention. An

  attorney must “exhibit some judgment” in deciding whether it is appropriate to

  pursue an appeal, id. at 1512, and “must realize, even if a party does not, that the

  decision to appeal should be a considered one, taking into account what the district

  judge has said,” id. at 1513 (internal quotation marks omitted). Thus, counsel may be

  sanctioned “for persisting in ignoring legal issues and repeating arguments previously

         4
           Due-process requirements of notice and an opportunity to be heard are
  satisfied by Mesa’s motion and Mr. Heskett’s and his counsel’s response. See
  Braley, 832 F.2d at 1515.

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  rejected by the court.” Id. It is clear that Mr. Lomena failed to exercise the

  necessary judgment in this case when he advanced no plausible legal basis for the

  claim asserted on appeal. We therefore conclude it is appropriate to order

  Mr. Lomena to pay to Mesa just damages in the amount of the reasonable excess

  costs, expenses, and attorney fees it has incurred in defending this appeal, as

  authorized by Rule 38 and § 1927.

        We affirm the order granting summary judgment in favor of Mesa but remand

  to the district court for the limited purpose of determining the amount of the sanction

  imposed on Mr. Lomena.

                                              Entered for the Court

                                              Harris L Hartz
                                              Circuit Judge

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