v. Women's Professional Rodeo Association , 2021 COA 105 ( 2021 )

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
August 5, 2021
2021COA105
No. 20CA0668, Walker v. Women’s Professional Rodeo
Association — Business Organizations — Nonprofit
Corporations — Business Judgment Rule
A division of the court of appeals considers whether members of a
nonprofit corporation that is a membership association are entitled
to judicial review of the corporate board’s interpretation and
application of the corporation’s internal rules. The division
concludes that, in the absence of allegations of fraud, arbitrary
conduct, or bad faith, such judicial review is barred by the business
judgment rule. The division also determines that although the
district court correctly dismissed the appellants’ claims under
C.R.C.P. 12(b)(5) and awarded mandatory attorney fees to the
appellees under section 13-17-201, C.R.S. 2020, it erred by
declining to hold a hearing on the reasonableness of such fees when
such a hearing was timely requested by the appellants.
COLORADO COURT OF APPEALS 2021COA105
Court of Appeals No. 20CA0668
El Paso County District Court No. 19CV32217
Honorable Thomas K. Kane, Judge
Mary Walker and Carley Cervi,
Plaintiffs-Appellants,
v.
Women’s Professional Rodeo Association, Inc.; Doreen Wintermute, in her
official capacity as Chief Executive Officer; and Sheridan-Wyo-Rodeo,
Incorporated,
Defendants-Appellees.
JUDGMENT AFFIRMED, ORDER AFFIRMED IN PART,
REVERSED IN PART, AND CASE REMANDED WITH DIRECTIONS
Division II
Opinion by JUDGE LIPINSKY
Harris and Davidson*, JJ., concur
Announced August 5, 2021
Kathie Troudt Riley, P.C., Kathie Troudt Riley, Loveland, Colorado, for
Plaintiffs-Appellants
Burns, Figa & Will, P.C., Dana L. Eismeier, Erik K. Schuessler, Greenwood
Village, Colorado, for Defendant-Appellee Women’s Professional Rodeo
Association
Mulliken Weiner Berg & Jolivet P.C., Murray I. Weiner, Colorado Springs,
Colorado, for Defendant-Appellee Doreen Wintermute
Sparks Willson, P.C., Eric V. Hall, Scott W. Johnson, Colorado Springs,
Colorado, for Defendant-Appellee Sheridan-Wyo-Rodeo, Incorporated
*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art.
VI, § 5(3), and § 24-51-1105, C.R.S. 2020.
¶1 Alexis de Tocqueville’s observation about Americans’
propensity to form associations rings just as true today as it did
more than 180 years ago:
Americans of all ages, all stations in life, and
all types of disposition are forever forming
associations. There are not only commercial
and industrial associations in which all take
part, but others of a thousand different types
— religious, moral, serious, futile, very general
and very limited, immensely large and very
minute.
Alexis de Tocqueville, Democracy in America 513 (J.P. Mayer ed.,
George Lawrence trans., Anchor Books 1969). And many of our
nation’s associations have adopted rules to govern themselves.
¶2 Although associations have long been deeply ingrained in
American culture, in this case we decide a novel issue under
Colorado law: whether members of an association — here a
nonprofit corporation — may obtain a legal remedy against the
association’s board of directors when the board allegedly violates
the association’s rules to the members’ detriment.
¶3 Plaintiffs, Mary Walker and Carley Cervi, are professional
barrel racers. Barrel racing is a timed rodeo event in which the
participant, usually a woman, must guide her galloping horse
1
through a complete circle around each of three barrels, creating a
cloverleaf pattern, and back to the starting point. Cooper v.
Comm’r, No. 16331-04S, 2005 WL 1693673, at *1 n.3 (T.C. July 21,
2005) (unpublished opinion) (not precedential pursuant to I.R.C.
§ 7463(b)).
¶4 The Women’s Professional Rodeo Association, Inc. (the WPRA),
was founded in 1948 as a Colorado nonprofit corporation for,
among other purposes, organizing female professional rodeo
contestants and setting standards for “cowgirl events.” The WPRA
adopted approximately 200 pages of rules, including rules
addressing its internal governance and the procedures at rodeo
events in which its members participate. WPRA, 2019 Official Rule
Book for the Women’s Professional Rodeo Association (Dec. 2018),
https://perma.cc/MJU8-2EAV (the Rules).
¶5 Walker and Cervi — members of the WPRA — dispute the
WPRA’s interpretation of the Rules applicable when a majority of
contestants who registered for barrel racing at a rodeo do not
compete because of dangerous arena conditions. Walker and Cervi
are two of the riders who competed in barrel racing at the Sheridan,
Wyoming, rodeo (the Rodeo) in 2019. Most of the other contestants
2
did not compete in barrel racing at the Rodeo because, the day
before the official start date of the Rodeo, the judges declared the
arena conditions dangerous as a result of heavy rains.
¶6 Walker and Cervi filed this case against the WPRA; Doreen
Wintermute in her official capacity as chief executive officer of the
WPRA; and Sheridan-Wyo-Rodeo, Incorporated (Sheridan
Incorporated), the organizer of the Rodeo, after the WPRA did not
pay Walker and Cervi the prize money to which they claim they
were entitled after they finished in first and second place,
respectively, in barrel racing conducted at the Rodeo after the arena
conditions improved. They appeal the district court’s orders
dismissing their claims for failure to state a claim upon which relief
can be granted and awarding attorney fees to the WPRA and
Wintermute without a hearing.
¶7 We affirm the district court’s entry of judgment in favor of the
WPRA, Wintermute, and Sheridan Incorporated and its ruling that
the WPRA and Wintermute are entitled to recover attorney fees.
However, we reverse the court’s award of a specific amount of
attorney fees and remand the case to the district court to conduct a
3
hearing on the reasonable amount of attorney fees awardable to the
WPRA and Wintermute.
¶8 Before we turn to the facts underlying Walker and Cervi’s
claims, we review the Rules applicable to this case.
I. The Applicable Rules
¶9 Under the Rules, a barrel racer competing at a
WPRA-sanctioned rodeo may participate in either “barrel racing
slack” or regularly scheduled performances. See Rule 12.6. The
“slack” consists of barrel races scheduled before or after the
regularly scheduled performances. Rule 12.6.1. The record
indicates that a racer cannot compete in both the “slack” and the
regularly scheduled performances.
¶ 10 Rodeo organizers offer “added money” to attract contestants to
participate in their rodeos. See Rule 10.1.6-10. The prize money
“pot” awarded to barrel racers at a rodeo consists of the
contestants’ entry fees plus any added money. In addition to prize
money, a contestant in a WPRA-sanctioned barrel race can earn
points. Rule 15. Upon reaching specified point totals, a racer
qualifies for events at future rodeos. Rule 15.1.
4
¶ 11 The Rules provide an alternate payout system for barrel racing
contestants when a barrel race is canceled due to dangerous
conditions. Under Rule 10.9, known as the “day money” rule,
if barrel race is cancelled after some have
competed due to dangerous conditions, the
event may be paid off using the day money
system in order not to sacrifice money won at
that rodeo or event.
....
In the case of cancellation of an event . . . if
half or more of the contestants competed, then
all added money plus applicable entry fees are
to be paid out to those contestants and points
will count. If less than half compete, a
prorated portion of the added money plus
applicable entry fees are to be paid out and
only those points will count.
Rule 10.9.1, 10.9.3. If the day money rule applies, each contestant
who competed in “barrel race,” as that term appears in the day
money rule, receives the same payout, based on the formula in the
rule, regardless of her performance. Rule 10.9.2. The day money
rule does not specify whether “barrel race” refers to a single event or
all the barrel races conducted at a rodeo.
¶ 12 The Rules also contain a grievance procedure if a WPRA
member believes the WPRA, its board of directors, or an individual
5
director violated the Rules “due to an official act or failure to act.”
Rule 1.4.2. The Rules specify that a member must submit any
grievance in writing to the WPRA’s board of directors. Id. The
board will then “determine the correctness of the grievance” at its
next regular meeting, which the complaining member may attend.
Id.
¶ 13 The Rules also contain an appeal procedure. If a member is
dissatisfied with the board’s resolution of her grievance, she may
submit a written appeal to the board. Id. As part of her appeal, she
may present any “new data or evidence” and “any new witnesses” at
the board’s next regular meeting. Id. The Rules do not specify
every procedural step applicable to grievances and appeals.
¶ 14 Significantly, the Rules grant the WPRA board discretion in
operating the organization and applying the Rules. Rule 4.1.2
states that “[t]he Board of Directors shall have discretionary power
to conduct the business and affairs of the WPRA . . . .”
II. Background Facts
¶ 15 Walker and Cervi registered to compete in WPRA-sanctioned
barrel racing at the Rodeo, scheduled for July 10 through 13, 2019.
Because the WPRA sanctioned the event, contestants could earn
6
both prize money and points. Sheridan Incorporated contributed
$12,000 in “added money” to the “pot.” Nearly 150 barrel racers
registered to compete at the Rodeo. Approximately 100 of them
were slated to race in the “slack” and forty-eight were scheduled to
race in the regularly scheduled performances. The barrel racing at
the Rodeo was to take place in an open-air arena.
¶ 16 The “slack” took place the day before the official start date of
the Rodeo. The area had experienced heavy rains that day,
however, and the arena was muddy. Before the “slack,”
approximately forty-five of the contestants announced that they
would not compete.
¶ 17 Thirty-six other contestants showed up to compete in the
“slack.” But after only three contestants rode, the arena judges
declared the ground conditions too dangerous for further racing and
canceled the “slack.”
¶ 18 The regularly scheduled performances at the Rodeo took place
over the next several days; by then, the arena conditions had
improved. Walker took first place and Cervi took second in the
regularly scheduled performances.
7
¶ 19 Walker and Cervi alleged that, following the cancellation of the
“slack,” a WPRA executive consulted with a Sheridan Incorporated
representative and the arena judges and decided to refund the entry
fees paid by those barrel racers who were present and prepared to
compete at the Rodeo. Walker and Cervi further allege that the
WPRA directors on the WPRA’s Competition Committee voted not to
count the points earned by the barrel racers who competed at the
Rodeo and to reduce the “added money” awardable for participation
in the Rodeo from $12,000 to $4,000. This decision affected not
only the contestants who had been prepared to race in the “slack,”
but also the contestants who competed in the regularly scheduled
performance at the Rodeo.
¶ 20 A few days after the Rodeo, the WPRA published a “Payout
Update” advising its members that, rather than the original
advertised payout, which included the $12,000 “added money,” the
barrel racers who registered for the Rodeo would each receive an
equal sum of money pursuant to the day money rule. The Payout
Update also said that any points earned at the Rodeo would not be
counted.
8
¶ 21 Walker and Cervi alleged this was the first time they learned
they would not be receiving the payouts and points they expected to
receive for their performances at the Rodeo. Under the reduced
payouts announced in the Payout Update, Walker and Cervi each
received $571.04, rather than $4,743.24 and $3,794.59, which they
respectively would have earned if the day money rule had not
applied. Neither received points they could apply towards
qualifying for future rodeos.
¶ 22 Walker and Cervi filed a grievance with the WPRA challenging
the decisions to apply the day money rule, to refund the
contestants’ entry fees, and not to count the points they otherwise
would have earned at the Rodeo.
¶ 23 The WPRA board of directors met telephonically to consider
Walker and Cervi’s grievance. Although the board allowed Walker
and Cervi to speak at the telephonic meeting, Walker and Cervi
alleged that the board limited their presentation to thirty minutes,
the board would not allow them to record the meeting, and the
WPRA kept no record of the meeting. The Rules are silent, however,
on whether a member who speaks at a meeting regarding a
9
grievance is subject to a time limit or whether she may record the
proceedings.
¶ 24 Following the telephonic meeting, the WPRA issued a “Payout
Update — Revised,” announcing that, while the barrel racing
contestants at the Rodeo would still be paid pursuant to the day
money rule, any points earned at the Rodeo would be counted.
¶ 25 Walker and Cervi filed an appeal with the WPRA board of
directors. Walker and Cervi allege that the board told them they
would not be allowed to call witnesses at, record the proceedings at,
or bring a court reporter to the meeting. Other than the references
to presenting “new data or evidence” and “new witnesses,” Rule
1.4.2, however, the Rules do not address the procedures for
reviewing an appeal.
¶ 26 Because of these restrictions, Walker and Cervi complained
that the WPRA was denying them a meaningful appeal. The WPRA
denied the appeal.
¶ 27 Walker and Cervi then filed suit against the WPRA,
Wintermute, and other defendants not relevant to this appeal. In
their complaint, Walker and Cervi alleged that the WPRA and
Wintermute had engaged in ultra vires acts, breached their
10
fiduciary duty to Walker and Cervi, and breached a contract with
them.
¶ 28 In their complaint, Walker and Cervi sought a declaratory
judgment stating, in relevant part, that
(1) the “Rodeo was not canceled”;
(2) the “[u]se of the day money system for payouts [at the
Rodeo] was not authorized under the Rules”;
(3) Walker and Cervi were entitled to payouts of $4,743.24
and $3,794.59, respectively;
(4) Walker “was unlawfully deprived of the opportunity to
compete at the Wrangler Pro Rodeo Tour Finale”;
(5) Cervi “was entitled to compete at the Mountain States
Circuit Finals Rodeo” based on the points she would have
received for her performance at the Rodeo; and
(6) Walker and Cervi “are entitled to an award of points
corresponding to the payout to which they are entitled . . . .”
¶ 29 They further sought a mandatory injunction requiring the
WPRA to credit Walker and Cervi with those points and to publicly
announce, and specifically advise the other major rodeo-sanctioning
association of, the corrected number of points awarded to Walker
11
and Cervi. They also asked the court to appoint a receiver to
manage the WPRA’s affairs.
¶ 30 The WPRA moved to dismiss Walker and Cervi’s complaint for
failure to state a claim upon which relief can be granted pursuant
to C.R.C.P. 12(b)(5). Together with their response to the dismissal
motion, Walker and Cervi filed an amended complaint in which they
added Sheridan Incorporated as a defendant and substituted a
claim for judicial dissolution of the WPRA in place of the ultra vires
acts claim. The WPRA filed a motion to dismiss the amended
complaint.
¶ 31 Wintermute and Sheridan Incorporated also filed motions to
dismiss. Wintermute’s motion raised similar arguments to those in
the WPRA’s dismissal motions. In its motion, Sheridan
Incorporated contended that it was not subject to personal
jurisdiction in Colorado. In their dismissal motions, the WPRA and
Wintermute sought an award of their attorney fees pursuant to
section 13-17-201, C.R.S. 2020.
¶ 32 The district court granted all three motions to dismiss and
awarded $18,748.00 in attorney fees to the WPRA and $11,445.50
12
in attorney fees to Wintermute without conducting a hearing on the
reasonableness of such fees. Walker and Cervi appeal.
III. Discussion
¶ 33 Walker and Cervi assert two principal errors on appeal. First,
Walker and Cervi contend that the trial court erred by granting the
motions to dismiss. For purposes of this appeal, Walker and Cervi
challenge the court’s determinations that
(1) the WPRA did not act in an oppressive or illegal manner
in applying the day money rule or in conducting the grievance
process;
(2) the WPRA does not owe fiduciary duties to its members;
(3) a breach of contract claim against a nonprofit
corporation cannot be based solely an alleged violation of its
internal rules;
(4) Walker and Cervi did not state a claim for injunctive
relief;
(5) they did not state a claim for dissolution of the WPRA or
for appointment of a receiver;
13
(6) they did “not allege any facts that raise a reasonable
inference” that the court could exercise personal jurisdiction
over Sheridan Incorporated;
(7) Sheridan Incorporated is an indispensable party to the
litigation;
(8) Walker and Cervi’s only claims pleaded against
Wintermute were those for breach of fiduciary duty and breach
of contract;
(9) the Rules did not constitute a contract between
Wintermute and the members of the WPRA; and
(10) although Wintermute owes fiduciary duties to the WPRA,
she does not owe such duties to the individual members of the
WPRA.
¶ 34 Second, Walker and Cervi assert that the district court erred
by (1) determining that their action sounded in tort and, thus, that
the WPRA and Wintermute were entitled to an award of attorney
fees under section 13-17-201 once the court dismissed Walker and
Cervi’s claims against them; and (2) declining to hold a hearing on
the reasonableness of the WPRA’s and Wintermute’s requested
attorney fees.
14
¶ 35 We affirm the district court’s judgment in favor of the WPRA,
Wintermute, and Sheridan Incorporated. We specifically hold that
Walker and Cervi’s claims for breach of fiduciary duty, breach of
contract, injunctive relief, and declaratory judgment are barred
under the business judgment rule. In addition, we hold that their
claim for judicial dissolution fails because they did not allege the
type of oppressive conduct necessary to obtain that drastic remedy.
We conclude, however, that, while an award of attorney fees to the
WPRA and Wintermute is mandatory under section 13-17-201, the
district court erred by awarding fees without holding a hearing on
whether such fees were reasonable. Thus, we reverse the district
court’s award of a specific amount of attorney fees to the WPRA and
Wintermute, and remand with instructions for the district court to
conduct such a hearing.
A. Standard of Review
¶ 36 We review de novo an order dismissing claims for failure to
state a claim upon which relief can be granted under C.R.C.P.
12(b)(5). See Hess v. Hobart, 2020 COA 139M-2, ¶ 11, 477 P.3d
771, 774. “In doing so, we accept all factual allegations in the
15
complaint as true, viewing them in a light most favorable to the
plaintiff.” Id.¶ 37 In Warne v. Hall, our supreme court adopted the United States
Supreme Court’s “plausibility standard” for determining whether a
plaintiff stated a claim upon which relief can granted. 2016 CO 50,
¶ 24, 373 P.3d 588, 595 (citing Ashcroft v. Iqbal, 556 U.S. 662(2009)). Under that test, “the factual allegations of the complaint
must be enough to raise a right to relief ‘above the speculative level,’
and provide ‘plausible grounds’” to create an inference that the
allegations are true. Id. at ¶ 9, 373 P.3d at 591 (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 591 (2007)). “To survive a motion
to dismiss for failure to state a claim, a plaintiff must state a claim
for relief that is plausible (not speculative) on its face.” Hess, ¶ 11,
477 P.3d at 774. If a claim does not satisfy the “plausible grounds”
test, it must be dismissed for failure to state a claim upon which
relief can be granted. Warne, ¶ 9, 373 P.3d at 591.
B. Interpretation of the WPRA’s Rules
¶ 38 Each of Walker and Cervi’s claims against the WPRA rests on,
among other allegations, their contention that the WPRA failed to
follow or misapplied certain of the Rules — most notably, the day
16
money rule and the Rules governing grievances and appeals.
Walker and Cervi contend that the day money rule was inapplicable
to the events at the Rodeo because the “barrel race” at the Rodeo
had not been “canceled,” as some of the contestants (including
Walker and Cervi) were able to compete in the regularly scheduled
performances. Under Walker and Cervi’s reading of the day money
rule, “barrel race” is canceled only if all barrel racing at a particular
rodeo is canceled. They reason that the cancellation of the “slack”
alone does not mean that “barrel race” at the Rodeo was “canceled.”
¶ 39 As explained below, however, because Walker and Cervi’s
allegations center on the board’s interpretation and application of
certain of the Rules, and they do not allege fraud, arbitrariness, or
bad faith, a court cannot interfere with the board’s decisions.
Accordingly, we agree with the district court that Walker and Cervi’s
claims against the WPRA do not meet the plausibility standard
articulated in Warne and must be dismissed under C.R.C.P.
12(b)(5).
1. The Business Judgment Rule
¶ 40 Under the business judgment rule, “[t]he good faith acts of
directors of profit or non-profit corporations which are within the
17
powers of the corporation and within the exercise of an honest
business judgment are valid.” Rywalt v. Writer Corp., 34 Colo. App.
334, 337, 526 P.2d 316, 317 (1974). “Courts will not, at the
instance of stockholders or otherwise, interfere with or regulate the
conduct of the directors in the reasonable and honest exercise of
their judgment and duties.” Id. Because fraud, self-dealing,
unconscionability, and similar conduct are “incompatible with good
faith and the exercise of honest judgment,” the business judgment
rule does not shield the actions of directors who engage in this type
of wrongful conduct. Fletcher v. Dakota, Inc., 948 N.Y.S.2d 263,
267 (App. Div. 2012); see Rywalt, 34 Colo. App. at 337, 526 P.2d at
317 (holding that “[t]here being no evidence that the directors acted
in bad faith or in fraud,” the court would not interfere with the
board’s decision).
¶ 41 The business judgment rule rests on the “reality that courts
‘are ill equipped and infrequently called on to evaluate what are and
must be essentially business judgments.’” Curtis v. Nevens, 31 P.3d
146, 151 (Colo. 2001) (quoting Hirsch v. Jones Intercable, Inc., 984
P.2d 629, 638 (Colo. 1999)). Courts presume that a corporation’s
18
directors possess the expertise and knowledge to make business
decisions.
¶ 42 This presumption applies to voluntary membership
associations, as well as to for-profit corporations. Bloom v. Nat’l
Collegiate Athletic Ass’n, 93 P.3d 621, 624 (Colo. App. 2004)
(“Courts are reluctant to intervene, except on the most limited
grounds, in the internal affairs of voluntary associations.”). “In the
absence of some clearly arbitrary and unreasonable invasion of a
member’s rights, courts will not review the internal operation and
affairs of voluntary organizations.” Jorgensen Realty, Inc. v. Box,
701 P.2d 1256, 1258 (Colo. App. 1985); see also NAACP v. Golding,
679 A.2d 554, 561 (Md. 1996) (acknowledging that the rule “limiting
courts’ intervention in the internal disputes of unincorporated
organizations absent misconduct like fraud is in essence analogous
to the business judgment rule applicable to incorporated
organizations”).
19
2. Because Walker and Cervi Did Not Allege that the WPRA
Engaged in Fraudulent or Similar Wrongful Conduct, the
Courts Will Not Override the WPRA’s Interpretation and
Application of the Rules
¶ 43 Walker and Cervi did not plead that the WPRA engaged in the
type of wrongful conduct that would justify disregarding the
business judgment rule and would allow a court to second-guess
the WPRA’s internal decision-making. This is particularly true
because the Rules at issue are either vague or susceptible of more
than one interpretation and choosing one interpretation over
another would favor certain members of the WPRA over other
members.
¶ 44 In weighing the consequences of the judges’ determination
that the conditions for the “slack” at the Rodeo were dangerous, the
WPRA board interpreted and applied Rules that leave room for
interpretation. Specifically, the Rules do not state whether the day
money rule applies when (1) the “slack” is canceled after some, but
not all, registered competitors have raced in it; and (2) the regularly
scheduled performance at the same rodeo then proceeds as
scheduled. More generally, the Rules do not make clear whether
“barrel race” can mean the “slack” alone or means all the barrel
20
racing conducted at a single rodeo. As noted above, the WPRA
determined that the day money rule applies when, as here, the
“slack” at a rodeo is canceled but the regularly scheduled
performances at the same rodeo proceed.
¶ 45 Similarly, the board exercised its discretion when it decided
that Walker and Cervi were not entitled to speak indefinitely about
their grievance at the board meeting, receive a record of such
proceedings, or present their appeal at a meeting of the board.
Significantly, Walker and Cervi did not allege that the WPRA
violated their due process rights by making these decisions.
¶ 46 These are archetypical examples of corporate board decisions
that courts will not second-guess under the business judgment rule
in the absence of allegations of fraud, arbitrary conduct, or bad
faith. Moreover, although Walker and Cervi pleaded that, before the
regularly scheduled performances at the Rodeo, unnamed WPRA
board members advised unnamed “select competitors” — but not
Walker and Cervi — that the WPRA would not count the points
earned at the Rodeo, such vague allegations fall short of stating the
type of wrongful conduct that would justify circumventing the
business judgment rule. Notably, Walker and Cervi do not indicate
21
who disclosed this information, to whom the information was
disclosed, or how the disclosure to the “select competitors” caused
them damages. See Grieveson v. Anderson, 538 F.3d 763, 777-78
(7th Cir. 2008) (noting that “problematic for [the plaintiff was] his
failure to tie actions of the named defendants to the injuries he
allegedly suffered”).
¶ 47 Moreover, the business judgment rule is particularly
applicable to the WPRA board’s interpretation of the day money rule
because that interpretation benefited some of its members to the
detriment of others. Had the WPRA decided not to apply the day
money rule in connection with the Rodeo, Walker and Cervi would
have benefitted through a larger payout and the WPRA members
who did not compete at the Rodeo would have received nothing and
lost their entry fees. In contrast, the WPRA’s interpretation and
application of the day money rule meant that each member who
competed in barrel racing at the Rodeo received the same payout.
Thus, numerous members of the WPRA, other than Walker and
Cervi, benefitted from the WPRA’s application of the day money
rule. The Board decided, under its reading of the day money rule,
to provide some financial recompense to those WPRA members who
22
were unable to compete at the Rodeo through no fault of their own.
Jurists whose experience with barrel racing is limited to watching
from the stands lack the expertise the WPRA possesses in deciding
the appropriate payouts to the contestants who raced at the Rodeo
and to those whose expectations were dashed when the “slack” was
canceled.
¶ 48 We also note that, when they joined the WPRA, Walker and
Cervi agreed to be bound by the Rules. See Jorgensen Realty, Inc.,
701 P.2d at 1257 (holding that, by joining a voluntary membership
organization, “a member agrees to submit to its rules and
regulations and assumes the obligations incident to membership”).
Even if the business judgment rule did not apply here, as noted
above, Rule 4.1.2 granted the WPRA board “discretionary power to
conduct the business and affairs of the WPRA . . . .” Walker and
Cervi cannot now disavow that Rule 4.1.2 grants the WPRA board
the discretion to conduct the WPRA’s business and affairs without
judicial oversight in the ordinary course of business.
¶ 49 For the above reasons, we hold that the district court correctly
concluded that Walker and Cervi’s claims for breach of fiduciary
duty, breach of contract, injunctive relief, and declaratory judgment
23
— all of which challenge the WPRA board’s interpretation of the day
money rule and the WPRA’s internal procedures — fail to meet the
plausibility standard under Warne. See Colo. Homes, Ltd. v. Loerch-
Wilson, 43 P.3d 718, 724 (Colo. App. 2001) (applying the business
judgment rule in a case involving claims for breach of contract and
breach of fiduciary duty); Rywalt, 34 Colo. App. at 337, 526 P.2d at
317 (refusing to uphold an injunction because of the business
judgment rule); Romeo v. Barrella, 921 N.Y.S.2d 83, 87-88 (App.
Div. 2011) (affirming the dismissal of declaratory judgment claims
based on the business judgment rule).
C. Judicial Dissolution of a Nonprofit Corporation
¶ 50 Although we conclude that the business judgment rule
precludes judicial review of the WPRA board’s interpretation and
application of the Rules, we separately review Walker and Cervi’s
claim for judicial dissolution of the WPRA and appointment of a
receiver to conduct its affairs. We conclude that the district court
correctly dismissed their judicial dissolution and receivership
claims because Walker and Cervi did not plead the type of wrongful
board conduct that would justify granting such drastic relief.
24
1. Applicable Law
¶ 51 Under the Colorado Revised Nonprofit Corporation Act (NCA),
a member of a nonprofit corporation may seek judicial dissolution
of the corporation if the directors “have acted, are acting, or will act
in a manner that is illegal, oppressive, or fraudulent.”
§ 7-134-301(2)(b), C.R.S. 2020.
¶ 52 Dissolution of a corporation is “a drastic remedy and [is] rarely
imposed.” Pueblo Bancorporation v. Lindoe, Inc., 37 P.3d 492, 496
(Colo. App. 2001), aff’d, 63 P.3d 353 (Colo. 2003). Walker and
Cervi do not cite to any Colorado case applying the remedy of
judicial dissolution to an entity other than a closely held
corporation. The only published Colorado cases affirming the
judicial dissolution of an entity involved closely held corporations.
See Colt v. Mt. Princeton Trout Club, Inc., 78 P.3d 1115, 1118 (Colo.
App. 2003); Polk v. Hergert Land & Cattle Co., 5 P.3d 402, 404
(Colo. App. 2000). And even in the context of a closely held
corporation, oppression “should be deemed to arise only when the
majority conduct substantially defeats expectations that, objectively
viewed, were both reasonable under the circumstances and were
25
central to the [member’s] decision to join the venture.” Colt, 78
P.3d at 1120 (citation omitted).
2. The District Court Did Not Err by Concluding that Walker and
Cervi Failed to State a Claim for Judicial Dissolution
¶ 53 Having concluded that the WPRA’s interpretation and
application of the Rules receives the protection of the business
judgment rule, we consider whether Walker and Cervi’s remaining
allegations regarding the WPRA’s failure to maintain records state a
plausible claim for judicial dissolution under section
7-134-301(2)(b). Even accepting these allegations as true, we agree
with the district court that the WPRA’s alleged record-keeping
deficiencies do not justify the extreme step of the WPRA’s
dissolution.
¶ 54 More fundamentally, Walker and Cervi do not point to a single
case in which a court, based on oppressive behavior, judicially
dissolved an entity that was not a closely held corporation. All the
judicial dissolution cases they cite concerned oppressive conduct by
majority shareholders of closely held corporations that harmed
minority shareholders. See Colt, 78 P.3d at 1118; Polk, 5 P.3d at
404.
26
¶ 55 A closely held corporation is materially different from a
nonprofit corporation that is a membership association, such as the
WPRA, because, in the former, “the relationship between directors
and shareholders is akin to a relationship among partners,” such
that the directors and majority shareholders owe heightened
fiduciary duties to the minority shareholders. Colt, 78 P.3d at
1119; see In re Kemp & Beatley, Inc., 473 N.E.2d 1173, 1178 (N.Y.
1984) (“Unlike the typical shareholder in a publicly held
corporation, who may be simply an investor or a speculator and
cares nothing for the responsibilities of management, the
shareholder in a close corporation is a co-owner of the business and
wants the privileges and powers that go with ownership.” (quoting 1
F. Hodge O’Neal, Close Corporations: Law and Practice § 1.07 (2d
ed. 1971))).
¶ 56 Walker and Cervi do not allege that the WPRA is a closely held
corporation and do not cite any legal authority in support of their
argument that the board of a membership association owes its
members the same heightened duties as the majority shareholders
of a closely held corporation owe to the minority shareholders.
27
¶ 57 In any event, we agree with the district court that, even if the
board of directors of the WPRA owed fiduciary duties to Walker and
Cervi, and even if the board’s failure to maintain adequate corporate
records could constitute a breach of fiduciary duty, a “simple
allegation of breach of fiduciary duty is not enough to dissolve a
corporation that is not closely-held.” Walker and Cervi do not cite
to any case, from any jurisdiction, holding that a corporation’s
deficient record-keeping is grounds for judicial dissolution. See
Pueblo Bancorporation, 37 P.3d at 496 (holding that the “drastic
remedy” of judicial dissolution is not justified absent allegations of
self-dealing, conflicts of interest, misapplication or diminishing of
corporate assets, or illegal behavior).
¶ 58 Accordingly, we hold that Walker and Cervi did not plead a
plausible claim for judicial dissolution. And, because the NCA only
contemplates the appointment of a receiver in the context of a
judicial dissolution claim, see §§ 7-134-302(3), 7-134-303(1), C.R.S.
2020, we need not separately consider whether Walker and Cervi’s
receivership claim stated a claim upon which relief can be granted.
28
D. Personal Jurisdiction Over Sheridan Incorporated
¶ 59 To the extent Walker and Cervi seek unique relief from
Sheridan Incorporated, such as an award of additional added
money, we must consider whether the district court erred by
concluding that it lacked personal jurisdiction over Sheridan
Incorporated. We undertake this analysis because the business
judgment rule does not apply to Walker and Cervi’s claims against
Sheridan Incorporated. As we understand those claims, they do not
challenge Sheridan Incorporated’s internal decision-making, but,
rather, Sheridan Incorporated’s actions taken at the behest of the
WPRA board.
1. Personal Jurisdiction Under the Long Arm Statute
¶ 60 In enacting the long arm statute, § 13-1-124, C.R.S. 2020, the
Colorado General Assembly “intended to extend the jurisdiction of
our courts to the fullest extent permitted by the due process
clauses of the United States and Colorado Constitutions.” Fleet
Leasing, Inc. v. Dist. Ct., 649 P.2d 1074, 1078 (Colo. 1982). “Due
process requires that a defendant have certain minimum contacts
with the forum state so that he may foresee being answerable in
court there. The quantity and nature of the minimum contacts
29
required depends on whether the plaintiff alleges specific or general
jurisdiction.” Archangel Diamond Corp. v. Lukoil, 123 P.3d 1187,
1194 (Colo. 2005) (citation omitted).
¶ 61 Under the concept of general jurisdiction, a court may exercise
jurisdiction over a defendant “for any cause of action arising from
the defendant’s activities, even if those activities occurred outside
the forum state.” Clean Energy Collective LLC v. Borrego Solar Sys.,
Inc., 2017 CO 27, ¶ 10, 394 P.3d 1114, 1117. For a nonresident
defendant to be subject to general jurisdiction in a particular state,
the defendant’s contacts with that state must be “so ‘continuous
and systematic’ as to render [it] essentially at home in the forum
State.” Magill v. Ford Motor Co., 2016 CO 57, ¶ 17, 379 P.3d 1033,
1037 (citation omitted). This is such a high bar, however, that a
“nonresident defendant’s contacts with the state will rarely justify
exercising general jurisdiction.” Id.¶ 62 In contrast, “[s]pecific jurisdiction is properly exercised where
the injuries triggering litigation arise out of and are related to
‘activities that are significant and purposefully directed by the
defendant at residents of the forum.’” Archangel Diamond Corp.,
123 P.3d at 1194 (quoting Keefe v. Kirschenbaum & Kirschenbaum,
30
P.C., 40 P.3d 1267, 1271 (Colo. 2002)). The specific jurisdiction
analysis requires a two-part minimum contacts inquiry: (1)
“whether the defendant purposefully availed himself of the privilege
of conducting business in the forum state,” and (2) “whether the
litigation ‘arises out of’ the defendant’s forum-related contacts.” Id.(citation omitted). To demonstrate “purposeful availment,” the
plaintiff “must show that the defendant deliberately ‘reached out
beyond’ its home — by, for example, ‘exploi[ting] a market’ in the
forum State or entering a contractual relationship centered there.”
Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 592 U.S. ___, ___, 141
S. Ct. 1017, 1025 (2021). Under the “arising out of” prong, “the
actions of the defendant giving rise to the litigation must have
created a ‘substantial connection’ with the forum state.” Archangel
Diamond Corp., 123 P.3d at 1194 (citation omitted).
¶ 63 “When a trial court decides [a] motion [to dismiss] on
documentary evidence alone, the plaintiff need only make a prima
facie showing of personal jurisdiction by raising a reasonable
inference that the court has jurisdiction over the defendant.”
Giduck v. Niblett, 2014 COA 86, ¶ 13, 408 P.3d 856, 862. Any
31
conflicts in the evidence “must be resolved in favor of the plaintiff.”
Id.
2. The District Court Did Not Err by Finding That Walker and
Cervi Did Not Raise a Reasonable Inference of Jurisdiction
Over Sheridan Incorporated
¶ 64 The district court concluded that Walker and Cervi’s factual
allegations and affidavits failed to establish that the court could
exercise general or specific personal jurisdiction over Sheridan
Incorporated. Specifically, the court found that
 Sheridan Incorporated is a Wyoming nonprofit
corporation with its principal place of business in
Wyoming.
 Sheridan Incorporated “does not have a registered agent,
an office, a place of business, any assets, or any
employees in Colorado.”
 Sheridan Incorporated does not recruit Colorado
residents, directly or through an intermediary in
Colorado, for employment inside or outside of Colorado.
 Sheridan Incorporated does not directly advertise in
Colorado.
32
 Sheridan Incorporated’s sole purpose is to organize and
run the Rodeo, which takes place in Wyoming.
 Sheridan Incorporated does not oversee any rodeos
outside Wyoming and does not conduct any business
outside Wyoming.
¶ 65 The court further noted that Walker and Cervi did not allege
that Sheridan Incorporated does any business in Colorado or has
any connection with Colorado other than its contract with the
WPRA concerning the Rodeo. Thus, it determined that Walker and
Cervi’s allegations did not raise a reasonable inference that it had
specific or general jurisdiction over Sheridan Incorporated.
¶ 66 Applying the first step of the minimum contacts analysis for
specific jurisdiction, a nonresident defendant is not subject to
personal jurisdiction in Colorado solely because the defendant
entered into a contract with a Colorado resident. That singular
connection, particularly in relation to an event outside Colorado,
does not establish that the nonresident “reached out beyond” its
own state to enjoy the benefits of conducting business in Colorado.
See Ford Motor Co., 592 U.S. at ___, 141 S. Ct. at 1025.
33
¶ 67 For this reason, Walker and Cervi’s contention that Sheridan
Incorporated subjected itself to specific personal jurisdiction in
Colorado by entering into the contract with the WPRA cannot be
squared with the minimum contacts analysis. Rather, “the
defendant’s conduct [must] connect[] him to the forum in a
meaningful way,” Giduck, ¶ 16, 408 P.3d at 863 (citation omitted),
such as by intentionally targeting the forum state market and its
consumers, see Ford Motor Co., 592 U.S. at ___, 141 S. Ct. at 1025.
A “defendant’s relationship with a plaintiff or third party, standing
alone, is an insufficient basis for jurisdiction.” Giduck, ¶ 16, 408
P.3d at 863 (citation omitted).
¶ 68 Thus, we conclude that Walker and Cervi’s allegations did not
create a reasonable inference that the district court could exercise
personal jurisdiction over Sheridan Incorporated. (Because we held
above that the district court properly dismissed Walker and Cervi’s
only claims against the WPRA involving Sheridan Incorporated —
their claims for a declaratory judgment and injunctive relief — we
do not need to consider whether Sheridan Incorporated is an
indispensable party to those claims.)
34
E. Walker and Cervi’s Claims Against Wintermute Fail to State
Claims Upon Which Relief Can Be Granted
¶ 69 In considering whether the district court erred by dismissing
Walker and Cervi’s claims against Wintermute individually, we
initially consider Walker and Cervi’s contention that Wintermute
admitted the allegations underlying their claims for judicial
dissolution, declaratory judgment, injunctive relief, and
appointment of a receiver by not specifically responding to them.
We agree with the district court that Wintermute was not required
to respond to these claims because they were not directed to her in
an individual capacity. Rather, Walker and Cervi’s only claims
against Wintermute individually were those for breach of fiduciary
duty and breach of contract.
¶ 70 Neither of these claims stated a claim upon which relief can be
granted against Wintermute, however. The directors and officers of
a nonprofit corporation “are not, as such, personally liable for the
acts, debts, liabilities, or obligations” of the corporation.
§ 7-126-103, C.R.S. 2020. Although there are exceptions to this
rule, Walker and Cervi did not plead that any of these exceptions —
such as the alter ego doctrine — applies here. See Krystkowiak v.
35
W.O. Brisben Cos., Inc., 90 P.3d 859, 867 n.7 (Colo. 2004). And,
under the plausibility standard, we do not assume the truth of
Walker and Cervi’s conclusory statements that Wintermute acted in
an illegal and oppressive manner and in bad faith, and that she
breached a duty of loyalty to Walker and Cervi. Scott v. Scott, 2018
COA 25, ¶ 19, 48 P.3d 626, 632 (“[F]acts pleaded as legal
conclusions (i.e., conclusory statements) are not entitled to the
assumption that they are true.”).
¶ 71 Further, to the extent Walker and Cervi allege that Wintermute
misapplied the day money rule and the Rules concerning grievances
and appeals, the business judgment rule bars such claims, as
discussed above.
F. Attorney Fees
1. Mandatory Fee Awards Under Section 13-17-201
¶ 72 “Whether a statute mandates an award of costs or attorney
fees is a question of statutory interpretation and is thus a question
of law we review de novo.” Crandall v. City of Denver, 238 P.3d 659,
661 (Colo. 2010).
36
a. The Applicability of Section 13-17-201
¶ 73 Under section 13-17-201, an award of attorney fees to the
defendant is mandatory whenever a trial court dismisses a tort
action. § 13-17-201; Kreft v. Adolph Coors Co., 170 P.3d 854, 859
(Colo. App. 2007). “When a plaintiff has pleaded both tort and
non-tort claims, a court must determine, as a matter of law,
whether the essence of the action was one in tort, in order to
ascertain if section 13-17-201 applies.” Castro v. Lintz, 2014 COA
91, ¶ 16, 338 P.3d 1063, 1068.
¶ 74 In making this determination the court should
first apply the “predominance” test, assessing
whether the “essence of the action” is tortious
in nature (whether quantitatively by simple
number of claims or based on a more
qualitative view of the relative importance of
the claims) or not. The Court would then turn
to the question of whether tort claims were
asserted to unlock additional remedies only
where the predominance test failed to yield a
clear answer, such as when the tort- and
non-tort claims are equal in number or
significance.
Gagne v. Gagne, 2014 COA 127, ¶ 84, 338 P.3d 1152, 1168. “[T]he
court should rely on the pleading party’s characterization of its
37
claims and should not consider what the party should or might
have pleaded.” Id. at ¶ 81, 338 P.3d at 1167.
b. Because Walker and Cervi’s Claims Against the WPRA and
Wintermute Sound in Tort, the District Court Did Not Err by
Applying Section 13-17-201
¶ 75 In its order awarding attorney fees to the WPRA and
Wintermute, the district court found that Walker and Cervi’s breach
of fiduciary allegations were “the essence” of their claims against
the WPRA and Wintermute. Because a breach of fiduciary duty
claim sounds in tort, Resol. Tr. Corp. v. Heiserman, 898 P.2d 1049,
1056 (Colo. 1995), the court reasoned that the WPRA and
Wintermute were entitled to an award of their attorney fees and
costs under section 13-17-201 upon the dismissal of all of Walker
and Cervi’s claims against them. We agree with the district court’s
conclusion.
¶ 76 According to Gagne, in determining whether the essence of
Walker and Cervi’s claims is in tort, we begin by evaluating the
number and type of claims they asserted against the WPRA and
Wintermute. We initially note that Walker and Cervi’s claims for
dissolution of the WPRA and appointment of a receiver are based on
their allegations that the WPRA and Wintermute breached their
38
alleged fiduciary duties to Walker and Cervi and engaged in
oppressive behavior. These claims sound in tort, regardless of how
Walker and Cervi characterize them.
¶ 77 Thus, together with the separate claim for breach of fiduciary
duty, the amended complaint contains three claims sounding in
tort. See Resol. Tr. Corp., 898 P.2d at 1056. The amended
complaint contains an equal number of tort and non-tort claims
because Walker and Cervi also asserted three non-tort claims —
their breach of contract, injunctive relief, and declaratory judgment
claims.
¶ 78 In this first step of the section 13-17-201 analysis, we may
also consider the “relative importance of the claims.” Gagne, ¶ 84,
338 P.3d at 1168 (citation omitted). Significantly, Walker and Cervi
acknowledge that all their claims and all the relief they sought
rested on the same allegations — that the WPRA and Wintermute
engaged in wrongful conduct by reducing the prize money
awardable to Walker and Cervi for their performances at the Rodeo.
As described above, these allegations sound in tort.
¶ 79 Further, even if the first step of the Gagne analysis does not
establish the essence of Walker and Cervi’s claims, through their
39
breach of fiduciary duty, dissolution, and receivership claims, they
attempted “to obtain relief beyond what was available solely under”
their non-tort claims. Crow v. Penrose-St. Francis Healthcare Sys.,
262 P.3d 991, 997 (Colo. App. 2011). Walker and Cervi pleaded
those claims to “unlock additional remedies,” including the
appointment of a receiver to supplant the WPRA’s board and the
most drastic possible remedy against a corporation — its
destruction through judicial dissolution. It is too late for Walker
and Cervi to contend that the essence of the case was merely their
claim for money damages premised on the WPRA’s alleged breach of
contract.
¶ 80 For these reasons, we agree with the district court that Walker
and Cervi’s action sounds in tort and, under section 13-17-201, the
WPRA and Wintermute are entitled to an award of their attorney
fees.
2. Hearing on Attorney Fees
a. When a Hearing on Attorney Fees Is Required
¶ 81 “If a party requests a hearing concerning an award of fees, the
trial court must hold a hearing.” Shyanne Props., LLC v. Torp, 210
P.3d 490, 493 (Colo. App. 2009); see C.R.C.P. 121, § 1-22(2)(c)
40
(“When required to do so by law, the court shall grant a party’s
timely request for a hearing.”). “When a hearing is requested to
determine the reasonableness and necessity of attorney fees, due
process requires that the trial court hold such a hearing.” Roberts
v. Adams, 47 P.3d 690, 700 (Colo. App. 2001); cf. Hendricks v.
Allied Waste Transp., Inc., 2012 COA 88, ¶ 36, 282 P.3d 520, 527
(holding that “a bare statement” that the fees at issue are
unreasonable does not entitle the party to a hearing).
b. The District Court Erred by Declining to Hold a Hearing on the
WPRA’s and Wintermute’s Requests for Attorney Fees
¶ 82 We disagree with the district court’s conclusion that a hearing
on attorney fees was not necessary. Walker and Cervi timely
requested a hearing on the WPRA’s and Wintermute’s requests for
attorney fees and challenged the reasonableness of the amount of
the requested fees. Specifically, Walker and Cervi raised factual
issues concerning Wintermute’s attorney fees request, such as
whether Wintermute incurred attorney fees herself and whether
Wintermute was seeking to recover attorney fees attributable to
work for the WPRA or claims not applicable to Wintermute.
Because, in opposing the WPRA’s and Wintermute’s fee request,
41
Walker and Cervi made a timely request for a hearing supported by
more than a bare statement that the requested fees were
unreasonable, we hold that the district court erred by declining to
grant their request for a hearing on the reasonableness of the
requested attorney fees.
¶ 83 The WPRA argues that Walker and Cervi were not entitled to a
hearing because they did not submit an expert’s affidavit together
with their request for a hearing. We are not persuaded. Aside from
timeliness, C.R.C.P. 121, section 1-22(c) does not mention any
specific requirements for obtaining a hearing on the reasonableness
of attorney fees. The WPRA does not point us to any legal authority
for limiting hearings on fees to situations in which the nonmoving
party submitted an expert’s affidavit.
¶ 84 Even though C.R.C.P. 121, section 1-22(2)(b) states that an
attorney fee motion “shall be accompanied by any supporting
documentation,” including a fee agreement, this language does not
require that “a written fee agreement or other materials evidencing
the fee agreement . . . accompany a motion for attorney fees and
costs,” Nesbitt v. Scott, 2019 COA 154, ¶¶ 24-25, 30, 457 P.3d 134,
138-39. If such expressly listed documentary support is not
42
required to file an attorney fee motion, they are surely not required
to obtain a hearing on the motion. Moreover, such a requirement
would be inconsistent with the requesting party’s burden to “prove
and establish the reasonableness of each dollar, each hour, above
zero.” Payan v. Nash Finch Co., 2012 COA 135M, ¶ 35, 310 P.3d
212, 219 (quoting Mares v. Credit Bureau, 801 F.2d 1197, 1210
(10th Cir. 1986)). Thus, we conclude that the language of C.R.C.P.
121, section 1-22(2)(b) does not support the WPRA and
Wintermute’s contention that a request for a hearing on the
reasonableness of attorney fees requires supporting documentation
such as an expert’s affidavit.
¶ 85 Finally, although the WPRA and Wintermute contend that the
district court did not abuse its discretion by declining to hold a
hearing “in the midst of the Coronavirus pandemic,” the court did
not cite the pandemic as a reason for not conducting the hearing.
¶ 86 Thus, we hold that the court erred by not granting Walker and
Cervi’s request for hearing on the reasonableness of the WPRA’s
and Wintermute’s requested attorney fees.
43
IV. Appellate Attorney Fees
¶ 87 The WPRA, Wintermute, and Sheridan request the award of
their appellate attorney fees. Because we conclude that the district
court properly dismissed Walker and Cervi’s claims against each
party under C.R.C.P. 12(b), “we must award attorney fees for
successfully defending an appeal of those dismissed claims” under
section 13-17-201. Duke v. Gunnison Cnty. Sheriff’s Off., 2019 COA
170, ¶¶ 42-44, 456 P.3d 38, 46.
V. Conclusion
¶ 88 The judgment in favor of the WPRA, Wintermute, and Sheridan
Incorporated, and the district court’s ruling that the WPRA and
Wintermute are entitled to attorney fees, are affirmed. The WPRA,
Wintermute, and Sheridan are awarded their reasonable attorney
fees on appeal. The district court’s award of a specific amount of
attorney fees to the WPRA and to Wintermute is reversed. The case
is remanded for the district court to hold a hearing on the amount
of the WPRA’s and Wintermute’s reasonable attorney fees though
this appeal and on the amount of Sheridan’s reasonable attorney
fees on appeal.
JUDGE HARRIS and JUDGE DAVIDSON concur.
44