CGC Holding v. Gache, No. 13-1255 (10th Cir. 2014)
Annotate this CaseColorado Golf Club Holding Company LLC (CGC Holding), Harlem Algonquin LLC and James Medick proposed certification of a class action suit. They alleged a group of lenders conspired to create a fraudulent scheme to obtain non-refundable up-front fees in return for loan commitments , and misrepresented their ability and their objective to make good on the promises to meet certain financing obligations as part of a scheme to entice borrowers to pay the up-front fees. The class intended to offer generalized proof that the lenders concealed the financial history of Sandy Hutchens, the principal defendant, and his use of pseudonyms, to preserve the superficial integrity of the operation. The borrowers argued that had they known about this pretense, no putative class member would have taken part in the financial transactions that caused each to lose its up-front fees, amounting to millions of dollars of cumulative losses. The ultimate issue this case presented for the Tenth Circuit's review centered on whether the class could pursue claims under the Racketeer Influenced and Corrupt Organizations Act (RICO). In opposing the claims, the lenders argued that each class member would have to demonstrate that it relied on the lenders’ misrepresentations or omissions to satisfy RICO’s causation element, making a single trial unwieldy and unworkable. The Tenth Circuit held that the lenders were wrong in this respect: RICO class-action plaintiffs are not entitled to an evidentiary presumption of a factual element of a claim. The Court agreed with the district court that a class could be certified in this context. Plaintiffs' theory sufficiently allayed any concerns about Rule 23(b)(3)’s requirement that common issues predominate over those idiosyncratic to individual class members. The Tenth Circuit affirmed certification of the class, but reversed the district court with regard to certification decision as to the lenders’ law firm and lawyers, Broad and Cassel, Ronald Gache and Carl Romano. Because several claims were not properly before the Court in this interlocutory appeal, the Court declined to address: (1) whether plaintiffs’ claims constituted an impermissible extraterritorial application of RICO; (2) whether the plaintiffs could prove proximate cause; or (3) whether the district court properly exercised personal jurisdiction over certain defendants.
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