In the recent decision Marin Metropolitan District v. Landmark Towers Association, the Colorado Court of Appeals held that an order creating a metropolitan district, once entered, cannot be challenged even if the organizers of the metropolitan district made misrepresentations to the municipal authorities and/or committed a fraud upon the court. This case relates to the Marin Metropolitan District, which was created in 2007. Included within the boundaries of the District are the Landmark and Meridian towers, located near I-25 and East Belleview Avenue, as well as some other property in the area. In 2008, the District issued approximately $30 million in bonds, which were to be repaid through revenue generated from a mill levy (i.e., a property tax) imposed on property within the District’s boundaries. The Landmark Towers Association is the HOA representing owners of condominium units in the Landmark and Meridian towers, who objected to the imposition of a mill levy to repay the bonds. The recent Court of Appeals decision stemmed from the HOA’s effort to invalidate the creation of the District, which would have also had the effect of relieving the property owners of the responsibility of paying the mill levy debt service for the bonds.

A developer that seeks to create a special metropolitan district must go through the statutory process set forth at C.R.S. § 32-1-101, et seq. This involves, among other things, submitting plans to counties and/or municipalities, holding public hearings, obtaining signatures from taxpayers within the proposed district’s boundaries, filing a petition for organization with the district court, providing various notices, and holding an election.

In this case Landmark Towers HOA sought to invalidate the creation of the Meridian Metropolitan District by alleging that the organizers failed to (1) provide notices as required by the statute; (2) have a sufficient number of taxpaying electors sign the organizational petition; and (3) have a proper election. After holding a three-day evidentiary hearing, the trial court agreed with the HOA that a fraud likely occurred and that the District was never properly approved by the required number of taxpaying electors. Nevertheless, the trial court dismissed the lawsuit based on the statutory bar found in C.R.S. 32-1-305(7), which provides:

If an order is entered declaring the special district organized, such order shall be deemed final, and no appeal or other remedy shall lie therefrom. The entry of such order shall finally and conclusively establish the regular organization of the special district against all persons except the state of Colorado in an action in the nature of quo warranto commenced by the attorney general within thirty-five days after entry of such order declaring such special district organized and not otherwise. The organization of said special district shall not be directly or collaterally questioned in any suit, action, or proceeding except as expressly authorized in this subsection (7).

The Colorado Court of Appeals agreed with the trial court’s interpretation of this statutory provision and concluded that the statute bars all claims seeking to attack the formation of a special metropolitan district. The Court relied, in part, on the public policy argument that there is a strong need to have certainty “in view of the need for accelerating contract negotiations and the taking of other action looking to accomplish the purposes of the district, free of the fear of subsequent attack of the district’s legal existence.” This could be seen as an important ruling for developers throughout Colorado, many of whom rely heavily on special district financing.

It should be noted that this case is distinct from another pending case that relates to the Marin Metropolitan District and the Landmark Towers HOA, though the two are related. In Landmark Towers Association, Inc., et al. v. UMB Bank, N.A., et al., Arapahoe County District Court Case No. 11CV1076, the District Court ordered that the Marin Metropolitan District could not assess taxes against the Landmark Towers property to pay roughly $30 million in general obligation bonds, and had to refund certain taxes already paid. While the trial court order on those issues was appealed, the appeal was dismissed by the Colorado Court of Appeals as premature, and the case remains pending before the trial court.