                                                                 F I L E D
                                                          United States Court of Appeals
                                                                  Tenth Circuit
                                 PUBLISH
                                                                 APR 28 2000
                 UNITED STATES COURT OF APPEALS
                                                               PATRICK FISHER
                                                                      Clerk
                              TENTH CIRCUIT



UNITED INTERNATIONAL
HOLDINGS, INC., a Delaware
corporation; and UIH ASIA
INVESTMENT COMPANY, a
Colorado general partnership,

      Plaintiffs-Appellees,

           v.                                    No. 97-1421
                                                 No. 98-1002
THE WHARF (HOLDINGS)
LIMITED, a Hong Kong company;
WHARF COMMUNICATIONS
INVESTMENTS LIMITED, a Hong
Kong company; WHARF CABLE
LIMITED, a Hong Kong company; and
STEPHEN NG, a Hong Kong citizen,

     Defendants-Appellants.
___________

PRODUCT LIABILITY ADVISORY
COUNCIL, INC.,

      Amicus Curiae.


            APPEAL FROM UNITED STATES DISTRICT COURT
                 FOR THE DISTRICT OF COLORADO
                        (D.C. No. 94-K-2560)



Paul Michael Dodyk, of Cravath, Swaine & Moore, New York, New York
(William R. Jentes, of Kirkland & Ellis, Chicago, Illinois; and Scott R. Bauer, of
Petrie, Bauer & Vriesman LLP, Denver, Colorado, with him on the brief), for the
appellants.

Louis R. Cohen, of Wilmer, Cutler & Pickering, Washington, D.C. (Steven P.
Finizio and Jonathan J. Frankel, of Wilmer, Cutler & Pickering, Washington,
D.C.; David B. Wilson, of Holme, Roberts & Owen LLP, Denver, Colorado; and
Jeffrey A. Chase, of Jacobs, Chase, Frick, Kleinkopf & Kelley, LLC, Denver,
Colorado, with him on the brief), for the appellees.

Malcolm E. Wheeler and Lee Mickus, of Wheeler, Trigg & Kennedy, P.C.,
Denver, Colorado; and Hugh F. Young, Jr., Product Liability Advisory Council,
Inc., Reston, Virginia, on the brief for the amicus curiae.


Before BRORBY, HOLLOWAY, and BRISCOE, Circuit Judges.


BRISCOE, Circuit Judge.


      This case arises out of the award to defendant The Wharf (Holdings)

Limited (Wharf) of a franchise to operate Cable Network Communications

Limited (CNCL), a cable television system in Hong Kong. United International

Holdings, Inc., (UIH) initiated this action against Wharf and one of its managing

directors, Stephen Ng, claiming UIH had acquired an option to acquire 10% of

the stock of CNCL and had been precluded from exercising its option. UIH

asserted claims under Section 10(b) of the Securities Exchange Act of 1934, the

Colorado Securities Act, and Colorado common law. Following an eleven-week

trial, a jury found in favor of UIH and awarded $67,000,000 in compensatory

damages and $58,500,000 in punitive damages. The district court awarded

                                         2
$28,208,440 in prejudgment interest. During post-judgment proceedings, the

district court held Wharf in contempt of court for failure to comply with the

court’s turnover order, sanctioned Wharf in the amount of $944,233.10, and

awarded UIH post-judgment attorney fees of $144,457.91. Wharf appeals and we

affirm.

                                          I.

Background

      The government of Hong Kong publicized its intent to grant an exclusive

license for operation of a cable television system in Hong Kong in 1991. Wharf

had little experience in the cable industry and directed Ng to locate suitable

business partners with telecommunications and cable television experience. Ng

initiated discussions with NYNEX Network Systems Company (NYNEX)

representative Paul Duffy, who agreed that NYNEX would review the

telecommunications portion of Wharf’s proposal. NYNEX had technical and

business expertise in the cable television industry, particularly in relation to the

design, installation, and maintenance of subscription television networks.

NYNEX devoted its resources to this early phase of the project with the tacit

understanding that if Wharf received the award and both Wharf and NYNEX

were comfortable with the relationship and the project, NYNEX would have an

opportunity to invest in the communications company or possibly garner an


                                          3
operations and maintenance contract for its efforts.

      Mark Schneider, vice president of UIH, met with Ng in early 1991. UIH is

based in Denver, Colorado, and owns, operates, and invests in worldwide cable

television systems. UIH representatives made it clear they were not interested in

serving as a consultant on the project for a fee, but would commit their resources

in exchange for a right to invest in CNCL if Wharf was awarded the license. Ng

wrote to William Hudon of UIH on July 20, 1991, stating: “If as a result of our

discussions you continue to be interested in co-investing in Wharf Cable’s

project in Hong Kong . . . I would appreciate hearing from you very soon.”

Appellants’ Addendum at 31. In response to UIH overtures that it was interested

in obtaining a greater ownership interest, Ng added: “Under the present rules in

Hong Kong governing television franchises, a foreign company is not permitted

to own more than 10% in the cable operator.”   Id. In October 1991, Schneider

signed a confidentiality agreement on behalf of UIH, prohibiting UIH from

divulging confidential and proprietary information provided by Wharf.

      Ng and Schneider met in Singapore in June 1992 and Ng informed

Schneider that Wharf had selected UIH as its cable partner. Ng also mentioned

that Wharf was engaged in serious negotiations with NYNEX regarding a

telephone partnership. According to Schneider, Ng did not expressly state that

NYNEX’s involvement was a prerequisite to any deal between UIH and Wharf.


                                          4
Schneider recalled that Ng offered UIH a 10% ownership interest in CNCL.

Schneider returned to Denver and sent a memo to the chair of the UIH board,

stating: “It looks like we are in for 10% of the Hong Kong project.”   Id. at 34.

      Beginning in August 1992, several UIH employees, at UIH’s expense, went

to Hong Kong to assist Wharf in crafting the cable proposal, negotiating key

contracts, designing the cable system, recruiting potential employees, and

arranging financing. Hudon, UIH’s financial specialist, contacted banks and

other funding sources regarding UIH’s 10% contribution obligation which would

be triggered if UIH exercised its option.

      UIH and Wharf drafted several letters of intent and shareholders’

agreements. The initial letter of intent drafted by Wharf and submitted to UIH in

early August recognized the “intention of the parties to cooperate together and

invest in” the cable company for the purpose of preparing and submitting the

license application and, hopefully, constructing, operating, and managing the

cable television network.   Id. at 43. Under the heading “Corporate Structure and

Shareholdings,” the draft provided that UIH would hold 10% of the company’s

share capital. Id. However, the draft letter provided: “This letter does not create

legally binding and enforceable obligations and is intended to identify in general

terms a number of the principal matters forming the basis of the cooperation

between the parties.”   Id. The letter concluded: “Each of the parties will


                                            5
negotiate in good faith, and use all reasonable endeavors to conclude the terms of

a formal, legally binding shareholders’ agreement between them by not later than

Friday 25th September, 1992.”    Id. at 46-47. Sonjia Norman, UIH’s Hong Kong

counsel, responded to this draft letter by advising UIH:

      “Our signing of the full Shareholder’s Agreement after this letter of
      intent should be conditional upon: (a) our approval of the financial,
      operating and programming plans; (b) board consent on both sides;
      (c) award of the local franchise; (d) the subscription of NYNEX of
      20% of Wharf Cable. (Mike [Fries, senior vice president of UIH], is
      this still our concern?)”

Id. at 48. The parties never signed a letter of intent.

      Schneider went to Hong Kong in September 1992 during Wharf’s final bid

preparations. Ng expressed concern that NYNEX might withdraw and deal

Wharf’s chances a critical blow, and that UIH’s unimpressive balance sheet

would make Wharf’s bid less attractive. Schneider offered to discuss UIH’s

financial status with Wharf’s board and specifically inquired as to Ng’s authority

to “make this deal” on behalf of Wharf. At trial, Schneider testified that Ng

expressed full authority to offer UIH a 10% right of investment, but no more.

The parties were unable to consummate a shareholders’ agreement before the

deadline for the license application.

      As the bid date came nearer, Wharf was increasingly uncomfortable with

the lack of a signed letter of intent or a signed shareholders’ agreement and the

perceived weaknesses of its proposal. To demonstrate it had secured sufficient

                                           6
technical expertise to construct and operate the system, Wharf entered into

separate Technical Cooperation Agreements with NYNEX and UIH on September

25, 1992. The UIH agreement obligated UIH to do nothing until Wharf was

awarded the license. The agreement acknowledged that Wharf “wishes to obtain

the benefit of UIH’s experience, and to engage UIH for the purpose of receiving

assistance with respect to the administrative and technical operations of the

subscription television system.”   Id. at 149. The agreement listed UIH’s

qualifications and duties with respect to construction and operation of the system,

described UIH as “an independent contractor,” and specified “UIH shall have no

right or interest in the Company or in the CATV System, nor any claim or lien

with respect thereto, arising out of this Agreement or the performance of its

services hereunder.”   Id. at 156. The agreement specifically provided: “Notice of

termination, changes and additions to this Agreement as well as any additional or

supplemental agreements to this Agreement must be made in writing. Additional

oral agreements are invalid. The requirement to use the written form may be

waived only in writing.”   Id. at 160. Michael Fries, senior vice president of UIH,

signed the Technical Cooperation Agreement on behalf of UIH. This is the only

agreement that was signed by the parties during the course of their relationship.

According to UIH, the agreement was simply a tool used to support Wharf’s bid

for the cable project. Fries, UIH’s primary negotiator, specifically deleted a


                                          7
section providing that the agreement “supersedes and invalidates all

commitments, representations, warranties and other agreements relating to the

subject matter hereof, . . . either orally or in writing prior to or

contemporaneously with the date hereof.” Appellees’ Suppl. App. at 428. Fries

characterized the agreement as part of a last minute filing strategy. He claimed

Emil Fung, who was heavily involved in negotiations on behalf of Wharf,

promised that notwithstanding the Technical Cooperation Agreement, the

submitted bid would clearly identify UIH’s right to invest. Fries testified at trial

that he made it clear that UIH would not agree to the proposed Technical

Cooperation Agreement approach without inclusion in the bid document of UIH’s

right to invest. UIH introduced a draft bid at trial that stated: “Wharf, as the

100% owner, has offered options to NYNEX and UIH to purchase up to 30% of

the shares in CNCL.”    Id. at 403. Schneider authorized Fries to sign the

Technical Cooperation Agreement after Fries viewed this draft bid. Fung

testified at trial that UIH representatives were shown the final license application

before it was submitted and did not object to its content.

      On September 30, 1992, Wharf submitted the license application in its own

name. The bid document contemplated “initial sole ownership and Board control

by The Wharf (Holdings) Limited coupled with the technical cable expertise and

experience of its two technical partners, NYNEX Network Systems Company and


                                            8
United International Holdings, Inc.”   Appellants’ Addendum at 191. Under the

heading, “Ownership Structure,” the bid provided: “If Wharf Cable is successful

in its license application, Wharf will consider the introduction at the appropriate

time of NYNEX, UIH and other strategic partners as co-investors to purchase up

to 40% of the shares in CNCL.”     Id. at 196. UIH officials were concerned by the

“noncommittal” language used by Wharf in the bid. According to Schneider, Ng

promised to resolve any problems when the parties met in Denver in October.

      At a meeting on October 8, 1992, Ng allegedly requested that UIH

continue to provide high level UIH employees until Wharf could hire suitable

permanent employees. UIH officials agreed to comply with this request if UIH’s

investment right in CNCL was “absolutely firm.” Ng allegedly agreed that in

exchange for UIH’s commitment to the project and continuing technical and

support service, Wharf would grant UIH an option to invest. The alleged terms

of the right to invest were: (1) UIH had an option to purchase 10% of CNCL’s

stock; (2) UIH’s option purchase price was 10% of the equity capital required to

fund the project, less UIH’s expenses and the value of UIH’s previous services;

(3) UIH’s option was exercisable only if UIH demonstrated its ability to fund for

18 months its portion of the project’s equity capital requirements; and (4) the

option expired if not exercised by UIH within six months after Wharf received

the franchise. This agreement was not put in writing and, at trial, Ng denied


                                          9
granting UIH a 10% option. Shortly after the meeting, UIH officials went to

Hong Kong and Ng introduced UIH as Wharf’s “strategic partner.” In addition,

Ng allegedly accompanied UIH officials to at least one bank meeting where the

subject was UIH’s attempt to raise money to invest in the cable company.

      In October and November, Wharf and UIH exchanged three different drafts

of proposed shareholders’ agreements. The drafts all contained the following

clause:

      This Agreement supersedes and invalidates all commitments,
      representations, warranties and other agreements relating to the
      subject matter hereof which may have been made by the
      Shareholders either orally or in writing prior to or
      contemporaneously with the date hereof, and which, if any exist,
      shall now become invalid from the date this Agreement becomes
      effective.

Id. at 252, 306. 388. Wharf and UIH could not reach an agreement on any of the

drafts and they all remained unsigned.

      In late December 1992, NYNEX informed Ng it was having difficulties

“with the internal sale of this opportunity,” and would “again examine the

opportunity for investment” at service launch.   Id. at 393. Ng disclosed

NYNEX’s tentative withdrawal to Schneider on January 14, 1993, and suggested

that Wharf and UIH “defer ownership discussions but [Schneider] wanted to

leave the door open . . . [and] talk to [Ng] in London at the end of next week.”

Id. at 394. After the London meeting, Schneider informed Ng that UIH “would


                                           10
like to discuss having a stake in the venture in the 25% range provided that

NYNEX is not going to participate in the business as an investor.” Appellees’

Suppl. App. at 610. Ng responded that “given the NYNEX situation, we should

put ownership issues on hold until after service launch.” Appellants’ Addendum

at 396.

      UIH filed its Form S-1 Registration Statement with the Securities and

Exchange Commission on April 21, 1993. The statement disclosed UIH’s current

and potential investments, and stated that upon award of the franchise to Wharf,

UIH “will be entitled to acquire a minimum of 10% of the equity in Wharf Cable,

with Wharf Holdings maintaining the remaining portion.”      Id. at 619. UIH and

Wharf continued their discussions throughout the spring of 1993, but were unable

to reduce an agreement to writing. This prompted Fries to submit a proposed

“Memorandum of Understanding” to Wharf stating that acquisition of the shares

of CNCL by UIH “is conditioned upon approval by both UIH and Wharf of”

several documents, including “the terms of the Shareholders’ Agreement.”       Id. at

401. This initial draft of the “Memorandum of Understanding” designated that,

subject to the stated conditions, “UIH shall notify Wharf in writing of its intent

to acquire” up to 20% of the shares of CNCL.    Id. The final version stated “UIH

will acquire a [10%] ownership interest in CNCL.”     Id. at 623. The percentage

of UIH’s potential ownership interest ranged from “up to 20% but not less than


                                          11
10%,” id. at 409, to 15%, and in the final version 10%. As with the letters of

intent and the shareholders’ agreements, the parties never signed any version of

the Memorandum of Understanding.

      On May 27, 1993, the Broadcasting Authority of the Hong Kong

government awarded the franchise license to Wharf, effective June 1, 1993. UIH

conducted a public offering and raised approximately $66,000,000 for its initial

investment in CNCL. In late July or early August, UIH informed Ng it had

satisfied the conditions of its option agreement and was ready to exercise its

option.

      Discussions regarding UIH’s claimed right of investment were occurring

inside Wharf. On August 11, 1993, Fung addressed a memorandum to Ng

evaluating the “pros and cons of minority (10%) equity participation by United

International Holdings in CNCL/Wharf Cable.” Appellees’ Suppl. App. at 700.

He recommended “structuring a 10% UIH investment” in recognition of the

“‘sweat-equity’ contributed by UIH in [Wharf Cable’s] nascent beginnings.”       Id.

at 701. Fung authored another memorandum to Ng on September 1 expressing

that “a partnership with UIH can be of strategic benefit to Wharf Cable,” and

reiterating that UIH’s contribution “was made in the spirit of entrepreneurial

partnership and justifies a form of compensation commensurate with the expected

upside of the Wharf Cable project.”   Id. at 885. Ng approached the Wharf board


                                          12
in early September to discuss UIH’s investment in CNCL. On September 9, Ng

reported to Fung: “Didn’t get very far with the Chairman! More interested in a

telecom partner! How do we get out?”    Id. at 887.

      Schneider and Ng continued to correspond in September and October.

According to Schneider, Ng hinted for the first time that a deal might not be

forthcoming without a telephone partner. Schneider pressed Ng for completion

of the memorandum of understanding and stressed that “[o]ur deal was never to

seek compensation but to be a 10-20% investor in the project. This was our

agreement from the very beginning.”    Id. at 888. Ng advised Schneider that

“[y]ou were made aware early on that board approval was necessary on our side.

You were also made aware at the time NYNEX made the decision at the end of

last year, that firstly we would need to find a new basis, and that secondly, my

board directed we should focus on station launch.” Appellants’ App. at 3237-38

      Schneider and Fries traveled to Hong Kong for Wharf’s station launch on

October 31. While there, they explained to Wharf’s board chairman UIH’s

contribution to the cable project and UIH’s concomitant right of investment.

According to Schneider, the chairman looked surprised. After the meeting, Ng

urged Schneider to be patient.

      On November 5, 1993, UIH submitted its final draft memorandum of

understanding to Wharf, which stated that “UIH’s investment in CNCL is


                                         13
conditioned upon the approval of the board of UIH and WCIL.” Appellants’

Addendum at 623. Schneider also addressed a letter to Ng, stating: “As you and

I have discussed, UIH has an expectation and desire to invest not less than 10%

in the Wharf Cable project. This has been our intent from the very beginning and

has been reconfirmed by both of us throughout our relationship.”   Id. at 620.

      UIH prepared another S-1 statement in early November. After discussions

between UIH and Wharf concerning language to describe the parties’

relationship, UIH settled on the following:

      [UIH] continues to pursue its opportunity to acquire through UIH
      Asia a 10% interest in Wharf Cable Limited and its affiliated
      programming company. . . . [UIH] is currently negotiating the
      acquisition of the 10% interest in Wharf Cable . . . . [UIH]
      anticipates that the terms of this investment will be finalized during
      the first three months of 1994; however, there can be no assurance
      that the Company will acquire an interest in Wharf Cable.

Id. at 631. A December 11 internal Wharf note regarding the S-1 states that the

      proper legal disclaimers have been inserted in the language so as to
      not bind us to UIH’s representation which speaks to an
      “opportunity” to acquire a 10% interest in Wharf Cable. Our next
      move should be to claim that our directors got quite upset over these
      representations and have therefore instructed us to “settle up” on the
      [technical cooperation agreement] only. Publicly, we   do not
      acknowledge the opportunity and speak only to UIH’s involvement
      vis a vis the [Technical Cooperation Agreement].

Appellees’ Suppl. App. at 925 (emphasis in original). Similarly, in a November

24 document entitled “Bi-Weekly Meeting with Chairman” under the topic

“UIH,” the following notations were made: “start to back pedal” and “Activate

                                          14
TCA [Technical Cooperation Agreement].”           Id. at 926.

       On December 1, 1993, Ng conveyed to Schneider that the Wharf board was

divided over UIH’s participation and the matter was “unlikely to be resolved . . .

in the near term.”   Id. at 928. A memo prepared by Ng to the Wharf board

indicated that Ng “[e]ncouraged [UIH] to activate” the Technical Cooperation

Agreement, “but they were careful not to take the bait.”        Id. Schneider wrote a

letter to Ng stating UIH would be “happy” to accept payment under the Technical

Cooperation Agreement provided UIH was not “in any way prejudicing our

position that we have been working under the expectation of an investment into

Wharf Cable.” Id. at 931. Scribbled in the margin of Ng’s copy of the letter are

the words “be careful, must deflect this! how?”       Id. In an internal Wharf

document entitled “Agenda for Meeting with Chairman,” the word “stall” was

written next to the topic “partnership strategy: UIH/others.”       Id. at 933. After

significant pressing, Schneider met with Wharf’s board in Hong Kong on March

18, 1994, to describe UIH’s involvement in the Wharf cable project. Schneider

told the board that UIH would be pleased to have the right to invest and was glad

to be partners with Wharf. Approximately two hours after the meeting, Ng

informed Schneider that the “board is not ready to entertain your investment at

this time.” Appellants’ App. at   2453.




                                            15
Instant litigation

      UIH initiated this action in November 1994, asserting it had provided

invaluable services that enabled Wharf not only to obtain the cable license, but

also to develop and implement the system. UIH contended these services were

rendered with the parties’ mutual understanding that UIH was entitled to a 10%

option to invest in CNCL. According to UIH, Wharf sold the option on October

8 in exchange for UIH’s services. UIH alleged Wharf deliberately misled UIH

and never intended to honor the option to invest. Based on these facts, UIH

asserted twelve claims for relief in its amended complaint, including violation of

Section 10(b) of the Securities Exchange Act, violation of the Colorado

Securities Act, breach of contract, fraud, breach of fiduciary duty, and negligent

misrepresentation. UIH sought both compensatory and punitive damages.

      Wharf denied all allegations and asserted UIH was aware from even

preliminary negotiations that any deal was contingent on involvement of a

telephone partner such as NYNEX. Wharf denied the existence of a joint

venture. In addition, Wharf claimed the documentary evidence demonstrated its

unequivocal intention not to be bound by anything short of a written agreement.

Finally, Wharf contended any deal was subject to approval by each party’s board

of directors.




                                        16
                                             II.

Subject matter jurisdiction

       On appeal, Wharf contends UIH has not stated an actionable federal claim

and, as a result, we must dismiss not only the Rule 10b-5 claim but also the state

claims. We consider this jurisdictional issue de novo.       See Brumark Corp. v.

Samson Resources Corp. , 57 F.3d 941, 944 (10th Cir. 1995).

       In its complaint, UIH alleged subject matter jurisdiction existed by virtue

of a federal question, namely securities fraud in violation of section 10(b) of the

Securities Exchange Act and Securities Exchange Commission Rule 10b-5.                See

28 U.S.C. § 1331. UIH pleaded supplemental jurisdiction existed over the state

law claims pursuant to 28 U.S.C. § 1367(a). Implicit in Wharf’s argument is the

notion that dismissal of a federal claim either in the district court or on appeal

automatically compels dismissal of pendent state claims. This clearly is not our

rule. We recognize that a federal court must have constitutional power to

exercise pendent jurisdiction. The scope of a federal court’s jurisdictional

power, however, does not fluctuate with the fate of a federal claim at trial or on

appeal, but exists if the federal claim initially had “substance sufficient to confer

subject matter jurisdiction on the court.”     Jones v. Intermountain Power Project     ,

794 F.2d 546, 549 (10th Cir. 1987),      overruled on other grounds , Yellow Freight

Sys., Inc. v. Donnelly , 494 U.S. 820 (1990). A federal claim is insubstantial, and


                                             17
incapable of conferring jurisdiction, “only if it is ‘obviously without merit or is

wholly frivolous,’ or ‘is clearly foreclosed by prior decisions of the Supreme

Court.’” Plott v. Griffiths , 938 F.2d 164, 167 (10th Cir. 1991). Once federal

question jurisdiction exists, it is within the trial court’s discretion to exercise

supplemental jurisdiction over those state law claims that derive from a common

nucleus of facts.   See Thatcher Enters. v. Cache County Corp.    , 902 F.2d 1472,

1477 (10th Cir. 1990). Thus, a district court has the constitutional power to

exercise supplemental jurisdiction over state claims even after a federal claim has

been dismissed, provided the federal claim was not insubstantial from the outset.

See 13B Charles A. Wright et al.,   Federal Practice and Procedure    , § 3564 (1984),

at 74 (“The practical importance of the distinction between [dismissal for failure

to state a claim and dismissal for bringing an insubstantial claim] is that if the

federal claim is substantial enough to invoke federal jurisdiction, the court has

power to exercise pendent jurisdiction over other claims that also may be asserted

in the complaint, for which there is no independent jurisdictional basis.”). The

same rule applies on appeal: “Once a trial is held . . . this court will order

dismissal of a pendent claim on remand only when the federal cause of action

was so insubstantial and devoid of merit that there was no federal jurisdiction to

hear it.” Jones , 794 F.2d at 549 (citations omitted). Therefore, we will uphold

the district court’s exercise of jurisdiction if the allegations in UIH’s complaint


                                           18
state a substantial and nonfrivolous 10b-5 claim.

       Section 10(b) of the Securities Exchange Act, codified at 15 U.S.C. § 78j,

declared it

       unlawful for any person, directly or indirectly, by the use of any
       means or instrumentality of interstate commerce or of the mails, or
       of any facility of any national securities exchange
             ...
             (b) To use or employ, in connection with the purchase or sale
       of any security . . . any manipulative or deceptive device or
       contrivance in contravention of such rules and regulations as the
       Commission may prescribe.

In accordance with section 10(b), the Commission prescribed 17 C.F.R.

§ 240.10b-5 (Rule 10b-5), which renders it unlawful for any person, in

connection with the purchase or sale of any security:

              (a) To employ any device, scheme, or artifice to defraud,
              (b) To make any untrue statement of a material fact or to omit
       to state a material fact necessary in order to make the statements
       made, in the light of the circumstances under which they were made,
       not misleading, or
              (c) To engage in any act, practice, or course of business which
       operates or would operate as a fraud or deceit upon any person.

To state an actionable 10b-5 claim, a plaintiff must allege (1) the defendant made

an untrue statement of material fact or failed to state a material fact; (2) the

defendant made the misrepresentation in connection with the purchase or sale of

a security; (3) the defendant made the misrepresentation with scienter; and (4) the

plaintiff relied on the misrepresentation and sustained damages as a proximate

result of the misrepresentation.   See Anixter v. Home-Stake Prod. Co.    , 77 F.3d

                                          19
1215, 1225 (10th Cir. 1996).

      In resolving Wharf’s jurisdictional challenge, our task is to review UIH’s

complaint, identify the alleged security, ascertain whether it allegedly was

purchased or sold as defined under the Securities Exchange Act, and determine if

Wharf’s alleged misrepresentations were made in connection with the purchase or

sale of a security. After conducting this review, we are convinced that UIH’s

allegations not only are substantial and nonfrivolous, but state an actionable 10b-

5 claim sufficient to withstand a motion to dismiss.

      UIH has asserted throughout this case, without challenge from Wharf, that

the security for 10b-5 purposes is not the CNCL stock but is the option itself

(“The grant of the option to acquire at least 10% of the stock of CNCL was the

sale of a security to [UIH], within the meaning of the Securities Exchange Act.”

Appellants’ App. at 90.). Wharf does not contest on appeal the classification of

the option as a security. Therefore, we assume the option is a security for

purposes of our review.   See One-O-One Enterprises, Inc. v. Caruso    , 848 F.2d

1283, 1288 (D.C. Cir. 1988). UIH also alleges that the option was purchased by

UIH on October 8, 1992, in exchange for its continued and expanded assistance

to Wharf in the pursuit of the cable television bid. Thus, UIH was a purchaser of

a security within the scope of the Exchange Act. Finally, UIH alleges that Wharf

made material misrepresentations and omissions regarding the option.      See


                                          20
Superintendent of Ins. v. Bankers Life & Cas. Co.       , 404 U.S. 6, 12 (1971)

(concluding the “in connection with” requirement is satisfied if plaintiff has

“suffered an injury as a result of deceptive practices touching” the purchase or

sale of a security). Wharf’s representations allegedly were false when made and

were made either with knowledge of their falsity or with reckless disregard for

their truth or falsity. The representations allegedly were made to induce UIH to

purchase the option. As such, the misrepresentations were made to influence

UIH’s investment decision and were made in connection with the purchase or

sale of a security.   See SEC v. Jakubowski , 150 F.3d 675, 679 (7th Cir. 1998);

Angelastro v. Prudential-Bache Secs., Inc.     , 764 F.2d 939, 943 (3d Cir. 1985).

       Wharf describes UIH’s 10b-5 claim as involving a mere allegation that

Wharf misrepresented its intent to sell UIH securities or a simple dispute between

Wharf and UIH over its rights to purchase stock. Wharf claims such disputes are

outside the scope of the federal securities laws. Wharf relies heavily on     Blue

Chip Stamps v. Manor Drug Stores       , 421 U.S. 723 (1975). In   Blue Chip Stamps ,

the Court held that only actual purchasers or sellers of securities, or those

designated by the Securities Exchange Act as purchasers or sellers, have standing

to bring a private cause of action for a 10b-5 violation.     Id. at 749. Here, UIH

was an actual purchaser of a security as it purchased the option from Wharf on

October 8, 1992.      Blue Chip does not preclude UIH’s 10(b)(5) claim.     See id. at


                                             21
751 (“the holders of puts, calls, options, and other contractual rights or duties to

purchase or sell securities have been recognized as ‘purchasers’ or ‘sellers’ of

securities for purposes of Rule 10b-5, not because of a judicial conclusion that

they were similarly situated to ‘purchasers’ or ‘sellers,’ but because the

definitional provisions of the 1934 Act themselves grant them such a status”).

       Further, we disagree with Wharf’s assertion that misrepresentations

regarding intent to sell securities or disputes over a right to purchase stock

necessarily are outside the scope of Rule 10b-5. Courts have noted that fraud in

the purchase or sale of a security includes entering into a contract to sell a

security with a secret reservation not to fully perform the contract.         See In re

Phillips Petroleum Secs. Litig.   , 881 F.2d 1236, 1245 n.13 (3d Cir. 1989);        Luce v.

Edelstein , 802 F.2d 49, 56 (2d Cir. 1986);     Threadgill v. Black , 730 F.2d 810,

811-12 (D.C. Cir. 1984);    Richardson v. MacArthur , 451 F.2d 35, 40 (10th Cir.

1971). It is a party’s secret reservation not to fully perform a securities contract

that distinguishes these cases from routine breach of contract and common law

fraud cases and brings them within the scope of Rule 10b-5.             See Mills v. Polar

Molecular Corp. , 12 F.3d 1170, 1176 (2d Cir. 1993).

       We conclude the other cases cited by Wharf are distinguishable or

inapposite. Two of the three cases involved breaches of contract and not

misrepresentations regarding an option or other security.        Hunt v. Robinson , 852


                                              22
F.2d 786, 787 (4th Cir. 1988) (noting the plaintiff had “alleged no

misrepresentation of the value of the stock which was to be conveyed”);       Tully v.

Mott Supermarkets, Inc. , 540 F.2d 187, 194 (3d Cir. 1976) (noting the plaintiff

did allege fraud, but not just in connection with the sale that actually occurred).

In the third case cited by Wharf,      Gurwara v. LyphoMed, Inc. , 937 F.2d 380 (7th

Cir. 1991), the defendant misrepresented to plaintiff, its employee, that plaintiff’s

option to buy defendant’s stock would be unaffected by his termination for

disability. When plaintiff attempted to exercise his option after accepting a

disability assignment, however, defendant cited his disability status and did not

allow his purchase of the stock. Plaintiff sued under Rule 10b-5 for securities

fraud. Unlike here, the plaintiff in     Gurwara alleged that the security was the

stock to be purchased and not the option to purchase the stock. Therefore,

defendant’s misrepresentations were not related to the stock but to the option,

which was neither alleged nor assumed to be a separate security. The court

dismissed the claim because defendant’s misrepresentations related not to the

value of the stock that plaintiff sought to purchase, but to the value of the option.

In doing so, the court stated: “Whether [plaintiff] might have sued successfully

under section 10(b) for misrepresentations in connection with his option contract

is an issue we need not resolve. Throughout the lawsuit, [plaintiff] has clearly

relied on the LyphoMed stock itself as the ‘security’ on which his 10(b) action


                                              23
was based.” Id. at 382 n.2. Viewed in this light,   Gurwara is entirely inapplicable

to UIH’s claim.   1



      In summary, if a party alleges a substantial and nonfrivolous federal claim,

a district court obtains subject matter jurisdiction and may, in its discretion,

exercise supplemental jurisdiction over related state law claims. Once subject

matter jurisdiction exists, a district court has constitutional authority to hear

related state claims even if the federal claim is later dismissed by the district

court or by this court on appeal. Here, UIH’s 10b-5 allegations clearly are not

frivolous, and in fact are sufficient to state a claim under Rule 10b-5.




Applicability of Hong Kong law



      1
         Moreover, in SEC v. Jakubowski , 150 F.3d at 679, the court retreated
from Gurwara :
      Gurwara was foreordained by Blue Chip Stamps , which held that a
      misrepresentation that induces a decision not to purchase securities
      is outside the scope of § 10(b) and Rule 10b-5. . . . In both   Blue
      Chip Stamps and Gurwara stock had a bargain element that eluded a
      potential purchaser because of a deceit, which fell outside Rule 10b-
      5 because there was no sale. . . . True enough, we wrote in     Gurwara
      that the “misrepresentation went only to Gurwara’s opportunity to
      purchase the stock at the described price. It in no way related to the
      value of that stock.” . . . But this passage was irrelevant to the
      question whether the statements were “in connection with” a
      (nonexistent) purchase or sale. Dicta cannot control over the
      language of the statute.

                                          24
       Wharf argues that the relationship between Wharf and UIH was governed

by Hong Kong law, that the application of Hong Kong law precludes application

of the federal securities laws, and that nonapplicability of the federal securities

laws prevents the exercise of federal jurisdiction.

       We disagree with the premise underlying this argument – that forum

selection or choice of law issues implicate a court’s subject matter jurisdiction.

Forum selection issues raise concerns not of subject matter jurisdiction but of

improper venue or failure to state a claim on which relief may be granted.        See

Lipcon v. Underwriters at Lloyd’s, London         , 148 F.3d 1285, 1289-90 (11th Cir.

1998), cert. denied , 119 S. Ct. 851 (1999);      New Moon Shipping Co., Ltd. v.

MAN B & W Diesel AG , 121 F.3d 24, 28 (2d Cir. 1997);           Riley v. Kingsley

Underwriting Agencies, Ltd. , 969 F.2d 953, 956 (10th Cir. 1992). Choice of law

issues are equally unrelated to subject matter jurisdiction; state and federal courts

routinely apply the law of other states, even of other countries.      See

Vukadinovich v. McCarthy , 59 F.3d 58, 62 (7th Cir. 1995);          Rivendell Forest

Prods., Ltd. v. Canadian Pac. Ltd.    , 2 F.3d 990, 994 (10th Cir. 1993). Although a

district court applying foreign law might find it appropriate to exercise its

discretion and either transfer venue or dismiss a case on grounds of forum

nonconveniens, the court here denied Wharf’s motion to dismiss for forum

nonconveniens, a ruling that Wharf does not separately appeal.


                                             25
       Wharf has not presented any choice of law issue with respect to UIH’s

Rule 10b-5 claim. It is sufficient that the anti-fraud provisions of the Securities

Exchange Act reach Wharf’s conduct. These provisions prohibit fraud in the sale

of securities when significant conduct occurs in the United States or conduct

occurs anywhere and has substantial effects on investors in the United States.

See Bersch v. Drexel Firestone, Inc.   , 519 F.2d 974, 993 (2d Cir. 1975);

Restatement (Third) of Foreign Relations Law of the United States § 416 (1987).

Here, the crux of UIH’s 10b-5 claim is the October 8, 1992, meeting between

Wharf and UIH in Denver, Colorado. The security was sold at that meeting, the

negotiations for the sale occurred at that meeting, and the most material of

Wharf’s misrepresentations were made at that meeting. Since conduct material to

the completion of the fraud occurred in the United States, jurisdiction is

appropriate despite the fact that additional relevant conduct occurred abroad.     See

Alfadda v. Fenn , 935 F.2d 475, 478-79 (2d Cir. 1991);      Psimenos v. E.F. Hutton

& Co. , 722 F.2d 1041, 1045-46 (2d Cir. 1983).

       Wharf has not identified any international comity or international choice of

law issues that would reasonably compel a court to decline to exercise its

jurisdiction in these circumstances. In general, we will not consider an

international comity or choice of law issue unless there is a “true conflict”

between United States law and the relevant foreign law.       Hartford Fire Ins. Co. v.


                                            26
California , 509 U.S. 764, 798-99 (1993);    In re Maxwell Communication Corp.       ,

93 F.3d 1036, 1049-50 (2d Cir. 1996). A true conflict exists only when a person

subject to regulation by two states cannot comply with the laws of both.     Hartford

Fire , 509 U.S. at 799; Filetech S.A. v. France Telecom S.A.    , 157 F.3d 922, 932

(2d Cir. 1998); Metro Indus., Inc. v. Sammi Corp.     , 82 F.3d 839, 847 n.5 (9th Cir.

1996). A true conflict would exist here only if Hong Kong law        compelled

securities fraud rather than just permitted it.

      Wharf has presented scant evidence either that Hong Kong is the

appropriate forum or that Hong Kong law applies to the dispute at issue. Wharf

reasons that from language in unsigned documents which states that Hong Kong

law applies and that the parties would submit to the non-exclusive jurisdiction of

the Hong Kong courts, we can infer the parties intended that any forum selection

and choice of law provisions be given effect. We disagree. These documents at

best represent the parties’ intent. The documents are virtually irrelevant in their

unsigned form and are insufficient to constitute binding forum selection and

choice of law provisions. “To be mandatory, a clause must contain language that

clearly designates a forum as the exclusive one.”     Northern California Dist.

Council of Laborers v. Pittsburg-Des Moines Steel Co.      , 69 F.3d 1034, 1037 (9th

Cir. 1995).

      Wharf cites Scherk v. Alberto-Culver Co. , 417 U.S. 506 (1974), and         Riley ,


                                            27
969 F.2d 953. Neither case is contrary to the result we reach here. Both cases

involved unambiguous forum selection clauses and choice of law provisions in

signed, bargained-for contracts. Wharf also cites provisions of Restatement

(Second) of Conflict of Laws which direct that if parties have not specified the

law to be applied, the law of the jurisdiction with the most significant

relationship to the incident is adopted. Again, however, Wharf does not direct

our attention to specific Hong Kong law that conflicts with the law of the forum.

Contrary to Wharf’s assertions, courts routinely decline to consider choice of law

issues in the absence of a demonstrated conflict.     See In re Payless Cashways ,

203 F.3d 1081, 1084 (8th Cir. 2000);     Millipore Corp. v. Travelers Indem. Co.     ,

115 F.3d 21, 29 (1st Cir. 1997);   Oil Shipping (Bunkering) B.V. v. Sonmez

Denizcilik Ve Ticaret A.S. , 10 F.3d 1015, 1018 (3d Cir. 1993);     Barron v. Ford

Motor Co. , 965 F.2d 195, 197 (7th Cir. 1992).



Statute of Frauds

       Wharf asserts the district court erred in refusing to instruct the jury on the

statute of frauds. The court ruled that the option did not fit neatly within the

definition of “security” under C.R.S. § 4-8-319, and that several exceptions took

the option agreement outside the scope of the statute of frauds. We review de

novo a determination that the statute of frauds does not apply.     See Horace Mann


                                            28
Ins. Co. v. Johnson , 953 F.2d 575, 576 (10th Cir. 1991) (reviewing district

court’s interpretation and application of state law de novo).

       Wharf argues that UIH’s oral option is barred by two Colorado statute of

frauds provisions. First, Wharf urges us to apply C.R.S. § 4-8-319, the statute of

frauds applicable to “a contract for the sale of securities.” Second, Wharf seeks

application of C.R.S. § 38-10-112(a), the statute of frauds for agreements that by

their terms may not be performed within a year of their making. Wharf has

waived its argument with respect to § 38-10-112(a) by failing to raise it in

district court.

       Section 4-8-319 provides that a contract for the sale of securities is not

enforceable by way of action or defense unless (1) there is some writing signed

by the party against whom enforcement is sought sufficient to indicate that a

contract has been made for sale of a stated quantity of described securities at a

defined or stated price; (2) delivery of a certificated security or transfer

instruction has been accepted, or transfer of an uncertificated security has been

registered and the transferee has not timely sent a written objection; (3) there is a

confirming writing; or (4) the party against whom enforcement is sought admits

the contract in a pleading, testimony or court.   2




       2
        Section 4-8-319 was repealed in 1996. Under current Colorado law, a
“contract or modification of a contract for the sale or purchase of a security is
                                                                       (continued...)

                                             29
      Initially, we must identify what constitutes the alleged “security” for

purposes of our analysis. Wharf asserts the security is CNCL stock. UIH asserts

the option itself is the instrument that should be analyzed to determine if it is a

“security.” The October 8, 1992, contract was for the purchase of the option.

UIH traded its services to Wharf and in turn received an option to purchase

CNCL securities.

      We next consider if the option is in fact a “security” for purposes of § 4-8-

319. The definition of “security” under § 4-8-319 bears little resemblance to the

definition of “security” under federal securities laws. Section 4-8-102 classifies

securities as either certificated or uncertificated. A certificated security is a

share, participation, or other interest in property or an enterprise of the issuer or

an obligation of the issuer which is

              (I) Represented by an instrument issued in bearer or registered
      form;
             (II) Of a type commonly dealt in on securities exchanges or
      markets or commonly recognized in any area in which it is issued or
      dealt in as a medium for investment; and

             (III) Either one of a class or series or by its terms divisible
      into a class or series of shares, participations, interests, or
      obligations.



      2
       (...continued)
enforceable whether or not there is a writing signed or record authenticated by a
party against whom enforcement is sought, even if the contract or modification is
not capable of performance within one year of its making.” C.R.S. § 4-8-113.

                                          30
C.R.S. § 4-8-102(1)(b). An uncertificated security is a share, participation, or

other interest in property or an enterprise of the issuer or an obligation of the

issuer which is

             (I) Not represented by an instrument and the transfer of which
      is registered upon books maintained for that purpose by or on behalf
      of the issuer; and
             (II) Of a type commonly dealt in on securities exchanges or
      markets; and
             (III) Either one of a class or series or by its terms divisible
      into a class or series of shares, participations, interests, or
      obligations; and
             (IV) Not a partnership interest in a limited partnership.

C.R.S. § 4-8-102(c).

      Wharf has not explained, and we cannot discern, how UIH’s option fits

within either definition. We agree with the district court that UIH’s oral option

was not a security under § 4-8-102(1), but was a security under the federal

Securities Exchange Act. See Comment to § 4-8-102 (“This definition has no

bearing upon whether an interest is a ‘security’ for purposes of federal securities

laws. By the same token the definitions of ‘securities’ for purposes of those laws

has no bearing upon whether an interest is a security within the definition of this

Article.”). Because Wharf did not establish that the option was a security under

4-8-319, it was not entitled to rely on the statute of frauds.

      The district court ruled that “several equitable exceptions” to the statute of

frauds applied. Although the court mentioned in its order the fraud, promissory


                                          31
estoppel, and full performance exceptions, it primarily discussed the partial

performance exception. We agree that, even if UIH’s option is a security for

purposes of § 4-8-319, the partial performance exception precludes application of

the statute of frauds. “[T]he part performance doctrine operates to preclude the

application” of the statute of frauds.   Nelson v. Elway , 908 P.2d 102, 108 (Colo.

1995). The doctrine applies if there is partial performance of an oral contract

which is “(1) substantial; and (2) required by, and fairly referable to no other

theory besides that allegedly contained within the oral agreement.”     Id. “This

rule is based on the premise that the conduct constituting that partial performance

must convincingly evidence the existence of the oral agreement.”       Id.

       The alleged oral agreement between UIH and Wharf required UIH to

provide additional services to Wharf. It cannot be disputed that UIH

substantially, and most likely fully, satisfied its obligations. Indeed, Wharf does

not dispute the assistance rendered by UIH, but asserts the assistance was fairly

referable to Wharf’s theory that UIH performed services relating to the cable

television project in the hope of persuading Wharf to sell it 10% of CNCL stock.

Because the issue of partial performance presents factual questions,     see A & R

Co. v. Union Air Transport, Inc.    , 738 P.2d 73, 74-75 (Colo. App. 1987), Wharf

contends the district court improperly took this issue from the jury and

exacerbated its error by failing to instruct on partial performance.


                                           32
      We conclude the district court did not take the issue of partial performance

from the jury, nor did it err in instructing the jury. We review the district court’s

refusal to give a particular instruction for an abuse of discretion. As for the

instructions, we conduct a de novo review to determine whether as a whole they

correctly stated the governing law and provided the jury with an ample

understanding of the issues and applicable standards.    Allen v. Minnstar, Inc. , 97

F.3d 1365, 1368 (10th Cir. 1996).

      We agree with the district court that Wharf’s proposed instruction on

partial performance was superfluous. The breach of contract instruction on

consideration precluded recovery on breach of contract if the jury found that UIH

“in exchange for the option . . . did or promised to do nothing more than it was

already obligated to do, or was working voluntarily for its own benefit.”

Appellees’ Suppl. App. at 81. Because the jury found that consideration existed

and the oral option agreement was valid, it necessarily concluded that UIH

provided Wharf assistance in exchange for the option and not for an extraneous

reason or in accordance with a separate “fairly referable” theory proffered by

Wharf. See Ellis Canning Co. v. Bernstein , 348 F. Supp. 1212, 1229 (D. Colo.

1972).

      We concede that a district court may properly give a separate instruction on

partial performance if it is warranted by the evidence. In reviewing a claim of


                                           33
instructional error, however, we consider the instructions in their totality and

determine not whether they were faultless in every particular, but whether the

jury was misinformed or misled.       Resolution Trust Corp. v. Stone   , 998 F.2d

1534, 1549 (10th Cir. 1993). We can discern no prejudice to Wharf based on the

district court’s failure to separately instruct the jury as to partial performance.



Economic Loss Rule

       Wharf argues that UIH’s fraud, breach of fiduciary duty, and negligent

misrepresentation claims are barred by the economic loss rule. The economic

loss rule is designed to preclude plaintiffs from circumventing the law of contract

and seeking recovery in tort for what in essence is merely a claim of damages for

breach of contract. As applied in Colorado, the rule “prevents recovery for

negligence when the duty breached is a contractual duty and the harm incurred is

the result of failure of the purpose of the contract.”    Jardel Enterprises, Inc. v.

Triconsultants, Inc. , 770 P.2d 1301, 1303 (Colo. App. 1988). Wharf asserts the

economic loss rule is triggered here because UIH’s tort claims do not allege

tortious conduct independent of Wharf’s breach of contract, but rest solely on

UIH’s allegation that Wharf did not honor its option agreement. We review de

novo the district court’s rejection of Wharf’s contentions.      See Horace Mann , 953

F.2d at 576.


                                              34
       Wharf’s argument that the economic loss rule precludes UIH’s fraud and

breach of fiduciary duty claims is without merit. It is settled in Colorado that the

economic loss rule applies only to tort claims based on negligence, and only to

some negligence claims. “As a general rule, no cause of action lies in tort when

purely economic damage is caused by negligent breach of a contractual duty.”

Jardel , 770 P.2d at 1303. The Colorado Court of Appeals distinguished the

situation in Jardel , which involved a breach of contract and negligence claim,

from cases in which an intentional tort was alleged.      Id. at 1304. Since Jardel ,

Colorado courts and courts applying Colorado law have noted this distinction and

applied the economic rule accordingly.        See Town of Alma v. Azco Constr., Inc.      ,

985 P.2d 56 (Colo. App. 1999)      Terrones v. Tapia , 967 P.2d 216, 220 (Colo. App.

1998); Commercial Union Ins. Co. v. Roxborough Village Joint Venture           , 944 F.

Supp. 827, 832 (D. Colo. 1996);     Cook v. Rockwell Int’l Corp. , 778 F. Supp. 512,

516 (D. Colo. 1991). The Colorado Court of Appeals implicitly reinforced this

interpretation of the economic loss rule in     Grynberg v. Agri Tech, Inc. , 985 P.2d

59 (Colo. App. 1999), where it prohibited plaintiffs from maintaining a

negligence claim based on an alleged breach of a duty that arose only from the

parties’ contract. Without comment, the court allowed plaintiffs’ breach of

fiduciary duty claim to stand.

       In characterizing UIH’s fraud and breach of fiduciary duty claims as


                                              35
factually synonymous with UIH’s breach of contract claim, Wharf assumes the

economic loss rule bars all claims related to a contractual transaction except

breach of contract claims. This assumption is erroneous. The economic loss rule

precludes recovery in tort only when “the duty breached is a contractual duty.”

Jardel , 770 P.2d at 1303. The rule is inapplicable where “the duty breached . . .

arises independent of the contract.”     Id. at 1304. Here, UIH’s breach of fiduciary

duty claim arose not from the contract but from the parties’ status as joint

venturers. See McCrea & Co. Auctioneers, Inc. v. Dwyer Auto Body         , 799 P.2d

394, 398 (Colo. App. 1989). UIH’s fraud claim, although premised on

representations made in the course of contractual negotiations, likewise arose

independently of the contract. In      Brody v. Bock , 897 P.2d 769, 776 (Colo.

1995), the Colorado Supreme Court rejected the trial court’s ruling that

representations that formed the basis for a common law fraud claim could not

also form the substance of an alleged oral contract.

       The rationale underlying the economic loss rule also explains why the rule

does not preclude UIH’s negligent misrepresentation claim. Where a negligence

claim is based only on breach of a contractual duty, the law of contract rightly

does not punish the breaching party, but limits the breaching party’s liability to

damages that naturally flow from the breach. It is an altogether different

situation where it appears two parties have in good faith entered into a contract


                                             36
but, in actuality, one party has deliberately made material false representations of

past or present fact, has intentionally failed to disclose a material past or present

fact, or has negligently given false information with knowledge that the other

party would act in reliance on that information in a business transaction with a

third party. The breaching party in this latter situation also is a tortfeasor and

may not utilize the law of contract to shield liability in tort for the party’s

deliberate or negligent misrepresentations.

       Colorado has recognized that “a claim of negligent misrepresentation based

on principles of tort law, independent of any principle of contract law, may be

available to a party to a contract.”   Mehaffy, Rider, Windholz & Wilson v.

Central Bank Denver , 892 P.2d 230, 235-36 (Colo. 1995). A negligent

misrepresentation claim is based not on a contractual duty but on an independent

common law duty requiring a party, in the course of business, to exercise

reasonable care or competence in obtaining or communicating information on

which other parties may justifiably rely.   Id. at 236. Consequently, the economic

loss rule does not bar UIH’s negligent misrepresentation claim.




Sufficiency of evidence regarding oral option contract

       Wharf contends the evidence introduced at trial was insufficient to support


                                            37
a finding that UIH had acquired an option to invest. Wharf asserts the

documentary evidence – the draft letters of intent, memoranda of understanding,

and shareholders’ agreements – is flatly inconsistent with the concept of an oral

option. “When a jury verdict is challenged on appeal, our review is limited to

determining whether the record – viewed in the light most favorable to the

prevailing party – contains substantial evidence to support the jury’s decision.”

Thunder Basin Coal Co. v. Southwestern Pub. Serv. Co.    , 104 F.3d 1205 (10th

Cir. 1997). The jury has the “exclusive function of appraising credibility,

determining the weight to be given to the testimony, drawing inferences from the

facts established, resolving conflicts in the evidence, and reaching ultimate

conclusions of fact.”   Id.

       We conclude there is ample evidence in the record to support the jury’s

finding that UIH obtained an option on October 8, 1992. UIH officials testified

that Ng specifically granted such an option in exchange for UIH’s continued and

expanded provision of services to Wharf. UIH partially or fully performed its

obligations under the alleged option agreement. Internal Wharf documents, while

not explicitly conceding that UIH had a 10% option to invest in CNCL, expressly

discussed steps that Wharf should take to “get out” of the agreement and

contemplated stalling and back pedaling. Viewed in light of the totality of the

evidence presented at trial, the proposed unsigned documents heralded by Wharf


                                         38
do nothing more than create factual conflicts and raise questions of witness

credibility. See Mohler v. Park County Sch. Dist. RE-2    , 515 P.2d 112, 114

(Colo. App. 1973). The jury resolved these conflicts in favor of UIH by

specifically finding in the special verdict form that UIH and Wharf did not intend

to be bound only by a written contract and that UIH would not have known that

Wharf intended to be bound only by a written contract.    See Appellants’ App. at

1569. We will not disturb the jury’s resolution of these issues where, as here,

there is substantial evidence in the record to support the jury’s verdict.



Damages

      The jury awarded $67,000,000 in compensatory damages on the securities

fraud claims, common law fraud claim, breach of contract claim, and breach of

fiduciary duty claim, and $58,500,000 in punitive damages on the common law

fraud claim and breach of fiduciary duty claim. Judgment was entered by the

district court for $125,000,000 because UIH indisputably is limited to a single

recovery for its loss. Wharf argues the compensatory damages award was not

supported by the evidence, was speculative and facially excessive, and did not

account for UIH’s obligation to mitigate its damages. Wharf asserts the punitive

damages award was not supported by the evidence and was contrary both to

Colorado and federal law.


                                          39
                                 Compensatory damages

       Wharf contends that the evidence introduced at trial was insufficient to

sustain the $67,000,000 award. Specifically, Wharf argues that UIH damage

expert Robert Jones grossly overstated the value of UIH’s alleged option by

failing to “deduct the price . . . UIH had to pay to exercise the option – a price

guesstimated at $50,000,000 or more.” Appellants’ Br. at 40. In other words,

Wharf argues Jones estimated the value of a 10% stock interest in CNCL without

considering the corresponding 10% capital funding contribution UIH was

required to make to exercise the option.

       Initially, we must determine whether Wharf preserved this issue for review.

To preserve a sufficiency of the evidence claim for appellate review, a party must

move for judgment as a matter of law (directed verdict) under Federal Rule of

Civil Procedure 50(a) at the close of the evidence.      See FDIC v. United Pacific

Ins. Co. , 20 F.3d 1070, 1076 (D.C. Cir. 1994). Motions under Rule 50 must

“specify the judgment sought and the law and the facts on which the moving

party is entitled to the judgment.” Fed. R. Civ. P. 50(a)(2)    . A party may not

circumvent Rule 50(a) by raising for the first time in a post-trial motion issues

not raised in an earlier motion for directed verdict.     See FDIC , 20 F.3d at 1076.

       Wharf asserts it raised this specific damage issue in its motion for directed

verdict at the close of evidence and reasserted the issue in its post-trial motions.


                                             40
Clearly, Wharf presented the issue in its post-trial motions.   See Appellants’ App.

at 1602 (“The Court should enter judgment for defendants or order a new trial

because the jury’s award is not supported by legally sufficient evidence. It is

based on the asserted value of a 10% interest in the Wharf cable project, rather

than the value of plaintiffs’ alleged ‘option’ to obtain such an interest, which is

legally, economically and factually different.”).

       Wharf’s motion for directed verdict at the close of evidence was made

orally. It comprised ten transcribed pages in the trial record and covered a

multitude of subjects. However, not once did Wharf mention damages.          Id. at

10023-10033. Wharf argues the damage issue was included by implication in the

other issues raised in the motion for directed verdict and thereby preserved for

both post-trial and appeal purposes. In considering whether the grounds of a

motion for directed verdict were stated with sufficient specificity, we liberally

construe Rule 50 in light of its purpose “to secure a just, speedy, and inexpensive

determination of a case.”    Anderson v. United Tel. Co. , 933 F.2d 1500, 1503

(10th Cir. 1991). Technical precision is unnecessary. A rigid application of the

rule is in order only if such application serves either of the rule’s rationales –

protecting the right to trial by jury or ensuring an opposing party has sufficient

notice of an alleged error so that it may be cured before the party rests its case.

Id. We consider whether the grounds stated in the motion are sufficiently


                                             41
specific on a case-by-case basis.    See id. at 1504.

       Wharf has not satisfied the “specific grounds” requirement no matter how

liberally we construe it. While Rule 50 “does not require technical precision in

stating the grounds of the motion[,] [it] does require that they be stated with

sufficient certainty to apprise the court and opposing counsel of the movant’s

position with respect to the motion.” 9A Charles A. Wright & Kenneth A.

Graham, Jr., Federal Practice and Procedure      § 2533 (1995), 310. “The statement

of one ground precludes a party from claiming later that the motion should have

been granted on a different ground.”     Id.

       In Green Constr. Co. v. Kansas Power & Light Co.        , 1 F.3d 1005, 1012-13

(10th Cir. 1993), we refused to entertain on appeal a defendant’s sufficiency of

the evidence argument regarding the plaintiff’s breach of contract, retainage, and

alter ego claims where in its directed verdict motion the defendant raised

sufficiency only with respect to plaintiff’s misrepresentation claim. In     FDIC , we

rebuffed a defendant’s attempt to raise sufficiency questions regarding proof of

bond coverage because the defendant moved for directed verdict only on the

ground that the plaintiff’s claim “was based on speculation and conjecture.” 20

F.3d at 1075. See also Kientzy v. McDonnell Douglas Corp.          , 990 F.2d 1051,

1060 (8th Cir. 1993); House of Koscot Dev. Corp. v. American Line Cosmetics,

Inc. , 468 F.2d 64, 67-68 (5th Cir. 1972). As these cases demonstrate, merely


                                            42
moving for directed verdict is not sufficient to preserve any and all issues that

could have been, but were not raised in the directed verdict motion.      See First

Sec. Bank v. Taylor , 964 F.2d 1053, 1056-57 (10th Cir. 1992).

       Since Wharf did not submit this issue to the district court until its post-trial

motion for judgment as a matter of law, we may review its argument only to

determine if there is any evidence to support the damage award.        United States v.

Flintco, Inc. , 143 F.3d 955, 967 (5th Cir. 1998);   House of Koscot , 468 F.2d at 68

n.5. Jones’ testimony was more than sufficient to satisfy this standard. Jones

was an experienced financial analyst with particular expertise in business

valuation of cable television systems. He described in detail the basis and

methods used to value UIH’s loss and explained the rationale underlying his

conclusions. His calculations represented a determination of the net present

value that UIH’s 10% investment in CNCL would have yielded had UIH

contributed its 10% funding contribution. Jones’ testimony indicated that in

determining CNCL’s net present value, he considered not only CNCL’s projected

revenue stream, but also its operating expenses and, significantly, 100% of the

projected capital/equity necessary to fund CNCL. This 100% by definition

included UIH’s 10% capital contribution requirement even if not precisely

labeled as such in Jones’ analysis. Jones discounted his net calculation to present

value and multiplied by 10% to obtain the net value of UIH’s 10% interest.


                                            43
Thus, the evidence introduced at trial supported the jury’s $67,000,000

compensatory damage award.       See Hudson v. Smith , 618 F.2d 642, 646 (10th Cir.

1980).

       Wharf contends the jury’s compensatory damage award was grossly

excessive and based on sheer speculation. The district court’s denial of Wharf’s

motion for new trial or remittitur on grounds of excessiveness will not be

disturbed on appeal absent a gross abuse of discretion.        See Campbell v. Bartlett ,

975 F.2d 1569, 1577 (10th Cir. 1992). We will not disturb a jury’s award of

damages on a claim of excessiveness unless the award is so unreasonable as to

shock the judicial conscience and to raise an irresistible inference that passion,

prejudice, corruption, or other improper cause invaded the trial.       Sanjuan v. IBP,

Inc. , 160 F.3d 1291, 1300 (10th Cir. 1998). It is within the virtually exclusive

purview of the jury to evaluate credibility and fix damages.        See Bennett v.

Longacre , 774 F.2d 1024, 1028 (10th Cir. 1985).

       Wharf’s excessive claim is without merit. Jones’ testimony and the

projections on which it was based provided a sufficiently precise basis for the

jury’s damage award. None of UIH’s claims required measurement of damages

by out-of-pocket expenses. UIH instead was entitled to compensation for the loss

suffered by Wharf’s wrongful deprivation of 10% of CNCL. Jones’ testimony

establishes this amount as $67,000,000. The jury’s adoption of the amount


                                            44
established by Jones indicates it was swayed by his testimony, not by passion,

prejudice, or other improper cause.

       Wharf also asserts the award is improperly based on speculative income

stream projections. Contrary to Wharf’s contentions, however, new businesses

are not precluded from seeking damages. Rather, damages are precluded only

where there is mere anticipation that an entity will enter the marketplace or where

the damages are themselves not reasonably determinable.         Roberts v. Holland &

Hart , 857 F.2d 492, 497 (Colo. App. 1993). As with all claims, a damage award

is permissible here if supported by “substantial evidence, which together with

reasonable inferences to be drawn therefrom provides a reasonable basis for

computation of the damage.”      Pomeranz v. McDonald’s Corp. , 843 P.2d 1378,

1383 (Colo. 1993). Jones’ testimony and the projections on which it was based

provide a sufficiently precise basis for the jury’s damage award.     See Brown v.

Presbyterian Healthcare Servs.   , 101 F.3d 1324, 1330-31 (10th Cir. 1996);

Rainbow Travel Serv. v. Hilton Hotels Corp.      , 896 F.2d 1233, 1238-39 (10th Cir.

1990).

       Wharf challenges the district court’s refusal to admit evidence of CNCL’s

post-1994 actual performance and UIH’s purported failure to mitigate damages.

We review a district court’s exclusion of evidence for an abuse of discretion.

See Orjias v. Stevenson , 31 F.3d 995, 999 (10th Cir. 1994). We will not disturb


                                            45
the district court’s ruling absent a distinct showing it was based on a clearly

erroneous finding of fact or an erroneous conclusion of law or manifests a clear

error of judgment.   See Lyons v. Jefferson Bank & Trust   , 994 F.2d 716, 727

(10th Cir. 1993).

      At trial, Wharf sought to demonstrate that the cable project’s actual

performance was worse than forecasted by Jones and that Jones improperly

assessed the risks associated with the project. The district court excluded the

evidence as irrelevant because damages became fixed on the date Wharf finally

denied UIH’s option claim – March 18, 1994.      See Southern Colo. MRI, Ltd. v.

Med-Alliance, Inc. , 166 F.3d 1094, 1100 (10th Cir. 1999) (“Breach of contract

damages are generally measured at the time of breach.”). The court did not abuse

its discretion in excluding this evidence.

      As regards Wharf’s contention that UIH failed to mitigate its damages,

Wharf argued that UIH could have invested elsewhere the funds intended for

investment in the cable project and that UIH’s failure to do so required reduction

of any compensatory damage award. An injured party claiming breach of

contract generally has a “duty to take such steps as are reasonable under the

circumstances in order to mitigate or minimize the damages sustained.”     Fair v.

Red Lion Inn , 943 P.2d 431, 437 (Colo. 1997). A defendant bears the burden of

proving the affirmative defense of failure to mitigate. “However, the defense of


                                          46
failure to mitigate damages will not be presented to the jury unless the trial court

determines there is sufficient evidence to support it.”   Id. In its offer of proof

made before trial, Wharf did not present any evidentiary support that UIH failed

to mitigate its damages. Nor did it direct the court’s attention to any evidence

that UIH had a substitute investment opportunity. Further, production of such

evidence would not have compelled admission of mitigation of damages evidence

and the giving of a mitigation of damages instruction unless Wharf also offered

evidence that UIH could not have accepted both the additional investment

opportunity and the CNCL investment.         See Katz Communications, Inc. v.

Evening News Ass’n , 705 F.2d 20, 26 (2d Cir. 1983); Restatement (Second) of

Contracts § 347, comment f (“If the injured party could and would have entered

into the subsequent contract, even if the contract had not been broken, and could

have had the benefit of both, he can be said to have ‘lost volume’ and the

subsequent transaction is not a substitute for the broken contract.”). The district

court did not abuse its discretion in excluding Wharf’s purported evidence of

UIH’s failure to mitigate damages.

                                    Punitive damages

       Wharf contends the evidence is insufficient to sustain the punitive damages

award. Wharf argues the evidence at best indicates it “did not promptly advise

UIH of its intention not to proceed with the transaction under negotiation.”


                                             47
Appellants’ Br. at 47. Wharf described UIH’s injury as the loss of a contractual

opportunity.

      Colorado permits the imposition of punitive damages in “all civil actions in

which damages are assessed by a jury for a wrong done to the person or to

personal or real property, and the injury complained of is attended by

circumstances of fraud, malice, or willful and wanton conduct.” C.R.S. § 13-21-

102(1)(a). Willful and wanton conduct is “conduct purposefully committed

which the actor must have realized as dangerous, done heedlessly and recklessly,

without regard to consequences, or of the rights and safety of others, particularly

the plaintiff.” C.R.S. § 13-21-102(b). The amount of punitive damages must be

reasonable, and generally cannot exceed the amount of a compensatory damages

award. C.R.S. § 13-21-102(a). A party must prove entitlement to punitive

damages beyond a reasonable doubt. C.R.S. § 13-25-127(2). Whether the

evidence is sufficient to support a punitive damages award is a question of law

we review de novo.   Miller v. Byrne , 916 P.2d 566, 580 (Colo. App. 1996). We

consider the evidence in its totality and “in the light most supportive of the

verdict.” Life Care Ctrs. of America, Inc. v. East Hampden Assocs. Ltd.

Partnership , 903 P.2d 1180, 1188 (Colo. App. 1995).

      There was ample evidence to support the jury award. The jury necessarily

found that on October 8, 1992, Ng agreed to grant UIH a 10% option, knowing


                                         48
even then that Wharf would not allow UIH to exercise that option. Wharf’s

internal memos in particular not only evidence Wharf’s deliberate

misrepresentations regarding the existence of UIH’s option, but also reveal

Wharf’s internal generation of fabricated excuses and purposeful implementation

of stall tactics in its subsequent dealings with UIH. Wharf points out that UIH’s

depiction of events was contradicted by other credible evidence. “The presence

of conflicting testimony need not prevent a jury from deciding that one side has

proven the existence of facts beyond a reasonable doubt.”   Klein v. Grynberg , 44

F.3d 1497, 1504 (10th Cir. 1995). Wharf had its opportunity at trial to convince

the jury. Our review is complete if, as here, there is evidence in the record which

if believed would support a punitive damages award beyond a reasonable doubt.

Id.

      Wharf also asserts the district court improperly declined to reduce or

disallow the award pursuant to its authority under C.R.S. § 13-21-102(2)(a)-(c).

The court properly considered Wharf’s motion and rejected it based on Wharf’s

“utter disregard” of UIH.   See Appellants’ App. at 2092. Contrary to Wharf’s

assertion, § 13-21-102(2) does not “direct” a court to reduce a punitive damages

award if the conduct has ceased, the deterrent effect has been accomplished, or

the purpose of punitive damages has been otherwise served. The statute grants

the district court discretion (“court may reduce or disallow the award”). If a


                                           49
punitive damages award is supported by sufficient evidence and not “grossly

excessive” under the Constitution, the decision to let the award stand is a matter

within the discretion of the district court.

       Wharf finally argues the punitive damages award is unconstitutional. The

question of whether the punitive damages award comports with state law is

separate from the determination of whether it complies with the Due Process

Clause of the Fourteenth Amendment. In         BMW of North America, Inc. v. Gore   ,

the Supreme Court refined the analysis used to determine if a punitive damages

award is “grossly excessive” and thus unconstitutional. 517 U.S. 559, 562

(1996). We review this issue de novo.      FDIC v. Hamilton , 122 F.3d 854, 857

(10th Cir. 1997).

       Under BMW , we engage in a multi-step analysis to determine if an award

is constitutionally infirm. Initially, we identify the State interests that a punitive

damages award is designed to serve. 517 U.S. at 568. “Punitive damages may

properly be imposed to further a State’s legitimate interests in punishing

unlawful conduct and deterring its repetition.”     Id. See Lexton-Ancira Real

Estate Fund v. Heller , 826 P.2d 819, 822 (Colo. 1992) (stating the general

purposes of punitive damages are punishment of the defendant and deterrence

against the commission of similar offenses by the defendant and others in the

future). Next, we determine if the defendant received “fair notice not only of the


                                            50
conduct that will subject him to punishment, but also of the severity of the

penalty that a State may impose.”   Id. at 574. Three factors guide our analysis of

whether a defendant received adequate notice of the magnitude of the penalty that

might be imposed: (1) the degree of reprehensibility of the defendant’s conduct;

(2) the ratio of the punitive damages award to the actual or potential harm

inflicted on the plaintiff; and (3) a comparison of the punitive damages award

with the civil or criminal penalties that could be imposed for comparable

misconduct. Id. at 583. See Deters v. Equifax Credit Information Servs.     , 202

F.3d 1262, 1272 (10th Cir. 2000).

      Viewed in the light most favorable to UIH, the evidence depicts

reprehensible conduct. The jury found Wharf deliberately misled UIH to secure

for itself a sought-after license worth at least $500,000,000. Wharf’s deliberate

misrepresentations and nondisclosures were not limited to a single episode but

occurred repeatedly over a protracted period of time. Wharf used UIH’s name,

contacts, and expertise (all given with an understanding that UIH would have a

right to invest in CNCL) to obtain the franchise and then used its financial and

negotiating leverage to string on UIH for several months. UIH’s injury

admittedly was economic in nature and thus less worthy under    BMW of a

punitive damages award.    See BMW , 517 U.S. at 576. The nature of the injury,

however, is just one factor among many. “[I]nfliction of economic injury,


                                          51
especially when done intentionally through affirmative acts of misconduct, or

when the target is financially vulnerable, can warrant a substantial penalty.”      Id.

There was sufficient evidence here to support a conclusion that Wharf’s

affirmative acts of misconduct were intentional.

       We next consider the ratio of the punitive damages award to the actual or

potential harm to the plaintiff. Although the Court eschewed any precise

mathematical formula in     BMW , it appeared to consider any punitive damages

award more than ten times the amount of either the actual       or potential harm to the

plaintiff to be dangerously close to the boundary of constitutional infirmity. 517

U.S. at 581. This factor weighs compellingly in favor of UIH. The $58,500,000

punitive damages award, although large, was only 87% of the $67,000,000

compensatory damages award. Only in rare circumstances will we find a punitive

damages award to be “grossly excessive” where the ratio of the punitive award to

the compensatory award is less than 1:1.       See Hamilton , 122 F.3d at 861 (finding

a 6:1 ratio permissible in a purely economic injury case). There is no precise

ratio that is excessive as a matter of law.    Post Office v. Portec, Inc. , 913 F.2d

802, 810 (10th Cir. 1990).

       Last, we compare the punitive damages award to the amount of civil and

criminal penalties that could be imposed on Wharf for comparable misconduct.

A person or entity violating the Securities Exchange Act is subject to penalties of


                                              52
fine and imprisonment. A fine of up to $2,500,000 may be imposed upon a

corporate entity. Natural persons may not be fined more than $1,000,000, but

may be imprisoned for up to ten years.      See 15 U.S.C. § 78ff(a). The Colorado

Securities Act likewise permits fines of up to $750,000 and imprisonment

between four and sixteen years for willful violations of its provisions.   See

C.R.S. § 11-51-603; C.R.S. § 18-1-105. The fines are relatively stiff, but

obviously not as severe from a financial point of view as the amount of punitive

damages levied against Wharf. This fact alone, however, does not compel

reduction of the punitive damages award. Comparison of the award to civil or

criminal penalties is only one of the indicators of whether a defendant is on

notice of the magnitude of the award that may be imposed based on the

defendant’s misconduct. In Colorado, a defendant is on notice of the magnitude

of the penalty by virtue of C.R.S. § 13-21-102(1)(a). That section generally

prohibits a punitive damages award in excess of the compensatory award. Thus,

a defendant is on notice that a potential punitive award varies with the magnitude

of the actual harm caused by the defendant, but only rarely will it exceed the

amount reflective of the actual harm. In other words, the greater the harm,

economic or otherwise, inflicted by the defendant, the greater the potential

punitive award.

       We agree that the punitive damages award here is large. However, it is


                                             53
only 87% of the compensatory damages award and is a product of the immensity

of UIH’s loss. Coupled with the reprehensible nature of Wharf’s conduct, the

award was not “grossly excessive” in violation of the Fourteenth Amendment.



Prejudgment interest

       Wharf contends the district court erred in awarding UIH $28,208,440 in

prejudgment interest. The district court awarded prejudgment interest on the

compensatory damages award at eight percent interest from October 31, 1992, to

May 21, 1997, the date of entry of judgment.

       In Colorado, a prevailing party is entitled to prejudgment interest “[w]hen

money or property has been wrongfully withheld.” C.R.S. § 5-12-102(1)(a).

“[I]nterest shall be an amount which fully recognizes the gain or benefit realized

by the person withholding such money or property from the date of wrongful

withholding to the date of payment or to the date judgment is entered, whichever

first occurs.”   Id. Section 5-12-102 is broadly construed “to effectuate the

legislative purpose of compensating parties for the loss of money or property to

which they are entitled.”   Westfield Dev. Co. v. Rifle Inv. Assocs.   , 786 P.2d

1112, 1122 (Colo. 1990). Whether a particular factual circumstance falls within

the terms of the prejudgment interest statute is a question of law reviewed de

novo. See Frontier Exploration, Inc. v. American Nat’l Fire Ins. Co.     , 849 P.2d


                                           54
887, 893 (Colo. App. 1992).

      Wharf contends § 5-12-102 is not applicable here because nothing was

“wrongfully withheld” as UIH claims only a “right to future income.”      See

Bennett v. Greeley Gas Co. , 969 P.2d 754, 766 (Colo. App. 1998) (“prejudgment

interest may not be awarded for future lost profits or earnings”). We disagree. It

is settled in Colorado that “one who is damaged by a breach of contract is

entitled to recover prejudgment interest of eight percent annually from the time

of the breach.”   Ballow v. PHICO Ins. Co. , 878 P.2d 672, 684 (Colo. 1994).

Likewise, “one who is damaged by a breach of [fiduciary] duty may recover

prejudgment interest from the date of the breach, since it is the breach itself that

makes the conduct wrongful.”     Vento v. Colorado Nat’l Bank , 907 P.2d 642, 647

(Colo. App. 1995). Section 5-12-102 is not limited to breaches of either contract

or fiduciary duty. As we have observed, “[i]t would appear . . . that victims of

tortious conduct are clearly entitled to prejudgment interest under the statute.”

Estate of Korf v. A.O. Smith Harvestore Prods., Inc.   , 917 F.2d 480, 486 (10th

Cir. 1990). Because UIH prevailed on its contract and tort claims, it is entitled to

prejudgment interest under C.R.S. § 5-12-102.



Post-judgment issues – contempt and sanctions

      Federal Rule of Civil Procedure 62(a) provides that a prevailing party may


                                           55
not execute a judgment until ten days after the entry of judgment. Even after the

expiration of ten days, execution of a judgment is stayed pending appeal once the

appellant files a supersedeas bond. Fed. R. Civ. Pro. 62(d). Wharf did not

satisfy the judgment within ten days or file a supersedeas bond, despite its

undisputed financial ability to do so. UIH sought execution of the judgment after

obtaining leave from the court to register the judgment under 28 U.S.C. § 1963.

After learning that Wharf was in the process of selling a hotel in California, UIH

filed a motion in the United States District Court for the Central District of

California for an order that UIH was entitled to the sale proceeds. The court

granted the motion. In defiance of the order, Wharf closed the sale and

transferred the funds from the United States. Next, UIH propounded

interrogatories in an attempt to identify Wharf’s assets in the United States.

Wharf’s responses to the interrogatories indicated it had less than $50,000 in

bank accounts in New York.

      On July 23, 1997, UIH filed a Motion for Assistance in Connection with a

Writ of Execution. The motion sought a turnover order commanding Wharf to

deliver certain personal property consisting of various foreign bank accounts and

stock certificates to the United States Marshal for the District of Colorado. A

magistrate judge granted the motion pursuant to his authority under Federal Rule

of Civil Procedure 69(a) and Colorado Rule of Civil Procedure 69(g). The


                                         56
magistrate directed Wharf to collect $150,000,000 of assets in Hong Kong and

Singapore and transfer them to the clerk of the court. Wharf filed objections and

the district court entered an order staying enforcement of the order until a hearing

could be held. The district court conducted a hearing on October 23 and affirmed

the magistrate’s order. The court rejected Wharf’s contention that the turnover

order provided UIH undeserved injunctive relief, and reiterated that “Wharf can

avoid all of this difficulty by posting a supersedeas bond.” Appellants’ App. at

2121. Wharf did not comply with the turnover order and its motion for stay of

the order was denied.

      On November 17, the district court entered an order directing Wharf to

show cause why it should not be held in contempt of court. At a hearing on

December 4, the court ruled that Wharf willfully and inexcusably was in

contempt of court. The court required that Wharf pay UIH’s attorney fees in

connection with the post-judgment proceedings. The attorney fee order was not

subject to vacatur. Further, the court allowed Wharf to purge itself of contempt

if it posted a supersedeas bond within ten days from the date of the hearing.

Also, the court imposed a daily monetary contempt sanction equivalent to the

amount of the daily interest accruing on the judgment. The court cautioned

Wharf that after expiration of the ten-day grace period, the accruing monetary

sanction would not be vacated under any circumstances. The sanction was to


                                         57
continue until Wharf posted a supersedeas bond or complied with the turnover

order.

         Wharf did not post a supersedeas bond by the end of the ten-day grace

period. The court issued an order reiterating the sanction and advising Wharf the

sanction was no longer subject to vacatur. At a hearing on December 22, the

court considered alternative measures and added additional provisions to its

contempt order after counsel advised that Wharf had not posted a supersedeas

bond. First, the court barred Wharf from seeking equitable relief from the court

as long as Wharf remained in contempt. Second, the court ruled:

         Wharf Holdings shall not, directly or through any person or entity
         under its direct or indirect control, transact any business . . . with
         any bank, brokerage, or other institution, wherever located, that (a)
         is in the business of loaning money, raising money for the benefit of
         others, accepting money or other property for deposit, or transferring
         or facilitating the transfer of money or property for the benefit of
         others, and (b) is chartered or incorporated or maintains a branch or
         office in the United States, including without limitation [numerous
         banks].

Id. at 2233-34. Under the terms of the court’s order, “transacting business”

included depositing, receiving, or transferring money from any of the long list of

financial institutions.

         In mid-January 1998, Wharf sought to obtain a supersedeas bond. The

court ordered cessation of accrual of contempt sanctions and, on January 27,

approved Wharf’s supersedeas bond and ordered UIH to stay enforcement


                                           58
proceedings against Wharf pending appeal. The court vacated its October 23,

1997, turnover award. At the time the contempt sanctions ceased, $944,233.10 in

contempt sanctions and $144,457.91 in attorney fees had accrued.

      Wharf appeals the imposition of the sanctions and fees. Wharf urges us to

reverse and vacate the district court’s order because (1) the court lacked subject

matter jurisdiction over the underlying matter; (2) the turnover order constituted

improper use of equitable relief to assist money judgment creditors in the

collection of judgments; and (3) the turnover order violated principles of

extraterritoriality and international comity. We review the district court’s

interpretation of Colorado law de novo.      See Gust v. Jones , 162 F.3d 587, 591

(10th Cir. 1998).

      The plain language of Federal Rule of Civil Procedure 69(a)

unambiguously permits a federal district court sitting in Colorado to reference

and apply Colorado law in “proceedings on and in aid of execution,” unless a

federal statute governs such proceedings. “Federal Rule of Civil Procedure Rule

69(a) . . . defers to state law to provide methods for collecting judgments.”

Mackey v. Lanier Collection Agency & Serv., Inc.       , 486 U.S. 825, 834 (1988). As

a result, the district court’s turnover order was valid if authorized by Colorado

law. See 12 Charles A. Wright et al.,     Federal Practice and Procedure   , § 3012

(1997), at 148. Colorado Rule of Civil Procedure 69(g) provides:


                                            59
      The court, master, or referee may order any party or other person
      over whom the court has jurisdiction, to apply any property other
      than real property, not exempt from execution, whether in the
      possession of such party or other person, or owed the judgment
      debtor, towards satisfaction of the judgment. Any party or person
      who disobeys an order made under the provisions of this Rule may
      be punished for contempt. Nothing in this Rule shall be construed to
      prevent an action in the nature of a creditor’s bill.

Colorado clearly recognizes that “[i]ssuance of a writ of execution . . . is not an

exclusive remedy, and the plaintiff . . . therefore [is] entitled to employ

supplemental proceedings in aid of execution to collect the judgment from the

defendants’ property.”   First Nat’l Bank of Denver v. District Court   , 652 P.2d

613, 617 (Colo. 1982). Rule 69(g) gives effect to this entitlement and permits

entry of a turnover order comparable to the order entered by the district court

here. 3 See Hudson v. American Founders Life Ins. Co.      , 417 P.2d 772 (Colo.

1966) (construing former Rule 69(f)).

      Wharf argues the turnover order was in effect a mandatory injunction

entered by the court without making the factual findings that are a prerequisite to

a grant of injunctive relief. Under the plain language of Federal Rule 69(a), such

factual findings are necessary only if compelled by the provisions of a federal



      3
         The host of cases cited by Wharf are not to the contrary. Those cases all
involved reversal of district court enforcement actions that were invalid because
the actions taken were not authorized by or effectuated in accordance with state
law. See , e.g. , Aetna Cas. & Sur. Co. v. Markarian , 114 F.3d 346, 349-50 (1st
Cir. 1997); Hilao v. Estate of Marcos , 95 F.3d 848, 856 (9th Cir. 1996).

                                          60
statute or the applicable state rules for execution of judgments. Wharf has not

directed us to any authority interpreting Colorado law as requiring a district court

to make factual findings sufficient to warrant injunctive relief before acting

under Colorado Rule 69(g).

       Wharf also asserts the turnover order conflicts with principles of

extraterritoriality and the comity of nations. Extraterritoriality principles limit

the United States’ ability to hold a party legally accountable for conduct that

occurred beyond its borders. Here, the district court merely directed a party over

whom it had personal jurisdiction to turn over assets. The location of those

assets is irrelevant.   See In re Simon , 153 F.3d 991, 997 (9th Cir. 1998). “Once

personal jurisdiction of a party is obtained, the District Court has authority to

order it to ‘freeze’ property under its control, whether the property be within or

without the United States.”    United States v. First Nat’l City Bank      , 379 U.S. 378,

384 (1965). Comity “counsels voluntary forbearance when a sovereign which has

a legitimate claim to jurisdiction concludes that a second sovereign also has a

legitimate claim to jurisdiction under principles of international law.”       United

States v. Nippon Paper Indus. Co.     , 109 F.3d 1, 8 (1st Cir. 1997). Wharf has not

offered a compelling reason to justify overruling the turnover order on comity

grounds. Compliance with the turnover order did not require Wharf to violate

Hong Kong law, nor did it preclude Wharf from satisfying its obligations


                                             61
elsewhere. At best, Wharf has demonstrated that its willful noncompliance with

the turnover order led to complications between Wharf and its banks. The fault

in that regard lies with Wharf, not the district court.

      Having determined that the district court had authority to enter the turnover

order, we next determine if it acted properly in holding Wharf in contempt for

failure to comply with that order. We review a finding of civil contempt under

an abuse of discretion standard.   O’Connor v. Midwest Pipe Fabrications, Inc.   ,

972 F.2d 1204, 1209 (10th Cir. 1992). A district court has broad discretion in

using its contempt power to require adherence to court orders.    Id.

      Wharf argues the district court improperly used its contempt power to force

compliance with a money judgment. This argument misconstrues the nature of

the court’s order. The court held Wharf in contempt for failing to comply with

the court’s properly entered turnover order. Colorado has specifically

contemplated a finding of contempt and imposition of sanctions for failing to

comply with a turnover order.

      To be sure, in the course of execution proceedings upon such a
      [money] judgment, a court may enter ancillary orders directing that
      the judgment debtor take certain actions, including the transfer of
      property. A willful failure to comply with such an order could
      furnish the predicate for the imposition of remedial or punitive
      sanctions.

In re Marriage of Nussbeck , 949 P.2d 73, 77 (Colo. App. 1997),    reversed on

other grounds , 974 P.2d 493 (Colo. 1999).

                                           62
      The district court did not abuse its discretion in finding Wharf in contempt

of court and in imposing sanctions. Nothing more was required of Wharf than of

any other litigant. A party against whom judgment is entered may either satisfy

the judgment or post a supersedeas bond. Wharf opted to do neither. Its decision

to ignore the turnover order was willful by its own admission. Wharf

indisputably had sufficient financial resources either to satisfy the judgment or to

post a supersedeas bond.

      AFFIRMED.




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