## Facts

- Timothy C. Hoiles, a Colorado resident, owned shares in Freedom Communications, Inc., a closely held family media company.
- Seeking to monetize his shares amid family and management disputes, Hoiles retained a consultant who recommended Joseph M. Alioto, a California-licensed attorney.
- Hoiles traveled to California, met with Alioto, and negotiated a contingent-fee agreement for legal representation aimed at extracting value from the shares, potentially including litigation in California.
- Hoiles signed the agreement after returning to Colorado; the agreement contained no choice-of-law clause.
- Alioto performed the contemplated services largely in California, including developing strategy and preparing pleadings for anticipated California state-court litigation.
- Before any lawsuit was filed, Freedom completed a recapitalization that allowed Hoiles to exchange his shares for cash.
- Hoiles contended Alioto was not entitled to a contingent fee based on the recapitalization transaction value.

## Issues

1. Under Colorado choice-of-law rules, whether Colorado or California law governs the validity and enforceability of the contingent-fee agreement between a Colorado client and a California attorney.
2. Whether the district court properly dismissed Alioto’s fraud and negligent misrepresentation claims before trial.

## Decision

- The Tenth Circuit held the district court erred by applying Colorado law to the contingent-fee agreement’s validity.
- Applying Colorado’s conflicts approach, the court concluded California had the most significant relationship to the fee agreement and its performance; California law governs enforceability.
- The court reversed dismissal of Alioto’s breach-of-contract claim and remanded for the district court to determine enforceability under California law.
- The court reversed dismissal of Alioto’s fraud and negligent misrepresentation claims, finding unresolved factual disputes made dismissal improper.
- The court remanded for further proceedings consistent with these rulings.

## Legal Principles

- A federal court sitting in diversity applies the forum state’s choice-of-law rules.
- Under Colorado’s contract conflicts analysis (Restatement (Second) “most significant relationship” test), the governing law turns on the state with the strongest connection to the transaction and parties, including relevant regulatory interests.
- In disputes over attorney fee agreements spanning states, the attorney’s state of licensure and principal place of performance—particularly where litigation there is contemplated—may supply the most significant relationship, given that state’s interest in regulating its bar.
- Fraud and negligent misrepresentation claims should not be disposed of as a matter of law when material factual disputes exist regarding alleged misstatements or omissions, reliance, and related circumstances.

## Conclusion

The court required application of California law to determine whether a contingent-fee agreement negotiated and performed primarily in California by a California lawyer is enforceable, and it reinstated the lawyer’s contract and related tort claims for resolution on a fuller factual record.


Hoiles v. Alioto, 461 F.3d 1224 (10th Cir. 2006)