F I L E D
                                                                      United States Court of Appeals
                                                                              Tenth Circuit
                     UNITED STATES COURT OF APPEALS
                                                                              JUL 21 2003
                                   TENTH CIRCUIT
                                                                         PATRICK FISHER
                                                                                  Clerk

 ELLSWORTH WALKER; ESTATE OF
 VIRGIL SALAZAR; MARY LOU SALAZAR,
 in her capacity as executor of Virgil Salazar’s
 Estate,
                                                               No. 02-1173
          Plaintiffs-Appellees,                                  (D. Colo.)
                                                           (D.Ct. No. 98-B-2585)
 v.

 BOARD OF TRUSTEES, REGIONAL
 TRANSPORTATION DISTRICT AND
 AMALGAMATED TRANSIT UNION
 DIVISION 1001 PENSION FUND TRUST;
 REGIONAL TRANSPORTATION DISTRICT
 AND AMALGAMATED TRANSIT UNION
 DIVISION 1001 PENSION FUND TRUST;
 ROSEMARIE SNYDER, MICHAEL RUCKER,
 GREGG FISHER, LLOYD MACK, LARRY
 SORGET, and EARL NICHOL, Trustees,

          Defendants-Appellants.


                             ORDER AND JUDGMENT *


Robert Lawrence Liebross (J. Mark Baird with him on the brief), Denver,
Colorado, for Plaintiffs-Appellees.



      *
          This order and judgment is not binding precedent except under the doctrines of
law of the case, res judicata and collateral estoppel. The court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 36.3.
Dean C. Heizer, II (David B. Seserman and Miranda K. Hawkins with him on the
briefs) of Gorsuch Kirgis LLP, Denver, Colorado, for Defendants-Appellants.


Before EBEL, Circuit Judge, BRORBY, Senior Circuit Judge, and MURPHY,
Circuit Judge.



      A Board of Trustees of a pension plan adopted an amendment and applied it

to existing retirees, reducing their pension benefits. Two of the retirees sued in

state court after the Board denied their appeals. The Board removed the action to

federal district court. The district court held the Board willfully and wantonly

breached its contract with the retirees and breached its fiduciary duties. The

Board appeals. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.



                                  I. Background

      The Denver Regional Transportation District and the Amalgamated Transit

Union entered a collective bargaining agreement. As part of the agreement, they

created a pension plan for Union employees. The District and the Union

appointed an independent Board of Trustees to administer the plan.



      Exercising its authority under the plan, the Board of Trustees amended the

plan definition of “final average earnings” in 1991. In relevant part, the new

definition allowed employees who transferred from covered Union positions to

                                         -2-
non-covered management positions to receive Union pension benefits based on

the employee’s highest sixty months of earnings, including any earnings made in

non-covered management positions. The Board adopted this amendment in order

to facilitate, and to avoid discouraging, the transfer of employees between

covered Union positions and non-covered management positions.



          Ellsworth Walker and Virgil Salazar were employees of the Regional

Transportation District and participants in the pension plan. After working for a

number of years in covered Union positions, both Messrs. Walker and Salazar

transferred to non-covered management positions. Both eventually retired and

began receiving pension benefits. At the time of their respective retirements, the

definition of “final average earnings” that the Board adopted in 1991 was in

effect.



          A few years after their retirements, the Board again amended the plan

definition of “final average earnings” because it believed the definition it adopted

in 1991 was “inconsistent” with other provisions of the plan and the plan’s

purpose. The amendment, adopted in 1998, revised the definition of “final

average earnings” to exclude from the benefit calculation employees’ earnings

from any non-covered management positions. The Board applied the 1998


                                           -3-
amendment to Messrs. Walker and Salazar, among others, significantly reducing

their pension benefits.



      Messrs. Walker and Salazar appealed the Board’s decision, but the Board

denied the appeals. They then sued the Board in the district court for the City and

County of Denver. The Board removed the action to the United States District

Court for the District of Colorado based on Messrs. Walker and Salazar’s claims

under 42 U.S.C. § 1983. 28 U.S.C. § 1441. The Board moved to dismiss, arguing

(among other things) it was immune from suit under the Colorado Governmental

Immunity Act for Messrs. Walker and Salazar’s breach of fiduciary duty claims.

The district court denied the motion in relevant part.



      The Board and Messrs. Walker and Salazar subsequently filed cross-

motions for summary judgment. The court granted the Board’s motion only on

Messrs. Walker and Salazar’s 42 U.S.C. § 1983 claims because they did not

include the claims in the pretrial order. The court granted Messrs. Walker and

Salazar’s motion on their claims for breach of contract and breach of fiduciary

duties.



      While this case was pending in the district court, Mr. Salazar died. The


                                         -4-
district court substituted Mr. Salazar’s wife, Mrs. Salazar, as a plaintiff in the

case in her capacity as executor of Mr. Salazar’s estate.



      The case went to trial on the issues of whether the Board’s conduct was

willful and wanton, whether Messrs. Walker and Salazar suffered emotional

distress as a result of the Board’s conduct, and attorney’s fees. The court found

the Board acted willfully and wantonly in breaching its contract with Messrs.

Walker and Salazar. In addition, the court found both Messrs. Walker and Salazar

suffered emotional distress as a result of the Board’s breach. The court awarded

Mr. Walker and Mr. Salazar’s estate compensatory damages, including emotional

distress damages, and attorney’s fees. The court also awarded Mr. Walker

consequential damages. The Board appeals.



                                    II. Discussion

      The Board raises five claims of error on appeal: (1) the district court

incorrectly determined the Board was not immune from suit under the Colorado

Governmental Immunity Act for Messrs. Walker and Salazar’s breach of fiduciary

duty claims; (2) the district court erred in granting summary judgment against the

Board on Messrs. Walker and Salazar’s claims for breach of contract and breach

of fiduciary duties; (3) the district court incorrectly allowed Mr. Salazar’s breach


                                          -5-
of fiduciary duty claims to survive his death in violation of Colorado’s survival

statute; (4) the district court erred in allowing Mr. Salazar’s wife to testify about

his emotional distress in violation of Colorado’s dead man’s statute; and (5) the

district court erroneously admitted hearsay evidence and concluded the Board’s

breach of contract was willful and wanton. We address each argument in turn. 1



                 A. The Colorado Governmental Immunity Act

      Before trial, the Board moved the district court to dismiss (in relevant part)

Messrs. Walker and Salazar’s claims for breach of fiduciary duty under Rules

12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. The district court

denied the motion. The Board argues on appeal the district court should have

dismissed the claims because it is “immune from liability for tort-based claims

under the Colorado Governmental Immunity Act.”



      We review de novo the district court’s denial of a motion to dismiss under

Fed. R. Civ. P. 12(b)(6) and 12(b)(1). See Ashley Creek Phosphate Co. v.


      1
          The Board also argues in a footnote the district court “erred by awarding Mr.
Walker consequential damages. Insufficient evidence existed in the record to support Mr.
Walker’s alleged consequential damages due to Mr. Walker’s continuous discovery
abuses.” The Board does not elaborate on this argument or cite to the record or any law
in support of this argument; in any event, after reviewing the record, we conclude the
district court did not err in awarding Mr. Walker consequential damages.


                                          -6-
Chevron USA, Inc., 

, 1267 (10th Cir. 2003), petition for cert. filed,

(U.S. Apr. 21, 2003) (No. 02-1758); Holt v. United States, 

, 1003 (10th Cir. 1995). We review for clear error the district court’s

findings of jurisdictional facts. See 

.



      Under the Colorado Governmental Immunity Act, “[n]o public entity shall

be liable for [actions which lie in tort or could lie in tort] except as provided in

this article.” Colo. Rev. Stat. § 24-10-105 (2001). The Act defines a “public

entity” as “the state, county, city and county, municipality, school district, special

improvement district, and every other kind of district, agency, instrumentality, or

political subdivision thereof organized pursuant to law and any separate entity

created by intergovernmental contract or cooperation only between or among

[public entities].” Colo. Rev. Stat. § 24-10-103(5) (2001) (amended 2002).



      The Act also grants immunity to public employees “for injuries arising out

of an act or omission occurring during the performance of his duties and within

the scope of his employment, unless such act or omission was willful and

wanton.” 

In relevant part, the Act defines a public employee as

“an officer, employee, servant, or authorized volunteer of the public entity.” 

Since the Act is “in derogation of the common law,” we must


                                           -7-
strictly construe it. See Bertrand v. Bd. of County Comm’rs, 

, 225

(Colo. 1994).



       Under the definition above, the Board does not qualify as a “public entity.”

It is not a “state, county, city and county, municipality, school district, special

improvement district, [or any] other kind of district, agency, instrumentality, or

political subdivision.” See Colo. Rev. Stat. § 24-10-103(5). Nor was it “created

by intergovernmental contract or cooperation between or among [public entities].”

The Board was created through a collective bargaining

agreement between the Regional Transportation District (a public entity), see

Brock v. Nyland, 

, 1040 (Colo. 1998), and the Union (a non-public

entity).



       The Board argues it is an “instrumentality” of the Regional Transportation

District and therefore “entitled to immunity” under the Act. Although the District

may appoint some Board members, the pension plan specifically states “the Board

and not the [District] shall have the responsibility for and the authority to manage

the operation and administration of the Plan.” Furthermore, Board members are

obligated to act only in the interest of the plan and not the District. As a result of

these considerations, we conclude the Board is not an “instrumentality” of the


                                           -8-
District.



       The Board also argues Board members are “public employees.” Since the

Board is not a public entity, however, its members cannot be public employees in

their capacity as Board members. Without record support, the Board argues some

of the Board members are public employees because they also work for the

Regional Transportation District. Even assuming some of the Board members

also work for the District, their conduct as Board members does not “occur[]

during the performance of [their] duties and within the scope of [their]

employment” for the District. Colo. Rev. Stat. § 24-10-105. Their duties as

Board members are distinct from whatever duties they may have as employees of

the District. Furthermore, they are being sued for their conduct as Board

members and not for their conduct as employees of the District. Board members

therefore are not “public employees” within the meaning of the Act’s immunity

provisions.



       Under the circumstances of this case, we conclude the Board is not a

“public entity” and Board members are not “public employees” within the

meaning of the Colorado Governmental Immunity Act; as a result, we conclude

the district court correctly held they are not “entitled to immunity under the


                                         -9-
[Act].” 2



               B. Breach of Contract and Breach Fiduciary Duties

       Messrs. Walker and Salazar subsequently moved the district court for

summary judgment on its breach of contract and breach of fiduciary duty claims.

The district court granted the motion. The court concluded the Board’s decision

to apply the 1998 amendment to Messrs. Walker and Salazar, thereby reducing

their pension benefits, was arbitrary and capricious; the decision was contrary to

the terms of the pension plan and the Board’s fiduciary duties under the plan and

common law. The Board argues on appeal the district court incorrectly granted

summary judgment against it. We agree with the district court.



       “We review the district court’s grant of summary judgment on these claims

de novo, applying the same legal standard used by the district court.” Simms v.



       2
          The Board also argues that because the district court concluded below its actions
were “state actions” for purposes of Messrs. Walker and Salazar’s 42 U.S.C. § 1983
claim, it must be a “public entity” under the Colorado Governmental Immunity Act. The
district court dismissed the § 1983 claim on summary judgment, however, and Messrs.
Walker and Salazar do not appeal the court’s ruling. As the issue is not before us, we do
not decide whether the Board’s conduct is “state action” for purposes of § 1983. We also
do not decide whether the district court erred in concluding the Board can engage in
“state action” under § 1983 but nevertheless fail to qualify as a “public entity” under the
Colorado Governmental Immunity Act.


                                           -10-
Oklahoma ex. rel. Dep’t of Mental Health & Substance Abuse Servs., 

, 1326 (10th Cir.), cert. denied, 

(1999). The plan in this case

grants the Board discretion to “construe the Plan,” to “correct any defects or

supply any omission or reconcile any inconsistency” in the plan, and to make

“such rules, regulations, interpretations, decisions, and benefit computations as

may be necessary” for the plan. The plan prohibits the Board, however, from

passing an amendment that would “decrease the accrued benefits of any

Participant.” Because the plan grants the Board with discretion, we should

uphold the Board’s decision unless it was arbitrary and capricious or an abuse of

discretion. 3 See Unisys Corp. v. Damon (In re Estate of Damon), 

,

1308 (Colo. 1996); Hubbard v. Pueblo Firemen’s Pension Fund, 

,

493 (Colo. 1962).



       “A pension plan is a unilateral contract that creates a vested right in those

employees who accept the offer it contains” by complying with the conditions

imposed by the plan. Pratt v. Petroleum Prod. Mgmt., Inc. Employee Sav. Plan &

Trust, 

, 661 (10th Cir. 1990) (quotation marks and citation omitted).


       3
         The Board believes the district court “either misapplied the arbitrary and
capricious standard of review or actually applied a de novo standard of review.” We
disagree. The district court expressly stated it was applying an “arbitrary and capricious”
standard of review, and we conclude it did not misapply this standard.


                                           -11-
See also Police Pension and Relief Bd. v. McPhail, 

, 700-02 (Colo.

1959); McInerney v. Public Employees’ Ret. Ass’n, 

, 352 (Colo. Ct.

App. 1998). The trustee of a pension plan must determine an employee’s benefits

according to the plan in effect at his or her retirement. See 

; Boog v. Bradley, Campbell, Carney & Madsen, P.C. Defined Benefit Pension

Plan & Trust, 

, 97 (Colo. Ct. App. 1997); Baker v. Sheet Metal

Workers Local Union No. 9 Pension Trust Fund, 

, 140 (Colo. Ct.

App. 1983). In addition, the trustee of a pension plan has a fiduciary duty, arising

from the common law of trusts, to administer the plan in accordance with the

terms of the plan. 4 See Sinai Hosp. v. Nat’l Benefit Fund, 

, 566 (4th

Cir. 1982); see also United Mine Workers v. Robinson, 

, 573-74

(1982); Restatement (Second) of Trusts § 164 (1959). Once an employee retires,

a trustee may not adopt an amendment that impairs an employee’s vested rights

under the plan: it is arbitrary and capricious, a breach of contract, and a breach of

its fiduciary duties. See Police Pension & Relief Bd. v. Bills, 

, 583-

85 (Colo. 1961); 

; 

. See also

United Mine 

; 

; Sinai 

.


      4
        The plan in this case also imposes on the Board a fiduciary duty to discharge its
responsibilities “in accordance with the documents and instruments governing the Plan.”


                                           -12-
      Under these principles, the Board cannot adopt an amendment that impairs

Messrs. Walker and Salazar’s vested pension benefits. It is obligated to provide

pension benefits to Messrs. Walker and Salazar according to the plan in effect at

the time of their respective retirements. It did not do so. We therefore conclude,

like the district court, the Board acted arbitrarily and capriciously and breached

its contract and fiduciary duties by applying the 1998 amendment to Messrs.

Walker and Salazar. See 

(“The trustees of a pension plan

act arbitrarily and capriciously when they act so as to contravene the express

language of the plan they are charged with administering.”).



      The Board seeks to justify its conduct by arguing it adopted the 1991

amendment in error. It argues the definition of “final average earnings” in the

1991 amendment was inconsistent with other provisions of the plan and the plan’s

purpose. According to the Board, it corrected this inconsistency by adopting the

1998 amendment and applying it to Messrs. Walker and Salazar. We reject the

Board’s argument. The Board did not adopt the 1991 amendment in error.



      The Board adopted the 1991 amendment to facilitate, and to avoid

discouraging, the transfer of employees between covered Union positions and

non-covered management positions. The Board was concerned some employees


                                         -13-
did not want to make such transfers in fear they would be “disadvantaged” in their

retirement plan. The Board resolved this concern in the 1991 amendment by

defining the term “final average earnings” to include an employee’s highest sixty

months of earnings in either covered or non-covered positions.



      The Board believes the definition of “final average earnings” in the 1991

amendment is inconsistent with the language of section 3.04 of the plan. We

disagree. The plan requires plan participants to have at least ten years of

“Credited Service,” i.e., ten years of continuous employment, to receive a regular

retirement benefit. As the number of years of “Credited Service” increases, so

does the amount of the regular retirement benefit (based on a percentage of final

average earnings). Section 3.04 of the plan clarifies an employee’s non-covered

employment “shall be counted as Continuous Employment for purposes of Vesting

and participation, but not for determining the amount of Credited Service for

benefit accrual purposes.” This section confirms an employee who transfers to

non-covered employment will retain his Credited Service “to the date of such

transfer.” Essentially, section 3.04 addresses the purposes for which the Board

will treat non-covered employment as continuous employment; it does not address

whether the Board should include non-covered employment in the final average

earnings calculation. As a result, we see nothing in section 3.04 that is


                                         -14-
inconsistent with the definition of “final average earnings” in the 1991

amendment.



      The Board argues the 1991 amendment of “final average earnings” is also

inconsistent with the definition of “Earnings” in the plan. Again, we fail to see

the inconsistency. The plan defines “Earnings” as the “total non-deferred cash

compensation paid [to an employee] in any Plan Year.” The amount of an

employee’s “Earnings” is used to determine the amount (based on a percentage of

“Earnings”) an employee must contribute to the trust that funds the plan. An

employee’s “final average earnings,” on the other hand, is used to determine the

amount of the employee’s actual retirement benefit. Since these two terms deal

with different issues, it was not inconsistent for the Board to define one

differently from the other.



      The Board briefly mentions the definition of “final average earnings” in the

1991 amendment is also “inconsistent with the underlying purpose of the Plan.”

It argues, without support, the purpose of the plan is “to provide retirement

benefits to union member employees for work performed while those employees

are covered by collective bargaining agreements between [the District] and the

Union.” Even assuming this is the plan’s purpose, we do not believe it


                                         -15-
inconsistent with that purpose to include the amount earned in non-covered

employment as part of the benefit calculation, especially when the plan also uses

(even under the 1998 amendment) periods of non-covered employment to

determine “Vesting and participation.”



       The Board’s attempt to justify its conduct by questioning the validity of the

1991 amendment fails. The 1991 amendment was a reasonable and good faith

interpretation of the plan. 5 As the 1991 amendment was in effect at the time of

their retirements, Messrs. Walker and Salazar each have a vested right to receive

benefits in accordance with its definition of “final average earnings.” The Board

cannot act to impair or eliminate these vested rights; the Board’s attempt to do so

is arbitrary and capricious, a breach of contract, and a breach of its fiduciary

duties under the plan and the common law of trusts.



       The Board argues in the alternative it cannot be liable for breaching its

fiduciary duties because it acted in good faith and relied on the advice of counsel.


       5
         A portion of the district court’s decision suggests the definition of “final average
earnings” in the 1998 amendment is an unreasonable interpretation of the plan. It is
unnecessary for us to reach this question. Even if the definition in the 1998 amendment is
a more reasonable interpretation of the plan than the one in the 1991 amendment, the
Board may not apply this new definition to Messrs. Walker and Salazar to reduce their
vested pension benefits.


                                            -16-
We disagree. Good faith and reliance on the advice of counsel are not defenses

where, as here, a trustee believes in error the plan authorized its conduct. See

Morgan v. Indep. Drivers Ass’n Pension Plan, 

, 1470 (10th Cir.

1992) (citing Restatement (Second) of Trusts § 201 cmt. b); Franzen v. Norwest

Bank Colorado (In re Trust of Franzen), 

, 1022 (Colo. 1998)

(noting “good faith reliance on the advice of counsel is not a defense to liability

for a breach of duty”). Under Colorado law and the express language of the plan

in this case, the Board is not authorized to pass an amendment that impairs a

vested pension benefit. 6 See 

; 

;

; 

. In any event, as discussed

below, we conclude the Board did not act in good faith reliance on the advice of

counsel in deciding the 1991 amendment was an error and in applying the 1998

amendment to Messrs. Walker and Salazar.



      In sum, we conclude the district court properly granted Messrs. Walker and

Salazar’s motion for summary judgment on their claims for breach of contract and

breach of fiduciary duties under the plan and the common law of trusts.



      6
         As discussed above, the plan authorizes the Board to amend the plan “at any
time” and to “reconcile any inconsistency,” but it expressly prohibits the Board from
passing an amendment that would “decrease the accrued benefit of any Participant.”


                                          -17-
                         C. Colorado’s Survival Statute

      While the parties were litigating this case in district court, Mr. Salazar

died. Mr. Salazar’s wife, Mrs. Salazar, moved the district court to substitute her

as a plaintiff in her capacity as executor of Mr. Salazar’s estate. The district

court granted the motion. The Board subsequently argued before the district court

that Colorado’s “Survival Statute bars [Mr. Salazar’s estate] from recovering

damages for Mr. Salazar’s emotional distress because Mr. Salazar’s breach of

fiduciary duty claim sounds in tort and is based upon personal injuries.” The

district court agreed, holding Mr. Salazar’s estate could not recover emotional

distress damages on its breach of fiduciary duty claim; however, the district court

also concluded the estate could recover emotional distress damages on its willful

and wanton breach of contract claim.



      The Board argues on appeal the district court erred in allowing the estate to

recover emotional distress damages on its willful and wanton breach of contract

claim. It believes Colorado’s “Survival Statute should also bar [the estate’s]

breach of contract claim for emotional distress damages.” We review this

question of law de novo. See Dang v. UNUM Life Ins. Co. of Am., 

,

1189 (10th Cir. 1999).




                                         -18-
         In “tort actions based upon personal injury,” Colorado’s survival statute

prohibits the recovery of “damages for pain, suffering, or disfigurement”

following the death of the person so injured. Colo. Rev. Stat. § 13-20-101(1)

(1997). The statute “is in derogation of the common law and thus must be strictly

construed.” Estate of Burron v. Edwards, 

, 1065 (Colo. Ct. App.

1979).



         Since the statute prohibits recovery of “damages for pain, suffering, or

disfigurement” only in “tort actions,” the plain language of the statute does not

bar Mr. Salazar’s estate from recovering damages for Mr. Salazar’s emotional

distress under a willful and wanton breach of contract claim. See Colo. Rev. Stat.

§ 13-20-101(1). The Board argues as significant, however, emotional distress

damages can also be recovered in tort actions. It claims “the very nature of the

emotional distress damages is tort-based.” It claims we should interpret the

survival statute to bar emotional distress damages in all cases. We disagree. The

Board’s argument ignores the plain language of the statute. 7 We therefore


         7
          The Board also argues the economic loss rule is analogous to the facts of this
case and should prevent Mr. Salazar’s estate from recovering emotional distress damages
on its willful and wanton breach of contract claim. Under Colorado law, the economic
loss rule prevents “a party suffering only economic loss from the breach of an express or
implied contractual duty ... [from] asserting a tort claim for such a breach absent an
independent duty of care under tort law.” Town of Alma v. Azco Constr., Inc., 

, 1264 (Colo. 2000). The economic loss rule does not operate to prevent an

                                           -19-
conclude the district court did not err in allowing Mr. Salazar’s estate to recover

emotional distress damages on its willful and wanton breach of contract claim.



                         D. Colorado’s Dead Man’s Statute

       After Mr. Salazar’s death, the Board also moved the district court under

Colorado’s dead man’s statute to exclude testimony by Mrs. Salazar about Mr.

Salazar’s emotional distress. The district court denied the motion. Mrs. Salazar

thereafter testified at trial on behalf of Mr. Salazar’s estate about Mr. Salazar’s

emotional distress. The Board argues on appeal Colorado’s dead man’s statute

prohibits her testimony. We review this question of law de novo. See 

.



       Under Colorado law, there is a general presumption that “[a]ll persons” are

competent to testify, including those “who have an interest in the event of an

action or proceeding.” Colo. Rev. Stat. § 13-90-101 (1997). See also Breeden v.

Stone, 

, 1174 (Colo. 2000). Of course, this general presumption is

subject to some exceptions, including the dead man’s statute. The dead man’s

statute prohibits, in relevant part, the testimony of a “person directly interested in



individual from bringing a contract action; it only prevents an individual from bringing a
tort action for economic loss arising from a breach of contract. Accordingly, the rule
does not apply to the estate’s willful and wanton breach of contract claim.

                                           -20-
the event [of a civil action, suit, or proceeding] when any adverse party sues or

defends ... as the executor or administrator, heir, legatee, or devisee of any

deceased person.” Colo. Rev. Stat. § 13-90-102(1) (1997) (repealed and

reenacted 2002). In other words, a person directly interested in an action is

incompetent to testify if “his testimony is being offered against an heir, legatee,

devisee, or other person listed in the statute.” 

(Colo.

2000).



         As mentioned above, Mrs. Salazar testified on behalf of the estate about

Mr. Salazar’s emotional distress. Even though she had a direct interest in the

outcome of the litigation as the sole heir to her husband’s estate, the dead man’s

statute did not prohibit her testimony because she did not testify “against” the

estate. 

(emphasis added). The estate was not an

“adverse party” in relation to Mrs. Salazar. See Colo. Rev. Stat. § 13-90-102(1).

Accordingly, the district court did not err in allowing her testimony. 8




         8
          The Board argues Mrs. Salazar’s testimony was “extremely prejudicial to the
Board because the Court based its award for emotional distress damages on her
testimony.” The Board believes such “testimony is precisely the type the Dead Man’s
Statute was intended to prohibit.” While Mrs. Salazar’s testimony may have been
unfavorable to the Board, we nevertheless disagree with the Board, as discussed above,
that the dead man’s statute prohibits her testimony.


                                          -21-
                  E. Willful and Wanton Breach of Contract

      The Board argues the district court improperly admitted hearsay evidence at

trial in support of Mr. Walker’s and Mr. Salazar’s estate’s willful and wanton

breach of contract claims. Absent this evidence, the Board believes there is no

evidence in the record to support the court’s finding the Board acted willfully and

wantonly. Even if the district court properly admitted this evidence, the Board

still believes the evidence does not demonstrate the Board acted willfully and

wantonly.



      We first address whether the district court properly admitted the challenged

evidence. “Evidentiary decisions rest within the sound discretion of the trial

court, and we review those decisions only for an abuse of that discretion. Our

review is especially deferential when the challenged ruling concerns the

admissibility of evidence that is allegedly hearsay.” United States v. Tome, 

, 1449 (10th Cir. 1995) (citation omitted). “[W]e consider the record as

a whole in reviewing evidentiary rulings.” United States v. Cestnik, 

,

907 (10th Cir. 1994).



      The government argues the district court erred in admitting tape recordings

and transcripts of two Board meetings. At one meeting in 1995, the Board


                                        -22-
reviewed an actuarial evaluation of the plan and discussed why the evaluation

included, as an actuarial assumption, the change in an employee’s pay when he

transferred between a covered Union position and a non-covered management

position. At another meeting in 1998, the Board discussed in detail the reasons

underlying its adoption of the 1991 and 1998 amendments and the consequences

of applying the 1998 amendment to existing retirees like Messrs. Walker and

Salazar.



      The district court admitted the tape recordings and transcripts of these

meetings in part, despite the Board’s hearsay objection, because the excerpts and

recordings “reflect[ed] knowledge on the part of identified named defendants,”

and “knowledge, of course, is an integral factor of the willful, wanton analysis.”

An out-of-court statement is not hearsay, and a district court may properly admit

it “if the statement is offered not for the truth of the matter asserted in the

statement but merely to show that a party had knowledge of a material fact or

issue.” Echo Acceptance Corp. v. Household Retail Servs., Inc., 

,

1090 (10th Cir. 2001); see also Fed. R. Evid. 801(c). We agree with the district

court that the tape recordings and transcripts discussed above are evidence of the

Board’s knowledge of facts material to this case; as a result, we conclude the

district court did not abuse its discretion in admitting the recordings and


                                          -23-
transcripts for this purpose.



      The Board cites a specific portion of the district court’s decision to

demonstrate the court erroneously admitted certain statements of the Board’s

attorney (during a Board meeting) for the truth of the matter asserted. It quotes

the following passage from the district court’s decision:

             And this was the meeting where Mr. Parsons advised the board
      to take comfort in the inability of these people to find a lawyer.
      “And even if they did, if there is a lawsuit, we’ll try to get every
      penny back that we paid them over and above what Amendment 9
      would otherwise allow.”

      You know what that was? “I dare you to sue me.”

The district court found the evidence quoted above, along with other evidence,

demonstrated “willful and wanton conduct. It is probative of such conduct.” This

portion of the district court’s decision paraphrases two separate statements. We

will examine each statement individually and determine whether the court

properly admitted it.



      The Board’s attorney made one of the statements at the Board meeting in

1998 during a discussion about whether to apply the 1998 amendment to existing

retirees. He stated:

      And also, you know, from just the frankness of the economics of it, I
      think the participants are going to have a hell of a time finding an

                                        -24-
      attorney who’s going to take the case, because there is no fee shifting
      provision in Colorado.

The district court did not abuse its discretion in admitting this statement as

evidence of the Board’s knowledge of the consequences of its decision to apply

the 1998 amendment to Messrs. Walker and Salazar. The district court did not

admit the statement for the truth of the matter asserted: Mr. Walker and Mr.

Salazar’s estate were not seeking to prove that Messrs. Walker and Salazar had a

hard time finding an attorney; instead, they were seeking to prove that the Board

acted willfully and wantonly in breaching its contract.



      The Board made the second statement in a letter it sent to both Messrs.

Walker and Salazar informing them of its decision to apply the 1998 amendment

to them. It read:

      Please be advised that, if you decide to file a lawsuit against the
      Board of Trustees, the Board of Trustees will file a counterclaim
      against you for recovery of the full amount of any overpayments of
      pension benefits.

The district court did not abuse its discretion in admitting this statement. Mr.

Walker and Mr. Salazar’s estate offered this statement against the Board, and the

Board itself made the statement. It is therefore an admission by a party-opponent,

and, as such, it is not hearsay. See Fed. R. Evid. 801(d)(2)(A).




                                         -25-
      We next address whether the evidence supports the district court’s finding

the Board willfully and wantonly breached its contract with Messrs. Walker and

Salazar. Under Colorado law, “a willful-and-wanton breach of contract [is] one

that is intentional, and without legal justification or excuse.” Giampapa v.

American Family Mut. Ins. Co., 

, 244 (Colo. 2003) (quotation marks

and citation omitted). The Board argues it “did not act willfully and wantonly

because it acted with legal justification and lacked the requisite intent.” We

review for clear error the district court’s factual findings. See Fed. R. Civ. P.

52(a). See also 

(treating the willful and wanton

conclusion as a finding of fact). “A finding of fact is clearly erroneous if it is

without factual support in the record or if [we], after reviewing all the evidence,

[are] left with a definite and firm conviction that a mistake has been made.”

Manning v. United States, 

, 812 (10th Cir. 1998) (quotation marks

and citation omitted).



      The Board argues generally there is no evidence “in the record, either direct

or circumstantial, that the Board intended to breach a contract.” The Board

argues as significant it “went to great lengths to discuss, debate and consider its

decision to adopt [the 1998 amendment].” The Board’s argument does not

address, however, whether the Board intentionally breached its contract. The


                                         -26-
district court made several findings of fact demonstrating the Board knew Messrs.

Walker and Salazar had vested pension benefits under the definition of “final

average earnings” in the 1991 amendment. The district court also made findings

showing the Board knew it did not adopt the 1991 amendment in error, and, in

spite of this knowledge, it applied the 1998 amendment to Messrs. Walker and

Salazar and denied their appeals based on its non-credible claim the 1991

amendment was an error. These factual findings are supported by the record and

further support the court’s finding that the Board’s breach was “purposeful[]” or

intentional.



      The Board also argues there is no evidence in the record “demonstrating

that the Board acted without legal justification or excuse.” It claims it “sought

the advice of legal counsel, evaluated its options and acted in accordance with

that advice.” We disagree. The Board’s attorney advised the Board that if the

1991 amendment was adopted in error, its application of the 1998 amendment to

existing retirees may survive judicial scrutiny; however, the Board points to no

evidence indicating its attorney advised the Board it adopted the 1991 amendment

in error. Furthermore, the district court found the Board “knew [the 1991

amendment] was no mistake. And the claim that it was an error or mistake or that

there were conflicts in provisions is not credible.” As a result of these


                                         -27-
considerations, we conclude the district court correctly found the Board did not

rely on its attorney’s advice, or act with legal justification, when it claimed the

1991 amendment was a mistake and applied the 1998 amendment to Messrs.

Walker and Salazar.



      In sum, we conclude the district court did not abuse its discretion in

admitting the evidence the Board objected to as hearsay. We also conclude the

record supports the district court’s findings that the Board intentionally breached

its contract and, in so doing, acted without legal justification or excuse. The

district court therefore did not commit clear error in finding the Board’s breach of

contract was willful and wanton.



                                   III. Conclusion

      For the reasons discussed above, we AFFIRM the judgment of the district

court. We grant Mr. Walker’s and Mr. Salazar’s estate’s request for attorney’s

fees on appeal and REMAND to the district court for the limited purpose of

determining the proper amount. See, e.g., Buder v. Sartore, 

, 1391

(Colo. 1989).

                                        Entered by the Court:

                                        WADE BRORBY
                                        United States Circuit Judge

                                         -28-