Court Opinion

ID: 4577631
Source: CourtListenerOpinion
Date Created: 2020-10-15 22:02:25.874802+00
Date Added: 2024-06-11T13:36:24.691208
License: Public Domain

The summaries of the Colorado Court of Appeals published opinions
  constitute no part of the opinion of the division but have been prepared by
  the division for the convenience of the reader. The summaries may not be
    cited or relied upon as they are not the official language of the division.
  Any discrepancy between the language in the summary and in the opinion
           should be resolved in favor of the language in the opinion.

                                                                  SUMMARY
                                                            October 15, 2020

                               2020COA146

No. 19CA1325, State Farm v. Steul — Civil Procedure —
Process — Time Limit for Service — Dismissal of Actions —
Involuntary Dismissal by Defendant

     A division of the court of appeals considers whether a trial

court’s orders extending the time for service under C.R.C.P. 4(m)

preclude it from subsequently granting a motion to dismiss for

failure to prosecute under C.R.C.P. 41(b)(1) based on the plaintiff’s

extended delay in serving the defendant. Because a court may

grant an extension under Rule 4(m) without finding good cause for

delay, but it must evaluate the justifications for delay, and potential

prejudice to defendant, before granting dismissal under Rule

41(b)(1), the division concludes that a court’s discretion under Rule

41(b)(1) is not limited by previous Rule 4(m) orders when the orders

make no good cause finding.
     The division further concludes that the trial court properly

applied Malm v. Villegas, 2015 CO 4, and did not err in failing to

consider whether the standards articulated in Malm are altered

when a defendant is served pursuant to section 42-7-414(3), C.R.S.

2019.
COLORADO COURT OF APPEALS                                         2020COA146

Court of Appeals No. 19CA1325
Arapahoe County District Court No. 16CV31910
Honorable Frederick T. Martinez, Judge

State Farm Mutual Auto Insurance Company,

Plaintiff-Appellant,

v.

Julie E. Steul,

Defendant-Appellee.

                              ORDER AFFIRMED

                                  Division IV
                         Opinion by JUDGE RICHMAN
                        Terry and Graham*, JJ., concur

                         Announced October 15, 2020

Greenberg & Sada, P.C., Alan Greenberg, Englewood, Colorado, for Plaintiff-
Appellant

Mary B. Pucelik, Lone Tree, Colorado, for Defendant-Appellant

*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art.
VI, § 5(3), and § 24-51-1105, C.R.S. 2019.
¶1    Plaintiff, State Farm Mutual Auto Insurance Company (State

 Farm), appeals a trial court order dismissing its suit against

 defendant, Julie E. Steul, for failure to prosecute its claim. We

 affirm.

                           I.    Background

¶2    According to the allegations of the complaint, Steul and State

 Farm’s insured, Michael Fehringer, were involved in a traffic

 accident on August 9, 2013. State Farm subsequently

 compensated Fehringer for his injuries. As Fehringer’s subrogee, it

 sought to recover from Steul. Steul was notified of the claim

 through her insurer, Allstate. However, negotiations between

 Allstate and State Farm ultimately proved fruitless.

¶3    On August 8, 2016, one day before the applicable three-year

 statute of limitations expired, State Farm filed its complaint against

 Steul. See § 13-80-101(1)(n)(I), C.R.S. 2019. At the time of filing,

 State Farm had not served Steul. The next day, the trial court

 issued a delay reduction order requiring State Farm to file a return

 of service within sixty-three days of filing the complaint. See

 C.R.C.P. 4(m) (stating that once a complaint is filed, a plaintiff has

 sixty-three days to serve a defendant before the court may take

                                    1
 adverse action). Thus, service was to be effected by October 10,

 2016.

¶4    On October 14, 2016, the trial court notified State Farm that

 the case could be dismissed without prejudice thirty-five days from

 the date of the order unless a return of service, notice of dismissal,

 stipulation for settlement, or statement showing good cause was

 filed. Id. (allowing extension of the time for service either in the

 court’s discretion or for good cause shown).

¶5    Thereafter, State Farm requested and was granted two

 additional extensions of time based on allegations that it was

 having difficulty locating Steul, one on November 22, 2016, and one

 on March 24, 2017. In the March 24 order, the trial court noted

 that the case was over 225 days old without service having been

 made. It therefore granted only a 90-day extension, although State

 Farm had requested 120 days.

¶6    On June 22, 2017, the day the second extension expired, State

 Farm filed a motion for substituted service under C.R.C.P. 4(f),

 seeking permission to serve Steul’s attorney. The trial court did not

 rule on the motion. Instead, on June 23, 2017, it dismissed the

                                     2
 case without prejudice due to the lengthy passage of time without

 service and the expiration of its June 22 deadline.

¶7    State Farm took no action for nearly six months. However, on

 December 1, 2017, it filed a motion to reinstate the case pursuant

 to C.R.C.P. 60(b), asserting that, in the interval, it had made efforts

 to “make certain that the Defendant still resides at the address

 known to the Plaintiff and that there are persons to whom service

 may be had under Rule 4(f). Those are satisfied.” The court

 granted the motion on January 17, 2018, giving State Farm leave to

 refile its motion for substituted service. For reasons not apparent

 from the record, State Farm did not do so.

¶8    On March 5, 2018, the trial court issued another delay

 reduction order, requiring that State Farm take action within

 thirty-five days. The order was met with another motion for

 extension of time. The court extended the deadline for service to

 June 30, 2018.

¶9    On June 8, State Farm filed another motion for substituted

 service, this time requesting permission to serve Steul’s relative in

 New York. The court granted the motion but did not extend the

 deadline for service beyond June 30. On July 2, State Farm

                                    3
  notified the court that service was in process and a return of service

  would be filed within approximately ten days. The court extended

  the deadline for service to July 23.

¶ 10   State Farm eventually attempted service on Steul’s relative,

  and filed a return on July 16. However, on September 24, 2018,

  the trial court deemed service insufficient because the New York

  process server did not complete service in accordance with Rule 4(f).

  The court mandated new proof of substituted service by October 29,

  2018.

¶ 11   On October 30, State Farm filed a “status update” in which it

  asked for an extension of the deadline until December 10, so that it

  could obtain a different New York process server. The court granted

  the extension but State Farm did not thereafter effect service on

  Steul via her relative, apparently because it could not locate a New

  York process server willing to comply with Rule 4(f).

¶ 12   On December 10, 2018, State Farm’s attorney filed a motion to

  serve Steul under section 42-7-414(3)(a), C.R.S. 2019, a provision

  that permits service upon a defendant through his or her insurance

  company. The motion stated, “Very recently, the undersigned

  learned of the existence of [this statute] from a pleading in an

                                     4
  unrelated case. The undersigned apologizes for his lack of

  knowledge of this provision . . . .” The motion was granted, with an

  order that return of service was to be “promptly filed.” State Farm

  served Allstate and filed proof of service on December 18, 2018.

¶ 13   In January 2019, Steul filed a motion to quash untimely

  service of process and dismiss the complaint, citing Rule 4(m), and

  Malm v. Villegas, 2015 CO 4 (discussing dismissal for failure to

  prosecute under C.R.C.P. 41(b)). She asserted that State Farm had

  not effected service within a reasonable time.

¶ 14   After an evidentiary hearing at which Steul testified, the trial

  court granted Steul’s motion and, relying on Malm, concluded that

  the delay in serving her was unreasonable. In reaching this

  conclusion, the court found the following:

          • At the time of the accident, Steul had provided her

             correct home address and insurance information.

          • Steul was aware of the subrogation claim and had hired

             a lawyer to defend her, but later dismissed the lawyer

             because she believed the case to be inactive.

          • Steul was prejudiced by the delay because, in addition to

             the likelihood that memories had faded, she had sold her

                                    5
             car a year and six months after the accident, and the

             identity of an “elderly couple” mentioned in the police

             report was unknown.

          • Steul had not moved since the accident, had retained

             the same insurance carrier, and had not attempted to

             secrete herself.

¶ 15   State Farm now appeals the order dismissing its claim. It

  contends that the trial court erred by (1) applying the wrong law to

  the question of dismissal; (2) contradicting its own orders extending

  the time for service under Rule 4(m); and (3) failing to consider

  whether, based on public policy concerns, a plaintiff who effects

  service pursuant to section 42-7-414(3) must be given an extended

  time in which to serve a defendant.

                        II.     Standards of Review

¶ 16   A trial court has broad discretion when determining whether

  to dismiss a case under Rule 41(b)(1). Gold Hill Dev. Co., L.P. v. TSG

  Ski & Golf, LLC, 2015 COA 177, ¶ 45. We therefore review the trial

  court’s decision for an abuse of discretion. Malm, ¶ 2; Powers v.

  Prof’l Rodeo Cowboys Ass’n, 832 P.2d 1099, 1104 (Colo. App. 1992).

                                      6
¶ 17   A trial court abuses its discretion only where its decision was

  manifestly arbitrary, unfair, unreasonable, or contrary to law. Streu

  v. City of Colorado Springs ex rel. Colo. Springs Util., 239 P.3d 1264,

  1268 (Colo. 2010); 23 LTD v. Herman, 2019 COA 113, ¶ 40. We

  need not agree with the trial court’s decision. All that is required is

  that the court not “exceed[] the bounds of the rationally available

  choices.” Streu, 239 P.3d at 1268 (quoting Big Sky Network Can.,

  Ltd. v. Sichuan Provincial Gov’t, 533 F.3d 1183, 1186 (10th Cir.

  2008)).

¶ 18   When our analysis requires us to construe statutes or rules of

  civil procedure, we review de novo. Curry v. Zag Built LLC, 2018

  COA 66, ¶ 22.

                    III.   Dismissal Under Rule 41(b)

¶ 19   State Farm asserts that the trial court erred because it relied

  on Malm, and its discussion of the doctrine of laches, rather than

  Rule 41(b). The court’s order initially implies that a laches analysis

  was contemplated by the court. However, our review of the

  remainder of the order reveals that the trial court did not rely on a

                                     7
  laches analysis.1 It is the substance of the order, not its explicit

  references, that must guide our conclusions. See Powers, 832 P.2d

  at 1104 (analyzing an order under Rule 41(b), although the order

  referred only to Rule 41(a), because the substance of the order

  indicated that the court had considered both subsections).

                                 A.       Law

¶ 20   State Farm is correct that the order primarily relied on Malm

  to define the applicable law. Although Malm briefly mentioned the

  doctrine of laches, it chiefly concerned the analytical framework to

  be applied to a Rule 41(b) motion to dismiss for failure to prosecute.

  Malm, ¶ 16 (comparing the constraints imposed on plaintiffs by the

  doctrine of laches to those imposed by the statute of limitations).

  Malm held that, in this context, a plaintiff’s claim may be subject to

  1 “The elements of laches are: (1) full knowledge of the facts; (2)
  unreasonable delay in the assertion of [the] available remedy; and
  (3) intervening reliance by and prejudice to another.” Hickerson v.
  Vessels, 2014 CO 2, ¶ 12 (quoting City of Thornton v. Bijou Irrigation
  Co., 926 P.2d 1, 73 (Colo. 1996)). These elements are similar to,
  but not the same as, the factors relevant to a dismissal under
  C.R.C.P. 41(b). The trial court did not cite these laches factors, nor
  did it evaluate whether State Farm had “full knowledge of the facts”
  or whether Steul’s conduct demonstrated her “reliance” on State
  Farm’s extended failure to serve her.

                                      8
  dismissal if the defendant is not served within a reasonable time

  after the complaint is filed. Id. at ¶ 11.

¶ 21      The Malm court also set forth a nonexclusive list of factors

  that may be considered when determining whether the delay at

  issue was “reasonable,” including “the length of delay, the reasons

  for delay, the prejudice that will result to the defendant by allowing

  the matter to continue, and the nature and extent of the plaintiff’s

  efforts in avoiding or rectifying the delay.” Id. Regardless of which

  factors are considered or the weight each factor is given, when

  evaluating whether a plaintiff has failed to prosecute its case, the

  court’s primary concern should be the plaintiff’s justification for the

  extended delay. Id. at ¶ 19. Although some of these factors could

  be relevant to a laches analysis, we do not read Malm as a laches

  case.

¶ 22      Malm concerned a circumstance in which the plaintiff filed the

  complaint one month before the applicable statute of limitations

  expired, and failed to serve the defendant for seven-and-one-half

  years thereafter. Id. at ¶¶ 3, 20. Consequently, Malm also

  addressed the standard to be applied when a lengthy delay in

  serving a defendant exceeds the expiration of the statute of

                                       9
  limitations, a circumstance in which additional delay is

  presumptively prejudicial. Id. at ¶ 16. The Malm court concluded

  that such a delay may be considered reasonable only where it is

  caused by the defendant’s own wrongful conduct or some formal

  impediment to service, “not simply the inability of the plaintiff to

  locate the named defendant, no matter how extensive his efforts

  may be.” Id. at ¶¶ 16-17.

                              B.    Analysis

¶ 23   Because Rule 41(b) provides the proper framework for an

  analysis of Steul’s motion, and Malm construes Rule 41(b), the trial

  court did not err in relying on Malm. It also appears that the court

  properly understood the question before it. It characterized the

  issue as “whether a delay in serving the opposing party is

  unreasonable,” and it understood its duty was to “evaluate a

  number of factors when determining whether the delay was

  unreasonable.”

¶ 24   Further, we perceive no error in the court’s application of the

  law to these facts. It properly considered the fact that Steul was not

  served with process until two years and four months after the

  statute of limitations had expired, raising a presumption that she

                                    10
  was prejudiced by the delay. It further evaluated the reasons for

  delay, including whether procedural impediments to service or

  Steul’s alleged misconduct caused extensive delay.2 We also note,

  although the trial court did not explicitly mention it, that there was

  a nearly six-month period of inactivity in 2017 and a second long

  period of inactivity in 2018, both of which can be seen as a lack of

  diligence on the part of plaintiff. And although Malm does not

  explicitly require a defendant to demonstrate actual prejudice to

  prevail on a Rule 41(b) motion, the court properly considered any

  prejudice that may have resulted from Steul’s decreased ability to

  identify witnesses. Id. at ¶ 20 (noting that a failure to demonstrate

  “specific prejudice” should not preclude dismissal of the claim).

¶ 25   We acknowledge that the trial court’s order may have initially

  mischaracterized Malm. However, its analysis and conclusions

  convince us that the court did not misunderstand the law or

  2 Steul’s testimony at the evidentiary hearing provided record
  support for the court’s conclusion that she had not attempted to
  secrete herself. The court also correctly observed that State Farm
  could have served Steul via section 42-7-414(3), C.R.S. 2019, at any
  time after filing suit, assuming Steul’s whereabouts for service of
  process could not be determined through reasonable effort.

                                    11
  otherwise abuse its discretion in determining that State Farm failed

  to prosecute its claim.

                       IV.   Effect of Court Orders

¶ 26   While State Farm concedes that Rule 41(b) is the controlling

  law, it nonetheless objects to the trial court’s reliance on Malm

  because Malm did not interpret or apply Rule 4(m) to the question

  of unreasonable delay. This argument dovetails with State Farm’s

  additional argument that its claim should not have been dismissed

  because it was acting in reliance on the trial court’s orders

  extending the time for service under Rule 4(m).

¶ 27   To address these arguments, we must first examine the

  relationship between Rules 4(m) and 41(b) to determine whether an

  order extending the time for service under Rule 4(m) necessarily

  precludes the court from later granting a Rule 41(b) motion to

  dismiss for failure to prosecute.

                                A.     Law

¶ 28   Rule 4(m) was adopted in 2013. It states as follows:

            If a defendant is not served within 63 days
            (nine weeks) after the complaint is filed, the
            court — on motion or on its own after notice to
            the plaintiff — shall dismiss the action without
            prejudice against that defendant or order that

                                      12
             service shall be made within a specified time.
             But if plaintiff shows good cause for the
             failure, the court shall extend the time for
             service for an appropriate period.

¶ 29   Prior to its adoption, a plaintiff faced no formal deadline for

  serving a defendant except that, under Rule 41(b), service was

  required to be completed “within a reasonable time after

  commencing an action by filing.” Malm, ¶ 11. If an unreasonably

  long period passed between filing and service, the defendant’s

  remedy was dismissal under Rule 41(b)(1) or (2) for failure to

  prosecute.3

¶ 30   Thus, the practical effect of the supreme court’s adoption of

  Rule 4(m) is to provide a specific number of days in which service

  must occur where no such deadline previously existed. Under Rule

  4(m), if service has not occurred by the deadline, the court has

  several options. It may (1) give the plaintiff notice that the case may

  be dismissed and ask for a showing of good cause, and if the

  plaintiff shows good cause it is entitled to an extension of time; (2)

  3Under Rule 41(b)(1), a complaint could also be dismissed due to a
  plaintiff’s failure to comply with the Colorado Rules of Civil
  Procedure. However, no such violation is at issue in this case, and
  we do not address this portion of the rule.

                                    13
  give the plaintiff additional time to serve the defendant; or (3)

  dismiss the complaint without prejudice once notice is given.

  Curry, ¶ 36 (citing Espinoza v. United States, 52 F.3d 838, 841

  (10th Cir. 1995), which interprets the similar federal rule); Taylor v.

  HCA-HealthONE LLC, 2018 COA 29, ¶ 23 (noting that expiration of

  the sixty-three day deadline is a condition precedent to dismissal or

  a new deadline). By its plain terms, the rule gives trial courts broad

  discretion. Curry, ¶ 36. This discretion includes the ability to grant

  plaintiff an extension without a showing of good cause, or any

  explicit excuse for delay. Id. at ¶ 39.

                               B.   Analysis

¶ 31   The court’s orders in this case do not state whether the court

  extended State Farm’s Rule (4)(m) deadlines because it found “good

  cause” for delay, or because the court was exercising its discretion

  to allow more time for service. Indeed, no such explanation is

  required under the rule. Therefore, we cannot assume that these

  orders reflect a series of findings that State Farm had good cause

  for delay.

¶ 32   By contrast, when the court considered Steul’s motion to

  dismiss for failure to prosecute under Rule 41(b), it was required to

                                     14
  evaluate State Farm’s justifications for the extended delay and

  weigh them against any potential prejudice to Steul. Malm, ¶¶ 11,

  19. Because the Rule 41(b) motion raised issues that were not

  previously explicitly decided by the court, we do not view the series

  of Rule 4(m) orders secured by State Farm as safe harbor from a

  Rule 41(b) dismissal in this case.

¶ 33   Further, Malm concluded that Rule 4(m) does “not displace

  Rule 41(b)(2)’s provision for dismissal for failure to prosecute.” Id.

  at ¶ 19. This is so because every violation of Rule 4(m) does not

  necessarily constitute a failure to prosecute under Rule 41(b).

¶ 34   When the delay at issue is not substantial, failure to serve a

  defendant before the Rule 4(m) deadline may amount to nothing

  more than a technical violation of the rule, a problem easily

  remedied by an order extending the deadline. However, once a

  court has granted multiple extensions of time to serve a defendant,

  the resulting delay may raise concerns that a plaintiff has failed to

  prosecute the claim. See Williams v. Illinois, 737 F.3d 473, 476

  (7th Cir. 2013) (noting that if a plaintiff’s delay is so long that it

  signifies a failure to prosecute, a court has discretion to dismiss the

  case on those grounds rather than dismissing it under

                                       15
  Fed. R. Civ. P. 4(m) for lack of service); O’Rourke Bros., Inc. v.

  Nesbitt Burns, Inc., 201 F.3d 948, 953 (7th Cir. 2000) (“In certain

  circumstances, a plaintiff’s dereliction in not obtaining service may

  lead beyond Rule 4 and head off into territory covered by Rule

  41(b).”).

¶ 35    Here, the delay at issue extended well beyond the initial

  sixty-three-day deadline set by the trial court under Rule 4(m). The

  court granted at least seven extensions of time (as well as approving

  alternative methods of service) and had previously reinstated the

  case after dismissal for failure to meet a Rule 4(m) deadline.

  Because the period of delay was so extended, we conclude that the

  trial court did not err by relying on Malm and Rule 41(b) to decide

  this issue rather than Rule 4(m).

                    V.    Effect of Section 42-7-414(3)

¶ 36    State Farm’s final contention is that the trial court erred by

  failing to consider the public policies served by the General

  Assembly’s enactment of section 42-7-414(3), and that the trial

  court’s decision to authorize service under this statute militates in

  favor of denying Steul’s motion to dismiss.

                                      16
                                 A.    Law

¶ 37   Section 42-7-414 is part of the “Motor Vehicle Financial

  Responsibility Act,” (the Act), § 42-7-101, C.R.S. 2019, a law

  enacted by the General Assembly to “protect our people from

  the . . . financial loss visited upon innocent traffic accident victims

  by negligent motorists who are financially irresponsible,”

  § 42-7-102, C.R.S. 2019. To that end, the Act was designed to

  “simplify the process for an innocent victim to access the negligent

  driver’s liability insurance policy or his or her own uninsured

  motorist coverage.” § 42-4-102(2)(b)(II). It therefore mandates that

  motor vehicle insurance policies are written to “require

  policyholders . . . to appoint their insurance carrier as an agent for

  the purpose of service of process in certain limited instances in

  accordance with section 42-7-414(3).” § 42-7-102(2)(c).

¶ 38   Section 42-7-414(3)(a) requires motor vehicle insurance

  policies to include a provision stating that “[i]f the insured’s

  whereabouts for service of process cannot be determined through

  reasonable effort, the insured agrees to designate and irrevocably

  appoint the insurance carrier as the agent of the insured for service

  of process.” However, under subsection (3)(f), if a plaintiff serves an

                                      17
  insurance carrier under subsection (3), the amount of the carrier’s

  liability cannot exceed the policy limits. Even so, any payment

  made by the carrier “shall not bar the injured person from

  subsequently making personal service” on the tortfeasor.

  § 42-7-414(3)(f).

                               B.    Analysis

¶ 39   The thrust of State Farm’s argument is that when a court

  authorizes service on a defendant’s insurance carrier under section

  42-7-414(3), and it later considers whether a plaintiff has failed to

  prosecute its claim, the standards articulated in Malm must be

  altered to reflect the standards set forth in subsection 3 to promote

  the public policies reflected in the Act. More specifically, according

  to State Farm, subsection (3)(a)’s “reasonable effort” standard

  should be relied upon to determine whether any delay between the

  filing of the complaint and service of process was justified under

  Rule 41(b). Similarly, any prejudice to the defendant should be

  evaluated in light of subsection (3)(f)’s limitation on a plaintiff’s

  recovery. We are not persuaded by these arguments.

¶ 40   While the enactment of section 42-7-414(3) provided plaintiffs

  with a new method to effect service on a defendant, the plain

                                      18
  language of subsection (3) contains no indication that it was

  intended to alter plaintiffs’ existing obligations under Rule 41(b) or

  Rule 4(m). Curry, ¶ 23 (noting that we apply statutes according to

  their plain language). By its own terms, subsection (3) addresses

  only the “reasonable effort” that a plaintiff must make in order to

  proceed under the statutory provision. This inquiry is entirely

  distinct from the inquiry necessary to decide a Rule 41(a) motion,

  i.e., whether a plaintiff has made sufficient efforts to avoid

  unreasonable delay in effecting service, and whether any delay is

  justified in light of potential prejudice to the defendant.

¶ 41   Certainly here, it is apparent that State Farm knew Allstate

  was Steul’s insurance agent before it filed suit. It therefore could

  have served Steul via her insurer immediately after its initial

  attempts to serve her in person failed. It apparently did not do so

  because its counsel did not research the options for service in a

  timely manner. This failure does not help State Farm prove that

  the delays at issue were justified by extraordinary circumstances.

¶ 42   We therefore conclude that the trial court did not err by

  declining to consider the standards set forth in section 42-7-414(3)

  in connection with the motion.

                                     19
                              VI.   Conclusion

¶ 43   We affirm the order.

       JUDGE TERRY and JUDGE GRAHAM concur.

                                     20