Cassidy v. Millers Cas. Ins. Co. of Texas, Civ.A. No. 94-B-1480.
| Decision Date | 02 April 1998 |
| Docket Number | Civ.A. No. 94-B-1480.,Civ.A. No. 94-B-1511. |
| Citation | 1 F.Supp.2d 1200 |
| Parties | Lynn K. CASSIDY, Susan K. Ball, and Earl Dean Smith, Plaintiffs, v. THE MILLERS CASUALTY INSURANCE COMPANY OF TEXAS, the Millers Mutual Fire Insurance Company of Texas, and John Does 1 through 10, Defendants. |
| Court | U.S. District Court — District of Colorado |
Thomas L. Roberts, Matthew Nelson, Roberts & Zboyan, P.C., Denver, CO, for Plaintiffs Cassidy and Ball.
Bradley A. Levin, Steve E. Abrams, Breit, Best, Levin & Coppola, Denver, CO, for Plaintiff Smith.
Kevin E. O'Brien, Miles M. Dewhirst, Hall & Evans, Denver, CO, for Defendants.
Defendants, The Millers Casualty Insurance Company of Texas (Millers Casualty) and The Millers Mutual Fire Insurance Company of Texas (Millers Mutual) (collectively, "Millers"), move to dismiss the claims of plaintiffs, Lynn K. Cassidy (Cassidy) and Susan K. Ball (Ball), pursuant to Fed. R.Civ.P. 12(b)(6). I referred this motion to a magistrate judge for recommendation pursuant to 28 U.S.C. § 636(a) and (b) (1994). The magistrate judge filed an Amended Recommendation on October 6, 1997 (the recommendation), which advises that I grant defendants' motion to dismiss in its entirety. Cassidy and Ball filed timely, specific written objections to the recommendation and Millers have responded to the objections. I review the recommendation de novo.
Also pending are: (1) plaintiffs' objection to the December 9, 1997 order of the magistrate judge denying plaintiffs' motion for a continuance and denying plaintiffs' motion to lift the stay of discovery; (2) defendants' motion pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss Cassidy and Ball's claim for declaratory relief; and (3) defendants' motion for summary judgment. I address each motion in turn.
I derive the following facts from the Second Amended Complaint and the undisputed facts contained in the recommendation (collectively, "the record").
In August 1988, Cassidy and Ball sued Earl Dean Smith (Smith) in Routt County District Court for negligence, negligent infliction of emotional distress, and outrageous conduct (the Routt County litigation). Cassidy and Ball alleged that Smith, "a trusted family advisor" and their "spiritual counselor," sexually abused them during their childhood and early adulthood. The alleged abuse consisted of, inter alia, Smith engaging in sexual intercourse with Cassidy and Ball, beginning when Cassidy was seventeen and Ball was fifteen and continuing for some time thereafter.
The trial court granted Smith's motion for summary judgment premised on the expiration of the statute of limitations, C.R.S. § 1380-102 (1987 Repl.Vol. 6A), and dismissed the action. The Colorado Court of Appeals affirmed dismissal as to claims for conduct occurring before August 1982 and reversed dismissal as to claims for conduct occurring after August 1982. See, generally, Cassidy v. Smith, 817 P.2d 555 (Colo.App.1991).
On remand, Millers Casualty, pursuant to a homeowner's insurance policy, agreed to defend Smith against Cassidy and Ball, but only under a reservation of rights that purportedly allows Millers Casualty to seek a judicial determination of its indemnity obligation to Smith. The Routt County litigation went to trial and on July 23, 1992, the jury returned a verdict in favor of Cassidy and Ball. The judgment remains unsatisfied and has a current estimated value approximating $3,000,000.00. Shortly thereafter, but on a date not disclosed by the record, Millers Casualty appealed the judgment entered in the Routt County litigation. Millers Casualty subsequently abandoned the appeal.
On October 19, 1992, Millers Casualty filed a declaratory judgment action in Denver County District Court against Smith, Cassidy, and Ball (the Denver County litigation). Millers Casualty sought a declaration that it has no duty to indemnify Smith in the Routt County litigation. Millers Casualty never prosecuted the Denver County litigation. On November 30, 1992, Smith filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Colorado (the bankruptcy proceeding). The record does not disclose whether Smith prosecuted his bankruptcy petition.
On June 2, 1994, Cassidy and Ball commenced a civil suit against Millers Casualty in Adams County District Court, alleging six claims for relief: breach of contract, willful breach of contract, bad faith breach of insurance contract, abuse of process, estoppel, and extreme and outrageous conduct. As a basis for these claims, Cassidy and Ball aver that Millers Casualty acted contrary to Colorado law during and after the Routt County litigation. Specifically, Cassidy and Ball allege that Millers Casualty:
(1) reneged an informal settlement agreement before the Routt County litigation went to trial;
(2) refused to engage in good faith settlement negotiations with Cassidy and Ball during the Routt County litigation;
(3) breached a promise to post an appeal bond after the jury returned a verdict in favor of Cassidy and Ball in the Routt County litigation, causing Smith to file for bankruptcy and forcing Cassidy and Ball to prosecute claims in bankruptcy court to protect their rights as creditors;
(4) frustrated Cassidy and Ball's attempts to execute on the judgment;
(5) appealed the Routt County litigation judgment without any basis for appeal and in bad faith;
(6) engaged in post-judgment settlement negotiations of the Routt County litigation in bad faith;
(7) breached contractual duties of indemnification owed to Smith, Cassidy, and Ball, which contractual duties arise from the homeowner's insurance policy;
(8) refused to pay to Cassidy and Ball the amount of the Routt County litigation judgment as well as post-judgment interest; and
(9) instituted the Denver District Court litigation in bad faith and after waiving its reservation of rights.
On June 7, 1994, Smith also commenced a civil suit against Millers Casualty in Adams County District Court, alleging eight claims for relief: breach of contract, willful breach of contract, negligence, breach of implied covenant of good faith and fair dealing, breach of fiduciary duty, extreme and outrageous conduct, deceptive trade practices, and promissory estoppel. Millers do not move to dismiss Smith's claims pursuant to Fed. R.Civ.P. 12(b)(6).
Millers Casualty removed Cassidy and Ball's Adams County action to this court on June 21, 1994. On removal, the Cassidy and Ball action became Civil Action No. 94-B-1480. On June 24, 1994, Millers Casualty removed Smith's Adams County action to this court, which case became Civil Action No. 94-B-1511. I subsequently consolidated the two cases on August 3, 1994.
On June 8, 1994, days after Smith, Cassidy, and Ball commenced their civil actions in Adams County, Millers Casualty and Millers Mutual filed a declaratory judgment action in the United States District Court for the Northern District of Texas against Smith, Cassidy, and Ball (the Texas litigation). Millers sought a declaration of no duty to indemnify Smith for the Routt County litigation. Millers also moved to transfer this consolidated case to Texas, which motion I denied on October 11, 1994.
Cassidy and Ball then filed their first amended complaint on January 19, 1995, adding: (1) the allegation that Millers Casualty and Millers Mutual commenced the Texas litigation in bad faith; and (2) Millers Mutual as a defendant. Millers then filed a motion to dismiss all six of Cassidy and Ball's claims pursuant to Fed.R.Civ.P. 12(b)(6) on January 30, 1995. Also on January 30, 1995, Millers filed a counterclaim for declaratory judgment pursuant to 28 U.S.C. §§ 2201 and 2202 (1994) and Fed.R.Civ.P. 57, seeking a clarification of its obligation to indemnify Smith for the Routt County litigation. I referred Millers' motion to dismiss to the magistrate judge for recommendation on August 6, 1997. The magistrate judge filed the recommendation on October 6, 1997. Cassidy and Ball objected to the recommendation on October 20, 1997.
On October 17, 1997, eleven days after the magistrate judge filed the recommendation, Cassidy and Ball moved to amend their complaint for a second time, which motion I granted. The second amended complaint adds a claim for declaratory relief pursuant to 28 U.S.C. §§ 2201 and 2202 and Fed. R.Civ.P. 57. Otherwise, the second amended complaint is identical to the first amended complaint. On November 10, 1997, Millers moved to dismiss the entirety of Cassidy and Ball's second amended complaint pursuant to Fed.R.Civ.P. 12(b)(6). Millers' November 10 motion to dismiss provided notice that Millers' January 30, 1995 motion, which related to the claims of Cassidy and Ball's first amended complaint, applied equally as well to Cassidy and Ball's second amended complaint. Millers' November 10 motion to dismiss also presents a new motion for dismissal of Cassidy and Ball's claim for declaratory relief. In this diversity action, I have jurisdiction pursuant to 28 U.S.C. § 1332 (1994) and Colorado substantive law governs.
Cassidy and Ball filed their second amended complaint on October 17, 1997. As noted above, the second amended complaint is identical to the first amended complaint, except that the second amended complaint states an additional claim for declaratory relief against defendants. Millers renewed their motion to dismiss on November 10, 1997, arguing for dismissal of all seven claims of the second amended complaint. Because I had already referred their January 30, 1995 motion to dismiss to the magistrate judge before Cassidy and Ball filed their second amended complaint, Millers' ...
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