Gen. Steel Domestic Sales, LLC v. Bacheller

• Decision Date: 27 November 2012
• Docket Number: Court of Appeals Case No. 09CA1383,Case No. 10SC403
• Citation: 2012 CO 68
• Parties: Petitioners: General Steel Domestic Sales, LLC, d/b/a General Steel Corporation, a Colorado limited liability corporation; Discount Steel Buildings, LLC, a Delaware limited liability corporation; Jeffrey Wayne Knight, individually; and Nathan Wright, individually, v. Respondent: Harold Irving Bacheller, III.
• Court: Colorado Supreme Court

2012 CO 68

Petitioners: General Steel Domestic Sales, LLC, d/b/a General Steel Corporation, a Colorado limited liability corporation; Discount Steel Buildings, LLC, a Delaware limited liability corporation; Jeffrey Wayne Knight, individually; and Nathan Wright, individually,

v. Respondent: Harold Irving Bacheller, III.

Case No. 10SC403 Court of Appeals Case No. 09CA1383

Supreme Court of the State of Colorado

November 27, 2012

Certiorari to the Colorado Court of Appeals

Judgment Affirmed

en banc

Attorneys for Petitioners:

Building Services Group, LLC

Patrick D. Frye

David S. Fein

Littleton, Colorado

Attorneys for Respondent:

Clisham, Satriana & Biscan, LLC

Daniel R. Satriana, Jr.

Denver, CO

Attorneys for Amicus Curiae:

Professor George W. Pring

Golden, Colorado

Kaplan Kirsch & Rockwell LLP

Lori J. Potter

Denver, Colorado

Hayes, Phillips, Hoffman & Carberry P.C.

Elizabeth R. Cross

Denver, Colorado

CHIEF JUSTICE BENDER delivered the Opinion of the Court. JUSTICE EID concurs in part and dissents in part.

¶1 In this appeal, we review the court of appeals' unpublished decision in Bacheller v. General Steel Domestic Sales, LLC,No. 09CA1383 (Colo. App. Apr. 22, 2010) (not published pursuant to C.A.R. 35(f)), to determine the applicability of Protect Our Mountain Environment, Inc. v. District Court,677 P.2d 1361 (Colo. 1984) ("POME")to this case and the propriety of the trial court's decision to treble an exemplary damages award. In POME,we held that a plaintiff must meet a "heightened standard" when suing a defendant for the alleged "misuse or abuse of the administrative or judicial processes of government." Id.at 1368-69. Our holding was grounded in the First Amendment's guarantee of the right to petition the government for a redress of grievances and United States Supreme Court precedent recognizing that this right necessarily includes the right of access to the courts. Id.

¶2 Here, Bacheller sued General Steel, Discount Steel, and those companies' presidents for abuse of process, malicious prosecution, and civil conspiracy, based on their filing an arbitration complaint against him. The court of appeals held that the trial court did not abuse its discretion by refusing to include additional elements reflecting POME'sheightened standard in the jury instruction for Bacheller'smalicious prosecution claims. The court of appeals also held that the trial court did not abuse its discretion by trebling an exemplary damages award against General Steel and Discount Steel.

¶3 We affirm the court of appeals. After reviewing POME, the federal case law on which that decision is based, and our precedent, we hold that POME does not apply where, as here, the underlying alleged petitioning activity was the filing of an arbitration complaint that led to a purely private dispute. Given our holding, the trial court did not err by refusing to include additional elements reflecting POME'sheightened standard in the jury instruction for Bacheller's malicious prosecution claims. We also hold that the trial court did not abuse its discretion by trebling the exemplary damages award against General Steel and Discount Steel. We remand to the court of appeals with directions to return the case to the trial court to enter final judgment consistent with this opinion.

I. Facts and Procedural History

¶4 General Steel Corporation ("General Steel") and Discount Steel Buildings, LLC ("Discount Steel") are separate companies that market and sell pre-engineered steel buildings. Jeffrey Wayne Knight is the sole shareholder and president of General Steel, and Nathan Wright is the sole shareholder and president of Discount Steel.

¶5 Harold Bacheller worked as a salesman for General Steel during two separate periods between September 2002 and April 2005. Bacheller never worked for Discount Steel. Bacheller eventually quit General Steel and began working as a salesman for Universal Steel Buildings Corporation ("Universal Steel"), another company that sells pre-engineered steel buildings.

¶6 After Bacheller began working for Universal Steel, General Steel and Discount Steel filed an arbitration complaint against Bacheller and seven of his coworkers at Universal Steel pursuant to a binding arbitration clause in their employment contracts. Bacheller and his coworkers had all previously worked for either General Steel or Discount Steel. The complaint asserted claims against Bacheller for breach of contract, intentional interference with business relations, and civil conspiracy. The claims were based on the allegation that Bacheller had violated his employment contract with General Steel by misappropriating confidential information to benefit his new employer, Universal Steel.

¶7 Following a hearing, the arbitrator found in Bacheller's favoron all three claims asserted against him. Bacheller then sued General Steel, Discount Steel, Knight, and Wright ("Defendants"), asserting claims for abuse of process, malicious prosecution, and civil conspiracy, based on their filing of the arbitration complaint against him. Bacheller sought actual and exemplary damages against Defendants for all three claims. See§ 13-21-102(1)(a), C.R.S. (2012) (permitting the jury to award reasonable exemplary damages in civil actions where the plaintiff's injury is attended by circumstances of "fraud, malice, or willful and wanton conduct").

¶8 At trial, following Bacheller's case-in-chief, Defendants moved for a directed verdict, arguing that they were entitled to judgment as a matter of law on Bacheller's abuse of process and malicious prosecution claims under POME'sheightened standard. In POME,we recognized that the First Amendment, and specifically its guarantee of the right to petition the government for a redress of grievances, "necessarily includes the right of access to the courts." POME,677 P.2d at 1365. To protect this right, we held that, when confronted with a motion to dismiss based on the First Amendment right to petition, a plaintiff bringing suit for "alleged misuse or abuse of the administrative or judicial processes of government" must meet a heightened standard showing that the defendant's petitioning activities (in POME,the filing of a lawsuit against a governmental entity) were not immunized from liability under the First Amendment. Id.at 1368-69. The trial court denied Defendants' motion.

¶9 After the close of evidence, and during the jury instruction conference, the parties disputed whether the jury instructions should include additional elements reflecting POME'sheightened standard for Bacheller's abuse of process, malicious prosecution, and civil conspiracy claims. Defendants argued that the jury instructions for all three claims should include the additional elements. The trial court initially stated that its "impression" was that "POMEdoesn't apply to this case at all because this is a purely private dispute," but it felt "compelled" to include additional elements reflecting POME'sheightened standard in the jury instruction for Bacheller's abuse of process claims. (The trial court's decision to include additional elements reflecting POME'sheightened standard in the abuse of processjury instruction is not a subject of this appeal.) The court refused to include the additional elements for the malicious prosecution and civil conspiracy claims because it was unaware of any Colorado case applying POMEto such claims. Thus, the jury instructions for Bacheller's malicious prosecution and civil conspiracy claims did not include any additional elements reflecting POME'sheightened standard.¹

¶10 The jury returned a verdict in Bacheller's favoron his malicious prosecution claims against all Defendants, awarding both actual and exemplary damages. For Bacheller's malicious prosecution claims against the corporate defendants, the jury awarded Bacheller $15,000 in actual damages and $60,000 in exemplary damages against General Steel, and $5,000 in actual damages and $35,000 in exemplary damages against Discount Steel.² The jury returned a verdict in Bacheller's favoron his abuse of process claims against Discount Steel and Wright, again awarding both actual and exemplary damages. For Bacheller's abuse of process claim against Discount Steel, the jury awarded Bacheller $5,000 in actual damages and $25,000 in exemplary damages.³ The jury found in favor of General Steel and Knight on Bacheller's abuse of process claims and in favor of all Defendants on Bacheller's civil conspiracy claims.

¶11 Defendants objected to the jury's damages award, arguing that the jurywas prohibited from awarding exemplary damages in excess of actual damages. See§ 13- 21-102(1)(a) ("The amount of such reasonable exemplary damages shall not exceed an amount which is equal to the amount of the actual damages awarded to the injured party."). In accordance with the exemplary damages statute, the trial court reduced the jury's award of exemplary damages to correspond to the jury's award of actual damages for all claims in which the jury found in Bacheller's favor, and then it entered judgment against Defendants.

¶12 Later, Bacheller filed a motion to amend the judgment and to increase the exemplary damages award under section 13-21-102(3), which provides that a court may increase an award of exemplary damages up to three times the amount of actual damages awarded if it is shown that the "defendant has acted in a willful and wanton manner during the pendency of the action in a manner which has further aggravated the damages of the plaintiff."

¶13 The trial court concluded that the actions of the corporate defendants during the pendency of the case constituted a pattern of attempts to delay, to harass, and to intimidate Bacheller and that their actions were motivated by a business dispute with Universal Steel, of which Bacheller "was simply caught in the middle." In coming to this conclusion, the court focused on three categories of conduct. First, the court found that Defendants made multiple requests before trial that...