State Farm Mut. Auto Ins. Co. v. Steul

• Decision Date: 15 October 2020
• Docket Number: Court of Appeals No. 19CA1325
• Citation: 477 P.3d 778
• Parties: STATE FARM MUTUAL AUTO INSURANCE COMPANY, Plaintiff-Appellant, v. Julie E. STEUL, Defendant-Appellee.
• Court: Colorado Court of Appeals

477 P.3d 778

STATE FARM MUTUAL AUTO INSURANCE COMPANY, Plaintiff-Appellant,

v.Julie E. STEUL, Defendant-Appellee.

Court of Appeals No. 19CA1325

Colorado Court of Appeals, Division IV.

Announced October 15, 2020

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

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

Opinion by JUDGE RICHMAN

¶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 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 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 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 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, 342 P.3d 422 (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 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, 378 P.3d 816. 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).

¶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, 457 P.3d 754. 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, 433 P.3d 125.

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 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 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...