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.
¶ 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.
¶ 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).
¶ 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.