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Kiefer v. Allstate Insurance Co.

United States District Court, D. Colorado

November 5, 2018




         This matter is before the Court on the Motion to Dismiss for Failure to Prosecute Under Rule 41(b) [Docket No. 27] filed by defendant Allstate Insurance Company.[1]

         In this insurance bad-faith case, plaintiffs allege that defendant delayed or denied the payment of benefits after a hailstorm damaged plaintiffs' roof on or about June 19, 2015. Docket No. 4. Plaintiffs filed this case on June 28, 2016. Id. at 1. On December 13, 2016, pursuant to a provision in the insurance policy, plaintiffs sent defendant a demand for appraisal. Docket No. 27-1. On January 26, 2017, the Court entered an Order [Docket No. 26] granting the parties' Joint Motion to Stay Proceedings Pending Appraisal [Docket No. 25]. The order directs the parties to file a status report with the Court no later than thirty days after the completion of the appraisal process. Docket No. 26. By the time of the filing of the motion to stay, neither party had begun discovery. Docket No. 25 at 2, ¶ 4.

         On June 13, 2017, defendant sent a letter to plaintiffs' law firm informing it that plaintiffs' claim was being closed because plaintiffs “failed to appoint and notify Allstate of [their] chosen appraiser” and that defendant has “received no additional communication from [plaintiffs].” Docket No. 27-4 at 1. The letter stated that “[c]losure of your claim concludes the appraisal process.” Id. at 2.

         On September 24, 2017, having received no response from plaintiffs, counsel for defendant contacted plaintiffs' counsel by email to inform him of defendant's intent to file a motion to dismiss for lack of prosecution. Docket No. 27-5. Plaintiffs' counsel responded two days later, indicating that “a few weeks ago” he was hit by a truck while on a motorcycle and had been “recovering from significant, serious injuries.” Docket No. 27-6. Plaintiff's counsel informed defendant that plaintiffs would oppose defendant's motion. Id. Defendant did not file a dismissal motion at that time. Docket No. 27-7. On February 8, 2018, counsel for defendant again contacted plaintiffs' counsel by email, indicating that defendant now intended to file a motion to dismiss for lack of prosecution. Id. Plaintiffs' counsel did not respond. Defendant filed its motion on May 24, 2018.

         Federal Rule of Civil Procedure Rule 41(b) provides:

If the plaintiff fails to prosecute or to comply with these rules or a court order, a defendant may move to dismiss the action or any claim against it. Unless the dismissal order states otherwise, a dismissal under this subdivision (b) and any dismissal not under this rule--except one for lack of jurisdiction, improper venue, or failure to join a party under Rule 19--operates as an adjudication on the merits.

Fed. R. Civ. P. 41(b).

         The sanction of dismissal with prejudice for failure to prosecute is a “severe sanction, ” warranted when “the aggravating factors outweigh the judicial system's strong predisposition to resolve cases on their merits.” Ecclesiastes 9:10-11-12, Inc. v. LMC Holding Corp., 497 F.3d 1135, 1143-44 (10th Cir. 2007) (quoting Ehrenhaus v. Reynolds, 965 F.2d 916, 921 (10th Cir. 1992)). Courts in this circuit apply five factors to determine whether a motion under Rule 41(b) should be granted: “(1) the degree of actual prejudice to the defendant; (2) the amount of interference with the judicial process; . . . (3) the culpability of the litigant; (4) whether the court warned the party in advance that dismissal of the action would be a likely sanction for noncompliance, and (5) the efficacy of lesser sanctions.” Ehrenhaus, 965 F.2d at 921 (internal quotations and citations omitted); see also Jones v. Thompson, 996 F.2d 261, 264 (10th Cir. 1993) (extending Ehrenhaus to Fed.R.Civ.P. 41(b) motions).

         The first Ehrenhaus factor is actual prejudice. Prejudice can be shown through unreasonable delay, as “a defendant has “a legitimate interest in bringing the matter to closure within a reasonable time.” Rogers v. Andrus Transp. Services, 502 F.3d 1147, 1152 (10th Cir. 2007). Prejudice can also be shown when, through plaintiff's conduct, defendants “los[e] an opportunity to gain relevant information . . . [about] the factual basis of the parties' claims. See Ecclesiastes, 497 F.3d at 1145.

         Defendant argues that it suffered inconvenience and prejudice in two related ways. First, over three years have passed since the storm that plaintiffs allege caused damage to their home, which has impeded the defendant's ability to resolve the case in a reasonable time. See Docket No. 1-3 at 2, ¶ 10. Second, the plaintiffs' failure to prosecute the action has interfered with defendant's ability to engage in meaningful discovery because the home in question has “experienced other weather events” since June 2015. See Docket No. 27 at 6. Plaintiffs argue that defendant has suffered no actual prejudice because defendant is in possession of a repair estimate provided by plaintiffs that includes “numerous photographs and details of the storm damage.” See Docket No. 28 at 7. Further, plaintiffs suggest that defendant's own claims file is “presumably replete with notes and photographs from their own adjuster's inspection.” Id.

         The Court finds that defendant has failed to show any actual prejudice. Defendant does not deny that it inspected the property near the time of the claim. See Docket No. 27 at 3, ¶ 3. Therefore, the passage of time since the proceedings were stayed does not prejudice defendant as it might otherwise have. Moreover, defendant fails to identify any discovery that it will not have access to once the stay is lifted. Finally, defendant does not show that it has lost the opportunity to gain relevant information about the factual basis of plaintiffs' claim. See Ecclesiastes, 497 F.3d at 1145. Therefore, the first Ehrenhaus factor weighs in favor of plaintiffs.

         Defendant also fails to show that the second Ehrenhaus factor, interference with the judicial process, weighs in its favor. This case has been administratively closed pending the appraisal process. Docket Nos. 25, 26. Because of the stay, the only interference with the judicial process has been general delay. Defendant has failed to demonstrate how plaintiff has “hindered the court's management of its docket.” See Jones v. Thompson, 996 F.2d 261, 265 (10th Cir. 1993). While plaintiffs have been remiss in their delay, it is worth noting that defendant could have moved to re-open the case over a year ago when it decided to close plaintiffs' claim. See Docket No. 27-4 at 1.

         The third factor is the culpability of the litigant in failing to prosecute the case. This factor asks whether plaintiffs (or their counsel) caused the failure to prosecute, or whether they are ...

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