United States District Court, D. Colorado
PINON SUN CONDOMINIUM ASSOCIATION, INC., a Colorado non-profit corporation, Plaintiff,
ATAIN SPECIALTY INSURANCE COMPANY, a foreign corporation, INDIAN HARBOR INSURANCE COMPANY, a foreign corporation, and GREAT LAKES INSURANCE, SE f/k/a GREAT LAKES REINSURANCE UK Pic, a foreign corporation, Defendants. GREAT LAKES INSURANCE, SE f/k/a GREAT LAKES REINSURANCE (UK) Pic, a foreign corporation, Defendant and Third-Party Plaintiff,
CLAIM SOLUTIONS LLC, a Colorado limited liability company, SCOTT BENGLEN, individually, SHALZ CONSTRUCTION LLC, a Colorado limited liability company; and BRADLEY SHALZ, individually, Third Party Defendants.
REPORT AND RECOMMENDATION ON JOINT MOTION TO AMEND
ANSWER TO COUNTERCLAIMS AND THIRD PARTY CLAIMS TO ADD
COUNTERCLAIMS AGAINST DEFENDANTS (DKT. #190)
Reid Neureiter, United States Magistrate Judge.
matter comes before the Court on Plaintiff Pinon Sun
Condominium Association Inc.'s ("Pinion Sun")
and Third Party Defendants Claim Solutions LLC ("Claim
Solutions") and Scott Benglen's
("Benglen") (collectively "Movants")
Joint Motion to Amend Their Answer to Defendants'
Counterclaims and Third-Party Claims to Add Counterclaims
Against Defendants (Dkt. #190). For the reasons stated below,
I recommend that the Motion to Amend be
a bad faith insurance lawsuit, originally brought by Pinion
Sun against three insurers, including Great Lakes Insurance,
SE's ("Great Lakes"), for breach of insurance
contract, statutory unreasonable delay, breach of the
covenant of good faith and fair dealing, and violation of the
Colorado Consumer Protection Act. (Dkt. #1). Great Lakes
responded to the complaint with counterclaims against Pinion
Sun, as well as third-party claims against Claim Solutions,
Benglen, Shalz Construction and Bradley Shalz. Great
Lakes' counterclaims and third party claims were for
fraud, civil theft, civil conspiracy, and both state and
federal racketeering, specifically alleging violations of the
Colorado Organized Crimes Act (COCCA) and the federal
Racketeer Influenced and Corrupt Organizations Act (RICO).
(Dkt. #49.) Great Lakes' counterclaims were based
generally on allegations that Pinion Sun and the Third Party
Defendants had conspired to commit insurance fraud by
claiming an amount for roofing repairs in excess of the
actual damage. The targets of Great Lakes' counterclaims
allegedly did this by (1) failing to obtain open competitive
bidding for the replacement of the allegedly damaged roof,
(2) failing to enter into a written contract setting forth
the scope of work and the cost of the services, as required
by Colorado law; (3) creating and submitting a false invoice
for repairs; (4) making various false claims concerning the
siding repairs; and (5) submitting multiple Sworn Statements
of proof of loss far in excess of the reasonable cost of
repair or replacement. (Dkt. #49 ¶¶ 21 -29 &
#51 ¶¶ 210-18.)
29, 2018, Judge Watanabe recommended that Great Lakes'
COCCA and RICO counterclaims be dismissed without prejudice
for failure to allege with sufficient particularity facts
that would support the necessary predicate acts of
racketeering. (Dkt. #167 at 13-17.) However, Judge Watanabe
declined to recommend dismissal of Great Lakes'
non-racketeering claims for fraud, civil conspiracy, civil
theft, and declaratory judgment. (Id. at 16-17.) On
July 18, 2018, Judge Arguello issued an order affirming and
adopting Judge Watanabe's recommendation. (Dkt. #174.)
light of the dismissal of Great Lakes' COCCA and RICO
claims, and also because of the alleged lack of evidence
produced to date in discovery to support Great Lakes'
remaining counterclaims, Movants Pinon Sun, Claim Solutions,
and Benglen, seek to amend their pleadings to add two
counterclaims of their own against Great Lakes for (1) abuse
of process and (2) malicious prosecution. Movants'
primary basis for these counterclaims is that Great Lakes has
no factual basis for any of its fraud and conspiracy
counterclaims or third-party claims. As Movants assert in
Now with substantial deposition discovery in this matter, it
has become apparent that there are no facts or law supporting
[Great Lakes'] insurance fraud and related claims.
Furthermore, from the October 6, 2017 letter from Great
Lakes, it would appear that the counterclaims were brought to
coerce Plaintiff into abandoning its claims and allowing CAG
to adjust [the] claim without further consequence.
#190 at 4.) Or, as summarized in the Movant's Conclusion
to their Motion, "Movants seek to amend their answer to
Counterlcaim Plaintffs Counterclaims as those counterclaims
are without legal and factual merit and were brought for the
improper purpose of intimidating Plaintiff to abandon its
lawful claims for insurance bad faith. . . . The Court should
grant Plaintiff's Motion to protect it from improper
retaliatory litigation." (Id. at 15.)
Court heard oral argument on the Motion to Amend on December
14, 2018. At that time, I cited to the Parties a number of
additional potentially relevant legal authorities, including
published cases and a law review article, and gave the
parties time to submit additional briefs addressing those
authorities. The Parties submitted supplemental briefs on
December 21, 2018. I have reviewed the proposed amendments,
the original and supplemental briefing, and considered the
arguments presented at oral argument.
STANDARD FOR GRANTING MOTION TO AMEND
may amend a pleading by consent of the other parties or by
leave of court. Fed.R.Civ.P. 15(a). Leave to amend is to be
freely given when justice so requires. Id. Refusing
leave to amend is generally only justified upon a showing of
undue delay, undue prejudice to the opposing parties, bad
faith or dilatory motive, failure to cure deficiencies by
amendments previously allow, or futility of amendment.
Frank v. U.S.W., Inc., 3 F.3d 1357, 1365 (10th Cir.
1993). See also Foman v. Davis, 371 U.S. 178,
find that there was no undue delay, bad faith or dilatory
motive. The only reason for denying amendment would be
futility. If a pleading, as amended, could not withstand a
motion to dismiss, then the amendment should be denied as
futile. TV Communications Network, Inc., v. Turner
Network Television, Inc., 964 F.2d 1022, 1028 (10th Cir.
1992). See also Glick v. Koenig, 766 F.2d 265 (7th
Cir. 1985) (holding that district court is justified in
denying a motion to amend the pleadings pursuant to rule
15(a) if the proposed amendment could not withstand a motion
to dismiss). Thus, to determine whether Movants should be
entitled to amend their respective pleadings to add claims of
malicious prosecution and abuse of process against Great
Lakes, I need to analyze whether these two discrete claims,
as pled, could survive a motion to dismiss under the Rule
Rule of Civil Procedure 12(b)(6) provides that a defendant
may move to dismiss a claim for "failure to state a
claim upon which relief can be granted." Fed.R.Civ.P.
12(b)(6). "The court's function on a Rule 12(b)(6)
motion is not to weigh potential evidence that the parties
might present at trial, but to assess whether the plaintiffs
complaint alone is legally sufficient to state a claim for
which relief may be granted." Dubbs v. Head Start,
Inc., 336 F.3d 1194, 1201 (10th Cir. 2003) (citations
and quotation marks omitted).
court reviewing the sufficiency of a complaint presumes all
of plaintiffs factual allegations are true and construes them
in the light most favorable to the plaintiff." Hall
v. Bellmon, 935 F.2d 1106, 1198 (10th Cir. 1991).
"To survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to
'state a claim to relief that is plausible on its
face.'" Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (citing Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 570 (2007)). Plausibility, in the context of a
motion to dismiss, means that the plaintiff pleaded facts
which allow "the court to draw the reasonable inference
that the defendant is liable for the misconduct
alleged." Id. The Iqbal evaluation
requires two prongs of analysis. First, the court identifies
"the allegations in the complaint that are not entitled
to the assumption of truth," that is, those allegations
which are legal conclusions, bare assertions, or merely
conclusory. Id. at 679-81. Second, the court
considers the factual allegations "to determine if they
plausibly suggest an entitlement to relief."
Id. at 681. If the allegations state a plausible
claim for relief, such claim survives the motion to dismiss.
Id. at 679.
the court need not accept conclusory allegations without
supporting factual averments. Southern Disposal, Inc., v.
Texas Waste, 161 F.3d 1259, 1262 (10th Cir. 1998).
"[T]he tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal
conclusions. Threadbare recitals of the elements of a cause
of action, supported by mere conclusory statements, do not
suffice." Iqbal, 556 U.S. at 678. Moreover,
"[a] pleading that offers 'labels and
conclusions' or 'a formulaic recitation of the
elements of a cause of action will not do.' Nor does the
complaint suffice if it tenders 'naked assertion[s]'
devoid of 'further factual enhancement.'"
Id. (citation omitted).
MOVANTS' CLAIM FOR MALICIOUS PROSECUTION IS NOT YET RIPE,
WOULD NOT SURVIVE A MOTION TO DISMISS, AND AMENDMENT TO ADD
THE CLAIM SHOULD BE DENIED AS FUTILE
Colorado, to prevail on a claim for malicious prosecution,
the following elements must be satisfied: (1) the defendant
contributed to bringing a prior action against the plaintiff;
(2) the prior action ended in favor of the plaintiff; (3)
there was no probable cause to bring the prior action; (4)
malice; and (5) damages. Hewitt v. Rice, 154P.3d408,
411 (Colo. 2007). See also CJI-Civ. 17:1 (2017).
Element two-that the prior action ended in favor of the
plaintiff-is referred to as the "favorable
termination" element. "The requirement of favorable
termination is important because the statute of limitations
begins running at the point of favorable termination, and
favorable termination is a substantive element" of the
claim. Hewitt, 154 P.3d at 412 (citing Dan B. Dobbs,
The Law of Torts, §436 (2000)). The favorable
termination requirement for malicious prosecution helps
separate a claim for malicious prosecution from the related,
but distinct, tort of abuse of process. Hewitt, 154
P.3d at 414 (citing Timothy P. Getzoff, Dazed and
Confused in Colorado: The Relationship Among Malicious
Prosecution, Abuse of Process, and the Noerr-Pennington
Doctrine, 67 U. Colo. L. Rev. 675, 685-686 (1996)
("Dazed and Confused')).
the favorable termination element refers not just to a single
discrete claim among many in a case, but to the
"action" as a whole. Accordingly, the Colorado
Supreme Court has observed that a "malicious prosecution
claim that arises out of the main action may not usually be
brought as a counterclaim since the main action has not yet
terminated in favor of the counterclaimant."
Westfield Dev. Co. v. Rifle Inv. Assoc, 786 P.2d
1112, 1119 n.4 (Colo. 1990), quoted in Hewitt, 154
P.3d at 412, and cited in Thompson v. Maryland Casualty
Co., 84 P.3d 496, 505 (Colo. 2004). In this instance,
Movants are seeking to bring a malicious prosecution action
as a counterclaim while the main action is still pending.
argue that they can satisfy the favorable termination element
of a claim for malicious prosecution because Great Lakes'
COCCA and RICO claims were dismissed. The problem for Movants
is that not all of Great Lakes' claims were
dismissed. As noted above, Great Lakes' non-racketeering
counter-claims and third-party claims for fraud, civil
conspiracy, civil theft, and declaratory judgment remain in
this lawsuit. Assuming, without deciding, that a dismissal
without prejudice could constitute a "favorable
termination" for the purpose of a claim for malicious
prosecution, the fact remains that Great Lakes still has
pending a number of claims against the movants which were ...