United States District Court, D. Colorado
ORDER ADOPTING, AS MODIFIED, MARCH 8, 2019
RECOMMENDATION OF MAGISTRATE JUDGE AND DENYING
PLAINTIFF'S MOTION TO AMEND
WILLIAM J. MARTÍNEZ UNITED STATES DISTRICT JUDGE
matter is before the Court on United States Magistrate Judge
Nina Y. Wang's Recommendation dated March 8, 2019 (the
“Recommendation”; ECF No. 58), which recommended
that this Court deny Plaintiff's Motion to Amend
Complaint to Add Claim for Exemplary Damages (“Motion
to Amend”) (ECF No. 42). The Recommendation is
incorporated herein by reference. See 28 U.S.C.
§ 636(b)(1)(B); Fed.R.Civ.P. 72(b).
and Defendant each filed a timely objection to different
portions of the Recommendation (ECF Nos. 59 (Plaintiff) and
60 (Defendant)), and each responded to the other's
objection (ECF Nos. 64 (Plaintiff) and 65 (Defendant)).
Defendant's objection challenges only the
Recommendation's reasoning, not its result. In essence,
Defendant asks the Court to modify the Recommendation but
preserve its result.
reasons set forth below, the Court generally agrees with
Defendant's objection, although the Court views the
matter somewhat differently than both Defendant and the
Magistrate Judge. The Recommendation is therefore adopted as
modified, Plaintiff's objection is overruled,
Defendant's objection is sustained, and Plaintiff's
Motion to Amend is denied.
magistrate judge issues a recommendation on a dispositive
matter, Federal Rule of Civil Procedure 72(b)(3) requires
that the district judge “determine de novo any part of
the magistrate judge's [recommendation] that has been
properly objected to.” An objection to a recommendation
is properly made if it is both timely and specific.
United States v. 2121 East 30th St., 73 F.3d 1057,
1059-60 (10th Cir. 1996). An objection is sufficiently
specific if it “enables the district judge to focus
attention on those issues-factual and legal-that are at the
heart of the parties' dispute.” Id. at
1059. In conducting its review, “[t]he district judge
may accept, reject, or modify the [recommendation]; receive
further evidence; or return the matter to the magistrate
judge with instructions.” Fed.R.Civ.P. 72(b)(3).
if a magistrate judge's ruling is nondispositive, the
Court must affirm the ruling unless it finds that the ruling
is “clearly erroneous or contrary to law.”
Fed.R.Civ.P. 72(a); 28 U.S.C. § 636(b)(1)(A); Ariza
v. U.S. West Commc'ns, Inc., 167 F.R.D. 131, 133 (D.
Colo. 1996). The clearly erroneous standard “requires
that the reviewing court affirm unless it on the entire
evidence is left with the definite and firm conviction that a
mistake has been committed.” Ocelot Oil Corp. v.
Sparrow Indus., 847 F.2d 1458, 1464 (10th Cir. 1988)
(internal quotation marks omitted). The “contrary to
law” standard permits “plenary review as to
matters of law, ” see 12 Charles Alan Wright
et al., Federal Practice & Procedure § 3069
(2d ed., Apr. 2016 update), but the Court will set aside a
magistrate judge's order only if it applied the wrong
legal standard or applied the appropriate legal standard
incorrectly, see Wyoming v. U.S. Dep't of
Agric., 239 F.Supp.2d 1219, 1236 (D. Wyo. 2002). In
short, “[b]ecause a magistrate judge is afforded broad
discretion in the resolution of non-dispositive . . .
disputes, the court will overrule the magistrate judge's
determination only if his discretion is abused.”
Ariza, 167 F.R.D. at 133.
in this District remain split whether a magistrate
judge's ruling on a motion to amend to add a claim for
exemplary damages is dispositive or nondispositive. See
Sunflower Condo. Ass'n, Inc. v. Owners Ins. Co.,
2018 WL 1755784, at *1 (D. Colo. Apr. 12, 2018); Grabau
v. Target Corp., 2008 WL 179442, at *5 (D. Colo. Jan.
17, 2008). The Magistrate Judge treated the matter here as
dispositive. (See ECF No. 58.) Plaintiff has
followed suit. (See ECF No. 59 at 3-4.) Defendant,
however, briefly asserts the standard of review for
nondispositive rulings, without explaining why the Magistrate
Judge was wrong to treat the issue as dispositive.
(See ECF No. 60 at 2.)
the circumstances, the Court will give Plaintiff the maximum
benefit of the doubt and review the matter as if dispositive
(or never referred to the Magistrate Judge in the first
place). Thus, the Court reviews the matter de novo.
is a homeowners association that manages a condominium
complex in Arvada, Colorado. (ECF No. 1 ¶ 2.) Defendant
was Plaintiff's property and casualty insurer as of May
8, 2017, the date on which a hailstorm damaged the
condominiums. (Id. ¶¶ 3-4, 31, 75.)
Plaintiff and Defendant have been unable to agree on the
amount Defendant owes to Plaintiff for repairs. (See
generally id.) Plaintiff thus sues Defendant for breach
of contract and unreasonable delay or denial of insurance
benefits in violation of Colorado Revised Statutes
§§ 10-4-1115 and -1116. (Id. at 12-15.)
Plaintiff's complaint announces that Plaintiff
“reserves its right to add a claim for exemplary
damages if permitted to do so and appropriate.”
(Id. at 15.) Plaintiff did not plead exemplary
damages in the first instance because Colorado does not allow
it: “A claim for exemplary damages . . . may be allowed
by amendment to the pleadings only after the exchange of
initial disclosures pursuant to rule 26 of the Colorado rules
of civil procedure and the plaintiff establishes prima facie
proof of a triable issue.” Colo. Rev. Stat. §
nine months into the case, Plaintiff filed its Motion to
Amend, arguing that discovery had uncovered a basis for
finding that Defendant had behaved with knowing dishonesty
during the adjustment of the claim. (ECF No. 42.) Defendant
responded that amendment would be futile because exemplary
damages are not available on either of Plaintiff's causes
of action; and, in any event, Plaintiff had not presented a
prima facie case. (ECF No. 52.)
Defendant's first argument, the Magistrate Judge agreed
to the extent exemplary damages were tied to breach of
contract, but not to the extent they were tied to
unreasonable delay or denial of insurance benefits. (ECF No.
58 at 6-9.) In other words, the Magistrate Judge reasoned
that unreasonable delay/denial is a proper anchor for an
exemplary damages claim, assuming the plaintiff has stated a
prima facie case. But, as to Defendant's second argument,
the Magistrate Judge agreed with Defendant that Plaintiff had
not stated a prima facie case. (Id. at 9-13.) For
that reason, the Magistrate Judge recommended denial of the
Motion to Amend.
objection does not challenge the Magistrate Judge's
reasoning regarding the availability (or not) of exemplary
damages as a remedy for breach of contract or unreasonable
delay/denial of insurance benefits. (See ECF No.
59.) Plaintiff argues only that the Magistrate Judge erred in
finding a lack of a prima facie case.
objection argues that the Magistrate Judge erred in finding
that exemplary damages are available for an unreasonable
delay/denial claim. (ECF No. 60.) But Defendant otherwise
supports the Magistrate Judge's recommended outcome.
(See ECF No. 65.)
punitive or exemplary damages (Colorado law uses those terms
interchangeably) are an available remedy for the unreasonable
delay/denial cause of action created by Colorado Revised
Statutes §§ 10-3-1115 and -1116 is a question of
Colorado law. “It is the duty of the federal . . .
trial court to ascertain and apply the state law where . .
. it controls [the] decision.” Huddleston v.
Dwyer, 322 U.S. 232, 236 (1944). “Where no
controlling state decision exists, ” this Court must
engage in the “ventriloquial function” of
“predict[ing] what the state's highest court would
do.” Wankier v. Crown Equip. Corp., 353 F.3d
862, 866 (10th Cir. 2003).
Colorado state-court decision answers whether punitive
damages are an available remedy for an unreasonable
delay/denial claim. This Court therefore must predict how the
Colorado Supreme Court would rule on the question.