Farm v. Steul

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

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 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

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 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

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 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

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 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

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 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).

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¶ 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

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 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.

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 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.

A. Law

¶ 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.

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 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.

B. Analysis

¶ 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.

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 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).

B. Analysis

¶ 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.

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 VI. Conclusion

¶ 43 We affirm the order.

JUDGE TERRY and JUDGE GRAHAM concur.

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