Kissing Camels Surgery Center, LLC et al v. HCA Inc. et al

Filing 242

ORDER OVERRULING IN PART AND SUSTAINING IN PART DISMISSED DEFENDANTS' 218 OBJECTION TO THE MAGISTRATE JUDGES ORDER: The Magistrate Judge's 212 Order is VACATED as an Order and is instead construed as a Report and Recommendation, which i s ADOPTED in PART. The 177 Dismissal Order is AMENEDED to state that all claims dismissed therein for failure to state a claim are DISMISSED WITHOUT PREJUDICE. Plaintiffs' 181 Motion for Leave to File Second Amended Complaint is GRANTED, and the 213 Second Amended Complaint is ACCEPTED AS FILED. The Dismissed Defendants shall file an Answer or responsive pleading to the Second Amended Complaint on or before 11/26/2014. By Judge William J. Martinez on 11/4/2014. (alowe)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 12-cv-3012-WJM-BNB
KISSING CAMELS SURGERY CENTER, LLC,
CHERRY CREEK SURGERY CENTER, LLC,
ARAPAHOE SURGERY CENTER, LLC, and
HAMPDEN SURGERY CENTER, LLC,
Plaintiff,
v.
CENTURA HEALTH CORPORATION,
Defendant.

ORDER OVERRULING IN PART AND SUSTAINING IN PART DISMISSED
DEFENDANTS’ OBJECTION TO THE MAGISTRATE JUDGE’S ORDER

This matter is before the Court on a filing by former Defendants Colorado
Ambulatory Surgery Center Association, Inc., Rocky Mountain Hospital and Medical
Service, Inc, d/b/a Anthem Blue Cross and Blue Shield of Colorado, UnitedHealthcare
of Colorado, Inc., Audubon Ambulatory Surgical Center, LLC, and Aetna, Inc.
(collectively “Dismissed Defendants”) objecting to an order by U.S. Magistrate Judge
Boyd N. Boland (“Objection”). (ECF No. 218.) For the reasons set f orth below, the
Objection is sustained in part and overruled in part.
I. LEGAL STANDARD
A magistrate judge may issue orders only on nondispositive motions. Ocelot Oil
Corp. v. Sparrow Indus., 847 F.2d 1461, 1462-63 (10th Cir. 1988). W hether motions to
amend a complaint are dispositive is an unsettled issue. See Chavez v. Hatterman,

2009 WL 82496, at *1 (D. Colo. Jan. 13, 2009) (collecting cases). When an order
denying a motion to amend removes or precludes a defense or claim from the case, it
may be dispositive. Zinn-Hoshijo v. Comm. for Catholic Secondary Educ. in Colo.
Springs, 2012 WL 1582784, at *1 (D. Colo. May 7, 2012).
When a magistrate judge issues a recommendation on a dispositive matter,
Federal Rule of Civil Procedure 72(b)(3) requires that the district court judge “determine
de novo any part of the magistrate judge’s [recommendation] that has been properly
objected to.” Fed. R. Civ. P. 72(b)(3). In conducting its review, “[t]he district court judge
may accept, reject, or modify the [recommendation]; receive further evidence; or return
the matter to the magistrate judge with instructions.” Id.
In contrast, when reviewing an objection to a Magistrate Judge’s non-dispositive
ruling, the Court must adopt 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); Hutchinson v. Pfeil,
105 F.3d 562, 566 (10th Cir. 1997); 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, 847 F.2d at 1464. The “contrary to law”
standard permits “plenary review as to matters of law,” 12 Charles Alan Wright, Arthur
R. Miller, Richard L. Cooper, Federal Practice and Procedure § 3069 p. 355 (2d ed.
1997), 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. W yo. 2002).

2

II. DISCUSSION
The Dismissed Defendants’ Motion challenges Magistrate Judge Boland’s Order
granting Plaintiffs’ Motion for Leave to Amend their complaint (“Magistrate Judge’s
Order”) (ECF No. 212). The Magistrate Judge’s Order, issued on August 12, 2014,
found that Plaintiffs had met the standards of Federal Rules of Civil Procedure 15 and
16, and had shown good cause to extend the deadline in the Scheduling Order for
amendment of pleadings to permit the proposed amendment of the complaint. (Id.)
Plaintiffs’ Second Amended Complaint (ECF No. 213) reinstates their claims against
the Dismissed Defendants, which were previously dismissed on February 13, 2014 in
an order granting the Dismissed Defendants’ Motions to Dismiss (“Dismissal Order”).
(ECF No. 177.)
The Dismissed Defendants now object to the Magistrate Judge’s Order on the
basis that the Dismissal Order effected a dismissal of all claims against them with
prejudice, and therefore they are not subject to reinstatement as defendants. (See ECF
No. 218 at 2-4.)
A.

Effect of Dismissal Order
The Dismissal Order is silent as to whether the claims against the Dismissed

Defendants were dismissed with or without prejudice. (ECF No. 177 at 23.) Rule 41(b)
governs involuntary dismissals, and states that “[u]nless the dismissal order states
otherwise, . . . [an involuntary dismissal]—except one for lack of jurisdiction, improper
venue, or failure to join a party under Rule 19—operates as an adjudication on the
merits.” Because the Dismissal Order does not specify that the claims against the

3

Dismissed Defendants are dismissed without prejudice, the Dismissed Defendants
contend that the dismissal of the claims against them was “an adjudication on the
merits”, which Tenth Circuit law establishes as a dismissal with prejudice. (ECF No.
218 at 4.) Plaintiffs do not contest this reading of Rule 41(b), arguing instead that such
a dismissal is still subject to revision under Rule 54(b) because it did not have the effect
of a final adjudication of all claims and parties. (ECF No. 225 at 3-5.)
The Court agrees with the Dismissed Defendants that, pursuant to Rule 41(b),
the Dismissal Order must be read to have effected a dismissal with prejudice. As a
result, the claims against the Dismissed Defendants could not be reinstated without
amending the Dismissal Order to specify that the dismissal is without prejudice.
However, the Magistrate Judge’s Order permitted Plaintiffs to amend their Complaint to
reinstate the claims against the Dismissed Defendants without such an amendment.
To that extent, the Magistrate Judge’s Order must be vacated as contrary to law. See
Ocelot Oil, 847 F.2d at 1464; Fed. R. Civ. P. 72(a). Accordingly, the Objection is
sustained insofar as it sought to vacate the Magistrate Judge’s Order.
B.

Motion to Amend
As a result of the vacatur of the Magistrate Judge’s Order, Plaintiffs’ Motion for

Leave to File a Second Amended Complaint (“Motion to Amend”) (ECF No. 179) is
once again pending. The Court has reviewed the Magistrate Judge’s Order, and finds
that it thoroughly analyzes Plaintiffs’ and Centura’s arguments under Rules 15 and 16.
(ECF No. 212.) Thus, because a denial of the Motion to Amend would be dispositive of
Plaintiffs’ claims against the Dismissed Defendants, the Court construes the Magistrate
Judge’s Order as a Report and Recommendation as to the appropriate analysis under
4

Rules 15 and 16, and will conduct de novo review of the portions of that Order to which
the parties have stated their objections. Fed. R. Civ. P. 72(b)(3); Zinn-Hoshijo, 2012
WL 1582784, at *1.
The Dismissed Defendants object to the Magistrate Judge’s Order to the extent
that it failed to consider the “severe prejudice” the Dismissed Defendants would face
upon reinstating Plaintiffs’ claims against them, “because they had no opportunity to
participate in the bulk of discovery in this case.” (ECF No. 218 at 5.) Specifically, the
Dismissed Defendants point out that, after their dismissal, Plaintiffs and Centura
conducted nearly six months of discovery, including 40 depositions and expert reports.
(ECF No. 226 at 3.)
In response, Plaintiffs argue that the Magistrate Judge’s Order already
considered the possibility that undue prejudice would result from the amendment, and
rejected that argument. (ECF No. 225 at 7 (quoting ECF No. 212 at 5).) However, the
Magistrate Judge’s Order dealt with the potential prejudice to Centura, not to the
Dismissed Defendants. (ECF No. 212 at 4-5.) Indeed, prior to the hearing before the
Magistrate Judge on the Motion to Amend, the Dismissed Defendants filed a Notice
informing the Court that, based on their contention that the claims against them were
dismissed with prejudice, they would not participate in the briefing or the hearing on the
Motion to Amend. (ECF No. 189.) Thus, the Magistrate Judge’s Order did not consider
any prejudice to the Dismissed Defendants in evaluating the proposed amendment
under Rule 15. (See ECF No. 212.)
In considering the Dismissed Defendants’ argument de novo, the Court finds that
the prejudice they cite does not constitute undue prejudice suf ficient to deny the Motion
5

to Amend. In unobjected-to findings, the Magistrate Judge noted that Plaintiffs promptly
sought leave to amend after the Dismissal Order was issued, that the proposed
amendments are designed to resolve the deficiencies identified in the Dismissal Order,
and that the facts on which the amendments are based were learned through recent
discovery. (ECF No. 212 at 5.) Although the Magistrate Judge’s Order did not explicitly
consider prejudice to the Dismissed Defendants, the Magistrate Judge’s analysis of the
prejudice to Centura is instructive, as the nature of the claimed prejudice here is the
same as that claimed by Centura in its opposition to the Motion to Amend. The Court
recognizes that “[t]he natural operation of the judicial system may result in some
inefficiencies based on allowing the plaintiffs to amend—e.g., some depositions may
have to be supplemented, some pleadings revised, and the expert reports reworked.”
(Id.) However, the Court finds that this prejudice is not sufficiently undue to deny the
Motion to Amend, given the liberal policy in favor of amendment as expressed in Rule
15, and the fact that the proposed amendments have been tailored to address the
pleading deficiencies in the First Amended Complaint. See Hardin v. ManitowocForsythe Corp., 691 F.2d 449, 456 (10th Cir. 1982) (the purpose of Rule 15 is to
provide litigants “the maximum opportunity for each claim to be decided on its merits
rather than on procedural niceties”).
The Court has reviewed the unobjected-to remainder of the Magistrate Judge’s
Order and finds it well-reasoned. Accordingly, the Court adopts the Magistrate Judge’s
analysis and finds that permitting the amendment is appropriate under Rules 15 and 16.
However, as discussed above, in order to reinstate Plaintiffs’ claims against the
Dismissed Defendants, the Dismissal Order must first be amended to specify that those
6

claims are dismissed without prejudice.
As to that question, Plaintiffs argue that Rule 54(b) permits such a revision to any
order that does not finally adjudicate all claims as to all parties. (ECF No. 225 at 3.)
Plaintiffs contend that the Court may revise its Dismissal Order in its discretion even at
this stage of the case. (Id. (citing Anixter v. Home-Stake Production Co., 977 F.2d
1533, 1547-49 (10th Cir. 1992) (affirming district court’s order reviving dismissed claims
seventeen days into trial)).) The Dismissed Defendants point out that Plaintiffs did not
move for such a revision, and argue that the Magistrate Judge was not empowered to
perform that revision. (ECF No. 226 at 2.) While the Magistrate Judge may have
lacked that authority, the Dismissed Defendants do not dispute that this Court may
revise its own Dismissal Order, nor do they raise any arguments against such a revision
apart from the prejudice already discussed.
The Court finds that, given the ambiguity of the Dismissal Order, Plaintiffs’
Motion to Amend may be construed as also requesting revision of the Dismissal Order
in order to permit the requested amendments. As discussed above, the Court has
found that the prejudice to the Dismissed Defendants is not undue prejudice sufficient
to deny the amendment. Accordingly, the Court finds it appropriate to exercise its
discretion and amend the Dismissal Order to specify that the dismissal is without
prejudice, in order to permit the proposed amendments.
Therefore, the Objection is overruled to the extent that it seeks denial of
Plaintiffs’ Motion to Amend.

7

III. CONCLUSION
For the reasons set forth above, the Court ORDERS as follows:
1.

The Dismissed Defendants’ Objection to the Magistrate Judge’s August 12, 2014
Order (ECF No. 212) is SUSTAINED IN PART and OVERRULED IN PART;

2.

The Magistrate Judge’s August 12, 2014 Order (ECF No. 212) is VACATED as
an Order and is instead construed as a Report and Recom mendation, which is
ADOPTED IN PART as discussed herein;

3.

The Dismissal Order (ECF No. 177) is AMENDED to state that all claims
dismissed therein for failure to state a claim are DISMISSED WITHOUT
PREJUDICE;

4.

Plaintiffs’ Motion for Leave to File Second Amended Complaint (ECF No. 181) is
GRANTED and the Second Amended Complaint (ECF No. 213) is ACCEPTED
AS FILED; and

5.

The Dismissed Defendants shall file an Answer or responsive pleading to the
Second Amended Complaint on or before November 26, 2014.
Dated this 4th day of November, 2014.
BY THE COURT:

__________________________
William J. Martínez
United States District Judge

8