ALPS Property & Casualty Insurance Company v. Bell et al.

Filing 58

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS, by Judge William J. Martinez on 5/6/2015.(dhans, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 14-cv-1868-WJM-KLM
ALPS PROPERTY & CASUALTY INSURANCE COMPANY, f/k/a ATTORNEYS
LIABILITY PROTECTION SOCIETY, INC.,
Plaintiffs,
v.
ROBERT C. BELL,
BELL & WRIGHT, LTD, d/b/a BELL & WRIGHT, LLC d/b/a BELL & WRIGHT LAW
FIRM,
DENVER LEGAL CARE, LTD., and
MARILYN BALL,
Defendants.

ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

This matter is before the Court on Defendant Robert C. Bell’s (“Defendant”)
Motion to Dismiss (“Motion”). (ECF No. 33.) For the reasons stated below, the Motion
is granted.
I. BACKGROUND
Defendant is an attorney licensed to practice in Colorado and Nevada.1 (ECF

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Plaintiff provides evidence of Defendant’s bar membership in two exhibits attached to
its response to the Motion, and both parties have included filings from a separate state court
action as exhibits. (See ECF Nos. 33-1, 33-2, & 42-1—42-6.) The Court may consider these
documents without converting the motion to dismiss to one for summary judgment. See Fed.
R. Civ. P. 10(c) (“A copy of a written instrument that is an exhibit to a pleading is a part of the
pleading for all purposes.”); Pace v. Swerdlow, 519 F.3d 1067, 1072–73 (10th Cir. 2008)
(district court properly took judicial notice of state court records relating to the federal action);
Tal v. Hogan, 453 F.3d 1244, 1264 n.24 (10th Cir. 2006) (district court may take judicial notice
of “facts which are a matter of public record” without converting a 12(b)(6) motion into a
summary judgment motion).

Nos. 42-2 & 42-3.) Defendant Marilyn Ball alleges that, on June 8, 2008, she hired
Defendant to represent her in connection with injuries she sustained in an automobile
accident. (ECF No. 42-5 at 2.) Defendant informed Ms. Ball that he would pursue her
underinsured coverage; Ms. Ball alleges that Defendant did not obtain a settlement with
respect to the underinsured coverage, and allowed the statute of limitations on the
coverage claim to lapse. (Id. at 3-4.)
Ms. Ball filed a malpractice suit against Defendant on June 2, 2014 in Nevada’s
Second Judicial District (“the Nevada Suit”). (ECF No. 2 at 4.) On June 9, 2014,
Defendant provided Plaintiff ALPS Property and Casualty Insurance Company, his
malpractice insurance carrier, with a copy of Ms. Ball’s complaint. (Id. at 10.) Plaintiff
accepted Defendant’s tender of the defense in the Nevada Suit, subject to a reservation
of rights to deny coverage, and subsequently notified Defendant on July 7, 2014 that
his malpractice policy was rescinded. (Id.) On the same day, Plaintiff initiated this
action seeking rescission of the policy, reimbursement of defense expenses, and a
declaratory judgment that the policy provides no coverage for any judgment against
Defendant in the Nevada Suit.2 (ECF No. 2.) On August 11, 2014, Defendant filed a
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The Court notes as an initial matter that Plaintiff’s choice to lay venue in Colorado is
questionable. In a civil action, venue is proper in:
(1) a judicial district where any defendant resides, if all defendants are residents
of the State in which the district is located; (2) a judicial district in which a
substantial part of the events or omissions giving rise to the claim occurred, or a
substantial part of property that is the subject of the action is situated; or (3) a
judicial district in which any defendant is subject to personal jurisdiction at the
time the action is commenced, if there is no district in which the action may
otherwise be brought.
28 U.S.C. § 1391(b). Plaintiff argues that a substantial part of the events giving rise to its
claims occurred in Colorado, and that Colorado is “intimately connected to the facts of this

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Third-Party Complaint against Plaintiff in the Nevada Suit, seeking a declaratory
judgment that there is coverage under the policy for Ms. Ball’s claims against Defendant
in the Nevada Suit. (ECF No. 33-2.)
On October 22, 2014, Defendant filed his Motion to Dismiss this action. (ECF
No. 33.) Defendant alleges that Plaintiff’s decision to file this suit was in bad faith and
was an effort to preempt Defendant’s own third-party lawsuit against Plaintiff on the
malpractice policy coverage issue. (Id. at 2.) Plaintiff urges the Court to deny
Defendant’s Motion because this action was filed before Defendant’s Third-Party
Complaint in the Nevada Suit, and hence the “first-filed” rule applies. (ECF No. 42.)
II. LEGAL STANDARD
While Defendant makes his Motion pursuant to “Rule 12(b)” of the Federal
Rules of Civil Procedure, Defendant does not enumerate, or explain, under which
subsection of Rule 12(b) he seeks relief. (ECF No. 33.) A review of the Motion
indicates that what Defendant truly seeks is the Court’s abstention from this matter
under Colorado River Water Conservation District v. United States, 424 U.S. 800, 817-

matter”. (ECF No.42 at 19.) Plaintiff states that although the malpractice insurance policy was
issued to Defendant at his Nevada business address, his application for insurance referenced
his Colorado address and bar license. (Id. at 12.) Furthermore, Plaintiff emphasizes that at the
time of Ms. Ball’s accident, which is the subject matter of her complaint against Defendant, she
was living and working in Colorado and the automobile insurance policy was issued in
Colorado. (Id. at 12-13.) However, Plaintiff’s claims in this case all relate to Defendant’s
negotiation of the malpractice policy and alleged misrepresentations made by Defendant during
that process. (ECF No. 2.) Because Defendant alleges that “the negotiation and execution of
the [insurance] contract . . . occurred solely in Nevada,” it is unclear how any significant portion
of the events giving rise to Plaintiff’s claims, which focus on Defendant’s misrepresentations,
occurred in Colorado. (ECF No. 52 at 2.)

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18 (1976) based on the parallel litigation in the Nevada Suit.3 (See id.)

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All of the Motion briefing focuses on the first-filed rule. (ECF Nos. 33, 42, & 52.) But
both parties fail to acknowledge that the first-filed rule only applies when both actions at issue
are pending in federal court, and thus the rule is inapplicable here. Mid-Continent Cas. Co. v.
Greater Midwest Builders, Ltd., 2011 WL 5597329, at *4 (D. Kan. Nov. 17, 2011) (holding that
the “the first-to-file rule—which promotes comity and requires courts to exercise care to avoid
interference with each other’s affairs—applies only to actions pending in federal courts of
coordinate jurisdiction and equal rank and is thus not implicated here”), aff’d sub nom
Mid-Continent Cas. Co. v. Vill. at Deer Creek Homeowners Ass’n, Inc., 685 F.3d 977 (10th Cir.
2012); see also Lipari v. U.S. Bancorp NA, 345 F. App’x 315, 317 (10th Cir. 2009) (rule applies
“when two district courts have jurisdiction over the same controversy” (emphasis added));
Buzas Baseball, Inc. v. Bd. of Regents of Univ. Sys. of Georgia, 189 F.3d 477 (10th Cir. 1999)
(the first-filed rule “permits a district court to decline jurisdiction where a complaint raising the
same issues against the same parties has previously been filed in another district court”
(emphasis added)). Colorado River is therefore the more appropriate analysis here.
Although not raised in the briefing, the Court also notes that the Brillhart/Wilton doctrine
does not apply here. Wilton v. Seven Falls Company, 515 U.S. 277 (1995) and Brillhart v.
Excess Insurance Company of America, 316 U.S. 491 (1942) are the seminal cases discussing
a court’s ability to stay or dismiss a declaratory judgment action when the same action is
pending in state court. Both cases make clear that a court has “discretion in determining
whether and when to entertain an action under the Declaratory Judgment Act, even when the
suit otherwise satisfies subject matter jurisdictional prerequisites.” Wilton, 515 U.S. at 282.
However, the Supreme Court did not address whether the broad discretion conferred by
the Declaratory Judgment Act and Brillhart/Wilton still applies when the complaint seeks both
declaratory and affirmative relief. See Alter v. F.D.I.C., 2014 WL 5465406, at *5 (D. Utah Oct.
28, 2014). The Tenth Circuit has held that the “nature of the relief requested by the plaintiff . . .
is the touchstone.” United States v. City of Las Cruces, 289 F.3d 1170, 1181 (10th Cir. 2002).
The Las Cruces court noted that suits seeking declaratory relief and “coercive actions” are
distinguishable for purposes of the Brillhart/Wilton analysis. Id. Consequently, “[i]f the plaintiff
only requests a declaration of its rights, not coercive relief, the suit is a declaratory judgment
action for purposes of determining whether the district court has broad discretion under Brillhart
to refuse to entertain the suit.” Id. In reaching this holding, the Court cited with approval the
Fifth Circuit’s bright-line standard that holds if “coercive relief . . . is sought in addition to
declaratory relief, the applicable standard is Colorado River.” Id. (citing Safety Nat. Cas. Corp.
v. Bristol-Myers Squibb Co., 214 F.3d 562, 564 (5th Cir. 2000)); see also R.R. St. & Co. v.
Vulcan Materials Co., 569 F.3d 711, 715 (7th Cir. 2009) (“The Fifth Circuit has adopted a strict
bright-line approach: When an action includes a claim for declaratory relief along with any
non-frivolous claim for coercive relief, Wilton/Brillhart abstention is completely inapplicable to all
claims, and the Colorado River doctrine governs instead.”). Thus, in this case, because
Plaintiff’s Complaint seeks “coercive relief,” i.e., rescission, in addition to declaratory relief,
Colorado River, and not Brillhart/Wilton, applies. Nautilus Ins. Co. v. Otero Cnty. Hosp. Ass’n,
2011 WL 12574962, at *4 (D.N.M. Nov. 4, 2011) (in a factually analogous case where insured
allegedly made material misrepresentations on insurance application, insurer’s complaint for
rescission and declaratory relief was coercive and thus Colorado River applied because

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The Colorado River doctrine governs whether a district court should stay or
dismiss a federal suit pending the resolution of a parallel state court proceeding. See
Colorado River, 424 U.S. at 817-18. The Supreme Court has concluded that judicial
economy concerns may justify deferral of a federal suit when pending state litigation will
resolve the issues presented in the federal case. See id. at 817–20. Whether to
decline to exercise jurisdiction pursuant to Colorado River is discretionary. Rienhardt v.
Kelly, 164 F.3d 1296, 1303 (10th Cir. 1999).
The Tenth Circuit has warned that the appropriate circumstances for deferral
under the Colorado River doctrine are “considerably more limited than the
circumstances appropriate for abstention” and must be “exceptional.” Id. (quoting
Colorado River, 424 U.S. at 817-18). Accordingly, the Court’s “task in cases such as
this is not to find some substantial reason for the exercise of federal jurisdiction . . .;
rather, the task is to ascertain whether there exist exceptional circumstances, the
clearest of justifications, that can suffice under Colorado River to justify the surrender of
the jurisdiction.” Id. (quoting Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp.,
460 U.S. 1, 25-26 (1983)). Simply stated, “[d]espite the temptation for federal courts to
use the doctrine as a means of stemming the rising tide of litigation, suits in federal
court are not easily swept away by Colorado River.” Id.
The first step under the Colorado River analysis is determining “whether the
state and federal proceedings are parallel.” Allen v. Board of Educ., Unified Sch. Dist.,
436, 68 F.3d 401, 403 (10th Cir. 1995). Suits are parallel if “substantially the same
“rescission stands independent of any request for purely declaratory relief”).

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parties litigate substantially the same issues in different forums.” Id. The court
examines “the state proceedings as they actually exist to determine whether they are
parallel to the federal proceedings, resolving any doubt in favor of exercising federal
jurisdiction.” Id. If the cases are not parallel, the federal court must exercise
jurisdiction. Allen, 68 F.3d at 403. If the cases are parallel, the federal court must
consider a multitude of other factors in deciding whether to surrender jurisdiction until
the conclusion of state court proceedings. Id.
The Supreme Court has identified several non-exclusive factors to consider in
evaluating whether to decline jurisdiction, including: (1) whether the state or federal
court has assumed jurisdiction over property in dispute; (2) the inconvenience to the
parties of the federal forum; (3) avoiding piecemeal litigation; (4) the order in which the
courts obtained jurisdiction; (5) the vexatious nature of the litigation; (6) whether federal
law provides the rule of decision; and (7) and the adequacy of the state court
proceeding to protect the federal plaintiff’s rights. See Colorado River, 424 U.S. at 818;
Moses H. Cone, 460 U.S. at 18-28. These factors are not a “mechanical checklist”;
rather, the Court should “careful[ly] balanc[e] . . . the most important factors as they
apply in a given case, with the balance heavily weighted in favor of the exercise of
jurisdiction.” Fox v. Maulding, 16 F.3d 1079, 1082 (10th Cir. 1994).
III. ANALYSIS
The Court must ascertain whether the Colorado River doctrine supports retaining
jurisdiction in this case. The Court finds as a threshold matter that this suit and the
Nevada Suit are parallel actions. Defendant’s Third-Party Complaint in the Nevada Suit

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and Plaintiff’s Complaint in this matter both assert a claim for declaratory relief on the
issue of coverage under Defendant’s malpractice insurance policy issued by Plaintiff.
(Compare ECF No. 2, with ECF No. 33-2.) Plaintiff acknowledges the similarities in its
response to the Motion, and notes that Def endant’s Third-Party Complaint “is
duplicative of one of [Plaintiff’s] three claims for relief in this action.” (ECF No. 42 at
15.)
Moreover, the Court finds that Plaintiff’s addition of Bell & Wright, LTD, Denver
Legal Care, LTD, and Ms. Ball as parties to this action, as well as Plaintiff’s additional
claims for rescission and reimbursement of defense expenses, do not alter the nature
of the suit. (ECF No. 2.) Plaintiff, in essence, seeks a declaration of its rights under the
malpractice policy against all parties who could feasibly bring a claim for such coverage.
See United States v. City of Las Cruces, 289 F.3d 1170, 1182 (10th Cir. 2002) (noting
that, “in the Colorado River context, . . . exact identity of parties and issues is not
required”). Moreover, the Nevada Suit “will be an adequate vehicle for the complete
and prompt resolution of the issues between the parties.” Moses H. Cone, 460 U.S. at
28. Ms. Ball and Defendant are already parties in the Nevada Suit, as is Plaintiff via
Defendant’s Third-Party Complaint. Should Plaintiff wish to assert claims against Ms.
Ball, Bell & Wright, LTD, Denver Legal Care, LTD, and Defendant in that action related
to the malpractice policy, it should have the ability to do so through third-party practice.4
Therefore, the Court finds that this action and the Nevada Suit are parallel because

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The Court notes that Plaintiff may not have to join Bell & Wright, LTD and Denver
Legal Care, LTD to the Nevada Suit based on an affidavit submitted by Plaintiff stating that both
entities “are two dissolved Limited Liability Companies” no longer in existence. (ECF No. 33-1
at 2.)

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“substantially the same parties [are] litigat[ing] substantially the same issues in different
forums.” Allen, 68 F.3d at 403.
The Court further finds that the relevant Colorado River factors support declining
jurisdiction over this matter.
First, the Court notes that Colorado does not appear to be a conv enient forum
for any of the parties, including Plaintiff. Only Denver Legal Care, LTD whose sole
member, according to Plaintiff, is Defendant, is based in Colorado. (ECF No. 2.)
Furthermore, Defendant asserts that Denver Legal Care, LTD has been dissolved.
(ECF No. 33-1.) As for the other parties, Defendant is a Nevada resident, Ms. Ball
resides in Missouri, Bell & Wright is incorporated in Nevada, and Plaintiff is organized
under the laws of, and has its principal place of business in, Montana. (ECF Nos. 2,
33-1, & 42-5.) It is therefore unclear how Colorado would be more convenient than the
state forum.
Second, deferring to the Nevada Suit would avoid piecemeal litigation, even
though the presiding judge in the Nevada Suit has stayed Defendant’s third-party
action. (ECF No. 56-1.) Allowing this matter to proceed would force Defendant and
Ms. Ball to obtain separate counsel to defend them in this action as well as in the
Nevada Suit. The Tenth Circuit has held that “[t]he paramount consideration in
Colorado River was the third factor: the danger of piecemeal litigation.”
D.A. Osguthorpe Family P’ship v. ASC Utah, Inc., 705 F.3d 1223, 1234 (10th Cir.
2013). The Court therefore gives especially great weight to this factor. In doing so, the
Court finds that, although the issue of insurance coverage is severable from the
underlying merits of Ms. Ball’s claims in the Nevada Suit, allowing this action to proceed
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in two separate forums, when it could easily be consolidated in the Nevada Suit, would
result in piecemeal litigation at the expense and inconvenience of the parties.
Third, federal law does not provide the rule of decision in this case. A federal
court sitting in diversity applies the substantive law of forum state. Jones v. Denver
Post Corp., 203 F.3d 748, 757 (10th Cir. 2000). Colorado and Nev ada choice-of-law
rules provide that an insurance contract is governed “by the law of the state with the
most significant relationship to the insurance contract.” Berry & Murphy, P.C. v.
Carolina Cas. Ins. Co., 586 F.3d 803, 808 (10th Cir. 2009); Progressive Max Ins. Co. v.
Toca, 2007 WL 2891980, at *3 (D. Nev. Sept. 28, 2007). Therefore, federal law does
not provide the rule of decision in this matter.
Fourth, the state court proceedings will adequately protect Plaintiff’s rights. As
stated above, Plaintiff should be able to assert its claims related to the insurance policy
in the Nevada Suit against all the parties to this action. Plaintiff will therefore not suffer
prejudice should it be forced to litigate in the Nevada Suit.
On balance, the Court finds that the above factors are relevant to this matter and
weigh in favor of not exercising jurisdiction over this case. Fox, 16 F.3d at 1082.
Having determined that abstention under Colorado River is appropriate, the
Court must choose whether to stay the case pending the resolution of the state
proceedings, or alternatively whether to dismiss. Where it is possible that “the state
court proceedings [may] not resolve all the federal claims, a stay preserves an available
federal forum in which to litigate the remaining claims, without the plaintiff having to file
a new federal action.” Id. at 1083. In this case, because no federal claims are asserted

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and Plaintiff’s claims for additional relief beyond a declaratory judgment can be
asserted in the Nevada Suit, the availability of the federal forum need not be preserved.
As Colorado River requires the Court to look to the state and federal actions as a whole
to determine whether to retain jurisdiction, the Court finds that Colorado River
abstention applies to this action in its entirety, rather than to Defendant alone. The
Court therefore finds that dismissal of this action without prejudice is appropriate.
III. CONCLUSION
For the reasons set forth above, the Court ORDERS as follows:
1.

Defendant Robert C. Bell’s Motion to Dismiss (ECF No. 33) is GRANTED;

2.

Defendant Marilyn Ball’s Motion to Dismiss (ECF No. 34) is DENIED AS MOOT;

3.

This action is DISMISSED WITHOUT PREJUDICE; and

4.

The Clerk SHALL ENTER FINAL JUDGMENT in accordance with this Order and
SHALL TERMINATE this case. The parties shall each bear their own attorneys’
fees and costs.
Dated this 6th day of May, 2015.
BY THE COURT:

William J. Martínez
United States District Judge

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