Scott v. Buckner Co.
Scott v. Buckner Co.
Opinion of the Court
In this action, Plaintiffs Joel Scott and Caron Scott ("Plaintiffs") bring various claims against Defendant The Buckner Company, Inc. ("Defendant"). (ECF No. 24.) Before the Court are Defendant's (1) Motion to Dismiss for Improper Venue ("First Motion to Dismiss"; ECF No. 14); and (2) Reasserted Motion to Dismiss for Improper Venue in Response to Plaintiffs' First Amended Complaint ("Second Motion to Dismiss"; ECF No. 39). For the reasons set forth below, the Court denies as moot the First Motion to Dismiss and denies the Second Motion to Dismiss.
I. BACKGROUND
Plaintiffs are residents of Colorado. (ECF No. 24 at 1, ¶ 1.) Defendant is a Utah corporation in the business of procuring insurance, and whose principal place of business is in Salt Lake City, Utah. (ECF Nos. 24 at 1, ¶ 2 & 14 at 2.) Silverhawk Enterprises, Inc. ("Silverhawk"), is a Utah corporation that builds custom homes, and whose principal place of business is located in Utah. (ECF Nos. 24 at 2-3, ¶¶ 6, 9 & 37 at 2.)
*1322In 2012, Plaintiffs hired Silverhawk to build an approximately $800,000 home in Salida, Colorado (the "Home"). (ECF No. 24 at 2, ¶ 6.) Before construction commenced, Silverhawk contacted Defendant's employee, Beat Koszinowski ("Koszinowski"), to obtain liability insurance for the project. (Id. at 3, ¶ 9.) Koszinowski had been Silverhawk's insurance agent for several years. (Id. )
Since the Home was to be built outside of Utah, the state where Silverhawk is based and most of its construction projects occur, Silverhawk's principal, Thomas Hasleton ("Hasleton"), allegedly "approached Koszinowski for the express purpose of ensuring that the work on the [Home] would be covered by liability insurance." (Id. ) In doing so, Hasleton allegedly described the project to Koszinowski, advised him that the Home would be built in Colorado, and expressly directed him to acquire full coverage for the project. (Id. ) Koszinowski then procured for Silverhawk liability insurance policies from Mid-Continent Casualty Company ("Mid-Continent"). (Id. at 2, ¶¶ 7-8.)
Sometime after Koszinowski had procured the initial insurance policy, Silverhawk's lender wanted proof that the project was insured. (Id. at 3, ¶ 10.) Thus, the lender requested that Silverhawk have Defendant complete two Evidence of Property Insurance ("EOI") forms with respect to the coverage Defendant had procured for Silverhawk for the project. (Id. ) In the first EOI, Defendant stated that Silverhawk was covered by an "Installation/Builders Risk/Course of Construction Coverage" policy issued by Great American Insurance Group (who is apparently Mid-Continent's parent company) for a period of one-year starting on November 3, 2011. (Id. ; see also ECF No. 38-1 at 1.) In addition, the first EOI stated that the "project location" was in Salida, Colorado. (ECF No. 24 at 3, ¶ 10; see also ECF No. 38-1 at 1.)
In the second EOI, Defendant stated that Silverhawk was covered by a policy issued by Great American Insurance Group for "[b]lanket builders risk/course of construction of residential 1-6 family dwellings within the States of Utah, Wyoming and Colorado." (ECF No. 24 at 3, ¶ 10; see also ECF No. 38-1 at 2.) Additionally, the second EOI stated that the property was located in Salida, Colorado. (ECF No. 24 at 3, ¶ 10; see also ECF No. 38-1 at 2.) Plaintiffs claim that Defendant also "issued Certificates of Liability Insurance for each of the years that the [H]ome was being constructed, indicating that Silverhawk was insured under the Mid-Continent Policies for work on the [H]ome." (ECF No. 24 at 3, ¶ 10.)
According to Plaintiffs, as a result of Defendant's alleged representations to Silverhawk that the project was covered by liability insurance, Silverhawk in turn informed Plaintiffs that the project was insured. (Id. at 3-4, ¶¶ 9, 11.) Plaintiffs allege that they "relied on the existence of liability insurance in deciding to move forward with the construction of their home by Silverhawk." (Id. at 4, ¶ 11.)
Construction began near the end of 2012 and the Home was substantially completed by the end of 2014. (Id. at 2, 4, ¶¶ 6, 12.) After the Plaintiffs moved into the Home, they discovered several defects in the property that they believed were caused by Silverhawk and its subcontractors. (Id. at 4, ¶ 12; see also ECF No. 37 at 3.) Plaintiffs claim that they spent approximately $260,000 correcting the defects and repairing the damage. (Id. )
On September 28, 2015, Plaintiffs brought action against Silverhawk, Hasleton, and others in the Chaffee County District Court in Salida, Colorado (the "state action"). (Id. at 4, ¶ 14.) In that *1323lawsuit, Plaintiffs sought reimbursement for the expenses they incurred in correcting the construction defects. (Id. ) After Silverhawk informed Koszinowski of the claims against it, Defendant reported the state action to Mid-Continent. (Id. at 4, ¶ 15.) Mid-Continent, however, denied coverage to Silverhawk for the claims made against it by the Plaintiffs. (Id. ) In particular, Mid-Continent denied Silverhawk's "request for a defense and indemnity because each of its Policies [with Mid-Continent] contained endorsements that eliminated coverage for liability arising out of Silverhawk's ongoing or completed construction operations performed in the State of Colorado." (Id. at 4-5, ¶ 15.) Thus, Plaintiffs allege that Defendant "acquired no liability coverage at all for Silverhawk for the construction of the [Home]." (Id. at 5, ¶ 15.)
After being denied insurance coverage, Silverhawk and Hasleton expended approximately $90,000 over the next three years defending themselves in the state action. (Id. at 5, ¶ 16; see also ECF No. 37 at 4.) In August 2018, the parties to the state action reached a settlement, whereby Silverhawk and Hasleton agreed to pay $97,500 as partial reimbursement for the expenses Plaintiffs incurred to correct the construction defects. (Id. ) "Silverhawk and Hasleton subsequently assigned their rights and claims against [Defendant] under Utah law to the [Plaintiffs]." (ECF No. 37 at 4; see also ECF No. 24 at 5, ¶ 20.) This lawsuit followed. (ECF No. 1.)
II. PROCEDURAL HISTORY
On January 18, 2019, Plaintiffs filed this action against Defendant. (Id. ) In the Amended Complaint, Plaintiffs assert four claims against Defendant. Three of these claims-negligent failure to procure, breach of contract to procure insurance, and negligent misrepresentation-were assigned to Plaintiffs by Silverhawk and Hasleton and are brought under Utah law. (ECF No. 37 at 4; see also ECF No. 24 at 7-9.) While the fourth and final claim is also one for negligent misrepresentation, this claim is asserted against Defendant under Colorado law. (ECF No. 37 at 4; see also ECF No. 24 at 6.)
On March 1, 2019, Defendant filed its First Motion to Dismiss. (ECF No. 14.) In that motion, Defendant asks the Court to dismiss Plaintiffs' Complaint "and/or change venue to the U.S. District Court for the District of Utah pursuant to Fed. R. Civ. P. 12(b)(3)." (Id. at 1.) On March 12, 2019, Plaintiffs filed an Amended Complaint while Defendant's First Motion to Dismiss was still pending before the Court. (ECF No. 24.) On March 22, 2019, Plaintiffs filed a Response to the First Motion to Dismiss. (ECF No. 38.)
On March 26, 2019, Defendant filed its Second Motion to Dismiss. (ECF No. 39.) In that Motion, Defendant does not raise any new arguments but instead "reasserts its previously filed [First] Motion to Dismiss" since the "Amended Complaint does not contain new allegations altering the basis for or the arguments made in support of Defendant's [First] Motion to Dismiss." (Id. at 1.) Indeed, the new allegations in the Amended Complaint only pertain to the amount in controversy in the case. (Compare ECF No. 24 with ECF No. 1.) On April 16, 2019, Plaintiffs filed a Response to the Second Motion to Dismiss, likewise asking the Court to "incorporate by reference in its entirety" their previously filed Response (ECF No. 38). (ECF No. 47.)
III. ANALYSIS
A. First Motion to Dismiss is Moot
It is well-established that an "amended complaint supersedes the original *1324complaint and renders the original complaint of no legal effect." Franklin v. Kan. Dep't of Corr. ,
Because the Complaint (ECF No. 1) has been superseded by Plaintiffs' Amended Complaint (ECF No. 24), Defendant's First Motion to Dismiss (ECF No. 14) must be denied as moot. Nevertheless, because the Second Motion to Dismiss wholly incorporates the First Motion to Dismiss, the Court will address the arguments made in the earlier motion. Similarly, because Plaintiffs' Response to the Second Motion to Dismiss wholly incorporates Plaintiffs' previous Response, the Court will address the arguments made in the earlier filing.
B. Plaintiffs Have Made Prima Facie Showing that Venue is Proper in Colorado
1. The Applicable Venue Inquiry
"Once venue is challenged, it is the plaintiff's burden to show that venue is proper in the forum district." Hanson v. Bosley & Bratch, Inc. ,
"[I]n reviewing a defendant's Rule 12(b)(3) motion to dismiss for improper venue, the Court may examine facts outside of the complaint and must draw all reasonable inferences and resolve all factual conflicts in favor of the plaintiff." Aspen Corps. v. Gorman ,
"Of course, determination of proper venue does not require the court to choose the best venue or determine which forum has the most, or most significant, contacts with plaintiff's claims." Sanchez v. Miller ,
The federal venue statute provides that a civil action may be brought in:
(1) a judicial district in which any defendant resides ...;
(2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred [the 'Events or Omissions Inquiry '], or a substantial part of property that is the subject of the action is situated [the 'Property Inquiry ']; or
(3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court's personal jurisdiction with respect to such action.
After a careful review of the pleadings and applicable case law, the Court finds that venue is proper in this District under the Property Inquiry, and that it need not consider whether venue is also appropriate under § 1391(b)(1) or the Events or Omissions Inquiry of § 1391(b)(2). See Atl. Marine Constr. Co. v. U.S. Dist. Court for the W. Dist. of Tex. ,
The Court notes that there is limited case law regarding the Property Inquiry in the Tenth Circuit. In fact, the Court has only been able to locate three cases in the Circuit where the plaintiff alleged that venue was proper under the Property Inquiry. See Mosier v. Farren ,
The Court recognizes that in Bartile Roofs , the Tenth Circuit introduced a "two-part analysis" courts should follow when "reviewing challenges to venue under § 1391 [ (b) ](2)."
*1326The Court finds support for its conclusion based on the fact that the Tenth Circuit only addressed the Events or Omissions Inquiry in Bartile Roofs.
2. Plaintiffs Have Satisfied the Property Inquiry
Defendant argues in its Second Motion to Dismiss that "the District of Colorado is the improper venue for this action because Defendant does not reside in Colorado and none of the alleged events or omissions giving rise to the claim occurred in Colorado." (ECF No. 44 at 1 (emphasis added); See ECF No. 14.) In other words, Defendant claims that venue is improper in this District because § 1391(b)(1) and § 1391(b)(2)'s Events or Omissions Inquiry cannot be satisfied. (See ECF No. 14.) Thus, Defendant's arguments regarding § 1391(b)(2) in the Second Motion to Dismiss focus solely on the Events or Omissions Inquiry. (Id. at 3-5.) Indeed, Defendant does not once address in its Motion the Property Inquiry prong of § 1391(b)(2). (See ECF No. 14.)
Because Defendant challenged Plaintiffs' choice of venue, Plaintiffs have the burden to establish that venue is proper in Colorado. See Hanson ,
In regard to the Property Inquiry, Plaintiffs make the following argument:
Venue is proper under subsection (b)(2) in a district in which "a substantial part of property that is the subject of the action is situated[.]" Here, the Scotts' property in Salida, Colorado[,] is at the center of each of the claims that are alleged against Buckner. It is the injury to that property that provides the foundation for all damages asserted by the Scotts-for their own as well as their assigned claims. Had no injury to the Scotts' property occurred, this lawsuit would not exist.
Specifically, the Scotts allege that the property would not have been injured but-for Buckner's misrepresentations that Silverhawk had insurance coverage in place in the event something went wrong during construction. If the property had not been injured, then the Scotts would not have incurred losses correcting or repairing those injuries and they would not have initiated the Chaffee County lawsuit to seek recompense. Thus, had the Scotts' property not been injured, Silverhawk ... and Thomas Hasleton would not have incurred losses defending themselves against and settling the Chaffee [sic ] County Suit. Venue is proper in this *1327district pursuant to28 U.S.C. § 1391 (b)(2) as a result.
(Id. at 5-6 (internal citations omitted).) In its Reply, Defendant does not address the Property Inquiry at all, let alone Plaintiffs' arguments regarding the Inquiry. (See ECF No. 44.)
The record amply supports a finding that a substantial part of the real property that is the subject of this action is situated in the judicial District of Colorado. The Home located in Colorado is at the center of each of Plaintiffs' causes of action. For instance, Plaintiffs assert that they detrimentally relied on Defendant's false representations to Silverhawk that the Colorado project was fully covered with liability insurance. (ECF No. 24 at 6.) Plaintiffs claim that based on these false representations, they allowed Silverhawk to construct the Home, which in turn led to the damage of their property. (Id. ) The damages Plaintiffs seek for the claim is "the difference between the amount expended to correct or repair the damage to the [H]ome and the amount paid pursuant to the settlement of the [state] Lawsuit." (Id. ) Plaintiffs' other three claims could be similarly analyzed.
Accordingly, the Court finds that all of Plaintiffs' claims are intrinsically linked to the Home, and thus to the real property which no one can dispute is located in the judicial District of Colorado. Therefore, the record before the Court supports a finding that there is substantial property located within the judicial District of Colorado that is the subject of this action. The Court notes that Defendant had an opportunity to counter the arguments squarely raised in Plaintiffs' Response regarding the Property Inquiry or argue that the Property Inquiry does not apply under the circumstances. Defendant, however, entirely failed to address the Property Inquiry in its Reply (or in its Second Motion to Dismiss, which was filed after Plaintiffs' Response). (See ECF Nos. 39 & 44.)
For all these reasons the Court will deny Defendant's Second Motion to Dismiss.
IV. CONCLUSION
For the reasons set for above, the Court ORDERS as follows:
1. Defendant's First Motion to Dismiss (ECF No. 14) is DENIED AS MOOT; and
2. Defendant's Second Motion to Dismiss (ECF No. 39) is DENIED. Dated this 16th day of May, 2019. BY THE COURT:
Since the Court has concluded that Plaintiffs have made a prima facie showing that venue is proper in Colorado under the Property Inquiry, the Court need not address the parties' arguments regarding the Events or Omissions Inquiry. Nevertheless, the Court notes that a review of the pleadings and applicable case law indicates that venue would likewise be proper under the Events or Omissions Inquiry. See Bartile Roofs ,
Reference
- Full Case Name
- Joel SCOTT, and Caron Scott v. The BUCKNER COMPANY
- Cited By
- 35 cases
- Status
- Published