May 21, 2019

Colorado Court of Appeals: Dismissal for Failure to Prosecute Inappropriate Where Party Awaited Judgment

The Colorado Court of Appeals issued its opinion in Hudak v. Medical Lien Management, Inc. on Thursday, May 23, 2013.

Failure to Prosecute.

Defendant Medical Lien Management (MLM) appealed the district court’s judgment dismissing with prejudice its counterclaims against plaintiff Tammy Hudak for failure to prosecute. The Court of Appeals reversed the judgment and the case was remanded with directions.

In 2006, Hudak was injured in an automobile accident. Because she was unable to pay for her medical treatment, she entered into “lien” agreements with various medical providers to obtain that treatment. Pursuant to those agreements, she received medical care in exchange for the providers’ right to place liens on any settlement or judgment funds she might obtain in a personal injury action against the alleged tortfeasor, and collect from her any amounts owed above that recovered in a settlement or judgment.

After obtaining a $47,000 settlement in her personal injury action, Hudak filed a motion for declaratory and interpleador relief, naming MLM as an interpleader defendant. MLM, which had accumulated or been assigned a lien balance of $40,430.70, filed a breach of contract, unjust enrichment, and account-stated counterclaims against Hudak for any amount owed after distribution of the interpleaded funds.

MLM filed a motion for summary judgment, claiming priority over other interpleador defendants to the interpleaded funds, and a right to judgment on its counterclaims. The trial court determined that because MLM had second priority, it was entitled to recover only $20,353.75 of the interpleaded funds. The district court never ruled on the part of MLM’s summary judgment motion relating to its counterclaims and, without notice to MLM, entered an order closing the case.

Thirteen months later, MLM filed a renewed motion for summary judgment with respect to its counterclaims. The district court, acting through a different judge, dismissed the counterclaims for failure to prosecute. On appeal, MLM argued this was error, and the Court agreed.

To reverse a decision to dismiss for failure to prosecute, the Court must find that the trial court’s decision was manifestly arbitrary, unreasonable, or unfair. Here, the case was inactive for thirteen months. MLM argued that it was awaiting a ruling by the district court on its pending motion for summary judgment and this was a mitigating circumstance or reasonable excuse for delay. The Court agreed that the burden of following up on motions generally is on the party filing them. However, MLM had done all that was necessary to put its dispositive summary judgment before the court and was not obliged to renew the motion or remind the court that it needed to be ruled on. Under these circumstances, it was error for the trial court to exercise its discretion to dismiss MLM’s case. The judgment was reversed and the case was remanded for reinstatement and further proceedings.

Summary and full case available here.

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