Often, those practicing in the construction defect field have faced questions concerning the joinder of a party. Recently, the U.S. District Court for the District of Colorado weighed in on the requirements for joinder under the Colorado Rules of Civil Procedure. See Roche Constructors, Inc. v. One Beacon America Ins. Co., 2012 WL 1060000 (D. Colo. 2012). Roche secured a construction contract to build a detention facility for the Lincoln County Sheriff’s Office in Lincoln County, Nebraska. In turn, Roche entered into a subcontract with Dobberstein Roofing Company, Inc. in October 2009 to install the roofing system and other related work at the detention facility. The subcontract agreement required Dobberstein to maintain adequate commercial general liability insurance and to add Roche as an additional insured under the policy. Roche maintained a builder’s risk policy issued by OneBeacon America Insurance Company and Dobberstein secured a certificate of liability insurance underwritten by Transportation Insurance Company (“TIC”). Id. at *1.
Roche alleged that Dobberstein constructed the roofing system in a negligent manner in violation of the subcontract. Roche claims it incurred additional costs to repair structural damage to the roofing system as a result of Dobberstein’s negligent work. In order to cover said damage, Roche tendered insurance claims to OneBeacon and TIC. According to Roche, OneBeacon denied coverage and TIC failed to respond to Roche’s claims. In June 2011, Roche brought claims against all three, Dobberstein, OneBeacon, and TIC in the Weld County District Court. Id. at *2. Roche brought claims for breach of an insurance contract, insurance bad faith, statutory damages for insurance bad faith, and declaratory judgment against OneBeacon and TIC. Roche claimed breach of contract, breach of implied warranty and express warranty, and negligence against Dobberstein.
About a month later, OneBeacon removed the case to the U.S. District Court for the District of Colorado pursuant to federal subject matter jurisdiction based on diversity. All of the defendants consented to removal. On August 22, 2011, Roche filed a motion to remand the case and an amended motion to remand on August 23, 2011. In its motions to remand, Roche argued removal was improper because Dobberstein had contractually waived its right to remove the case pursuant to the forum selection clauses in the subcontract agreement. As such, Roche argued Dobberstein is estopped from consenting to removal and that the resulting lack of unanimous consent precludes removal pursuant to 28 U.S.C. § 1446(b). Id. at *3. After finding that Roche’s amended motion to remand timely, the court turned to the merits of said amended motion.
The court acknowledged that the forum selection clause in the subcontract agreement between Roche and Dobberstein expressly gave Roche the right to choose the forum to have any matters arising out of litigation to be heard. Neither OneBeacon nor TIC disputed that Roche had the right to choose the forum in litigation or that the forum selection clause was unenforceable. The court found Dobberstein violated the forum selection clause by consenting to remove the case to federal court, which was not the forum selected by Roche. Id. Because Dobberstein could not properly consent to removal, not all defendants consented to removal from the Weld County Court. OneBeacon and TIC argued that the court should sever the two sets of claims and only remand the claims against Dobberstein. In its motion to sever, OneBeacon argued that Roche had engaged in a fraudulent misjoinder by suing diverse defendants in state court. TIC argued that Roche waived its ability to remand by choosing to combine its claims against defendants not subject to the forum selection clause in one action.
While acknowledging when procedural misjoinder generally occurs[1] in its opinion, the U.S. District Court for the District of Colorado indicated that the application of procedural misjoinder was not necessary to resolve Roche’s amended motion to remand.[2] According to the court, the joinder of claims against multiple defendants in a single action is governed by Colorado Rule of Civil Procedure 20, which provides:
All persons may be joined in one action as defendants if there is asserted against them jointly, severally, or in the alternative, any right to relief in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all defendants will arise in the action.
Id. at *4 (quoting C.R.C.P. 20(a)). Under Colorado law, Rule 20 is given the “broadest possible reading.” Id.; see City of Aurora ex rel. Utility Enterprise v. Colorado State Eng’r, 105 P.3d 595, 623 (Colo. 2005). The U.S. District Court for the District of Colorado found that Roche’s complaint met the requirements for a Rule 20 joinder. More specifically, the court found that all claims arise from the construction of the detention facility, meaning the case will involve a significant amount of overlapping evidence. Additionally, the court found common questions of fact and/or law exist concerning the claims, such as Dobberstein’s alleged negligent construction, the extent to which the OneBeacon policy covers negligent construction, the subcontract terms as it relates to Roche’s coverage under Dobberstein’s policy with TIC, and whether TIC waived its right to assert certain policy provisions. Id. at *5. Accordingly, the court granted Roche’s amended motion to remand, and remanded the case back to the Weld County District Court.
While you may enjoy success in seeking to join additional parties to one action if you can demonstrate that your claims arise out of the same transaction or occurrence, and will involve a significant amount of overlapping evidence, your success may be limited and/or precluded if the pertinent contract documents contain enforceable forum selection clauses.
For additional information regarding Colorado construction litigation, please contact David M. McLain at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.
[1] According to the U.S. District Court for the District of Colorado, procedural misjoinder generally occurs “when a plaintiff sues a diverse defendant in state court and joins a non-diverse or in-state defendant even though the plaintiff has no reasonable procedural basis to join such defendants in one action.” Id. at *4. [2] The U.S. District Court for the District of Colorado also acknowledged that the Tenth Circuit had not adopted the doctrine of procedural misjoinder, and the court declined to resolve this issue since the application of the procedural misjoinder was not necessary to resolve Roche’s amended motion.