The long-established American Rule provides that each party to a lawsuit generally pays their own attorneys’ fees, regardless of whether they win or lose. Exceptions altering this rule include contract provisions and various statutes. To discourage frivolous lawsuits concerning tort claims, Colorado has enacted Colorado Revised Statute section 13-17-201, which permits awards of attorneys’ fees in tort actions dismissed under Colorado Rule of Civil Procedure 12(b).
The Colorado Court of Appeals examined section 13-17-201 in Castro v. Lintz, 2014 COA 91 (Colo. App. July 17, 2014). Josue Castro, who was working for Lintz Construction, was injured on the job when he fell off a roof while shoveling snow. Mr. Castro prevailed on his workers’ compensation claim, and then filed three claims against Mr. Lintz and Lintz Construction: (1) for judgment on the workers compensation award; (2) to pierce the corporate veil; and, (3) breach of duty to him. Mr. Lintz moved for dismissal, and the district court dismissed the claims for failure to state a claim based on claim preclusion. The district court then awarded attorneys’ fees to Mr. Lintz pursuant to section 13-17-201, and Mr. Castro appealed that order.
To determine if section 13-17-201 applied in the case, the Court of Appeals examined Mr. Castro’s claims. The court concluded that Mr. Castro’s claim seeking to pierce the corporate veil was not a tort claim, but that his claim for breach of duty did allege tort. The court then examined the “essence” of Mr. Castro’s action, and concluded it did not sound in tort. The Court of Appeals therefore reversed the district court’s order awarding Mr. Lintz attorneys’ fees under section 13-17-201.
The Colorado Court of Appeals also analyzed section 13-17-201 in Gagne v. Gagne, 2014 COA 127 (Colo. App. Sept. 25, 2014). That case arose from disputes between Paula Gagne and Richard Gagne, mother and son, who were the sole members of four limited liability companies (“LLCs”) owning multi-unit apartment complexes. Richard Gagne sued his mother requesting, among other relief, judicial dissolution of the LLCs. Paula Gagne filed counterclaims that were dismissed for failure to state a claim on which relief could be granted. Richard Gagne sought attorneys’ fees pursuant to section 13-17-201, but the trial court denied his request based on its interpretation that section 13-17-201 only applied to defendants, and not plaintiffs. Richard Gagne appealed the trial courts determination regarding section 13-17-201.
Section 13-17-201 states, in pertinent part, that an award of attorneys’ fees is mandatory when an action is “dismissed on motion of the defendant prior to trial under rule 12(b)” (emphasis added). Although the statute does not specifically define the term “defendant”, the common definition includes persons sued via counterclaim. The Court of Appeals thus decided that recovery of attorneys’ fees should not be determined by “who gets to the courthouse first.” Gagne at ¶ 77. With Richard Gagne an eligible plaintiff/counterclaim defendant, the court analyzed whether Paula Gagne’s claims were tort claims within the meaning of section 13-17-201. Paula Gagne brought two tort claims (conversion and breach of fiduciary duty) and two contract claims (unjust enrichment and specific performance). The predominance factor favored neither tort nor non-tort claims, and, as in Castro, the court therefore looked to determine the essence of the action. Because none of Paula Gagne’s claims sought remedies beyond those pursued in connection with her contract counterclaims, the Court of Appeals found section 13-17-201 inapplicable and affirmed the district court’s decision denying Richard Gagne’s request for attorneys’ fees.
Defendants, and plaintiffs who are counterclaim defendants, are entitled to attorneys’ fees in accordance with section 13-17-201 when a tort action is dismissed pursuant to Rule 12(b). When an action includes both tort and non-tort claims, however, the parties must analyze predominance (number of claims and significance of claims) to determine if the “essence” of the action is tortious in nature. If the predominance test fails to provide a clear answer, the court likely will determine whether the tort claims alleged sought remedies beyond those sought on the non-tort claims.