Health Grades, Inc., a Colorado Corporation, v. Christopher Boyer and Patrick Singson
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COLORADO COURT OF APPEALS
2012 COA 196 M
Court of Appeals No. 11CA1829
Jefferson County District Court No. 10CV1168
Honorable Jane A. Tidball, Judge
Health Grades, Inc., a Colorado Corporation,
Plaintiff-Appellant and Cross-Appellee,
v.
Christopher Boyer and Patrick Singson,
Defendants-Appellees and Cross-Appellants.
JUDGMENT REVERSED AND CASE
REMANDED WITH DIRECTIONS
Division III
Opinion by JUDGE RICHMAN
Roy* and Dailey, JJ., concur
Opinion Modified and
Petition for Rehearing DENIED
Announced November 8, 2012
Rothgerber Johnson & Lyons LLP, Kris J. Kostolansky, Susan S. Sperber,
Denver, Colorado, for Plaintiff-Appellant and Cross-Appellee
The Law Office of Paul Maxon, P.C., Paul Maxon, Denver, Colorado, for
Defendants-Appellees and Cross-Appellants
*Sitting for petition for rehearing by assignment of the Chief Justice under
provisions of Colo. Const. art. VI, § 5(3), and § 24-51-1105, C.R.S. 2012.
OPINION is modified as follows:
Section IV, which begins on page 26, is added.
¶1
Plaintiff, Health Grades, Inc., appeals the trial court’s
judgment following a jury verdict in favor of defendants,
Christopher Boyer and Patrick Singson, on their abuse of process
counterclaim. We reverse the judgment and remand the case with
directions. Although defendants filed a notice of cross-appeal, they
did not brief the issues on which it was based. Accordingly, we do
not address defendants’ cross-appeal.
I. Background
¶2
The facts pertinent to this appeal are not in dispute. Health
Grades is a web-based information resource that provides
healthcare information and provider ratings online. Defendants are
former Health Grades employees who resigned over a dispute as to
whether websites they created improperly competed with Health
Grades’ business.
¶3
Health Grades filed suit against defendants, asserting five
claims for relief: breach of duty of loyalty, misappropriation of trade
secrets, interference with prospective business advantage,
conversion, and breach of contract. In the same lawsuit,
defendants asserted a counterclaim for abuse of process based on
the theory that Health Grades’ claims against them amounted to
1
“sham litigation,” and defendant Singson individually asserted a
counterclaim for tortious interference with contract, alleging that
his employment was affected by a letter Health Grades sent to a
potential employer.
¶4
Before trial, defendants moved for summary judgment on all of
Health Grades’ claims, and Health Grades moved for summary
judgment on all of defendants’ counterclaims. Health Grades
argued that there were no genuine issues of material fact, that its
complaint was not a sham, and that defendant Singson’s
employment was not affected by the letter it had sent. Defendant
Singson agreed to dismiss the tortious interference counterclaim.
¶5
In one written order, the trial court denied both motions for
summary judgment. The court found that “genuine issues of
material fact do exist with respect to defendants’ abuse of process
counterclaim.” The court noted that to prove abuse of process, a
party need not show that it was successful in the proceedings
where a legal process was abused. Thus, it denied Health Grades’
motion for summary judgment on the abuse of process
counterclaim.
2
¶6
With respect to defendants’ motion for summary judgment,
Health Grades argued that there were genuine issues of material
fact as to each claim, and the court “agree[d] with respect to each of
Health Grades’ claims.” Thus, it concluded that defendants were
not entitled to summary judgment.
¶7
The case proceeded to trial before a jury. At the close of
evidence, defendants moved for a directed verdict on Health Grades’
four tort claims based on the economic loss doctrine. They argued
that the doctrine barred the tort claims because Health Grades had
failed to show that defendants owed a duty to Health Grades
independent of their contractual obligations as employees.
Defendants did not argue for a directed verdict as to the contract
claim, nor did they specifically argue that there was insufficient
evidence to support any of the five claims.
¶8
The court denied the motion as to the breach of fiduciary duty
claim, stating, “I think that’s an independent duty for which,
viewing the evidence in the light most favorable to Plaintiff, the jury
could find that the Defendants have breached their fiduciary duty of
loyalty.” It also denied the motion as to the misappropriation of
trade secrets claim, noting that it was a statutory claim that
3
imposed a “different duty.” At that time, the court reserved ruling
on the conversion claim, which was ultimately submitted to the
jury, and the tortious interference claim, which Health Grades
withdrew before the case was submitted to the jury.
¶9
Thereafter, Health Grades moved for a directed verdict on
defendants’ abuse of process counterclaim, arguing that defendants
failed to show that its claims were “devoid of reasonable, factual
support or lacked any basis in law” and therefore did not constitute
“sham litigation,” a showing that is required by the First
Amendment when an abuse of process claim is based on the filing
of a lawsuit. Defendants responded that there was disputed
evidence regarding whether there was “actual competition” by
defendants, whether defendants’ websites had identical technical
features, and whether defendants’ activities had any impact on
Health Grades’ revenues.
¶ 10
The court cut off defendants’ argument and denied the motion,
stating, “I believe that when viewing the evidence in the light most
favorable to Defendants on their counterclaim that there is evidence
sufficient that the jury could find for the Defendants.”
4
¶ 11
The jury was instructed on the four claims submitted by
Health Grades. It was also instructed that if it found in favor of
Health Grades on any of those claims, it must find against
defendants on their abuse of process counterclaim, which was
submitted to the jury on separate verdict forms for each defendant.
¶ 12
The jury was further instructed that to find for defendants on
their counterclaim, it must find, by a preponderance of the
evidence, that
1. Health Grades intentionally filed the claims
consisting this lawsuit; and
2. The principal reason for Health Grades’
filing of its claims was not for the proper legal
purpose that such process is used, in that
Health Grades’ claims were devoid of
reasonable factual support, or, if so
supportable, lacked any cognizable basis in
law; and
3. Health Grades’ actions caused Mr. Boyer
and Mr. Singson injuries, damages and/or
losses.
¶ 13
The jury returned verdicts in defendants’ favor on all four of
Health Grades’ claims and on defendants’ counterclaim for abuse of
process, awarding each defendant $200,000.
5
¶ 14
Health Grades moved for judgment notwithstanding the
verdict. It argued that the verdict against it on the conversion claim
should be reversed because it was contrary to the evidence, and
consequently, the judgment on defendants’ abuse of process
counterclaim should also be reversed. It further argued that it was
entitled to a judgment notwithstanding the verdict on the abuse of
process counterclaim because defendants failed to prove that all of
Health Grades’ claims were devoid of reasonable factual support or
pursued for an improper objective. Thus, it argued that there was
insufficient evidence to prove that its claims constituted “sham
litigation.”
¶ 15
After full briefing on the motion, the court issued a written
order stating merely that it could not conclude that “reasonable
persons could not reach the same conclusions as the jury.” It
declined to enter judgment notwithstanding the verdict on any
claim or counterclaim.
II. Issues on Appeal
¶ 16
Health Grades contends that the trial court erred by denying
its motions for directed verdict and judgment notwithstanding the
verdict as to defendants’ abuse of process counterclaim because, it
6
contends, once its claims survived motions for summary judgment
and directed verdict, they could not, as a matter of law, constitute
“sham litigation.” Health Grades does not specifically address in
this appeal how the evidence it presented at trial demonstrates that
its claims against defendants were not devoid of reasonable factual
support; rather, it argues that the trial court necessarily should
have reached that conclusion because it deemed the claims
sufficient for submission to the jury. Thus, Health Grades
contends that the trial court erred as a matter of law by denying its
motions for directed verdict and judgment notwithstanding the
verdict.
A. Standard of Review
¶ 17
We review de novo a trial court’s rulings on motions for
directed verdicts and judgments notwithstanding the verdict. Hall
v. Frankel, 190 P.3d 852, 862 (Colo. App. 2008). Ordinarily, where
such a motion concerns a question of fact, we consider whether the
evidence, viewed in the light most favorable to the nonmoving party,
compels the conclusion that reasonable jurors could not disagree or
that no evidence to support the verdict was received at trial. Reigel
v. SavaSeniorCare L.L.C., ___ P.3d ___, ___, 2011 WL 6091709, *3
7
(Colo. App. 2011). In contrast, where the motion concerns
questions of law, we independently determine the legal questions.
Id. In this case, we review de novo whether the trial court applied
the correct analytical framework to address Health Grades’
constitutional argument.
B. Applicable Law
¶ 18
“In Colorado, abuse of process requires proof of (1) an ulterior
purpose in the use of judicial proceedings; (2) willful actions by a
defendant in the use of process that are not proper in the regular
conduct of a proceeding; and (3) damages.” Hewitt v. Rice, 154 P.3d
408, 414 (Colo. 2007); see also Sterenbuch v. Goss, 266 P.3d 428,
438 (Colo. App. 2011).
An additional showing is required to establish a prima facie
case for abuse of process when the process alleged to have been
abused entails the filing of “sham litigation.” Sterenbuch, 266 P.3d
at 438. The party asserting an abuse of process claim must show,
under the “heightened standard” adopted in Protect Our Mountain
Environment, Inc. v. District Court, 677 P.2d 1361, 1369 (Colo. 1984)
(POME), that the allegedly sham litigation is not immunized from
liability under the First Amendment because (1) the litigation is
8
devoid of reasonable factual support or if supportable in fact, has
no cognizable basis in law,1 (2) the primary purpose of the litigation
is to harass the other party or to effectuate some other improper
objective, and (3) the litigation has the capacity to have an adverse
effect on the legal interests of the other party.
¶ 19
In Concerned Members of Intermountain Rural Electric
Association v. District Court, 713 P.2d 923 (Colo. 1986), the supreme
court explained that to further protect the constitutional rights of
citizens to utilize legal processes for redress of grievances, when a
party suing for abuse of process is confronted with a motion to
dismiss, that party must demonstrate the constitutional viability of
its claim. The trial court should give both parties a reasonable
opportunity to present all material pertinent to the motion, treat it
Health Grades urges that we follow federal antitrust cases, such
as Professional Real Estate Investors, Inc. v. Columbia Pictures
Industries, Inc., 508 U.S. 49, 51 (1993), which state that the first
criterion of sham litigation is that it is “objectively baseless.” In In
re Foster, 253 P.3d 1244 (Colo. 2011), our supreme court stated
that it adopted “nearly identical principles in POME” to those
described in Professional Real Estate Investors, id. at 1251, and it
described the first POME factor as requiring a showing that the
underlying litigation was “objectively baseless.” Id. at 1254; see
also People v. Richardson, 181 P.3d 340, 345 (Colo. App. 2007). We
apply the POME framework here because it is on point.
1
9
as one for summary judgment, and decide it under the “heightened
standard” of POME. Id. at 924. The court explained:
This standard places the burden on the party
asserting the abuse of process claim to make a
sufficient showing to allow the trial court to
reasonably conclude that the petitioning
activities on the part of the party being sued
for abuse of process were not immunized from
liability by the First Amendment because . . .
those activities are devoid of factual support
or, if supportable in fact, have no cognizable
basis in law . . . .
Id.; see also In re Foster, 253 P.3d 1244, 1251 (Colo. 2011) (“The
burden for surviving the motion automatically shifts to the plaintiff,
who must make a sufficient showing to permit the court to
reasonably conclude that the defendant’s underlying lawsuit was
not protected by the First Amendment.”).
¶ 20
On remand of the Concerned Members case, a division of this
court concluded that the “heightened standard” places the burden
on “the party asserting [the] abuse of process claim, to make a
sufficient showing to allow the trial court to conclude that the
litigation is not immunized under the First Amendment because all
of the [three POME criteria] exist.” Ware v. McCutchen, 784 P.2d
846, 848 (Colo. App. 1989); see also Krystkowiak v. W.O. Brisben
10
Cos., 90 P.3d 859, 862 (Colo. 2004) (“We reaffirm POME’s holding
that a motion to dismiss based on First Amendment immunity is
properly decided as a motion for summary judgment.”).
¶ 21
And, in Yadon v. Lowry, 126 P.3d 332, 337 (Colo. App. 2005),
a division of this court applied the POME factors in a purely private
lawsuit between private parties, despite law review literature
endorsing a more narrow application of those factors.
¶ 22
Based on these cases, which describe the First Amendment
protection afforded to an abuse of process defendant as a form of
“immunity” and the plaintiff’s claims as subject to a “heightened
standard,” we conclude that the correct procedure for the trial court
to follow when faced with a motion to dismiss a claim of abuse of
process based on sham litigation is analogous to the procedure in
cases where a defendant asserts a qualified immunity under the
First Amendment. See Krystkowiak, 90 P.3d at 863; see also
Mitchell v. Forsyth, 472 U.S. 511, 526 (1985) (“Unless the plaintiff’s
allegations state a claim of violation of clearly established law, a
defendant pleading qualified immunity is entitled to dismissal
before the commencement of discovery.”).
11
¶ 23
In the qualified immunity context, even if the plaintiff’s
complaint alleges the commission of acts that violated clearly
established law, the defendant is entitled to summary judgment if
discovery fails to uncover evidence sufficient to create a genuine
issue as to whether the defendant in fact committed those acts.
Hunter v. Bryant, 502 U.S. 224, 228 (1991) (“Immunity ordinarily
should be decided by the court long before trial.”); Air Wisconsin
Airlines Corp. v. Hoeper, 2012 CO 19, ¶ 21; Conde v. Colorado State
Dep’t of Personnel, 872 P.2d 1381, 1388 (Colo. App. 1994)
(“[B]ecause qualified immunity means immunity from suit as well as
from liability, the issue should be decided as early as possible in the
litigation process.”); see Freedom from Religion Foundation, Inc. v.
Romer, 921 P.2d 84, 91 (Colo. App. 1996) (affirming trial court’s
dismissal of claims based on qualified immunity); Conde, 872 P.2d
at 1387 (same).
¶ 24
Moreover, once a qualified immunity defense is asserted, the
court, and not the jury, must decide if the plaintiff can show that
the defendant’s conduct violated clearly established laws under an
objective reasonableness test. Abouzari v. Foster, 795 P.2d 1386,
1389 (Colo. App. 1990). A plaintiff’s failure to meet this burden
12
does not create a jury question; “[r]ather, such failure of proof will
properly result in the dismissal of plaintiff’s claims.” Id.
¶ 25
These qualified immunity cases offer guidance on how a trial
court should apply the POME framework when a party asserts
abuse of process based on a sham litigation theory. Thus, to
ensure that the constitutional rights of citizens to utilize legal
processes for redress of grievances are not infringed, when an
abuse of process claim is based on a sham litigation theory, the
trial court, not the jury, must determine whether an abuse of
process claim meets the “heightened standard” stated in POME. But
see Technical Computer Services, Inc. v. Buckley, 844 P.2d 1249,
1252 (Colo. App. 1992) (citing POME and stating that “when a party
[asserting an abuse of process claim] makes out a prima facie case,
even though the facts are in dispute, it is for the jury, rather than
the court, to resolve the conflict,” while not expressly applying the
POME framework).
C. Argument on Appeal
¶ 26
As noted, Health Grades bases its appeal solely upon its
contention that the court’s denial of defendants’ motions for
summary judgment and directed verdict amounts to a legal
13
conclusion that Health Grades’ claims had reasonable factual
support, and thus the trial court’s rulings absolutely preclude a
conclusion that its claims against defendants were devoid of
reasonable factual support. Thus, Health Grades argues that the
abuse of process counterclaim should not have been submitted to
the jury, and therefore the jury’s verdicts cannot stand.
¶ 27
We agree that the constitutional aspect of Health Grades’
defense to the abuse of process claims should have been decided by
the court and should not have been submitted to the jury. But we
do not agree with Health Grades’ assertion that a bright-line test
should be applied.
¶ 28
Health Grades cites no Colorado authority, and we have found
none, for the bright-line rule it urges us to adopt – that any lawsuit
that survives a motion for summary judgment or directed verdict
cannot be the basis for an abuse of process claim. Health Grades
cites to one federal court and state courts in Georgia and California
that have adopted a rule that approaches what it urges here. See,
e.g., Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1081 (8th Cir.
1999) (“firm denial” of motion to dismiss counterclaims fatal to
malicious prosecution claim); Wilson v. Parker, Covert & Chidester,
14
50 P.3d 733,739 (Cal. 2002); Davis v. Butler, 522 S.E.2d 548, 550
(Ga. Ct. App. 1999) (“Where the trial court finds in the alleged
abusive litigation that such action withstands the attack by motion
for summary judgment and is entitled to a trial by jury, although
the plaintiff may lose at trial, such denial of summary judgment
constitutes a legal determination that the action has substantial
justification.”); see also Professional Real Estate Investors, Inc. v.
Columbia Pictures Industries, Inc., 508 U.S. 49, 61 (1993) (defining
sham litigation as failing to be objectively genuine, in that it raises a
“genuine issue,” and subjectively genuine, in that it is “sincerely
and honestly felt or experienced” (quoting Webster’s Third New
International Dictionary 948 (1986))).
¶ 29
However, state courts in Vermont and Arizona have declined to
adopt such an absolute rule. See Wolfinger v. Cheche, 80 P.3d 783,
789, 791-92 (Ariz. Ct. App. 2003) (“We do not agree, however, that
under all circumstances surviving a motion for summary judgment
means that a claim is objectively reasonable. . . . [W]e believe the
better rule, and the one we adopt here, is that the defeat of a
motion for summary judgment is a factor that the court should
consider in determining whether there is or is not an objectively
15
reasonable basis for a claim or defense; the denial is not, standing
alone, dispositive of the issue as a matter of law.”); Bacon v. Reimer
& Braunstein, LLP, 929 A.2d 723, 727 (Vt. 2007) (court looks to see
if the summary judgment ruling constitutes a “qualitative merits
determination”).
¶ 30
We decline to adopt an all-encompassing rule that the denial
of a motion for summary judgment, or the denial of a motion for
directed verdict, necessarily bars a claim for abuse of process based
on a sham litigation theory.
¶ 31
A summary judgment motion may be denied for a number of
reasons. The trial court may not wish to sift through the
voluminous documents filed in support of or against it. See Powell
Products, Inc. v. Marks, 948 F. Supp. 1469, 1484 (D. Colo. 1996)
(“[The court is] under no obligation to scour the considerable reams
of paper that plaintiff submitted in support of its opposition to
summary judgment in search of evidence in its favor.”). Or a court
may exercise its discretion to deny an otherwise proper summary
judgment motion on the grounds that further development of the
case will sharpen the facts and law at issue, lead to a more accurate
or just decision, or enhance the court’s legal analysis. See 11
16
Moore’s Federal Practice § 56.07[3][a] (Matthew Bender 3d ed.). In
some cases, a court might conclude that “a trial will actually
consume less court time than would be needed to determine the
summary judgment motion.” Id.
¶ 32
A directed verdict motion may be denied because a jury verdict
is less likely to be reversed on appeal and, if the verdict is contrary
to the court’s view of the reasonableness of the claims, the court
can still correct the result with a judgment notwithstanding the
verdict. As one commentator notes:
[P]ragmatic considerations weigh against
directing verdicts in all but the clearest cases.
If the court denies the motion for directed
verdict, even though the judge may find the
movant’s arguments very persuasive, the jury
may return a verdict for the unsuccessful
movant, and the jury’s verdict is estimably
harder to overturn on appeal than the court’s
grant of a directed verdict. Moreover, sending
the case to the jury under these circumstances
does not forever condemn an adverse verdict
as beyond challenge – indeed, the court may
subsequently entertain a motion for judgment
notwithstanding the verdict. These pragmatic
considerations may have no place in the letter
of the rules, but litigators should recognize
that they exist.
Stephen A. Hess, 5A Colo. Prac., Handbook on Civil Litigation §
11:1(C) (2012 ed.).
17
¶ 33
Indeed, the court’s underlying rulings in this case illustrate
that a more careful analysis, as opposed to application of the
bright-line rule espoused by Health Grades, is necessary.
1. Denial of Summary Judgment
¶ 34
Before trial, defendants moved for summary judgment on all of
Health Grades’ claims, and the court denied the motion on the
ground that genuine issues of material fact existed with respect to
each of Health Grades’ claims. However, the ruling contains little
analysis of the facts or law as they relate to Health Grades’ claims.
See Bacon, 929 A.2d at 727. Such a ruling does not constitute a
“qualitative merits determination” establishing that Health Grades’
claims necessarily had reasonable factual support. Id. Nor does
the ruling include findings which could support a determination
that Health Grades’ claims had “substantial justification.” Cf.
Davis, 522 S.E.2d at 550.
¶ 35
Moreover, because a litigant like Health Grades is generally
entitled to have disputed facts regarding its claims determined by
the finder of fact during trial, “it is only in the clearest of cases,
where no doubt exists concerning the facts, that summary
judgment is warranted.” Meyer v. Haskett, 251 P.3d 1287, 1290
18
(Colo. App. 2010); Siepierski v. Catholic Health Initiative Mountain
Region, 37 P.3d 537, 539 (Colo. App. 2001) (“Even if it is extremely
doubtful that a genuine issue of fact exists, summary judgment is
not appropriate.”). Summary judgment is not appropriate if a
litigant is able raise any doubt, through an affidavit or otherwise,
about the existence of a genuine issue. Therefore, at the summary
judgment stage in this case, the trial court resolved all doubts as to
whether a genuine issue exists in favor of Health Grades’ claims.
Hyden v. Farmers Ins. Exchange, 20 P.3d 1222, 1224 (Colo. App.
2000); Capitran Inc. v. Great Western Bank, 872 P.2d 1370, 1376
(Colo. App. 1994).
2. Denial of Directed Verdict
¶ 36
Near the close of evidence, defendants moved for a directed
verdict solely on Health Grades’ tort claims based on the economic
loss rule. Under that rule, “a party suffering only economic loss
from the breach of an express or implied contractual duty may not
assert a tort claim for such a breach absent an independent duty of
care under tort law.” Town of Alma v. AZCO Construction, Inc., 10
P.3d 1256, 1264 (Colo. 2000). The court concluded that, viewed in
the light most favorable to Health Grades, the evidence established
19
the existence of an independent duty giving rise to a claim for
breach of fiduciary duty. The court further concluded that the
economic loss rule did not preclude Health Grades’ other claims,
whether or not they were torts.
¶ 37
However, the court’s ruling does not include specific findings
that Health Grades’ claims were not devoid of a reasonable factual
basis. Cf. Porous Media Corp, 186 F.3d at 1081(“firm denial” of
motion to dismiss counterclaims fatal to malicious prosecution
claim); Davis, 522 S.E.2d at 550 (“Where the trial court finds in the
alleged abusive litigation that such action withstands the attack by
motion for summary judgment . . . denial of summary judgment
constitutes a legal determination that the action has substantial
justification, because it is not groundless or frivolous and can
proceed to jury trial.”).
¶ 38
We decline to conclude that the ability to meet this low
standard, particularly where the court’s ruling consists of only one
sentence, conclusively establishes that Health Grades’ claims had a
reasonable factual basis.
20
¶ 39
Thus, defendants’ abuse of process counterclaim is not
automatically barred because Health Grades’ claims survived
motions for summary judgment and directed verdict.
D. Analysis
¶ 40
Nonetheless, we agree with Health Grades that the trial court
erred in this case. As set forth above, the pertinent motions at both
the summary judgment and directed verdict stages, although not
strictly motions to dismiss, called for the trial court to determine
simultaneously (1) whether Health Grades had shown that its
claims had sufficient merit to be submitted to the jury, and (2)
whether defendants had shown, under the heightened standard of
POME, that those claims were devoid of reasonable factual support
such that a counterclaim for abuse of process could be submitted to
the jury on the same facts. Although, as we conclude above,
allowing Health Grades’ claims to go to the jury does not
automatically determine that the abuse of process counterclaim
must be dismissed, we nonetheless conclude that the court erred in
its ruling on Health Grades’ motion for directed verdict on
defendants’ abuse of process counterclaim.
21
¶ 41
The trial court, having heard defendants’ argument based on
the economic loss doctrine, allowed all of Health Grades’ claims to
go to the jury. Moments later, the court concluded, without
explanation, that the abuse of process counterclaim, which required
defendants to show that Health Grades’ claims were devoid of
reasonable factual support, could also go to the jury, and it denied
Health Grades’ motion for directed verdict.
¶ 42
We conclude the trial court erred for the following reasons.
First, it appears from the record that in denying Health Grades’
motion, the court did not apply the heightened standard required
by POME. Certainly the court did not articulate that it was applying
the heightened standard. In addition, the court allowed the jury to
decide whether Health Grades claims were “devoid of reasonable
factual support, or, if so supportable, lacked any cognizable basis in
law,” as reflected by the jury instruction given on the abuse of
process counterclaim. However, the cases cited above require the
court, not the jury, to determine the constitutional issue and decide
whether the party claiming abuse of process has made a “sufficient
showing to permit the court to reasonably conclude that the
[opposing party’s] petitioning activities were not immunized from
22
liability . . . because . . . [those] claims were devoid of reasonable
factual support.” POME, 677 P.2d at 1369.
¶ 43
Second, the error made in ruling on the directed verdict
motion was not corrected by the ruling on Health Grades’ motion
for judgment notwithstanding the verdict. At that stage, with the
benefit of the jury’s verdicts denying all of Health Grades’ claims,
the trial court could have ruled that not only did the claims fail
under a preponderance of the evidence standard, but they were also
devoid of a reasonable factual basis – a different and heightened
standard. The court did not make such a ruling. Instead, it first
rejected Health Grades’ argument that it was entitled to a judgment
notwithstanding the verdict on its claim for conversion, stating only
that it “cannot say reasonable persons could not reach the same
conclusions as the jury.” And, having decided not to overturn the
verdict against Health Grades on that claim, the court denied
Health Grades’ motion to set aside the abuse of process verdicts
without further analysis.
¶ 44
Although Health Grades’ motion expressly argued that each of
its four claims submitted to the jury was supported by a reasonable
factual basis, the court did not address those arguments in its
23
ruling. Again, there is no indication in the record that the court
applied the heightened standard set forth in POME, and from the
cursory ruling, it seems evident that the heightened standard was
not applied.
E. Remedy
¶ 45
Although we could review the evidence submitted at trial and
determine de novo whether or not Health Grades’ claims were
devoid of a reasonable factual basis, we conclude that the
appropriate remedy in this case is to reverse the ruling on Health
Grades’ motion for judgment notwithstanding the verdict and
remand the case to the trial court for reconsideration of that
motion. We reach this result because the briefing on appeal does
not fully address the question of whether Health Grades’ claims
were devoid of a reasonable factual basis, and the remand better
serves judicial economy due to the trial court’s familiarity with the
claims made and the evidence submitted.
¶ 46
On remand, the court should apply the heightened standard
stated in POME and determine whether the claims asserted by
Health Grades were devoid of reasonable factual support or had no
24
cognizable basis in law.2 In reaching this determination, it should
consider all the evidence submitted at trial, without relying on the
jury’s verdicts rejecting all of Health Grades’ claims. Those verdicts
are based on the test of a preponderance of the evidence and do
not, without more, establish that the claims were devoid of
reasonable factual support.
¶ 47
If, after applying this test, the court concludes that all of
Health Grades’ claims were devoid of reasonable factual support or
had no cognizable basis in law, it shall deny Health Grades’ motion
for judgment notwithstanding the verdict and reaffirm the jury
verdicts in favor of defendants.3
¶ 48
If, on the other hand, after applying this test, the court
concludes that one or more of Health Grades’ claims were not
devoid of reasonable factual support, and if supportable in fact, had
Health Grades does not argue on appeal, nor did it in its motion
for a directed verdict, that defendants failed to satisfy the second or
third criteria of POME. Therefore, neither we nor the trial court on
remand needs to consider them.
3 In their first amended counterclaim, defendants allege that Health
Grades “had an ulterior motive and improper purpose in filing suit
against [them]”; its “claims lack reasonable factual basis and
cognizable basis in law and are a sham”; and its “continued
prosecution of this case is improper.” Accordingly, to prevail on
their abuse of process counterclaim, defendants must show that all
of Health Grades’ claims that were then pending were a sham.
2
25
a cognizable basis in law, it shall grant the motion for judgment
notwithstanding the verdict and vacate the jury verdicts on
defendants’ abuse of process counterclaim.
¶ 49
The court may allow supplemental briefing on these issues but
may not take additional evidence. The court’s ruling after remand
may be appealed to this court.
III. Conclusion
¶ 50
The judgment is reversed, and the case is remanded for
further proceedings consistent with this opinion.
IV. Petition for Rehearing
¶ 51
On November 23, 2012, defendants filed a petition for
rehearing in which they argue that they should not be required to
show on remand that all of Health Grades’ claims were “devoid of
reasonable factual support, or, if supportable, lacked any
cognizable basis in law.” Rather, they argue that they should have
to show only that “specific elements of [Health Grades’] claims are a
sham.” We disagree, and the petition for rehearing is denied.
¶ 52
In addition, after we issued the opinion in this case, our
supreme court announced General Steel Domestic Sales, LLC v.
Bacheller, 2012 CO 68 (Nov. 27, 2012). Defendants filed a notice of
26
supplemental authority referring to General Steel and arguing that
it stands for the proposition that “purely private litigation” does not
constitute petitioning activity that is subject to First Amendment
protection, and therefore, when alleged to be “sham litigation,” does
not have to meet the “heightened standard” under POME. We
directed the parties to file supplemental briefs addressing the
implications, if any, that General Steel has on our opinion.
¶ 53
Defendants filed a notice of cross-appeal in this case,
indicating their intention to argue that the trial court erred by
instructing the jury that they were required to prove that “plaintiffs’
entire lawsuit was devoid of reasonable factual support” to prevail
on their claim for abuse of process. However, defendants did not
brief this issue on appeal. Instead, they argued that Health Grades’
First Amendment rights were protected by the trial court’s
application of the “heightened standard” of POME. We thus
conclude that defendants abandoned the argument that they now
seek to raise through their citation to supplemental authority.
Moreover, for several reasons, we also conclude that General Steel
does not require us to withdraw our opinion.
27
¶ 54
In General Steel, the trial court declined to give a “heightened
standard” jury instruction with respect to the plaintiff’s claim that
the defendants’ commencement of an arbitration proceeding
constituted malicious prosecution.4 The supreme court affirmed,
stating: “We hold that, consistent with the Noerr–Pennington
doctrine on which it is based, POME’s heightened standard does not
apply where, as here, the underlying alleged petitioning activity was
the filing of an arbitration complaint that led to a purely private
dispute.” Id. at ¶ 32. The holding, therefore, does not suggest an
exception to the POME “heightened standard” unless the underlying
“petitioning activity” was the filing of an arbitration complaint in a
purely private dispute.
¶ 55
The supreme court further emphasized in General Steel that
“Defendants initiated a private arbitration action pursuant to a
binding arbitration clause in an employment contract. As such,
they did not petition any branch of government for a redress of
grievances.” Id. at ¶ 34 (citation omitted). The court concluded that
The trial court did give a “heightened standard” instruction on the
plaintiff’s claim alleging abuse of process, and the jury rendered a
verdict in favor of the defendants on that claim. The plaintiff did
not cross-appeal that result.
4
28
“even assuming that the right to petition is implicated whenever a
party exercises his or her right of access to the courts, [the
defendants] did not ‘use the channels and procedures of . . . [the]
courts to advocate their causes and points of view.’” Id. (footnote
omitted) (quoting California Motor Transport Co. v. Trucking
Unlimited, 404 U.S. 508, 511 (1972)).
¶ 56
Although Health Grades’ complaint in the instant case, which
gave rise to defendants’ abuse of process counterclaim, framed a
purely private dispute, it was not filed as an arbitration demand,
but rather as a complaint in a Colorado district court.
¶ 57
General Steel also quotes California Motor Transportation Co.,
404 U.S. at 510, for the proposition that “[t]he right of access to the
courts is indeed but one aspect of the right of petition,” General
Steel, ¶ 18, and states that the Supreme Court has “recognized that
the First Amendment right to petition includes the right of access to
the courts.” Id. at ¶ 33.
¶ 58
Prior cases have recognized that the First Amendment right to
petition includes the right of access to the courts, even in the case
of a private dispute. In Bill Johnson’s Restaurants, Inc. v. NLRB,
29
461 U.S. 731, 741 (1983), where an employer sued an employee in
state court for defamation, the Supreme Court stated:
We should be sensitive to these First
Amendment values in construing the [National
Labor Relations Act] in the present context. As
the Board itself has recognized, “going to a
judicial body for redress of alleged wrongs
. . . stands apart from other forms of action
directed at the alleged wrongdoer. The right of
access to a court is too important to be called
an unfair labor practice solely on the ground
that what is sought in court is to enjoin
employees from exercising a protected right.”
See also Cal. Motor Transp. Co., 404 U.S. at 510-11 (where
competing groups of trucking companies sued other highway
carriers alleging antitrust violations, the Supreme Court stated:
“Certainly the right to petition extends to all departments of the
Government. The right of access to the courts is indeed but one
aspect of the right of petition [subject to an exception if the
litigation is shown to be a ‘sham’].”); Concerned Members, 713 P.2d
at 924 (where members of electric cooperative sued to compel recall
election of its directors, our supreme court ruled that POME
requires cooperative “to make a showing sufficient to permit the
district court to reasonably conclude that the petitioning activities
in question were not constitutionally immunized from liability”
30
under First Amendment); Foster, 253 P.3d at 1254-55 (where
attorney charged, in discipline case, with abusive pro se litigation
conduct against his wife in their divorce proceeding, POME applies);
Yadon, 126 P.3d at 337.
¶ 59
Defendants’ supplemental brief relies primarily on the
following sentence from a footnote in General Steel: “We do not
mean to suggest that Defendants’ initiating an arbitration action,
rather than filing a lawsuit in court, is in itself totally dispositive of
the POME question.” General Steel, ¶ 34 n.7. Defendants interpret
this footnote to mean that whether a dispute arises in arbitration or
a lawsuit, “it is the private nature of parties and claims which
renders a lawsuit a purely private dispute” and takes the dispute
outside the “heightened standard” required in POME. We do not
read this footnote to be dispositive.
¶ 60
In General Steel, the supreme court introduced its discussion
of this issue by describing two contentions made by the defendants
arguing for application of the “heightened standard” – first, that
under POME, filing an arbitration complaint constitutes petitioning
the government; and second, that Foster, 253 P.3d 1244, precludes
31
application of POME where the “underlying alleged petitioning
activity involves a purely private dispute.” General Steel, ¶ 31.
¶ 61
Thus, the General Steel opinion was postured to compel a
conclusion that the case would not be subject to the heightened
standard of POME if either the asserted petitioning activity was the
filing of an arbitration or the dispute was purely private. However,
in General Steel the court concluded that both conditions were met.
Therefore, we do not read its opinion to hold that satisfying either
condition is sufficient to avoid the application of the POME
standard, for two reasons.
¶ 62
First, in footnote 7, the supreme court rejected the notion that
filing an arbitration proceeding could never be considered
petitioning the government:
We do not mean to suggest that Defendants’
initiating an arbitration action, rather than
filing a lawsuit in court, is in itself totally
dispositive of the POME question. See Judd
Constr. Co. v. Evans Joint Venture, 642 P.2d
922, 924 (Colo. 1982) (encouraging the use of
arbitration as an “efficient, convenient
alternative to litigation”). Rather, we also find
persuasive the fact that the arbitration action
here was a purely private dispute brought
pursuant to a binding arbitration clause in an
employment contract between private parties.
We are not here faced with an arguably
32
different situation in which the arbitration was
somehow required by law (although we are
unaware of any mandatory arbitration statutes
in Colorado), or where a governmental entity is
a party to the arbitration, such that filing the
arbitration could be considered “petitioning the
government” under the First Amendment and
POME.
General Steel, ¶ 34 n.7. Thus, the court suggested that the
heightened standard might apply if the arbitration were required by
law or involved a governmental entity.
¶ 63
Second, we read the “even assuming” sentence quoted above
as avoiding the question whether a purely private dispute, if
brought as a lawsuit, is exempt from the heightened standard. The
court went on to state:
Foster does not compel a contrary conclusion.
In deciding that POME should be applied in
attorney discipline cases where an attorney
has been charged with abusive pro se litigation
conduct, we did not necessarily extend POME
to situations where the underlying petitioning
activity constituted a purely private
dispute. . . . We were not asked to address
what type of activity constitutes “petitioning
the government” in Foster, and we did not
purport to resolve that issue in that case.
Id. at ¶ 35.
33
¶ 64
Accordingly, because General Steel does not decide that the
POME “heightened standard” is applicable to private party disputes
when one party seeks to petition the government by means of
bringing a judicial proceeding, we decline to withdraw our opinion
in this case.
JUDGE ROY and JUDGE DAILEY concur.
34
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