We tend to see plaintiffs filing in the wrong venue when the insured is a foreign business entity. Reason being, foreign business entities are, by their very definition, organized under the laws of another state, so the appropriate venue is not always so clear. When plaintiffs do it wrong in Colorado, they typically have filed the lawsuit in Boulder or Denver County. Why? Because those two jurisdictions tend to be the most liberal, plaintiff friendly ones in the state. In determining whether a lawsuit against a foreign business entity has been commenced in the right place, the following must be considered:
The Procedural Framework
Colorado Rule of Civil Procedure 98(c) provides the procedural framework for venue of civil actions sounding in tort. With respect to foreign business entities, subsection (c)(1) states in its entirety as follows:
[A]n action shall be tried in the county in which the defendants, or any of them, may reside at the commencement of the action, or in the county where the plaintiff resides when service is made on the defendant in such county; or if the defendant is a nonresident of this state, the same may be tried in any county in which the defendant may be found in this state, or in the county designated in the complaint.[i]
C.R.C.P 98(c) does not provide a definition of the term “residence” for application to the venue provisions. In the case of individuals, residence is usually equated with domicile, or the place in which a person resides with an intent to live permanently.[ii] Colorado courts have found venue in a county is proper when a corporation is served at its principal place of business in that county, suggesting a corporation is a resident of at least that county.[iii] While the legislature has not yet provided a definition of “residence” for venue purposes, for more than one-hundred years the Courts of the State of Colorado have looked to a corporation’s principal place of business in order to determine its legal residence.[iv]
Grounds for Changing Venue
Where a party seeks a change of venue “…upon a ground which entitles it to the change as a matter of right the trial court loses all jurisdiction except to order the change.”[v] A trial court may change the place of trial “on good cause shown” under two circumstances:
(1) When the county designated in the complaint is not the proper county;
(2) When the convenience of witnesses and the ends of justice would be promoted by the change.[vi]
The language of C.R.C.P. 98(f) has been interpreted to permit trial of an action in the county of plaintiff’s choice where no defendant is a resident of Colorado.[vii] However, where at least one defendant resides in the state of Colorado, a tort action may “be tried in the county where the tort was committed.”[viii] “A harmonious construction of the rule requires that, when at least one defendant is a Colorado resident, [a] plaintiff may not designate a county that is unrelated to either the defendant’s county of residence, the plaintiff’s county of residence, or the county in which a tort occurred.”[ix]
Case Law Interpreting C.R.C.P. 98(f)(2)
In In re Hagan v. Farmers Insurance Exchange, In re Ewald v. Farmers Insurance Exchange, and In re Mayfield v. Farmers Insurance Exchange,[x] plaintiffs had filed separate actions against the same defendant, Farmers Insurance Exchange, in Boulder County District Court. In each case, Farmers moved to change venue under C.R.C.P. 98(f)(2), alleging a change would promote “the convenience of witnesses and the ends of justice.”[xi] Farmers supported its motions with attorney affidavits demonstrating — based on Google Maps printouts alone — the transferee court was a more convenient venue for plaintiffs and their medical treatment providers.[xii] The trial court granted the motions in all three cases.[xiii] Plaintiffs asked the Supreme Court to issue a Rule to Show Cause why the orders granting a change of venue should not be vacated and venue transferred back to Boulder County. The Colorado Supreme recognized an inconsistency in how judges within the same district (Boulder County) had been applying C.R.C.P. 98(f)(2) and in an effort to promote a uniform application of the venue rules, the Supreme Court issued Rules to Show Cause.[xiv]
The Colorado Supreme Court solely based its ruling that Boulder County was the proper county, pursuant to C.R.C.P. 98(c)(1), on the fact Farmers Insurance maintained its “principal place of business” in California. Indeed, in reviewing plaintiffs’ selection of Boulder County as the venue for the litigation under C.R.C.P. 98(c)(1), the Supreme Court stated:
Here, it is undisputed that Farmers has its principal place of business in California and is not a resident of Colorado. Consequently, pursuant to the highlighted language above, the Hagans, Ewald, and Mayfield were permitted to designate any county in their complaints, including Boulder County.[xv]
The clear implication from the Supreme Court’s decision in Hagan is if Farmers Insurance maintained its principal place of business in Colorado, then Farmers Insurance would be a resident of Colorado and venue would be proper in the District Court of the County in which its principal place of business was located.
After Hagan was decided, another venue case made its way to the Colorado Supreme Court. In Magill v. Ford Motor Company,[xvi] the Colorado Supreme Court issued a Rule to Show Cause in order to determine whether venue was proper in Denver County, because Ford had a registered agent there. Ford Motor Company was incorporated in Delaware, with its principal place of business in Michigan.[xvii] It was ultimately held that by only maintaining a registered agent in Colorado, it did not convert a foreign corporation into a “resident” for the purpose of establishing general personal jurisdiction over the corporation.[xviii] Of course, Ford would remain a “foreign” corporation, because it was neither incorporated, nor had its principal place of business in Colorado.
The Court’s focus in Magill was on Colo. Const. Art. 15, § 10, which speaks to the requirement that a foreign corporation — that is, a corporation not being incorporated or having its principal place of business in Colorado — have a registered agent within the state and at least one “known place of business.” A “known place of business” is distinguishable from a “principal place of business;” in that, a “known place of business” and a registered agent is required for a foreign corporation that “do[es] business” within Colorado in order to provide sufficient contacts for service of process reasons.[xix] In other words, the application of Colo. Const. Art. 15, § 10 dictates whether a would-be plaintiff must resort to Colorado’s long-arm statute to effectuate service or can rely upon service of process within the borders of the state.
Consistency with Determining the Residency of an Individual
Not surprisingly, the foregoing holdings from the Colorado Supreme Court about determining the residency of foreign business entities are harmonious with the Colorado Courts’ long-standing precedent with respect to determining the residency of an individual. In Colorado, whether a person is a resident of the state is determined by that person’s physical presence and intent to remain.[xx] Accordingly, a foreign business entity’s “physical presence” is not in the state in which it was organized; but rather, the jurisdiction in which it maintains its principal place of business.
What Must be Shown to Support a Change of Venue
In Hagan, relying on precedent, namely Sampson v. District Court,[xxi] the Colorado Supreme Court explained when moving for change of venue pursuant to C.R.C.P. 98(f)(2), a party must show, “through affidavit or evidence, the identity of the witnesses, the nature, materiality and admissibility of their testimony, and how the witnesses would be better accommodated by the requested change in venue.”[xxii] Although, no one category is to be considered determinative and a trial court must assess the totality of the circumstances to assess whether a change of venue is necessary and appropriate.[xxiii]
When an insured foreign business entity is sued in Colorado, it is important to immediately evaluate the chosen venue to ensure it is proper under C.R.C.P. 98(c). With respect to foreign business entities, if it maintains a principal place of business in Colorado, the proper venue will be in the county where the principal place of business is located. If the foreign business entity does not maintain a principal place of business in Colorado, venue is not determined based upon the location of the registered agent within the state. Instead, any county designated in the complaint will be the proper venue.
If a change of venue is required, defense counsel must be sure, through affidavit or other evidence, to satisfy the three categories of pertinent information required by the Colorado Supreme Court in Hagan: (1) “the identity of the witnesses”; (2) “the nature, materiality and admissibility of their testimony”; and, (3) “how the witnesses would be better accommodated by the requested change in venue.”
[i] C.R.C.P. 98(c)(1).
[ii] See 5A Colo. Prac., Handbook On Civil Litigation § 1:5 (2016 ed.).
[iii] Id. (citing Halliburton v. County Court In and For City and County of Denver, 672 P.2d 1006 (Colo. 1983)).
[iv] See, e.g., Woods Gold Min. Co. v. Royston, 46 Colo. 191 (1909); Maxwell-Chamberlin Motor Co. v. Piatt, 65 Colo. 140 (1918); Hagan v. Farmers Insurance Exchange, 2015 CO 6, ¶ 19.
[v] Ranger Ins. Co. v. District Court, 647 P.2d 1229, 1231 (Colo. 1982).
[vi] C.R.C.P. 98(f).
[vii] Denver Air Ctr. v. Dist. Court For Twentieth Judicial Dist. of State of Colo., 839 P.2d 1182, 1184-85 (Colo. 1992) (citing International Serv. Ins. Co. v. Ross, 169 Colo. 451, 462, 457 P.2d 917, 923 (1969)).
[viii] See C.R.C.P. 98(c)(5).
[ix] Id. at 1185.
[x] 2015 CO 6.
[xi] Hagan v. Farmers Ins. Exch., 2015 CO 6, ¶1.
[xiv] Id. at ¶2.
[xv] Hagan, 2015 CO 6, ¶ 19 (citing Denver Air Ctr. at 1184–85 (“[t]he language of [Rule 98(c)] has been interpreted to permit trial of an action in the county of plaintiff’s choice where no defendant is a resident of Colorado (citing Int’l Serv. Ins. Co., at 462)); see also Stephen A. Hess, 5A Colorado Practice: Handbook on Civil Litigation § 1.5 (“[i]f no defendant is a resident, the plaintiff may choose any county to name as the place of venue.”).
[xvi] 2016 CO 57.
[xvii] Magill v. Ford Motor Company, 2016 CO 57, ¶ 5.
[xviii] Id. at ¶ 2.
[xix] See Colo. Const. Art. 15, § 10; see also 6 Colo. Prac., Civil Trial Practice § 3.16 (2d ed.) (service outside of Colorado).
[xx] See Gordon v. Blackburn, 618 P.2d 668, 671 (Colo. 1980) (legal residence, or domicile, is created if a person has the intention of permanently residing “in a place he considers his ‘home’”); Carlson v. District Court, 116 Colo. 330, 338, 180 P.2d 525, 529–30 (1947) (a resident of this state is one who has a “personal presence at some place of abode” and a “purpose and intent to remain for an undetermined period”); Sharp v. McIntire, 23 Colo. 99, 102, 46 P. 115, 116 (1896) (residence or domicile “requires, not only a personal presence for the requisite time, but a concurrence therewith of an intention to make the place of inhabitancy the true home”).
[xxi] 197 Colo. 158 (1979).
[xxii] Hagan, 2015 CO at ¶ 23 (citing Sampson v. Dist. Court, 197 Colo. 158, 160; Ranger Ins. Co., 647 P.2d at 1231 (reiterating this principle); State, Dep’t of Highways v. Dist. Court In & For City & Cty. of Denver, 635 P.2d 889, 891 (Colo. 1981) (same)).
[xxiii] Id. at ¶ 30.