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Century Surety Co. v. Prince
Citation: 265 F. Supp. 3d 1182Docket: Case No. 2:16-CV-2465 JCM (PAL)
Court: District Court, D. Nevada; July 13, 2017; Federal District Court
Defendant Dennis Prince filed a special motion to dismiss under NRS 41.660, re-filing after a previous motion was ordered to comply with page limits. Plaintiff Century Surety Company responded to this motion, and Prince subsequently replied. Co-defendant George Ranalli joined Prince's motion and filed his own, while Sylvia Esparza also joined the special motion to dismiss and filed an independent motion. Century responded to both Ranalli's and Esparza's motions, and a motion to stay proceedings was filed by Prince, with support from Ranalli and Esparza, leading to a hearing on March 7, 2017. Magistrate Judge Leen granted the stay, prompting Century to object and seek reversal, with Prince and other defendants responding to those objections. The case revolves around an alleged fraudulent scheme to obtain a multimillion-dollar judgment against Century following a serious vehicle accident involving Michael Vasquez, who was driving his truck when he struck a cyclist, Ryan Pretner, resulting in severe injuries and significant medical expenses. Vasquez, while off work and running personal errands, held a personal automobile insurance policy with a $100,000 limit, while his mobile detailing business, Blue Streak, had a commercial liability garage policy with Century that carried a $1,000,000 limit. Century's claims include violations under Nevada's RICO statute and allegations of civil conspiracy related to a "bad faith insurance setup" among the defendants. Pretner was initially represented by Esparza, who received a $100,000 personal policy limit offer from Progressive after the accident. Due to the severity of Pretner’s injuries, Esparza delayed providing a release until all insurance coverage was exhausted. He demanded Century's policy limit, but Century denied coverage, claiming that Vasquez was not acting within the scope of his business at the time of the accident. Esparza requested a copy of Century’s garage policy, which Century refused to provide. Approximately three weeks before the statute of limitations expired, Pretner retained Prince, who then filed a complaint against Vasquez and Blue Streak just five days before the deadline. Century contended that Prince indicated his intention to represent the plaintiffs and to set up a subsequent bad faith claim against Century, while assuring he would not pursue Vasquez personally. Century argued that there was no evidence supporting Vasquez's coverage and that available evidence contradicted material allegations in the complaint. In contrast, Prince asserted that the claims against Blue Streak were based on allegations of Vasquez’s scope of employment during the accident, supported by case law, business nature, and a potential witness. Century was informed of Prince’s representation and the possibility of coverage under its garage policy, which led Century to provide a copy of the policy but not to indemnify or defend Vasquez or Blue Streak, believing Progressive was handling the case. Defaults were entered against Vasquez and Blue Streak on June 27, 2011, and Century maintained it had no coverage. Subsequently, Progressive and Prince negotiated a settlement agreement, with Progressive retaining Ranalli to represent Vasquez and Blue Streak in these negotiations, where Prince agreed to a covenant not to execute in exchange for the payment of the policy limit. Progressive and Defendant Prince reached a settlement wherein Progressive would pay its $100,000 policy limit, and Pretner and his co-legal guardians would receive an assignment from Blue Streak and Vasquez to pursue claims against Plaintiff Century Surety under the Garage Policy. Additionally, Defendant Prince would seek a default judgment against Vasquez and Blue Streak. The settlement included a covenant from Pretner and his co-legal guardians not to execute the resulting state court judgment. Vasquez expressed reluctance to sign the agreement, citing disbelief in Century Surety's liability and claiming pressure from Defendant Ranalli. On February 15, 2012, Prince applied for a default judgment, leading to a judgment of $18,050,185.45 in plaintiffs' favor. Subsequently, Prince initiated a case against Century Surety in state court, which was removed to federal court, seeking damages linked to the default judgment and Century’s alleged bad faith. Century responded by asserting that the claims against it stemmed from fraud and collusion. Century attempted to intervene in the state court action but was denied, and it has not filed counterclaims or reopened discovery on the fraud and collusion defense. The legal standard for a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) requires a complaint to contain a short and plain statement of a claim showing entitlement to relief, moving beyond mere labels or conclusions. A complaint must plead sufficient factual content to allow a reasonable inference of the defendant's liability, demonstrating facial plausibility as per the standards established in relevant case law. A complaint fails to meet the plausibility standard for relief if it presents facts that are only consistent with a defendant’s liability, indicating merely a possibility of entitlement. The Supreme Court's Iqbal decision established a two-step process for district courts evaluating motions to dismiss. First, courts must accept true all non-legal allegations in a complaint. Second, only complaints that state a plausible claim for relief can survive dismissal. If the allegations do not allow for an inference beyond mere possibility of misconduct, they only suggest entitlement to relief without proving it. The Ninth Circuit's Starr v. Baca further specifies that allegations must not just recite legal elements but must provide sufficient underlying facts to notify the opposing party and justify the costs of litigation. Regarding Prince's special motion to dismiss under Nevada's anti-SLAPP statute (NRS § 41.660), he argues that Century's complaint constitutes a strategic lawsuit against public participation (SLAPP) aimed at retaliating against attorneys for their advocacy. Prince asserts that the complaint infringes on defendants’ First Amendment rights by deterring them from defending clients vigorously. The court must follow specific procedures under the anti-SLAPP statute: first, determine if the claim is based on good faith communication related to public concern; second, assess if the plaintiff has shown a probability of prevailing; third, ensure that the ruling does not impact later stages of the case; fourth, consider relevant evidence; and fifth, stay discovery until the motion is resolved and any appeals are concluded. The court's analysis under Nevada's anti-SLAPP statute begins with determining whether Century's complaint is based on protected activity, specifically defendants' good faith communications related to the right to petition or free speech concerning a public issue (Nev. Rev. Stat. 41.637). Prince asserts, with Century not contesting, that the complaint arises from statements made in relation to a legal proceeding (Nev. Rev. Stat. 41.637(3)). Prince argues that both of Century’s claims stem from his conduct in pursuing a lawsuit for his injured client, thus qualifying for protection under the anti-SLAPP statute (ECF No. 37 at 10). Century, however, contends that Prince and others fail the 'good faith' requirement of NRS 41.660, claiming Prince knowingly made false statements regarding Vasquez's employment status at the time of the accident, indicating bad faith (ECF Nos. 1 at 4, 44 at 12-15). In response, Prince maintains that his actions were made in good faith to protect his client's interests, citing a legal obligation to name Blue Streak as a defendant to preserve a significant claim (ECF No. 37 at 18). He also states he had legal research supporting his claim that Vasquez was acting within the scope of his employment (Id.). The court finds that Prince has demonstrated, by a preponderance of the evidence, that his claim was based on good faith communication in relation to public concern (Nev. Rev. Stat. 41.660(3)(a)). Century has not adequately disputed Prince's claims that he did not abuse the privilege to petition the court with malice (Circus Circus Hotels, Inc. v. Witherspoon, 99 Nev. 56, 657 P.2d 101, 105 (1983)). Century's main argument is that Prince knew the underlying complaint was untruthful, referring to discrepancies between the complaint and established facts (ECF No. 44 at 11-15). However, Century had opportunities to contest these facts but chose not to, as indicated by the correspondence and acknowledgment of the allegations against Blue Streak by their assigned attorney, Lisa Henderson. Prince asserts a legitimate legal basis for alleging respondeat superior liability against Blue Streak, independent of the validity of Vasquez’s opinions. He informed Century of these allegations and requested discussions regarding the factual and legal foundation of the claim. Prince communicated with Henderson and claims adjuster Holland through letters, but instead of engaging, Henderson replied by stating that Century had no coverage and that Progressive Insurance was handling the matter. Century had multiple opportunities to contest Prince’s legal conclusions but chose not to respond to his inquiries. Prince detailed his position to Century and referenced research suggesting coverage under their policy. The court finds that Prince's actions in filing the complaint were in good faith to protect a $1,000,000 claim for his client, and Century's failure to defend Blue Streak does not imply malice on Prince’s part. Regarding the anti-SLAPP analysis, the court concludes that Prince has met the first requirement, as Century's claims stem from his good faith filing. The excerpt then outlines the legal standards for a RICO claim under Nevada law, which parallels federal provisions. To establish a civil RICO claim, a plaintiff must prove conduct of an enterprise through a pattern of racketeering activity resulting in injury to their business or property. Additionally, due to the fraudulent nature of RICO claims, heightened pleading standards apply, requiring specific details about the alleged fraudulent acts, including the time, place, content, and parties involved. The court must evaluate whether the plaintiff shows a prima facie probability of prevailing on the RICO claim. If a complaint is based on defendants' good faith communication related to the right to petition or free speech on a public concern, the plaintiff must demonstrate a likelihood of success on the claim by clear and convincing evidence. Following 2013, this burden heightened. Century identified three predicate acts involving Prince, Ranalli, and Esparza in relation to Pretner’s state court claim: (1) alleging Vasquez was acting within his employment, which was deemed false evidence and insurance fraud; (2) claiming Blue Streak owned a vehicle, also classified as false evidence and insurance fraud; and (3) actions related to a settlement agreement and obtaining Vasquez’s signature through false pretenses, perjury, and insurance fraud. Century argued that Prince was not pursuing Vasquez personally due to a conflict of interest, while Prince claimed his litigation strategy aimed to protect a significant financial claim. Century noted Prince communicated with Century Surety about representing Pretner. Allegations against Ranalli include drafting the settlement agreement and persuading Vasquez to sign it despite misrepresentations. Esparza’s involvement was limited to prior representation of Pretner and facilitating attorney decisions. Despite these claims, Century did not adequately establish the elements required for a RICO claim. To prove an enterprise, Century needed to show a continuing unit of associates, but allegations were confined to a single court case without an identifiable separate entity. Furthermore, Century's complaint did not meet the continuity requirement, as it failed to demonstrate ongoing behavior indicative of criminal activity, with Prince's actions in the state case seen as isolated rather than part of a broader pattern. Prince’s allegations in state court regarding Vasquez's employment, Blue Streak's ownership of the Ford F-150, and the settlement execution do not demonstrate an 'enterprise' or a pattern of racketeering activity necessary for a RICO claim. The court characterizes the defendants' actions as a single episode aimed at achieving a specific goal—allegedly a 'bad faith' insurance scheme to secure a multi-million dollar judgment against Century. Century's claims of multiple instances of insurance fraud are insufficiently supported, as all alleged fraudulent acts are steps toward this singular purpose, failing to meet the requirement of multiple 'predicate acts' necessary for RICO (Sever, 978 F.2d at 1535; Perelman v. State, 115 Nev. 190, 192, 981 P.2d 1199 (1999)). NRS 686A.291 criminalizes filing false statements, but the statute targets fraudulent claims overall; multiple false statements supporting one claim are treated as one crime. Consequently, Century has not established a pattern of conduct, essential for sustaining a RICO claim (Living Designs, Inc. 431 F.3d at 361). The court finds that Prince’s state court complaint does not constitute 'offering false evidence' or insurance fraud, as it was neither forged nor fraudulently altered. Century has failed to provide clear evidence that Prince acted with intent to defraud, and instead, Prince asserts that he filed a good faith complaint to preserve a significant claim for his client. Additionally, the negotiation of a settlement and the actions taken to persuade Vasquez to sign do not qualify as insurance fraud under the relevant statute, as Century does not claim that the settlement concealed or omitted essential facts, but rather asserts that it contained false information. Century was aware of the allegations in the complaint and had the opportunity to contest them but chose not to defend its insureds, Vasquez and Blue Streak. Progressive had previously offered the full policy limit of $100,000 to Pretner’s counsel, Esparza, who delayed providing a release pending the exhaustion of all insurance coverage options. On May 26, 2009, Esparza requested a covenant not to execute from Progressive to explore coverage under other policies, including Century's. Progressive's offer was disclosed to Century by Prince, who represented Pretner, along with a letter detailing the offer. After Century denied the claim, Progressive engaged Ranalli to negotiate the covenant. Century's claim that Prince orchestrated the offer is unfounded, as the offer was made before his involvement. Moreover, Century's assertions of perjury and misleading conduct lack substantive evidence, as they failed to demonstrate any false representation. Judge Gordon ruled that Century breached its duty to defend its insureds, supporting the validity of the state court judgment against Century. Judge Herndon noted Century's inaction during the proceedings, indicating it failed to engage with the case appropriately, resulting in a default judgment. Prince did not orchestrate Century’s failure to defend, as he merely contacted Century regarding Pretner’s claims. Century made a unilateral decision to deny coverage and refused to defend either Vasquez or Blue Streak, choosing not to appear in the state court litigation. Century acknowledged its awareness of the underlying litigation yet relied on the incorrect assumption that Progressive was defending the action, which resulted in a default judgment due to Century's inaction. The injury claimed by Century does not stem from the defendants’ actions but rather from Century's failure to defend its insured after denying coverage on June 27, 2011. As for Century's RICO claim, the court concluded that it failed to sufficiently plead its case, negating the need to consider the absolute litigation privilege. Consequently, the special motion to dismiss was granted regarding the RICO claim. Regarding the civil conspiracy claim, Nevada law defines it as a combination of two or more persons acting concertedly to achieve an unlawful objective that results in harm. Century's claim hinges on allegations of fraudulent procurement of a default judgment by Prince, requiring specificity in pleading. However, Century did not adequately demonstrate a concerted action or intent to commit an unlawful objective. Conclusory assertions of a 'bad faith setup' and vague claims of conspiracy were insufficient. Furthermore, allegations against Esparza failed to establish her involvement in a civil conspiracy, as her prior representation of Pretner did not constitute clear evidence of concerted action or unlawful intent. The complaint acknowledges that instead of hiring counsel for Vasquez and Blue Streak, Progressive engaged Defendant Ranalli to collaborate with Prince on a settlement agreement. Ranalli was tasked with drafting this agreement after Prince had already reached an understanding with Progressive regarding an assignment in exchange for a covenant not to execute post-payment of Progressive's policy limits. Consequently, it is established that Ranalli did not conspire with Prince since the settlement was pre-agreed. Century has failed to adequately allege or demonstrate by clear and convincing evidence a concerted action necessary for a civil conspiracy claim. Additionally, the settlement agreement between Prince and Progressive is not considered tortious, thereby lacking an 'unlawful objective' for Century’s conspiracy claim. Century had opportunities to protect its interests but opted to believe that Progressive would handle the litigation on its behalf. Progressive had a duty to defend Vasquez and the right to enter a good-faith settlement. Factors that assess the good faith of a settlement include the settlement amount, allocation among plaintiffs, insurance limits, financial conditions of settling defendants, and evidence of collusion or fraud aimed at harming non-settling defendants. A negotiated settlement requires cooperation but not necessarily collusion unless it aims to harm absent tortfeasors. Century has not demonstrated that the settlement was in bad faith or that it constituted tortious collusion. The settlement was made early in the claim process, offering the policy limit, and Century failed to take steps to dispute coverage or pay its policy limit. Consequently, the special motion to dismiss the civil conspiracy claim is granted. Century's SLAPP complaint is barred under Nevada law, meeting the statutory test since it is based on Prince’s good faith court petitioning, and Century has not shown a likelihood of success on its claims. Therefore, the complaint is dismissed with prejudice against all defendants, and Century's objections to the order staying discovery are rendered moot. The special motion to dismiss is granted, and Prince’s first motion to dismiss is denied as moot. Esparza's and Ranalli's motions to dismiss have been denied as moot, along with Century's objections to the order staying discovery. The court will enter judgment and close the case. The original special motion to dismiss was denied for non-compliance with Local Rule 7-3, which mandates motions to adhere to page limits unless good cause is shown, and requests to exceed page limits must be filed in advance. The magistrate judge required the motion to be refiled due to its original length of fifty-six pages. Racketeering activity is defined as engaging in at least two related crimes with similar patterns or characteristics, occurring after July 1, 1983, and within five years of a previous related crime, per Nevada Revised Statute (NRS) 207.390. A predicate act refers to incidents supporting allegations of racketeering, as outlined in NRS 207.360. Civil RICO claims utilize the same analysis for predicate acts as criminal cases, though prior convictions are not needed. Offering forged documents as genuine constitutes a category D felony under NRS 199.210. The court does not need to determine if the civil conspiracy claim is time-barred or viable with the RICO claim since Century's RICO claim fails the anti-SLAPP analysis legally. Dismissal under a special motion to dismiss is considered an adjudication on the merits according to NRS 41.660(5).