Editor’s Note: Law Week Colorado edits court opinion summaries for style and, when necessary, length.
Nelson v. Encompass PAHS Rehabilitation Hospital
The Colorado Supreme Court en banc unanimously made a rule absolute involving a motion for a venue change.
Floyd Nelson, a resident of Arapahoe County, alleged he was injured from a fall at a rehabilitation hospital owned by Encompass PAHS Rehabilitation Hospital, LLC, in Arapahoe County. Encompass also does business as Encompass Health Rehabilitation Hospital of Littleton.
Nelson sued Encompass bringing forward claims of negligence, medical negligence and negligent hiring, supervision, retention and training. Although Nelson is a resident of Arapahoe County, the LLC is in Arapahoe County and the alleged torts happened in Arapahoe County, Nelson brought the action in Boulder County District Court.
Encompass moved to change the venue from Boulder County to Arapahoe County pursuant to Colorado Rule of Civil Procedure 98(f). Under that rule, a court on a showing of good cause may grant a change of venue when a county designated in the complaint isn’t the proper one. Encompass argued neither it nor Nelson resided in Boulder County and the alleged tort occurred in Arapahoe County, so the venue wasn’t proper and the suit needed to be moved to Arapahoe County.
Nelson opposed the motion and asserted the trial court should look to the residence of Encompass’ two limited liability members: Encompass Health Littleton Holdings, LLC and Porter Care Adventist Health System. Nelson wanted the court to look at those to determine the proper venue.
Nelson asserted since Littleton Holdings, which owns 68% of Encompass, is a Delaware-chartered corporation, he could file suit in the county of his choice pursuant to Rule 98(c). Nelson further found, upon information and belief, Porter is a resident of Boulder County since it owns or operates two facilities in the county.
A trial court denied Encompass’ motion for a change of venue. Encompass filed a petition for a rule to show cause why the trial’s court denial of the motion to change shouldn’t be reversed. The high court then issued an order to show cause.
The Colorado Supreme Court considered whether the trial court erred in looking at the residences of the limited liability company’s members in determining that venue was proper and in denying the LLC’s motion to change the venue.
The high court rejected the respondent’s argument, based on federal diversity jurisdiction cases, that the trial court can properly look at the residences of the LLC’s members to decide where a venue lies. The Colorado Supreme Court concluded an LLC’s residence, when considering venue purposes under Rule 98, is determined based on the residence of the LLC, not the residence of its members.
The Colorado Supreme Court surmised since Encompass’ residence, like Nelson’s, is in Arapahoe County and the alleged torts happened there, the Boulder County venue isn’t proper. The high court found the trial court erred in denying Encompass’ motion to change venue, as the Colorado Supreme Court made the rule to show cause absolute, vacated the district court’s order denying Encompass’ motion to change venue and remanded for more proceedings consistent with the opinion.
McMichael et al. v. Encompass PAHS Rehabilitation Hospital, LLC
Patricia and Lynette McMichael are the personal representatives for the estate of Charles McMichael. The representatives alleged Charles McMichael sustained injuries and died after falling on at least three occasions at the rehabilitation hospital owned by Encompass PAHS Rehabilitation Hospital, LLC, which also does business as Encompass Health Rehabilitation Hospital of Littleton.
The McMichaels sued Encompass and asserted claims for negligence, medical negligence; negligent hiring, supervision, retention and training; and premises liability. Charles McMichael was a resident and Encompass is a resident of Arapahoe County, and the alleged torts happened at Encompass’ rehabilitation hospital in the same county, but the McMichaels filed the lawsuit in Boulder County.
After the complaint was filed by the McMichaels in May 2022, Encompass failed to file a timely response, according to court records. The McMichaels moved for default judgment which was granted. Thirteen days after the response to the complaint was due, Encompass filed two different pleadings with the court: its attorneys’ entry of appearance along with a motion to set aside the default judgment. In its motion, Encompass argued the default judgment needed to be set aside because the McMichaels’ counsel failed to confer with Encompass’ counsel before the filing of the motion for default judgment. Encompass said this was very problematic because the McMichaels’ lawyer was engaged for months with Encompass’ lawyers about a proper venue for the case.
Encompass claimed the failure by McMichaels’ attorney to mention the default judgment motion appeared to be an effort to unfairly and prejudicially disadvantage Encompass. Encompass also argued Boulder County wasn’t the proper venue as Charles McMichael was a resident of Arapahoe County, as was Encompass, the alleged torts happened in that county and Encompass was a Colorado resident.
The trial court vacated the default judgment and noted that McMichaels’ counsel failed to confer with Encompass’ counsel despite its obligation to do so and despite the ongoing discussions before the default judgment motion was filed. That court also found the short delay didn’t prejudice the McMichaels and accordingly, the trial court granted Encompass’ motion to set aside the default judgment so the matter could be heard on its merits.
Encompass then moved for a change of venue according to Rule 98(f) reiterating its prior location complaints and Encompass wasn’t an out-of-state resident, which meant the McMichaels couldn’t properly designate a Colorado county of its choosing to file the complaint.
The trial court found Boulder County wasn’t a proper venue and granted the motion to change it to Arapahoe County. The McMichaels filed a petition for a rule to show cause which the Colorado Supreme Court granted.
The high court concluded the trial court didn’t abuse its discretion by choosing to hear the matter on the merits despite Encompass’ 13-day delay in responding to the complaint. After applying the holding in Nelson v. Encompass PAHS Rehabilitation Hospital, the Colorado Supreme Court concluded the trial court didn’t err by transferring the venue from Boulder to Arapahoe County.
And since the residence of a limited liability company, according to the Colorado Supreme Court, for venue purposes is the residence of the LLC, rather than the residence of its members, the county designated in the complaint wasn’t proper and Encompass was entitled to change the venue. The Colorado Supreme Court unanimously en banc discharged the rule to show cause.