April 9, 2013, Utah Supreme Court Case Summaries

April 9, 2013,

Utah Supreme Court Cases

Strohm v. Clearone Communications, Inc., 2013 UT 21, No. 20110569 (April 9, 2013)

JUSTICE LEE authored the opinion of the Court in Sections I–V, in which CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE NEHRING, JUSTICE DURHAM, and JUSTICE PARRISH joined.

JUSTICE LEE authored the opinion of the Court in Sections VI and VIII, in which CHIEF JUSTICE DURRANT and ASSOCIATE CHIEF JUSTICE NEHRING joined.

JUSTICE LEE filed a dissenting opinion in Section VII as to Section I of JUSTICE PARRISH‘s opinion, in which ASSOCIATE CHIEF JUSTICE NEHRING joined.

JUSTICE PARRISH authored the opinion of the Court as to Section I of her opinion, in which CHIEF JUSTICE DURRANT and JUSTICE DURHAM joined.

JUSTICE PARRISH filed a dissenting opinion in Section II as to Section VI of JUSTICE LEE‘s opinion, in which JUSTICE DURHAM joined.

Justice Lee,

This case concerns a corporation‘s statutory and contractual duty to indemnify a corporate officer‘s criminal defense costs.   Susie Strohm, the one-time CFO of ClearOne Communications, Inc., was charged with eight federal criminal counts relating to an investigation into certain accounting practices at ClearOne. She was later acquitted of all but one count. Strohm and her counsel, Dorsey, asserted that ClearOne is obligated by statute and con-tract to indemnify her (and, by extension, Dorsey) for her criminal defense costs and brought suit to collect those costs. The district court agreed with Strohm and Dorsey and ordered ClearOne to indemnify Strohm for her defense costs, subject to certain restrictions. It also found that a contract between the parties entitled Dorsey to charge ClearOne 18 percent interest on the amounts that were billed to ClearOne but not timely paid and to collect the costs it expended in enforcing ClearOne‘s contractual obligation to indemnify Strohm.

On appeal, ClearOne challenges the district court‘s decisions and its ultimate fee award. Strohm and Dorsey cross-appeal the district court‘s decision to place certain limitations on their indemnification and collection award.  

At ¶¶ 1-2.

[W]e first affirm the district court‘s indemnification rulings in full, except for the decision to limit indemnification for defense costs to those incurred before Strohm‘s perjury conviction. We likewise affirm the district court‘s determination that the engagement agreement between the parties does not give ClearOne the right to unilaterally terminate its payment obligation to Dorsey. And though ClearOne challenges the district court‘s fee award in the criminal case as unreasonable, we disagree and affirm. We next consider and affirm the court‘s ruling that the parties‘ engagement agreement contemplated 18 percent interest on unpaid fees and allowed Dorsey to recover fees and costs incurred in enforcing the engagement agreements. We also affirm the district court‘s decision to enforce the interest rate provision. Finally, though I would enforce the collection fee provision as well, a majority of the court, joining Section I of Justice Parrish‘s separate opinion, invalidates the collection fee provision on public policy grounds.

At ¶ 16.

Statutory Indemnification

ClearOne‘s first statutory argument is based on [Utah Code sections 16-10a-902], which allows a corporation to indemnify its director if ―his conduct was in good faith; . . . he reasonably believed that his conduct was in, or not opposed to, the corporation‘s best interests; and . . . in the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful.‖ UTAH CODE § 16-10a-902(1). According to ClearOne, this statute establishes a “standard of conduct” and limits the indemnification a corporation can provide to its officers. This argument falters on the grounds that it misconstrues section 902 and ignores other sections of the code that expressly apply to officer indemnification.

By its own terms, section 902 applies only to the directors of a corporation. Id. (“[A] corporation may indemnify an individual made a party to a proceeding because he is or was a director . . . .” (emphasis added)). This section‘s title (“Authority to indemnify directors”) confirms that. Id. We can find nothing in section 902 that suggests that it extends beyond directors to encompass officers. See Olsen v. Eagle Mountain City, 2011 UT 10, ¶ 9, 248 P.3d 465 (stating that statutory interpretation often requires examination of a statute‘s structural context).

At ¶ 19-20.

Because the code contains provisions that specifically govern officer indemnification, we cannot presume that all the provisions governing director indemnification apply to officers as well.

At ¶ 21.

The district court ordered ClearOne to indemnify Strohm under sections 16-10a-903 and -907—not under section 902. Under section 907, an officer is entitled to mandatory indemnification only to the extent that a director is entitled to indemnification under 903. Id. And section 903 requires a corporation to indemnify a director who successfully defended himself in a proceeding where he was a party to the action because he was/is a director of the corporation. See id. § 16-10a-903. Thus, an officer is entitled to mandatory indemnification when he successfully defends himself in a proceeding where he was a party because he was/is an officer of a corporation. See id § 16-10a-907(1).

At ¶ 22.

Because Strohm successfully defended seven of the eight charges brought against her in her capacity as an of-ficer of ClearOne, she is entitled to indemnification from ClearOne under Utah Code sections 16-10a-903 and -907 for the reasonable expenses she incurred in doing so. We accordingly af-firm the district court‘s ruling on statutory indemnification.

At ¶ 24.

It is true that Utah Code section 16-10a-907 allows a corporation to limit its duty to indemnify its officers. But, by the terms of that statute, a corporation must place such limitation in its articles of incorporation. Id. Nowhere does section 907 allow a corporation to place limitations on indemnification in its bylaws. Because ―articles of incorporation‖ is unambiguous and on its face does not encompass bylaws, ClearOne‘s attempt to limit indemnification in its bylaws is of no consequence under the controlling stat-ute in this case. We refuse to dismiss the statutory terminology as insignificant. Bylaws are not articles of incorporation, and a statute contemplating the latter is not satisfied by the former.

At  26.

The Court rejects ClearOne’s argument that section 902 “establishes a Utah public policy prohibiting the use of corporate funds unless the corporate director or officer has satisfied the requisite standard of conduct.”

At ¶¶ 29-32.

Contractual Indemnification

The Court interprets the terms of the contractual agreements and holds that “the engagement letters unambiguously required ClearOne to indemnify Strohm for her criminal defense . . . .”

At ¶¶ 33-39.

In its ruling and order dated January 24, 2011, the district court held that “from the date of [the perjury] jury verdict ClearOne shall not be held liable . . . to pay [Strohm‘s] fees and expenses in the criminal case post-February 27, 2009, all of which must be attributed to the perjury count.” Based on this language, it appears that the district court assumed that Strohm could not recover defense fees related to charges for which she was convicted. This would have been true if Strohm‘s—and Dorsey‘s—claims were limited to statutory indemnification. The statute under which Strohm qualifies for indemnification states that “a corporation shall indemnify a director [or, by operation of subsection 907, an officer] who was successful, on the merits or otherwise, in the defense of any proceeding, or in the defense of any claim . . . against reasonable expenses incurred by him in connection with the proceeding or claim with respect to which he has been successful.” UTAH CODE § 16-10a-903 (emphasis added). Because Strohm was convicted of one count of perjury, this statute would operate to save ClearOne from indemnifying her for fees related to that charge.

¶42 But the district court did not limit Strohm and Dorsey‘s indemnification right to statutory indemnification. Rather, it held that the engagement letters “provid[ed] an alternative basis to require [ClearOne] to pay [Strohm‘s] reasonable legal fees incurred in her defense of federal criminal proceedings . . . or to reimburse her for fees paid to her counsel and co-plaintiff.” So, Strohm and Dorsey can require indemnification for the perjury charge if the letter agreements contemplated that ClearOne would indemnify

Strohm for fees related even to unsuccessfully defended charges. We read the letters that way and accordingly reverse.

At ¶¶ 41-42.

Termination of Engagement Agreement

The Court interprets that Engagement Agreement and holds that it did not allow ClearOne to unilaterally terminate the attorney-client relationship.  Rather, it required both ClearOne and Strohm to request termination of the relationship.

At ¶¶ 45-49.

Reasonableness of the Attorney Fees

 The Court reviews ClearOne’s challenges to the district court’s determination that the attorney fees awarded were reasonable.  The Court holds that the district court’s finding was not an abuse of discretion.

At ¶¶ 50-63.

Inclusion of Interest on Unpaid Fees

ClearOne argues that the engagement letter with Dorsey, the law firm representing Strohm, did not contain a provision allowing Dorsey to change 18 percent interest on unpaid fees.  The Court reviews the engagement letter and finds that unambiguously incorporates a previous engagement letter’s interest rate and collection fee provisions.

At ¶¶ 64-68.

Reasonableness of the Interest Rate on Unpaid Fees

The Court rejects ClearOne’s argument that the interest rate changed on unpaid fees is unreasonable.  It specifically notes that the higher standard regarding the reasonableness of an attorney fee imposed by the rules of professional conduct do not apply to interest on unpaid fees, stating: “we fail to see how a rule that on its face sets standards for fees has any impact on interest that accrues on un-paid fees. Interest charged after a lawyer has assessed a fee does not become part of the fee itself. “

At ¶¶ 69-75.

ClearOne must offer more than its bare assertion of unreasonableness to convince us to override the already-determined intentions of the parties to a contract. At base, ClearOne‘s position is simply that it shouldn‘t have to pay 18 percent interest because that rate is high. But it is not enough to assail a contract term on the grounds that it seems unfavorable to your interests. And if ClearOne thought that 18 percent interest was truly outside the bounds of acceptable rates—unconscionable as a matter of public policy—it was obligated to present expert testimony and/or established caselaw to that effect. It offered neither.

At ¶ 70.

Enforceability of the Collection Fee Provision

ClearOne . . . challenges the collection fee provision, arguing that the district court ran afoul of state public policy when it allowed Dorsey to collect attorney fees on its own engagement agreement. Specifically, ClearOne contends that our decision in Jones, Waldo, Holbrook & McDonough v. Dawson, 923 P.2d 1366, 1374 (Utah 1996), articulates a public policy basis for disallowing pro se lawyer-litigants from recovering their own attorney fees. Unlike the majority, I disagree and would hold that Jones, Waldo applies only in situations involving a true pro se lawyer-litigant. Because Dorsey is not such a litigant, Jones, Waldo is inapplicable, as the district court correctly concluded.

At ¶ 76.

I find Jones, Waldo distinguishable and inapplicable here. Unlike the law firm in Jones, Waldo, Dorsey is not purely a pro se litigant. See id. at 1369; see also Smith v. Batchelor, 832 P.2d 467, 473–74 (Utah 1992) (holding that a pro se attorney-litigant is not entitled to recover attorney fees for successful litigation). As a signatory to the engagement agreements, Strohm is “jointly and severally responsible” for fees owed to Dorsey, including those incurred in the collection action. Thus, Dorsey seeks in this case to vindicate not only its rights, but Strohm‘s as well.

¶80 This is an important difference in my view—one that Justice Parrish‘s separate opinion for the court dismisses too quickly. Dorsey has a client in this case. And the presence of a client interest largely alleviates the public policy and incentive concerns raised in Jones, Waldo. With Strohm on board, Dorsey cannot be seen to operate without client control because it is bound by rule and by agreement to represent Strohm professionally and ethically.

At ¶¶ 79-80.

That does not mean, however, that my preferred approach would give Dorsey and firms like it an unfettered and ungoverned right to collect these kinds of fees. In circumstances like the-se, this court has always entrusted the calculation of fees and assessment for reasonableness to the discretion of the district court.

At ¶ 84.

JUSTICE PARRISH, Opinion of the Court as to Section I; dissenting as to Section II:

Enforceability of the Collection Fee Provision

Even though this case does not involve a purely pro se lawyer-litigant, see supra ¶¶ 79–80, Strohm had no incentive to rein in Dorsey, who was therefore unconstrained by costs. Our prohibition on fee collection by lawyer-litigants was designed to protect against this precise type of behavior.

At ¶ 87.

Though the lead opinion correctly concludes that Dorsey has a client in the formal sense, by distinguishing between the purely pro se setting of Jones Waldo and the facts here, it eviscerates the underlying principles of Jones Waldo—protecting captive clients and curbing improper incentives. Particularly where, as here, the client has little or no incentive to act as a check on the behavior of her attorneys and there are few, if any, external incentives for the attorneys to control costs, the policies driving our holding in Jones Waldo are implicated.

At ¶ 91.

Though Dorsey technically has a client in Strohm, the public policy concerns motivating the general prohibition against the collection of attorney fees for pro se attorney-litigants are directly implicated by the facts here. ClearOne, as the entity underwriting the cost of Strohm‘s litigation, is the captive client that ―has no control over the amount of time the attorney will spend or how it will be spent.‖ Id. Dorsey had no incentive to limit the hours it expended or the costs it incurred to prosecute its collection action against ClearOne. Nor was Strohm motivated to limit Dorsey‘s expenditures in the collection action. Because ClearOne was jointly and severally liable under the Agreements for the underlying fees and was statutorily required to indemnify Strohm for her fees in both the underlying criminal and the subsequent collection action, Strohm had almost nothing to lose by support-ing Dorsey‘s attempt to prevail against ClearOne.

At ¶ 96.

Attorney’s Ethical Obligations Regarding Attorney Fees

I disagree with the lead opinion‘s analysis regarding the standard to be applied to attorneys entering into fee agreements. Supra ¶ 64. While I agree that the Dorsey letter incorporates the provisions of the Bendinger letter, the interest rate and collection provisions contained in the letters raise concerns about a lawyer‘s ethical role when drafting such engagement agreements and I believe the issue should not be resolved on summary judgment.

At ¶ 100.

In this case . . . the communication between Dorsey, Strohm, and ClearOne is anything but explicit.

For example, Dorsey‘s decision to bring in what the district court determined to be overpriced out-of-state counsel was not adequately communicated. See supra ¶ 54. Because the Dorsey letter did not explicitly contemplate the use of expensive outside counsel, neither Strohm nor ClearOne were on notice that Dorsey would hire such counsel and bill them at rates hundreds of dollars higher than those in the local area. Such exorbitant fees were in contrast to the language of the letter stating that Dorsey‘s “fees are ordinarily based on our usual and customary hourly rates [of approximately $255].” And though the Dorsey letter stated that “[o]ur hourly rates are subject to adjustment from time to time,” hiring high-priced out-of-state counsel surely cannot constitute an “adjustment” to Dorsey‘s typical hourly rates.

The lack of clarity in agreements such as those at issue here is entirely within the control of the attorneys drafting the agreements. And when lack of clarity leads to issues of notice or misplaced expectations, it is the clients, rather than the drafting attorneys, who are negatively impacted. I believe that attorneys should be held to a higher standard. They should not just strive for “great[] clarity” in their agreements, but should not be benefitted when they neglect to draft agreements that lack such clarity.

At ¶¶ 103-105.

Penunuri v. Sundance, 2013 UT 22, No. 20110565 (April 9,2013)

CHIEF JUSTICE DURRANT authored the opinion of the Court, in which ASSOCIATE CHIEF JUSTICE NEHRING, JUSTICE DURHAM, and JUSTICE PARRISH joined.

JUSTICE LEE filed a concurring opinion.

Justice Durrant,

Ms. Penunuri was injured while participating in a guided horseback ride near Sundance Resort. Before the ride, she signed a release (Waiver), in which she waived her right to sue Defendants

(collectively, Sundance) for injuries caused by Sundance’s ordinary negligence. In this appeal, Ms. Penunuri asks us to find that the Waiver is unenforceable under the Limitations on Liability for Equine and Livestock Activities Act (Equine Act)1 and that it violates the public policy expressed in the Equine Act.

We first consider whether the Waiver is unenforceable under the Equine Act. We conclude that the Equine Act establishes no public policy that invalidates preinjury releases for ordinary negligence. Second, we consider whether the Equine Act is sufficiently similar to Utah’s Inherent Risks of Skiing Act (Skiing Act) such that the “public policy bargain” we inferred from the language of the Skiing Act in Rothstein v. Snowbird Corp.  similarly invalidates preinjury releases under the Equine Act. Because the Equine Act lacks the discussion of public policy contained in the Skiing Act, we decline to infer that the Equine Act was the result of a public policy bargain. Accordingly, we conclude that the Waiver is enforceable and does not violate public policy.

At ¶¶ 1-2.

The Equine Act

Section 202 of the Equine Act provides that equine activity sponsors9 are not liable for injuries caused by the “inherent risks” associated with equine activities. “Inherent risk” is defined under the Equine Act as “those dangers or conditions which are an integral part of equine or livestock activities,” including, among other things, “the propensity of the animal to behave in ways that may result in injury” and “the unpredictability of the animal’s reaction to outside

stimulation.”

But section 202 does not completely eliminate an equine sponsor’s liability. In relevant part, section 202 provides as follows:

(2) An equine activity sponsor, equine professional, livestock activity sponsor, or livestock professional is not liable for an injury to or the death of a participant due to the inherent risks associated with these activities, unless the sponsor or professional:

(a)(i) provided the equipment or tack;

(ii) the equipment or tack caused the injury; and

(iii) the equipment failure was due to the sponsor’s

or professional’s negligence;

(b) failed to make reasonable efforts to determine whether the equine or livestock could behave in a manner consistent with the activity with the participant;

(c) owns, leases, rents, or is in legal possession and control of land or facilities upon which the participant sustained injuries because of a dangerous condition which was known to or should have been known to the sponsor or professional and for which warning signs have not been conspicuously posted;

(d)(i) commits an act or omission that constitutes negligence, gross negligence, or willful or wanton disregard for the safety of the participant; and

(ii) that act or omission causes the injury; or 

(e) intentionally injures or causes the injury to the participant.

While section 202 eliminates liability for the inherent risks of equine activities, section 203 requires sponsors to provide notice to participants that the sponsor is not liable for those risks. Section 203 requires that the “[n]otice shall be provided” either by “posting a sign in a prominent location within the area being used for the activity” or by “providing a document or release for the participant, or the participant’s legal guardian if the participant is a minor, to sign.”

At ¶¶ 9-11.

The Equine Act Does NOT Invalidate Preinjury Releases of Liability for Ordinary Negligence

[Petitioner] asserts that by protecting equine activity sponsors from liability arising out of the inherent risks associated with equine activities, the Legislature impliedly intended that they remain liable for all other claims.

At ¶ 13.

[T]he fact that the Equine Statute does not eliminate a sponsor’s liability for negligence does not mean that the Legislature intended to invalidate preinjury waivers for ordinary negligence. In other words, “[n]owhere does the text suggest that [equine sponsors] may not contractually further limit their liability for risks that are not inherent” to equine activities.

At ¶ 18.

Petitioner's Public Policy Argument

Ms. Penunuri argues that the Waiver is unenforceable as a violation of public policy. Specifically, she argues that the Equine Act was modeled after—and enacted for the same purpose as—the Skiing Act.  Relying on Rothstein v. Snowbird Corp., in which we invalidated a preinjury release as a violation of the public policy expressed in the Skiing Act, Ms. Penunuri argues that preinjury releases are similarly unenforceable under the Equine Act.

At ¶ 23.

In this case, the Equine Act is silent regarding public policy. Indeed, neither “public policy” nor any similar phrase appears in any section of the Act. Accordingly, because a public policy is not “deducible . . . from constitutional or statutory provisions,” we may infer a public policy in the Equine Act “if at all, only with the utmost circumspection.” But unlike the Skiing Act, the Equine Act does not explain the motivation behind the Legislature’s decision to eliminate liability for inherent risks for equine activities. Further, the Equine Act contains no statement regarding the importance of equine activities on the tourism industry or the difficulty equine sponsors face in purchasing insurance at affordable rates.

Thus, we cannot conclude that the “central purpose” of the Equine Act was to permit equine sponsors “to purchase insurance at affordable rates.” And as discussed above, it was that “central purpose” of the Skiing Act, as expressed by the Legislature, that led us to infer that the Legislature had struck a “public policy bargain” when it eliminated liability for the inherent risks of skiing. But there is not a similar expression of purpose in the Equine Act, and we “resist the temptation to add language or meaning to the Act where no hint of it exists in the text.” We cannot infer that, by removing liability for the inherent risks of equine activities, the Legislature intended that equine sponsors be precluded from escaping liability for their negligent acts. We therefore conclude that preinjury waivers for ordinary negligence do not violate public policy under the Equine Act.

At ¶¶ 32-33.

Justice Lee, concurring,

I write separately only to note my disagreement with Rothstein v. Snowbird Corp., 2007 UT 96, 175 P.3d 560, which the majority restates and then distinguishes. I see no logical or legal basis for Rothstein’s conclusion that enforcement of a ski resort’s release waiving liability for negligence “breached [the] public policy bargain” struck by the Inherent Risks of Skiing Act, UTAH CODE §§ 78B-4-401 to -404. Rothstein, 2007 UT 96, ¶ 16. Even if the “central purpose” of that statute was to “permit ski area operators to purchase insurance at affordable rates,” it could hardly follow that “the Legislature [thereby] authoritatively” renounced the enforceability of written waivers of liability for negligence. Id. ¶¶ 15–16. Enforcement of such releases could only further advance the stated goal—making insurance even more affordable. I would therefore repudiate Rothstein instead of distinguishing it in a manner that tends to reinforce it.

At ¶ 35.

April 5, 2013, Utah Supreme Court Case Summaries

April 5, 2013,

Utah Supreme Court Cases

State v. Berriel, 2013 UT 19, No. 20110926 (April 5, 2013)

Affirming Judge Gary Stott,

Justice Durham,

On certiorari, we consider whether the court of appeals erred in affirming the district court’s refusal to instruct the jury on defense of a third person. We consider whether the evidence supports defendant Darren Berriel’s theory that he stabbed the victim in defense of a third person under Utah Code section 76-2-402. We agree with the court of appeals that there is no basis in the evidence to support this theory and accordingly affirm.

At ¶ 1.

A “[d]efendant is entitled to have the jury instructed on [the defense’s] theory of the [case] if there is any basis in the evidence to support that theory.” State v. Brown, 607 P.2d 261, 265 (Utah 1980).

At ¶ 12.

Under Utah Code section 76-2-402(1)(a), “[a] person is justified in threatening or using force against another when and to the extent that the person reasonably believes that force or a threat of force is necessary to defend the person or a third person against another person’s imminent use of unlawful force.” “When interpreting a statute, we assume, absent a contrary indication, that the legislature used each term advisedly according to its ordinary and usually accepted meaning.” Marion Energy, Inc. v. KF  Ranch P’ship, 2011 UT 50, ¶ 14, 267 P.3d 863 (internal quotation marks omitted). The key terms in section 76-2-402 for purposes of this case are “imminent” and “necessary.”

At ¶ 13.

The Court reviews the evidence and determines that there is no evidence to support Defendant’s defense of a third party theory of the case because the evidence does not support the imminent or necessary requirements of the statute.

At ¶¶ 15-16.

[S]tanding alone, a history of violence or threats of future violence are legally insufficient to create “a situation of imminent danger.” Id. at 820. And we see no other facts in the record which, taken together with Luis’s history of violence, render erroneous the district court’s refusal to instruct the jury on defense of a third person.

At ¶ 20.

Mclaughlin v. Schenk, 2013 UT 20, No. 20111109 (April 5, 2013)

Affirming Judge Anthony Quinn

Justice Parrish,

The Court summarizes the complex background of this case.  Essentially, this case arises from a dispute between majority shareholders (Schenk) and a minority shareholder (Mclaughlin) in a closely held corporation.  One majority shareholder sold his shares to Schenk without offering the right of first refusal to the corporation or the other shareholders in violation of the shareholder agreement.  In response to Mclaughlin’s complaints, the shareholders, including Schenk, voted to ratify the action and waive the requirements of the shareholder agreement.  Mclaughlin sued to enforce the shareholder agreement.

The Supreme Court in Mclaughlin I held that the shareholder vote to ratify the move was tainted by the new owner’s inclusion in the vote and remanded the case to determine the fairness of the ratification vote.  Before the fairness hearing, the corporation again voted to ratify the decision, but did not include Schenk in the vote.  The District Court initially found that the corporation’s actions did not suffice and that McLaughlin was “entitled to the fairness hearing identified by the Supreme Court.”  However, a new judge was assigned to the case and he granted the corporation summary judgment based on the new vote to ratify the sale.  Mclaughlin appeals the grant of summary judgment.

Mclaughlin asserts four theories: (1) the second district court judge violated the law of the case doctrine by ignoring the first judge’s ruling that he was entitled to a fairness hearing; (2) the holding of McLaughlin I that shareholders in closely held corporations owe each other fiduciary duties has been superseded by statute and the new statute is dispositive in this case; (3) the District Court violated the Supreme Court’s order in Mclaughlin I to hold a fairness hearing, and the post-remand corporate action did not moot the need for a fairness hearing; and (4) the 2009 ratification of the vote by the disinterred shareholders was not effective because they were not provided sufficient information.

At ¶¶ 5-18.

Law of the Case Doctrine

Under the law of the case doctrine, “a court [may] decline to revisit issues within the same case once the court has ruled on them.” IHC Health Servs., Inc. v. D & K Mgmt., 2008 UT 73, ¶ 26, 196 P.3d 588. However, this doctrine is generally discretionary, with three exceptions for extraordinary circumstances in which reconsideration is mandatory.

Law of the case does not prohibit a district court judge from revisiting a previously decided issue during thecourse of a case, regardless of whether the judge has changed or remained the same throughout the proceedings. Rather, the doctrine allows a court to decline to revisit issues within the same case once the court has ruled on them.

Mid-Am. Pipeline Co. v. Four-Four, Inc., 2009 UT 43, ¶ 11, 216 P.3d 352 (internal quotation marks omitted).

At ¶ 22.

McLaughlin correctly points out that there are exceptions to the law of the case. In these situations, a judge is required to reassess a prior ruling. These situations are “(1) when there has been an intervening change of authority; (2) when new evidence has become available; or (3) when the court is convinced that its prior decision was clearly erroneous and would work a manifest injustice.” Mid-Am. Pipeline, 2009 UT 43, ¶ 14 (internal quotation marks omitted). “While there are exceptions to the doctrine of law of the case, these exceptions function only to dictate when the district court has no discretion but rather must reconsider a previously decided, unappealed issue.” Id. The exceptions do not operate to bar a replacement judge from reconsidering an issue previously ruled on by a prior judge in the same case. We therefore hold that the replacement judge did not abuse his discretion when he decided to re-visit the retired judge’s decision ordering a fairness hearing.

At ¶ 24.

New Statute

As a general rule, statutes are not retroactive without clear evidence to the contrary. Warne v. Warne, 2012 UT 13, ¶ 25, 275 P.3d 238; see also UTAH CODE § 68-3-3 (“A provision of the Utah Code is not retroactive, unless the provision is expressly declared to be retroactive.”). Because section 622(3) is silent as to retroactivity, it does not apply retroactively. And because the stock purchase, the 2005 Waivers, and the 2009 Ratifications all occurred prior to the passage of the amendment, section 622(3) does not apply and is not dispositive here.

At ¶ 28.

Consideration of Post-Remand Corporate Waiver

There was nothing in our McLaughlin I opinion forbidding Cookietree from attempting to remedy the defects in the 2005 Waivers using procedures available under then-applicable law and its corporate governance documents. The disinterested Board and the disinterested shareholders were therefore free to act, and if they were successful in ratifying the 2005 Waivers, then our order for a fairness hearing would necessarily be moot. Thus, the district court did not violate our remand order when it considered the validity of other avenues for resolving the nontransaction conflict of interest created by the 2005 Waivers.

At ¶ 30

Challenge to 2009 ratification vote

[Mclaughlin] argues that the post-remand actions by the Board and shareholders could not be effective as a matter of law because there remained disputed issues of fact as to the adequacy and fairness of the information provided to the disinterested director.

At ¶ 31.

McLaughlin’s alleged factual disputes about Rudd’s [the disinterested shareholder] knowledge regarding the stock transfers are legally irrelevant. There is nothing in the Corporation Act or the Bylaws requiring that qualified directors have a perfect knowledge as to all matters on which they cast a vote. The only requirement is that they be disinterested and that the conflicted director disclose “the existence and nature of the conflicting interest . . . and all facts known to the director respecting the subject matter of the transaction that an ordinarily prudent person would reasonably believe to be material to a judgment about whether or not to proceed with the transaction.” Id. §§ 16-10a-850(4), 16-10a-852(3). And McLaughlin does not even attempt to argue that Rudd was conflicted.

The 2009 Ratification resolved any conflict of interest problem with the transfer of shares to Schenk. Summary judgment was therefore proper.

At ¶¶ 40-41.

April 4, 2013, Utah Court of Appeals Case Summaries

April 4, 2013

Utah Court of Appeals Cases

Assmann v. Department of Public Safety, 2013 UT App. 81, No. 20120270‐CA (April 4, 2013)

Affirming Judge Robert Adkins,

Per Curiam,

Shane Assmann appeals the district court’s decision following a trial de novo affirming the administrative revocation of his driver license for a period of thirty six months.  We affirm.

At ¶ 1.

The Court reviews the evidence presented in the trial de novo and finds that there was substantial evidence to support the trial court’s determination that a police officer had given Assmann the required admonitions that refusal to submit to a chemical breath analysis would result in revocation of his driver’s license and that Assmann still refused to take the test.  The Court also reviews an evidentiary challenge based on the best evidence rule and finds that Assmann did not preserve the argument because he failed to object during the trial, and even if the evidence was suppressed there would still be sufficient evidence to support the court’s factual findings.

Cagatay v. Erturk, 2013 UT App 82, No. 20120189‐CA 9April 4, 2013)

Affiriming in part and reversing in part Judge Andrew Stone.

Judge Voros,

Nilufer Cagatay (Wife) challenges several aspects of the Decree of Divorce entered by the trial court. We affirm in part and reverse and remand in part.

At ¶ 1.

Wife challenges the trial court’s award of joint custody and its finding that both parents participated in raising the child before the divorce.  The Court finds that Wife has not marshaled the evidence and it cannot, therefore, review the finding because Wife cannot show that the decision was clearly erroneous.

At ¶¶ 2-3.

Wife challenges the trial court’s reliance on a custody evaluator’s report when that evaluator did not testify.  The Court finds that the trial court did not rely exclusively on the report and “our case law states that trial courts may rely on custody evaluations in making custody determinations, even when the evaluator does not testify. See Merriam v. Merriam, 799 P.2d 1172, 1175–76 (Utah Ct. App. 1990).

At ¶¶ 4-5.

Wife challenges the trial court’s valuation of an apartment in Istambul and its refusal to grant a new trial based on additional evidence discovered concerning the apartment.  The Court admonishes Wife for failing to mention that the trial court explicitly excluded some of the evidence as a discovery sanction and determines that it cannot question the trial court’s finding.

At ¶ 6-8.

Wife next contends that the trial court erred in calculating her income for purposes of child support. The court ordered Husband to pay $13.05 per month in child support. Wife asserts that the court attributed the net rent from an apartment in New York City to Wife’s income for purposes of calculating child support but awarded the apartment to Husband. Husband responds that the trial court did not in fact attribute the rental income to Wife. Our own review of the record indicates that Wife is correct on this point.

At ¶ 9.

The Court directs the trial court to reconsider its alimony decree in light of its mistake allocating rental income to wife.

At ¶ 10.

Gullickson v. Gullickson, 2013 UT App 83, No. 20110700‐CA (April 4, 2013)

Affirming in part and reversing in part Judge John Kennedy,

JUDGE STEPHEN L. ROTH authored this Opinion, in which JUDGE MICHELE M. CHRISTIANSEN concurred. JUDGE JAMES Z. DAVIS dissented in part and concurred in part, with opinion.

Judge Roth,

Jeffrey M. Gullickson (Husband) appeals from the district court’s order on a petition to modify the divorce decree and a petition for temporary order filed by Catherine N. Gullickson (Wife). Specifically, Husband contends that, without an evidentiary hearing, the district court improperly modified the divorce decree’s distribution of the home in which the parties had resided during the marriage; overruled his objection to Wife’s plan to move out of state with the parties’ minor child, and the corresponding adjustment to his parent‐time, without a showing of immediate and irreparable harm as required by Utah Rule of Civil Procedure 106; denied him an evidentiary hearing on these issues; and refused to consider his contempt claim. He also seeks his attorney fees incurred in the home modification proceedings. We vacate the court’s order regarding the home and remand for a modification hearing. On remand, the court should reconsider the award of attorney fees as appropriate following the modification hearing. Otherwise, we affirm the district court.

At ¶ 1.

The Court summaries the proceedings and determinations of the Commissioner and district court.

At ¶¶ 2-13.

Husband first contends that the shift in responsibility for the mortgage payments and upkeep of the house constituted a modification of the divorce decree that cannot be made under the limited temporary order authority granted to the court by rule 106(b) of the Utah Rules of Civil Procedure but instead may only be made following an evidentiary hearing, essentially a trial.

At ¶ 15.

Husband next appeals from the district court’s order allowing Wife to move with the son to Virginia on the basis that the decision was made without a showing of immediate and irreparable harm and without allowing Husband an evidentiary hearing at which Husband could have demonstrated that there would be no such harm and that the move was not in the son’s best interest. Husband’s argument is rooted in rule 106 of the Utah Rules of Civil Procedure. Wife asserts that relocation of a minor child is governed by Utah Code section 30‐3‐37.

At ¶ 16.

Finally, Husband argues that the district court improperly declined to consider the contempt issue.

At ¶ 17.

Rule 106 of the Utah Rules of Civil Procedure provides that “proceedings to modify a divorce decree . . . shall be commenced by filing a petition to modify.” Utah R. Civ. P. 106(a). “[A] party requesting that a divorce decree be modified must demonstrate that there has been a substantial change of circumstances occurring since the entry of the decree and not contemplated in the decree itself.” Whitehouse, 790 P.2d at 61 (citation and internal quotation marks omitted). With regard to a divorce decree’s division of the parties’ property, we have noted that courts should modify such provisions “with great reluctance” and “only upon a showing of compelling reasons arising from a substantial and material change in circumstances.” Id. (emphasis, citation, and internal quotation marks omitted).

At ¶ 21.

[W]hether Wife should be permitted to rent the home to defray the mortgage expense when she is not occupying it or whether Husband’s options, exercisable under the decree only at the end of the five‐year period, ought to be changed or accelerated are questions that must be resolved at an evidentiary hearing typical of modification proceedings and seem to require something more rigorous than the simple contract interpretation approach employed here.

At ¶ 23.

[U]nder rule 106, which was the rule relied on by the parties, the court cannot modify the real property division prior to an evidentiary hearing unless there are no material facts at issue, which does not appear to be the case here. See generally id. R. 106(b)(1)(B) (explaining that the court may temporarily modify child support, custody, or parent‐time during the pendency of a modification proceeding to address “an immediate and irreparable harm” but carving out no such exception for property distribution)

At ¶ 24.

[R]ule 106 applies only if one party is seeking to modify the existing custody or parent‐time provisions of a decree. Permanent orders addressing the relocation of one parent, on the other hand, are governed by the Relocation Statute. The Relocation Statute defines relocation as “moving 150 miles or more from the residence specified in the court’s decree.” Utah Code Ann. § 30‐3‐37(1) . . . Because Husband’s briefing focuses on the propriety of the court’s order under rule 106, not the Relocation Statute, he has failed to adequately challenge the basis of the court’s decision. . . . In particular, he has failed to demonstrate that there was any error in the court’s best interest evaluation and subsequent order under the Relocation Statute

At ¶¶ 27-29.

Thus, while we recognize that ordinarily an evidentiary hearing is the preferred mechanism for resolving disputes about the best interest of a child, see, e.g., Montano v. Third Dist. Court for Cnty. of Salt Lake, 934 P.2d 1156, 1157 (Utah Ct. App. 1997), under the particular circumstances of this case, Husband has failed to persuade us that the district court abused its discretion by declining to hear witness testimony on the relocation issue for the first time at the objection hearing.

At ¶ 35.

{a}commissioner is generally required either to consider an issue and make a recommendation to the district court as to how it should be resolved or to certify the issue directly to the court for resolution.

Here, the commissioner neither ruled on the issue of Wife’s alleged contempt nor certified it to the court for resolution but reserved his decision without explaining the reasons for doing so. It is certainly within the discretion of a judge or commissioner to postpone the decision on an issue when it is reasonable to do so, for example where the best decision requires additional evidence or resolution reasonably depends on yet unresolved or developing circumstances. . . . Such discretion is necessary to informed and effective judicial decision‐making at both the commissioner and the district court levels. District courts likewise have discretion to consider issues upon which a commissioner’s decision has previously been reserved in order to expeditiously move cases through the court system. . . . But while a district court has the discretion to consider an issue that has not been certified, Husband has provided us with no authority for the proposition that a court is required to do so.

Instead, if Husband believed that the commissioner had no reasonable basis for reserving decision on the contempt issue, then his remedy was to ask the judge to order the commissioner to make a recommendation on contempt, to certify the issue to the district court, or to explain why reserving decision was appropriate. Husband could request, but not demand, that the court consider the issue in the first instance. We therefore affirm the court’s decision to decline to consider the non‐certified issue of contempt.

At ¶¶ 38-40.

Judge Davis, dissenting in part

Although the district courts “have broad discretion in managing the cases before them,” A.K. & R. Whipple Plumbing & Heating v. Aspen Constr., 1999 UT App 87, ¶ 11, 977 P.2d 518, I believe it was nonetheless inappropriate for the district court here to refuse Husband an evidentiary hearing on preservation grounds. . . .

 . . . Regardless of whether it is appropriate or desirable to first present evidence to a commissioner, applying the preservation rule to the proceedings before a domestic relations commissioner impermissibly expands the function of the court commissioner system by barring litigants access to the court regardless of the merits of their cases.

Coincidentally, imposition of a preservation requirement in proceedings before the commissioner may negatively impact the system by requiring litigants to present every scrap of evidence to the commissioner or risk having that evidence rejected by a judge. Because “[t]he people have a right to have their cases and controversies ultimately decided by . . . judges who have been vested with judicial power by the constitution,” and “[a]nything less is a clear violation of the Utah constitution and Utah law,” Holm, 840 P.2d at 168, I respectfully dissent from Section II of the majority opinion and would, on remand, direct the district court to hear Husband’s evidence regarding the best interest issue.

At ¶¶ 44-46.

Donnelly v. Donnelly, 2013 UT App 84, No. 20100764‐CA (April 4, 2013)

Affirming Judge Bruce Lubeck and Judge Keith Kelly

JUDGE WILLIAM A. THORNE JR. authored this Opinion, in which J. FREDERIC VOROS concurred.

JUDGE GREGORY K. ORME concurred, with opinion.

Judge Thorne,

Michael Donnelly (Husband) appeals from the district court’s Decree of Divorce, challenging the district court’s temporary and permanent alimony awards and its orders pertaining to reimbursement of travel expenses and medical insurance premiums. Stacy Donnelly (Wife) cross‐appeals, challenging the district court’s decision to value Husband’s retirement plan as of the date of the parties’ separation rather than the date of divorce. We affirm.

At ¶ 1.

This is a very fact sensitive analysis of the trial court’s alimony award, the lack of an award for travel expenses caused by wife’s relocation, payment of medical insurance premiums, and valuation of husband’s retirement plan.

Alimony

The Court refuses to address many of Husband’s arguments regarding the various alimony awards because the issues were not preserved below.

At ¶¶ 14-22.

The Court review the issues concerning the district court’s alimony determination and finds that the district court’s factual determinations were not an abuse of discretion.

At ¶¶ 23-29.

Travel Expenses

Husband next argues that the district court erred when it refused to order Wife to reimburse him for portions of the children’s travel expenses pursuant to Utah’s relocation statute, Utah Code section 30‐3‐37. Husband argues that the district court misinterpreted the relocation statute to preclude reimbursement of travel expenses where, as here, the noncustodial parent is not current on all support obligations but has not been found in contempt. Husband further argues that the district court’s denial of travel expense reimbursement was inequitable and represented an abuse of the court’s discretion.

At ¶ 30.

We disagree with Husband’s interpretation of section 30‐3‐ 37(11). Section 30‐3‐37(11) requires a reimbursement order in only one circumstance, that of a noncustodial parent who is current on support payments. By implication, the statute imposes no requirement that a noncustodial parent who is not current on support be awarded reimbursement.

At ¶ 32.

The Court rejects Husbands argument that the district court’s denial of travel expenses was an inequitable and an abuse of discretion because all of the relevant arguments were not argued at the trial court level.

At ¶¶ 35-36.

Medical Insurance

It is readily apparent that both the parties and the court had strived mightily to accomplish a comprehensive resolution of the parties’ disputes over financial matters and reimbursement of medical expenses prior to the issuance of the Decree of Divorce. Husband’s failure to raise the issue at some point before the conclusion of that lengthy process acted as a waiver of any statutory right that he may have had to have Wife equally share the costs of the children’s medical insurance.

At ¶ 40.

Retirement Plan

“[A]s a general rule, the marital estate is valued at the time of the divorce decree,” Rappleye v. Rappleye, 855 P.2d 260, 262 (Utah Ct. App. 1993); see also Berger v. Berger, 713 P.2d 695, 697 (Utah 1985), and that “any deviation from the general rule must be supported by sufficiently detailed findings of fact that explain the trial court’s basis for such deviation,” Rappleye, 855 P.2d at 262. Here, however, the district court did explain its variation from the general rule, and Wife has not persuaded us that the district court’s explanation was inadequate.

At ¶ 41.

Judge Orme, concurring

I concur in the court’s opinion, with one reservation. Wife’s claimed expenses for the parties’ youngest child, such as for “special foods” and “lots of therapy,” are not relevant in calculating alimony; they are factors to be considered in fixing child support.

At ¶49.

State v. Loeffel, 2013 UT App 88, No. 20120108‐CA (April 4, 2013)

Affirming Judge G. Rand Beacham

Judge Orme,

Defendant Michael Dennis Loeffel appeals his conviction for three counts of aggravated assault, a third degree felony. See Utah Code Ann. § 76‐5‐103 (LexisNexis 2008). We affirm.

At ¶ 1.

At the close of evidence at trial, the court instructed the jury on the elements of aggravated assault and included an instruction on a reckless mental state.  Defendant objected to the instruction, arguing that recklessness was insufficient to satisfy the offense’s mens rea requirement. The court overruled the objection and allowed the instruction. Defendant was ultimately convicted. He now appeals.

At ¶ 6.

Defendant also contends that even if aggravated assault can be committed recklessly, the State presented insufficient evidence to support his conviction.

At ¶ 7.

A person is guilty of aggravated assault if that person commits an assault under Utah Code section 76‐5‐102 and, inter alia, uses a dangerous weapon as defined in Utah Code section 76‐ 1‐601(5). See id. § 76‐5‐103(1)(b). For purposes of this appeal, an assault under section 76‐5‐102 is either “(a) an attempt, with unlawful force or violence, to do bodily injury to another ”; or “(b) a threat, accompanied by a show of immediate force or violence, to do bodily injury to another.”5 Id. § 76‐5‐102(1)(a), (b). Under our criminal code, every offense not involving strict liability requires a prescribed culpable mental state. See id. § 76‐2‐102. However, if the definition of an offense “does not specify a culpable mental state and the offense does not involve strict liability, [then] intent, knowledge, or recklessness shall suffice to establish criminal responsibility.” Id.

Nothing in the text of either assault provision explicitly prescribes a culpable mental state. See id. §§ 76‐5‐102, ‐103. Therefore, our statutory framework prescribes that section 76‐2‐102 controls and that the mens rea requirement defaults to “intent, knowledge, or recklessness.” See id. § 76‐2‐102.

At ¶¶ 9-10.

We conclude that the State put on more than enough evidence to allow a reasonable jury to convict Defendant.

At ¶ 12.

Riggs v. Asbestos Corporation, 2013 UT App 86, No. 20110544‐CA (April 4, 2013)

Affirming Judge Glen Iwasaki

Judge Davis,

Micah Riggs, on behalf of his mother‐in‐law, the decedent Vickie Warren, appeals the trial court’s decision that the Comparative Negligence Act (CNA), and therefore joint and several liability, did not apply in this case. Defendant Union Carbide Corporation cross‐appeals, arguing that its motion for judgment notwithstanding the verdict was wrongly denied because the raw material supplier rule shields Union Carbide from liability under the facts of this case. Alternatively, Union Carbide argues in its cross‐appeal that there was insufficient evidence to support the jury’s verdict that the unique type of asbestos it supplied medically caused Warren’s illness. Defendant Georgia–Pacific, LLP also crossappeals, challenging the sufficiency of the evidence identifying a particular Georgia–Pacific product at the various construction sites where Warren was exposed to asbestos. We affirm.

At ¶ 1.

Plaintiff’s Comparative Negligence Argument

[D]uring a pretrial conference with all of the parties, Warren argued for the first time that the CNA, rather than the Liability Reform Act (LRA) that the parties had been proceeding under for the entire three years since the filing of the case, ought to apply because it was in effect at the time of Warren’s exposure to Defendants’ asbestos and asbestos‐containing products. The trial court rejected Warren’s argument, determining that the LRA applies both because Warren did not have a cause of action until she was diagnosed with mesothelioma and because her argument was untimely.

At ¶ 4.

“The general rule is that the law establishing substantive rights and liabilities when a cause of action arises, and not a subsequently enacted statute, governs the resolution of the dispute.” Carlucci v. Utah State Indus. Comm’n, 725 P.2d 1335, 1336 (Utah 1986). Likewise, “[t]he courts of this state operate under a statutory bar against the retroactive application of newly codified laws,” unless the newly enacted statute indicates that it is to be retroactive, State v. Clark, 2011 UT 23, ¶ 11, 251 P.3d 829; see also Utah Code Ann. § 68‐3‐3 (LexisNexis 2011) (“A provision of the Utah Code is not retroactive, unless the provision is expressly declared to be retroactive.”), or the “statutory amendments are procedural, rather than substantive,” State v. Burgess, 870 P.2d 276, 280 n.6 (Utah Ct. App. 1994). The issue before us is not one of statutory interpretation, as Warren asserts, but a question of when Warren’s claim arose.

At ¶ 13.

“A tort cause of action accrues when it becomes remediable in the courts, that is, when all elements of a cause of action come into being.” Davidson Lumber Sales, Inc. v. Bonneville Inv., Inc., 794 P.2d 11, 19 (Utah 1990); cf. Sevy v. Security Title Co. of S. Utah, 902 P.2d 629, 634 (Utah 1995) (“The general rule regarding statutes of limitations is that the limitation period begins to run when the last event necessary to complete the cause of action occurs.”). In other words, “the law does not recognize an inchoate wrong, and . . . until there is actual loss or damage resulting to the interests of another, a claim for negligence is not actionable.” Seale v. Gowans, 923 P.2d 1361, 1364 (Utah 1996) (citation and internal quotation marks omitted). The injury necessary to pursue any tort action must be a “legal injury” in that there needs to be a remediable injury and “the injury [must have been] caused by negligent action.” Id. at 1363 (citation and internal quotation marks omitted). Accordingly, “even though there exists a possibility, even a probability, of future harm, it is not enough to sustain a claim, and a plaintiff must wait until some harm manifests itself.” Id. at 1364–65 (holding “that damages in the form of an enhanced risk” are insufficient to sustain a cause of action); see also Johnson v. Mullee, 385 So. 2d 1038, 1040 (Fla. Dist. Ct. App. 1980) (holding that a patient’s malpractice cause of action did not accrue “when the patient first learned of the misdiagnosis, [because] there was no evidence that the alleged negligence ‘had resulted in any harm toher’” and treatment for her cancer could still be successful despite the misdiagnosis, leaving her where she would have been if the misdiagnosis did not occur and the cancer had been detected during the previous year’s mammogram (cited by Seale, 923 P.2d at 1365)).

Here, Warren argues that her claim accrued “long before” the LRA became effective because her “initial injury” was the cell damage and scarring that resulted from inhaling Defendants’ asbestos. We disagree. Regardless of whether the replication of those damaged cells over time produced Warren’s cancer, see infra ¶¶ 27‐28, she nonetheless did not have an actionable claim until she was diagnosed with mesothelioma. Until then, Warren’s development of mesothelioma was only a possibility in light of her exposure to asbestos. . . . Accordingly, because Warren’s cause of action did not accrue until her diagnosis in July 2007, long after the repeal of the CNA and enactment of the LRA, we affirm the trial court’s application of the LRA.

At ¶¶ 14-15.

Union Carbide’s Raw Material Supplier Rule Argument

Union Carbide [argues that it] . . . could not be held liable for Warren’s illness because it is a bulk supplier of raw materials, as described in the Third Restatement of Torts. See Restatement (Third) of Torts: Products Liability § 5 & cmt. c (1998). The trial court had rejected this argument . . . summary judgment, reasoning that “Utah has not considered the issue of adopting the Restatement (Third) of Torts: Products Liability § 5 and, indeed, recent Utah case law supports the conclusion that with respect to the specific provision at issue . . . , the Restatement (Second) of Torts should act as the guide,” and the court ultimately declined to walk through the application of either restatement because doing so involved disputed issues of material fact.

At ¶ 7.

Two days after the jury reached its verdict in this case, our supreme court, in Gudmundson v. Del Ozone, 2010 UT 33, 232 P.3d 1059, adopted the rule in the Third Restatement of Torts on which Union Carbide now relies. See id. ¶¶ 55–56. Gudmundson adopted the rule as follows:

“One engaged in the business of selling or otherwise distributing product components who sells or distributes a component is subject to liability for harm to persons or property caused by a product into which the component is integrated if:

. . .

(b)(1) the seller or distributor of the component substantially participates in the integration of the component into the design of the product; and

(2) the integration of the component causes the product to be defective, as defined in [the Restatement]; and

(3) the defect in the product causes the harm.”

Id. ¶ 55 (quoting Restatement (Third) of Torts: Products Liability § 5 (1998)); see also id. ¶ 55 n.14 (declining to adopt subsection (a) of the Restatement provision at issue because “it only addresses situations in which the component part itself is defective” and those situations are already “adequately addressed in our case law”). The supreme court explained that this new rule “embraces the policy‐based rationale that although manufacturers of nondefective component parts at the time of sale should not bear the risk of ensuring the integrated product’s safety, a component manufacturer who participates in the design of the product should bear some liability risk.” Id. ¶ 56; accord Restatement (Third) of Torts: Products Liability § 5 cmt. a.

The rule defines “[p]roduct components” as “raw materials, bulk products, and other constituent products sold for integration into other products.” Restatement (Third) of Torts: Products Liability § 5 cmt. a. Liability for a nondefective product under the rule “requires two findings. First, the participation [by the component supplier in integrating the component into the final product] must be substantial. Second, the integration of the nondefective component must cause the integrated product to be defective.” Gudmundson, 2010 UT 33, ¶ 57. The first requirement “ensures that ‘[m]ere suppliers [will not be] expected to guarantee the safety of other manufacturers’ [products],’” id. ¶ 59 (first alteration in original) (quoting Crossfield v. Quality Control Equip. Co., 1 F.3d 701, 704 (8th Cir. 1993)), and also “prevents the imposition [on uninvolved component parts suppliers] of a duty to ‘foresee all the dangers that may result from the use of a final product which contains its component part or materials,’” id. ¶ 58 (quoting Bond v. E.I. Du Pont De Nemours & Co., 868 P.2d 1114, 1119 (Colo. Ct. App. 1993)). See House v. Armour of Am., Inc., 886 P.2d 542, 553 (Utah Ct. App. 1994) (“‘[I]f the component part manufacturer does not take part in the design or assembly of the final system or product, he is not liable for defects in the final product if the component part itself is not defective.’” (quoting Koonce v. Quaker Safety Prods. & Mfg. Co., 798 F.2d 700, 715 (5th Cir. 1986))), aff’d, 929 P.2d 340 (Utah 1996); accord Buonanno v. ColmarBelting Co., Inc., 733 A.2d 712, 719 (R.I. 1999).

At ¶¶ 18-19.

The Court holds that raw materials cannot be defective; accordingly “the question boils down to whether Calidria was defective based on the adequacy of the warnings provided.”

At ¶¶ 20-22.

Which individuals Union Carbide owed a duty to warn, and whether its warnings to Georgia–Pacific satisfied that duty, are questions that were not addressed or developed at trial in such a way as to permit our review, especially under the constraints of the JNOV framework. . . .

. . . Thus, we find ourselves in the peculiar procedural position of reviewing a denial of a judgment notwithstanding the jury’s verdict, when the issue at hand, while persuasive at an abstract level, was not presented to the jury and therefore not a part of its verdict. Because we are constrained by the JNOV standard, we must affirm the trial court’s determination. Thus, Union Carbide has demonstrated that the bulk supplier rule generally applies in cases like this one but has failed to show that the evidence before the jury requires a conclusion, as a matter of law, that it had fulfilled whatever duty to warn it had under the circumstances, even if that duty extended only to Georgia–Pacific and not to Warren.

At ¶¶ 23-24.

Union Carbide’s Causation Argument & Georgia-Pacific’s Sufficiency of the Evidence Argument

Georgia–Pacific also cross‐appeals, arguing that its directed verdict motion was wrongly denied because the jury’s verdict was not supported by sufficient evidence as to the identification of its tape joint compound at any of the locations where Warren was exposed to asbestos‐containing tape joint compound.

At ¶ 11.

The Court reviews the evidence and finds that there was sufficient evidence to support the jury’s verdicts.

At ¶¶ 26-35.