424 P.3d 1016
Utah Ct. App.2018Background
- Patricia Beckman founded Cybertary and entered an Employment Agreement with Cybertary as CEO for a three-year term, which listed seven specific events that would constitute "cause" for immediate termination and provided an attorney-fees clause tied to a defined "nonprevailing party."
- Relations soured; Beckman filed bankruptcy (May 2011). After settlement-demand communications, Beckman recorded a 90-minute October 2011 call with Christian Faulconer that began with both parties stating it was "for settlement purposes only." Beckman sued Cybertary in November 2011 for unpaid salary and benefits (post-bankruptcy amounts); Cybertary then terminated her for cause.
- Beckman amended to add Franchise Foundry and Faulconer, alleging they interfered and retaliated; Cybertary counterclaimed for breaches and damages. The court denied Beckman leave to file a second amended complaint adding several new claims.
- The trial court excluded Beckman’s recorded October conversation under Utah R. Evid. 408 as settlement negotiations, struck Cybertary’s untimely damage disclosure, granted a directed verdict on Cybertary’s counterclaims, and submitted a jury instruction that incorporated both the Employment Agreement’s enumerated "cause" events and language applying a business-judgment / objective-reasonableness standard.
- Jury awarded Beckman $103,063.83 for unpaid salary and benefits and found no gross negligence or willful misconduct by Franchise Foundry or Faulconer. The trial court denied prejudgment interest, awarded net attorney fees to Beckman under the Employment Agreement, and separately awarded fees to Franchise Foundry and Faulconer under Utah’s reciprocal-fees statute; Beckman appealed.
Issues
| Issue | Plaintiff's Argument (Beckman) | Defendant's Argument (Defendants) | Held |
|---|---|---|---|
| Denial of leave to amend complaint | Motion was not untimely; bankruptcy justified delay; defendants not prejudiced | Motion came >16 months in; discovery closed; amendment prejudiced defendants | Affirmed — trial court did not abuse discretion (untimeliness, delay, prejudice supported denial) |
| Exclusion of October recording under Utah R. Evid. 408 | Recording is business communication, no dispute yet; or otherwise discoverable so admissible | Call was settlement negotiation; statements inadmissible under Rule 408(a)(2) | Affirmed — recording was concessionary settlement discussion and excluded under Rule 408(a)(2) |
| Jury instruction defining "cause" (inclusion of business-judgment / objective-reasonableness language) | Employment Agreement expressly defined seven events as "cause"; plain language should control; no business-judgment standard | Uintah Basin permits objective-reasonableness / good-faith standard where contract uses "just cause" or undefined term | Reversed — court erred: where contract specifically defines enumerated "cause" events, employer’s subjective/business-judgment standard should not be grafted on; new trial on wrongful termination claim required |
| Prejudgment interest on unpaid wages/benefits | Damages were ascertainable/calculable from the contract and fixed as of termination; prejudgment interest appropriate | Damages required jury discretion; interest accrual complicated; Employment Agreement not loan/forbearance | Reversed — prejudgment interest should have been awarded; remanded to compute amount |
| Attorney-fees clause interpretation and fee awards | Clause yields a single "nonprevailing party" in the proceeding; by subtraction Cybertary should be the nonprevailing party; fees to Franchise Foundry/Faulconer improper | Trial court may assess fees per-claim (bifurcate); clause ambiguous; reciprocal-fees statute justifies fees to Franchise Foundry/Faulconer | Mixed: vacated trial-court fee award to Cybertary and remanded to resolve ambiguity via extrinsic evidence; reversed fees to Franchise Foundry/Faulconer (reciprocal-fees statute inapplicable because Beckman did not sue them on the Employment Agreement as an enforceable contract) |
Key Cases Cited
- Uintah Basin Med. Ctr. v. Hardy, 110 P.3d 168 (Utah Ct. App.) (objective reasonableness / employer good-faith standard applied where contract used undefined "just cause")
- Encon Utah, LLC v. Fluor Ames Kraemer, LLC, 210 P.3d 263 (Utah 2009) (prejudgment interest appropriate where damages are complete, fixed, and measurable)
- Favero Farms, LC v. Baugh, 356 P.3d 188 (Utah Ct. App.) (prevailing party on appeal generally entitled to appellate fees when fees were awarded below)
- Kern v. Palmer Coll. of Chiropractic, 757 N.W.2d 651 (Iowa 2008) (refusing to apply objective-reasonableness approach where contract expressly defined "cause")