906 F.3d 884
10th Cir.2018Background
- Equity Title’s key Utah office employees (Smith, Carrell, Williams) had signed noncompete and nonsolicitation employment agreements while employed by Equity.
- First American Financial acquired Equity in stages (completed by Feb. 2009) and later merged Equity into FA LLC; employees reviewed First American’s Employee Handbook and Code of Ethics.
- In March 2015 Smith, Carrell, and others left to form Northwest Title Insurance Agency; many Equity/First American employees and clients followed.
- First American sued for breach of contract, breach of fiduciary duty, tortious interference, and civil conspiracy; district court granted partial summary judgment on several contract issues and rejected many defenses.
- A jury found multiple defendants liable (breach of contract, fiduciary duty, tortious interference) and awarded $2,725,000 in total damages plus punitive damages against Northwest; the district court awarded about $2.9 million in attorneys’ fees.
- On appeal defendants challenged standing, contract enforceability after stock purchase/merger, jury instructions, damages apportionment, and the fee award; the Tenth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing (Article III) | First American had concrete injury from lost employees/clients and can sue to recover damages. | Plaintiffs failed to prove which corporate entity had standing and improperly proceeded jointly. | Plaintiffs satisfied standing; any entity identity issue is real-party-in-interest, largely forfeited or waived by defendants and stipulation. |
| Enforceability of Equity employment agreements after stock purchase/merger | Equity’s employment contracts remained enforceable against employees after acquisition and merger into FA LLC. | Stock acquisition/merger terminated or altered the agreements’ restrictive covenants (e.g., the noncompete period ran from stock sale). | Stock purchase and merger did not extinguish the contracts; agreements transferred per corporate law; alleged judicial admission was legal conclusion and not binding. |
| Jury instructions and preservation | Plaintiffs’ proposed instructions were adequate; given instructions captured law on fiduciary duties and competition. | Court erred by refusing/omitting several proposed instructions (fiduciary scope, simultaneous representation, etc.). | Most complaints waived for failure to timely and specifically object; no plain-error showing; instructions on fiduciary duties appropriately addressed planning-to-compete exceptions. |
| Damages apportionment and award reliability | Jury avoided double recovery and apportioned a total loss among causes/defendants based on evidence of lost profits. | Damages weren’t apportioned by claimant/claim and awards were inconsistent/duplicative. | Jury’s award upheld: lost-profits proof can be inexact; verdict form shows intent to avoid double recovery; no prejudice shown. |
| Attorneys’ fees allocation and amount | Fees are recoverable and need not be segregated where claims arise from same nucleus of operative facts; amount was within court’s discretion. | Plaintiffs failed to segregate fees between compensable and noncompensable claims; award excessive relative to damages. | Fee award affirmed: claims overlap so no mandatory segregation; amount not an abuse of discretion under Utah law. |
Key Cases Cited
- Massachusetts v. EPA, 549 U.S. 497 (standing principles for Article III) (discusses adversity and concrete stake required for federal jurisdiction)
- Jackson v. Volvo Trucks N. Am., Inc., 462 F.3d 1234 (10th Cir.) (three-part Article III standing test)
- New England Health Care Emps. Pension Fund v. Woodruff, 512 F.3d 1283 (10th Cir. 2008) (real-party-in-interest vs. standing distinction)
- OfficeMax, Inc. v. Levesque, 658 F.3d 94 (1st Cir. 2011) (noncompete post-sale context; facts distinguished)
- Cellport Sys., Inc. v. Peiker Acustic GMBH & Co. KG, 762 F.3d 1016 (10th Cir. 2014) (de novo review of contract interpretation)
- Aetna Life & Cas. v. United Pac. Reliance Ins. Cos., 580 P.2d 230 (Utah) (merger/assumption of contracts under state law)