KTM Health Care Inc. v. SG Nursing Home LLC
436 P.3d 151
Utah Ct. App.2018Background
- Pharmacy (KTM Health Care) and Nursing Home (SG Nursing Home/Apex) signed a closed-door exclusive pharmacy contract on May 25, 2010, to begin June 28, 2010; Nursing Home later discovered it was contractually bound to another provider and decided to stay with that provider.
- Pharmacy incurred business changes and expenditures in reliance (hiring a pharmacist in Nevada, renovating its facility, ≈$33,000 in improvements) and sued Nursing Home for breach of contract plus multiple fraud-based tort claims.
- Before trial the court excluded Pharmacy’s proposed expert on contract renewal length and, on Nursing Home’s motion, dismissed Pharmacy’s fraud-based claims on election-of-remedies grounds; the case proceeded on breach only.
- A jury initially found breach and awarded $143,989 in lost profits (and wrote “plus attorney fees”), but also found mutual mistake as to Nursing Home’s ability to terminate its prior contract; the court perceived an inconsistency and sent the still-empaneled jury back to clarify.
- After re-deliberation the jury reaffirmed breach, switched the mutual mistake answer to no, increased consequential damages to $120,000, and removed attorney fees from the verdict; the trial court refused prejudgment interest and entered judgment based on the second verdict.
- On appeal the court (Utah Ct. App.) held the trial court properly sought jury clarification on mutual mistake but abused its discretion by allowing re-deliberation on damages; it affirmed exclusion of the expert, reversed dismissal of fraud claims only as to election of remedies (but affirmed dismissal under the economic loss rule), and upheld denial of prejudgment interest. The matter was remanded to enter judgment for breach with the jury’s original damages ($143,989 lost profits; $0 consequential damages), excluding attorney fees.
Issues
| Issue | Plaintiff's Argument (Pharmacy) | Defendant's Argument (Nursing Home) | Held |
|---|---|---|---|
| Whether the trial court erred by resubmitting the special verdict to the still-empaneled jury after perceiving inconsistencies | The verdict could be reconciled; court should have resolved without sending jury back | Court properly clarified apparent inconsistency while jury was available | Court: Trial judge had discretion to seek clarification on mutual mistake; remand to reinstate original damages because re-deliberation on damages was an abuse of discretion |
| Whether exclusion of Pharmacy’s expert on expected contract renewals was erroneous | Expert would have helped quantify multi-year lost profits | Expert testimony was speculative and not reliably applied to facts | Court: No abuse of discretion in excluding expert because assumptions about renewals were unsupported |
| Whether dismissal of fraud-based claims was required by election of remedies or barred by economic loss rule | Election of remedies should not have been applied pretrial; Pharmacy may plead inconsistent theories | Pharmacy elected contract remedies and thus cannot pursue fraud-based remedies | Court: Dismissal on election-of-remedies grounds was error (plaintiff may plead alternatives), but fraud-based claims are barred by the economic loss rule because alleged duties arise from the contract—not an independent tort duty |
| Whether prejudgment interest on lost profits was required (and at what rate) | Lost-profits award should carry prejudgment interest (per contract or otherwise) | Prejudgment interest not appropriate because lost profits are speculative; contractual rate inapplicable | Court: Denial of prejudgment interest affirmed—lost profits were not a fixed, ascertainable sum and awarding prejudgment interest was inappropriate |
Key Cases Cited
- Bennion v. LeGrand Johnson Constr. Co., 701 P.2d 1078 (Utah 1985) (trial courts should seek to reconcile jury interrogatories if possible after discharge; objection while jury empaneled preferred to allow clarification)
- Neff v. Neff, 247 P.3d 380 (Utah 2011) (appellate rule to accept any reasonable view that reconciles jury answers when reviewing alleged inconsistencies)
- Smith v. Riceland Foods, Inc., 151 F.3d 813 (8th Cir. 1998) (trial court has discretion to decide whether verdict findings are inconsistent and whether to resubmit to jury)
- Helf v. Chevron U.S.A. Inc., 361 P.3d 63 (Utah 2015) (modern pleading allows inconsistent claims to be pled; election of remedies should not force premature binding election)
- SME Indus., Inc. v. Thompson, Ventulett, Stainback & Assocs., Inc., 28 P.3d 669 (Utah 2001) (economic loss rule distinguishes contract expectancy protection from tort duties)
- Grynberg v. Questar Pipeline Co., 70 P.3d 1 (Utah 2003) (tort claims premised on the same conduct and duties as contract claims are barred by the economic loss rule)
- USA Power, LLC v. PacifiCorp, 372 P.3d 629 (Utah 2016) (prejudgment interest inappropriate where lost profits are speculative or not calculable by fixed standards)