946 F.3d 1122
10th Cir.2019Background
- Mountain Dudes obtained a $1.175M judgment against Split Rock, Inc. (SRI) and sued under Utah’s UFTA after SRI sold its assets to Split Rock Holdings (SR Holdings) in June 2009.
- The June 2009 Sale of Assets purportedly obligated SR Holdings to pay SRI $2.7M plus interest; parties dispute whether SR Holdings executed the promissory note.
- In January 2010 the parties executed a modification canceling any previous note and converting payment to 8% of net revenue (min $135,000); SR Holdings paid only ~$188,000 and made distributions to defendants.
- Mountain Dudes alleged the January 2010 Modification was a fraudulent transfer under UFTA (actual intent, lack of equivalent value, insolvency theories) and must be avoided so Mountain Dudes could levy the original obligation.
- The jury deadlocked but reported unanimous findings that SRI acted to delay creditors and was insolvent; jurors split on whether the January 2010 Modification was a “transfer.”
- The district court granted Defendants judgment as a matter of law under Fed. R. Civ. P. 50(b) on grounds not raised by the parties (including absence of an executed note and reliance on Rupp), denied Mountain Dudes’ 50(b) motion, and the Tenth Circuit reversed the sua sponte JMOL and remanded for a new trial while affirming denial of plaintiff’s JMOL.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court may grant JMOL on grounds not raised in Rule 50(a)/(b) | The court erred; Rule 50 requires pre-deliberation notice so plaintiff can cure evidentiary defects | Court relied on unraised grounds after deliberations; defendants did not press those specific grounds | Reversed: district court erred; may not grant JMOL on sua sponte grounds not raised in Rule 50 motions |
| Whether the Jan. 2010 Modification was a UFTA "transfer" of an asset (disposition of the $2.7M right) | It materially reduced SR Holdings’ obligation and thus disposed of SRI’s $2.7M asset | The modification did not diminish value (or could have increased value) and therefore was not a transfer | No JMOL for either side; disputed factual issue for jury (evidence could support either inference) |
| Whether there was an enforceable $2.7M obligation (signed promissory note) necessary to show an asset existed to be transferred | Circumstantial evidence supports that SR Holdings executed the note (contract required note, parties acted as if completed, January 2010 canceled any previous note) | No signed note was produced; without it SRI never acquired an enforceable right to the $2.7M | District court erred to grant JMOL on this unraised ground; credibility/circumstantial evidence makes issue for jury |
| Whether Mountain Dudes proved UFTA liability as a matter of law | Mountain Dudes argued clear and convincing evidence established UFTA elements (fraudulent intent and transfer) | Defendants pointed to factual disputes about transfer, enforceability, and extent of harm | Denied plaintiff JMOL; genuine disputes of material fact preclude JMOL; case remanded for new trial |
Key Cases Cited
- Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 546 U.S. 394 (U.S. 2006) (Rule 50 preservation requirement and purpose explained)
- Hewlett-Packard Co. v. Mustek Sys., Inc., 340 F.3d 1314 (Fed. Cir. 2003) (error to grant JMOL on ground not raised by Rule 50 motions)
- Perez v. El Tequila, LLC, 847 F.3d 1247 (10th Cir. 2017) (arguments in Rule 50(b) cannot be considered if not asserted in Rule 50(a))
- Home Loan Inv. Co. v. St. Paul Mercury Ins. Co., 827 F.3d 1256 (10th Cir. 2016) (Rule 50 compliance is mandatory)
- In re: Cox Enters., Inc., 871 F.3d 1093 (10th Cir. 2017) (JMOL proper only when evidence points but one way without reasonable contrary inferences)
- Rupp v. Moffo, 358 P.3d 1060 (Utah 2015) (UFTA interpretation regarding property encumbered by liens and actual harm reasoning)