Thurston v. Block United
2021 UT App 80
| Utah Ct. App. | 2021Background
- Thurston co-founded Block United LLC; after managerial deadlock he sued the company alleging conversion, breach of fiduciary duty, accounting misstatements, and other claims.
- On February 20, 2019 the parties reached a mediated settlement: Block United would pay money and transfer assets to Thurston in exchange for his signing and filing dismissal and release papers.
- Block United promptly tendered the agreed funds and assets; Thurston repeatedly refused to sign dismissal papers, later alleging Block United made material misrepresentations during mediation.
- Nearly six months later Thurston filed an amended complaint seeking to void the settlement for fraud and alleging new claims based on those alleged misrepresentations.
- Block United moved to enforce the settlement; the district court found Thurston waived any right to rescind by retaining the settlement proceeds and dismissed the amended complaint with prejudice.
- The Utah Court of Appeals affirmed, holding the district court did not abuse its discretion and remanded only to calculate appellate attorney fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Thurston waived the right to rescind the settlement by keeping proceeds | Thurston says his post-settlement communications and later amended complaint show intent to rescind and pursue rescission promptly | Block United says retaining the settlement benefits while delaying rescission constitutes waiver; petitioner must return benefits to rescind | Court: Waiver — keeping proceeds and waiting months foreclosed rescission; no abuse of discretion |
| Whether fraud claims in the amended complaint could survive enforcement as an affirmation/damages claim | Thurston contends the amended complaint sought damages and thus could be read as affirming the settlement and suing for fraud damages | Block United argues the amended complaint sought only to void the settlement and did not plead alternative relief or a damages theory premised on affirming the contract | Court: Pleading deficient — claims sought rescission only, not alternative relief; dismissal of amended complaint proper |
Key Cases Cited
- Tracy-Collins Bank & Trust Co. v. Travelstead, 592 P.2d 605 (Utah 1979) (settlements may be summarily enforced by motion in original action)
- Dugan v. Jones, 615 P.2d 1239 (Utah 1980) (defrauded party may rescind or affirm contract and may recover damages)
- Taylor v. Moore, 51 P.2d 222 (Utah 1935) (delay or continued enjoyment of benefits can waive right to rescind)
- Perry v. Woodall, 438 P.2d 813 (Utah 1968) (retention of property/benefits defeats rescission)
- Ockey v. Lehmer, 189 P.3d 51 (Utah 2008) (failure to object/return benefits can constitute ratification)
- McKelvey v. Hamilton, 211 P.3d 390 (Utah Ct. App. 2009) (standard of review: enforcement of settlement reviewed for abuse of discretion)
- Asael Farr & Sons Co. v. Truck Ins. Exch., 193 P.3d 650 (Utah Ct. App. 2008) (notice pleading requires fair notice of alternative theories and relief)