Yuanzong Fu v. Rhodes, 2015 UT 59

Fu lent petitioners (real-estate investors) over $170,000 and sued in 2008 for nonpayment, asserting breach of contract, foreclosure, fraudulent transfer, fraud, and negligent misrepresentation.
Petitioners repeatedly missed discovery deadlines from 2009 into 2010; the district court ordered production and warned that failure would result in striking the answer and judgment as prayed.
Petitioners continued to miss deadlines; Fu moved for default judgment as a discovery sanction under Utah R. Civ. P. 37. The district court granted default judgment after two hearings, finding continued discovery noncompliance.
On appeal the Utah Court of Appeals unanimously affirmed the default sanction but was divided on whether petitioners could raise for the first time on appeal that Fu’s complaint was legally insufficient to support certain claims.
The Utah Supreme Court granted certiorari, reviewed for abuse of discretion on the sanction and for correctness on preservation, and affirmed the court of appeals on both issues.

Issue	Fu's Argument	Petitioners' Argument	Held
Whether the district court abused its discretion by entering default judgment as a discovery sanction	Sanction appropriate because petitioners’ repeated discovery failures frustrated litigation and prevented proof of alleged fraud	Default was extreme; lesser sanctions would suffice; petitioners’ production and explanations mitigated sanction severity	No abuse of discretion; delays, unreliable explanations, and persistent noncompliance justified default in this case
Whether defendants may raise for the first time on appeal the legal sufficiency of the complaint when the default judgment was entered as a discovery sanction	A default judgment cannot rest on a legally insufficient complaint; Skanchy permits challenging sufficiency on appeal from default	Defendants had ample opportunity before and after judgment to raise sufficiency below; preservation rule applies to defaults as sanctions	Preservation rule bars new sufficiency arguments on appeal from a discovery-sanction default unless preserved or an ordinary preservation exception applies

Kilpatrick v. Bullough Abatement, Inc., 199 P.3d 957 (Utah 2008) (sets two-step review for discovery sanctions and requires findings on willfulness/bad faith but allows affirmance if record supports sanction)
Skanchy v. Calcados Ortope SA, 952 P.2d 1071 (Utah 1998) (on default for failure to appear, a defendant may challenge complaint sufficiency on appeal)
W. W. & W. B. Gardner, Inc. v. Park W. Vill., Inc., 568 P.2d 734 (Utah 1977) (default is appropriate where discovery failure frustrates the judicial process and prevents adjudication on the merits)
State v. Sixteen Thousand Dollars United States Currency, 914 P.2d 1176 (Utah Ct. App. 1996) (preservation principles for challenging case defects)