Case Information
*1
T HE U TAH C OURT OF A PPEALS
T HE A RMER T EXAS T RUST , ET AL ., Appellants, v.
R OBERT V. B RAZELL , I N -S TORE B ROADCASTING N ETWORK LLC, I N - S TORE B ROADCASTING H OLDINGS LLC, IBN M EDIA LLC, I N -T OUCH LLC, I N -T OUCH M EDIA LLC, T ALOS P ARTNERS LLC, V ON H. W HITBY , R OBERT W. K ASTEN J R ., R OBERT E. R ILEY , AND R OBIN N EBEL , Appellees.
Opinion No. 20150140-CA Filed February 24, 2017 Third District Court, Salt Lake Department The Honorable Andrew H. Stone No. 130900740 Donald H. Flanary Jr., John P. Mertens, and Adam L. Hoyt, Attorneys for Appellants
Michael N. Zundel, John S. Chindlund, and Florence M. Vincent, Attorneys for Appellees IBN Parties Richard D. Burbidge, Jefferson W. Gross, and S. Ian Hiatt, Attorneys for Appellee Von H. Whitby J UDGE K ATE A. T OOMEY authored this Opinion, in which J UDGES G REGORY K. O RME and S TEPHEN L. R OTH concurred.
1. The parties on appeal are not limited to those listed, but also include other parties whose names appear on the notice of appeal or who have otherwise entered appearances in this court.
TOOMEY, Judge:
¶1 The Appellants seek reversal of the district court’s order denying them leave to amend their complaint and determining that their complaint lacked particularity under rule 9(c) of the Utah Rules of Civil Procedure. We affirm.
BACKGROUND
¶2 The Appellants are individuals and entities who allegedly invested approximately two million dollars in various In-Store Broadcasting Network entities. They claimed these investments were induced by the misrepresentations of the Appellees (collectively, IBN). In their initial complaint and subsequent amended
complaints, the Appellants alleged several causes of action including fraudulent misrepresentation, fraudulent inducement and rescission, promissory estoppel, civil conspiracy, common law fraud, constructive trust, fraudulent transfer, and violation of the Utah Uniform Securities Act. The Appellants filed their initial complaint in February
2013. In March 2013, before IBN had responded, the Appellants filed a first amended complaint. They later sought leave of court to file a second amended complaint, which the court granted, and they filed it in September 2013. The parties then stipulated 2. On November 1, 2016, after this case was argued, rule 9 of the Utah Rules of Civil Procedure was amended. While the amendment made no substantive changes, language previously appearing under rule 9(b) now appears under rule 9(c). Thus, although the parties’ briefing and the district court’s order refer to rule 9(b), we will refer to rule 9(c) throughout this opinion to avoid confusion.
to a scheduling order, which provided that any “*a+mended pleadings shall be filed by July 3, 2014.” The district court never approved this stipulation, and in March and July 2014, the Appellants filed third and fourth amended complaints without leave of court. In October 2014, IBN filed a rule 12(b)(6) motion to
dismiss the Appellants’ complaint for failure to state a claim upon which relief could be granted. Instead of defending the latest iteration of their complaint, the Appellants responded by seeking leave to file a fifth amended complaint. The district court denied the Appellants’ motion to amend
because the motion was untimely, because granting it would substantially prejudice IBN, and because the Appellants gave no justification for this fifth attempt. The court also determined that the fifth amended complaint “fail*ed+ to plead a fraud claim as to any specific plaintiff against any specific defendant with the particularity required by Rule 9([c]).” The district court determined there was no need to decide whether the previous versions of the Appellants’ complaint met the requirements of rule 9(c), because the Appellants acknowledged that their fifth amended complaint “contain*ed+ greater particularity than the earlier versions,” and because the court had determined that 3. In support of their motion for leave to file an amended complaint, the Appellants stated that the fifth amended complaint “adds nothing to the Third and Fourth Amended Complaints except where it fills in the lack of particularity gaps about which [IBN] complain[s] in [the] Rule 12(b)(6) Motion to Dismiss.” In opposition to IBN’s rule 12(b)(6) motion, the Appellants likewise acknowledged that “the Second Amended Complaint is admittedly deficient under Rule 9(*c+)” and asserted that the “proposed Amended Complaint . . . fully meets the requirements of Rule 9(*c+).”
this more detailed version was still insufficient under the rule. Stating that “*s+ix tries at pleading fraud are enough,” the court granted IBN’s motion to dismiss. The Appellants appeal the district court’s order.
ISSUES AND STANDARDS OF REVIEW
¶7 The Appellants raise three issues on appeal. First, they contend the district court erred when it refused to grant them leave to amend their complaint for the fifth time. We review a district court’s ruling on a motion to amend a complaint for abuse of discretion. Coroles v. Sabey , 2003 UT App 339, ¶ 16, 79 P.3d 974. Under this standard, we will not reverse a district court’s decision unless it “exceeds the limits of reasonability.” (citation and internal quotation marks omitted).
¶8 Next, the Appellants contend the district court erred
when, as a part of its rule 12(b)(6) dismissal, it determined that
the fifth amended complaint did not meet the requirements of
rule 9(c) of the Utah Rules of Civil Procedure. “*A+n appeal from
a rule 12(b)(6) dismissal presents only questions of law, and we
review the district court’s ruling for correctness.”
Fidelity Nat’l
Title Ins. Co. v. Worthington
,
ANALYSIS
I. Rule 15(a)
The Appellants’ first contention is that the district court
erred by denying them leave to amend their complaint.
Rule 15(a) of the Utah Rules of Civil Procedure provides
that, except for one amendment “as a matter of course” in
specified circumstances, “a party may amend his pleading only
by leave of court or by written consent of the adverse party; and
leave shall be freely given when justice so requires.” When
determining whether to grant or deny a motion to amend, a
court may consider certain factors, including: “(1) the timeliness
of the motion; (2) the justification given by the movant for the
delay; and (3) the resulting prejudice to the responding party.”
Kleinert v. Kimball Elevator Co.
,
the Appellants’ motion to amend. It determined that their
motion was “untimely, coming long after both the Court-
imposed presumptive deadline for amendment as well as [the
deadline] stipulated to by the parties.” It determined the
Appellants had provided “no justification for not having
pleaded their multiple earlier versions of the complaint with the
additional facts” that were “plainly available to *the Appellants]
from the start.” Finally, the court determined that IBN would be
4. In
Kelly v. Hard Money Funding, Inc.
,
substantially prejudiced “as *it+ would now be faced with new
factual theories for which [it has] not had time to prepare.”
¶13 In arguing that the district court should have allowed
them to amend their complaint, the Appellants do not address
the court’s analysis, and they do not acknowledge the factors on
which the court relied in making its decision. Instead, the
Appellants merely assert that the court’s decision was in error
because the fifth amended complaint would not have prejudiced
IBN. They cite
Williams v. State Farm Insurance Co.
,
Williams analysis focuses on the adequacy of pleadings, specifically in the context of affirmative defenses. at 969–71. Williams does not discuss amended complaints, and while it correctly outlines the purpose behind “our liberal[] pleading rules,” which liberality is expressly tempered by rule 9(c)’s particularity requirement, it has no bearing on whether the district court properly denied the Appellants’ motion to amend. See id. at 971. “The decision to allow leave to amend a complaint is discretionary with the trial court,” and a court may rely on several factors when making this decision. See Kleinert , 854 P.2d at 1028. Otherwise, the Appellants’ briefing on this issue leaves
much to be desired. They fail to cite or analyze the proper factors
a district court typically considers when deciding a motion to
amend. They ignore relevant case law from this jurisdiction and
instead cite authority from other jurisdictions in support of their
assertions. Furthermore, in arguing that the court erred, the
Appellants do not address the basis of the court’s decision. In its
order, the court outlined three applicable factors and detailed
why each factor supported a denial of the Appellants’ motion to
amend. The Appellants do not attempt to explain why the
court’s decision regarding the timeliness or justification of the
motion was in error; they argue only that the motion to amend
was not prejudicial because a trial date had not been set. The
Appellants have failed “to attack the district court’s reason[ing]”
in denying the motion and “thus cannot demonstrate that the
district court erred.”
See Golden Meadows Props., LC v. Strand
,
complaint “at this point would substantially prejudice [IBN] as [it] would now be faced with new factual theories for which [it has] not had time to prepare.” “*S+ince almost every amendment of a pleading will result in some practical prejudice to the opposing party,” the prejudice to the nonmoving party “must be undue or substantial”—mere inconvenience “is not grounds to deny a motion to amend.” ¶ 31 (emphasis, citation, and internal quotation marks omitted). The Appellants argue that their fifth amended complaint would not have substantially prejudiced IBN because, as a trial date had not yet been set, IBN would have had “ample time to prepare this matter for trial.” We are not persuaded that IBN would have been prejudiced only if a trial date had been set. Nearly two years had passed since the original complaint was filed, discovery was well under way, and a motion to dismiss had been filed. In addition, the fifth amended complaint was prompted by IBN’s motion to dismiss. We agree with the district court that IBN would have been unduly prejudiced by the Appellants’ fifth amended complaint. And while a court’s analysis should generally be “multi-factored,” “a court’s ruling on a motion to amend can be predicated on only one or two of the particular factors.” ¶ 42. ¶20 For these reasons, we conclude the district court did not abuse its discretion in denying the Appellants’ motion to amend their complaint.
II. Futility Under Rule 9(c) The Appellants next contend the district court erred in
determining that their fifth amended complaint was insufficient under rule 9(c) of the Utah Rules of Civil Procedure. The rule requires parties to plead “with particularity the circumstances constituting fraud or mistake.” Utah R. Civ. P. 9(c). Pleadings satisfy this standard only if they include “a sufficiently clear and specific description of the facts underlying the *plaintiff’s+ claim of [fraud].” Carlton v. Brown , 2014 UT 6, ¶ 38, 323 P.3d 571 (alterations in original) (citation and internal quotation marks omitted). As outlined above, IBN moved to dismiss this case under
rule 12(b)(6) of the Utah Rules of Civil Procedure, arguing that the Appellants’ complaint did not state a claim upon which relief could be granted. In response, the Appellants did not attempt to defend their amended complaint, but instead sought leave to amend it for the fifth time to meet the requirements of rule 9(c). In granting IBN’s motion to dismiss, the district court first denied the Appellants’ motion to amend because, as explained above, it was untimely, unjustified, and prejudicial. The court also determined that the amendment was futile because it did not meet the particularity requirements of rule 9(c). And because the Appellants had conceded that all prior iterations of their complaint were also deficient under rule 9(c), the court granted IBN’s motion to dismiss. In making this determination, the court concluded that the amended complaint “still fails to plead a fraud claim as to any specific plaintiff against any specific defendant with the particularity required by Rule 9([c]).” The court continued:
The proposed Fifth Amended Complaint is long on narrative and short on specifics with respect to each individual party. It does not explain when any false representation was made to any individual plaintiff, or any plaintiff’s specific reliance on that statement. . . . Fraud-based claims are highly individualized, because reliance is an individual decision. Accordingly, stating a particularized claim of fraud requires each plaintiff to allege which representations were made to them, when and how and by whom, and how they each relied on that representation. This permits each of the defendants to defend against the allegation as to each defendant and each plaintiff. The Fifth Amended Complaint does not permit any one defendant to determine which supposed misrepresentation of fact was relied on by which plaintiff in what way, and why each defendant should be charged with that alleged misrepresentation. The Appellants argue this decision was in error, but they
make only conclusory statements that their proposed amended complaint “stated with particularity, each of *their+ fraud based claims with the specificity required by Rule 9([c]),” and they do not provide any analysis of or citations to specific portions of the fifth amended complaint to support their arguments. For example, they allege their complaint “set*s+ out with a high degree of particularity each element of a fraud claim including: (1) who made the statement or representation; (2) to whom the statement or representation was made; [and] (3) when the statement or representation was made.” But the Appellants do not cite their amended complaint and do not demonstrate how their complaint meets these requirements. And our own review suggests it does not. The Appellants also allege that “*i+n the proposed amended complaint, particularly in paragraphs 20 through 146, [Steve Brazell] and the Investor Plaintiffs described in clear and concise language each representation of fact [Steve Brazell] and the Investor Plaintiffs relied on for this action.” This “essentially dumps” upon this court the “burden of sifting through *dozens+ of paragraphs of alleged facts” to determine whether the Appellants’ complaint is sufficient under rule 9(c), and “*s+uch an approach is unacceptable.” See Coroles v. Sabey , 2003 UT App 339, ¶ 27, 79 P.3d 974. Furthermore, these bald assertions illustrate the fatal flaw identified by the district court—the Appellants refer to the plaintiffs collectively, and they do not show how their amended complaint “plead*s+ a fraud claim as to any specific plaintiff against any specific defendant.” Because the Appellants do little more than insist that their amended complaint meets the requirements under rule 9(c), without addressing the basis of the district court’s decision, we reject this challenge. See Golden Meadows Props., LC v. Strand , 2010 UT App 257, ¶ 17, 241 P.3d 375. The Appellants have not persuaded us that the court erred.
5. The Appellants also contend they did not file their third and fourth amended complaints in violation of rule 15(a) of the Utah Rules of Civil Procedure. They argue they did not need leave of court to amend their complaint because the parties had stipulated that amended pleadings could be filed up to July 3, 2014. The district court determined that it had never approved this stipulation, but it did not conclude that those amended complaints violated rule 15(a). We therefore have no occasion to consider this contention.
III. Applicability of Rule 9(c)
¶25 Finally, the Appellants contend that rule 9(c) does not apply to their “claims of constructive fraud (insolvency) under the Utah Fraudulent Transfer Act.” Because rule 9(c) allegedly does not apply to these causes of action, the Appellants argue the district court erred when it dismissed them for not meeting the rule’s particularity requirements. The Appellants’ complaint does not specifically contain a
“constructive fraud (insolvency)” cause of action, and it is unclear which cause of action they argue was dismissed in error. In their fourth and fifth amended complaints, the Appellants include a “constructive trust” cause of action and a “fraudulent transfer” cause of action. Under the constructive trust cause of action, the Appellants allege that IBN violated the Delaware Limited Liability Company Act and claim “the imposition of a constructive trust” is “the only remedy that will adequately compensate [the Appellants] for the improper and/or fraudulent transfers.” But the Appellants’ “claims of constructive fraud (insolvency) under the Utah Fraudulent Transfer Act” cannot refer to the constructive trust cause of action, because this cause of action only acknowledges that the formation of a constructive trust is a remedy, and because it alleges a violation of a Delaware act, not the Utah Fraudulent Transfer Act. Instead, the “claims of constructive fraud (insolvency)” is most likely a reference to the Appellants’ fraudulent transfer cause of action, which alleges that “*IBN has+ engaged in fraudulent transfers under . . . the Uniform Fraudulent Transfer Act.” The Appellants’ brief argues there are two different types of fraudulent transfers—intentional fraudulent transfers and constructive fraudulent transfers. They claim that whether rule 9(c) applies to these fraudulent transfers is an issue of first impression in Utah, and they cite a United States District Court of Utah memorandum decision for the proposition that “courts generally apply Rule 9([c])’s requirements to intentional fraudulent transfer claims . . . but not to constructive fraudulent transfer claims.” Wing v. Horn , No. 2:09-CV-00342, 2009 WL 2843342, at *3 (D. Utah Aug. 28, 2009). Even assuming without deciding that rule 9(c) does not apply to constructive fraudulent transfers, the Appellants have not shown the district court erred in applying the rule to their fraudulent transfer cause of action. The Appellants’ amended complaint alleges only a general fraudulent transfer cause of action and does not specify whether the fraudulent transfer was intentional or constructive. Accordingly, they have not demonstrated how the district court erred by applying rule 9(c) to a general “fraudulent transfer” cause of action where the rule requires parties to plead “with particularity the circumstances constituting fraud.” Utah R. Civ. P. 9(c). In any event, this issue is unpreserved. In order to
preserve an issue for appeal, it must be “presented to the trial
court in such a way that the trial court [had] and opportunity to
rule on *it+.”
Wohnoutka v. Kelley
,
CONCLUSION The district court did not abuse its discretion in denying
the Appellants’ motion to amend. In addition, the Appellants have not shown the court erred in determining that their fifth amended complaint was deficient under rule 9(c). Finally, the Appellants have not shown the court erred by applying rule 9(c) to their fraudulent transfer claim. Accordingly, we affirm the decision of the district court.