AL-IN Partners v. LifeVantage , 2021 UT 42 ( 2021 )

2021 UT 42IN THE
SUPREME COURT OF THE STATE OF UTAH
AL-IN PARTNERS, LLC, BRADLEY DIXON
Appellees,
v.
LIFEVANTAGE CORPORATION,
Appellant.
No. 20190565
Heard April 14, 2021
Filed August 12, 2021
On Interlocutory Appeal
Third District, Salt Lake
The Honorable Andrew H. Stone
No. 170907711
Attorneys:
Gregory M. Saylin, Brittany J. Merrill, Salt Lake City, for appellant
JUSTICE PETERSEN authored the opinion of the Court, in which
CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE LEE,
JUSTICE HIMONAS, and JUSTICE PEARCE joined.
JUSTICE PETERSEN, opinion of the Court:
INTRODUCTION
¶1 An independent distributor sued a wellness company for
breach of contract, claiming that the company had waived the
provision upon which it later relied to terminate the distributor’s
contract. The distributor alleged that the company effected the
waiver through express oral statements and conduct. The
company moved to dismiss, arguing that because the contract
contained both an antiwaiver provision and a requirement that
any waiver be in writing, anything less was insufficient as a
matter of law to waive a provision of the contract. The district
court denied the motion and the company filed this interlocutory
appeal.
AL-IN PARTNERS, LLC V. LIFEVANTAGE
Opinion of the Court
¶2 A contracting party alleging waiver must show the other
party intentionally waived both the underlying provision and any
applicable antiwaiver provisions. Here, the distributor’s allegation
of an express oral waiver was legally sufficient to defeat a motion
to dismiss. We affirm.
BACKGROUND1
¶3 In 2009, Plaintiff Bradley Dixon, his wife Shelly, and their
friends Corey and Denise Ray became some of the first
independent distributors of products from LifeVantage, a multi-
level marketing company that “manufactures wellness products
which it markets and sells to consumers through a network of
independent distributors.” Like all independent distributors,
Dixon entered into the LifeVantage Distributor Application and
Agreement (the Agreement), which incorporated the company’s
policies and procedures (the P&Ps).
¶4 Relevant here, the Agreement permitted an independent
distributor to own only one distributorship (the individual
distributorship provision). And any breach of the Agreement
could result in LifeVantage terminating the contract.
¶5 The Agreement also contained an antiwaiver provision,
which stated that:
The company never gives up its right to insist on
compliance with the Agreement . . . . No failure of
LifeVantage to exercise any right or power under the
Agreement or to insist upon strict compliance by an
Independent Distributor with any obligation or
provision of the Agreement, and no custom or
practice of the parties at variance with the terms of
the Agreement[] shall constitute a waiver of
LifeVantage’s right to demand exact compliance
with the Agreement.
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1 On appeal from a motion to dismiss, “we accept the factual
allegations in the complaint as true and interpret those facts, and
all reasonable inferences drawn therefrom, in a light most
favorable to the plaintiff as the nonmoving party.” Olguin v.
Anderton, 2019 UT 73, ¶ 4 n.3, 456 P.3d 760 (citation omitted).
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¶6 Further, the Agreement specified that any waiver could
be effected “only in writing by an authorized officer of the
Company” (the written waiver requirement).
¶7 Bradley Dixon owned Distributorship 101982 and Corey
Ray owned Distributorship 101987. Despite Distributorship
101987 being “organized under Ray’s name,” Dixon and Ray
worked jointly to develop its “downline” and the pair focused all
of their efforts on it. They shared equally in the profits. Within one
year of this operation, LifeVantage recognized Dixon and Ray as
“elite distributors” and presented them with “Certificates of
Accomplishment.” Dixon and Ray were featured as co-owners of
Distributorship 101987 in at least three separate issues of Prosper
magazine, which “LifeVantage funds or otherwise uses as a
marketing tool.” LifeVantage sent Dixon to train lower-level
distributors at “events across the globe” and “awarded both
Dixon and Ray for Distributorship 101987’s success with
vacation[s] and a new Jeep Wrangler.” Dixon’s individual
distributorship never achieved “elite status.”
¶8 In 2013, Ray and Dixon formed AL-IN Partners, LLC
(AL-IN), which they each owned in equal parts. They decided to
assign ownership of Distributorship 101987 to their new
partnership. So Dixon, who was a member of LifeVantage’s
Advisory Board Committee, approached LifeVantage CEO Doug
Robinson, Vice President of Sales Ryan Thompson, and Chief
Compliance Officer Ed Merchant at a LifeVantage board meeting
to discuss ownership of Distributorship 101987. Because of the
individual distributorship provision, “Dixon discussed with
Robinson, Thompson, and Merchant how he could acquire an
ownership interest in Distributorship 101987 as a member of
[AL-IN] while remaining in compliance” with the P&Ps. Dixon
suggested he relinquish ownership in his individual
distributorship, but Robinson and Thompson “both affirmatively
stated that Dixon need not transfer” that ownership “before
formally acquiring an ownership interest in Distributorship
101987.” Thompson told Dixon that he and Ray need only
complete a Distributorship Name Change Form to transfer
ownership of Distributorship 101987 to AL-IN. They did so, and
LifeVantage approved the form and modified the account to
remove Ray’s name and list AL-IN as the owner of
Distributorship 101987.
¶9 After LifeVantage approved the name change form, it
began paying commissions from Distributorship 101987 to AL-IN.
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AL-IN PARTNERS, LLC V. LIFEVANTAGE
Opinion of the Court
And “LifeVantage continued to announce and promote Dixon and
Ray as partners in Distributorship 101987 at trainings,
conventions, meetings, and other public forums.”
¶10 But in 2016, LifeVantage terminated Distributorship
101987, citing a violation of the individual distributorship
provision. Shortly thereafter, pursuant to an agreement with
LifeVantage, Ray ended his ownership in AL-IN and was
reinstated as a distributor for the company. This left Dixon as the
sole owner of AL-IN. LifeVantage then stopped paying
Distributorship 101987’s commissions to AL-IN and channeled
the commissions to Ray.
¶11 Dixon and AL-IN (collectively, AL-IN) sued LifeVantage,
seeking a declaratory judgment that LifeVantage had waived its
right to enforce the individual distributorship provision and that
it improperly terminated Distributorship 101987 because of this
waiver. AL-IN also alleged breach of contract, breach of the
covenant of good faith and fair dealing, and promissory estoppel.
¶12 LifeVantage moved to dismiss, contending, among other
things, that the breach of contract and declaratory judgment
claims failed as a matter of law because AL-IN did not plead facts
sufficient to establish that LifeVantage waived the individual
distributorship provision. Specifically, LifeVantage pointed to the
Agreement’s antiwaiver provision and written waiver
requirement. And it argued that because AL-IN’s complaint did
not assert the existence of any writing by a company officer
waiving the individual distributorship provision, the allegations
in the complaint were “plainly insufficient . . . to amount to
waiver.”
¶13 In opposition, AL-IN asserted that it “pled allegations
from which a fact finder could determine that under the totality of
the circumstances, LifeVantage both expressly and impliedly
waived its right to enforce” the individual distributorship
provision. And it argued that the antiwaiver provision “is simply
one factor in the totality of the circumstances analysis” to
determine whether LifeVantage waived that provision.
¶14 Shortly after briefing was complete on the motion to
dismiss, we issued Mounteer Enterprises, Inc. v. Homeowners Ass’n
for the Colony at White Pine Canyon, 2018 UT 23, 422 P.3d 809,
which LifeVantage submitted to the district court as supplemental
authority. In Mounteer, we held in the context of an implied
waiver that “a party asserting waiver in the face of an antiwaiver
clause must establish ‘a clear intent to waive both the [antiwaiver]
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clause and the underlying contract provision.’” Id. ¶ 21 (alteration
in original) (citation omitted). LifeVantage argued that, because
AL-IN made “no reference to the antiwaiver provisions” in its
complaint, it had “failed to allege an adequate factual basis” for
waiver of these provisions and thus could not state a claim for
breach of contract or declaratory judgment.
¶15 After oral argument, the district court granted the motion
to dismiss as to AL-IN’s claims for breach of the covenant of good
faith and fair dealing and promissory estoppel, but denied it as to
the claims for breach of contract and declaratory judgment. In its
oral ruling, the court recognized that “Mounteer establishes a
fairly high burden of proof for plaintiffs seeking to prove waiver
of a provision and separately to prove waiver of the antiwaiver
provisions; and for that matter, in this case, to prove waiver of the
requirement that any waiver be made in writing by an officer.”
But the court noted that “Mounteer also appears to draw a
distinction between sins of omission and sin[s] of commission.”
So, because AL-IN alleged “affirmative conduct by officers of
LifeVantage . . . that [Dixon] didn’t have to divest himself . . . [of
his] individual distributorship and could maintain joint
ownership of another distributorship,” the court concluded that
the complaint was sufficient to defeat the motion to dismiss as to
the breach of contract and declaratory judgment claims.
¶16 We granted LifeVantage’s petition for interlocutory
appeal. We exercise jurisdiction under Utah Code section 78A-3-
102(3)(j).
STANDARD OF REVIEW
¶17 The issue before us is whether the district court erred
when it denied LifeVantage’s motion to dismiss with respect to
the breach of contract and declaratory judgment claims. “A ruling
on a motion to dismiss presents a legal question that we review
for correctness, affording no deference to the district court’s
decision.” Turner v. Staker & Parson Cos., 2012 UT 30, ¶ 7, 284 P.3d
600.
ANALYSIS
¶18 Before we proceed to the merits of this question, we must
address the fact that Appellee AL-IN did not file a brief or
otherwise appear in this interlocutory appeal. So, we discuss as an
initial matter how this affects our resolution of this case.
¶19 An appellee’s failure to file a brief does not amount to an
automatic default and consequent reversal of the lower court.
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AL-IN PARTNERS, LLC V. LIFEVANTAGE
Opinion of the Court
“[W]e do not view the failure to file a brief as a confession of error
on the part of the appellee.” State v. Sorbonne, 2020 UT App 48,
¶ 16 n.3, 462 P.3d 409. But when an appellee fails to present us
with any argument, an appellant need only establish “a prima facie
showing of a plausible basis for reversal.” Paxman v. King, 2019
UT 37, ¶ 7, 448 P.3d 1199; see also Broderick v. Apartment Mgmt.
Consultants, L.L.C., 2012 UT 17, ¶¶ 18–21, 279 P.3d 391 (reversing
summary judgment because the appellee “failed to address [the
appellants’] arguments,” leaving the appellants’ claims
“unrebutted”). This is a lower standard than the typical burden of
persuasion on appeal. See Utah Dep’t of Transp. v. Coalt, Inc., 2020
UT 58, ¶ 45, 472 P.3d 942.
¶20 However, despite AL-IN’s nonappearance, LifeVantage
has not persuaded us that there is a plausible basis to reverse the
district court here. LifeVantage argues that it is impossible to
orally waive an antiwaiver provision with a written waiver
requirement. Indeed, it asserts that even an express oral waiver of
the individual distributor provision and the written waiver
requirement itself would be insufficient to waive those provisions
under the Agreement. It contends that a waiver can be
accomplished only “in writing by an authorized officer of the
Company,” as provided in the written waiver requirement. And it
argues that the district court erred in denying its motion to
dismiss because AL-IN’s complaint contained no allegation of a
written waiver.
¶21 LifeVantage essentially argues that its written waiver
requirement is unwaivable. But we have made clear that the
parties to a contract may choose to waive any provision of their
agreement. See Dillman v. Massey Ferguson, Inc., 369 P.2d 296, 298
(Utah 1962) (“[P]arties to written contracts may modify, waive or
make new terms regardless of provisions in the contracts to the
contrary.” (citation omitted)). “Even an antiwaiver provision is
subject to waiver.” Mounteer Enters., Inc. v. Homeowners Ass’n for
the Colony at White Pine Canyon, 2018 UT 23, ¶ 20, 422 P.3d 809.
Indeed, even a contract subject to the statute of frauds can be
modified by oral agreement.2 Likewise, there is no basis for us to
__________________________________________________________
2 See Salt Lake City Corp. v. Big Ditch Irrigation Co., 2011 UT 33,
¶ 48, 258 P.3d 539 (recognizing a “narrow exception” to the
requirement that modification of a contract subject to the statute
of frauds be in writing “where a party has changed position by
(continued . . .)
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legally restrict the parties to an agreement from choosing to waive
a written waiver requirement. Rather, the question is whether the
non-breaching party has intentionally relinquished the right to
insist on a written waiver.
¶22 In general, waiver is an equitable remedy employed to
“prevent[] a ‘waiving party from lulling the other party into a
belief that strict compliance with a contractual duty will not be
required’ and then enforcing its contractual rights upon default.”
Mounteer, 2018 UT 23, ¶ 18 (citation omitted). But “[c]ourts do not
lightly consider a contract provision waived.” Id. ¶ 17. To
establish the existence of a waiver, there must be “an ‘intentional
relinquishment of a known right,’” which can be either express or
implied. Id. (citation omitted). So, only where “the otherwise-
breaching party can show that the other party intentionally
waived its rights under the contract, noncompliance with the
relevant provision will not be construed as a breach.” Id. ¶ 18.
¶23 However, when the contract at issue contains an
antiwaiver provision, “[t]he calculus changes.” Id. ¶ 19. This is
because “[a]n antiwaiver provision embodies the agreement
between the parties—an agreement that specifically prohibits the
mere failure to enforce a contractual right as being construed as
waiver of that right.” Id. ¶ 22. To allow “waiver where the party
has not clearly waived the antiwaiver provision would undo this
agreement and would ‘beg[] the question of validity of the non-
waiver clause.’” Id. (alteration in original) (citation omitted). An
antiwaiver provision provides “flexibility” to the parties “in
enforcing their rights under the contract . . . without ‘result[ing] in
a complete and unintended loss of its contract rights if it later
decides that strict performance is desirable.’” Id. ¶ 19 (second
alteration in original) (citation omitted).
¶24 But we have made clear that both an antiwaiver
provision and the requirement that any waiver be in writing are
waivable. In Calhoun v. Universal Credit Co., the plaintiff bought a
performing an oral modification so that it would be inequitable to
permit the other party to found a claim or defense on the original
agreement as unmodified” (citation omitted)); Allen v. Kingdon,
723 P.2d 394, 396–97 (Utah 1986) (same); see also White v. Fox, 665
P.2d 1297, 1301 (Utah 1983); Bamberger Co. v. Certified Prods., Inc.,
48 P.2d 489, 491–92 (Utah 1935).
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AL-IN PARTNERS, LLC V. LIFEVANTAGE
Opinion of the Court
car, and the note was assigned to Universal Credit Company. 146
P.2d 284, 285 (Utah 1944). The contract required payments to be
made on time and stated that any default could result in
immediate repossession of the vehicle. Id. at 286. There was also
an antiwaiver provision that required any waiver to be “evidenced
by writing signed by the parties.” Id. (emphasis added). Calhoun
made every payment late. Id. at 285. After about a year, he
contacted Universal to let it know he was joining the army and
wanted to discuss the contract. Id. An adjuster for Universal told
Calhoun “that he might have time to make some disposition of
the automobile so that he could get his equity out of it.” Id. But a
few days later, the adjuster directed Universal to repossess the
vehicle. Id. Calhoun sued for breach of contract, alleging the
adjuster orally waived strict compliance with the contract. Id. The
district court agreed, finding Universal guilty of conversion. Id. at
285–86.
¶25 Universal appealed, making the same argument that
LifeVantage makes here: that “as a matter of law, there can be no
waiver of strict compliance unless it be in writing.” Id. at 286. We
disagreed, stating that a waiver made intentionally and
knowingly by an agent of a company who had apparent authority
to do so is binding on the company—even where there is a
provision in the contract “that no waiver is to become effective
unless made by some particular officer . . . and unless indorsed on
the policy.” Id. at 286–88. Thus, the adjuster’s express statements to
Calhoun effectively waived the underlying provision, the
antiwaiver provision, and the written waiver clause. Id. at 288.
¶26 LifeVantage argues that Calhoun is not dispositive here
because our recent decision in Mounteer established a new, higher
burden for parties alleging waiver of a contractual provision in
the face of an antiwaiver provision. But this is a misreading of
Mounteer.
¶27 In Mounteer, Mounteer Enterprises, Inc. was hired by a
homeowners’ association (HOA) to provide snow removal
services. 2018 UT 23, ¶ 1. The contract between the parties
required Mounteer to maintain at least $7 million in insurance
coverage. Id. ¶ 5. Failure to do so permitted the HOA to, among
other things, “immediately terminate the contract.” Id. ¶ 6. The
contract also provided “that the HOA’s failure to notice a
deficiency in Mounteer’s insurance coverage cannot be construed
as a waiver of the insurance provision.” Id. ¶ 2. Mounteer
obtained only $5 million in insurance coverage and sent the HOA
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certificates of insurance showing the $5 million policy. Id. ¶ 7. The
HOA continued to pay “Mounteer for its services despite this
deficiency.” Id. After an unrelated disagreement between the
parties, the HOA cancelled the contract, citing Mounteer’s
deficient insurance policy. Id. ¶ 8. Mounteer sued for breach of
contract, arguing that by accepting the certificates of insurance
showing only $5 million in coverage and by paying Mounteer, the
HOA waived the insurance policy provision of the contract. Id.
¶ 9. The jury agreed and found the HOA liable for breach of the
contract. Id. ¶ 12.
¶28 We reversed, holding that to establish waiver of a
contractual provision where the contract contains an antiwaiver
clause, the party must show not only clear intent to waive the
underlying provision, but also the intent to waive the antiwaiver
provision. Id. ¶ 15. Applying this rule, we determined that the
HOA had not waived the antiwaiver provision “because the
failure to insist on performance after breach is entirely consistent
with the rights set out in the antiwaiver provision—rights of
flexibility that often benefit the otherwise-breaching party.” Id.
¶ 24. We concluded that a finding of waiver in such circumstances
would thus “render the antiwaiver provision meaningless.” Id.
Indeed, the contract explained that the precise conduct which
Mounteer claimed was a waiver could not be construed as such.
Id. ¶ 6. So the HOA’s failure to insist on Mounteer’s performance
was “entirely compatible with the antiwaiver clause.” Id. ¶ 26.
¶29 We went on to explain that an express waiver was
sufficient to waive both “the underlying provision and the
antiwaiver provision.” Id. ¶¶ 4, 23, 25. And we cited to Calhoun for
this proposition. Id. ¶ 23. We also distinguished the HOA’s failure
to act from a party’s affirmative conduct, which “can be viewed as
sufficient to establish a reasonable basis for the conclusion that a
party intends to . . . waive[] the antiwaiver provision[].” Id. ¶ 28;
see also ASC Utah, Inc. v. Wolf Mountain Resorts, L.C., 2010 UT 65,
¶ 34, 245 P.3d 184 (determining that the defendant’s active
participation in litigation waived the parties’ contractual
arbitration agreement).
¶30 Accordingly, Mounteer did not diminish Calhoun’s
holding that an express oral waiver suffices to waive both the
underlying provision and the antiwaiver provision of a contract,
even when the contract contains an additional requirement that
waivers must be in writing. Mounteer, 2018 UT 23, ¶ 23. And we
reaffirm this holding today. Further, affirmative conduct may be
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Opinion of the Court
sufficient to establish a party’s intent to waive an antiwaiver
provision and, by extension, a written waiver requirement. See id.
¶ 28.
¶31 LifeVantage argues that, in the presence of a written
waiver requirement, validation of an express oral waiver violates
our conclusion in Mounteer that “if the specific language of the
antiwaiver clause expressly precludes parties from construing
certain conduct as a waiver of contractual rights, courts must
enforce this provision as part of the parties’ agreement.” Id. ¶ 19.
We agree that in the face of an antiwaiver provision, “a party
cannot waive a contractual right merely by failing to enforce the
provision establishing that right.” Id.
¶32 But that is not what AL-IN alleges. AL-IN alleged in its
complaint that Dixon approached the CEO, Vice President of
Sales, and Chief Compliance Officer of LifeVantage to discuss
how he could acquire an ownership interest in Distributorship
101987 as a member of AL-IN and remain in compliance with the
P&Ps. He offered to relinquish his personal distributorship so that
he would have an ownership interest in only one distributorship.
But he was told expressly that he did not need to do so. Further,
he was told that to effectuate his joint ownership of
Distributorship 101987—notably, the second distributorship in
which he would own an interest—he and Ray need only complete
a Distributor Name Change Form. Importantly, he was not told
that before he could own an interest in two distributorships, he
needed to obtain a written waiver from an authorized officer of
the company.3
¶33 This is unlike the “failure to insist on performance after
breach” in Mounteer—which we found to be “entirely consistent
with the rights set out in the antiwaiver provision.” Id. ¶ 24. Here,
AL-IN alleges that LifeVantage officers expressly told Dixon he
did not need to give up his personal distributorship in order to
obtain an interest in a second distributorship. In other words, AL-
IN alleges that the LifeVantage officers did not merely fail to
enforce the individual distributorship provision. Instead, AL-IN’s
complaint says the officers expressly told Dixon he could hold an
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3 AL-IN alleged additional affirmative conduct in accord with
these facts.
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interest in two distributorships without mention of a written
waiver.
¶34 Accordingly, the district court correctly determined that
AL-IN alleged sufficient facts to survive a motion to dismiss. And
LifeVantage has not persuaded us that there is a plausible basis to
reverse the district court.
CONCLUSION
¶35 Parties to a contract may choose to waive any provision
of the contract. However, the party alleging waiver must show
that the other party intentionally waived both the underlying
provision and any applicable antiwaiver provisions. Here, the
district court correctly denied LifeVantage’s motion to dismiss
AL-IN’s breach of contract and declaratory judgment claims
because AL-IN’s complaint alleged facts that, taken as true, were
sufficient to infer that LifeVantage waived the individual
distributorship provision, the antiwaiver provision, and the
written waiver requirement.
¶36 We affirm.
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