KTM Health Care v. SG Nursing Home , 436 P.3d 151 ( 2018 )

2018 UT App 152THE UTAH COURT OF APPEALS
KTM HEALTH CARE INC.,
Appellee and Cross-appellant,
v.
SG NURSING HOME LLC DBA KOLOB CARE
& REHABILITATION OF ST. GEORGE,
AND APEX HEALTHCARE SOLUTIONS LLC,
Appellants and Cross-appellees.
Opinion
No. 20160558-CA
Filed August 16, 2018
Fifth District Court, St. George Department
The Honorable Jeffrey C. Wilcox
No. 100503405
Gary R. Guelker and Janet I. Jenson, Attorneys for
Appellants and Cross-appellees
Justin D. Heideman and Justin R. Elswick, Attorneys
for Appellee and Cross-appellant
JUDGE RYAN M. HARRIS authored this Opinion, in which JUDGES
GREGORY K. ORME and DAVID N. MORTENSEN concurred.
HARRIS, Judge:
¶1 KTM Health Care, Inc. (Pharmacy) and SG Nursing Home
LLC dba Kolob Care & Rehabilitation of St. George (Nursing
Home) entered into a written agreement for Pharmacy to
become Nursing Home’s exclusive provider of all pharmacy-
related products and services. Soon after signing the contract,
however, Nursing Home attempted to cancel its agreement with
Pharmacy, apparently realizing that it was still contractually
committed to a different provider. Pharmacy then sued Nursing
Home, asserting claims for breach of contract as well as various
fraud-related causes of action. Nursing Home defended the case,
KTM Health Care v. SG Nursing Home
in part, by arguing that the parties had been mutually mistaken
about Nursing Home’s ability to terminate its contract with its
existing provider, and asserting that the parties had therefore
never actually entered into an enforceable contract. Prior to trial,
on Nursing Home’s motion, the court determined that Pharmacy
chose to “elect” its breach of contract remedies and that it would
not be permitted to further pursue its fraud-based remedies.
¶2 The case proceeded to trial, and a jury determined that
Nursing Home breached the contract and that Pharmacy was
entitled to over $143,000 in damages, plus attorney fees, even
though the jury instructions made no mention of attorney fees.
However, the jury also determined that the parties had, in fact,
been mutually mistaken about the terms of Nursing Home’s
contract with its previous provider. Believing that the jury’s
answers to the questions on the special verdict form were
inconsistent, the trial court resubmitted the case to the jury. After
briefly re-deliberating, the jury affirmed its breach finding, but
changed its mutual mistake finding. It also amended its damages
award by increasing the amount of consequential damages while
eliminating any mention of attorney fees. Following trial, the
court refused to award Pharmacy any prejudgment interest.
¶3 Both parties appeal. Nursing Home asserts that the trial
court erred in resubmitting the case to the jury. Pharmacy asserts
that the trial court erred by excluding one of its expert witnesses,
by dismissing its fraud-based claims prior to trial, and by failing
to award prejudgment interest. We affirm in part, reverse in
part, vacate the trial court’s judgment, and remand the case for
the limited purpose of entering judgment in favor of Pharmacy
on its breach of contract claim in an amount consistent with the
jury’s original damages award (less attorney fees).
BACKGROUND
¶4 In August 2009, Adam Katschke and a business partner
formed Pharmacy. Pharmacy began as an “open-door”
pharmacy, which is a “typical retail community pharmacy” that
20160558-CA 2 2018 UT App 152KTM Health Care v. SG Nursing Home
is open to the public. After operating as an open-door pharmacy
for several months, Katschke and his business partner decided
that they wanted to grow their business, and in 2010 started
contacting various entities in southern Utah with the goal of
becoming a “closed-door” pharmacy. A “closed-door” pharmacy
typically is not open to the public but, instead, serves as a
dedicated pharmacy for one or more entities such as long-term
care facilities, nursing homes, or assisted living centers.
¶5 One of the entities that Pharmacy contacted was Nursing
Home, a facility that billed itself as “the largest skilled nursing
facility in Southern Utah.” When Pharmacy initially contacted
Nursing Home about becoming its pharmacy, Nursing Home
already had an existing agreement with a different provider, but
was considering a change due to “service issues” it was
experiencing with that provider.
¶6 In March 2010, Katschke met with a representative
(Manager) of Apex Healthcare Solutions, LLC, the company that
owned Nursing Home and had supervisory authority over its
employees. During the meeting, Manager indicated to Katschke
that Nursing Home was interested in utilizing Pharmacy’s
services, but that Katschke had to be the specific pharmacist
assigned to the account; no one else would do. Katschke
indicated that he would be willing to make arrangements to
serve as the face of Pharmacy in its relationship with Nursing
Home, and to personally work with Nursing Home during the
contemplated closed-door contract. Although they had
apparently come close to agreement on material terms, Nursing
Home and Pharmacy did not sign a contract at that meeting.
According to Katschke, Nursing Home wanted Pharmacy “to go
write it up and give [Nursing Home] some proofs” of a
proposed contract.
¶7 After meeting with Katschke, Manager contacted Nursing
Home’s existing provider to determine whether it could
terminate its contract. After that conversation, Manager “was
under the impression that [Nursing Home was] on a month-to-
month contract” with its existing provider, and that Nursing
20160558-CA 3 2018 UT App 152KTM Health Care v. SG Nursing Home
Home would be able to terminate its contract and transition to a
different provider as early as June 28, 2010. However, Nursing
Home did not terminate its contract at that time. And Katschke,
for his part, was unaware of the terms of Nursing Home’s
contract with its other provider.
¶8 Katschke also owned and operated another pharmacy in
Nevada (Nevada Pharmacy), and Katschke was the sole
pharmacist staffing that pharmacy. To honor Nursing Home’s
request that he be the face of Pharmacy for any relationship with
Nursing Home, Katschke determined that Nevada Pharmacy
would need to hire another pharmacist to operate it. Soon after
the March 2010 meeting, believing that a contractual relationship
with Nursing Home was imminent, Nevada Pharmacy made
that hire, and agreed to retain a second pharmacist for a 36-
month term beginning on May 1, 2010, at a rate of $45 per hour
for a 40-hour week plus various benefits.
¶9 Meanwhile, Katschke began to renovate Pharmacy in
order to come into compliance with regulations governing
closed-door pharmacies. This involved adding shelving,
countertops, pharmacy software, an alarm system, and a
refrigerator. Pharmacy completed these improvements in April
2010, and incurred over $33,000 in expenses in doing so.
¶10 On May 25, 2010, after some additional negotiations,
Katschke and Manager—on behalf of their respective entities—
signed a contract whereunder Pharmacy would become Nursing
Home’s exclusive closed-door pharmacy beginning on June 28,
2010 and continuing for an initial one-year term. The agreement
contained a provision allowing for automatic renewal of the
agreement for additional one-year periods unless, at least ninety
days prior to the expiration of the current contractual term,
either party provided the other with written notice of its intent
not to renew.
¶11 That same day, after the contract had been signed,
Nursing Home’s administrator (Administrator) contacted the
existing provider to let it know that Nursing Home was “going
20160558-CA 4 2018 UT App 152KTM Health Care v. SG Nursing Home
in a different direction.” The provider responded by expressing
its view that Nursing Home did not have the right to cancel the
contract. Administrator informed Katschke of the issue in an
email, but initially downplayed it, stating that he thought he
could “get this resolved within a day or two.”
¶12 Several days later, on June 7, however, Administrator sent
another email to Katschke informing him that “apparently we
are not going to be able to get out of” the contract with the other
provider “until the end of October [2010],” despite just having
signed a contract with Pharmacy. Administrator further
explained that “[w]e . . . would like to do business with you but
right now it looks like we don’t have a choice other than to take
a step back, at least for a while.”
¶13 Later that month, after apparently making the
determination that it was bound by its contract with the other
provider, Nursing Home made the decision to renew its contract
with that provider. The renewed contract was set to commence
on July 1, 2010, just three days after its contract with Pharmacy
was set to commence, and was renewable in one-year terms
thereafter. Administrator gave Katschke the bad news on July
11, 2010, via email: “[W]e have decided to stick with [the other
provider] for at least another year.” Administrator’s email did
not mention Nursing Home’s contract with Pharmacy.
¶14 Later that year, in October 2010, Pharmacy sued Nursing
Home for (among other claims) breach of contract, fraud in the
inducement, constructive fraud, intentional misrepresentation,
and negligent misrepresentation.
¶15 As the case proceeded to trial, Pharmacy informed the
court and Nursing Home of its intention to call a pharmacist
(Pharmacy Expert) as an expert witness. Pharmacy Expert had
experience dealing with closed-door pharmacies, and Pharmacy
wanted him to testify about “the number of years for which
[Pharmacy] can recover damages” for lost profits. Pharmacy
Expert’s proposed testimony included the opinion that the
parties likely would have renewed the contract for at least six
20160558-CA 5 2018 UT App 152KTM Health Care v. SG Nursing Home
years. Nursing Home moved to exclude that testimony, arguing
that Pharmacy Expert’s analysis was unhelpful and unreliable.
The trial court granted Nursing Home’s motion, reasoning that
“there are not sufficient facts in this case to support the proposed
testimony” that Nursing Home “would have renewed its
pharmacy provider agreement with [Pharmacy] for at least six
years had [Nursing Home] begun using [Pharmacy] for its
pharmaceutical needs in 2010.” Therefore, the trial court
determined that Pharmacy Expert’s proposed testimony should
be excluded because it would not be helpful to the jury.
¶16 Also prior to trial, Nursing Home asked the trial court to
force Pharmacy to “elect its remedy,” arguing that Pharmacy “is
seeking to recover two categories of damages that are wholly
contradictory to one another.” Nursing Home argued that “there
must be an election of remedies in cases involving contracts and
deceitful inducement because the recovery of both lost profits
and reliance damages constitutes a double recovery.” The trial
court agreed with Nursing Home, determining that Pharmacy
“has chosen to affirm its contract with [Nursing Home] and has
elected money damages as the remedy for [Nursing Home’s]
alleged breach of that contract.” From that premise, the court
concluded that “the doctrine of election of remedies and the
economic loss rule preclude [Pharmacy] from pursuing its tort
claims against [Nursing Home] for fraud in the inducement,
constructive fraud, intentional misrepresentation[,] and
negligent misrepresentation.”
¶17 The case then proceeded to jury trial on Pharmacy’s claim
for breach of contract. Pharmacy did not call a damages expert,
choosing instead to rely on Katschke’s testimony regarding
damages. Katschke initially testified that Pharmacy would have
realized $401,280 in profit during the first year of its contractual
relationship with Nursing Home. Katschke arrived at that figure
by starting with the pricing terms of the contract, making certain
assumptions about the number of patients and other variables,
and computing a one-year profit estimate. On cross-examination,
Katschke acknowledged that his figure did not include certain
20160558-CA 6 2018 UT App 152KTM Health Care v. SG Nursing Home
additional overhead costs, which he estimated to be
approximately $43,000. In the end, then, Katschke testified that
Pharmacy sustained approximately $358,000 in lost profits
during the relevant one-year period.
¶18 Nursing Home countered that testimony with a damages
expert (Damages Expert), who was employed as a financial
analyst for Nursing Home’s existing provider’s parent company,
which Damages Expert characterized as the “largest long-term
care or closed-door pharmacy operator in the country.”
Damages expert offered his opinion that, not only did Pharmacy
not sustain any lost profits, Pharmacy would have lost over
$127,000 had it been Nursing Home’s exclusive provider of
pharmacy services for the one-year term of the contract.
Damages Expert based his calculation on an analysis of the
revenues received and expenses incurred during the year in
question by Nursing Home’s existing provider, and then
adjusting that analysis based on various perceived differences
between Pharmacy and the existing provider. On cross-
examination, Pharmacy’s counsel called into question several of
the assumptions that Damages Expert made during his analysis.
¶19 At the conclusion of the trial, Pharmacy argued to the jury
that Nursing Home breached the contract by deciding “to stick
with [the other provider] for at least another year.” Nursing
Home, in contrast, argued that it was mistaken about its ability
to terminate its contract with its other provider, and therefore
the affirmative defense of mutual mistake applied.
¶20 Upon completion of closing arguments, the trial court
submitted a special verdict form to the jury that contained a
series of questions. The verdict form was nine pages long and
quite complex, and after some of the questions it instructed the
jury to proceed in one fashion if its answer was “yes,” but to
proceed in a different fashion if its answer was “no.” In
particular, after the question about mutual mistake, the verdict
form stated as follows: “If you answered ‘yes’ [that mutual
mistake existed], please proceed to the next question.” After the
next question, the jury was instructed, regardless of the answer,
20160558-CA 7 2018 UT App 152KTM Health Care v. SG Nursing Home
to “[p]roceed to” the question “on the following page” and to
complete the remainder of the verdict form. The instructions did
not inform the jury that, if it found the existence of a mutual
mistake, the parties’ contract may be considered unenforceable.1
¶21 After deliberation, the jury found that Nursing Home
entered into and breached a contract with Pharmacy. However,
the jury also found that Nursing Home’s “ability to terminate its
contract with [the other provider] was a basic assumption or an
important fact, upon which both” parties based their contract,
and that, at the time the contract was formed, both Pharmacy
and Nursing Home “were mistaken regarding [Nursing Home’s]
ability to terminate its contract” with the other provider. In
addition, the jury found that Pharmacy sustained $143,9892 in
“Lost Profits,” but that Pharmacy did not sustain any amount of
“Consequential Damages.” After a line entitled, “Total Damage
Award,” the jury wrote the phrase “$143,989 plus attorney fees.”
¶22 After reviewing the special verdict form in open court, the
trial court determined that “there are inconsistencies here.” The
court explained to the jury:
An affirmative defense to the breach of contract is
mutual mistake, and you found that there was [a]
mutual mistake. If there was a mutual mistake
made, then there was no contract. It never formed,
1. Indeed, in its post-verdict musings, the trial court stated that
“[p]erhaps on this one we should have said if you find mutual
mistake . . . stop your deliberations, sign the jury verdict form
and return it.”
2. While this figure is certainly within the range of damages
discussed by Katschke and Damages Expert, it is unclear from
the record how this figure was derived. Neither Katschke nor
Damages Expert used this figure, and neither side’s counsel
advocated for its application during closing argument.
20160558-CA 8 2018 UT App 152KTM Health Care v. SG Nursing Home
and so you couldn’t award damages. And rather
than have this go up on appeal with that
instruction, I would like you to go back and
consider if, in fact, you found by clear and
convincing evidence that there was [a] mutual
mistake . . . , then you can’t find a contract and find
damages.
¶23 The court then referenced the jury’s hand-written award
of “attorney fees,” and made the following statement to the still-
empaneled jury:
As a matter of fact, the only time attorney[] fees
can be awarded is if it’s in the contract or if there’s
a statute. There was no statute that would be
involved, and if you read—and I’m sure that you
did—the contract did not have an attorney[] fees
clause. If there had been one, we would have been
arguing about it and about the amount. And since
it’s not, your suggestion here plus attorney[] fees is
also [—] I guess as a matter of law I can’t do that.
¶24 The court then resubmitted the case to the jury. The court
did not restrict the number of questions the jury could
reconsider; rather, the court simply gave the jury another
complete copy of the special verdict form, along with the “old
one to review,” and sent the jury back into the jury room. After
re-deliberation, the jury reaffirmed its finding that Pharmacy
and Nursing Home entered into a contract and that Nursing
Home had breached that contract. However, the jury changed its
prior finding of mutual mistake, this time answering “no” to the
question of whether Nursing Home’s “ability to terminate its
contract with [the other provider] was a basic assumption, or an
important fact, upon which both” parties based their contract.
The jury also amended its damages award. The jury again found
that Pharmacy suffered “Lost Profits” of $143,989, but this
time—after the court informed it that attorney fees were not
recoverable—found that Pharmacy had also suffered
“Consequential Damages” of $120,000. The second damages
20160558-CA 9 2018 UT App 152KTM Health Care v. SG Nursing Home
verdict contained no mention of attorney fees. After it returned
the second verdict form, the jury was discharged.
¶25 After trial, Pharmacy submitted a proposed judgment
calculating its total damages as $603,980.60, apparently arriving
at that figure after taking the jury’s award and adding interest at
a rate of 1.5% per month, pursuant to a term of the contract.
Nursing Home objected to the proposed judgment, arguing that
Pharmacy’s proposed judgment was “based on an improper
prejudgment interest rate.” Specifically, Nursing Home asserted
that the contract’s rate of 1.5% per month applied only to
penalties on “unpaid balances” and “invoices” and did not
apply to the jury’s damages award because Pharmacy “never
actually provided any drugs or medical supplies to [Nursing
Home’s] patients.” Nursing Home also argued that if
prejudgment interest were appropriate, it should be calculated at
10% per annum. The trial court, however, determined that an
award of prejudgment interest was inappropriate, no matter the
rate, because the jury could not have reached its judgment
amount using “fixed standards of valuation,” and must instead
have reached its verdict based on “its best judgment.”
ISSUES AND STANDARDS OF REVIEW
¶26 Both parties appeal, and together raise four issues for our
review. Nursing Home raises one issue in its appeal, and
Pharmacy raises three issues in its cross-appeal.
¶27 Nursing Home argues that the trial court should not have
resubmitted the case to the jury after reviewing the jury’s first
special verdict form. As we explain below, infra ¶ 46, we review
this issue for abuse of discretion.3
3. Nursing Home also argues that the evidence was insufficient
to support the jury’s $120,000 award of consequential damages.
As we discuss below, we conclude that the trial court should not
(continued…)
20160558-CA 10 2018 UT App 152KTM Health Care v. SG Nursing Home
¶28 In its cross-appeal, Pharmacy first argues that the trial
court should have allowed Pharmacy Expert to testify. “We
review a district court’s decision to admit or exclude expert
witness testimony for an abuse of discretion and will not reverse
that decision unless it exceeds the limits of reasonability.”
Conocophillips Co. v. Utah Dep’t of Transp., 2017 UT App 68, ¶ 12,
397 P.3d 772.
¶29 Pharmacy next argues that “[t]he trial court erred in
determining that the economic loss rule and doctrine of election
of remedies required dismissal of [Pharmacy’s] fraud-based
claims.” “The availability of a remedy is a legal conclusion that
we review for correctness.” Ockey v. Lehmer, 2008 UT 37, ¶ 42,
189 P.3d 51.
¶30 Finally, Pharmacy argues that the trial court erred by
determining that Pharmacy was not entitled to prejudgment
interest. A trial court’s decision regarding prejudgment interest
is a question of law that we review for correctness. Smith v.
Fairfax Realty, Inc., 2003 UT 41, ¶ 16, 82 P.3d 1064.
ANALYSIS
I. Nursing Home’s Appeal
¶31 Nursing Home argues that the trial court erred by re-
submitting the case to the jury after it perceived inconsistencies
in the jury’s answers to some of the questions on the special
verdict form. As Nursing Home sees it, the trial court could have
“reconciled” the jury’s answers to the questions, and therefore
should not have sent the jury back for additional deliberation. To
support its argument, Nursing Home cites several Utah cases
(…continued)
have resubmitted the amount-of-damages issue to the jury at all,
and because we reach that conclusion, we need not address
Nursing Home’s sufficiency-of-the-evidence argument.
20160558-CA 11 2018 UT App 152KTM Health Care v. SG Nursing Home
instructing trial courts not to “presume inconsistency” in a jury’s
answers to questions on a special verdict form; instead, “[w]here
the possibility of inconsistency in jury interrogatories or special
verdicts exists,” courts are instructed to “seek to reconcile the
answers if possible.” Bennion v. LeGrand Johnson Constr. Co., 701
P.2d 1078, 1083 (Utah 1985); see also Neff v. Neff, 2011 UT 6, ¶¶ 49,
76, 247 P.3d 380 (stating that “with regard to a claim that a jury
verdict is internally inconsistent, we resolve any inconsistency in
favor of giving effect to a jury verdict,” and that “we will seek to
reconcile the answers if possible” (quotation simplified)); Tooele
Associates Ltd. P’ship v. Tooele City, 2012 UT App 214, ¶ 10, 284
P.3d 709 (stating that a court’s “duty is to reconcile special
verdicts if possible”).
¶32 This rule—imposing a strict duty on trial courts to
reconcile potentially inconsistent answers on a special verdict
form, if possible—makes perfect sense in the context in which
each of these cases arose: when a court is presented with a
potential inconsistency after the jury has been discharged. Each
of the cases Nursing Home cites arose in this procedural posture.
See Neff, 2011 UT 6, ¶ 31 (reviewing a post-trial motion for
judgment notwithstanding the verdict); Bennion, 701 P.2d at 1082
(reviewing a post-trial motion for new trial); Tooele Associates,
2012 UT App 214, ¶¶ 7–8 (reviewing competing post-trial
motions). After a trial court discharges the jury, it is no longer
possible to ask the jury about any arguable inconsistencies in its
answers to the written questions on the special verdict form. In
that situation, rather than re-convene a new jury and put the
parties and the court to the time and expense of a second trial,
trial courts should of course make every effort to view the
special verdict form in a way that permits each of the answers to
be reconciled with the others.
¶33 But we do not think that this same rule should apply—at
least not with the same force—in a situation where an arguable
inconsistency is brought to the trial court’s attention while the
jury remains empaneled. In that situation, it is still possible to
ask the jury to clarify any inconsistencies in the verdict form.
20160558-CA 12 2018 UT App 152KTM Health Care v. SG Nursing Home
This case presents the question of whether, and to what extent, a
trial court has the discretion to ask a still-empaneled jury to re-
deliberate to resolve perceived inconsistencies in a special
verdict form. For the reasons we explain, we hold that, where a
jury remains empaneled, a trial court need not strain quite so
mightily to reconcile the answers on the verdict form as it must
after the jury has been discharged, and that, in such a situation,
trial courts possess discretion to both (a) determine whether an
inconsistency exists in the jury’s verdict, and (b) determine
whether to resubmit the case to the jury for re-deliberation to
resolve the perceived inconsistency.
A
¶34 The first issue that we must confront involves
determining whether inconsistency is present in a jury verdict,
and in calibrating the breadth of the discretion given to the trial
court in making that determination. See Shaun P. Martin,
Rationalizing the Irrational: The Treatment of Untenable Federal Civil
Jury Verdicts, 28 Creighton L. Rev. 683, 713 (1995) (stating that
“[t]he most pervasive difficulty with inconsistent verdicts . . .
involves determining when they exist”). As noted, when the
question arises after the jury has been dismissed, Utah law
already provides answers to these questions: a court must strive
to reconcile the answers given by the jury, and cannot order a
new trial unless the jury’s answers cannot be reconciled under
“any reasonable view.” See Neff, 2011 UT 6, ¶ 49 n.20 (stating that
“[w]hen reviewing claims that a jury verdict is inconsistent, we
must accept any reasonable view of the case that makes the
jury’s answers consistent”). To our knowledge, it is an open
question in Utah whether those same rules apply in cases where
the potential inconsistency is brought to the court’s attention
before the jury is discharged.4
4. Although our supreme court, in Bennion v. LeGrand Johnson
Constr. Co., 701 P.2d 1078 (Utah 1985), did not address the
(continued…)
20160558-CA 13 2018 UT App 152KTM Health Care v. SG Nursing Home
¶35 Other courts and commentators, however, have
addressed this issue, and most of them are of the view that the
rules ought to be, and are, different if the issue arises prior to the
jury’s dismissal. See, e.g., Smith v. Riceland Foods, Inc., 151 F.3d
813, 821 (8th Cir. 1998) (stating that “[a trial] court has discretion
to decide whether a jury’s findings on a verdict form are
incomplete, confusing, or inconsistent and whether to resubmit
the claim to the jury”); Veranda Beach Club Ltd. P’ship v. Western
Surety Co., 936 F.2d 1364, 1381 (1st Cir. 1991) (stating that “if
there was room for doubt, we believe that the trial court should
be granted substantial latitude in determining whether or not the
jury’s response to a verdict form which the court prepared is
clear and free from ambiguity”); Clyma v. Sunoco, Inc., No. 03-
CV-809, 2008 WL 3394616, at *5 (N.D. Okla. Aug. 8, 2008) (stating
that “case law from other circuits makes clear that where a jury
is still available, the trial court has the discretion to resubmit a
special verdict form to the jury with a request for clarification; if
the court elects not to seek clarification from the jury or the
inconsistency is not noticed until after the jury has been
(…continued)
precise issue we address here, we view that case as generally
supportive of our conclusions. In that case, the court held that
the jury’s answers could conceivably be reconciled, and
therefore affirmed the trial court’s decision to deny a post-trial
motion regarding a potential inconsistency. See id. at 1083. After
reaching its decision, however, the court (in dicta) chided the
appellant for “fail[ing] to object to the verdict before the jury was
discharged,” and stated that “[t]he rule requiring an objection if
there is some ambiguity serves the objective of avoiding the
expense and additional time for a new trial by having the jury
which heard the facts clarify the ambiguity while it is able to do
so.” Id. If the trial court were prohibited from seeking the jury’s
input in any event (because the verdict was technically
reconcilable), there would have been no need to chide the
appellant for its failure to object, because its failure to object
would have been meaningless.
20160558-CA 14 2018 UT App 152KTM Health Care v. SG Nursing Home
dismissed, the court must then attempt to harmonize the
answers, or order a new trial” (emphasis added)).5 We find these
authorities persuasive.
5. See also McHugh v. Olympia Entm’t, Inc., 37 F. App’x 730, 738
(6th Cir. 2002) (stating that “we should be deferential to the
determination of inconsistency made by a [trial] judge who has
observed the jury during the trial, prepared the questions and
explained them to the jury because he is in the best position to
determine whether the answers reflect confusion or uncertainty”
(quotation simplified)); Romano v. U-Haul Int’l, 233 F.3d 655, 671–
72 (1st Cir. 2000) (holding that the trial court did not abuse its
discretion when it decided to ask the jury to redeliberate
regarding a verdict that was not necessarily inconsistent “under
all possible views”); Richard v. Firestone Tire & Rubber Co., 853
F.2d 1258, 1260–61 (5th Cir. 1988) (stating that “[w]e have
consistently given the [trial] court wide discretion in deciding
whether the jury’s answers to the court’s questions are clear,”
and affirming a trial court’s decision to ask the jury to
redeliberate regarding a verdict that could potentially have been
reconciled); 35B C.J.S. Federal Civil Procedure § 1036 (2018)
(stating that trial courts have “the discretion to decide whether a
jury’s findings on a verdict form are incomplete, confusing, or
inconsistent,” and that “[w]hen a verdict appears to be internally
inconsistent, the safest course is to defer its acceptance, consult
with counsel, give the jury supplemental instructions, and then
recommit the matter for further consideration”); 33 Fed. Proc., L.
Ed. § 77:329 (2018) (stating that “it is settled that a [trial] court
has discretion to decide whether a jury’s findings on a special
verdict form are inconsistent”); Shaun P. Martin, Rationalizing the
Irrational: The Treatment of Untenable Federal Civil Jury Verdicts, 28
Creighton L. Rev. 683, 725 (1995) (arguing that “courts should be
given wide discretion in determining whether a jury’s verdict is
unacceptably inconsistent,” and stating that “courts are not
required to accept a jury verdict that is almost certainly derived
from confusion, mistake, or indifference to the law, even though
(continued…)
20160558-CA 15 2018 UT App 152KTM Health Care v. SG Nursing Home
¶36 The chief reason for taking a different approach in cases
where the jury remains empaneled is not difficult to divine. In
such cases, because the body that rendered the verdict remains
available for consultation, a powerful option exists that does not
exist later: the court can simply ask the jury what it meant.
Exercising this option allows the court to go right to the source
for clarification and remove any doubt about the jury’s true
intentions. After the jury makes clear its true intentions, there is
no longer any need for judges or attorneys to spin their wheels
speculating about the jury’s true intent or about the verdict’s
various possible meanings, or arguing about whether the verdict
can (or cannot) be reconciled.
¶37 In order to breathe life into this approach, however, trial
courts must be given a measure of discretion in determining
whether inconsistencies are present in a particular verdict. This
is so for at least two reasons. First, by definition, such an issue
will arise in a time-sensitive setting—with the jury still
empaneled, there will not usually be time for comprehensive
research or briefing on the issue. In most such instances, the
court will be assisted only by some brief and improvised oral
argument from counsel. The court is in the position of having to
decide, more or less on the spot, whether the jury’s answers are
inconsistent, because once the court discharges the jury, it is no
longer possible to seek the jury’s input. 6 In this situation, there
seems very little possible harm (as discussed further below, infra
(…continued)
there may be an insubstantial (but non-zero) chance that its
origins lie elsewhere”).
6. This is certainly not the only situation in which trial courts
must make quick decisions. But in this situation—unlike most
others, in which a court often can, for instance, revisit its
decision to exclude evidence or sustain an objection—an
improvident decision not to seek a jury’s input can never be
remedied, because a jury can never be recalled once discharged.
20160558-CA 16 2018 UT App 152KTM Health Care v. SG Nursing Home
¶¶ 44–45) in asking the jury to re-deliberate, but there are almost
certainly substantial benefits (e.g., clarity) to be gained, which
potential benefits will evaporate as soon as the jury is
discharged. In close cases, where facial or potential
inconsistencies are present, trial courts should be encouraged to
seek the jury’s input while they still can, without having to
worry about being reversed on appeal because, technically
speaking and after comprehensive research and briefing, the
original verdict turned out to be reconcilable after all. See
Veranda Beach Club, 936 F.2d at 1381 (stating that, “if there was
room for doubt” about whether the verdict contained
inconsistencies, “the trial court should be granted substantial
latitude” to seek the jury’s input).
¶38 Second, the trial court will by that point have sat through
the entire trial, and will have observed the jury’s behavior and
attitude. The trial court will also have approved the questions
posed to the jury, and will have also provided the jury its
instructions that it used to interpret and fill out the verdict form.7
For these reasons, courts have recognized that the trial judge is
“in the best position to determine whether the answers reflect
confusion or uncertainty,” see Smith, 151 F.3d at 821 (quotation
simplified), and “is in an excellent position to evaluate whether
7. The trial court is under an obligation to properly instruct the
jury, which duty includes providing a proper verdict form. See
Ames v. Maas, 846 P.2d 468, 471 (Utah Ct. App. 1993) (noting that
a trial court has a duty to instruct the jury on the law applicable
to the facts of the case); see also State v. Campos, 2013 UT App 213,
¶ 42, 309 P.3d 1160 (stating that “[t]he duty to properly instruct
the jury applies to the verdict form”). Indeed, the problem that
eventually arose in this case could have been easily avoided had
the parties and the court more carefully considered the language
of the special verdict form, and simply instructed the jury that if
it answered the questions regarding mutual mistake in the
affirmative, that it should stop its deliberations and submit the
verdict form to the court.
20160558-CA 17 2018 UT App 152KTM Health Care v. SG Nursing Home
the jury will likely be able to resolve [the] uncertainty with
proper guidance,” see Richard v. Firestone Tire & Rubber Co., 853
F.2d 1258, 1260 (5th Cir. 1988). For all of these reasons, the trial
court is in an advantaged position to be able to discern—even in
a time-sensitive setting—whether the jury’s answers are
inconsistent in a way that might be illuminated by additional
jury input.
¶39 We therefore hold that—as long as the jury that rendered
the verdict remains empaneled—a trial court is not under the
same obligation to “reconcile” a jury’s answers as it is after the
jury is discharged. A trial court may seek the jury’s input if the
jury’s answers are potentially inconsistent, or are inconsistent
under any reasonable view. See Veranda Beach Club, 936 F.2d at
1381 (stating that a trial court may seek the jury’s input “if there
[is] room for doubt” about whether the verdict is inconsistent). 8
B
¶40 Moreover, trial courts possess the latitude to seek the
jury’s input regarding potential inconsistencies, regardless of the
particular form the verdict takes.
¶41 In some situations, trial courts—by force of rule—can
(and sometimes must) seek the input of a still-empaneled jury
regarding potential inconsistencies in its verdict. For instance,
when a jury is asked to render a “general verdict” along with
8. It is important to note that our holding in this case is
grounded in recognizing the trial court’s discretion. We in no
way mean to infer that a trial court must seek the jury’s input in
all similar situations. Indeed, in such situations, a trial court may
elect not to resubmit matters to the jury for reconsideration, and
may determine that the jury’s answers can be reconciled without
the need for additional deliberation. A trial court’s decision not
to seek additional jury input will also be reviewed for abuse of
discretion.
20160558-CA 18 2018 UT App 152KTM Health Care v. SG Nursing Home
“written interrogatories upon one or more issues of fact the
decision of which is necessary to a verdict,” a trial court “shall
return the jury for further consideration” if its “answers are
inconsistent with each other and one or more is likewise
inconsistent with the general verdict,” see Utah R. Civ. P. 49(b),
and “may return the jury for further consideration” if its
“answers are consistent with each other but one or more is
inconsistent with the general verdict,” id. In the case before us,
however, the trial court did not ask the jury to render a general
verdict accompanied by answers to written questions. Instead,
the trial court submitted a special verdict form to the jury.
Special verdicts are governed by rule 49(a), not by rule 49(b), and
rule 49(a) is silent with regard to whether a trial court can, or
must, send a jury back for re-deliberation if its answers to the
questions on the special verdict form are inconsistent. See
generally Utah R. Civ. P. 49(a).
¶42 Courts in other jurisdictions—interpreting language
substantively identical to the language of the applicable Utah
rule—have determined that resubmission is an exercise best left
to a trial court’s broad discretion, regardless of whether the issue
arises under rule 49(a) (special verdicts) or 49(b) (general
verdicts accompanied by interrogatories). 9 Indeed, “[t]he
majority of [federal] circuits agree” that “resubmission of
inconsistent verdicts” under either rule 49(a) or (b) is
permissible. Wavelinq, Inc. v. JDS Lightwave Products Group, Inc.,
289 F. App’x 755, 761 (5th Cir. 2008); see also Duk v. MGM Grand
Hotel, Inc., 320 F.3d 1052, 1057 (9th Cir. 2003) (stating that,
“where the jury is still available, a [trial] court’s decision to
resubmit an inconsistent [special] verdict for clarification is
within its discretion”); Auwood v. Harry Brandt Booking Office,
Inc., 850 F.2d 884, 891 (2d Cir. 1988) (stating that, “[i]f the
9. Where the applicable federal rule contains identical language,
Utah appellate courts often look to federal case law for guidance
in interpreting our own rules. See, e.g., Arbogast Family Trust v.
River Crossings, LLC, 2010 UT 40, ¶ 16, 238 P.3d 1035.
20160558-CA 19 2018 UT App 152KTM Health Care v. SG Nursing Home
inconsistency between special verdict answers is noticed prior to
the dismissal of the jury, the trial court has the discretion to
resubmit the issues to the jury with a request for clarification . . .
whether or not the parties themselves request clarification”); In
re Stanton by Brooks v. Astra Pharm. Products, Inc., 718 F.2d 553,
575–76 (3d Cir. 1983) (observing that “in purely pragmatic terms,
it seems terribly inefficient not to obtain clarification from a still-
empaneled jury of the meaning of its answers and verdict,
especially when we consider that unclarified inconsistent
answers often necessitate a retrial of the entire case,” and
holding that the trial court “did not abuse its discretion in
resubmitting ‘special questions’ to the jury, whether those
questions be deemed to have been propounded under Rule 49(a)
or 49(b)”). But see McCollum v. Stahl, 579 F.2d 869, 871 (4th Cir.
1978) (noting that rule 49(a) does not explicitly provide for
resubmission, and holding that resubmission was therefore “not
allowable”). State courts are in agreement. See, e.g., Kanahele v.
Han, 263 P.3d 726, 737 (Haw. 2011) (stating that, when the jury is
“still available, it [is] within the court’s discretion” to resubmit
the case to the jury to resolve a potential inconsistency in the
answers on the special verdict form (quotation simplified)).
¶43 We find the majority interpretation persuasive. In our
view, rule 49 of the Utah Rule of Civil Procedure should be
interpreted to allow trial courts the discretion to seek the input
of a still-empaneled jury, regardless of whether the jury was
asked to return a special verdict or a general verdict with written
interrogatories. In particular, we agree that “it seems terribly
inefficient not to obtain clarification from a still-empaneled jury
of the meaning of its answers and verdict, especially when we
consider that unclarified inconsistent answers often necessitate a
retrial of the entire case.” See Stanton, 718 F.2d at 575–76; cf.
Bennion, 701 P.2d at 1083 (stating that “[t]he rule requiring an
objection if there is some ambiguity serves the objective of
avoiding the expense and additional time for a new trial by
having the jury which heard the facts clarify the ambiguity while
it is able to do so”). When either a party or the court itself notices
a potential inconsistency prior to the jury’s discharge, a trial
20160558-CA 20 2018 UT App 152KTM Health Care v. SG Nursing Home
judge has the option of seeking clarification from the jury,
regardless of the specific form of the verdict.
C
¶44 A word of caution, however: when a trial court decides to
send a case back to the jury for re-deliberation regarding a
perceived inconsistency, the court must take pains to remain
neutral, and to make sure that nothing in the court’s
communications to the jury about the inconsistency could
possibly be construed as encouraging the jury to reach a
particular result after re-deliberation. The danger is that, in some
cases, a jury may “perceive [a judge’s order to re-deliberate] to
be judicial encouragement to alter its findings, . . . [even if] such
influence is not intended.” See Shaun P. Martin, Rationalizing the
Irrational: The Treatment of Untenable Federal Civil Jury Verdicts, 28
Creighton L. Rev. 683, 724 (1995).
¶45 In order to avoid any such perception, whenever a trial
court orders a jury to re-deliberate regarding an inconsistency,
the court should explain to the jury the reasons it is being asked
to resume deliberations, but must do so in a completely neutral
and impartial way.10 See Smith, 151 F.3d at 821–22 (stating that
“[i]f a [trial] court decides to address a jury on an inconsistency
in its findings[,] the court must not pressure or coerce the jury,
either explicitly or subtly, to reach a certain result through its
direction to the jury to reconsider its findings”).
D
¶46 Because we have determined that the trial court had the
discretion to both (a) determine whether an inconsistency was
present in the jury’s verdict, and (b) send the case back to the
10. We would urge trial courts to seek input from counsel
regarding the content of such supplemental instructions before
providing those instructions to the jury.
20160558-CA 21 2018 UT App 152KTM Health Care v. SG Nursing Home
jury for clarification, we review the trial court’s decisions for
abuse of that discretion. Cf. Mota v. Mota, 2016 UT App 201, ¶ 6,
382 P.3d 1080 (reviewing a trial court’s actions for abuse of
discretion where the statute in question allowed the trial court
discretion, stating that “because the statute is permissive, we
review the court’s ultimate decision . . . for an abuse of
discretion”). In this case, the trial court gave the jury the
opportunity to clarify two separate issues: the mutual mistake
issue, and the attorney fees issue. In our view, the trial court did
not abuse its discretion by seeking the jury’s input on the mutual
mistake issue, but did abuse its discretion by allowing the jury to
re-deliberate regarding the amount of damages to be awarded.
1
¶47 The jury found both that (1) Pharmacy and Nursing
Home entered into a contract and that Nursing Home breached
that contract, and (2) both parties based the contract on the
mistaken assumption that Nursing Home was able to “get out
of” its contract with its previous provider.11 “A mutual mistake
of fact can provide the basis for equitable rescission . . . of a
contract[.]” Burningham v. Westgate Resorts, Ltd., 2013 UT App
244, ¶ 12, 317 P.3d 445; see also Kendall Ins., Inc. v. R & R Group,
Inc., 2008 UT App 235, ¶ 15 n.1, 189 P.3d 114 (stating that a
“[m]utual mistake of fact makes a contract voidable and is a
basis for equitable rescission” (quotation simplified)). Thus,
11. Neither party asks us to review the question of whether this
situation could, as a matter of law, constitute a mutual mistake of
fact. The terms of Nursing Home’s contract with its previous
provider were knowable facts; Nursing Home simply
misinterpreted the contract. Moreover, Pharmacy was not a
party to that contract, and played no role in its formation and
had no apparent reason to be familiar with its terms. However,
while we have our doubts that these facts could, as a matter of
law, constitute mutual mistake, we do not reach this issue
because the parties do not ask us to do so.
20160558-CA 22 2018 UT App 152KTM Health Care v. SG Nursing Home
although the jury may not have been fully aware of the legal
import of its findings, the jury essentially found that (1) no
contract existed due to mutual mistake, (2) Nursing Home
nonetheless breached the contract, and (3) Pharmacy was
entitled to damages for breach of contract. These findings were
at least facially inconsistent, because there would be no reason
for the jury to determine that a contract had been breached and
that damages should be awarded if the contract did not exist in
the first place.
¶48 Nursing Home nonetheless asserts that these findings can
be reconciled. It specifically argues that “the jury’s
determination that [Pharmacy] suffered $143,989 in lost profits
simply reflects its initial determination that [Nursing Home]
breached a contract with [Pharmacy],” and “does not address
the next logical step of whether the contract is enforceable such
that [Nursing Home] is liable for [Pharmacy’s] lost profits.”
Nursing Home then asserts that “once the jury found that a
mutual mistake had occurred, it was then the [trial] court’s duty
to make the legal determination that [Nursing Home] was not
liable for [Pharmacy’s] lost profits.” See Dishinger v. Potter, 2001
UT App 209, ¶ 17, 47 P.3d 76 (observing that “the jury only finds
the facts, and the court applies the law thereto and renders the
verdict” (quotation simplified)). Essentially, Nursing Home
argues that the jury’s verdict can be reconciled because its
mutual mistake finding, as a legal matter, nullifies its
accompanying findings of breach and damages.
¶49 This argument is not without force. Indeed, if this issue
had been brought to the trial court’s attention for the first time
after the jury had been discharged, the trial court’s duty to
reconcile the potentially-inconsistent answers may very well
have compelled the conclusion that no contract existed. See
Tooele Associates, 2012 UT App 214, ¶ 10; see also Dishinger, 2001
UT App 209, ¶ 17 (observing that courts enter judgment based
on applying the law to the jury’s findings of fact). But because
the trial court became aware of the issue while the jury was still
empaneled, and because the jury’s verdict was at least
20160558-CA 23 2018 UT App 152KTM Health Care v. SG Nursing Home
potentially inconsistent, the trial court was within its discretion
to ask the jury to clarify the potential inconsistency. See, e.g.,
Romano v. U-Haul Int’l, 233 F.3d 655, 671 (1st Cir. 2000)
(determining that a court did not abuse its discretion by seeking
additional jury input, even though “there was not an
inconsistency within this verdict under all possible views”);
Richard, 853 F.2d at 1260 (same).
¶50 In particular, we acknowledge that the trial court had
legitimate doubts about whether the jury’s answer to the mutual
mistake question was based on a complete understanding of the
law as applied to the facts. First of all, the verdict form contained
an error, in that it did not tell the jury to stop its deliberations if
it found the presence of mutual mistake. Second, and relatedly,
while the jury heard plenty of testimony about Nursing Home’s
misunderstanding of the terms of its contract with its previous
provider, neither attorney spent much time discussing mutual
mistake, or its potential ramifications, during closing argument.
Upon reviewing the verdict, especially under the time pressures
associated with the situation, the trial court did not abuse its
discretion by seeking the jury’s input for clarification. We find
no fault in the trial court’s conclusion that the verdict was
potentially inconsistent, nor with the trial court’s decision to ask
the jury to confirm that the result was indeed what it intended.
¶51 And we likewise perceive no infirmities with the trial
court’s statement to the jury regarding the potential
inconsistency. The trial court objectively explained to the jury
what the inconsistency was—specifically, that the jury’s finding
of mutual mistake was potentially inconsistent with its findings
of breach and damages—and asked the jury to re-deliberate on
those issues. We perceive nothing in the trial court’s statement to
the jury that could be interpreted, even subtly, as the trial court
placing its thumb on the scale.
¶52 Accordingly, we conclude that the trial court acted within
its discretion when it asked the jury to re-deliberate regarding
the inconsistency in the verdict form between the jury’s mutual
mistake finding and the jury’s breach and damages findings.
20160558-CA 24 2018 UT App 152KTM Health Care v. SG Nursing Home
2
¶53 We reach a different conclusion, however, with regard to
the trial court’s decision to allow the jury to re-deliberate
regarding the amount of damages. There was not even a
potential inconsistency in the jury’s answers on this issue, and
therefore there was no basis to ask the jury for additional input.
¶54 In its initial verdict, the jury awarded Pharmacy $143,989
in “Lost Profits” damages and $0 in “Consequential Damages.”
In addition, the jury hand-wrote the words “plus attorney fees.”
In connection with its discussion that the jury’s finding of
mutual mistake and breach of contract was inconsistent, the trial
court also explained to the jury that the court could award
attorney fees only if authorized by statute or by contract, and
that neither situation was applicable. After learning that
information, and after its second round of deliberations, the jury
amended its consequential damages award, increasing it from $0
to $120,000, but this time did not hand-write in any award of
“attorney fees.”
¶55 There was no plausible inconsistency regarding the jury’s
initial findings regarding the amount of damages, and therefore
there was nothing for the jury to reconsider upon re-deliberation
regarding the amount of damages. The jury very clearly and
unambiguously determined that Pharmacy was entitled to
$143,989 in lost profits, $0 in consequential damages, and that
the jury wished for Pharmacy to also recover its attorney fees.
The entire attorney fees issue could have—and should have—
been handled simply by excising the hand-written words “plus
attorney fees” from the first verdict form.12 See Meadowbrook, LLC
12. The trial court could also have avoided trouble in this case by
providing more careful instruction to the jury when it provided
the jury with the second special verdict form. Specifically, the
court could have instructed the jury to re-deliberate only
regarding a certain limited number of questions, rather than
(continued…)
20160558-CA 25 2018 UT App 152KTM Health Care v. SG Nursing Home
v. Flower, 959 P.2d 115, 117–18 (Utah 1998) (noting that “the
determination of reasonable attorney fees is an issue generally
left to the sound discretion of the trial court, not the jury” and
that generally courts do not visit the issue of attorney fees “until
one party has prevailed” (quotation simplified)). There was no
reason for the trial court to give the jury an opportunity to
reconsider the amount of damages it wished to award to
Pharmacy.13
¶56 Accordingly, we conclude that the trial court abused its
discretion by affording the jury a second opportunity to consider
the amount of damages, and that this error was prejudicial, in
that it resulted in a damages award that was $120,000 higher
than it should have been. We therefore vacate the jury’s second
damages award, but not the jury’s reconsidered answer
regarding mutual mistake, and remand the case to the trial court
with instructions to reinstate the damages amounts (less any
attorney fees) that the jury awarded in its first verdict.
II. Pharmacy’s Cross-Appeal
¶57 In its cross-appeal, Pharmacy raises three issues. First, it
asserts that the trial court erred by excluding the testimony of
Pharmacy Expert. Second, it asserts that the trial court erred by
dismissing its fraud-based causes of action. Finally, it contends
(…continued)
allowing the jury to reconsider the form in its entirety. The trial
court could also have opted to say nothing to the jury about the
attorney fees issue while it remained empaneled.
13. Such opportunities, when afforded in the absence of any
inconsistency in the verdict form, can potentially lead to jury
mischief. In this case, for instance, it is hard to escape the
conclusion that the jury altered its consequential damages award
in order to make up for the fact that Pharmacy could not recover
attorney fees in this case.
20160558-CA 26 2018 UT App 152KTM Health Care v. SG Nursing Home
that it is entitled to prejudgment interest on its damages award,
and that the trial court erred by failing to include such interest in
the judgment. We address each of these issues, in turn.
A
¶58 First, we conclude that the trial court did not abuse its
discretion by excluding Pharmacy Expert’s testimony.
¶59 Under rule 702 of the Utah Rules of Evidence, “a witness
who is qualified as an expert by knowledge, skill, experience,
training, or education may testify in the form of an opinion or
otherwise if the expert’s scientific, technical, or other specialized
knowledge will help the trier of fact to understand the evidence
or to determine a fact in issue.” Utah R. Evid. 702(a). With expert
testimony specifically, “[t]he ultimate question that must be
answered” in deciding whether to admit it “is whether, on
balance, the evidence will be helpful to the finder of fact.”
Balderas v. Starks, 2006 UT App 218, ¶ 27, 138 P.3d 75 (quotation
simplified). Further, an expert’s testimony must be “reliably
applied to the facts” of the case at hand. Utah R. Evid. 702(b)(3);
see also Eskelson ex rel. Eskelson v. Davis Hosp. & Med. Ctr., 2010
UT 59, ¶¶ 18–19, 242 P.3d 762 (holding that a doctor’s expert
testimony was reliably applied to the facts of the case where the
doctor, drawing from his “specialized knowledge in removing
foreign objects from childrens’ ears,” offered an opinion
regarding a perforated eardrum). Trial courts have “wide
discretion” to determine whether expert testimony is admissible.
Balderas, 2006 UT App 218, ¶ 27.
¶60 Here, the trial court determined that Pharmacy Expert’s
proposed testimony “would not help the trier of fact to
understand the evidence or a fact in issue,” because the facts
were “not sufficient” to support a conclusion that Nursing Home
would have renewed its contract with Pharmacy for six years.
Pharmacy disagrees, and asserts on appeal that one of the
primary issues in the case was whether it was entitled to
damages for one year, or whether it was also entitled to damages
for additional renewal periods. Pharmacy contends that
20160558-CA 27 2018 UT App 152KTM Health Care v. SG Nursing Home
Pharmacy Expert’s testimony would have established that
closed-door pharmacy contracts, like the one at issue here, “are
almost always one-year contracts with auto-renewal clauses that
are honored by the parties,” and that Pharmacy Expert would
have testified about “the expected length of similar closed[-]door
pharmaceutical agreements.”
¶61 But on the facts of this case, the parties never had an
opportunity to contemplate whether they might want to renew
the contract at the conclusion of the first year, because Nursing
Home almost immediately decided not to continue its
contractual relationship with Pharmacy. As noted above, either
party had the right, pursuant to the non-renewal provisions of
the contract, to end the contractual relationship after the first
year. Nursing Home exercised this right—albeit in somewhat
unconventional fashion—by email in July 2010, before the
contractual relationship ever really got off the ground. Under
these circumstances, there was therefore no need for expert
testimony postulating about whether, and for how long, the
parties might have renewed or extended the contract.
¶62 Thus, there existed a sound basis for the trial court’s
conclusion that Pharmacy Expert’s proposed testimony would
not have been helpful to the jury in determining any disputed
issues, see Balderas, 2006 UT App 218, ¶ 27, and was therefore not
“reliably applied to the facts” of the case, see Utah R. Evid.
702(b)(3). Accordingly, the trial court did not abuse its discretion
when it excluded Pharmacy Expert’s testimony from the jury’s
consideration at trial.14
14. Although Nursing Home does not raise this issue, there
exists a separate basis upon which we could affirm the trial
court’s decision to exclude Pharmacy Expert’s testimony:
Pharmacy has not provided us with a transcript of the April 10,
2013 hearing at which the trial court made its decision to exclude
the testimony. “[I]t is the appellant’s burden to assemble,
(continued…)
20160558-CA 28 2018 UT App 152KTM Health Care v. SG Nursing Home
B
¶63 Pharmacy next asserts that the trial court erred by
dismissing its claims for fraud in the inducement, constructive
fraud, intentional misrepresentation, and negligent
misrepresentation, based on both (1) the election of remedies
doctrine and (2) the economic loss rule. Pharmacy argues that
neither the election of remedies doctrine nor the economic loss
rule compel dismissal of its fraud-based claims. We agree with
Pharmacy that the trial court erred in dismissing these claims
(…continued)
transmit, and perfect the record on appeal.” Gines v. Edwards,
2017 UT App 47, ¶ 21, 397 P.3d 612 (citing Utah R. App. P. 11(c),
(e)). An appellant is not necessarily required “to provide the
transcript from every proceeding that occurred in a case,” but an
“appellant is required to ‘include in the record a transcript of all
evidence relevant to a finding or conclusion’ that is being
challenged on appeal.” Id. (quoting Utah R. App. P. 11(e)(2))
(quotation simplified). In Gines, the appellant failed to provide a
transcript of a hearing at which the trial court made a ruling
regarding the admissibility of expert testimony. Id. ¶¶ 19, 21. On
appeal, we concluded that the appellant had failed to carry its
burden of demonstrating that the trial court abused its discretion
in making its evidentiary ruling, especially where the trial
court’s written ruling specifically stated that “[t]he basis for the
Court’s ruling is set out in greater detail in the record of the
hearing.” Id. ¶ 19 (quotation simplified). Similarly here, the trial
court’s written ruling is brief, comprising only two substantive
paragraphs, and specifically references “the reasons stated at the
hearing” as part of the basis for the decision. Where Pharmacy
challenges the trial court’s ruling to exclude Pharmacy Expert,
and the court’s written ruling specifically references “the reasons
stated at the hearing,” and Pharmacy fails to provide us with a
transcript of that hearing, Pharmacy has—like the appellant in
Gines—failed to meet its burden of persuasion on appeal.
20160558-CA 29 2018 UT App 152KTM Health Care v. SG Nursing Home
pursuant to the election of remedies doctrine, but affirm the trial
court’s decision based on the economic loss rule.
1
¶64 A party to a lawsuit cannot have a double recovery for a
single loss. Brigham City Sand & Gravel v. Machinery Ctr. Inc., 613
P.2d 510, 511–12 (Utah 1980) (holding that a party cannot
“recover for the value of his property” and then also “recover
the property”); see also Helf v. Chevron U.S.A. Inc., 2015 UT 81,
¶ 68, 361 P.3d 63 (stating that “[i]f a defendant wrongfully
retains possession of a plaintiff’s cow, . . . the plaintiff may not
recover both the cow and the reasonable value of the cow,” and
that the plaintiff “must elect one of these two remedies”
(emphasis in original)). To prevent this, a defendant can invoke,
and courts can apply, the doctrine of election of remedies. This
doctrine “is a technical rule of procedure and its purpose is not
to prevent recourse to any remedy, but to prevent double redress
for a single wrong.” Royal Resources, Inc. v. Gibralter Fin. Corp.,
603 P.2d 793, 794 (Utah 1979).
¶65 Prior to the advent of rule 8 of the Utah Rules of Civil
Procedure, which allows a party to “state legal and equitable
claims . . . regardless of consistency,” id. R. 8(e) (emphasis added), a
party had to elect its remedy (i.e., choose between theories of
recovery that potentially relied on inconsistent facts) upon the
filing of a complaint, Helf, 2015 UT 81, ¶ 72. Modern pleading
rules, however, as exemplified by rule 8, “dictate that a court
may not require a plaintiff to elect between inconsistent claims
prior to trial.” Id. ¶ 76.
¶66 Our supreme court recently discussed the election of
remedies doctrine at length. See generally id. There, a worker was
injured “by a poisonous gas” after she added “sulfuric acid to an
open-air pit containing waste products from [an oil] refinery.” Id.
¶ 1. The worker sought and received workers’ compensation
benefits, and then later sued her employer in district court,
alleging that the employer was liable for an intentional tort. Id.
¶¶ 1, 18. The court discussed the fact that the worker’s two
20160558-CA 30 2018 UT App 152KTM Health Care v. SG Nursing Home
remedies were inconsistent: in her workers’ compensation case,
which began in administrative proceedings, the worker was
entitled to compensation only if the incident was “an accident,”
but in her district court case, the worker was entitled to
compensation only if the incident constituted an “intentional
tort” on the part of the employer. Id. ¶ 78. The court also noted
that, as a practical matter, the worker was not able to pursue
these two remedies as alternatives in a single lawsuit, because
the workers’ compensation case and the district court case had to
be pursued in separate fora. Id. ¶ 79. The court nonetheless held
that the worker could indeed pursue both remedies, id. ¶ 86, and
summarized the election of remedies doctrine as follows:
As an equitable judicial principle, the election of
remedies doctrine should be applied to produce
fair outcomes for litigants. It certainly applies to
prevent the worker from obtaining a double
recovery or recovering two inconsistent remedies.
But it should not be applied to force the worker to
make a binding election before knowing how a
jury will resolve an intentional tort claim.
Id. ¶ 85; see also id. ¶ 79 (stating that “[i]f these two remedies
could be pursued in a single forum, the answer would be
simple” in that “[t]he worker could plead” both claims “in the
alternative,” and then “after the fact-finder made a final
determination regarding the nature of the injury, the worker
would elect the remedy available under the facts found”).
¶67 In this case, the trial court dismissed Pharmacy’s fraud-
based claims because it perceived Pharmacy’s claims as in
tension with one another: to prevail on its contract-based claims,
Pharmacy would need to prove the existence of the contract and
rely upon its efficacy for recovery, but to prevail on its fraud-
based claims, Pharmacy would need to prove that it had been
defrauded in entering into the contract and would be asking for
rescission as its remedy. The trial court concluded that Pharmacy
was required to either affirm the contract and seek damages for
20160558-CA 31 2018 UT App 152KTM Health Care v. SG Nursing Home
breach, or avoid the contract and seek reliance and/or punitive
damages for fraud. The court then found that Pharmacy chose
“to affirm its contract with [Nursing Home]” and “elected
money damages as the remedy for [Nursing Home’s] alleged
breach” of the contract. Based on what it viewed as Pharmacy’s
“election of remedies,” the trial court then dismissed all of
Pharmacy’s fraud-based causes of action.
¶68 This ruling was at odds with Helf. Rule 8(e) permits
Pharmacy to pursue inconsistent theories at trial (i.e., breach of
contract and fraudulent inducement), and Pharmacy should not
have had to elect its remedy until after the jury returned a
verdict on those theories. See Helf, 2015 UT 81, ¶¶ 79, 86 (noting
that the worker “may not retain the inconsistent workers’
compensation benefits and an award of tort damages” but that
the worker only had to “elect” her remedy after the jury or
administrative body determined the outcomes of those
respective proceedings); see also id. ¶ 71 (stating that “if a
plaintiff obtains a judgment authorizing a writ of replevin for the
return of a cow wrongfully obtained by a defendant, the election
is not final until the cow is returned,” because “[i]f the plaintiff
later discovers that the cow had died while in the defendant’s
possession, the plaintiff may still pursue a claim for payment of
the reasonable value of the cow”). The trial court therefore erred
in dismissing Pharmacy’s fraud-based claims prior to trial under
the doctrine of election of remedies.
2
¶69 We can nevertheless affirm the trial court’s dismissal of
Pharmacy’s tort claims if those claims are barred by the
economic loss rule, which was an alternative basis for the trial
court’s decision to dismiss those claims. We conclude that, at
root, Pharmacy’s fraud-based claims are based on alleged
breaches of the same duties that Nursing Home agreed to
assume under the parties’ contract. See Hermansen v. Tasulis, 2002
UT 52, ¶ 16, 48 P.3d 235. Accordingly, because no “independent
duty” is at issue, those claims fall within the purview of the
20160558-CA 32 2018 UT App 152KTM Health Care v. SG Nursing Home
economic loss rule, and the trial court therefore did not err when
it dismissed Pharmacy’s tort claims pursuant to that doctrine.
¶70 “The economic loss rule is a judicially created doctrine
that marks the fundamental boundary between contract law,
which protects expectancy interests created through agreement
between the parties, and tort law, which protects individuals
and their property from physical harm by imposing a duty of
reasonable care.” SME Indus., Inc. v. Thompson, Ventulett,
Stainback & Assocs., Inc., 2001 UT 54, ¶ 32, 28 P.3d 669. When
applied, “the economic loss rule prohibits tort claims for purely
economic loss.” Gables at Sterling Village Homeowners Ass’n, Inc. v.
Castlewood-Sterling Village I, LLC, 2018 UT 04, ¶ 47, 417 P.3d 95.
Utah’s “formulation of the economic loss rule is that a party
suffering only economic loss from the breach of an express or
implied contractual duty may not assert a tort claim for such a
breach absent an independent duty of care under tort law.”
Hermansen, 2002 UT 52, ¶ 16 (emphasis in original) (quotation
simplified).
¶71 Thus, to determine whether the economic loss rule bars a
cause of action sounding in tort, we focus on the nature of the
duties existing between the parties, and specifically on whether
the duties existing between the parties arise as a result of the
parties’ contract or arise from other non-contractual sources. See
Davencourt at Pilgrims Landing Homeowners Ass’n v. Davencourt at
Pilgrims Landing, LC, 2009 UT 65, ¶ 27, 221 P.3d 234 (“Where the
economic loss rule is at issue, the initial inquiry becomes
whether a duty exists independent of any contractual obligations
between the parties.” (quotation simplified)). If the tort alleges a
breach of a duty that the contract itself imposes, then the claim is
barred; the plaintiff can sue only for contract-based remedies. See
Grynberg v. Questar Pipeline Co., 2003 UT 8, ¶ 52, 70 P.3d 1 (noting
that “failure to properly perform a duty assigned by the contract
is a breach of that contract and nothing more”); see also id. ¶ 43
(“[O]nce there is a contract, any tort claim must be premised
upon an independent duty that exists apart from the contract.
20160558-CA 33 2018 UT App 152KTM Health Care v. SG Nursing Home
All contract duties, and all breaches of those duties—no matter
how intentional—must be enforced under contract law.”).
¶72 However, if the tort claim alleges a breach of a duty that is
separate and distinct from any contractual duty existing between
the parties, then the claim is unaffected by the economic loss
rule; the plaintiff can proceed with that separate, non-contract
claim. See Gables, 2018 UT 04, ¶ 48 (“If we find that an
independent duty exists under the law, the economic loss rule
does not bar a tort claim because the claim is based on a
recognized independent duty of care and thus does not fall
within the scope of the rule.” (quotation simplified)).
¶73 In applying the economic loss rule, our supreme court has
occasionally suggested, in dicta, that intentional torts—and
fraud claims specifically—fall categorically outside the ambit of
the rule. See SME Indus. Inc., 2001 UT 54, ¶ 32 n.8, (suggesting
that “plaintiffs may recover purely economic losses in cases
involving intentional torts such as fraud, business disparagement,
and intentional interference with contract” (emphasis added));
Davencourt, 2009 UT 65, ¶ 38 (stating that, “despite the recovery
of what would otherwise be considered economic loss damages,
claims arising under a fiduciary duty, similar to fraud claims, lie
outside the scope of the economic loss rule” (emphasis added)).
Pharmacy relies on these broad assertions in support of its
position that its fraud-based claims are not barred by the
economic loss rule. However, we consider Pharmacy’s reliance
on these statements misplaced.
¶74 As an initial matter, the footnote in SME Industries was
written prior to Hermansen, in which our supreme court adopted
the “independent duty” formulation of the economic loss rule.
See Hermansen, 2002 UT 52, ¶¶ 16–17. Indeed, our supreme court
has itself disavowed its SME Industries footnote for that precise
reason. See Grynberg, 2003 UT 8, ¶ 49 (stating that, because SME
Industries was decided “before we adopted” the independent
duty formulation, “we do not find [the SME Industries footnote
to be] persuasive authority”); see also HealthBanc Int’l, LLC v.
Synergy Worldwide, Inc., 208 F. Supp. 3d 1193, 1197, 1199 (D. Utah
20160558-CA 34 2018 UT App 152KTM Health Care v. SG Nursing Home
2016) (Parrish, J.) (stating that the Utah Supreme Court, in
Grynberg, “specifically addressed” the SME Industries footnote
and “repudiated” it). And we also conclude that Pharmacy
places more weight upon the supreme court’s passing statement
in Davencourt than it is able to bear. We view that statement as
simply indicating that fraud-based claims can lie outside the
scope of the economic loss rule, as long as they are grounded in
an independent, non-contractual duty that is separate from the
duties agreed upon in the parties’ operative contract. This
reading is consistent with not only other Utah Supreme Court
cases, but also with decisions from federal courts applying Utah
law and with case law from other jurisdictions.15
¶75 For instance, in Grynberg, the Utah Supreme Court was
asked to consider whether various tort claims fell within the
economic loss rule. In that case, Questar (and/or its predecessor-
in-interest) entered into contracts with a supplier of natural gas,
whereunder Questar agreed to purchase natural gas at a price to
be “determined by a formula with three variables: price, volume,
and gross heating value.” See Grynberg, 2003 UT 8, ¶ 4. The
supplier sued Questar, alleging that “by mismeasuring and
wrongly analyzing the heating content of the gas,” Questar
breached the terms of the contract. Id. ¶ 46 (quotation
simplified). In addition to claims for breach of contract, the
15. The Utah legislature has codified the economic loss rule, at
least as applied to design defect and construction cases. See Utah
Code Ann. § 78B-4-513 (LexisNexis 2012). That statute states that
“nothing in this section precludes” a plaintiff in a design defect
or construction case “from bringing . . . another cause of action
. . . based on an intentional or willful breach of a duty existing in
law.” Id. § 78B-4-513(5). To the extent that this statutory
subsection could be construed as a broad exception to the
economic loss rule for intentional torts, see HealthBanc Int’l, LLC
v. Synergy Worldwide, Inc., 208 F. Supp. 3d 1193, 1198 n.1 (D. Utah
2016), that exception would not apply here, because this case
does not involve claims for design or construction defect.
20160558-CA 35 2018 UT App 152KTM Health Care v. SG Nursing Home
supplier also brought fraud-based claims, including negligent or
intentional misrepresentation and fraud. Id. ¶ 13. However, the
fraud-based claims “also allege[d] mismeasurement and/or
wrongful analysis of the heating content, the same conduct that
is asserted in the contract claim.” Id. ¶ 46. Accordingly, our
supreme court held that all of the supplier’s tort claims were
barred by the economic loss rule, because “[t]he fact that the
exact same conduct is described in both the contract and tort
claims, and the exact same facts and circumstances are at play, is
indicative of the overlapping duties in this case.” Id. ¶ 53.16
¶76 This same approach has consistently been followed by
federal courts applying Utah law: those courts have examined
fraud claims and other intentional torts through the
“independent duty” lens, and have held that tort claims—even
intentional tort claims such as fraud—are barred by the
economic loss rule if those claims are grounded in the same
duties that exist by virtue of the parties’ contract. See, e.g.,
HealthBanc, 208 F. Supp. 3d at 1197, 1199–1200 (dismissing a
claim for constructive fraud pursuant to the economic loss rule,
because the constructive fraud claim was seeking “a tort remedy
for breaches of duties imposed by” contract, and because there
was no independent duty); Anapoell v. American Express Bus. Fin.
16. The Grynberg court applied Wyoming law, not Utah law. See
Grynberg v. Questar Pipeline Co., 2003 UT 8, ¶ 40, 70 P.3d 1.
However, the court interpreted Wyoming law to be governed by
the same “independent duty” principles that govern Utah law in
this area. Id. ¶ 43 (citing Snyder v. Lovercheck, 992 P.2d 1079,
1087–88 (Wyo. 1999), and stating that “the underlying premise of
the economic loss doctrine” is “identification of the underlying
duties governing the parties’ relationship”). As discussed, the
court also took pains to specifically disavow its own footnote
from SME Industries regarding intentional torts. Id. ¶ 49. Even if
not strictly binding, we consider the court’s opinion in Grynberg
to be very useful guidance regarding our supreme court’s view
of the economic loss rule under Utah law.
20160558-CA 36 2018 UT App 152KTM Health Care v. SG Nursing Home
Corp., No. 2:07-CV-198, 2007 WL 4270548, *6–7 (D. Utah Nov. 30,
2007) (citing Grynberg and stating that the economic loss rule
“applies to claims for intentional, as well as non-intentional,
torts,” and dismissing the plaintiff’s tort claims under the
economic loss rule because they were “part and parcel of the
rights set forth in the” contract, and therefore were not based on
any “duty independent of the” contract); Associated Diving
& Marine Contractors, LC v. Granite Constr. Co., No. 2:01-CV-330,
2003 WL 25424908, *6–7 (D. Utah July 11, 2003) (dismissing some
of the plaintiff’s tort claims because those claims did not
“allege anything different” than was alleged in the breach of
contract claim, and stating that “[h]ow [the defendant]
went about breaching that [contractual] duty, whether by
negligence, inadvertence, misunderstanding, concealment, or
misrepresentation is not legally supportive of a separate legal
duty sounding in tort,” but allowing a claim for fraud in the
inducement to proceed, because that claim included allegations
that the defendant “committed a tort before the contract was
ever entered into” by allegedly misrepresenting “facts before
the” contract was awarded).17
¶77 Under these legal principles, to determine whether the
economic loss rule bars the fraud-based claims that Pharmacy
has brought in this case, we must focus on whether those claims
17. Persuasive authority from other jurisdictions is in accord. See,
e.g., United Vaccines, Inc. v. Diamond Animal Health, Inc., 409 F.
Supp. 2d 1083, 1093 (W.D. Wis. 2006) (holding that there is a
“narrow exception” to the economic loss rule for fraud-based
claims when such claims are “extraneous to, rather than
interwoven with, the contract”); Huron Tool and Eng’g Co. v.
Precision Consulting Services, Inc., 532 N.W.2d 541, 545 (Mich. Ct.
App. 1995) (holding that fraud-based claims that are
“undergirded by factual allegations identical to those supporting
their breach of contract [claims]” are barred by the economic loss
rule, but that fraud-based claims that are “extraneous to the
contract” are not (quotation simplified)).
20160558-CA 37 2018 UT App 152KTM Health Care v. SG Nursing Home
allege breaches of duties that are extraneous to the parties’
contract, or whether those claims allege simply that contractual
duties were breached through misrepresentation or fraud. Such
an inquiry requires us to carefully examine the specific claims
Pharmacy makes in support of its fraud-based claims.
¶78 Pharmacy’s tort claims all contain similar allegations: that
Nursing Home “represented to [Pharmacy] that [it] had the
ability to comply and perform in accordance with the terms” of
the parties’ contract, that it “would comply and perform in
accordance with the terms” of the parties’ contract, and that
those representations were false because Nursing Home never
intended to honor the contract and instead was simply using its
contractual negotiations with Pharmacy to leverage a better deal
with its existing provider.18 It is evident, however, that these
allegations amount to nothing more than an assertion that
Nursing Home promised that it could and would comply with
the terms of the parties’ contract, and that it broke those
promises. These are quintessential breach of contract allegations,
and they do not materially differ from the allegations Pharmacy
makes to support its claim for breach of contract.
¶79 Notably, Pharmacy does not allege that Nursing Home
made any other false representations—other than that it would
comply with the terms of the contract—that were specifically
intended to induce Pharmacy to enter into the contract. See
18. The allegations undergirding Pharmacy’s claims for fraud in
the inducement, intentional misrepresentation, and negligent
misrepresentation are nearly identical. The allegations
undergirding its claim for constructive fraud are phrased a bit
differently, but the differences are ultimately immaterial. As part
of that claim, Pharmacy alleges that Nursing Home had a duty
to disclose to Pharmacy that it “would not terminate [its]
apparent contract” with its existing provider, and that Nursing
Home “had no intention of complying and performing in
accordance with the terms” of the parties’ contract.
20160558-CA 38 2018 UT App 152KTM Health Care v. SG Nursing Home
Huron Tool and Eng’g Co. v. Precision Consulting Services, Inc., 532
N.W.2d 541, 546 (Mich. Ct. App. 1995) (dismissing plaintiff’s
fraud in the inducement claim because “plaintiff’s allegations of
fraud are not extraneous to the contractual dispute”).19 This case
is therefore materially indistinguishable from Grynberg, where
our supreme court concluded that “[t]he fact that the exact same
conduct is described in both the contract and tort claims, and the
exact same facts and circumstances are at play, is indicative of
the overlapping duties in this case.” 2003 UT 8, ¶ 53. In Grynberg,
the supreme court affirmed a trial court’s dismissal of a
plaintiff’s tort claims under the economic loss rule under such
circumstances, and we are compelled to do the same in this case.
C
¶80 Pharmacy’s final argument is that the trial court erred in
determining that it was not entitled to any prejudgment interest,
19. If a plaintiff alleges that the defendant induced it to enter into
a contract by making misrepresentations regarding facts not
incorporated into the contract, then the plaintiff’s fraud in the
inducement claim would not be barred by the economic loss
rule. To give one hypothetical example, if Pharmacy had
informed Nursing Home that the contract only made financial
sense for Pharmacy if Nursing Home had over 200 patients, and
Nursing Home falsely represented that it did, and Pharmacy
then entered into a “requirements” contract in reliance on that
representation, Pharmacy’s claim for fraud in the inducement
would not be barred by the economic loss rule, because the
representation in question was made prior to entering into the
contract, and was a representation that went beyond simply
promising to deliver the contractual goods. Here, the only
misrepresentation to which Pharmacy can point is that Nursing
Home promised to honor the contract and then failed to do so.
Under these circumstances, Pharmacy’s tort claims simply do
not stem from an “independent duty” separate from the duties
imposed by the parties’ contract.
20160558-CA 39 2018 UT App 152KTM Health Care v. SG Nursing Home
regardless of the rate. We conclude that the trial court’s decision
was correct.
¶81 Under Utah law, courts “award prejudgment interest in
cases where damages are complete and can be measured by
fixed rules of evidence and known standards of value.” Smith v.
Fairfax Realty, Inc., 2003 UT 41, ¶ 17, 82 P.3d 1064 (quotation
simplified). In contrast, courts will not award prejudgment
interest in cases where the trier of fact has to use its “best
judgment in assessing the amount to be allowed for past as well
as for future injury.” USA Power, LLC v. PacifiCorp, 2016 UT 20,
¶ 100, 372 P.3d 629 (quotation simplified). The question
presented here is whether Pharmacy’s damages award for lost
profits is the sort of damage that “can be measured by fixed
rules of evidence and known standards of value,” or whether it
is the sort of damage that can only be assessed by using
nebulous “best judgment” criteria.
¶82 Our supreme court has stated that, “[a]lthough not per se
excluded, we are generally reluctant to award prejudgment
interest for unrealized profits.” Id. (quotation simplified). This is
because such losses “do not represent an actual, ascertainable
loss”; rather, they are a representation of the factfinder’s “best
approximation of that loss.” Id. (quotation simplified). As a
result, “the very nature of lost future profits injects an air of
uncertainty and speculation into the calculation of damages.” Id.(quotation simplified). Therefore, “evidence that is sufficient to
permit a jury to consider whether to award damages for lost
profits may still be insufficient to justify an award of
prejudgment interest.” Id. ¶ 102.
¶83 For example, in USA Power, our supreme court held that
prejudgment interest on an award of lost profits was
inappropriate in a case where a jury found that the defendant
misappropriated a trade secret and breached a confidentiality
and non-disclosure agreement, id. ¶ 26, because the plaintiff
business’s project “was not an established business with a long-
term history of profits, there was no contract specifying the
amount of profit [the plaintiff] would have gotten if [the
20160558-CA 40 2018 UT App 152KTM Health Care v. SG Nursing Home
defendant] had not breached, and it is uncertain whether [the
plaintiff] would have actually obtained” the additional contracts
upon which the damages computation was based, id. ¶ 101.
¶84 By contrast, however, our supreme court has recognized
that prejudgment interest is sometimes appropriate on an award
of lost profits, if the lost profits calculation is based on “known,
calculable figures” and is shown to be non-speculative. See Encon
Utah, LLC v. Fluor Ames Kraemer, LLC, 2009 UT 7, ¶ 60, 210 P.3d
263. In that case, the plaintiff was seeking “recovery of damages
for a completed percentage of work on a fixed-price contract and
for profits on that work at a rate of 10%.” Id. The defendant
argued that prejudgment interest was not appropriate in that
case, in part because the plaintiff was seeking recovery of lost
profits. Id. ¶ 59. The supreme court was unpersuaded, on the
facts of that case, concluding that “the profits [the plaintiff] seeks
are known, calculable figures and are not similar to the
speculative future profits that were at issue” in the cases cited by
the defendant. Id. ¶ 60. Moreover, the supreme court noted that,
“the [trial] court was not left to its best judgment to ascertain
damages,” but instead “the court reviewed the terms of [the
plaintiff’s] fixed price contract, the percentage of work [it]
completed, and noted that the parties agreed that 10% profit on
that work was reasonable.” Id. ¶ 65. The supreme court affirmed
the trial court’s conclusion that prejudgment interest was
appropriate in that case. Id. ¶ 69.
¶85 This case has much more in common with USA Power
than it does with Encon. In this case, as in USA Power, the
plaintiff (here, Pharmacy) was not an established business with a
long-term history of profits, and there was no contract specifying
the amount of profit Pharmacy would have received in the event
Nursing Home breached the contract. See USA Power, 2016 UT
20, ¶ 101. Also, neither Katschke nor Damages Expert offered a
damages analysis grounded in “mathematical accuracy,” id.
¶ 100; both made a number of assumptions that called into
question the firmness of their respective calculations. In the end,
the jury came up with a figure that neither witness had
20160558-CA 41 2018 UT App 152KTM Health Care v. SG Nursing Home
discussed and that neither side’s attorney advocated for at
closing. Under these circumstances, this case falls within USA
Power’s general rule that prejudgment interest should not be
awarded “for unrealized profits” because “damages in [such]
cases do not represent an actual, ascertainable loss” but instead
“represent the fact-finder’s best approximation of that loss.” Id.(quotation simplified).
¶86 Accordingly, the trial court correctly determined not to
award prejudgment interest on Pharmacy’s lost profits.
CONCLUSION
¶87 With regard to Nursing Home’s appeal, we conclude that
the trial court had the discretion to determine whether
inconsistencies existed in the jury’s answers on the special
verdict form and, as long as the jury remained empaneled, had
the discretion to ask the jury to re-deliberate regarding any
inconsistencies. The trial court properly asked the jury to
reconsider its potentially inconsistent answers regarding mutual
mistake, breach, and damages, but the trial court abused its
discretion in allowing the jury to re-deliberate regarding the
amount of damages.
¶88 With regard to Pharmacy’s cross-appeal, we conclude that
the trial court acted within its discretion in excluding the
testimony of Pharmacy Expert. We further conclude that the trial
court should not have dismissed Pharmacy’s fraud-based claims
based on the election of remedies doctrine, but nonetheless
properly dismissed those claims under the economic loss rule.
Finally, we conclude that the trial court correctly determined not
to award prejudgment interest on Pharmacy’s damages award.
¶89 We therefore affirm in part and reverse in part the trial
court’s orders, vacate the trial court’s judgment, and remand the
case to the trial court for the limited purpose of entering
judgment in favor of Pharmacy on its breach of contract claim in
an amount consistent with the jury’s original damages award
20160558-CA 42 2018 UT App 152KTM Health Care v. SG Nursing Home
($143,989 in lost profits, and $0 in consequential damages), but
without attorney fees.
20160558-CA 43 2018 UT App 152