Evans v. B and E Pace Investment , 424 P.3d 963 ( 2018 )

2018 UT App 37THE UTAH COURT OF APPEALS
PAUL EVANS, JEANETTE EVANS, AND KERN RIVER GAS
TRANSMISSION CO.,
Appellants,
v.
B&E PACE INVESTMENT LLC, GSH GEOTECHNICAL INC., SKY
PROPERTIES INC., EAGLEPOINTE DEVELOPMENT LC, SMOOT REAL
ESTATE, RALPH CANNON REAL ESTATE, AND WILFORD W. CANNON,
Appellees.
Opinion
No. 20170114-CA
Filed March 8, 2018
Second District Court, Farmington Department
The Honorable Michael G. Allphin
No. 150700392
Brent O. Hatch and Shaunda L. McNeill, Attorneys
for Appellants Paul Evans and Jeanette Evans
John A. Snow, Alex B. Leeman, John A. Hutchings,
and Burton G. Davis, Attorneys for Appellant
Kern River Gas Transmission Co.
Benson L. Hathaway Jr., Analise Q. Wilson, and
Ryan R. Beckstrom, Attorneys for Appellees B&E
Pace Investment LLC, Sky Properties Inc.,
Eaglepointe Development LC, Smoot Real Estate,
Ralph Cannon Real Estate, and Wilford W. Cannon
Craig C. Coburn and Brian D. Bolinder, Attorneys for
Appellee GSH Geotechnical Inc.
JUDGE RYAN M. HARRIS authored this Opinion, in which JUDGES
GREGORY K. ORME and DAVID N. MORTENSEN concurred.
Evans v. B&E Pace Investment
HARRIS, Judge:
¶1 Permission to amend pleadings should be “freely
give[n],” see Utah R. Civ. P. 15(a)(2), especially where permission
is sought at or near the end of fact discovery, before expert
discovery, before any trial date has been set, and where the
grounds for at least some of the amendments were first
discovered only weeks before the end of the fact discovery
period. Under the circumstances of this case, we conclude that
the district court exceeded its discretion when it denied two
motions to amend, and therefore reverse.
BACKGROUND
¶2 On August 5, 2014, a massive landslide (the Landslide)
decimated a hillside in North Salt Lake, Utah. The Landslide was
approximately 500 feet wide, 500 feet long, and 60 feet deep, and
displaced between 300,000 and 400,000 cubic yards of earth and
debris. Among the properties located near the bottom of the
Landslide was a residential home owned by Paul and Jeanette
Evans (collectively, Evans) and a tennis club (the Tennis Club).
Both Evans and the Tennis Club claim that their properties were
damaged by the Landslide.
¶3 On April 21, 2015, the Tennis Club sued the City of North
Salt Lake, various developers and real estate entities
(Developers), and John Does1 for causes of action related to the
Landslide. Developers soon answered, and filed counterclaims
against the Tennis Club as well as third-party claims against
various entities, including Kern River Gas Transmission Co.
1. A John Doe is “[a] fictitious name used in a legal proceeding to
designate a person whose identity is unknown.” John Doe,
Black’s Law Dictionary (10th ed. 2014).
20170114-CA 2 2018 UT App 37Evans v. B&E Pace Investment
(Kern River), GSH Geotechnical Inc. (GSH),2 and Evans. In July
2015, Evans answered Developers’ claims, and also filed
counterclaims against Developers and various John Does for,
among other things, negligence, nuisance, breach of fiduciary
duty, and fraudulent non-disclosure. Later, in January 2016, the
district court consolidated into this action a separate lawsuit
filed by Kern River against Developers and GSH, in which Kern
River brought claims for negligence, nuisance, and injunctive
relief. After the consolidation, the lawsuit then pending before
the district court involved, by our count, seventeen parties
represented by fifteen different law firms.
¶4 In February 2016, the district court entered a stipulated
case management order that arranged the various parties
involved in the litigation into ten different “sides,” and allowed
for each “side” to conduct five elective depositions, over and
above twenty-eight depositions that all parties agreed were
essential. The order set the fact discovery deadline for September
30, 2016; the expert discovery deadline for April 28, 2017; and the
deadline for dispositive motions for May 31, 2017. The district
court subsequently extended each of those deadlines by ninety
days, with the close of fact discovery set to occur around the end
of December 2016.
¶5 Although the case management order makes no mention
of it, the parties (apparently on their own) mutually decided to
work toward a mediation and, in an effort to limit litigation
costs, agreed that, prior to the mediation, they would limit
themselves to written discovery and to six or seven depositions
that were deemed the most critical. After completing that limited
discovery, the parties attempted mediation as scheduled in June
2. GSH was originally a party to this appeal. Since the filing of
the notice of appeal, however, all claims involving GSH have
been dismissed.
20170114-CA 3 2018 UT App 37Evans v. B&E Pace Investment
2016, but were unable to reach a settlement at the mediation
conference. The parties did not completely abandon settlement
efforts, however; they continued to informally discuss the
possibility of settlement, even after the June conference, and the
mediator remained involved until December 2016.
¶6 After the mediation conference proved unsuccessful, the
parties attempted to proceed with fact discovery pursuant to the
case management order. They soon began to discuss dates for
the remaining depositions, but coordinating the schedules of
fifteen different law firms proved difficult and required
significant lead time. Depositions noticed in July ended up
taking place as late as November. Depositions noticed in
September ended up taking place as late as December.
¶7 On June 10, 2016, as the parties were preparing for the
mediation conference, and roughly six months before the end of
fact discovery, Evans filed a motion for leave to amend their
pleadings. Specifically, Evans sought permission to add
negligence claims against GSH and another engineering firm
related to their alleged involvement with geotechnical work on
the hillside. Due to the impending mediation, Evans agreed to
extend the deadline for any response to its motion to amend
“until mediation was completed.” Because the mediator
remained involved and settlement discussions continued
informally even after the failed mediation conference, Evans did
not consider the mediation truly “completed” until December
2016, when the mediator’s involvement ended. Thus, Evans did
not submit the June 2016 motion to amend for the court’s
decision until December 9, 2016.
¶8 Meanwhile, in August 2016, Kern River filed its own
motion seeking leave to amend its pleadings. Specifically, Kern
River asked permission to add additional cross-claims against
Developers alleging negligence, nuisance, and unjust
enrichment. The parties did not postpone briefing on this
20170114-CA 4 2018 UT App 37Evans v. B&E Pace Investment
motion, and Kern River submitted it for decision in due course.
In October 2016, the district court granted Kern River’s motion
and allowed the amendment to include the additional claims.
¶9 On December 13, 2016, with only a few weeks left in the
fact discovery period, and while the parties were finishing up
depositions, the district court consolidated yet another case into
this action. In that other case, Questar Gas Company (Questar)
had brought negligence and nuisance claims against the City of
North Salt Lake related to the Landslide.
¶10 That same day, the district court denied Evans’s June 2016
motion to amend, concluding that the motion was untimely
because, even though it had been filed in June, it had not been
submitted for decision until December, and explaining that
“[t]he close of the extended date of fact discovery is now only
sixteen days away.” A few days later, Evans asked the court to
reconsider its ruling, asserting that any delay in submitting the
motion for decision was due to professional courtesies Evans’s
counsel had extended to GSH related to the ongoing settlement
discussions. The district court denied the motion to reconsider.
¶11 Near the end of December, as the fact discovery period
was ending, three additional motions to amend were filed. On
December 29, 2016, Evans moved yet again to amend their
pleadings. Evans again sought to add negligence claims against
GSH (but this time not against the other firm). In addition, this
time Evans sought to add various new claims (such as breach of
fiduciary duty, civil conspiracy, and pattern of unlawful activity)
against the existing Developers and/or their principals, including
claims alleging that some of the Developer entities were the alter
egos of their principals. On December 23, 2016, the Tennis Club
filed a motion for leave to amend, seeking to add new claims
against the existing Developers and/or their principals that were
similar to the claims Evans sought to add. And on December 30,
2016, Kern River filed a motion seeking leave to amend, asking
20170114-CA 5 2018 UT App 37Evans v. B&E Pace Investment
for permission to bring negligence claims against two
engineering firms, Bingham and Geostrata.
¶12 All of the parties that moved to amend—the Tennis Club,
Evans, and Kern River—asserted that the facts supporting the
filing of many of these new claims did not come to light until the
depositions taken between September and December 2016, and
that they were therefore unable to bring these claims earlier.3 To
take one specific example, Kern River asserts that a principal of
one of the Developers initially testified that Bingham was not
3. Whether Evans or Kern River actually did discover relevant
facts late in the fact discovery period that they did not already
know is a factual issue. Indeed, on appeal, Developers contest
Evans’s and Kern River’s assertion that, before taking the
depositions that occurred late in the fact discovery period, they
lacked sufficient factual knowledge to bring their new claims. In
its various rulings on the motions to amend, however, the
district court did not mention this issue, and certainly did not
endeavor to resolve the contested factual questions. We can, of
course, affirm a district court’s decision on any alternative
ground apparent from the record. See Bailey v. Bayles, 2002 UT 58,
¶ 10, 52 P.3d 1158. However, because we are in no position to
resolve factual disputes that the district court left unresolved, it
is not apparent on this record that Evans’s and Kern River’s
factual assertions are incorrect. Thus, for the purpose of our
analysis in this opinion, we simply assume that the factual
claims made by the movants are true. Certainly, if the district
court had made factual findings on this issue, we would have
deferred to those findings in the same way we defer to other
factual findings made by a trial court. See, e.g., Outsource
Receivables Mgmt., Inc. v. Bishop, 2015 UT App 41, ¶ 5, 344 P.3d
1167 (stating that “we review a trial court’s factual findings
under the deferential clearly erroneous standard”) (citation and
internal quotation marks omitted)).
20170114-CA 6 2018 UT App 37Evans v. B&E Pace Investment
involved in the geotechnical work on the hillside, but that in one
of the later depositions, a construction manager for one of the
Developers testified that Bingham was indeed involved in the
geotechnical work on the hillside.
¶13 The district court denied all three motions, explaining that
“[w]hile no trial date has been set, it is clear that this case is in
the advanced procedural stages of litigation and that alterations
to claims at this point are untimely.” The court also determined
that “adding new parties and new claims at this late stage of
litigation will result in prejudice to those parties,” but the only
prejudice the district court identified was that “fact discovery is
closed” and that “[f]act discovery is a crucial element in
preparing for trial.”
¶14 Evans and Kern River now seek interlocutory review of
the district court’s denial of their respective motions to amend.4
We granted them leave to appeal, and now consider their claims.
ISSUE AND STANDARD OF REVIEW
¶15 Both Evans and Kern River argue that the district court
erred by denying their respective motions to amend. “We review
a district court’s decision on a motion to amend under an abuse
of discretion standard.” Tretheway v. Furstenau, 2001 UT App 400,
¶ 7, 40 P.3d 649; see also Stichting Mayflower Mountain Fonds v.
4. The Tennis Club elected not to pursue an interlocutory
challenge to the district court’s order. Instead, because the
statute of limitations had not yet run on its new claims, it elected
to file a separate lawsuit containing the claims it had sought
leave to file. After this court granted permission for Evans and
Kern River to bring this interlocutory appeal, the district court
stayed all matters in both this case and the Tennis Club’s new
case pending the outcome of this appeal.
20170114-CA 7 2018 UT App 37Evans v. B&E Pace Investment
United Park City Mines Co., 2017 UT 42, ¶¶ 48–49 (stating that the
question on appeal is “whether we find an abuse of discretion in
the district judge’s decision to deny the motion,” and stating that
a district judge has “substantial discretion” in making that
determination).
ANALYSIS
¶16 Rule 15 of the Utah Rules of Civil Procedure instructs
district courts that they “should freely give permission [for a
party to amend its pleadings] when justice requires.” Utah R.
Civ. P. 15(a)(2). “The purpose of rule 15 is to provide litigants the
maximum opportunity for each claim to be decided on its merits
rather than on procedural niceties.” Shah v. Intermountain
Healthcare, Inc., 2013 UT App 261, ¶ 7, 314 P.3d 1079 (emphasis,
brackets, citation, and internal quotation marks omitted). Trial
courts should therefore “liberally allow amendments unless the
amendments include untimely, unjustified, and prejudicial
factors.” Daniels v. Gamma West Brachytherapy, LLC, 2009 UT 66,
¶ 58, 221 P.3d 256.
¶17 In determining whether to allow a proposed amendment,
courts are instructed to generally focus on three main factors: (1)
timeliness; (2) prejudice; and (3) justification. Swan Creek Village
Homeowners Ass’n v. Warne, 2006 UT 22, ¶ 20, 134 P.3d 1122.
“[M]otions to amend are typically deemed untimely when they
are filed in the advanced procedural stages of the litigation
process, such as after the completion of discovery, on the eve of
a scheduled trial date, or after an order of dismissal has already
been entered,” or where the motion is filed “several years into
the litigation.” Kelly v. Hard Money Funding, Inc., 2004 UT App
44, ¶¶ 29–30, 87 P.3d 734.
¶18 In evaluating the “prejudice” factor, courts must keep in
mind that “a showing of simple prejudice is not enough to
support a denial of a motion to amend.” Id. ¶ 31. Indeed, “almost
20170114-CA 8 2018 UT App 37Evans v. B&E Pace Investment
every amendment of a pleading will result in some practical
prejudice to the opposing party.” Id. (citation and internal
quotation marks omitted). Instead, for this factor to support
denial of the motion, the nonmoving party must suffer “undue
or substantial prejudice” that is “unavoidable.” Id. “Mere
inconvenience to the opposing party is not grounds to deny a
motion to amend.” Id. (emphasis, citation, and internal quotation
marks omitted). The key to this part of the inquiry is whether
“the opposing side would be put to unavoidable prejudice by
having an issue adjudicated for which he or she had no time to
prepare.” Swan Creek, 2006 UT 22, ¶ 21, (emphasis, brackets,
citation, and internal quotation marks omitted). A motion to
amend may well be “prejudicial when the nonmoving party
would have little time to prepare a response before trial,”
Daniels, 2009 UT 66, ¶ 59, but if any such prejudice can be
avoided with a reasonable, brief, and targeted extension of the
fact discovery cutoff date, prejudice may not be present, see
Timm v. Dewsnup, 851 P.2d 1178, 1183 (Utah 1993) (noting that
“[t]here can be no prejudice” if the court “give[s] ample time for
an answer” to the new claims (citations and internal quotation
marks omitted)); see also DeLuca v. Winer Indus., Inc., 857 F. Supp.
606, 608 (N.D. Ill. 1994) (granting a motion to amend that was
filed on “the day fact discovery closed,” and determining that
granting the motion “would not unduly prejudice [defendants] if
the fact discovery deadline is extended for the limited purpose
of completing discovery on the additional claims”).
¶19 With regard to justification, “the analytic thrust should . . .
be focused on the reasons offered by the moving party for not”
raising the issues earlier. Kelly, 2004 UT App 44, ¶ 38. In cases
where “the party knew of the events or claims earlier yet failed
to plead them due to a dilatory motive, a bad faith effort during
the pleading process, or unreasonable neglect in terms of
pleading preparation,” the justification factor will weigh against
allowing the amendment. Id. On the other hand, “‘where the
party’s prior knowledge was minimal, or where it was instead
20170114-CA 9 2018 UT App 37Evans v. B&E Pace Investment
based on suspicious or inconclusive evidence, the party’s
decision to hold off on pleading those allegations until reliable
confirmation could be obtained’” should not be held against that
party. Swan Creek, 2006 UT 22, ¶ 22 (quoting Kelly, 2004 UT App
44, ¶ 38).
¶20 Although courts should consider all three factors, “the
circumstances of a particular case may be such that a court’s
ruling on a motion to amend can be predicated on only one or
two of the particular factors.” Kelly, 2004 UT App 44, ¶ 42. The
applicability of the three factors will vary from case to case, but
our supreme court has emphasized that, in many cases, the
factor that “the trial court should primarily consider” is “whether
granting the motion would subject the opposing party to
unavoidable prejudice.” Aurora Credit Servs., Inc. v. Liberty West
Dev., Inc., 970 P.2d 1273, 1282 (Utah 1998) (emphasis added); see
also Kelly, 2004 UT App 44, ¶ 31 (observing that “courts should
focus on whether the nonmoving party would suffer prejudice if
the motion to amend is granted” (citation and internal quotation
marks omitted)).
¶21 Here, Evans and Kern River assert that their respective
motions to amend were timely, that no unavoidable prejudice
will result from allowing the amendment, and that they had
good reason for waiting until December 2016 to bring the claims.
We agree with these assertions.
¶22 The district court determined that the motions to amend
filed in late December 2016 were untimely because “[f]act
discovery is now closed more than a year and a half after the
filing [of] this case and after being extended twice,” and stated
that, “[w]hile no trial date has been set, it is clear that this case is
in the advanced procedural stages of litigation and that
alterations to claims at this point are untimely.” It is certainly
true that the case had been pending for about a year and a half
when the motions were filed, and that the fact discovery
20170114-CA 10 2018 UT App 37Evans v. B&E Pace Investment
deadline had already been extended. But the motions were filed
right at the end of the fact discovery period, which is not
necessarily a tardy time to file such motions, at least not in cases
where the moving party learns facts during the fact discovery
period that put it on notice that it might possess valid claims.
And we simply disagree with the district court’s characterization
that the case was “in the advanced procedural stages of
litigation”—after all, fact discovery was just concluding, expert
discovery had not yet even begun, and no trial date had been set.
¶23 We acknowledge that the motions to amend, at least with
regard to some of the new claims, could perhaps have been filed
a few weeks earlier, and that this very well might have made a
difference to the district court, given that the court granted Kern
River’s earlier motion to amend in October 2016, and allowed
consolidation of the Questar case in mid-December. Parties
should certainly endeavor to bring new claims to the attention of
the court as soon as possible after the relevant facts are
discovered. But in this case, Evans and Kern River claim to have
been discovering relevant facts well into December 2016, and we
do not think it unreasonable under the circumstances of this case
for Evans and Kern River to have waited until December to file
all of their asserted new claims in one omnibus motion.
¶24 In our view, the timeliness factor does not weigh against
amendment under the circumstances presented here. We
consider the procedural posture of this case to be comparable to
other cases in which an appellate court has reversed a district
court’s denial of a motion to amend. See, e.g., Gillman v. Hansen,
486 P.2d 1045, 1046 (Utah 1971) (holding that the district court
erred in denying a motion to amend when “the case had not
been set for trial” and “the only adverse effect which the
amendment could have on the plaintiff might be to require the
taking of a further deposition of the defendant”); Nunez v. Albo,
2002 UT App 247, ¶ 33, 53 P.3d 2 (holding that the district court
erred in denying a motion to amend when “no trial date had
20170114-CA 11 2018 UT App 37Evans v. B&E Pace Investment
been set, no expert discovery had taken place, and discovery was
still on-going”).5
¶25 We are likewise unconvinced that any undue or
substantial unavoidable prejudice would be visited upon any of
the defendants if Evans and Kern River are allowed to bring
their new claims in this action. The only prejudice identified by
either the district court or by any of the defendants is that, at the
time the motions were filed, fact discovery was ending and
defendants would not have an opportunity to conduct discovery
5. We also note, in connection with our discussion of timeliness,
that the statute of limitations had not yet run (and, according to
Evans, has still not yet run) on the new claims that Evans, Kern
River, and the Tennis Club wanted to bring by way of their
December 2016 motions to amend. Indeed, the Tennis Club
demonstrated this by filing a new lawsuit upon learning that it
would not be permitted to bring those new claims into this case.
While consideration of whether the statute of limitations has run
on the putative new claims is not one of the factors that the case
law instructs courts to weigh, it is a factor that may sometimes
be relevant, and the three main factors are not necessarily
exclusive. See Kelly v. Hard Money Funding, Inc., 2004 UT App 44,
¶ 39, 87 P.3d 734 (observing that in addition to evaluating
timeliness, prejudice, and justification, “Utah law does not
preclude trial courts from considering other factors in their rule
15(a) determinations”). In many cases, whether the statute of
limitations has run on the proposed new claims can, as a
practical matter, change the analysis. If a party can (as the Tennis
Club did here) simply file a new lawsuit if the motion to amend
is denied, in some cases that fact may weigh in favor of granting
the motion to amend, because it may be more efficient in the
long run for a court to simply allow the new claims to be
brought in the original action than to deny the motion to amend
and then have to wrestle later with motions to consolidate.
20170114-CA 12 2018 UT App 37Evans v. B&E Pace Investment
and fully defend themselves against the new claims. But this sort
of prejudice can be easily remedied by a brief, tailored extension
to the discovery deadlines to allow the defendants to conduct
discovery on those new claims. Indeed, Evans and Kern River, in
their motions to amend, indicated that they would have no
objection to such an extension.
¶26 We do not mean to suggest that extending or reopening
discovery deadlines can never constitute “undue or substantial”
prejudice. See Kelly, 2004 UT App 44, ¶ 31 (citation and internal
quotation marks omitted). Certainly, if trial is imminent and
reopening discovery would necessitate moving the trial date, or
if expert discovery has been completed and allowing new claims
would put the parties to the expense of re-deposing (or
obtaining supplemental reports from) experts, the situation
would be different. But where facts underlying potential new
claims are discovered for the first time during fact discovery
itself, and the party seeking to bring the new claims files its
motion to amend as fact discovery is ending, there will usually
not be undue and substantial prejudice to any party by allowing
the amendment and permitting a reasonable extension of fact
discovery that is tailored to address the new claims.
¶27 In this case, any prejudice can easily be ameliorated by
allowing for a brief and targeted extension of the discovery
deadlines. This is not a case where “the ongoing passage of time
makes it increasingly difficult for the nonmoving party to
effectively respond to the new allegations or claims.” Id. ¶ 30.
Under the circumstances of this case, the prejudice factor does
not weigh in favor of denying the motion to amend.
¶28 Finally, with regard to justification, there is no indication,
on the facts of this case, that Evans and Kern River acted with a
“dilatory motive, bad faith, or unreasonable neglect.” Hudgens v.
Prosper, Inc., 2010 UT 68, ¶ 18, 243 P.3d 1275 (citation and
internal quotation marks omitted). One reason for the delay was
20170114-CA 13 2018 UT App 37Evans v. B&E Pace Investment
that all parties participated in good faith in a mediation
conference, and agreed to conduct only limited discovery prior
to the mediation. But the main reason Evans and Kern River did
not bring many of these claims earlier was that they claim not to
have had a sufficient factual basis to bring them until after they
participated in the depositions that took place between
September and December 2016. Given parties’ obligations,
pursuant to rule 11 of the Utah Rules of Civil Procedure, not to
bring claims for which they possess an insufficient factual basis,
waiting until that factual basis is present is a perfectly reasonable
justification for not bringing the claims earlier. On balance, we
think it better to encourage parties to wait to file claims until
they possess a sufficient factual basis to bring them, instead of
encouraging parties to bring marginal claims earlier in the
proceedings for which supporting evidence may be sketchy.
¶29 Accordingly, none of the three factors weigh in favor of
refusing to allow amendment of pleadings in this case. We
therefore conclude that the district court should have granted
the motions to amend, and that it exceeded its discretion in
denying them.
CONCLUSION
¶30 In this case, “justice require[d]” granting the motions to
amend filed by Evans and Kern River. See Utah R. Civ. P. 15(a).
We therefore reverse the district court’s orders denying the
motions to amend, and remand the case for further proceedings
consistent with this opinion.
20170114-CA 14 2018 UT App 37