The Armer Texas Trust v. Brazell , 397 P.3d 604 ( 2017 )

2017 UT App 35THE UTAH COURT OF APPEALS
THE ARMER TEXAS TRUST, ET AL.,1
Appellants,
v.
ROBERT V. BRAZELL, IN-STORE BROADCASTING NETWORK LLC,
IN- STORE BROADCASTING HOLDINGS LLC, IBN MEDIA LLC,
IN-TOUCH LLC, IN-TOUCH MEDIA LLC, TALOS PARTNERS LLC,
VON H. WHITBY, ROBERT W. KASTEN JR., ROBERT E. RILEY,
AND ROBIN NEBEL,
Appellees.
Opinion
No. 20150140-CA
Filed February 24, 2017
Third District Court, Salt Lake Department
The Honorable Andrew H. Stone
No. 130900740
Donald H. Flanary Jr., John P. Mertens, and Adam L.
Hoyt, Attorneys for Appellants
Michael N. Zundel, John S. Chindlund, and Florence
M. Vincent, Attorneys for Appellees IBN Parties
Richard D. Burbidge, Jefferson W. Gross, and S. Ian
Hiatt, Attorneys for Appellee Von H. Whitby
JUDGE KATE A. TOOMEY authored this Opinion, in which JUDGES
GREGORY K. ORME and STEPHEN L. ROTH concurred.
1. The parties on appeal are not limited to those listed, but also
include other parties whose names appear on the notice of
appeal or who have otherwise entered appearances in this court.
The Armer Texas Trust v. Brazell
TOOMEY, Judge:
¶1 The Appellants seek reversal of the district court’s order
denying them leave to amend their complaint and determining
that their complaint lacked particularity under rule 9(c) of the
Utah Rules of Civil Procedure.2 We affirm.
BACKGROUND
¶2 The Appellants are individuals and entities who allegedly
invested approximately two million dollars in various In-Store
Broadcasting Network entities. They claimed these investments
were induced by the misrepresentations of the Appellees
(collectively, IBN).
¶3 In their initial complaint and subsequent amended
complaints, the Appellants alleged several causes of action
including fraudulent misrepresentation, fraudulent inducement
and rescission, promissory estoppel, civil conspiracy, common
law fraud, constructive trust, fraudulent transfer, and violation
of the Utah Uniform Securities Act.
¶4 The Appellants filed their initial complaint in February
2013. In March 2013, before IBN had responded, the Appellants
filed a first amended complaint. They later sought leave of court
to file a second amended complaint, which the court granted,
and they filed it in September 2013. The parties then stipulated
2. On November 1, 2016, after this case was argued, rule 9 of the
Utah Rules of Civil Procedure was amended. While the
amendment made no substantive changes, language previously
appearing under rule 9(b) now appears under rule 9(c). Thus,
although the parties’ briefing and the district court’s order refer
to rule 9(b), we will refer to rule 9(c) throughout this opinion to
avoid confusion.
20150140-CA 2 2017 UT App 35The Armer Texas Trust v. Brazell
to a scheduling order, which provided that any “*a+mended
pleadings shall be filed by July 3, 2014.” The district court never
approved this stipulation, and in March and July 2014, the
Appellants filed third and fourth amended complaints without
leave of court.
¶5 In October 2014, IBN filed a rule 12(b)(6) motion to
dismiss the Appellants’ complaint for failure to state a claim
upon which relief could be granted. Instead of defending the
latest iteration of their complaint, the Appellants responded by
seeking leave to file a fifth amended complaint.
¶6 The district court denied the Appellants’ motion to amend
because the motion was untimely, because granting it would
substantially prejudice IBN, and because the Appellants gave no
justification for this fifth attempt. The court also determined that
the fifth amended complaint “fail*ed+ to plead a fraud claim as to
any specific plaintiff against any specific defendant with the
particularity required by Rule 9([c]).” The district court
determined there was no need to decide whether the previous
versions of the Appellants’ complaint met the requirements of
rule 9(c), because the Appellants acknowledged that their fifth
amended complaint “contain*ed+ greater particularity than the
earlier versions,”3 and because the court had determined that
3. In support of their motion for leave to file an amended
complaint, the Appellants stated that the fifth amended
complaint “adds nothing to the Third and Fourth Amended
Complaints except where it fills in the lack of particularity gaps
about which [IBN] complain[s] in [the] Rule 12(b)(6) Motion to
Dismiss.” In opposition to IBN’s rule 12(b)(6) motion, the
Appellants likewise acknowledged that “the Second Amended
Complaint is admittedly deficient under Rule 9(*c+)” and
asserted that the “proposed Amended Complaint . . . fully meets
the requirements of Rule 9(*c+).”
20150140-CA 3 2017 UT App 35The Armer Texas Trust v. Brazell
this more detailed version was still insufficient under the rule.
Stating that “*s+ix tries at pleading fraud are enough,” the court
granted IBN’s motion to dismiss. The Appellants appeal the
district court’s order.
ISSUES AND STANDARDS OF REVIEW
¶7 The Appellants raise three issues on appeal. First, they
contend the district court erred when it refused to grant them
leave to amend their complaint for the fifth time. We review a
district court’s ruling on a motion to amend a complaint for
abuse of discretion. Coroles v. Sabey, 2003 UT App 339, ¶ 16, 79
P.3d 974. Under this standard, we will not reverse a district
court’s decision unless it “exceeds the limits of reasonability.” Id.(citation and internal quotation marks omitted).
¶8 Next, the Appellants contend the district court erred
when, as a part of its rule 12(b)(6) dismissal, it determined that
the fifth amended complaint did not meet the requirements of
rule 9(c) of the Utah Rules of Civil Procedure. “*A+n appeal from
a rule 12(b)(6) dismissal presents only questions of law, and we
review the district court’s ruling for correctness.” Fidelity Nat’l
Title Ins. Co. v. Worthington, 2015 UT App 19, ¶ 7, 344 P.3d 156.
¶9 Finally, the Appellants contend the district court
erroneously applied rule 9(c) to their fraudulent transfer claim.
As this is also an appeal from a rule 12(b)(6) dismissal, we
review the court’s decision for correctness. See id.ANALYSIS
I. Rule 15(a)
¶10 The Appellants’ first contention is that the district court
erred by denying them leave to amend their complaint.
20150140-CA 4 2017 UT App 35The Armer Texas Trust v. Brazell
¶11 Rule 15(a) of the Utah Rules of Civil Procedure provides
that, except for one amendment “as a matter of course” in
specified circumstances, “a party may amend his pleading only
by leave of court or by written consent of the adverse party; and
leave shall be freely given when justice so requires.” When
determining whether to grant or deny a motion to amend, a
court may consider certain factors, including: “(1) the timeliness
of the motion; (2) the justification given by the movant for the
delay; and (3) the resulting prejudice to the responding party.”
Kleinert v. Kimball Elevator Co., 854 P.2d 1025, 1028 (Utah Ct. App.
1993).4
¶12 The district court relied on these three factors in denying
the Appellants’ motion to amend. It determined that their
motion was “untimely, coming long after both the Court-
imposed presumptive deadline for amendment as well as [the
deadline] stipulated to by the parties.” It determined the
Appellants had provided “no justification for not having
pleaded their multiple earlier versions of the complaint with the
additional facts” that were “plainly available to *the Appellants]
from the start.” Finally, the court determined that IBN would be
4. In Kelly v. Hard Money Funding, Inc., 2004 UT App 44, 87 P.3d
734, this court outlined factors that should be considered in
determining whether to grant or deny a motion to amend. We
emphasized then that the test should not be “an exclusive three-
part analysis” but instead a “multi-factored, flexible inquiry that
allows trial courts the leeway to evaluate the factual
circumstances and legal developments involved in each
particular case.” Id. ¶ 41. Timeliness, prejudice, and justification
may be analyzed alongside other considerations, id. ¶¶ 26–42,
and “although a general approach should be multi-factored, 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,” id. ¶ 42.
20150140-CA 5 2017 UT App 35The Armer Texas Trust v. Brazell
substantially prejudiced “as *it+ would now be faced with new
factual theories for which [it has] not had time to prepare.”
¶13 In arguing that the district court should have allowed
them to amend their complaint, the Appellants do not address
the court’s analysis, and they do not acknowledge the factors on
which the court relied in making its decision. Instead, the
Appellants merely assert that the court’s decision was in error
because the fifth amended complaint would not have prejudiced
IBN. They cite Williams v. State Farm Insurance Co., 656 P.2d 966(Utah 1982), for the proposition that the only limitation on
Utah’s “liberalized pleading rules” is the requirement that the
opposing party “have fair notice of the nature and basis or
grounds of the claim and a general indication of the type of
litigation involved.” See id. at 971 (citation and internal quotation
marks omitted). They argue that because a date for trial had not
yet been set, the fifth amended complaint would have given IBN
fair notice of the Appellants’ claims and IBN would not have
been prejudiced by it.
¶14 The Appellants’ reliance on Williams is misplaced. The
Williams analysis focuses on the adequacy of pleadings,
specifically in the context of affirmative defenses. Id. at 969–71.
Williams does not discuss amended complaints, and while it
correctly outlines the purpose behind “our liberal[] pleading
rules,” which liberality is expressly tempered by rule 9(c)’s
particularity requirement, it has no bearing on whether the
district court properly denied the Appellants’ motion to amend.
See id. at 971. “The decision to allow leave to amend a complaint
is discretionary with the trial court,” and a court may rely on
several factors when making this decision. See Kleinert, 854 P.2d
at 1028.
¶15 Otherwise, the Appellants’ briefing on this issue leaves
much to be desired. They fail to cite or analyze the proper factors
a district court typically considers when deciding a motion to
20150140-CA 6 2017 UT App 35The Armer Texas Trust v. Brazell
amend. They ignore relevant case law from this jurisdiction and
instead cite authority from other jurisdictions in support of their
assertions. Furthermore, in arguing that the court erred, the
Appellants do not address the basis of the court’s decision. In its
order, the court outlined three applicable factors and detailed
why each factor supported a denial of the Appellants’ motion to
amend. The Appellants do not attempt to explain why the
court’s decision regarding the timeliness or justification of the
motion was in error; they argue only that the motion to amend
was not prejudicial because a trial date had not been set. The
Appellants have failed “to attack the district court’s reason[ing]”
in denying the motion and “thus cannot demonstrate that the
district court erred.” See Golden Meadows Props., LC v. Strand,
2010 UT App 257, ¶ 17, 241 P.3d 375; see also Angel Inv’rs, LLC v.
Garrity, 2009 UT 40, ¶ 35, 216 P.3d 944 (“[W]e will not assume [a
party’s+ burden of argument and research.” (alterations in
original) (citation and internal quotation marks omitted)).
¶16 In any event, the district court did not abuse its discretion.
First, the court found that the Appellants’ motion to amend was
untimely. Motions to amend are “typically deemed untimely”
when they are filed in “the advanced procedural stages of the
litigation process” or when “they *are+ filed several years into
the litigation.” Kelly v. Hard Money Funding, Inc., 2004 UT App
44, ¶¶ 29, 30, 87 P.3d 734. The district court found that the
Appellants had filed the motion to amend “long after both the
Court-imposed presumptive deadline for amendment as well as
*the deadline+ stipulated to by the parties.” The motion to amend
also came nearly two years after the initial complaint was filed.
¶17 Next, the court noted the Appellants gave no justification
for their delay. When considering a party’s justification, courts
“typically focus*+ on whether the moving party had knowledge
of the events that are sought to be added in the amended
complaint before the original complaint was filed.” Id. ¶ 32.
Courts should also focus on “the reasons offered by the moving
20150140-CA 7 2017 UT App 35The Armer Texas Trust v. Brazell
party for not including the facts or allegations in the original
complaint.” Id. ¶ 38. Here, the court found that the Appellants
“offer[ed] no justification for not having pleaded their multiple
earlier versions of the complaint with the additional facts offered
in the Fifth Amended Complaint” when “all of the facts
regarding [the] supposed misrepresentations and [the
Appellants’+ reliance thereon were plainly available to them
from the start.” Most of the alleged misrepresentations took
place in 2006, seven years before the initial complaint was filed
and nearly nine years before the Appellants sought leave to
amend their complaint for the fifth time. Thus, not only did the
Appellants fail to provide any reason for the untimeliness of
their motion to amend, but they also had knowledge of the
alleged misrepresentations that formed the core of their
proposed amendments long before they filed their initial
complaint.
¶18 Finally, the district court found that an amendment to the
complaint “at this point would substantially prejudice [IBN] as
[it] would now be faced with new factual theories for which [it
has] not had time to prepare.” “*S+ince almost every amendment
of a pleading will result in some practical prejudice to the
opposing party,” the prejudice to the nonmoving party “must be
undue or substantial”—mere inconvenience “is not grounds to
deny a motion to amend.” Id. ¶ 31 (emphasis, citation, and
internal quotation marks omitted). The Appellants argue that
their fifth amended complaint would not have substantially
prejudiced IBN because, as a trial date had not yet been set, IBN
would have had “ample time to prepare this matter for trial.”
¶19 We are not persuaded that IBN would have been
prejudiced only if a trial date had been set. Nearly two years had
passed since the original complaint was filed, discovery was well
under way, and a motion to dismiss had been filed. In addition,
the fifth amended complaint was prompted by IBN’s motion to
dismiss. We agree with the district court that IBN would have
20150140-CA 8 2017 UT App 35The Armer Texas Trust v. Brazell
been unduly prejudiced by the Appellants’ fifth amended
complaint. And while a court’s analysis should generally be
“multi-factored,” “a court’s ruling on a motion to amend can be
predicated on only one or two of the particular factors.” Id. ¶ 42.
¶20 For these reasons, we conclude the district court did not
abuse its discretion in denying the Appellants’ motion to amend
their complaint.
II. Futility Under Rule 9(c)
¶21 The Appellants next contend the district court erred in
determining that their fifth amended complaint was insufficient
under rule 9(c) of the Utah Rules of Civil Procedure. The rule
requires parties to plead “with particularity the circumstances
constituting fraud or mistake.” Utah R. Civ. P. 9(c). Pleadings
satisfy this standard only if they include “a sufficiently clear and
specific description of the facts underlying the *plaintiff’s+ claim
of [fraud].” Carlton v. Brown, 2014 UT 6, ¶ 38, 323 P.3d 571(alterations in original) (citation and internal quotation marks
omitted).
¶22 As outlined above, IBN moved to dismiss this case under
rule 12(b)(6) of the Utah Rules of Civil Procedure, arguing that
the Appellants’ complaint did not state a claim upon which relief
could be granted. In response, the Appellants did not attempt to
defend their amended complaint, but instead sought leave to
amend it for the fifth time to meet the requirements of rule 9(c).
In granting IBN’s motion to dismiss, the district court first
denied the Appellants’ motion to amend because, as explained
above, it was untimely, unjustified, and prejudicial. The court
also determined that the amendment was futile because it did
not meet the particularity requirements of rule 9(c). And because
the Appellants had conceded that all prior iterations of their
complaint were also deficient under rule 9(c), the court granted
IBN’s motion to dismiss. In making this determination, the court
concluded that the amended complaint “still fails to plead a
20150140-CA 9 2017 UT App 35The Armer Texas Trust v. Brazell
fraud claim as to any specific plaintiff against any specific
defendant with the particularity required by Rule 9([c]).” The
court continued:
The proposed Fifth Amended Complaint is long on
narrative and short on specifics with respect to
each individual party. It does not explain when
any false representation was made to any
individual plaintiff, or any plaintiff’s specific
reliance on that statement. . . . Fraud-based claims
are highly individualized, because reliance is an
individual decision. Accordingly, stating a
particularized claim of fraud requires each plaintiff
to allege which representations were made to
them, when and how and by whom, and how they
each relied on that representation. This permits
each of the defendants to defend against the
allegation as to each defendant and each plaintiff.
The Fifth Amended Complaint does not permit any
one defendant to determine which supposed
misrepresentation of fact was relied on by which
plaintiff in what way, and why each defendant
should be charged with that alleged
misrepresentation.
¶23 The Appellants argue this decision was in error, but they
make only conclusory statements that their proposed amended
complaint “stated with particularity, each of *their+ fraud based
claims with the specificity required by Rule 9([c]),” and they do
not provide any analysis of or citations to specific portions of the
fifth amended complaint to support their arguments. For
example, they allege their complaint “set*s+ out with a high
degree of particularity each element of a fraud claim including:
(1) who made the statement or representation; (2) to whom the
statement or representation was made; [and] (3) when the
statement or representation was made.” But the Appellants do
20150140-CA 10 2017 UT App 35The Armer Texas Trust v. Brazell
not cite their amended complaint and do not demonstrate how
their complaint meets these requirements. And our own review
suggests it does not. The Appellants also allege that “*i+n the
proposed amended complaint, particularly in paragraphs 20
through 146, [Steve Brazell] and the Investor Plaintiffs described
in clear and concise language each representation of fact [Steve
Brazell] and the Investor Plaintiffs relied on for this action.” This
“essentially dumps” upon this court the “burden of sifting
through *dozens+ of paragraphs of alleged facts” to determine
whether the Appellants’ complaint is sufficient under rule 9(c),
and “*s+uch an approach is unacceptable.” See Coroles v. Sabey,
2003 UT App 339, ¶ 27, 79 P.3d 974. Furthermore, these bald
assertions illustrate the fatal flaw identified by the district
court—the Appellants refer to the plaintiffs collectively, and they
do not show how their amended complaint “plead*s+ a fraud
claim as to any specific plaintiff against any specific defendant.”
¶24 Because the Appellants do little more than insist that their
amended complaint meets the requirements under rule 9(c),
without addressing the basis of the district court’s decision, we
reject this challenge. See Golden Meadows Props., LC v. Strand,
2010 UT App 257, ¶ 17, 241 P.3d 375. The Appellants have not
persuaded us that the court erred.5
5. The Appellants also contend they did not file their third and
fourth amended complaints in violation of rule 15(a) of the Utah
Rules of Civil Procedure. They argue they did not need leave of
court to amend their complaint because the parties had
stipulated that amended pleadings could be filed up to July 3,
2014. The district court determined that it had never approved
this stipulation, but it did not conclude that those amended
complaints violated rule 15(a). We therefore have no occasion to
consider this contention.
20150140-CA 11 2017 UT App 35The Armer Texas Trust v. Brazell
III. Applicability of Rule 9(c)
¶25 Finally, the Appellants contend that rule 9(c) does not
apply to their “claims of constructive fraud (insolvency) under
the Utah Fraudulent Transfer Act.” Because rule 9(c) allegedly
does not apply to these causes of action, the Appellants argue
the district court erred when it dismissed them for not meeting
the rule’s particularity requirements.
¶26 The Appellants’ complaint does not specifically contain a
“constructive fraud (insolvency)” cause of action, and it is
unclear which cause of action they argue was dismissed in error.
In their fourth and fifth amended complaints, the Appellants
include a “constructive trust” cause of action and a “fraudulent
transfer” cause of action. Under the constructive trust cause of
action, the Appellants allege that IBN violated the Delaware
Limited Liability Company Act and claim “the imposition of a
constructive trust” is “the only remedy that will adequately
compensate [the Appellants] for the improper and/or fraudulent
transfers.” But the Appellants’ “claims of constructive fraud
(insolvency) under the Utah Fraudulent Transfer Act” cannot
refer to the constructive trust cause of action, because this cause
of action only acknowledges that the formation of a constructive
trust is a remedy, and because it alleges a violation of a
Delaware act, not the Utah Fraudulent Transfer Act. Instead, the
“claims of constructive fraud (insolvency)” is most likely a
reference to the Appellants’ fraudulent transfer cause of action,
which alleges that “*IBN has+ engaged in fraudulent transfers
under . . . the Uniform Fraudulent Transfer Act.”
¶27 The Appellants’ brief argues there are two different types
of fraudulent transfers—intentional fraudulent transfers and
constructive fraudulent transfers. They claim that whether rule
9(c) applies to these fraudulent transfers is an issue of first
impression in Utah, and they cite a United States District Court
of Utah memorandum decision for the proposition that “courts
20150140-CA 12 2017 UT App 35The Armer Texas Trust v. Brazell
generally apply Rule 9([c])’s requirements to intentional
fraudulent transfer claims . . . but not to constructive fraudulent
transfer claims.” Wing v. Horn, No. 2:09-CV-00342, 2009 WL
2843342, at *3 (D. Utah Aug. 28, 2009). Even assuming without
deciding that rule 9(c) does not apply to constructive fraudulent
transfers, the Appellants have not shown the district court erred
in applying the rule to their fraudulent transfer cause of action.
The Appellants’ amended complaint alleges only a general
fraudulent transfer cause of action and does not specify whether
the fraudulent transfer was intentional or constructive.
Accordingly, they have not demonstrated how the district court
erred by applying rule 9(c) to a general “fraudulent transfer”
cause of action where the rule requires parties to plead “with
particularity the circumstances constituting fraud.” Utah R. Civ.
P. 9(c).
¶28 In any event, this issue is unpreserved. In order to
preserve an issue for appeal, it must be “presented to the trial
court in such a way that the trial court [had] and opportunity to
rule on *it+.” Wohnoutka v. Kelley, 2014 UT App 154, ¶ 4, 330 P.3d
762 (alterations in original) (citation and internal quotation
marks omitted). In its motion to dismiss, IBN claimed that the
Appellants’ complaint did not meet the requirements of rule 9(c).
The Appellants acknowledged their fourth amended complaint
was deficient under rule 9(c),6 and instead of attempting to
defend it, they sought leave of court to file another amended
complaint. Their opposition to IBN’s rule 12(b)(6) motion to
dismiss argued only that the fifth amended complaint fully
complied with rule 9(c) and did not mention the rule was
6. In their motion for leave to amend, the Appellants stated “The
[Fifth] Amended Complaint adds nothing to the Third and
Fourth Amended Complaints except where it fills in the lack of
particularity gaps about which [IBN] complain[s] in [the] Rule
12(b)(6) Motion to Dismiss with Prejudice.” See supra note 3.
20150140-CA 13 2017 UT App 35The Armer Texas Trust v. Brazell
inapplicable to their fraudulent transfer claim. Because the
Appellants did not raise this issue in the district court, it is not
preserved and we will not consider it. See id. ¶¶ 3–4.
CONCLUSION
¶29 The district court did not abuse its discretion in denying
the Appellants’ motion to amend. In addition, the Appellants
have not shown the court erred in determining that their fifth
amended complaint was deficient under rule 9(c). Finally, the
Appellants have not shown the court erred by applying rule 9(c)
to their fraudulent transfer claim. Accordingly, we affirm the
decision of the district court.
20150140-CA 14 2017 UT App 35