Commercial Club v. Global Rescue , 2023 UT App 37 ( 2023 )

2023 UT App 37THE UTAH COURT OF APPEALS
COMMERCIAL CLUB BUILDING LLC,
Appellee and Cross-appellant,
v.
GLOBAL RESCUE LLC AND GR DIRECT LLC,
Appellants and Cross-appellees.
Opinion
No. 20200747-CA
Filed April 13, 2023
Third District Court, Salt Lake Department
The Honorable Laura Scott
No. 170903867
William B. Ingram and Scarlet R. Smith, Attorneys
for Appellants and Cross-appellees
Matthew N. Evans, Matthew M. Cannon, and
Whitney Hulet Krogue, Attorneys for Appellee and
Cross-appellant
JUSTICE DIANA HAGEN authored this Opinion, in which
JUDGE DAVID N. MORTENSEN and JUSTICE JILL M. POHLMAN
concurred. 1
HAGEN, Justice:
¶1 Global Rescue LLC created a wholly owned subsidiary, GR
Direct LLC, to sell memberships for Global Rescue’s emergency
travel services. GR Direct entered into a lease agreement for office
space with Commercial Club Building LLC. After Global Rescue
1. Justice Diana Hagen and Justice Jill M. Pohlman began their
work on this case as members of the Utah Court of Appeals. They
each became members of the Utah Supreme Court thereafter and
completed their work on the case sitting by special assignment as
authorized by law. See generally Utah R. Jud. Admin. 3-108(4).
Commercial Club v. Global Rescue
stopped funding GR Direct, it went out of business and stopped
paying rent under the lease agreement.
¶2 Commercial Club sued both GR Direct and Global Rescue.
After obtaining a default judgment against GR Direct,
Commercial Club proceeded to trial against Global Rescue,
pressing direct claims and seeking to hold Global Rescue liable for
GR Direct’s breach of the lease agreement under theories of joint
venture and alter ego. A jury found Global Rescue liable under
both theories. The jury awarded full damages under the lease,
rejecting Global Rescue’s defense that Commercial Club had
failed to mitigate its damages. The jury also found that the transfer
of GR Direct’s assets to Global Rescue was voidable as a
constructive fraudulent transfer and that Global Rescue tortiously
interfered with the lease agreement.
¶3 Global Rescue moved for judgment notwithstanding the
verdict (JNOV). The district court granted the motion in part,
vacating the jury’s verdict on the tortious interference claim, but
otherwise denied the motion. The district court later awarded
Commercial Club the attorney fees it incurred in obtaining a
default judgment against GR Direct and defeating Global
Rescue’s mitigation defense. On appeal, Global Rescue challenges
the district court’s partial denial of its JNOV motion. Global
Rescue also challenges the court’s determination that it would be
inequitable if the court did not find that GR Direct was the alter
ego of Global Rescue.
¶4 We agree with Global Rescue that the jury’s finding of a
joint venture cannot stand because there was no evidence that
Global Rescue and GR Direct exercised mutual control over a
separate business endeavor distinct from GR Direct itself. We also
vacate the district court’s alter ego determination and remand for
further findings because the basis for the court’s finding that an
inequitable result would occur is not clear on the record.
20200747-CA 2 2023 UT App 37Commercial Club v. Global Rescue
¶5 For its part, Commercial Club challenges the district
court’s grant of JNOV in favor of Global Rescue on the tortious
interference claim. Because we conclude that Commercial Club
has not carried its burden of persuasion on cross-appeal, we
affirm.
BACKGROUND 2
The Parties
¶6 Global Rescue is a company that provides medical,
security, travel risk, crisis management, and telemedicine services
“that individuals might need when they’re traveling.” Global
Rescue is headquartered in Lebanon, New Hampshire. In 2015, an
employee of Global Rescue, Douglas Robinson, pitched an idea to
the CEO, Dan Richards, about creating a multilevel marketing
company to sell Global Rescue products and services through
memberships. Richards liked the idea and “made the decision to
form GR Direct” as a wholly owned subsidiary of Global Rescue
to “manage the organization and creation of the network
marketing business.” Robinson became the president of GR
Direct.
¶7 Global Rescue funded GR Direct’s services in addition to
its overhead, marketing, and employee salaries. GR Direct opened
its office in Salt Lake City, Utah, and entered into a three-year
lease agreement with Commercial Club. Robinson signed the
2. “[O]n appeal from a jury verdict, we view the evidence and all
reasonable inferences in a light most favorable to that verdict and
recite the facts accordingly.” Mueller v. Allen, 2005 UT App 477,
¶ 2, 128 P.3d 18 (cleaned up). “We present conflicting evidence
only as necessary to understand issues raised on appeal.” State v.
Holgate, 2000 UT 74, ¶ 2, 10 P.3d 346.
20200747-CA 3 2023 UT App 37Commercial Club v. Global Rescue
lease agreement on behalf of GR Direct, which was listed as the
tenant.
¶8 About a year later, Global Rescue stopped funding GR
Direct, and GR Direct went out of business. GR Direct defaulted
on its lease, it abandoned the leased premises, and GR Direct’s
remaining monetary and physical assets went to Global Rescue.
The Lawsuit
¶9 Commercial Club subsequently filed a lawsuit against GR
Direct and Global Rescue alleging six causes of action. Claim 1
was a breach of contract claim against GR Direct for failure to pay
the rent due under the lease agreement. Claims 2 and 6 sought to
hold Global Rescue liable for GR Direct’s breach of the lease
agreement under theories of alter ego or joint venture,
respectively.
¶10 Claims 3 and 4 sought to void the transfer of GR Direct’s
assets to Global Rescue pursuant to the Uniform Voidable
Transactions Act (UVTA), Utah Code §§ 25-6-101 to -502, which
makes certain transfers by a debtor voidable as to a creditor.
Subsection 25-6-202(1) identifies two types of voidable transfers:
(a) transfers made “with actual intent to hinder, delay, or defraud
any creditor of the debtor” (also known as intentionally
fraudulent transfers), and (b) transfers made “without receiving a
reasonably equivalent value in exchange for the transfer or
obligation,” leaving the debtor essentially insolvent (also known
as constructively fraudulent transfers). Commercial Club alleged
both types of voidable transfers as separate causes of action.
¶11 Finally, Claim 5 alleged that Global Rescue had tortiously
interfered with the lease agreement between Commercial Club
and GR Direct. Specifically, Commercial Club asserted that Global
Rescue “intentionally interfered with the contract by, among
other things, removing assets from [GR Direct] so that [it could
not] make lease payments, making the decision to close the office
20200747-CA 4 2023 UT App 37Commercial Club v. Global Rescue
in Salt Lake City, refusing to pay amounts due and owing under
contract as represented to [Commercial Club] and leaving [GR
Direct] as a shell with little or no assets to pay the lease amounts.”
¶12 GR Direct did not answer the complaint, and Commercial
Club received a default judgment on Claim 1. The default
judgment awarded Commercial Club the amounts owed under
the lease agreement and allowed Commercial Club to “augment
[the judgment] to include continuing monthly rent and other
amounts owing under the Lease Agreement until such time as a
suitable replacement tenant is located.” The order also awarded
Commercial Club its attorney fees and costs incurred in bringing
the action against GR Direct, “as provided for in” the lease
agreement, and allowed the judgment to be “augmented in the
amount of reasonable attorneys’ fees and costs incurred in
collecting” the judgment.
¶13 After default judgment was entered against GR Direct,
Commercial Club continued to pursue its claims against Global
Rescue.
Pre-Trial Motions
¶14 Early on in this litigation, Global Rescue filed multiple
motions for partial summary judgment. Relevant to this appeal,
Global Rescue sought summary judgment on the tortious
interference claim, arguing that, as a matter of law, the conduct
alleged by Commercial Club did not constitute “improper
means.” The district court granted the motion in part and denied
it in part. The court first identified the improper means alleged by
Commercial Club to support its claim for tortious interference:
(1) Removing assets from [GR Direct] so that it could
not make lease payments; (2) making the decision to
close the Salt Lake City office; (3) refusing to pay
amounts due and owing under the lease agreement;
(4) leaving [GR Direct] as a “shell” with little or no
20200747-CA 5 2023 UT App 37Commercial Club v. Global Rescue
assets; (5) engaging in “theft” of [GR Direct’s] assets,
including its intellectual property, income/revenue,
and personal property; (7) converting these assets;
and (8) fraudulently transferring these assets to
Global Rescue.[3]
¶15 The court granted the motion with respect to alleged
improper means 2, 3, 5, and 7, and that ruling has not been
challenged on appeal. The court characterized the remaining
allegations—improper means 1, 4, and 8—as the “alleged
improper means of fraudulent transfer,” which Commercial Club
had alleged in Claims 3 and 4 as the basis for voiding the transfer
of GR Direct’s assets to Global Rescue. The court ruled that “a
fraudulent transfer based on ‘actual intent to hinder, delay, or
defraud any creditor’ (Utah Code Ann. § 25-6-202(1)(a)) [as
alleged in Claim 3], if proven, may constitute an improper means
for a tortious interference claim because it involves conduct
similar to deceit or misrepresentations.” On the other hand, “a
fraudulent transfer under Utah Code Ann. § 25-6-202(1)(b) [as
alleged in Claim 4] would not constitute improper means because
there is nothing ‘independently tortious or wrongful’ about a
company transferring assets for less than ‘reasonably equivalent
value.’” Therefore, the court concluded that if Commercial Club
“proves that [GR Direct’s] intellectual property, income/revenue,
and/or personal property was transferred to Global Rescue with
the actual intent to hinder, delay, or defraud [Commercial Club as
alleged in Claim 3], it may constitute the improper means”
element of tortious interference.
Trial
¶16 The case proceeded to a six-day jury trial. At the end of the
trial, the jury found that Global Rescue and GR Direct engaged in
a joint venture as alleged in Claim 6 and accordingly found Global
3. The number six was omitted in the order.
20200747-CA 6 2023 UT App 37Commercial Club v. Global Rescue
Rescue responsible for all amounts owed under the lease
agreement as a result of GR Direct’s breach. The jury also
determined that Commercial Club did not fail to mitigate its
damages, and that none of the damages awarded to Commercial
Club for the breach should be reduced. With respect to
Commercial Club’s voidable transfer claims, the jury found that
GR Direct’s transfer of its assets to Global Rescue was voidable as
a constructive fraudulent transfer as alleged in Claim 4, but that
Commercial Club had not proven intentional fraudulent transfer
as alleged in Claim 3. The jury also found for Commercial Club
on its claim of tortious interference (Claim 5) and granted
compensatory damages for the amounts due under the lease as
well as punitive damages.
¶17 As to the alter ego claim (Claim 2), the jury was provided
with a special verdict form that asked it to make findings on the
first prong of the alter-ego test known as the “formalities
requirement,” leaving the second prong, referred to as the
“fairness requirement,” to the court. See Jones & Trevor Mktg., Inc.
v. Lowry, 2012 UT 39, ¶ 14, 284 P.3d 360 (discussing the two
requirements and explaining that the second prong “is addressed
to the conscience of the court” (cleaned up)). The jury made the
following findings that weighed in favor of alter ego: GR Direct
was undercapitalized, Global Rescue siphoned GR Direct’s funds,
GR Direct did not have separate corporate records, Global Rescue
used GR Direct as a “façade” for its own operations, and “there
was such a unity of interest and ownership between Global
Rescue and GR Direct that the separate personalities of the two no
longer existed.” The jury also made the following findings that
weighed against alter ego: GR Direct did not fail to observe
corporate formalities and had its own functioning officers and
directors other than those employed by Global Rescue.
¶18 After trial, the district court addressed the alter ego claim
and the jury’s findings with respect to the first prong. The court
reiterated the jury’s findings and explained on the record the
20200747-CA 7 2023 UT App 37Commercial Club v. Global Rescue
evidence that supported those findings. When turning to the
second prong and determining whether the “observation of the
corporate form would sanction a fraud, promote injustice or an
inequit[able] result would follow” the court found “no evidence
of fraud.” The court continued,
Nevertheless, I do find that second element is met
because under these circumstances and considering
all the facts and testimony and other evidence at
trial, I do find it would promote an injustice or an
inequitable result would follow . . . if I were to
recognize that separate corporate existence[].
The court therefore found in favor of Commercial Club on its alter
ego claim.
Post-Trial Motions
¶19 After trial, Global Rescue filed two motions for JNOV that
are relevant to this appeal.
¶20 First, Global Rescue moved to vacate the jury’s finding of
joint venture, arguing that it was entitled to judgment as a matter
of law. Among other things, Global Rescue asserted that “the
jury’s verdict must be set aside because a joint
venture/partnership requires a combination of two or more
persons.” Global Rescue cited “black-letter law that a joint
venture or partnership requires ‘two or more persons’” and
argued that there was no evidence to support a finding that
Global Rescue and GR Direct were “separate entities [that]
combined their resources and had a joint proprietary interest in
the sale of Global Rescue memberships, a mutual right to control
GR Direct’s business, a right to share in the profits generated by
the sales of Global Rescue’s memberships, and a duty to share in
the losses.” The district court denied the motion.
20200747-CA 8 2023 UT App 37Commercial Club v. Global Rescue
¶21 Global Rescue also moved for JNOV with respect to the
jury’s tortious-interference verdict. Global Rescue argued that
because the district court had previously determined that
Commercial Club could establish the “improper means” element
of tortious interference only if the jury found intentional
fraudulent transfer, the tortious-interference verdict could not
stand because the jury found only constructive fraudulent
transfer. Commercial Club countered that constructive fraudulent
transfer is sufficient to establish improper means and the jury
verdict should not be vacated. The district court agreed with
Global Rescue and vacated the tortious interference verdict. The
court explained that its prior ruling “narrowed” the tortious
interference claim to “intentional fraud” and that “it could not be
constructive fraud.” Because the jury did not find intentional
fraud, the tortious interference claim failed.
¶22 For its part, Commercial Club sought attorney fees as the
prevailing party under the lease agreement. The district court
determined that, under the attorney fees provision in the lease,
Commercial Club was entitled to recover only fees incurred in
connection with obtaining the default judgment against GR Direct
and in prevailing against Global Rescue’s mitigation defense at
trial. The court ruled that Global Rescue was jointly and severally
liable for the attorney fees based on its “finding of joint
venture/partnership liability.”
¶23 Each party now appeals.
ISSUES AND STANDARDS OF REVIEW
¶24 Global Rescue first contends that the district court erred in
denying its JNOV motion challenging the jury’s joint venture
verdict. We review the district court’s decision on a JNOV motion
for correctness. See USA Power, LLC v. PacifiCorp, 2016 UT 20, ¶ 34,
372 P.3d 629. A court may grant a JNOV motion “only if, after
looking at the evidence and all reasonable inferences in a light
20200747-CA 9 2023 UT App 37Commercial Club v. Global Rescue
most favorable to the nonmoving party, the trial court concludes
that there is no competent evidence which would support a
verdict in the nonmoving party’s favor.” Id. (cleaned up). 4
¶25 Global Rescue also contends that the district court erred in
its equitable determination under the theory of alter ego and in
“finding that not piercing the corporate veil would lead to an
injustice.” “[A] trial court is accorded considerable latitude and
discretion in applying and formulating an equitable remedy, and
it will not be overturned unless it has abused its discretion.” Ockey
v. Lehmer, 2008 UT 37, ¶ 42, 189 P.3d 51 (cleaned up). And because
“a trial court is in an advantaged position to consider equities, we
give considerable deference to its findings and judgment.” Smith
v. Simas, 2014 UT App 78, ¶ 10, 324 P.3d 667 (cleaned up).
¶26 On cross-appeal, Commercial Club argues that the district
court erred in granting Global Rescue’s JNOV motion and “setting
aside the jury’s verdict in favor of Commercial Club . . . on
Commercial Club’s claim for Intentional Interference with
Contractual Relations.” 5 We review the “entry of JNOV . . . for
4. Global Rescue also challenges a portion of the attorney fees
award, arguing that the fees Commercial Club incurred in
defeating Global Rescue’s mitigation defense were unrelated to
the enforcement of the lease agreement. We have no occasion to
reach this issue given our conclusion that the evidence was
insufficient to sustain the jury’s joint venture verdict. Because
Global Rescue was held jointly and severally liable for attorney
fees based on “joint venture/partnership liability,” we vacate the
attorney fee award entirely as it relates to Global Rescue.
5. Commercial Club raises three other issues in its cross-appeal
that we do not reach. First, Commercial Club argues that the
district court erred in concluding that its “claim/remedy for joint-
venture/partnership was not an action to ‘enforce’ any provisions
(continued…)
20200747-CA 10 2023 UT App 37Commercial Club v. Global Rescue
correctness,” reversing only if we find that there is support for the
jury’s verdict. Neff v. Neff, 2011 UT 6, ¶ 49, 247 P.3d 380.
ANALYSIS
I. Global Rescue and GR Direct Did Not Create a Joint Venture.
¶27 Global Rescue argues that the district court erred in
denying its motion to vacate the jury’s joint venture verdict
because there was no evidence of “a mutual right to control and
any purported profits or losses were several, not joint.” We agree
that the evidence, viewed in the light most favorable to the jury’s
verdict, does not support the existence of a joint venture.
of the Lease Agreement” and therefore not covered by the lease’s
attorney fees provision. But Commercial Club acknowledges that
Global Rescue can be held liable for attorney fees only under a
joint venture theory. Because the evidence at trial was insufficient
to establish a joint venture, we need not reach the proper
interpretation of the lease’s attorney fees provision. Second,
Commercial Club argues that “if the jury’s verdict for tortious
interference is reinstated as to liability, the ju[r]y undoubtedly
properly exercised its broad discretion to award punitive
damages with that claim” and the vacated punitive damages
should be reinstated. Because we affirm the district court’s
dismissal of the tortious interference claim, we do not reach this
argument. Finally, Commercial Club has requested its attorney
fees on appeal. “Ordinarily, we award appellate attorney fees and
costs when a party was awarded fees and costs below and then
prevails on appeal.” Cougar Canyon Loan, LLC v. Cypress Fund,
LLC, 2019 UT App 47, ¶ 15 n.11, 440 P.3d 884 (cleaned up), cert.
denied, 455 P.3d 1058 (Utah 2019). Commercial Club is not the
prevailing party on appeal and is therefore not entitled to its
attorney fees. See id.20200747-CA 11 2023 UT App 37Commercial Club v. Global Rescue
¶28 “A joint venture is an agreement between two or more
persons ordinarily but not necessarily limited to a single
transaction for the purpose of making a profit.” Bassett v. Baker,
530 P.2d 1, 2 (Utah 1974). To form a joint venture,
[t]he parties must combine their property, money,
effects, skill, labor and knowledge. As a general
rule, there must be [1] a community of interest in the
performance of the common purpose, [2] a joint
proprietary interest in the subject matter, [3] a
mutual right to control, [4] a right to share in the
profits, and [5] unless there is an agreement to the
contrary, a duty to share in any losses which may be
sustained.
Ellsworth Paulsen Constr. Co. v. 51-SPR-LLC, 2008 UT 28, ¶ 15, 183
P.3d 248 (brackets in original) (cleaned up). “Whether a joint
venture exists is ordinarily a question of fact,” and we must
“therefore look at the facts of the case and determine whether
there is evidence to support each of the five elements of a joint
venture.” Id. (cleaned up).
¶29 Those five elements presuppose “an agreement between
two or more persons” to engage in a separate business endeavor.
See Bassett, 530 P.2d at 2. In other words, at least two persons—
person A and person B—must agree to jointly undertake venture
C. The joint venture itself cannot be one of the two or more
persons to the agreement.
¶30 The difficulty with this case is that we do not seem to have
two distinct persons who entered into an alleged joint venture.
Instead, it appears that GR Direct was created by Global Rescue
as its wholly owned subsidiary for the sole purpose of selling
Global Rescue memberships. If GR Direct did not independently
20200747-CA 12 2023 UT App 37Commercial Club v. Global Rescue
exist, we question how it could have agreed with Global Rescue
to form itself. 6
¶31 But that is not the way Global Rescue has presented the
case on appeal. Instead of arguing that the joint venture claim fails
for want of “two or more persons,” Global Rescue argues that
there was no evidence of a mutual right to control the alleged joint
venture. 7 In analyzing the mutual control element, both parties
treat GR Direct as the other person who allegedly entered into a
joint venture with Global Rescue. The joint venture claim was
presented the same way at trial, where the jury was asked to find
if “Global Rescue and GR Direct engage[d] in a joint venture or
partnership.”
¶32 Although we question whether the “two or more persons”
requirement was satisfied in this case, we will assume for
purposes of our analysis that Global Rescue and GR Direct are the
alleged joint venturers. But if we make that assumption, it
requires us to define the joint venture as something other than GR
Direct itself. We must then determine whether there was
sufficient evidence to support the jury’s findings that Global
6. There is no evidence in the record to suggest that Robinson was
the second person who entered into an agreement with Global
Rescue to create GR Direct. Instead, the evidence shows that
Robinson, as an employee of Global Rescue, had the idea to create
a multi-level marketing company to sell Global Rescue
subscriptions and that Richards then organized a limited liability
company, GR Direct, to sell the subscriptions while shielding
Global Rescue from liability.
7. Global Rescue also argues that there was no right to share in
profits or duty to share in losses. Because there is no evidence to
support the mutual control element, we do not reach those
additional arguments.
20200747-CA 13 2023 UT App 37Commercial Club v. Global Rescue
Rescue and GR Direct exercised mutual control over that separate
joint venture.
¶33 Commercial Club contends that Global Rescue and GR
Direct created a “new joint venture” as “a joint effort with a
mutual right to control, with each side bringing their respective
resources to the table for the joint venture.” Under this theory of
the case, Global Rescue’s contribution to the alleged joint venture
appears to have been the product—telemedicine memberships—
while GR Direct’s contribution was “creating a multilevel
marketing company to sell Global Rescue product.” But instead
of defining the joint venture as a separate business endeavor,
Commercial Club defines the joint venture as the “operations of
GR Direct.”
¶34 Indeed, both parties have struggled to identify the distinct
joint venture over which Global Rescue and GR Direct would
need to exercise mutual control. In its opening brief, Global
Rescue correctly states that the parties must have mutual control
over the “joint venture” but then argues that GR Direct had no
mutual control over Global Rescue, as if Global Rescue is the
alleged joint venture, rather than an alleged joint venturer.
¶35 In response, Commercial Club correctly points out that
joint venturers must exercise mutual control over the joint
venture—not each other—but then equates GR Direct with the
joint venture:
Global Rescue misses the mark when it argues that
“[a]lthough Global Rescue had the right to control
GR Direct, GR Direct had no voice in Global
Rescue’s business operations.” This argument
ignores the critical fact that the joint venture was the
operations of GR Direct, not the general operations of
Global Rescue. The question is whether or not there
was a mutual right to control with respect to the
venture—the MLM business at GR Direct—not if GR
20200747-CA 14 2023 UT App 37Commercial Club v. Global Rescue
Direct could also assert control over Global Rescue’s
other business operations.
(Emphasis added.) Commercial Club argues that “there was
extensive evidence presented at trial demonstrating that along
with Global Rescue, GR Direct had a mutual right to control the
operations of GR Direct—the joint venture.”
¶36 In reply, Global Rescue identifies the “sale of telemedicine
services” as the alleged joint venture. It argues that “GR Direct’s
limited control to manage its own day-to-day operations does
nothing to demonstrate a mutual right to control the sale of
memberships for telemedicine services.”
¶37 However one defines the alleged joint venture, it must be
something other than either of the two alleged joint venturers. Yet
in support of the jury’s finding of mutual control, Commercial
Club relies solely on evidence that “GR Direct had a mutual right
to control the operations of GR Direct.” Specifically, Commercial
Club points to evidence that GR Direct handled matters related to
its lease, hired and fired GR Direct employees, maintained its own
bank accounts, built GR Direct’s “compensation plan/wealth
plan,” created its own marketing strategies, “was running the
entire [multilevel marketing] program,” and was “doing
everything related to network marketing.” All that evidence
relates to the control GR Direct exercised over its own multilevel
marketing operations. None of that evidence suggests that GR
Direct exercised control over a separate joint venture.
¶38 The lack of evidence showing mutual control over a
separate joint venture is fatal to Commercial Club’s joint venture
claim. It also underscores why a joint venture theory is ill-fitted to
the facts of this case. Global Rescue and GR Direct did not
undertake a joint venture separate from GR Direct. Instead,
Global Rescue created a wholly owned subsidiary to sell Global
Rescue’s telemedicine memberships through multilevel
20200747-CA 15 2023 UT App 37Commercial Club v. Global Rescue
marketing. As Global Rescue puts it, “GR Direct was merely
Global Rescue’s instrument for its own benefit.”
¶39 In concluding that the jury’s verdict cannot stand, we do
not hold that a parent company and a subsidiary are incapable of
creating a joint venture. See, e.g., Wirth v. Sun Healthcare Group,
Inc., 2017-NMCA-007, ¶ 33, 389 P.3d 295 (recognizing that “it is at
least conceivable that a parent may share a business venture with
its subsidiary”); Kissun v. Humana, Inc., 479 S.E.2d 751, 752 (Ga.
1997) (“[T]he parent/subsidiary relationship alone does not, as a
matter of law, preclude such corporations from establishing the
legal relationships of principal and apparent agent or joint
venturers . . . .”). But the joint venture of a parent corporation and
a subsidiary corporation must be distinct from the subsidiary
itself. Cf. Hanback v. GGNSC Southaven, LLC, No. 3:13-CV-00288-
MPM-SAA, 2014 WL 3530613, at *5 (N.D. Miss. July 15, 2014) (“[I]f
the capture of upstream profits constitutes a joint venture, then
nearly all formally organized . . . parent/holding companies
would be considered part of a joint venture . . . .”).
¶40 Here, GR Direct was not a subsidiary that agreed with its
parent corporation to undertake a separate business venture. And
without evidence of a separate venture, Commercial Club could
not prove that Global Rescue and GR Direct exercised mutual
control over such a venture. Accordingly, we reverse the jury’s
joint-venture verdict and vacate the court’s judgment in favor of
Commercial Club on Claim 6. Commercial Club cannot hold
Global Rescue liable for GR Direct’s default unless it prevails on
its alter ego claim (Claim 2). See infra Section II.
¶41 We must also vacate the portion of the attorney fees award
finding Global Rescue jointly and severally liable for attorney fees
under the lease agreement between Commercial Club and GR
Direct. The district court based that finding solely on “joint
venture/partnership liability.” Because we hold that the evidence
20200747-CA 16 2023 UT App 37Commercial Club v. Global Rescue
was insufficient to prove a joint venture, Global Rescue cannot be
liable for attorney fees under that theory.
II. There Are Insufficient Findings of Fact to Support the District
Court’s Alter-Ego Determination.
¶42 Global Rescue next challenges the district court’s alter-ego
determination finding Global Rescue liable for GR Direct’s breach
of the lease agreement. Global Rescue is the sole shareholder of
GR Direct. “Ordinarily a corporation is regarded as a legal entity,
separate and apart from its stockholders.” Jones & Trevor Mktg.,
Inc. v. Lowry, 2012 UT 39, ¶ 13, 284 P.3d 630 (cleaned up). “The
purpose of such separation is to insulate the stockholders from the
liabilities of the corporation, thus limiting their liability to only the
amount that the stockholders voluntarily put at risk.” Salt Lake
City Corp. v. James Constructors, Inc., 761 P.2d 42, 46 (Utah Ct. App.
1988).
¶43 “The alter ego doctrine is an exception to the general rule
that limits stockholders’ liability for obligations of the
corporation.” Jones & Trevor Mktg., 2012 UT 39, ¶ 13. “A party may
pierce the corporate veil and obtain a judgment against the
individual shareholders for a cause of action that arose from a
dispute with the corporate entity if the plaintiff proves that the
corporation is acting as an alter ego of its shareholders.” Simons v.
Park City RV Resort, LLC, 2015 UT App 168, ¶ 5, 354 P.3d 215(cleaned up).
¶44 “Generally, courts must balance piercing and insulating
policies and will only reluctantly and cautiously pierce the
corporate veil.” Jones & Trevor Mktg., 2012 UT 39, ¶ 15 (cleaned
up). The decision to do so “is a highly factual determination, and
each case should be determined on its particular facts.” Id.; see also
Norman v. Murray First Thrift & Loan Co., 596 P.2d 1028, 1032 (Utah
1979) (“[I]t is the particular circumstances of the case that
determine whether the application of the alter ego doctrine is
appropriate.”); James Constructors, Inc., 761 P.2d at 47 (“A key
20200747-CA 17 2023 UT App 37Commercial Club v. Global Rescue
feature of the alter ego theory is that it is an equitable doctrine
requiring that each case be determined upon its peculiar facts.”).
¶45 In Norman v. Murray First Thrift & Loan Co., 596 P.2d 1028(Utah 1979), the Utah Supreme Court established a two-prong test
to determine whether an alter ego exists to allow a party to pierce
the corporate veil: “(1) there must be such unity of interest and
ownership that the separate personalities of the corporation and
the individual no longer exist, viz., the corporation is, in fact, the
alter ego of one or a few individuals; and (2) the observance of the
corporate form would sanction a fraud, promote injustice, or an
inequitable result would follow.” Id. at 1030.
¶46 On appeal, Global Rescue challenges only the second
prong, which is appropriately addressed by the district court and
not the jury. See Jones & Trevor Mktg., 2012 UT 39, ¶ 14 (“The
second prong . . . is addressed to the conscience of the court.”
(cleaned up)). “Under the second prong, it is not necessary that
the plaintiff prove actual fraud, but must only show that failure
to pierce the corporate veil would result in an injustice.” Id.(cleaned up).
¶47 “[T]here are no established factors to be considered in
evaluating the fairness element because it is simply an appeal to
the conscience of the court and the court’s equitable powers.” Id.
¶ 20. But the absence of any established factors to analyze under
the fairness prong “does not give courts ‘carte blanche’
permission to pierce the corporate veil.” Id. ¶ 20 n.6. “A party
attempting to prevail on an alter ego theory must still appeal to
the court’s equitable powers and articulate how the observance of
the corporate form would sanction a fraud, promote injustice, or
an inequitable result would follow.” Id. (cleaned up).
¶48 Here, the district court found that there was no “evidence
of fraud in this case,” but it determined that “under these
circumstances and considering all the facts and testimony and
other evidence at trial, . . . it would promote an injustice or an
20200747-CA 18 2023 UT App 37Commercial Club v. Global Rescue
inequitable result would follow . . . if [the court] were to recognize
that separate corporate existence[].”
¶49 Global Rescue argues that the district court abused its
discretion in finding that the fairness prong had been met under
the circumstances of this case. Although the court discussed the
various ways in which the relationship between Global Rescue
and GR Direct might “have been misleading under certain
circumstances,” it ultimately concluded that it did not constitute
“fraudulent conduct in any way.” In addition, Global Rescue
points to the district court’s prior factual finding that, before
executing the lease agreement, Commercial Club knew that
Global Rescue and GR Direct were separate entities. 8 Because the
court identified no other facts or circumstances to support its
finding on the fairness prong, Global Rescue contends that the
alter ego determination should be set aside.
¶50 Commercial Club defends the district court’s equitable
determination, arguing that it was reasoned and persuasive and
“resulted in over six transcript pages” of findings. But for the most
part, those findings relate to the formalities prong and not to the
fairness prong challenged on appeal. The court cited specific
evidence in support of its finding that there was no fraudulent
conduct, but it did not identify the evidence at trial that supported
its conclusion that “it would promote an injustice or an
8. Specifically, in granting Global Rescue’s motion for summary
judgment on Commercial Club’s claim of joint venture by
estoppel, the court found that “given the language in the Lease
Agreement between [Commercial Club] and GR Direct, and
[Commercial Club’s] knowledge before executing the Lease
Agreement that Global Rescue and GR Direct were separate
entities, it was not reasonable as a matter of law for [Commercial
Club] to rely on any alleged representations necessary for a
finding of joint venture by estoppel.”
20200747-CA 19 2023 UT App 37Commercial Club v. Global Rescue
inequitable result would follow” if the court did not allow
Commercial Club to pierce the corporate veil.
¶51 It is not clear from this ruling what circumstances, facts,
testimony, or other evidence presented at trial the court relied on
in making this determination. And “without insight into the
district court’s reasoning, we are unable to ascertain whether the
district court’s decision follows logically from, and is supported
by, the evidence.” Veracity Networks LLC v. MCG S. LLC, 2019 UT
App 53, ¶ 35, 440 P.3d 906 (cleaned up), cert. denied, 455 P.3d 1058(Utah 2019). Where we cannot conduct meaningful appellate
review of the district court’s decision, we “may remand for the
entry of more-detailed findings.” Id. (cleaned up).
¶52 Here, the discretionary decision to pierce the corporate veil
depends on the court’s assessment of the facts presented at trial.
But because we cannot ascertain the basis for the court’s
determination that failure to pierce the corporate veil would
promote injustice or produce an inequitable result, we cannot
properly evaluate whether the district court abused its discretion
in finding Global Rescue liable as the alter ego of GR Direct.
Therefore, we vacate the entry of judgment in favor of
Commercial Club on Claim 2. We remand for the district court to
make further findings on the fairness prong and enter an
amended judgment in accordance with those findings.
III. Commercial Club Has Not Carried Its Burden of Showing
Any Error in the District Court’s Entry of JNOV in Favor of
Global Rescue on the Tortious Interference Claim.
¶53 On cross-appeal, Commercial Club contends that the
district court erred in determining that constructive fraud did not
satisfy the “improper means” element of tortious interference
with contractual relations. Commercial Club therefore argues that
the district court erred in entering JNOV in favor of Global Rescue
on that claim. “JNOV is justified only if, after looking at the
evidence and all reasonable inferences in a light most favorable to
20200747-CA 20 2023 UT App 37Commercial Club v. Global Rescue
the nonmoving party, the trial court concludes that there is no
competent evidence which would support a verdict in that party’s
favor.” Neff v. Neff, 2011 UT 6, ¶ 49, 247 P.3d 380 (cleaned up).
Here, however, the district court’s entry of JNOV rested on the
court’s earlier ruling that granted partial summary judgment on
the tortious interference claim.
¶54 To succeed on a claim for tortious interference with
contractual relations, the plaintiff must prove: “(1) that the
defendant intentionally interfered with the plaintiff’s existing or
potential economic relations, (2) by improper means, (3) causing
injury to the plaintiff.” Eldridge v. Johndrow, 2015 UT 21, ¶ 70, 345
P.3d 553 (cleaned up). Our supreme court has “defined improper
means narrowly to include only those actions that are contrary to
law, such as violations of statutes, regulations, or recognized
common-law rules, or actions that violate an established standard
of a trade or profession.” See C.R. England v. Swift Transp. Co., 2019
UT 8, ¶ 42, 437 P.3d 343 (cleaned up). And the court has offered
“a non-exhaustive list of conduct that would constitute improper
means: violence, threats or other intimidation, deceit or
misrepresentation, bribery, unfounded litigation, defamation, or
disparaging falsehoods.” Id. (cleaned up). As the court explained,
because “such acts are illegal or tortious in themselves they are
clearly improper means of interferences.” Id. (cleaned up).
¶55 Commercial Club argues that the improper means element
was satisfied here because the jury found that the transfer of GR
Direct’s assets to Global Rescue was constructively fraudulent
and therefore voidable under the UVTA. But in ruling on Global
Rescue’s motion for partial summary judgment, the court
dismissed the tortious interference claim except to the extent it
alleged, as the improper means, “a fraudulent transfer based on
actual intent to hinder, delay, or defraud any creditor.” The court
reasoned that an intentional fraudulent transfer under Utah Code
subsection 25-6-202(1)(a) “involves conduct similar to deceit and
misrepresentation,” which our supreme court has identified as
20200747-CA 21 2023 UT App 37Commercial Club v. Global Rescue
improper means. 9 Utah Code § 25-6-202(1)(a). On the other hand,
the court ruled that a constructively fraudulent transfer under
subsection (1)(b) “would not constitute improper means because
there is nothing ‘independently tortious or wrongful’ about a
company transferring assets for less than reasonably equivalent
value.” See id. § 25-6-202(1)(b).
¶56 The jury ultimately found that the transfer of GR Direct’s
assets to Global Rescue was voidable as a constructively
fraudulent transfer but not as an intentional one. Consistent with
the pre-trial ruling narrowing the tortious interference claim, the
court granted Global Rescue’s JNOV motion because the jury did
not find an intentionally fraudulent transfer.
¶57 In its opening brief, Commercial Club does not cite or
otherwise acknowledge the district court’s pre-trial ruling that
only an intentional fraudulent transfer—not a constructive
fraudulent transfer—could satisfy the improper means element of
tortious interference. Nor does Commercial Club cite the district
court’s oral ruling granting JNOV, in which the court expressly
relied on its summary judgment ruling as the basis for setting
aside the jury verdict finding tortious interference.
¶58 Global Rescue argues that by ignoring the district court’s
summary judgment ruling, Commercial Club has effectively
limited the issue on appeal to whether the district court abused its
discretion in declining to reconsider that ruling when Global
Rescue moved for JNOV. Global Rescue relies on the law-of-the-
case doctrine, which provides that “a decision made on an issue
during one stage of a case is binding in successive stages of the
9. Because the jury did not find intentional fraudulent transfer, we
have no occasion to review the district court’s pre-trial ruling that
a transfer by a debtor “with actual intent to hinder, delay, or
defraud any creditor of the debtor” constitutes improper means
for purposes of a tortious interference claim against the transferee.
20200747-CA 22 2023 UT App 37Commercial Club v. Global Rescue
same litigation.” IHC Health Services., Inc. v. D & K Mgmt., Inc.,
2008 UT 73, ¶ 26, 196 P.3d 588 (cleaned up). Although the parties
are bound by the prior decision, the court remains free to
reconsider that decision so long as the case remains pending
before the court prior to any appeal. Id. ¶ 27. “Whether to
reconsider a prior ruling is ordinarily within the sound discretion
of the district court . . . .” Colony Ins. Co. v. Human Ensemble, LLC,
2013 UT App 68, ¶ 6, 299 P.3d 1149. If the district court declines to
reconsider a prior decision without reaching the merits, we will
reverse only if the court has abused its discretion. See Bergmann v.
Bergmann, 2018 UT App 130, ¶ 12, 428 P.3d 89. “Conversely, when
a district court reaches the merits of a motion to reconsider and
provides legal analysis and legal conclusions, we would reach the
merits of its ruling.” Blueridge Homes Inc. v. Method Air Heating
& Air Conditioning, 2019 UT App 149, ¶ 20, 450 P.3d 114.
¶59 Here, the district court did not simply decline to reconsider
the summary judgment ruling. Instead, it also ruled that it was
“not persuaded that [its] ruling on the motion for summary
judgment was incorrect; that the notion of improper means could
be expanded to include [the] constructive fraudulent transfer
claim.” The court explained that the only evidence of improper
means offered by Commercial Club was the transfer of office
equipment from GR Direct to Global Rescue, which the jury found
constituted a voidable transfer based on constructive fraud. The
court concluded that there was nothing “independently tortious
or wrongful about Global Rescue receiving the transfer of that
asset” and therefore the evidence supporting the jury’s verdict on
constructive fraud was insufficient to prove improper means as a
matter of law. Because the district court engaged with the issue
on the merits, we cannot simply affirm the ruling as a
discretionary refusal to reconsider a prior ruling.
¶60 But Commercial Club’s failure to acknowledge the basis of
the district court’s ruling hinders our ability to review the merits
of the decision. Under our rules of appellate procedure, the party
20200747-CA 23 2023 UT App 37Commercial Club v. Global Rescue
challenging the district court’s decision must “explain, with
reasoned analysis supported by citations to legal authority and
the record, why the party should prevail on appeal.” Utah R. App.
P. 24(a)(8). To satisfy the burden of persuasion on appeal, “an
appellant must provide reasoned analysis on how the district
court erred.” Syme v. Symphony Group LLC, 2018 UT App 212, ¶ 28,
437 P.3d 576 (cleaned up). Here, Commercial Club has not
“engaged with the district court’s reasoning” in granting Global
Rescue’s JNOV motion, which was premised on the court’s earlier
ruling granting partial summary judgment on the tortious
interference claim. See Dale K. Barker Co. PC CPA Profit Sharing
Plan v. Turner, 2021 UT App 119, ¶ 31, 500 P.3d 940. Because its
arguments are not tethered to the district court’s actual ruling,
Commercial Club has not carried its burden to demonstrate that
the district court erred in ruling, as a matter of law, that a
constructive fraudulent transfer does not constitute improper
means for purposes of a tortious interference claim.
¶61 Instead of engaging with the district court’s reasoning,
Commercial Club asks us to reinstate the jury’s tortious
interference verdict “because the jury determined ‘by clear and
convincing evidence’ that Global Rescue engaged in a constructive
fraudulent transfer, which satisfies the ‘improper means’ prong of
a tortious interference claim under Utah law.” Because the UVTA
allows a creditor to void such a transfer, Commercial Club
contends that Global Rescue “engaged in conduct ‘in which the
defendant did not have a legally recognized right to engage.’”
(Quoting C.R. England, 2019 UT 8, ¶ 42.) But Commercial Club
offers no authority to support the proposition that engaging in a
voidable transfer is “independently wrongful or tortious
conduct” that establishes not only a cause of action under the
UVTA but also the improper means element of a tortious
interference claim.
¶62 Even assuming that the conduct described in subsection
(1)(b) constitutes “independently tortious or wrongful conduct,”
20200747-CA 24 2023 UT App 37Commercial Club v. Global Rescue
the jury’s verdict voiding the transfer does not establish that
Global Rescue used improper means to tortiously interfere with
the lease contract. Whether a transfer is voidable under subsection
(1)(b) depends on the debtor’s conduct, not the transferee’s. 10 The
jury’s finding that GR Direct made the transfer “without receiving
a reasonably equivalent value in exchange” when its remaining
assets could not cover its debts does not speak to whether Global
Rescue engaged in wrongful conduct by accepting the transfer.
Commercial Club points to the availability of a judgment against
the transferee as evidence that “Global Rescue’s actions in
accepting fraudulently transferred assets . . . create direct liability
under—and constitute a violation of—the UVTA.” But, as Global
Rescue correctly observes, “the statute merely provides a
mechanism by which a creditor may claw back assets. It says
nothing about whether the transferee who receives assets is guilty
of any tortious or wrongful conduct.”
¶63 We do not foreclose the possibility that receipt of a
constructively fraudulent transfer might constitute “improper
means” for purposes of a tortious interference claim. But
Commercial Club has not demonstrated that the district court’s
ruling in this case was in error. Because Commercial Club has not
carried its burden of persuasion on appeal, we affirm the
dismissal of the tortious interference claim.
10. Where the transfer is voidable under subsection (1)(a), a
transferee’s conduct is relevant to determining whether the good-
faith purchaser exception applies. See Utah Code § 25-6-304
(providing that “a transfer or obligation is not voidable under
Subsection 25-6-202(1)(a) against a person that took in good faith
and for a reasonably equivalent value given the debtor”). But
Commercial Club acknowledges that the good-faith purchaser
exception does not apply here because the jury found that the
transfer was voidable under subsection (1)(b).
20200747-CA 25 2023 UT App 37Commercial Club v. Global Rescue
CONCLUSION
¶64 We reverse the jury’s verdict in favor of Commercial Club
on its joint venture claim because there was no evidence that
Global Rescue and GR Direct exercised mutual control over a
separate business endeavor that was distinct from GR Direct
itself. Because the attorney fees award was premised on the
existence of a joint venture, we vacate the attorney fees award as
well. We also vacate the district court’s alter ego determination
and remand for additional findings under the equitable prong of
the alter ego test and for entry of an amended judgment reflecting
those findings. Finally, we affirm the district court’s entry of
JNOV in favor of Global Rescue with respect to the tortious
interference claim because Commercial Club has not carried its
burden of persuasion on cross-appeal.
20200747-CA 26 2023 UT App 37