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Williams v. Anderson

Court of Appeals of Utah

June 2, 2017

Jacob D. Williams, Appellant,
v.
Craig Alan Anderson, Quinn Zite, and Anderson Zite LLC, Appellees.

         Third District Court, Salt Lake Department The Honorable Robert P. Faust No. 130901891

          Melinda A. Morgan and Richard F. Ensor, Attorneys for Appellant.

          Daniel K. Brough and Eric B. Vogeler, Attorneys for Appellees.

          Judge Jill M. Pohlman authored this Opinion, in which Judges J. Frederic Voros Jr. and Michele M. Christiansen concurred.

          OPINION

          POHLMAN, Judge.

         ¶1 In this interlocutory appeal, plaintiff Jacob D. Williams appeals the district court's grant of a motion in limine preventing him from presenting damages-related evidence at trial. Challenging the basis for the court's ruling, Williams contends that he adequately disclosed "a computation of any damages claimed" for purposes of rule 26 of the Utah Rules of Civil Procedure when he disclosed that he sought damages amounting to 30% of the purchase price of the company that he once co-owned with Craig Alan Anderson and Quinn Zite. We agree and therefore reverse and remand.

         BACKGROUND

         ¶2 Williams filed a complaint against Anderson, Zite, and Anderson Zite LLC (collectively, Defendants), alleging that he and Anderson founded Fix A Phone LLC, a company that repaired cell phones and consumer electronics and sold electronic accessories.[1] According to Williams, Zite subsequently became a partner in Fix A Phone, resulting in Williams having a 30% ownership interest in the company. Williams alleged, among other things, that Anderson and Zite unjustly cancelled or terminated his ownership interest and thereafter sold the company to Tricked Out Services Inc.

         ¶3 In his complaint, Williams sought declaratory relief and alleged claims for breach of fiduciary duty, civil conspiracy, and fraud. In connection with his claims, Williams sought to recover 30% of the purchase price that Tricked Out Services paid for Fix A Phone. He also sought a ruling declaring that he was "a thirty percent (30%) owner of any equity or ownership interest that [Anderson and Zite] possess[] in Tricked Out Services, . . . or in any money owed by Tricked Out Services" to Anderson or Zite, as well as punitive and other damages. Williams did not allege the amount of Fix A Phone's purchase price, but he alleged that approximately seven months before his ownership interest in Fix A Phone was cancelled, his interest was worth between $77, 000 and $119, 000. He also alleged that a few months later, Fix A Phone was valued at approximately $1.5 million. Williams identified his case as a "Tier Three Case" under Utah Rule of Civil Procedure 26.[2]

         ¶4 In response, Defendants answered and asserted counterclaims, seeking damages in an amount to be proven at trial, and alleging that Fix A Phone had sold "substantially all of [its] assets for a base purchase price of $200, 000." Defendants also alleged, "This is a Tier 3 case for purposes of discovery."

         ¶5 At the outset of discovery, Williams provided initial disclosures in which he claimed "entitle[ment] to 30% of the price Tricked Out Services, Inc., paid for Fix A Phone, LLC, as well as 30% of any equity or ownership interest Defendants may have in Tricked Out Services, Inc., including any money owed by Tricked Out Services, Inc., and punitive damages." Later, Williams received the purchase agreement between Fix A Phone and Tricked Out Services, which provides that the "aggregate purchase price to be paid by [Tricked Out Services] to [Fix A Phone] for the Acquired Assets and for the other covenants and agreements of [Fix A Phone] shall be $200, 000.00 (the 'Purchase Price')." The agreement also states that "[i]n addition to the Purchase Price, and as consideration for [Anderson's and Zite's consulting] services . . ., [Tricked Out Services] further . . . agrees to pay to [Anderson and Zite] 50% of [its] Net Profits . . . derived from cell phone repair services" for two years.

         ¶6 Before depositions were taken, the parties exchanged emails regarding a potential mediation of the dispute. In one email, Defendants' counsel explained that because Defendants sold Fix A Phone for $200, 000, "the most" Williams could recover was "30% of $200, 000, or $60, 000, " even if he prevailed on all claims:

Regarding mediation, my clients' position is that they sold the assets of the Fix-A-Phone business for $200, 000, per the purchase agreement. Any further compensation they receive is in consideration for the services they are required to render per the contract. (In other words, if they don't consult, they don't get paid.) Therefore, the most Mr. Williams can recover, even if he succeeds on 100% of his claims, is 30% of $200, 000, or $60, 000. If Mr. Williams is willing to set that figure as a ceiling for the mediation, my clients would be willing to mediate . . . .

         The parties mediated, but Williams did not agree to Defendants' suggested ceiling.

         ¶7 Afterward, Williams amended his initial disclosures. He maintained that he was entitled to 30% of Fix A Phone's purchase price and 30% of any equity or ownership interest that Defendants may have in Tricked Out Services, including punitive damages and "any money owed by Tricked Out Services." Williams also added that he was "entitled to 30% of any cash or other assets that remained at Fix A Phone after the asset sale" and to "Fix A Phone distributions from which he was excluded."

         ¶8 During a subsequent deposition, Williams testified that former employees of Fix A Phone told him that the company was valued at and sold for $1.5 million. He also stated that he ultimately learned that the company had not sold for that much:

Q: Did you ultimately learn or come to the conclusion that the company had not in fact ...

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