District Court, Provo Department The Honorable Darold J.
McDade No. 110402922
W. Stavros and Austin B. Egan, Attorneys for Appellant
K. Brough and James C. Dunkelberger, Attorneys for Appellees.
Jill M. Pohlman authored this Opinion, in which Judges
Michele M. Christiansen and David N. Mortensen concurred.
Patricia Beckman appeals the trial court's judgment in
her lawsuit against Cybertary Franchising LLC, Franchise
Foundry LLC, and Christian Faulconer (collectively,
Defendants). We affirm in part, reverse in part, vacate in
part, and remand for further proceedings.
In 2005 Beckman established Cybertary, a company offering
virtual administrative services to businesses. At a business
conference in 2010, Beckman met Faulconer, a principal of
Franchise Foundry. Franchise Foundry provided marketing
services for companies, and Faulconer expressed an interest
in marketing for and investing in Cybertary.
Beckman and Faulconer ultimately negotiated three agreements.
First, Beckman, Franchise Foundry, and another entity
executed an operating agreement for Cybertary. Second,
Cybertary and Franchise Foundry entered into a service
agreement under which Franchise Foundry agreed to perform
marketing and sales services in exchange for a minority share
in Cybertary. Third, Cybertary and Beckman executed an
employment agreement (the Employment Agreement) under which
Cybertary agreed to employ Beckman as its chief executive
officer for a three-year term "[s]ubject to earlier
termination as provided in" that agreement. The
Employment Agreement set a base salary for Beckman and
provided for bonuses and a monthly benefits allowance. The
Employment Agreement allowed Cybertary to terminate
Beckman's employment for "cause" and enumerated
seven events that would constitute "cause."
Beckman's relationship with Cybertary soured, and
Cybertary failed to pay her according to the terms of the
Employment Agreement. Concurrently, Beckman filed for
bankruptcy on May 20, 2011. In Beckman's view, Faulconer
was threatening to terminate her employment and was
considering buying out her shares of Cybertary through the
bankruptcy proceeding. In October 2011, Beckman's counsel
sent a letter to Faulconer and a Cybertary manager
threatening litigation and demanding that Cybertary pay the
amounts it owed Beckman. Faulconer responded and arranged a
phone call "for settlement purposes only."
On October 19, 2011, Beckman and Faulconer had a
ninety-minute phone call, which Beckman recorded (the October
conversation). At the beginning of the call, Faulconer
stated, "This whole conversation . . . is really just
for settlement purposes only . . . ." Beckman
acknowledged this preface, stating, "Now you said this
discussion is for settlement purposes only, " and,
"If . . . this entire discussion is aiming towards a
settlement, what is it that you propose?" She and
Faulconer then candidly discussed Beckman's grievances
but did not resolve them.
On November 2, 2011, Beckman sued Cybertary. Beckman alleged
claims for breach of contract and unjust enrichment based on
Cybertary's failure to pay her base salary and benefits
allowance. Because Beckman expected that all amounts owed to
her before May 2011 would be addressed in the bankruptcy
proceeding, she sought compensation only for those amounts
that came due after her bankruptcy filing.
Two weeks later, on November 14, 2011, Cybertary formally
notified Beckman that, "effective immediately, " it
was terminating her employment for cause. The notice cited
three subsections of the Employment Agreement's
termination provision to support its determination of cause:
subsections 6(b)(ii), (iii), and (vi). As evidence of
cause, Cybertary explained that it had reason to believe that
Beckman had engaged in certain conduct that discredited
Cybertary or was detrimental to its reputation or its results
of operation or business, pursuant to subsection 6(b)(vi).
Cybertary further explained,
Not only does that [particular] conduct fall squarely within
Section 6(b)(vi) . . . and its prohibition on conduct that
harms Cybertary's reputation or operations, but [it] also
constitutes "gross neglect" or
"dereliction" of your duties pursuant to Section
6(b)(ii) . . ., as well as "material misconduct with
regard to" Cybertary pursuant to Section 6(b)(iii) . . .
As further evidence of cause, Cybertary believes that you
have failed to perform certain crucial duties related to your
responsibility as Cybertary's chief executive officer.
Those failures constitute "habitual neglect" or
"dereliction" of your duties pursuant to Section
6(b)(ii) . . ., as well as "material misconduct"
pursuant to Section 6(b)(iii).
notice also stated that the grounds articulated as cause for
Beckman's termination were "not intended to be a
comprehensive list" and that Cybertary "reserve[d]
the right to articulate additional grounds for terminating
[Beckman's] employment for cause."
Beckman subsequently amended her complaint, adding Franchise
Foundry and Faulconer as defendants. Beckman's amended
breach of contract claim stated,
In retaliation for filing this lawsuit, Faulconer and
Franchise Foundry have attempted on behalf of Cybertary to
terminate Beckman as Chief Executive Officer for Cybertary.
Faulconer and Franchise Foundry have interfered with
Beckman's ability to perform her duties as Chief
Executive Officer . . . . Such retaliation and actions on
behalf of Cybertary further constitute a material breach of
the Employment Agreement.
also added a claim for declaratory judgment, seeking to
nullify Cybertary's termination of the Employment
Agreement. In her prayer for relief, Beckman indicated that
at trial she would prove damages believed to be "in
excess of $300, 000, plus interest, attorney's fees and
Cybertary filed counterclaims against Beckman for, among
other things, breach of contract, breach of the implied
covenant of good faith and fair dealing, and breach of
fiduciary duty. Cybertary alleged that Beckman had disparaged
it, failed to keep its affairs confidential, and failed to
perform her duties "in an effective and careful
manner." Cybertary also asserted that it had
"sustained significant damages" and, without
specifying an amount, sought "general, specific, and
consequential damages, in an amount to be proven at
In March 2013, Beckman sought leave to amend her complaint
for a second time. Beckman sought to amend her factual
allegations, expand her claim for unjust enrichment, and add
four new causes of action: breach of the operating agreement;
breach of fiduciary duty; fraudulent inducement; and civil
conspiracy. The trial court denied the motion, finding that
it "was untimely and the product of unreasonable delay,
" and that Defendants would be prejudiced if the
amendment were allowed.
Beckman and Defendants subsequently filed cross-motions for
summary judgment. The trial court denied Beckman's motion
but granted Defendants' motion in part. Specifically, it
granted summary judgment to Franchise Foundry and Faulconer
on Beckman's claim for breach of the Employment
Agreement. The court explained that it was undisputed that
"neither Franchise Foundry nor Faulconer are parties to
[the] Employment Agreement" and reasoned that Beckman
could not "enforce that contract against individuals or
entities that are not parties to the contract." The
court otherwise denied Defendants' motion.
In advance of trial, Defendants filed a motion in limine,
requesting that the trial court exclude the recording of the
October conversation. Defendants argued that the recording
constituted evidence of settlement negotiations and that it
therefore should be excluded at trial pursuant to rule 408 of
the Utah Rules of Evidence. The court agreed and granted
Defendants' motion, ruling that "the statements
captured therein constitute[d] compromise negotiations."
The case proceeded to trial. Although Cybertary had provided
a supplemental disclosure quantifying its claimed damages as
$373, 500, the trial court found that the disclosure was
untimely and refused to submit the question of
Cybertary's damages to the jury. The court subsequently
granted Beckman's motion for a directed verdict on
Before submitting the case to the jury, the parties disagreed
about the jury instruction defining "cause" as it
related to Cybertary's termination of Beckman's
employment (Instruction 12). Beckman asserted that
Instruction 12 should be worded to define "cause"
as the seven events enumerated in the Employment Agreement,
and she argued that Cybertary was required to prove at least
one event "by a preponderance of the evidence."
Defendants, on the other hand, asserted that Instruction 12
should explain that the determination of whether one of the
events constituted "cause" "was a matter for
Cybertary's good business judgment." Defendants
further proposed that Instruction 12 provide that "[s]o
long as Cybertary possessed a fair and honest cause or
reason, in good faith, that met one of these [seven
enumerated] definitions, cause existed to terminate Beckman,
whether or not the facts that Cybertary believed to be true
really, in fact, were true." (Citing Uintah Basin
Med. Center v. Hardy, 2005 UT App 92, ¶ 16, 110
The version of Instruction 12 given to the jury included
Beckman's language about Cybertary having to prove at
least one of the seven enumerated events by a preponderance
of the evidence, while also including Defendants'
language providing that whether "cause" existed
"was a matter for Cybertary's good business
The jury found in favor of Beckman, in part. On the special
verdict form, the jury indicated that Cybertary breached the
Employment Agreement by failing to pay Beckman's
compensation and benefits, but did not breach the agreement
by terminating her employment without cause. The jury further
found that neither Franchise Foundry nor Faulconer acted with
gross negligence or willful misconduct. Although Beckman
sought an award of $235, 041.05, the jury determined that
Cybertary owed Beckman $84, 913.83 in unpaid salary and $18,
150 in unpaid benefits, totaling $103, 063.83 in damages.
Beckman then moved for an award of prejudgment interest. The
trial court denied the motion, concluding that Beckman's
damages "are not the type of damages that are
susceptible to an award of prejudgment interest."
Beckman and Cybertary also filed competing motions for
attorney fees. Both relied on the attorney fees provision
contained in the Employment Agreement. Under that provision,
the "nonprevailing party" "to any proceeding
under [the Employment Agreement]" pays its own and the
other side's reasonable expenses, including attorney
fees. The provision defined "nonprevailing party"
as "the party that the court of competent jurisdiction
awards less than one-half (1/2) of all of the amounts in
The court construed the attorney fees provision "as
mandating an assessment of whether each party asserting a
claim under the Employment Agreement is a 'nonprevailing
party' under that claim." As to Beckman's fees
request, the court determined that "[b]ecause Cybertary
was awarded less than one-half of the amounts it sought
against Beckman, it [was] the nonprevailing party with
respect to its counterclaims, and it [was] therefore required
to pay Beckman's attorney fees and costs incurred in
defending against those claims." Accordingly, the court
awarded Beckman $75, 317.24 against Cybertary. As to
Cybertary's request for fees, the court determined that
Beckman was the nonprevailing party with respect to her
claims, "having recovered less than one half of the
amount she sought against Cybertary." Thus, the court
found, Beckman was required to pay the attorney fees and
costs Cybertary incurred in defending against her claims,
which amounted to $62, 181.90. The court then subtracted the
amount awarded to Cybertary from the amount awarded to
Beckman, resulting in a net award of attorney fees and costs
of $13, 135.34 to Beckman.
Franchise Foundry and Faulconer also requested attorney fees.
The trial court determined that because Franchise Foundry and
Faulconer prevailed on summary judgment on Beckman's
claim against them under the Employment Agreement, they were
entitled to $27, 153.33 in attorney fees from Beckman.
AND STANDARDS OF REVIEW
Beckman advances five main claims of error on appeal. First,
Beckman contends that the trial court abused its discretion
by denying her motion for leave to amend her complaint. This
court "will not disturb a trial court's denial of a
motion to amend pleadings absent an abuse of
discretion." Reller v. Argenziano, 2015 UT App
241, ¶ 14, 360 P.3d 768. Under this standard, we will
reverse the trial court if its decision "exceeds the
limits of reasonability." Coroles v. Sabey,
2003 UT App 339, ¶ 16, 79 P.3d 974 (citation and
internal quotation marks omitted).
Second, Beckman contends that the trial court incorrectly
applied rule 408 of the Utah Rules of Evidence and exceeded
its discretion in refusing to admit an audio recording of the
October conversation on the ground that the recording was
evidence of compromise negotiations. We review the trial
court's resolution of the legal questions underlying the
admissibility of evidence for correctness and the trial
court's decision to admit or exclude evidence for an
abuse of discretion. See State v. Griffin, 2016 UT
33, ¶ 14, 384 P.3d 186.
Third, Beckman contends that Instruction 12 incorrectly
defined "cause" with regard to the termination of
her employment under the Employment Agreement. "A trial
court's decision regarding jury instructions presents a
question of law, which is reviewed for correctness."
Vitale v. Belmont Springs, 916 P.2d 359, 361 (Utah
Ct. App. 1996).
Fourth, Beckman contends that the trial court erroneously
failed to award her prejudgment interest. "A trial
court's decision to grant or deny prejudgment interest
presents a question of law which we review for
correctness." Cornia v. Wilcox, 898 P.2d 1379,
1387 (Utah 1995).
Fifth, Beckman contends that the trial court erred in its
awards of attorney fees. "A challenge to an award of
attorney fees [based on a] contract or statute . . . presents
a question of law that we review for correctness."
Brodkin v. Tuhaye Golf, LLC, 2015 UT App 165, ¶
34, 355 P.3d 224.
Leave to Amend
First, Beckman contends that the trial court abused its
discretion by denying her motion for leave to file a second
amended complaint to add four new claims. Beckman argues that
she should have been allowed to amend her complaint because
her motion was not untimely, her delay was justified by her
pending bankruptcy action, and Defendants would have had
adequate time to prepare to defend against the new claims.
Rule 15 of the Utah Rules of Civil Procedure allows a party,
before trial, to amend its pleading "once as a matter of
course" within twenty-one days after serving the
pleading, or, where a responsive pleading is required, the
earlier of twenty- one days after service of that pleading or
twenty-one days after service of a motion under rule 12(b),
(e), or (f). Utah R. Civ. P. 15(a)(1). Additional
amendments may be filed "only with the court's
permission or the opposing party's written consent."
Id. R. 15(a)(2). "The court should freely give
permission when justice requires." Id.
Our supreme court has recently explained that this standard
requires a district court "to decide whether the
nonmoving party has identified a ground or factor sufficient
to defeat the presumption in favor of amendment."
Stichting Mayflower Mountain Fonds v. United Park City
Mines Co., 2017 UT 42, ¶ 48. Among the factors that
may weigh against a decision to allow an amendment are
untimeliness, undue delay, prejudice to the opposing party,
bad faith, and failure to cure pleading deficiencies with
other, earlier amendments; but, "[t]here is no rigid
test." Id. ¶¶ 47-48; see also
Daniels v. Gamma West Brachytherapy, LLC, 2009 UT 66,
¶ 58, 221 P.3d 256. "Even a single consideration or
factor may be enough to justify denial of a motion for leave
to amend." Stichting Mayflower, 2017 UT 42,
In reviewing a district court's decision to deny a motion
for leave to amend under rule 15(a), we owe the court
deference because rule 15(a) "leaves a lot of discretion
in the hands of the district judge." Id. ¶
52. We afford that discretion because we recognize that
district courts "are in a much better position than
appellate courts to make such case-specific determinations as
whether too much time has passed to fairly allow an
amendment, whether a party's delay is the result of an
unfair tactic or dilatory motive, or whether some other
unforeseen factor militates for or against a particular
result in that particular case." Kelly v. Hard Money
Funding, Inc., 2004 UT App 44, ¶ 41, 87 P.3d 734.
Thus, "[t]he question presented is not whether we would
have granted leave to amend. It is whether we find an abuse
of discretion in the district judge's decision to deny
the motion." Stichting Mayflower, 2017 UT 42,
Under this standard, we affirm. The trial court here based
its denial of Beckman's motion to amend on findings of
untimeliness, unreasonable delay, and prejudice to
Defendants. Beckman challenges all three of those findings
but has not demonstrated that the trial court exceeded the
bounds of its discretion in denying her motion on those
First, with respect to timeliness, Beckman argues that her
motion, filed more than sixteen months after she filed her
original complaint, was not untimely "as a matter of
law." We do not disagree. There is, after all, no
"bright line rule" against which to judge the
timeliness of a motion to amend. See Kelly, 2004 UT
App 44, ¶ 28. However, we are not persuaded that it was
unreasonable for the trial court to conclude that
Beckman's motion was untimely under the circumstances.
Beckman filed her motion months after the discovery deadline
had passed and after her lawsuit had been dormant for
some time, causing the trial court judge to observe that the
case had been "dragging on and dragging on and-and
nothing done." Where Beckman sought to significantly
expand the scope of the lawsuit by adding four new claims
(including claims for fraud and conspiracy) more than sixteen
months into litigation that had shown little outward
progress, and months after deadlines established by rule 26
of the Utah Rules of Civil Procedure had passed, we cannot
conclude that there was no reasonable basis for the
court's timeliness finding.
Second, and closely related to her untimeliness argument,
Beckman contends that she was justified in waiting to file
her amended complaint because of uncertainties associated by
her then-pending bankruptcy case. She argues that
"moving forward with new and plausible claims for relief
would have increased the likelihood that the trustee would
have seized those claims, " and thus she was justified
in waiting until after the bankruptcy case concluded. In
evaluating a movant's justification for delay, district
courts "focus on the reasons offered by the moving
party for failing to include the new facts or allegations in
the original complaint." Carter v. Bourgoin Constr.,
Inc., 2015 UT App 198, ¶ 11, 357 P.3d 1 (alteration
in original) (citation and internal quotation marks omitted).