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Qualpay Inc. v. Solid Business Solutions, LLC

United States District Court, D. Utah, Northern Division

April 26, 2018

QUALPAY INC., a Delaware corporation, Plaintiff,
v.
SOLID BUSINESS SOLUTIONS, LLC, a Utah limited liability company, and JACOB COLVIN, an individual, Defendants and Third-Party Plaintiffs,
v.
JS & JL HOLDINGS, LLC D/B/A CHARGEBACK DEFENSE SOLUTIONS, a Utah limited liability company, Third-Party Defendants.

          Tena Campbell District Judge.

          MEMORANDUM DECISION AND ORDER GRANTING PLAINTIFF'S EXPEDITED MOTION TO RECONSIDER

          Brooke C. Wells United States Magistrate Judge.

         Plaintiff Qualpay, Inc. (Qualpay) asks the court to reconsider its Memorandum Decision and Order Granting and Denying in Part Amended Motion for Leave to Amend Answer (the Order)[1] and deny Defendants' Solid Business Solution and Jacob Colvin (collectively SBS) Motion for Leave to Amend Answer[2] in full. This matter was referred to Magistrate Judge Brooke C. Wells by District Judge Tena Campbell pursuant to 28 U.S.C. § 636(b)(1)(A).[3] The court has carefully reviewed the memoranda submitted by the parties. Given Qualpay's expedited request, the court determined the request on the basis of the written memoranda. The court acknowledges the Order relied on recently overturned Utah case law and did not consider the decision of Eldridge v. Johndrow.[4] Re-analyzing the facts and law in this case, the court now denies in full SBS's Motion for Leave to Amend Answer for the reasons set forth below.

         STANDARD OF REVIEW

         The Tenth Circuit recognizes three grounds that warrant a motion to reconsider: “(1) an intervening change in the controlling law, (2) new evidence previously unavailable, and (3) the need to correct clear error or prevent manifest injustice.”[5] Thus, “a motion for reconsideration is appropriate where the court has misapprehended the . . . controlling law.”[6]

         BACKGROUND

         SBS sought leave of the court under Rule 15 to amend its answer to assert the counterclaims of unjust enrichment and tortious interference. Qualpay opposed the motion on the basis that the unjust enrichment claim was barred by the undisputed existence of a contract between Qualpay and SBS, and that SBS failed to adequately allege wrongful means in support of its intentional interference claim. The court denied the Motion to Amend with respect to the unjust enrichment claim finding it was barred by the existence of an enforceable contract between the parties.[7] With respect to the tortious interference claim, the court found SBS had alleged enough facts to establish improper purpose, and did not address the improper means prong. In fact, citing Leigh Furniture & Carpet Co. v. Isom, [8] the court found improper means “is an alternative to improper purpose under the second prong of the Leigh Furniture test.”[9]

         In its request to reconsider, Qualpay correctly points out to the court that it applied recently overturned case law by the Utah Supreme Court in determining the tortious interference claim. In Eldridge v. Johndrow, [10] the Utah Supreme Court rejected the improper-purpose rule, holding that “a claim for tortious interference may only succeed where the defendant has employed an improper means.”[11] Disavowing dicta in Leigh Furniture, the Utah Supreme Court held that to prevail under a tortious interference claim under Utah law, a plaintiff must now prove the following elements: “(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.”[12]

         a. Proposed First Amended Answer and Counterclaim In its proposed counterclaim, SBS makes the following allegations:

• in November 2016, Qualpay threatened to rescind their agreement unless SBS entered into a separate contract with Chargeback Defense Solutions (Chargeback)[13]
• based on Qualpay's threats, SBS entered into an agreement with Chargeback in December 2016, wherein Chargeback represented it would fight back chargebacks they were confident they would win[14]
• Qualpay knew about the agreement between SBS and Chargeback, as it had compelled SBS to enter the agreement[15]
• Qualpay directed Chargeback not to oppose chargebacks[16]
• on information and belief, Qualpay used improper means, including but not limited to coercion, inducement, collusion, bribery, persuasion, requirement and/or directive, to compel Chargeback not to oppose the chargebacks pursuant to the agreement with SBS[17]
• Chargeback opted not to defend almost all chargebacks[18]
• on a specific instance, Qualpay directed Chargeback to fraudulently and deceitfully conceal alerts for several chargebacks from SBS, including taking funds from SBS's checking account to conceal these facts[19]
• when confronted by SBS, Chargeback admitted that Cliff at Qualpay directed Jeremiah at Chargeback to hide alerts and take funds from SBS fraudulently[20]
• Qualpay and Chargeback conspired and defrauded SBS, and their actions resulted in lost revenues and profits for SBS, including SBS becoming liable to Qualpay for losses suffered by Qualpay due to the chargebacks[21]

         ANALYSIS

         To establish a claim of tortious interference with existing or prospective economic relations, a plaintiff must allege conduct on the part of the defendant that “ˊintentionally and improperly interferes with the performance of a contract . . . between another and a third person by inducing or otherwise causing the third person not to perform the contract.'”[22] In fact, “[i]t is settled that one party to a contract cannot be liable for the tort of interference with contract for inducing breach by himself or the other contracting party.”[23] As discussed above, the elements of a tortious interference claim are as follows: “(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.”[24]

         The improper means prong “is satisfied where the means used to interfere with a party's economic relations are contrary to law, such as violations of statutes, regulations, or recognized common-law rules.”[25] “Commonly included among improper means are violence, threats, or other intimidation, deceit or misrepresentation, bribery, unfounded litigation, defamation, or disparaging falsehood.”[26] “Means may also be improper or wrongful because they violate ‘an established standard of trade or profession.'”[27]

         Qualpay argues SBS failed to allege improper means on two grounds. First because SBS did not plead any facts alleging Qualpay violated any statute, regulation, or recognized common-law rules. The court does not believe Utah law stands for such a narrow requirement. In fact, both Leigh Furniture and St. Benedict's Development Co v. St. Benedict's Hosp., [28] use the term “such as” before the phrase “violations of statutes, regulations, or recognized common-law rules;” inferring that this list is not all inclusive. Likewise, the Utah Supreme Court further explained that improper mean may include “violence, threats, or other intimidation, deceit or misrepresentation, ...


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