FIRST AMERICAN TITLE INSURANCE COMPANY; FIRST AMERICAN TITLE COMPANY, LLC., Plaintiffs - Appellees,
NORTHWEST TITLE INSURANCE AGENCY; MICHAEL SMITH; KRISTI CARRELL, Defendants - Appellants, and JEFF WILLIAMS, Defendant.
from the United States District Court for the District of
Utah (D.C. No. 2:15-CV-00229-DN)
Anne Q. Wood (Stephen Q. Wood, with her on the briefs), Wood
Balmforth LLC, Salt Lake City, Utah, for
Matthew L. Lalli (Mark O. Morris, Bret R. Evans, and W. Danny
Green, with him on the brief), Snell & Wilmer, L.L.P.,
Salt Lake City, Utah, for Plaintiffs-Appellees.
TYMKOVICH, Chief Judge, LUCERO, and HARTZ, Circuit Judges.
an appeal from a large jury award based on breaches of
contractual and fiduciary duties by employees of a title
company who left to form a competing company and encouraged
former coemployees to join them. The plaintiffs below were
two wholly owned subsidiaries of First American Financial
Corporation: First American Title Insurance Company (FA
Company) and First American Title Company, LLC (FA LLC)
(collectively Plaintiffs). The defendants below who are
appealing the judgment (Defendants) are Michael Smith, Kristi
Carrell, and Northwest Title Insurance Agency, LLC. Jeffrey
Williams was also a defendant below but is not a party to the
appeal. Defendants raise numerous grounds on appeal, many of
which have not been adequately preserved or presented.
Exercising appellate jurisdiction under 28 U.S.C. §
1291, we affirm.
individual defendants originally worked for Equity Title
Insurance Agency, Inc. Carrell became the vice president and
manager of Equity's office in West Jordan, Utah. Smith
was Equity's chief operations officer and general
counsel. Both signed employment agreements with Equity.
Carrell's agreement, executed in August 2003, contained a
noncompete clause stating that "[d]uring [her]
employment with Equity Title and for a period of one year
thereafter, [she] may not participate in any competing title
insurance or escrow business within a 40-mile radius of any
of Equity Title's offices."
App., Vol. IV at 935. Smith's agreement,
executed in August 2004, limited Smith's right to compete
with Equity during and after his employment there, and
contained a nonsolicitation provision barring him from trying
to recruit away Equity employees. In May 2006 Williams signed an
employment agreement with Equity to serve as the senior
vice-president for Equity's escrow operations. It also
contained nonsolicitation and noncompete provisions.
2003 and February 2009, FA Company acquired all of
Equity's stock: a 50% share between 2003 and 2005; a 45%
share in October 2008; and the remaining 5% in February 2009.
The October 2008 purchase was effected through a Stock
Purchase Agreement (SPA). After the final February 2009
purchase, Equity became a wholly owned subsidiary of FA
November 2012, Equity and FA LLC filed a merger plan with
Utah regulators. Merger documents stated that Equity and FA
LLC would "merge into a single entity"- which would
be FA LLC, a subsidiary of First American Financial
Corporation. Aplt. App., Vol. III at 754.
FA Company acquired all the stock of Equity, employees at the
title-company office were required to review various
documents, including the First American Employee Handbook
(the Employee Handbook) and the Code of Ethics and Conduct
(the Code of Ethics). The Employee Handbook required that
employees use office equipment only for company business and
limited personal matters; it also barred outside business
activity competing with First American. The Handbook referred
to the Code of Ethics, which contained similar restrictions
on the use of company equipment and outside employment.
Office records indicate that Smith, Carrell, and Williams
reviewed the Employee Handbook and the Code of Ethics.
efforts to create Northwest began in late 2014. On March 9,
2015, Northwest opened for business and Smith quit his FA LLC
job. The following day, Carrell resigned and started at
Northwest. Within two weeks, at least 25 other employees
defected as well.
Company and FA LLC (referred to individually and jointly
throughout the litigation simply as First American) promptly
sued Northwest, Smith, Carrell, and Williams, alleging, among
other things, (1) breach of contract against Smith, Carrell,
and Williams (based on their Equity employment agreements,
the Employee Handbook, and the Code of Ethics); (2) tortious
interference with contract against Northwest, Smith,
Williams, and Carrell; (3) breach of fiduciary duty against
Smith; (4) tortious interference with economic relations
against Northwest; and (5) civil conspiracy against all the
trial Plaintiffs agreed to dismiss some claims and the court
granted summary judgment against Plaintiffs on the
tortious-interference claims against Carrell and Williams.
Plaintiffs also enjoyed some victories. The district court
granted them partial summary judgment, holding that (1) the
Equity employment contracts had legally transferred to First
American; (2) Williams and Carrell-but not Smith-had breached
their employment contracts' noncompete provisions; and
(3) Smith and Williams had breached their employment
contracts' nonsolicitation provisions. The court
clarified, however, that it had not "resolve[d] all
issues related to validity of the contracts, such as
reasonableness of scope and duration; First American's
performance; or whether First American suffered
damages." First Am. Title Ins. Co. v. Nw. Title Ins.
Agency, LLC, No. 2:15-cv-00229-DN, 2016 WL 6091540, at
*15 (D. Utah Oct. 18, 2016) (First American I).
Later it rejected several potential defenses against the
enforceability of the Equity employment agreements, the
Employee Handbook, and the Code of Ethics, such as
unconscionability and alleged material breach by Plaintiffs.
See First Am. Title Ins. Co. v. Nw. Title Ins. Agency,
LLC, No. 2:15-cv-00229-DN, 2016 WL 6902473, at *3 (D.
Utah Nov. 23, 2016) (First American II).
first phase of the trial, which addressed liability and
compensatory damages, the jury found Smith, Williams, and
Carrell liable for breach of contract, Smith liable for
breach of fiduciary duty, and Smith and Northwest liable for
tortious interference with contract; but it found Northwest
not liable for tortious interference with business relations
and Defendants not liable for civil conspiracy. It awarded
Plaintiffs $1.625 million from Smith; $50, 000 each from
Carrell and Williams; and $1 million from Northwest. After
the second phase of the trial, which addressed punitive
damages, the jury awarded Plaintiffs an additional $500, 000
from Northwest. The court later awarded Plaintiffs attorney
fees of almost $2.9 million.
argue that Plaintiffs failed to establish constitutional
standing to bring their claims. Although we doubt that
Defendants preserved this issue in the district court,
constitutional standing is a jurisdictional matter that must
be addressed even if raised for the first time on appeal.
See New England Health Care Emps. Pension Fund v.
Woodruff, 512 F.3d 1283, 1288 (10th Cir. 2008).
assert that the district court "erred by disregarding
the [Plaintiffs'] burden to each prove their separate and
distinct standing to sue for each cause of action."
Aplt. Br. at 34. Regarding the breach-of-contract claims,
they complain that Plaintiffs "proceeded jointly on the
breach of contract claims in the common name of their parent
company 'First American,' without even attempting to
prove which entity, if any, had the right to enforce the
Equity Agreements" and, similarly, that Plaintiffs
"did not attempt to prove which entity, if any, was a
party to the First American Employee Handbook and Code of
Ethics." Id. at 36-37. They then add that
Plaintiffs "also improperly proceeded jointly as
'First American' on their tortious interference and
breach of fiduciary duty claims." Id. at 38
(footnotes omitted). Defendants' arguments are misguided.
III of the Constitution limits federal-court jurisdiction to
'Cases' and 'Controversies.' Those two words
confine the business of federal courts to questions presented
in an adversary context and in a form historically viewed as
capable of resolution through the judicial process."
Massachusetts v. EPA, 549 U.S. 497, 516 (2007)
(internal quotation marks omitted). "At bottom, the gist
of the question of standing is whether petitioners have such
a personal stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens the
presentation of issues upon which the court so largely
depends for illumination." Id. at 517 (internal
quotation marks omitted). Consequently, the elements of
constitutional, Article III standing are "(1) injury in
fact that is (2) traceable to the defendant and (3)
redressable by the court." Jackson v. Volvo Trucks
N. Am., Inc., 462 F.3d 1234, 1241 (10th Cir. 2006). As
we have noted:
The purpose of the standing inquiry is not to determine
whether a party has proven its case but to gauge
whether it should be granted access to the federal courts.
The focus of the injury element is on ensuring a legitimate
dispute between the parties. A plaintiff who is personally
harmed has a stake in the litigation and is not a mere
intermeddler. For this reason, the issue generally arises in
the constitutional or public law context and is rarely
implicated in private civil disputes.
Id. at 1241-42 (citations omitted).
three elements of constitutional standing are clearly
satisfied for the Utah title company that lost key employees
and clients to Northwest. There was evidence, which the jury
believed, that its business was injured, the injury was
caused by Defendants, and damages would provide redress for
the injury. We have before us a proper Case or Controversy.
There may be some question as to what entity-FA Company, FA
LLC, or both-speaks for that Utah title company (although the
portion of the record before us shows that the business was
part of FA LLC). But that raises the question of who is (are)
the real party (parties) in interest, which is not a
jurisdictional issue. See Norris v. Causey, 869 F.3d
360, 366-67 (5th Cir. 2017) (The defendants' argument
that the plaintiffs' claim belonged to the bankruptcy
trustee was a real-party-in-interest issue, not a matter of
constitutional standing, because they certainly had standing:
"The [plaintiffs'] injury is clear: They lost
thousands of dollars. They argue that [the defendants']
diversion of funds caused that injury. And this litigation
can redress the loss through damages, as the judgment
demonstrates."); Cranpark, Inc. v. Rogers Grp.,
Inc., 821 F.3d 723, 730 (6th Cir. 2016) ("one who
sells his interest in a cause of action is not deprived of
Article III standing, but he is susceptible to a
real-party-in-interest challenge"); Whelan v.
Abell, 953 F.2d 663, 671-72 (D.C. Cir. 1992); see
generally 6A Charles Alan Wright et al., Federal
Practice & Procedure § 1542, at 468, 471-75 (3d ed.
2010) (distinguishing real party in interest and standing);
13A Charles Alan Wright et al., Federal Practice &
Procedure § 3531, at 1, 23 (3d ed. 2008) (suggesting
that concept of real party in interest is a better fit than
standing in context of private disputes).
extent that Defendants are raising a real-party-in-interest
issue, they have waived that issue-in two ways. First, by
including only a small fraction of the trial transcript in
its appendix on appeal, they have precluded this court from
examining the factual basis for the real-party-in-interest
status of either plaintiff. Second, the parties saw fit to
treat both FA LLC and FA Company as one entity, at least for
trial purposes, and so stipulated. The district court's
preliminary (that is, before opening statements) Instruction
No. 8, which is not challenged on appeal, states as follows:
The plaintiffs and the defendants have stipulated-that is
they have agreed-to certain facts. You must therefore treat
those facts as conclusively proven. I will now read the
* * *
Over time [FA Company] acquired ownership in Equity, and in
2012, [FA LLC] merged with Equity. [FA Company] and [FA
LLC] are referred to as ...