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Raass Brothers Inc. v. Summer Raass

Court of Appeals of Utah

November 15, 2019

Raass Brothers Inc., Appellant,
Summer Raass and J&M Rentals LLC, Appellees.

          Fourth District Court, Provo Department The Honorable Kraig Powell No. 170401107

          Brinton M. Wilkins, Attorney for Appellant

          Elaina M. Maragakis and Aaron C. Hinton, Attorneys for Appellees

          Judge Ryan M. Harris authored this Opinion, in which Judges Gregory K. Orme and Kate Appleby concurred.


          HARRIS, JUDGE.

         ¶1 After months of frustrating and futile attempts to obtain complete responses to discovery requests, Summer Raass and J&M Rentals LLC (often collectively referred to herein as Summer[1]) filed a motion asking the district court to sanction Raass Brothers Inc. (RBI). The district court held a three-day evidentiary hearing on Summer's motion, followed by a full day of oral argument, and concluded that RBI had acted inappropriately, and that, as a sanction, it should pay Summer the attorney fees she incurred in bringing the sanctions motion and participating in the evidentiary hearing. Shortly thereafter, following additional litigation over the appropriate amount, the district court determined that Summer had reasonably incurred $235, 286.73 in attorney fees and costs related to the motion and hearing. RBI appeals, asserting that the district court abused its discretion by concluding that RBI's behavior warranted sanction and in its calculation of "reasonable" attorney fees. We affirm.


         ¶2 RBI is a construction business that, prior to late 2015, was jointly owned and operated by Summer's then-husband Stan Raass and his brother John. In August 2015, Summer filed for divorce. Shortly thereafter, Stan confessed to John that he and Summer had been embezzling RBI's corporate funds for personal use. Following Stan's confession, John and RBI entered into an agreement with Stan whereunder Stan agreed, among other things, to surrender his ownership interest in the company, and RBI agreed not to sue Stan. However, the agreement did not preclude further action against Summer, and in October 2015 RBI sued Summer, stating claims for theft and conversion and alleging that Summer "misappropriated funds from RBI for her personal use."

         ¶3 After responding to RBI's complaint, Summer served RBI with multiple written discovery requests, and sent separate subpoenas to Stan and RBI's office manager (Manager). Among other things, Summer asked RBI to "[p]roduce all documents in [RBI's] possession, custody, or control" showing the following: "gross receipts" (Request 3); "financial statements, balance sheets, income statements, tax filings, and loan applications" (Request 8); "documents . . . showing compensation, draws, distributions, expenditures or bonuses made to . . . any of the officers, directors or shareholders of RBI" (Request 9); and contracts "to provide labor or services" to "any federal, state, or local government" (Request 10).

         ¶4 Following these requests, Summer became aware that RBI was required to submit certain forms (SBA Forms) to the federal Small Business Association each year, the content of which was at least partially responsive to Requests 3, 8, and 9. In addition, Summer was dissatisfied with RBI's production of its job files related to TKL Construction (TKL Job Files), which files Summer believed contained information responsive to Requests 3 and 10. In an attempt to obtain RBI's SBA Forms as well as complete TKL Job Files, Summer engaged in substantial meet-and-confer efforts with RBI, including five separate communications (two face-to-face and three written). Even after meeting and conferring, however, Summer's concerns were not assuaged.

         ¶5 Summer then submitted two statements of discovery issues (SDIs) to the district court, seeking an order compelling RBI to produce copies of all of its SBA Forms and all of the TKL Job Files. The district court made a ruling favorable to Summer on her SDIs, entering a written order to that effect on March 1, 2017 (March 1 Order). The March 1 Order provided that, within thirty days, RBI must "fully comply with Requests 3, 8, and 9" of Summer's requests for production of documents, "including by producing copies of all [SBA Forms] . . . in [its] possession, custody or control, regardless of the current location or the form or medium in which they are stored." In addition, the court ordered that RBI must "fully comply with Requests 3 and 10," "including by producing complete copies of all TKL job files in its possession, custody or control."

         ¶6 A few weeks later, RBI certified that it had complied with the March 1 Order. Summer disagreed with that characterization, however, and filed a motion for sanctions, pursuant to rule 37(b) of the Utah Rules of Civil Procedure, alleging that RBI had failed to comply with the March 1 Order. Summer also asked the court to schedule an evidentiary hearing on the issue, and the court granted that request.

         ¶7 Although the hearing was originally scheduled for just one day, the parties were unable to fully present their evidence in that time span, and the court ended up taking three full days to hear from the parties' witnesses. After the hearing, the court asked the parties to provide supplemental briefing, and after considering that briefing, the court entertained a full day of oral argument on the motion for sanctions.

         ¶8 About a week after oral argument, the district court issued an eleven-page written ruling (Sanctions Order) granting Summer's motion. Among other findings, the court determined that RBI "failed to provide" to Summer documents that it had been ordered to produce, including "all [TKL] job files," "profit allocation information," "budget variance sheets," and SBA Forms. It also concluded that the SBA Forms "filed by RBI and currently kept by the Small Business Administration are within the custody or control of RBI and must be procured and produced by RBI." In addition, the court found that RBI was "at fault for failing to properly comply with [its] discovery obligations," and that it had "engaged in persistent dilatory tactics." While the court declined Summer's invitation to impose more severe sanctions (for instance, dismissing RBI's lawsuit), it held RBI, Stan, and Manager in contempt of court, and ordered them to produce a number of specific documents, including all TKL Job Files and SBA Forms, within sixty days. In addition, it ordered RBI "to pay all costs and attorney fees incurred by [Summer] in prosecuting" the motion for sanctions, "obtaining the discovery items referenced" in the Sanctions Order, and "securing full compliance with this order."

         ¶9 Soon after the court issued its ruling, Summer filed affidavits regarding attorney fees and costs, requesting that the court order RBI to pay Summer a total of $343, 590.12. RBI objected, asserting that the amount of fees requested was unreasonable. In particular, RBI argued that Summer should not be able to recover any fees incurred prior to March 17, 2017, the first date on which work relating to the motion for sanctions began. Moreover, it argued that Summer's attorneys often had two attorneys perform work that could have been handled by just one, and asserted that certain billing entries included in the request were unrelated to the motion for sanctions or were unduly vague. After reviewing Summer's fee ...

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