M.J. v. Wisan , 2016 Utah LEXIS 34 ( 2016 )

This opinion is subject to revision before final
publication in the Pacific Reporter
2016 UT 13
IN THE
SUPREME COURT OF THE STATE OF UTAH
M.J.,
Petitioner,
v.
BRUCE R. WISAN, Court-Appointed Special Fiduciary of the United
Effort Plan Trust,
Respondent.
No. 20140189
Filed March 23, 2016
On Appeal of Interlocutory Order
Third District, Salt Lake
The Honorable Keith A. Kelly
No. 070916254
Attorneys:
Jeffery L. Shields, Michael D. Stanger, Salt Lake City, for petitioner
Alan W. Mortensen, Lance L. Milne, Michael A. Worel, Paul M.
Simmons, Salt Lake City, for respondent
ASSOCIATE CHIEF JUSTICE LEE authored the opinion of the Court, in
which CHIEF JUSTICE DURRANT, JUSTICE DURHAM, and JUSTICE
HIMONAS joined.
JUSTICE JOHN A. PEARCE became a member of the Court on
December 17, 2015, after oral argument in this matter, and
accordingly did not participate.
ASSOCIATE CHIEF JUSTICE LEE, opinion of the Court:
¶1 In this case we consider an interlocutory appeal from the
denial of a defense motion for summary judgment. The claims at
issue were asserted by M.J., an individual who allegedly was
required to enter into an underage marriage with Allen Steed at the
direction of Warren Jeffs. At the time, Jeffs was acting as the head of
M.J. v. WISAN
Opinion of the Court
the Fundamentalist Church of Jesus Christ of Latter-Day Saints and
trustee of the United Effort Plan Trust (―UEP Trust‖ or the ―Trust‖).
M.J. filed suit against Jeffs and against Bruce R. Wisan in his capacity
as Special Fiduciary of the Trust, asserting tort claims and grounds
for both direct and vicarious liability.
¶2 The Trust moved for summary judgment on several grounds.
The district court denied the Trust‘s motions. We agreed to review
that decision on interlocutory appeal because the Trust‘s motions
raised a number of important legal questions on matters of first
impression—as to the effect of our decision in Snow, Christensen &
Martineau v. Lindberg, 2013 UT 15, 299 P.3d 1058; the impact of M.J.‘s
release of claims against Allen Steed; and the viability of her claims
for vicarious liability under the doctrines of respondeat superior and
―reverse‖ veil-piercing. We affirm in large part. We uphold the
district court‘s decisions on all issues except its determination that
the Trust is subject to liability on reverse veil-piercing grounds.
I
¶3 In 1942, the leaders of a fundamentalist religious movement
called the ―Priesthood Work‖ formed the UEP Trust.1 Fundamentalist
Church of Jesus Christ of Latter-Day Saints v. Lindberg, 2010 UT 51, ¶ 2,
238 P.3d 1054. The Trust‘s stated purpose was ―charitable and
philanthropic.‖ Id. But membership in the Trust was conditioned
upon ―consecration‖ of real and certain other property to the Trust.
Id. ―For this fundamentalist group—predecessor to the
Fundamentalist Church of Jesus Christ of Latter-Day Saints (the
‗FLDS Church‘ or ‗Church‘)—consecration was an act of faith
whereby members deeded their property to the UEP Trust to be
managed by Church leaders.‖ Id. ―Church leaders, who were also
trustees, then used this property to minister to the needs of the
members.‖ Id.
¶4 ―In 1986, some Trust property residents sued the UEP trustees
for breach of fiduciary duty.‖ Id. ¶ 3. In proceedings leading to a
decision of this court, we held that the Trust was subject to suit on
fiduciary duty claims by Trust beneficiaries because it was a private,
and not a charitable, trust. See Jeffs v. Stubbs, 970 P.2d 1234, 1252
(Utah 1998). The basis for that decision was the determination that
1 In light of the summary judgment posture of this case, the facts
here are presented in the light most favorable to M.J. See Johnson v.
Hermes Assocs., Ltd., 2005 UT 82, ¶ 12, 128 P.3d 1151.
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the UEP Trust was intended from its inception to benefit specified
individuals—the Trust‘s founders. Id.
¶5 In response to that decision, Rulon Jeffs, the then-president of
the FLDS Church and sole surviving founder of the 1942 Trust,
executed an ―Amended and Restated Declaration of Trust of the
United Effort Plan.‖ Fundamentalist Church, 2010 UT 51, ¶ 4. This
1999 restatement established a charitable trust. Id. It also provided
that ―in the event of termination of this Trust, whether by the Board
of Trustees or by reason of law, the assets of the Trust Estate at that
time shall become the property of the Corporation of the President of
the [FLDS Church].‖ Id.
¶6 From 1998 to 2006 the Trust was operated for the express
purpose of furthering the doctrines of the FLDS Church, including
the practice of plural marriage involving underage girls. Throughout
this period there was no clear delineation between the FLDS Church
and the Trust. Funds were comingled between the two entities, and
the President of the FLDS Church had ―extraordinary powers‖ in
administering the Trust, including the power to appoint or remove
trustees at will.
¶7 In 2004 the Trust was subjected to suit in two separate tort
actions, one involving allegations of child sex abuse and the other
asserting a fraud claim. Id. ¶ 5. At some point during the course of
this litigation the Trust terminated its counsel. Id. And when the
Trust declined to appoint substitute counsel, and trustees failed to
otherwise appear, the court appointed a special fiduciary to
represent the interests of the Trust until new trustees could be
appointed. Id. ¶ 6. Eventually, ―[t]he district court asked the special
fiduciary to prepare a memorandum identifying issues the court
needed to address before appointing new trustees.‖ Id. ¶ 7. And ―the
special fiduciary expressed concern in a memorandum filed with the
district court that the Trust needed to be reformed if new trustees
were to be appointed.‖ Id.
¶8 In response, ―the district court entered an order that
concluded that the Trust could be reformed so that the special
fiduciary could administer the Trust to meet the ‗just wants and
needs‘ of the beneficiaries according to neutral, nonreligious
principles.‖ Id. ¶ 8. Through further litigation—and without any
participation by the FLDS Church or its leaders or trustees of the
Trust, all of whom sat silent on the sidelines—the district court
ultimately reformed the Trust under the doctrine of cy pres. Id.
¶9 In reforming the Trust the district court sought to preserve the
Trust‘s ―charitable intent‖ of protecting the interests of Trust
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beneficiaries. Yet it also concluded that ―it could reform the Trust by
excising the purpose of advancing the religious doctrines and goals
of the FLDS Church to the degree that any of these were illegal,‖
including ―polygamy, bigamy, [and] sexual activity between adults
and minors.‖ Id. ¶ 12 (alteration in original). Thus, the reformation of
the Trust effectively ―strip[ped] the FLDS Church president of
several powers under the Trust‖ and ―remove[d] any requirement
that the president of the FLDS Church approve any Board action‖ on
behalf of the Trust. Id. ¶ 15.
¶10 The district court has since retained jurisdiction over the
administration of the reformed Trust. As Special Fiduciary, Wisan
has instituted a process allowing Trust beneficiaries to petition the
Trust for benefits.
¶11 Further litigation has continued, however. Years after the
Trust modification was complete, a group of FLDS Church members
filed a petition for extraordinary writ challenging the reformation on
constitutional and other grounds. We rejected that petition on
equitable laches grounds in our decision in Fundamentalist Church,
2010 UT 51. In so doing, we noted that Church leaders and members
had consciously determined to sit silent during the course of
reformation proceedings in the district court, and that numerous
claimants had relied on the finality of the court‘s reformation. Id.
¶¶ 33–34. For those reasons we denied the Church members‘ petition
without reaching its merits.
¶12 In 2013, we also resolved a further dispute involving the
Trust. In Snow, Christensen & Martineau v. Lindberg, 2013 UT 15, ¶ 56,
299 P.3d 1058, we considered district court orders disqualifying the
Trust‘s former counsel from representing an adverse party in
subsequent litigation and requiring former counsel to provide
privileged material to the Trust and to its then current counsel. In
reversing those orders, a majority of this court concluded that the
Trust was effectively a new entity—in the position of an asset
purchaser—for purposes of the issues presented in the case. Id. ¶ 48.
¶13 That brings us to this case. It was filed by M.J., a former
member of the FLDS Church and beneficiary of the UEP Trust. M.J.
alleges that in 2001, when she was fourteen years old, she was forced
to marry Allen Steed, her first cousin. The wedding was performed
by Warren Jeffs, who at the time was acting president of both the
FLDS Church and the Board of Trustees of the Trust.2 M.J. and Steed
2 At the time of M.J‘s marriage, Rulon Jeffs, the father of Warren
Jeffs, was the President of the FLDS Church. Yet Rulon Jeffs had
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resided on UEP Trust property provided by another one of the
trustees. M.J. claims that Steed repeatedly sexually assaulted and
raped her while she resided on this property. She requested a
divorce from Steed on multiple occasions, but Jeffs refused to allow
it. He also refused to let M.J. live on Trust property separately from
her husband. M.J. also alleges that none of the other trustees objected
or acted to stop the marriage.
¶14 M.J. filed this suit in 2007. She has asserted a variety of tort
claims against both Warren Jeffs and the UEP Trust3 and advances
claims for both vicarious and direct liability against the Trust. She
seeks to hold Jeffs responsible, and the trust vicariously liable, for
intentional infliction of emotional distress, outrage, and negligence.
She also asserts claims against the UEP Trust for negligence, as well
as negligent hiring, appointment, retention, and supervision.
¶15 M.J. advances two theories of vicarious liability. She first
claims that Jeffs and other trustees were acting ―in furtherance of the
trust administration and within the scope of their authority,‖ and
thus contends that the Trust should be liable under the doctrine of
respondeat superior. Second, she asserts that the UEP Trust was Jeffs‘s
―alter ego.‖ And on that basis she asserts a right to ―reverse veil-
piercing‖—an equitable remedy that would treat Trust assets as if
they were Jeffs‘s personal assets.
¶16 M.J. has not asserted any claims against Steed. But her
complaint alleges that he was acting ―at the direction and under the
control of Warren Jeffs and other UEP Trust trustees‖ as
ecclesiastical leaders. Third Amended Complaint at 8. In response,
the Trust asserts a cross-claim for indemnity. It has also filed a third-
diminished capacity at the time of the marriage as a result of a
stroke, and had delegated much of his authority to his son. Warren
Jeffs took over as both President of the FLDS Church and President
of the Board of Trustees of the Trust upon his father‘s death in 2002.
3 In addition to these claims, M.J. initially asserted a claim of
conspiracy to commit battery and sexual abuse of a child against
both Jeffs and the Trust. The conspiracy claim was dismissed,
however, because the court concluded that a conspiracy was not
possible between a trustee and the trust that he administers. M.J. also
asserted a breach of fiduciary duty claim against Warren Jeffs, but
that claim appears to have been dropped. Neither of these claims is
before us on this appeal.
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party complaint against Steed and a notice of intent to allocate fault
to Steed and others.
¶17 Steed responded by asserting claims against M.J. for
invasion of privacy, libel, and slander. Those claims prompted a
settlement between M.J. and Steed. In the parties‘ settlement
agreement, M.J. and Steed agreed to a mutual release of all claims
―that exist or may exist‖ between them. But the agreement made no
express reference to—or preservation of—any claims against other
persons or entities.
¶18 The Trust filed a series of motions for summary judgment.
All of those motions were denied. The Trust then filed a petition for
review on interlocutory appeal, which we granted. Our review of the
district court‘s summary judgment decisions is de novo. See Bahr v.
Imus, 2011 UT 19, ¶ 15, 250 P.3d 56.
II
¶19 The Trust has advanced four principal grounds for
summary judgment in its favor: (a) our decision in Snow, Christensen
& Martineau v. Lindberg, 2013 UT 15, 299 P.3d 1058, which the Trust
views as establishing that the reformed Trust is a new entity, and
thus not liable for the tortious acts of its predecessor; (b) the release
entered into between M.J. and Steed, which the Trust interprets as
foreclosing any claims against the Trust; (c) the elements of the
doctrine of respondeat superior, which the Trust contends are not
satisfied; and (d) the doctrine of ―reverse‖ veil-piercing, which the
Trust urges us to reject, at least as applied to the circumstances of
this case.
¶20 We affirm the denial of summary judgment in large part.
We reject each of the Trust‘s proposed grounds for summary
judgment except the last one. On that issue we generally endorse the
doctrine of reverse veil-piercing, but conclude that its elements
cannot be satisfied in this case.
A. The Effect of Our Decision in Snow, Christensen
¶21 The Trust‘s first proposed ground for summary judgment is
our decision in Snow, Christensen & Martineau v. Lindberg, 2013 UT 15,
299 P.3d 1058. In that case the Trust moved to disqualify the law firm
of Snow, Christensen & Martineau (SC&M) from representing an
association of FLDS Church members in litigation against the Trust.
Id. ¶ 15. In advancing that motion, the Trust asserted that SC&M had
represented the Trust‘s predecessor—prior to its reformation—in
earlier litigation. Id. And it sought to disqualify the firm under rule
1.9 of the Utah Rules of Professional Conduct. Id.
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¶22 The Trust also served subpoenas on SC&M seeking
documents related to the firm‘s prior representation of the UEP
Trust. Id. ¶ 14. SC&M refused to comply, asserting that the
documents were protected by the attorney-client privilege. Id.
¶23 The district court agreed with the Trust. It entered an order
disqualifying the firm from representing the association of church
members against the Trust. Id. ¶ 16. And it also rejected SC&M‘s
right to claim the attorney-client privilege. Id. ¶ 14. The basis for
both decisions was essentially the same—that the unreformed UEP
Trust was effectively the same entity as the reformed Trust. On that
basis the court held that SC&M was barred from representing clients
in related litigation against a former client under rule 1.9. Id. ¶¶ 15-
16. And it also concluded that the privilege as to documents in
SC&M‘s hands belonged to the Trust, and thus that the firm had an
obligation to turn over privileged documents to the Trust upon
request. Id.
¶24 This court reversed on both counts. The majority concluded
that the secular reformation of the Trust ―so changed its purpose and
identity that it is a different entity‖ for purposes of rule 1.9 and the
attorney-client privilege. Id. ¶ 43. Specifically, the majority noted that
the reformed Trust had a different beneficiary class from that of its
predecessor—and in fact that the reformed Trust had been accused
of being overtly hostile to the interests of the FLDS Church. Id.
¶¶ 46–47. And on that basis the majority declined to deem the
reformed trust ―a continuation for purposes of the attorney-client
privilege.‖ Id. ¶ 48. Instead it treated the two entities as if the
reformed trust had merely purchased the assets of the pre-
reformation trust. Id.
¶25 The Trust seeks to extend the majority‘s analysis in Snow,
Christensen to cut off M.J.‘s claims against it. And the Trust has a
point under the logic of the majority‘s analysis. If the reformed Trust
is in the position of an asset purchaser, it would not be liable for the
actions of its predecessor.4
4 See Tabor v. Metal Ware Corp., 2007 UT 71, ¶¶ 7, 11, 168 P.3d 814
(explaining the general rule of successor nonliability modeled on the
Restatement (Third) of Torts section 12 and refusing to adopt
additional exceptions adopted in other jurisdictions).
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¶26 Yet the question presented is not a pure matter of logic. It is
a question of law—of the interpretation of our decision in Snow,
Christensen. For reasons set forth below, we decline to extend that
decision to its logical end.
¶27 The majority position in Snow, Christensen was rooted in
unstable ground. Its asset transfer analogy was persuasively
questioned by a two-justice dissent. Id. ¶ 64 (Durrant, J., dissenting,
joined by Nehring, J.) (asserting that the majority‘s ―asset-purchase
metaphor does not account for the legal and practical ramifications
arising from the fact that . . . the trust was modified, not
terminated‖). And the majority itself was unwilling to extend its
position to its logical conclusion; it expressly limited its decision by
stating that it did not ―implicate[] the rights of the Reformed Trust‘s
beneficiaries‖ or affect the ―validity‖ of the reformation. Id. ¶ 24 n.3.
¶28 That limitation is appropriate—and necessary to protect the
settled interests of the claimants to the Trust‘s assets. The Trust‘s
reformation has been upheld by this court. See Fundamentalist Church
of Jesus Christ of Latter-Day Saints v. Lindberg, 2010 UT 51, ¶ 35, 238
P.3d 1054. In the Fundamentalist Church case we held that any
challenge to the reformation by the FLDS Church was barred under
the doctrine of laches. Id. ¶ 26. Our laches analysis, moreover, was
based in large part on protecting the interests of those who relied on
the reformation at a time when the FLDS Church openly declined to
participate in litigation leading to the reformation. Id. ¶¶ 31–35.
Since that time numerous claimants have asserted claims against the
reformed Trust for activity or conduct predating the reformation.
And the Trust itself has settled such claims in parallel reliance on our
decision.
¶29 We see no basis—save the logic of the Snow, Christensen
majority—for now cutting off the Trust‘s liability for acts that
predated the reformation. M.J. is in a particularly strong position in
terms of her reliance interest in pursuing claims against the Trust.
She first filed her claim in this case before our decision in Snow,
Christensen. And she should be entitled to pursue her claim despite
the breadth of the language employed in that opinion. We so hold,
limiting the Snow, Christensen opinion to its facts and declining to
extend it any further.5
5 Neither party has asked us to overrule our opinion in Snow,
Christensen. And we stop short of so doing in the absence of any such
request. But we do repudiate the analysis in the court‘s opinion in
that case. And we limit Snow, Christensen to its facts—to SC&M‘s
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B. The Effect of the Steed Release
¶30 The second proposed basis for summary judgment for the
Trust is the written release that M.J. entered into with Allen Steed.
The Trust notes that that release did not expressly reserve a claim
against the Trust. And in the Trust‘s view, the failure to reserve such
a claim effectively forecloses it as a matter of law.
¶31 The Utah Code includes two separate provisions addressed
to the effect of a written release of liability on claims against other
parties. The first is the Joint Obligations Act (JOA), Utah Code
sections 15-4-1 to -7. That statute provides that an ―obligee‘s release
or discharge of one or more of several obligors, or of one or more of
joint or of joint and several obligors, does not discharge co-obligors
against whom the obligee in writing and as part of the same
transaction as the release or discharge expressly reserves his rights.‖
UTAH CODE § 15-4-4. This preserves the traditional common law rule.
As described in our cases, it provides that unnamed joint obligors
are released ―from liability by the release of other joint obligors
unless there is an express reservation in writing‖ of the injured
party‘s claim. Peterson v. Coca-Cola USA, 2002 UT 42, ¶ 10, 48 P.3d
941.
representation of members of the trust, and the Trust‘s request for
privileged document at that time and in the context of that case.
In so doing, we reserve for another day the question whether
the Trust may be entitled to privileged material of potential
relevance to M.J.‘s claims against it. The Trust raised this concern in
its briefing and argument in this case. It questioned the wisdom and
propriety of a legal regime under which the Trust stands in its
predecessor‘s shoes for liability purposes but is deemed a different
entity for purposes of the attorney-client privilege. We see the
Trust‘s point. It would seem an unfair whipsaw to subject the Trust
to liability for its predecessor‘s torts without also arming the Trust
with material necessary to its defense. So if there is privileged
material in possession of the Trust‘s former counsel of relevance to
this litigation, the Trust may well be entitled to it—notwithstanding
our decision in Snow, Christensen.
We leave that question for future litigation, however. If and
when the Trust seeks privileged material in the hands of its former
counsel of relevance to this litigation, the courts may then consider
the question whether to grant the Trust access to it.
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¶32 Yet that general rule has been overridden to a large degree
by the terms of the Liability Reform Act (LRA), Utah Code sections
78B-5-817 to -823. That statute provides that a ―release given by a
person seeking recovery to one or more defendants does not
discharge any other defendant unless the release so provides.‖ UTAH
CODE § 78B-5-822. Our cases have read that provision as prescribing
a rule under which a release of one party does not release another
unless the other party is identified in the release. Peterson, 2002 UT
42, ¶ 10. So the LRA reverses the presumption of the JOA. Under the
JOA the default is that a release of one party extends to others (with
an exception where the claim is expressly reserved), while under the
LRA the default is that a release of one party does not extend to
others (with an exception for parties mentioned or identified in the
release).6
¶33 We have described the LRA as effecting a pro tanto repeal of
the terms of the JOA. Id. ¶ 11. Yet the repeal is incomplete. The JOA
still stands in effect to a limited degree. Its presumption applies in
the limited circumstance of ―vicariously liable parties.‖ Id. Such
parties are not covered by the LRA because its terms are limited to
―[d]efendant[s],‖ defined as those ―claimed to be liable because of
fault to any person seeking recovery.‖ UTAH CODE § 78B-5-817(1).
And because ―[f]ault,‖ in turn, is defined as an ―actionable breach of
legal duty‖ or ―act‖ or ―omission proximately causing or
contributing to injury or damages sustained by a person seeking
recovery,‖ id. § 78B-5-817(2), we have deemed the terms of the LRA
not to extend to liability based purely on principles of vicarious
liability. See Nelson ex rel. Hirschfeld v. Corp. of the Presiding Bishop of
the Church of Jesus Christ of Latter-day Saints, 935 P.2d 512, 514 n.3
(Utah 1997); Peterson, 2002 UT 42, ¶ 11.
¶34 The Trust invokes the above in support of its motion to
dismiss M.J.‘s claims. It notes that M.J.‘s release of claims against
Steed failed to reserve any claims against the Trust. And because
M.J.‘s claims against the Trust implicate its liability for actions
involving others (Jeffs and Steed), the Trust insists that its alleged
liability is vicarious—and thus that it is the JOA, and not the LRA,
that applies. Because the JOA requires a claim to be expressly
reserved in order for it to be preserved, moreover, the Trust asserts
6 See Child v. Newsom, 892 P.2d 9, 12 (Utah 1995) (explaining that
under the LRA ―a release must contain language either naming the
defendant or identifying the defendant with some degree of
specificity in order to discharge that defendant from liability‖).
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that M.J.‘s claims are foreclosed by the JOA given the lack of any
such reservation in the release executed by M.J. and Steed.
¶35 We see the matter differently. The standard for invoking the
JOA is more limited than that advanced by the Trust. Not every
claim for liability that involves another tortfeasor is exempt from the
LRA. Instead, the JOA applies only where the basis for a party‘s
liability attaches regardless of any showing of fault. Conversely, the
LRA applies when liability is based on fault—even if that fault is
connected to or arises out of the conduct of another individual.
¶36 A respondeat superior claim escapes the coverage of the LRA
because it does not depend on any showing of ―fault‖ by the party
subject to such liability. LRA fault is an ―actionable breach of legal
duty‖ or an ―act‖ or ―omission proximately causing or contributing
to injury or damages sustained by a person seeking recovery.‖ UTAH
CODE § 78B-5-817(2). And respondeat superior liability involves no act,
omission, or breach of a duty by the defendant. It involves only a
relationship (between a principal and an agent) and an act or breach
by a third party (of an agent within the scope of agency).7
¶37 The only fault that must be established to sustain respondeat
superior liability is the fault of the primary tortfeasor—the agent. The
principal‘s liability is not based on fault. This is pure pass-along
liability—liability of a principal for the acts of an agent.
¶38 A principal‘s pass-along liability is governed by the JOA,
not the LRA. So a principal‘s liability is effectively waived by a
release of claims against the agent (unless the claims against the
principal are expressly reserved). This makes sense because the
agent‘s acts are the only thread connecting the principal to the
plaintiff. Once that thread is severed (by a release), there is no longer
any basis for the principal‘s liability (unless it is expressly reserved).
¶39 That does not hold for claims based on ―fault‖ under the
LRA. For claims involving independent acts, omissions, or breaches
of duty, a waiver of claims against one defendant does not sever the
thread of liability back to the other. Products liability is a good
example. A retailer has an independent duty not to sell defective
products. Such a retailer is accordingly liable for harm caused by the
7 RESTATEMENT (THIRD) OF AGENCY § 2.04 cmt. b (AM. LAW INST.
2006) (noting that ―respondeat superior is a basis upon which the
legal consequences of one person‘s acts may be attributed to another
person‖).
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defective products that it sells even absent any negligence or breach
on the part of the manufacturer of such a product (or by the retailer
itself).8 And for that reason it makes sense to conclude that a release
of a claim against the manufacturer would not result in a waiver of a
claim against the retailer (unless the retailer is mentioned or
identified in the release). This is the LRA rule. UTAH CODE § 78B-5-
822.
¶40 The claims at issue in Nelson and Peterson fell clearly into the
JOA basket. Nelson involved a claim of liability for a church, under
the doctrine of respondeat superior, for the tortious conduct of a
church leader acting within the scope of his church responsibilities.
935 P.2d at 514. Peterson is similar. It also involved a claim of liability
under the doctrine of respondeat superior. The court found that the
JOA applied to a claim of liability of an employer for the tortious acts
of an employee within the scope of his employment. 2002 UT 42,
¶ 11.
¶41 M.J.‘s claims against the Trust, by contrast, appear to fall
into the LRA basket—at least to some extent. The basis for the
Trust‘s liability in this case is not just pass-along liability for the acts of
Steed (the subject of the release). Instead M.J. has asserted claims
against the Trust based on tortious activity or fault on the part of
Jeffs. Such claims stand independent of any fault assigned to Steed.
And to that extent a release of claims against Steed would not sever
the thread of liability extending to the Trust through Jeffs. So long as
there is a separate, independent thread of liability extending to the
Trust through Jeffs, the release of liability running through Steed
would not affect claims running through Jeffs.
¶42 This analysis suggests a nuance that may require further
refinement on remand. The Trust has maintained that the thread of
liability running from Steed to Jeffs is vicarious in nature. That may
be true to the extent that M.J. attempts to hold Jeffs liable for his
relationship with Steed rather than for independent wrongful
conduct. To the extent the Trust would be on the hook for Jeffs‘s
8 See RESTATEMENT (THIRD) OF TORTS: PROD. LIAB. § 1 cmt. a (AM.
LAW INST. 1998) (―Courts early began imposing liability without fault
on product sellers for harm caused by such defects, holding a seller
liable for harm caused by manufacturing defects even though all
possible care had been exercised by the seller in the preparation and
distribution of the product.‖).
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pass-along liability for the acts of Steed, the JOA would apply and
would extend M.J.‘s release of Steed‘s liability to the Trust itself.9
¶43 Not all of M.J.‘s claims against the Trust appear to fit this
paradigm, however. M.J. seems to be alleging negligence or fault on
Jeffs‘s part that is not based solely on his relationship with Steed.
Thus, Jeffs is described in M.J.‘s complaint as ―command[ing],
instruct[ing], and facilitat[ing]‖ Steed‘s illegal marriage and sexual
assaults against M.J. Third Amended Complaint at 7. And M.J.
asserts that Jeffs‘s exercise of ―supreme and inseparable‖
ecclesiastical authority threatened M.J. with ―loss of . . . home,
famil[y] and support,‖ id. at 9, an allegation that seems to identify a
basis for M.J.‘s claim for intentional infliction of emotional distress.
These allegations seem to fit the LRA paradigm. To the extent the
Trust‘s liability is not pass-along liability for the acts of Steed, but
liability with an independent thread of fault running through Jeffs,
the LRA would apply and M.J.‘s release of Steed would not result in
a waiver of claims as to the Trust.
¶44 We leave the application of these principles for further
litigation on remand. It will be up to the district court to decide in
the first instance, on further motions or at trial, whether and to what
extent M.J.‘s claims run independently through Jeffs (and are thus
preserved under the LRA) or run vicariously through Steed (and are
thus subject to waiver under the JOA).
C. The Doctrine of Respondeat Superior
¶45 A third proposed basis for summary judgment for the Trust
is a series of challenges to the imposition of vicarious liability under
the doctrine of respondeat superior. On grounds described in detail
below, the Trust contends that it should not be held vicariously
liable for the tortious conduct of Warren Jeffs. The Trust‘s arguments
implicate both common law and statutory principles of respondeat
superior.
9 This conclusion would not be obviated, as M.J. insists, by the
fact that M.J. has not asserted independent claims against Steed. The
JOA applies broadly to individuals ―severally bound for the same
performance.‖ UTAH CODE § 15-4-1(4). And if someone is vicariously
liable for the conduct of another, then that person is clearly
―severally bound for the same performance.‖ Thus, it is clear that
any vicarious claims against the trust based on its vicarious liability
for the actions of Steed would be waived, even if Steed was not an
agent of the trust and even if M.J. never brought these claims.
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¶46 At common law a trust had no vicarious liability for the acts
of a trustee. Trusts were not seen as separate entities capable of
entering into contracts or incurring liabilities. See Ace Inv’rs, LLC v.
Rubin, 494 F. App‘x 856, 859 (10th Cir. 2012). So persons injured by
the trustee—by his individual or representative acts—had only a
right of action against the trustee as an individual, and no claim
against the trust.
¶47 This common law regime has been altered by statute in
Utah. Under section 1010 of the Uniform Trust Code, a trust is liable
for the trustee‘s acts performed ―in the course of administering [the]
trust.‖ UTAH CODE § 75-7-1010(1). This standard is not defined by
statute or in our cases. And the caselaw in other jurisdictions that
have adopted the Uniform Trust Code is scant.10
¶48 Yet the terms of the statute, in context, are quite clear. In the
course of is the traditional formulation of the standard for vicarious
liability under the doctrine of respondeat superior. See Clark v. Pangan,
2000 UT 37, ¶ 21, 998 P.2d 268 (inquiring into whether tortious
conduct occurred ―during the course of‖ employment); Clover v.
Snowbird Ski Resort, 808 P.2d 1037, 1042 (Utah 1991) (noting that a
past case had rejected respondeat superior liability on the ground that
―the employee‘s actions were a substantial departure from the course
of employment‖). We accordingly interpret the Uniform Trust Act as
incorporating the established standard of respondeat superior liability.
See Maxfield v. Herbert, 2012 UT 44, ¶ 31, 284 P.3d 647 (noting that a
legal term that is transplanted into a statute ―brings the old soil with
it‖ (citation omitted)). Thus, under section 1010 of that act, a trust is
liable for the acts of a trustee when the trustee was acting within the
scope of his responsibility as a trustee.
¶49 That leaves the question whether the tortious conduct of
Jeffs can sustain the Trust‘s liability under the doctrine of respondeat
superior. The Trust advances two grounds for avoiding such liability:
(1) that intentional acts in furtherance of sexual misconduct are not
within the scope of a trustee‘s employment under the standard set
forth in Birkner v. Salt Lake County, 771 P.2d 1053, 1057 (Utah 1989);
10 The limited caselaw on this point focuses mostly on whether a
trustee may be reimbursed for his services as a fiduciary. See, e.g.,
Hastings v. PNC Bank, NA, 54 A.3d 714, 727 (Md. 2012) (noting that ―a
trustee is generally entitled to indemnity for expenses incurred
reasonably and properly in the course of administering a trust‖).
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and (2) that equitable considerations—such as concern for Trust
beneficiaries who in no way participated in or benefited from Jeffs‘s
acts—preclude application of the doctrine of respondeat superior in
this case. We reject both of these arguments for reasons explained
below.
1
¶50 Respondeat superior is a doctrine of the common law of
agency. The basic question presented under this doctrine is whether
to treat the torts of an agent as the acts of the principal. The
arguments in favor of extending such liability include fairness to
injured parties and deterrence of tortious activity.
¶51 First, respondeat superior ―reflects the likelihood that an
employer will be more likely to satisfy a judgment‖ than an
employee and is in a better position to ―insure against liability
encompassing the consequences of all employees‘ actions.‖
RESTATEMENT (THIRD) OF AGENCY § 2.04 cmt. b (AM. LAW INST. 2006).
Second, respondeat superior is also aimed at deterrence. It ―creates an
incentive for principals to choose employees and structure work
within the organization so as to reduce the incidence of tortious
conduct.‖ Id. ―This incentive may reduce the incidence of tortious
conduct more effectively than doctrines that impose liability solely
on an individual tortfeasor.‖ Id.
¶52 Yet fairness considerations also help mark the law‘s
limitations on such vicarious liability. When an agent‘s act occurs
within ―an independent course of conduct‖ not connected to the
principal, he is not acting within the scope of employment. Id.
§ 7.07(2) (also indicating that ―[a]n employee acts within the scope of
employment when performing work assigned by the employer or
engaging in a course of conduct subject to the employer‘s control‖).
And it would be unfair to subject the employer to liability for
tortious activity occurring within such an ―independent course of
conduct.‖
¶53 The difficult question for the law in this field has been to
define the line between a ―course of conduct subject to the
employer‘s control‖ and ―an independent course of conduct‖ not
connected to the principal. Id. An ―independent course of conduct‖
is a matter so removed from the agent‘s duties that the law, in
fairness, eliminates the principal‘s vicarious liability. Such a course
of conduct is one that ―represents a departure from, not an escalation
of, conduct involved in performing assigned work or other conduct
that an employer permits or controls.‖ Id. § 7.07 cmt. b.
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¶54 Our cases have identified three factors of relevance to this
inquiry: (1) whether the agent‘s conduct is ―of the general kind the
[agent] is employed to perform‖; (2) whether the agent is acting
―within the hours of the [agent‘s] work and the ordinary spatial
boundaries of the employment‖; and (3) whether the agent‘s acts
were ―motivated, at least in part, by the purpose of serving the
[principal‘s] interest.‖ Birkner, 771 P.2d at 1057. In the Birkner case we
held as a matter of law that a social worker‘s sexual interaction with
a client he met through a ―crisis line‖ maintained by Salt Lake
County was not a matter within the course of his employment with
the county. Id. at 1058. In so doing we concluded that the worker‘s
sexual interactions with the client were ―not the general kind of
activity a therapist is hired to perform‖ and ―arose from his own
personal impulses, and not from an intention to further his
employer‘s goals.‖ Id. So although the ―misconduct took place
during, or in connection with, therapy sessions,‖ we held that
―reasonable minds could not disagree with the conclusion that the
sexual contacts in th[e] case were not within the scope of [the
therapist‘s] employment.‖ Id. And we cited, in support of that
holding, ―rulings in other jurisdictions holding as a matter of law
that the sexual misconduct of an employee is outside the scope of
employment‖ for purposes of the doctrine of respondeat superior. Id.
¶55 Our Birkner decision was handed down more than twenty-
five years ago. And the law in this area has evolved somewhat in the
ensuing years. The Third Restatement, for example, notes that
consideration of whether an agent is ―situated on the employer‘s
premises‖ or ―continuously or exclusively engaged in performing
assigned work‖ is incompatible with ―the working circumstances of
many managerial and professional employees and others whose
work is not so readily cabined by temporal or spatial limitations.‖
RESTATEMENT (THIRD) OF AGENCY § 7.07 cmt. b. Thus, under the
Third Restatement, and in the caselaw of a number of states, spatial
and time boundaries are no longer essential hallmarks of an agency
relationship.11 Instead, the law now recognizes that agents may
―interact on an employer‘s behalf with third parties although the
11 See Md. Cas. Co. v. Huger, 728 S.W.2d 574, 579 (Mo. Ct. App.
1987) (―Whether an act is within the ‗scope of employment‘ or ‗scope
of duty‘ is not measured by the time or motive of the act . . . .‖);
Childers v. Shasta Livestock Auction Yard, Inc., 235 Cal. Rptr. 641, 647
(Cal. Ct. App. 1987) (holding that respondeat superior liability may
attach even when tortious conduct occurs ―at times and locations
remote from the ordinary workplace‖).
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employee is neither situated on the employer‘s premises nor
continuously or exclusively engaged in performing assigned work.‖
Id.
¶56 A number of courts have also questioned the viability of the
requirement that an agent‘s acts be motivated in some part by an
intention to serve the principal‘s purposes.12 The Third Restatement
itself maintains this element. See id. § 7.07(2) (―An employee‘s act is
not within the scope of employment when it occurs within an
independent course of conduct not intended by the employee to
serve any purpose of the employer.‖). And its commentary asserts
that ―[m]ost cases apply‖ this standard. Id. § 7.07 cmt. b.
¶57 Yet the Third Restatement commentary also acknowledges
―[a]lternative formulations‖ in the caselaw of other jurisdictions,
under which courts ―avoid the use of motive or intention to
determine whether an employee‘s tortious conduct falls within the
scope of employment‖ and adopt a different standard for identifying
the ―tie between the tortfeasor‘s employment and the tort.‖ Id. One
such standard is whether ―the tort is a generally foreseeable
consequence of the enterprise undertaken by the employer or is
incident to it‖—in other words, whether the agent‘s ―conduct is not
so unusual or startling that it seems unfair to include the loss
resulting from it in the employer‘s business costs,‖ or whether the
―tort was ‗engendered by the employment[]‘ or an ‗outgrowth‘ of it.‖
Id. Another considers ―whether the employment furnished the
specific impetus for a tort or increased the general risk that the tort
would occur.‖ Id. ―These tests leave to the finder of fact the challenge
of determining whether a tortfeasor‘s employment did more than
create a happenstance opportunity to commit the tort.‖ Id.
¶58 We are not called upon here to resolve all aspects of the
tension between our Birkner decision and the ensuing caselaw
developments in other jurisdictions. To resolve this case we need not
choose, for example, between the purpose or motive test that the
Third Restatement portrays as the majority view and the
―alternative‖ formulations that it describes. That is because we find
that the Trust‘s attempts to defeat its liability on summary judgment
12 See Marston v. Minneapolis Clinic of Psychiatry & Neurology, Ltd.,
329 N.W.2d 306, 311 (Minn. 1982) (asserting that it is ―a rare situation
where a wrongful act would actually further an employer‘s
business,‖ while concluding that parsing an employee‘s motivation
is ―unrealistic and artificial‖).
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Opinion of the Court
fail under any of the above formulations (for reasons described
below).
¶59 We do openly endorse one particular aspect of the Third
Restatement formulation of the doctrine of respondeat superior,
however. Specifically, and contrary to our decision in Birkner, we
hold that an agent need not be acting ―within the hours of the
employee‘s work and the ordinary spatial boundaries of the
employment‖ in order to be acting within the course of his
employment. Birkner, 771 P.2d at 1057. Instead, as noted in the Third
Restatement, we acknowledge that in today‘s business world much
work is performed for an employer away from a defined work space
and outside of a limited work shift. And we accordingly reject the
Trust‘s attempt to escape liability on the ground that Jeffs‘s acts as a
trustee were not performed while he was on the Trust‘s clock or at a
work space designated for his work for the Trust. Instead we hold
that the key question is whether Jeffs was acting ―within the scope of
employment when performing work assigned by the employer or
engaging in a course of conduct subject to the employer‘s control.‖
RESTATEMENT (THIRD) OF AGENCY § 7.07(2).13
¶60 We also reject the Trust‘s reliance on Birkner for the
proposition that settled caselaw establishes ―as a matter of law that
the sexual misconduct of an employee is outside the scope of
employment.‖ See Birkner, 771 P.2d at 1058 (citing cases). Granted,
there are many cases that so conclude—both before Birkner and
after.14 And some of those cases seem to turn principally on the
ground that drove our Birkner decision—that an agent who commits
a sexual assault is merely gratifying his own personal sexual desire
and cannot be viewed as advancing, even in part, the purposes of his
13 In so concluding we do not foreclose the circumstantial
relevance of the time and place of the employee‘s tortious activity.
We simply hold that proof that the agent was operating within the
hours of the employee‘s work and the ordinary spatial boundaries of
the employment is no longer a required element of the doctrine of
respondeat superior.
14 See, e.g., J.H. ex rel. D.H. v. W. Valley City, 840 P.2d 115, 122–23
(Utah 1992); Jackson v. Righter, 891 P.2d 1387, 1391 (Utah 1995);
D.D.Z. v. Molerway Freight Lines, Inc., 880 P.2d 1, 4–5 (Utah Ct. App.
1994); Andrews v. United States, 732 F.2d 366, 370 (4th Cir. 1984);
Cosgrove v. Lawrence, 522 A.2d 483, 484–85 (N.J. Super. Ct. App. Div.
1987).
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principal.15 Yet some of the cases in this field (particularly more
recent ones) go the other way;16 and a number of decisions adopt the
―alternative‖ approach noted in the Restatement (Third) of
Agency—in adopting a standard that turns not on motive or purpose
but on foreseeability,17 or on whether the employee‘s acts were
15See e.g., J.H. ex rel. D.H., 840 P.2d at 123 (Utah 1992) (noting that
―[n]o record evidence exists that would lead reasonable minds to
conclude that [the employee] was acting in the interest of [his
employer] when he committed acts of molestation on plaintiff‖).
16 Lyon v. Carey, 533 F.2d 649, 655 (D.C. Cir. 1976) (―It is, then, a
question of fact for the trier of fact, rather than a question of law for
the court, whether the assault stemmed from purely and solely
personal sources or arose out of the conduct of the employer‘s
business . . . .‖); Stropes ex rel. Taylor v. Heritage House Childrens Ctr. of
Shelbyville, Inc., 547 N.E.2d 244, 249 (Ind. 1989) (―A blanket rule
holding all sexual attacks outside the scope of employment as a
matter of law because they satisfy the perpetrators‘ personal desires
would draw an unprincipled distinction between such assaults and
other types of crimes . . . .‖). See also infra, notes 17-18.
17 See Marston v. Minneapolis Clinic of Psychiatry & Neurology, Ltd.,
329 N.W.2d 306, 311 (Minn. 1983) (―[S]exual relations between a
psychologist and a patient is a well-known hazard and thus, to a
degree, foreseeable and a risk of employment.‖); Lisa M. v. Henry
Mayo Newhall Mem’l Hosp., 907 P.2d 358, 364 (Cal. 1995) (concluding
that a sexual tort is ―engendered by the employment‖ if the
―motivating emotions were fairly attributable to work-related events
or conditions‖); Rodgers v. Kemper Constr. Co., 50 Cal. App. 3d 608,
619 (Cal. Ct. App. 1975) (concluding that liability attaches if ―in the
context of the particular enterprise an employee‘s conduct is not so
unusual or startling that it would seem unfair to include the loss
resulting from it among other costs of the employer‘s business‖);
Riviello v. Waldron, 391 N.E.2d 1278, 1282 (N.Y. 1979) (concluding
that ―it suffices that the tortious conduct be a natural incident of the
employment‖); Costner v. Adams, 121 S.W.3d 164, 169 (Ark. Ct. App.
2003) (holding that ―liability attaches when an employee commits a
foreseeable act within the scope of his employment at the time of the
incident‖).
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engendered by or an outgrowth of the employment, or the
employment furnished the impetus for the tort.18
¶61 With this in mind, we cannot accept the Trust‘s invitation to
rule as a matter of law that the sexual activity of an agent can never
be a matter within the scope of employment. That proposition may
have seemed viable at the time of our decision in Birkner. But it
seems less so now. In at least some circumstances the contrary
conclusion is possible.
¶62 And we conclude that this is one of those cases. Given Jeffs‘s
unique role as leader of the FLDS Church, and in light of the
unusual, troubling function of plural marriage involving young
brides in the FLDS culture, we hold that a reasonable factfinder
could conclude that Jeffs was acting within the scope of his role as a
trustee in directing Steed to engage in sexual activity with M.J. We
affirm the denial of the Trust‘s summary judgment motion on that
basis.
¶63 We do so, moreover, without directly resolving the tension
between our decision in Birkner and the alternative formulations
noted in the Third Restatement regarding the role of purpose or
motive in the course of employment inquiry. Instead we hold that
Jeffs‘s activity appears to fit under any of the standards employed by
the courts, and thus that the Trust is not entitled to summary
judgment on this ground.
¶64 In this case it cannot be said that Jeffs‘s acts were an
―independent course of conduct‖ not intended by Jeffs to serve ―any
purpose‖ of the Trust. Jeffs‘s direction of the ―marriage‖ between
M.J. and Steed would certainly appear to be misguided. And Jeffs
may have had his personal interest in mind when he exercised
control over trust property to compel M.J. to be submissive to his
ecclesiastical authority and remain in her illegal marriage. But in
these unusual circumstances we cannot conclude that Jeffs had no
18 Simmons v. United States, 805 F.2d 1363, 1369, 1371 (9th Cir.
1986) (concluding that a counselor who exploited patient‘s ―trusting
dependency relationship‖ in order to induce sexual conduct acted
―in conjunction with his legitimate counseling activities‖); Xue Lu v.
Powell, 621 F.3d 944, 954 (9th Cir. 2010) (considering whether a
sexual assault was ―an outgrowth of workplace responsibilities,
conditions or events‖ (citation omitted)).
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purpose of advancing the interests of the Trust (however misguided
those interests may seem—as they certainly do).
¶65 As trustee of the Trust prior to its reformation, Jeffs was
called upon to administer the Trust in accordance with the doctrines
and principles of the FLDS Church. Those doctrines and principles,
according to M.J.‘s allegations and evidence in the record, included
the arrangement of plural, underage marriages. Thus, as abhorrent
and troubling as this may appear to be, there is a basis in the record
for the conclusion that Jeffs‘s acts were aimed in part at advancing
the interests of the Trust as he perceived them. And there is also
reason to conclude that Jeffs‘s conduct was ―of the general kind‖ he
was expected ―to perform‖ as trustee. We affirm the denial of the
Trust‘s motion for summary judgment on that basis.
¶66 In so doing, we leave open the possibility in a future case of
reviewing and revising the standard set forth in our decision in
Birkner. We see no need to do so here because the Trust‘s motion fails
even under the Birkner standard. But we also note that the
―alternative‖ formulations set forth above would also be met in this
case. And although we need not reach the question here, we leave
open the possibility of embracing one of these alternative standards
in a future case in which the question is presented.
2
¶67 The doctrine of respondeat superior is rooted in common law
principles of agency. As noted above, it is aimed at assuring
adequate deterrents against tortious activity by agents. And because
principals are often more likely to have resources (or insurance)
sufficient to pay compensation, respondeat superior liability also
protects the interests of injured parties in being compensated.
¶68 These premises of the doctrine of respondeat superior are a
threshold ground for rejecting the Trust‘s equitable challenge to its
application here. Our law has long held that equity is served by
recognition of a principal‘s vicarious liability for the acts of an agent
falling within the scope of his employment. The common law,
moreover, has left no room for case-by-case evaluation of the
equities of imposing such liability in light of the nature of the
principal‘s business or the innocence of its stakeholders. It has
concluded instead that equity is enhanced by the extension of
vicarious liability in the broad run of cases. So the innocence of the
Trust‘s beneficiaries is no reason to foreclose its vicarious liability
under the doctrine of respondeat superior. That doctrine presupposes
an innocent principal. Yet it extends vicarious liability on the basis of
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a determination that the upsides of such liability outweigh any
downsides.
¶69 The Trust‘s equitable challenge to the doctrine of respondeat
superior is undermined further by the terms of the Uniform Trust
Act. Under that statute an injured party has a cause of action against
a trust for actions of a trustee ―in the course of administering a
trust.‖ UTAH CODE § 75-7-1010(2). That provision leaves no room for
us to second-guess the imposition of vicarious liability on a trust for
the acts of a trustee. Where the legislature has spoken our role is
limited. In the face of duly-enacted legislation we no longer have a
primary policymaking role. See Graves v. N.E. Servs., Inc., 2015 UT 28,
¶ 70, 345 P.3d 619 (noting that in light of ―a detailed statutory
scheme . . . our role as policymaker is preempted‖). We are left only
to interpret the terms of the statute and then to implement them.
¶70 That conclusion forecloses the Trust‘s equitable position.
The Uniform Trust Act draws no distinctions between different
types of trusts. And it leaves no room for an exception to respondeat
superior liability for trusts whose beneficiaries are innocent victims of
a trustee‘s tortious acts. That may often be the case where a trustee
engages in tortious activity. But if that activity falls within the scope
of the trustee‘s responsibilities in administering the trust, the trust is
vicariously liable by statute—whether or not a court might find such
liability equitable.
D. Reverse Veil-Piercing
¶71 The Trust‘s final proposed basis for summary judgment is
addressed to a different theory of vicarious liability asserted by
M.J.—―reverse piercing‖ of the corporate veil, under which an
artificial entity may be viewed as an individual‘s alter ego, and the
entity is thus deemed responsible for the individual‘s personal acts.
This court has not had occasion to endorse this theory of liability in
its past cases. And the Trust urges us to reject it as a matter of law.
Alternatively, it also urges us to refuse to extend this doctrine to the
circumstances of this case.
¶72 For reasons noted below we acknowledge the viability of
the doctrine of reverse piercing of the corporate veil under Utah law.
Yet we also conclude that extension of this doctrine in this case
would be improper, and thus foreclose its application on remand.
1
¶73 Corporations and certain other artificial entities are treated
as legally distinct from their shareholders, officers, and directors. As
a general rule they are accordingly shielded from liability; they have
no individual responsibility for the legal obligations of the corporate
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entity. See Dockstader v. Walker, 510 P.2d 526, 528 (Utah 1973). This is
the concept of the corporate veil.
¶74 We have long embraced an exception to this general rule,
however. Where a shareholder, officer, or director abuses the
corporate form, and treats the legal entity as his alter ego, our law
allows a creditor to pierce the veil. Id. Veil-piercing allows claimants
to go after the assets of an individual in the unusual circumstance in
which the corporate entity is not really distinct from the individual.
Id. This principle has also been extended to the trust context.19
¶75 Our law counsels ―great caution‖ before allowing a claimant
to pierce the corporate veil. Shaw v. Bailey-McCune Co., 355 P.2d 321,
322 (Utah 1960). Most often, the cases in which the veil is
appropriately pierced involve a limited number of shareholders or
trustees, or at least an unusual unity of interest and purpose.
Dockstader, 510 P.2d at 528 (noting that the ―doctrine is generally
applied to . . . ‗one-man corporations‘‖). We have also said that the
corporate veil may be pierced only in circumstances where refusing
to do so ―would sanction a fraud or promote injustice.‖ Grover v.
Garn, 464 P.2d 598, 603 (Utah 1970) (citation omitted).20 And because
veil-piercing is an equitable remedy it is available only where it is
―in the interest of justice,‖ Shaw, 355 P.2d at 322, a standard that
takes into account the availability of an ―adequate remedy at law‖ to
prevent irreparable harm to the plaintiff, Buckner v. Kennard, 2004 UT
78, ¶ 56, 99 P.3d 842, and the potential for adverse impacts on third
parties, see Cascade Energy & Metals Corp. v. Banks, 896 F.2d 1557, 1577
(10th Cir. 1990).
¶76 Reverse piercing cuts the opposite way. It allows a claimant
to access the assets of a corporate entity (or other entity like a trust)
for the acts of an individual—and to do so in circumstances where
the individual and the entity were not treated as distinct, but have
19 See e.g., In re Maghazeh, 310 B.R. 5, 16 (Bankr. E.D.N.Y. 2004); In
re Felice, 494 B.R. 160, 175 (Bankr. D. Mass. 2013).
20 We have endorsed the factors set forth in Colman v. Colman, 743
P.2d 782, 786 (Utah Ct. App. 1987), as ―non-exclusive considerations‖
for deciding whether a corporation is an alter ego. Jones & Trevor
Mktg., Inc. v. Lowry, 2012 UT 39, ¶ 21, 284 P.3d 630. Many of these
factors—like the failure to observe formalities, pay out expected
sums, or maintain adequate records—may also be useful in the trust
context. Yet we reiterate that these are ―merely helpful tools and not
required elements.‖ Id. ¶ 18.
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become each other‘s alter ego. See generally Kurtis A. Kemper,
Annotation, Acceptance and Application of Reverse Veil-Piercing—Third-
Party Claimant, 2 A.L.R. 6th 195 (2016). Courts in other jurisdictions
have long embraced this theory of reverse veil-piercing.21 In Utah we
have not yet had occasion to do so. In past cases we have twice been
asked to endorse the principle of reverse piercing of the corporate
veil. But both times we demurred, resolving the case instead on
other grounds. See Messick v. PHD Trucking Serv., Inc., 678 P.2d 791,
793 (Utah 1984); Transamerica Cash Reserve, Inc., v. Dixie Power &
Water, Inc., 789 P.2d 24, 26-27 (Utah 1990).
¶77 In this case the viability of reverse veil-piercing is squarely
presented. And we take this occasion to generally endorse this
principle of liability. In years past we could properly say that reverse
piercing was ―a little-recognized theory.‖ Messick, 678 P.2d at 793.
But that is no longer a correct description of the law in other
jurisdictions. This principle of liability has now gained widespread
acceptance. See Kurtis A. Kemper, Annotation, Acceptance and
Application of Reverse Veil-Piercing—Third Party Claimant, 2 A.L.R. 6th
195 § 4 (2016) (listing eighteen states, D.C., and a number of federal
courts that have accepted reverse veil-piercing). Even in Utah, our
courts appear to have employed it without great controversy or
difficulty. See Colman v. Colman, 743 P.2d 782, 786-87 (Utah Ct. App.
1987).
¶78 More importantly, the doctrine of reverse piercing seems to
us to ―follow[] logically‖ from the premises of the longstanding
doctrine of traditional (direct) veil-piercing. Transamerica Cash
Reserve, Inc., 789 P.2d at 26 (Utah 1990). Where an individual so
abuses the corporate form that it becomes his alter ego, and where
honoring its separate existence ―would sanction a fraud or promote
injustice,‖ Grover, 464 P.2d at 603 (citation omitted), it would make
no sense for the law to preclude a claimant from treating the two as
if they were identical. This is true not only for corporations, but also
21 See Kingston Dry Dock Co. v. Lake Champlain Transp. Co., 31 F.2d
265, 267 (2d Cir. 1929) (Hand, J.) (acknowledging that in some
limited cases ―a subsidiary [might] . . . be liable for a transaction
done in the name of a parent,‖ while concluding that such
circumstances, ―if possible at all, must be extremely rare‖); W. G.
Platts, Inc. v. Platts, 298 P.2d 1107, 1110 (1956) (disregarding the
corporate veil when a husband hid assets in a divorce).
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Opinion of the Court
for trusts.22 And in such circumstances we conclude that our law
should allow reverse piercing of the corporate veil.
2
¶79 The legal standards for reverse piercing, however, should be
parallel to the law of direct piercing. Thus, following the principles
set forth above, a claimant seeking to impose reverse-piercing
liability on a corporate entity or trust must establish not only an
abuse of the corporate form, but also that such abuse resulted in
fraud or injustice, and that reverse piercing is necessary to avoid an
injustice (or in other words that the claimant lacks an adequate
remedy at law). Thus, reverse piercing should be a tool of last resort;
too-frequent imposition of such liability could ―bypass[] normal
judgment-collection procedures‖ in a manner prejudicing ―non-
culpable shareholders.‖ Cascade Energy, 896 F.2d at 1577.
¶80 As a practical matter, this principle of liability has teeth only
for individual acts falling beyond the reach of the doctrine of
respondeat superior. For acts within the scope of employment, after all,
the corporate entity or trust would have respondeat superior liability.
So there would be no practical need for reverse veil-piercing for
individual acts covered by that doctrine. And reverse piercing would
come into play only for acts falling within an independent course of
conduct not covered by respondeat superior.
¶81 We conclude that reverse piercing would be inappropriate
in this case under the above standards. M.J. has identified a
threshold basis in the record for concluding that the Trust was Jeffs‘s
alter ego. And she has also adequately asserted the perpetration of a
grave injustice. But the other elements of the standard for reverse
piercing are lacking.
¶82 First, the Trust is subject to vicarious liability under the
doctrine of respondeat superior. For that reason M.J. has access to an
adequate legal remedy. So it cannot be said that reverse piercing is
necessary to avoid an injustice in this case.
¶83 Second, equitable considerations also cut against the
imposition of reverse piercing liability in this case. As noted above,
veil-piercing is most easily invoked in cases involving a limited
number of shareholders or trustees, or at least an unusual unity of
interest and purpose. See supra ¶ 75. Conversely, equitable
22 See, e.g., Zahra Spiritual Trust v. United States, 910 F.2d 240, 244-
46 (5th Cir. 1990) (concluding that the veil of a trust could be pierced
to satisfy taxpayer liabilities if the trust was used as an alter ego).
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Opinion of the Court
considerations may counsel against reverse piercing in cases
involving adverse impacts on innocent third parties. See supra ¶¶ 75-
76. And in our view these concerns counsel against reverse piercing
in this case.
¶84 This is not a case involving a limited number of
shareholders or trustees. The Trust‘s beneficiaries, rather, include
innocent third parties whose interests could be adversely affected if
the Trust‘s veil is pierced. Some of those beneficiaries may
themselves have claims against the Trust. And because those claims
could be jeopardized by the remedy of reverse veil-piercing, and M.J.
has access to a legal remedy under the doctrine of respondeat superior,
we conclude that this is not an appropriate case for reverse piercing.
We hold that the Trust is entitled to summary judgment on that
limited basis.
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