Northgate Village Development v. Orem City , 2019 UT 59 ( 2019 )

This opinion is subject to revision before final
publication in the Pacific Reporter
2019 UT 59
IN THE
SUPREME COURT OF THE STATE OF UTAH
NORTHGATE VILLAGE DEVELOPMENT, LC,
Appellee,
v.
CITY OF OREM,
Appellant.
No. 20180465
Filed October 2, 2019
On Certiorari to the Utah Court of Appeals
Fourth District, Utah County
The Honorable Lynn W. Davis
No. 090401127
Attorneys:
J. Craig Smith, Kathryn J. Steffey, Clayton H. Preece,
Salt Lake City, for appellee
Jody K. Burnett, Robert C. Keller,
Salt Lake City, for appellant
JUSTICE PETERSEN authored the opinion of the Court in which
CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE LEE,
JUSTICE HIMONAS, and JUDGE VALENCIA joined.
Having recused himself, JUSTICE PEARCE does not participate herein.
DISTRICT JUDGE JENNIFER L. VALENCIA sat.
JUSTICE PETERSEN, opinion of the Court:
INTRODUCTION
¶1 Ten years ago, Northgate Village Development, LC sued the
City of Orem to recover the cost of cleaning up property Northgate
had purchased from the City. Northgate contends that when it began
NORTHGATE v. OREM
Opinion of the Court
to excavate the property to prepare it for sale to a developer, it found
subsurface asphalt and “urban detritus.” This litigation centers on
who was responsible for cleaning up the property under the parties’
agreement.
¶2 After a grant of summary judgment, an appeal, and a
reversal and remand, this case was back in the district court.
Northgate filed an interlocutory appeal, challenging two of the
district court’s pretrial evidentiary rulings. The court of appeals
reversed, holding that the district court incorrectly excluded expert
testimony and other evidence proposed by Northgate. The City
petitioned for certiorari, which we granted.
¶3 Because we agree with the court of appeals’ reasoning
regarding both evidentiary rulings, we affirm.
BACKGROUND
¶4 Northgate purchased a parcel of property from the City that
the City had used to operate a public works facility. When Northgate
began excavating the property, it found
car bumpers, bicycles, tires, water heaters, washing
machines, car engines, car parts, asphalt, galvanized
pipes, asbestos-containing transit pipe, trees, bushes,
medical waste products, brick, mason blocks, concrete,
toilets, electrical panels, refrigerators, silverware,
50-gallon drums, conduit, general garbage, storm
drains, ADS pipe, slag, barbed wire, field fence, cedar
fence posts, railroad ties, plywood, carpet,
transformers, mercury-containing ballasts, gas cables,
truck mud flaps, plastic sheeting, car doors, pallets,
rebar, pop bottles, sewer pipe, metal t-posts, fire
hydrants, water valves, ductile iron, copper parts and
valves, brass parts, fiberglass insulation, twine, rubber
traffic cones, concrete manhole sections, metal rings
and lids for manholes, valve boxes, bags of leaves, and
metal sheeting for roofs.
¶5 Northgate demanded that the City reimburse its clean-up
costs or perform the work itself. The City refused, disputing
Northgate’s characterization of the parties’ agreement. Ultimately,
Northgate incurred approximately $3 million in clean-up costs.
¶6 In 2009, Northgate sued the City, alleging breach of contract.
The parties filed competing summary judgment motions disputing
the terms of their agreement. The parties’ contract provided that the
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City was to “complete any environmental clean-up responsibilities
specified in the written action plan.” Northgate argued that the
“written action plan” referred to both an Environmental Site
Assessment referenced elsewhere in the contract and an
Environmental Clean-Up List (Clean-Up List) attached to the
agreement. The City argued that the Clean-Up List was the only
“written action plan.”
¶7 The Clean-Up List outlined certain obligations including:
(1) “Landfilling construction materials with pieces of asphalt”;
(2) “Permit required for continued landfilling”; (3) “Site assessment
and application required for closure of site”; (4) “Landfill
operations—burial of asphalt materials—Check permitting & closure
requirements including Coordination with State of Utah Division of
Solid & Hazardous Waste”; and (5) “Landfill operations—burial of
electrical transformers with PCB’s.”1
¶8 The district court agreed with the City that the “written
action plan” referred only to the Clean-Up List. Further, the court
interpreted the Clean-Up List to require the City to remove only
buried transformers. For the remaining debris and landfill material,
the court concluded that the agreement obligated the City only to
procure the necessary permits to leave it in place.
¶9 Northgate appealed. The court of appeals affirmed the
district court’s determination that the agreement obligated the City
to perform only the clean-up identified in the Clean-Up List, but it
disagreed that the list unambiguously required the City to remove
only buried transformers. Northgate Vill. Dev., LC v. Orem City
(Northgate I), 2014 UT App 86, ¶ 36, 325 P.3d 123. The court of
appeals noted that the parties had “ascribe[d] contrary meanings” to
a section of the Clean-Up List that could impose additional
obligations on the City:
1. Landfilling construction materials with pieces of
asphalt
2. Permit required for continued landfilling
3. Site assessment and application required for closure
of site
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1 The copy of the list in the record is difficult to read.
Accordingly, we have extracted relevant portions from the parties’
briefs and the court of appeals’ opinions.
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Id. ¶ 37. With regard to these items in the Clean-Up List, Northgate
argued that the first and second entries imposed separate
requirements on the City to both remove construction materials with
pieces of asphalt and obtain the proper permit for continued
landfilling. Id. In contrast, the City argued that the first and second
entries should be read together, meaning that the City would fulfill
any obligation associated with subsurface asphalt by procuring any
necessary permits.2 Id. The court of appeals found both
interpretations to be plausible and reversed and remanded to the
district court for fact-finding on the parties’ intent regarding these
ambiguous contract provisions. Id. ¶¶ 38–39.
¶10 On remand, the City made pretrial motions to exclude some
of Northgate’s proposed evidence. First, the City moved under Utah
Rule of Evidence 403 to exclude evidence relating to the clean-up of
any debris and material other than asphalt (Fill Material Evidence).
The district court granted the motion primarily under Utah Rule of
Evidence 401, finding that the evidence was irrelevant because it
“contributes nothing to the fact in question: whether the City was
bound under the Agreement to remove asphalt from the property.”
The court also stated that the Fill Material Evidence “would be more
prejudicial than probative.”
¶11 Second, the City moved to exclude the testimony of two of
Northgate’s proposed expert witnesses under Utah Rule of
Evidence 702, arguing that their expert opinions were based on an
unreliable study. Northgate asserted that its experts did not rely on
the study in question and attached declarations from each expert
explaining the methodology they used to calculate damages. The
district court found that the new declarations were sufficient to show
the experts’ methodology was reliable under rule 702. But the court
excluded the experts as a discovery sanction because the initial
expert reports had not contained the information in the declarations,
and without it, “[t]he expert reports failed to contain all data and
other information that will be relied upon by the witness in forming
those opinions.”
¶12 Northgate petitioned for permission to file an interlocutory
appeal, which the court of appeals granted. Northgate challenged
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2 In Northgate I, the court of appeals explained why “[b]uried
asphalt presents an environmental hazard.” 2014 UT App 86, ¶ 37
n.5, 325 P.3d 123.
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Opinion of the Court
both of these evidentiary orders, and the court of appeals agreed and
reversed both. Northgate Vill. Dev., LC v. Orem City (Northgate II),
2018 UT App 89, ¶ 35, 427 P.3d 391.
¶13 The City petitioned this court for certiorari, which we
granted. We exercise jurisdiction pursuant to Utah Code
section 78A-3-102(3)(a).
STANDARD OF REVIEW
¶14 “When a case is before us on certiorari review, we review
the decision of the court of appeals . . . de novo to determine whether
the court of appeals correctly applied the appropriate standard of
review to the district court’s determinations.” Brown v. Div. of Water
Rights of Dep’t of Nat. Res., 2010 UT 14, ¶ 9, 228 P.3d 747. “Two
different standards of review apply to [Northgate’s] claims
regarding the admissibility of evidence. The first standard of review,
correctness, applies to ‘the legal questions underlying the
admissibility of evidence.’” State v. Griffin, 2016 UT 33, ¶ 14, 384 P.3d
186 (citation omitted). “The second standard of review, abuse of
discretion, applies to the [district] court’s decision to admit or
exclude evidence . . . and to the [district] court’s determination
regarding the admissibility of expert testimony.” Id. (citations
omitted).
ANALYSIS
I. EXPERT TESTIMONY
¶15 We agree with the court of appeals that the district court
erred in excluding Northgate’s proposed expert testimony as a
discovery sanction, because it applied the wrong version of rule 26.
¶16 In 2011, the Utah Rules of Civil Procedure were revised.
“Due to the significant changes in the discovery rules,” the 2011
amendments are effective only as to cases filed on or after
November 1, 2011. UTAH R. CIV. P. 1 advisory committee notes.
Because this case was filed in 2009, the parties are subject to the
pre-2011 discovery rules.
¶17 Relevant here are the substantive revisions to the expert
discovery provisions in rule 26. The pre-2011 rule 26 (Old Rule)
required expert disclosures to be accompanied by a written report
that “contain[s] the subject matter on which the expert is expected to
testify; the substance of the facts and opinions to which the expert is
expected to testify; [and] a summary of the grounds for each
opinion.” Id. 26(a)(3)(B) (2010). That language changed with the 2011
amendments.
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¶18 The post-2011 rule 26 (New Rule) mandates that expert
disclosures contain “a brief summary of the opinions to which the
witness is expected to testify” and “all data and other information
that will be relied upon by the witness in forming those opinions.”
Id. 26(a)(4)(A)(ii)–(iii).
¶19 In the City’s motion to exclude the testimony of two of
Northgate’s proposed expert witnesses, it argued that the expert
opinions were based on an unreliable study and therefore
inadmissible under Utah Rule of Evidence 702. Northgate countered
that its experts did not rely on the study in question and attached
declarations from each expert explaining the methodology they had
used to calculate damages. The district court found that the new
declarations showed that the experts had not relied on the allegedly
unreliable study and were therefore admissible under rule 702. But
the district court excluded the experts as a discovery sanction
because “such information was not provided in the expert reports
and the inclusions of the declarations are a form of supplementation
after the deadlines.” Accordingly, the court concluded:
The expert reports failed to contain “all data and other
information that will be relied upon by the witness in
forming those opinions.” . . . As such, the Court will
exclude the expert testimony of [Northgate’s proposed
experts] under UTAH R. CIV. P. 37(f) for failing to
comply with Rule 26 disclosures.
¶20 The “all data and other information” requirement is found
only in the New Rule, which does not apply in this case. By
excluding the expert witnesses for this reason, the district court
required Northgate to comply with the wrong version of rule 26.
¶21 The court of appeals identified this mistake and was correct
in holding that the district court’s exclusion of the experts as a
sanction was an abuse of discretion. “[L]egal errors, such as . . . the
application of an improper legal standard, are usually an abuse of
discretion.” Schroeder v. Utah Att’y Gen.’s Office, 2015 UT 77, ¶ 49, 358
P.3d 1075. Here, the district court improperly applied the New Rule
rather than the Old Rule.
¶22 We also agree with the court of appeals’ conclusion that the
district court’s error was harmful. In analyzing whether the error
was harmful, the court of appeals evaluated whether Northgate’s
expert disclosures would have satisfied the Old Rule’s requirements
and concluded they would have.
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¶23 The City argues that “the two standards are substantially
similar in this particular respect, and even arguably require the same
information.” But that is not the case. Providing a “summary of the
grounds for each opinion” pursuant to the Old Rule is a less onerous
and more general task than the more specific requirement in the
New Rule to provide “all data and other information that will be
relied upon by the witness in forming those opinions.” The court of
appeals correctly described the New Rule as altering “the quantum
and quality of the disclosure requirement.” Northgate II, 2018 UT
App 89, ¶ 31, 427 P.3d 391.
¶24 The City further argues that the court of appeals substituted
its judgment for the district court’s by impermissibly reweighing the
evidence. But it did not. Once the court of appeals determined the
district court had applied the wrong rule, it could have remanded to
the district court to determine if the evidence was sufficient under
the Old Rule. But the court of appeals was not required to do so.
Here, the court of appeals conducted its own analysis of
harmfulness, which was also proper.
¶25 The City also asserts that the district court’s finding that the
declarations were “a form of supplementation after the deadlines”
provides an alternative basis for the discovery sanction. But this
rationale fails because it also relies on the requirements of the New
Rule. As the court of appeals properly noted, “the initial disclosures
complied with the [applicable] rule,” id. ¶ 32 n.7, so no sanction was
warranted under that rule for a failure to supplement.
II. FILL MATERIAL EVIDENCE
¶26 The court of appeals correctly determined that the district
court abused its discretion in excluding the Fill Material Evidence as
irrelevant under rule 401 and as prejudicial under rule 403 of the
Utah Rules of Evidence.
¶27 “[W]e grant a [district] court broad discretion to admit or
exclude evidence and will disturb its ruling only for abuse of
discretion.” Daines v. Vincent, 2008 UT 51, ¶ 21, 190 P.3d 1269. “An
abuse of discretion may be demonstrated by showing that the
district court relied on an erroneous conclusion of law . . . .”
Kilpatrick v. Bullough Abatement, Inc., 2008 UT 82, ¶ 23, 199 P.3d 957
(citation omitted) (internal quotation marks omitted). Further, a
“district court abuses its discretion only when its ‘decision was
against the logic of the circumstances and so arbitrary and
unreasonable as to shock one’s sense of justice . . . [or] resulted from
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bias, prejudice, or malice.’” Jones v. Layton/Okland, 2009 UT 39, ¶ 27,
214 P.3d 859 (alterations in original) (citation omitted).
¶28 The City moved under rule 403 to exclude evidence relating
to the clean-up of any material other than “construction materials
containing asphalt”—the Fill Material Evidence. Rule 403 states that
a “court may exclude relevant evidence if its probative value is
substantially outweighed by a danger of one or more of the
following: unfair prejudice, confusing the issues, misleading the jury,
undue delay, wasting time, or needlessly presenting cumulative
evidence.” UTAH R. EVID. 403. The City argued that evidence of the
other “urban detritus” that Northgate had unearthed could confuse
the jury about the scope of the City’s duty to clean the property,
unfairly prejudice the City by insinuating it had violated
environmental regulations, bias the jury against the City, and
provoke the jury to punish the City.
¶29 The district court sua sponte excluded the evidence under
rule 401. That rule provides that “[e]vidence is relevant if: (a) it has
any tendency to make a fact more or less probable than it would be
without the evidence; and (b) the fact is of consequence in
determining the action.” Id. 401.
¶30 In its analysis, the district court determined that “under the
Court of Appeals’ ruling, [the Fill Material Evidence] has no bearing
in this case” because “the City’s responsibility regarding landfill
material not containing asphalt is not at question in this case” and
“the Clean-Up List does not include a provision for such landfill
material.” The district court characterized “the fact in question” as
“whether the City was bound under the Agreement to remove
asphalt from the property.”
¶31 But the court of appeals explained this is not the proper
reading of Northgate I. Northgate II, 2018 UT App 89, ¶ 18, 427 P.3d
391. In that case, the court of appeals remanded to the district court
for fact-finding related to the parties’ intent as to the section of the
Clean-Up List containing these three entries:
1. Landfilling construction materials with pieces of
asphalt
2. Permit required for continued landfilling
3. Site assessment and application required for closure
of site
Northgate I, 2014 UT App 86, ¶¶ 37–38, 325 P.3d 123.
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Opinion of the Court
¶32 Although Northgate I references “buried asphalt,” “the
asphalt provision,” and “asphalt clean-up,” it never defines those
terms. And it “did not narrow the scope of relevant evidence solely
to asphalt, as the district court determined.” Northgate II, 2018 UT
App 89, ¶ 19. Instead, Northgate I concludes that “the Clean-Up List
contains ambiguities,” Northgate I, 2014 UT App 86, ¶ 36, and so any
evidence relevant to the parties’ intent or any other issue of
consequence at trial, such as damages or mitigation of damages,
meets the requirement of rule 401. The district court relied on a
misinterpretation of Northgate I to make legal determinations
regarding the relevance of evidence.
¶33 The court of appeals, in Northgate II, rightly determined that
this was an abuse of discretion. 2018 UT App 89, ¶ 21. As we
explained previously, legal errors are generally an abuse of
discretion. See Schroeder v. Utah Att’y Gen.’s Office, 2015 UT 77, ¶ 49,
358 P.3d 1075; see also Kilpatrick, 2008 UT 82, ¶ 23 (providing that
“[a]n abuse of discretion may be demonstrated by showing that the
district court relied on an erroneous conclusion of law” (citation
omitted) (internal quotation marks omitted)); Maak v. IHC Health
Servs., Inc., 2016 UT App 73, ¶ 26, 372 P.3d 64 (“The district court
abuses its discretion when its decision rests on an erroneous legal
determination.”).
¶34 We also agree with the court of appeals’ rule 403 analysis. In
addition to determining that the Fill Material Evidence was
irrelevant, the district court concluded that the evidence “would be
more prejudicial than probative.” But this statement does not reflect
the analysis required by the balancing test set forth in rule 403.
Rule 403 permits a court to “exclude relevant evidence if its
probative value is substantially outweighed by a danger of . . . unfair
prejudice.”
¶35 We do not question that the district court knows the rule 403
standard, and it included the proper law elsewhere in its order. But
when applying the law to this evidence, the district court did not
weigh the probative value of the evidence against the danger of
unfair prejudice or determine that any prejudice would be unfair.
Perhaps the district court did apply this balancing test and was only
using shorthand, but we cannot tell that from the Fill Material Order.
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We give deference to district courts on evidentiary rulings, but we
can only defer to what is provided.3
¶36 Based on the language in the Fill Material Order, we agree
with the court of appeals that the district court did not conduct the
balancing test contemplated by rule 403, which is an abuse of
discretion. Accordingly, we affirm.
CONCLUSION
¶37 The court of appeals correctly held that the district court
erred in excluding expert testimony based on the application of an
incorrect legal standard and excluding the Fill Material Evidence
based on an incorrect interpretation of the law and an incomplete
application of rule 403. We affirm the court of appeals’ decision.
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3 Our decision does not foreclose the possibility that the district
court could engage in a proper rule 403 analysis on remand.
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