Rawcliffe v. Anciaux ( 2017 )


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  •                  This opinion is subject to revision before final
    publication in the Pacific Reporter
    
    2017 UT 72
    IN THE
    SUPREME COURT OF THE STATE OF UTAH
    JAMES ROBERT RAWCLIFFE,
    Appellant,
    v.
    ROBERT ANCIAUX, ET AL., 1
    Appellees.
    No. 20150852
    Filed October 11, 2017
    On Direct Appeal
    Third District, Salt Lake
    The Honorable Heather Brereton
    No. 140905252
    Attorneys:
    Eric L. Zagar, Robin Winchester, Kristen L. Ross, Radnor, PA,
    J. Ryan Mitchell, Steven J. Joffee, Salt Lake City,
    for appellant
    Erik A. Christiansen, Alan S. Mouritsen, Salt Lake City,
    Douglas A. Rappaport, Lucy C. Malcolm, James Tysse,
    New York, NY, for appellees
    JUSTICE DURHAM authored the opinion of the Court in which CHIEF
    JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE LEE, JUSTICE HIMONAS,
    and PRESIDING JUDGE ORME joined.
    Having recused himself, JUSTICE PEARCE does not participate herein;
    COURT OF APPEALS PRESIDING JUDGE GREGORY ORME sat.
    1Other appellees are Jerry G. McClain, Ronald S. Poelman, James
    H. Bramble, Jim Brown, Gilbert Fuller, Kevin G. Guest, Daniel A.
    Macuga, David A. Wentz, Deborah Woo, and Nominal Defendant
    USANA Health Sciences, Inc.
    RAWCLIFFE v. ANCIAUX
    Opinion of the Court
    JUSTICE DURHAM, opinion of the Court:
    INTRODUCTION
    ¶1 James Rawcliffe, a shareholder of USANA Health Sciences,
    Inc., brought this action against USANA’s board of directors and
    several of its officers for authorizing and receiving spring-loaded,
    stock-settled stock appreciation rights (SSARs). Mr. Rawcliffe
    concedes that USANA’s Compensation Committee strictly complied
    with the company’s compensation plan in authorizing the SSARs.
    Based on this and the absence of an allegation that the Compensation
    Committee intended to circumvent the plan, the district court
    dismissed all of Mr. Rawcliffe’s claims under Utah Rule of Civil
    Procedure 12(b)(6) without prejudice. We affirm.
    BACKGROUND
    ¶2 In 2006, USANA’s board of directors approved, and its
    shareholders ratified, the USANA Health Sciences, Inc. 2006 Equity
    Incentive Award Plan (Plan). Pursuant to the Plan, the board of
    directors established the Compensation Committee, consisting of
    three members of the board of directors. The Plan gave the
    Compensation Committee the “exclusive power, authority, and
    discretion” to award SSARs to directors, officers, and other
    employees, as an incentive to continue working diligently for the
    company.
    ¶3 SSARs, as defined by the Plan, are a specific type of incentive
    award that differs somewhat from stock options. On the day that the
    Compensation Committee awards SSARs, called the “grant date,”
    the “exercise price” for the SSARs is set. The exercise price of each
    SSAR is equal to the average trading price of USANA’s stock on the
    grant date. 2 After the vesting period runs, the awardee can exercise
    the SSARs and receive stock as compensation. The day on which the
    awardee exercises the SSARs is called the “exercise date.” When the
    awardee exercises her SSARs, she is given stock in an amount
    reflecting the difference between the market price of USANA’s stock
    2 The exercise price must be set by the Compensation Committee
    at not less than “100% of the Fair Market Value on the date of grant.”
    The Plan defines Fair Market Value as “the mean between the
    highest and lowest selling price of a share of Common Stock on the
    principal exchange on which shares of Common Stock are then
    trading, if any, on such date, or if shares were not traded on such
    date, then on the closest preceding date on which a trade occurred.”
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                             Opinion of the Court
    on the exercise date, and the exercise price. 3 The recipient does not
    need to pay an exercise price.
    ¶4 The lower the exercise price and the higher the value of the
    company’s stock on the exercise date, the more the SSARs are worth.
    When the market price is lower on the exercise date than on the
    grant date, the SSARs are “out of the money” and return no value to
    the holder; if the SSARs are exercised when the market price is
    higher than the exercise price, they are “in the money,” and the
    holder then receives the difference in price in the form of USANA
    stock.
    ¶5 While the Plan allows SSARs to be granted as incentive
    awards, it does not explicitly mention spring-loaded SSARs. Spring-
    loading involves granting equity awards just prior to the release of
    non-public information reasonably expected to drive up the market
    price of the company’s stock. Spring-loading increases the value of
    SSARs because the exercise price is set on a day when the good news
    has not yet been released, making the exercise price lower than if it
    were to be set after the good news was released. It makes the SSARs
    more likely to be “in the money” once they vest and also increases
    3  The terminology under the Plan is somewhat confusing. We
    provide the following information and a hypothetical to explain how
    this works. In this case, the SSARs were granted, and the exercise
    price was set, on February 3, 2014, (the grant date) with an exercise
    price of $57.62 (the market value of USANA’s stock on February 3rd).
    The SSARs each had specific vesting periods, during which they
    could not be exercised. The earliest any of the SSARs could be
    exercised was 23 months after the grant date. Thus, as a hypothetical,
    if a director exercised her SSARs on February 3, 2017, (three years
    after the grant date) and the fair market value of USANA’s stock was
    $100 per share on the date she exercised them (called the exercise
    date), the director would be granted $42.38 worth of USANA stock
    per SSAR that she was granted. This is tied to the following
    calculation: $100 (the fair market value of USANA stock on the
    exercise date) – $57.62 (the exercise price) = $42.38. So, if a director
    were granted 12,000 SSARs in this hypothetical, the director would
    get $508,560 worth of USANA stock.
    If the SSARs were granted on February 5, 2014, the day after the
    good news was announced, the exercise price would have been
    $68.46. Under the same hypothetical, each SSAR would be worth
    only $31.54 on February 3, 2017, for a total value of $378,480.
    3
    RAWCLIFFE v. ANCIAUX
    Opinion of the Court
    the difference between the exercise price and the market price on the
    exercise date.
    ¶6 The Plan states only that the exercise price must be at least 100
    percent of the “Fair Market Value” 4 of the common stock on the date
    of the grant, with no mention of spring-loading. In this case, the
    Committee awarded SSARs on February 3, 2014, to four members of
    the board of directors (including the three directors serving on the
    Compensation Committee) and several corporate officers. These
    awards were made just one day before USANA announced its net
    sales and earnings per share figures from 2013, which greatly
    exceeded expectations. On February 6, 2014, each of the defendants
    filed a Form 4 with the Securities and Exchange Commission
    disclosing the SSARs awards. The SSARs’ exercise price the day they
    were granted was $57.62. On February 5, 2014, after the
    announcement, the company’s stock price rose to $68.46 per share, a
    gain of $10.84 per share or 18.8 percent in two days. While the value
    of USANA’s stock rose 18.8 percent just two days after the exercise
    price was set, the SSARs did not vest, and could not be exercised,
    until 23 to 42 months later. Thus, the directors and officers could not
    realize that 18.8 percent increase until their SSARs had vested, and
    only if USANA’s stock either maintained its $68.46 value or it
    increased in value during that vesting period.
    ¶7 Mr. Rawcliffe acknowledges that the issuance of the spring-
    loaded SSARs complied with the terms of the Plan. He argues only
    that it violated the underlying “spirit” of the Plan. Accordingly, he
    alleges that the Compensation Committee members breached their
    fiduciary duties and wasted corporate assets. He also alleges that
    one director, who was not a member of the Compensation
    Committee, and several officers breached their fiduciary duties and
    were unjustly enriched by passively receiving the spring-loaded
    SSARs.
    STANDARD OF REVIEW
    ¶8 A motion to dismiss presents a question of law that is
    reviewed de novo, giving “no deference” to the district court’s
    analysis. See State v. Ririe, 
    2015 UT 37
    , ¶ 5, 
    345 P.3d 1261
    .
    4See supra note 2 (giving the Plan’s definition of “Fair Market
    Value”).
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                              Opinion of the Court
    ANALYSIS
    ¶9 We first clarify the fiduciary duties imposed on corporate
    directors and officers under the Utah Revised Business Corporation
    Act. Next, we address Mr. Rawcliffe’s substantive claims in this case.
    I. DUTIES OWED BY CORPORATE OFFICERS
    AND DIRECTORS
    ¶10 The question of whether spring-loading SSARs constitutes a
    breach of fiduciary duty is an issue of first impression in Utah.
    Corporate fiduciary duties were originally creatures of common law.
    Now, Utah corporations are governed by the Utah Revised Business
    Corporation Act (URBCA). UTAH CODE §§ 16-10a-101 to -1804. Utah
    Code section 16-10a-840(4) 5 codifies when a corporate director or
    officer can be held liable and states that:
    (4) A director or officer is not liable to the
    corporation [or] its shareholders . . . for any action
    taken, or any failure to take any action, as an officer or
    director, as the case may be, unless:
    (a) the director or officer has breached or failed
    to perform the duties of the office in compliance with
    this section; and
    (b) the breach or failure to perform constitutes
    gross negligence, willful misconduct, or intentional
    infliction of harm on the corporation or the
    shareholders.
    (Emphases added).
    ¶11 As the emphasized portions show, this statute requires that
    a cause of action brought by a corporation or shareholder 6 against a
    director or officer, for the official acts of the director or officer, must
    be for a breach of Utah Code section 16-10-840(4). See Bagley v.
    Bagley, 
    2016 UT 48
    , ¶ 10, 
    387 P.3d 1000
    (holding that we interpret
    statutes to determine the intent of the legislature by looking first to
    5 This section was amended effective May 9, 2017. See H.B. 41,
    62nd Legis. § 1 (2017). However, the provisions at issue here remain
    substantially unchanged. For this reason, we cite the current version
    of the statute.
    6 The statute also lists “any conservator or receiver, or any
    assignee or successor-in-interest thereof . . . .” UTAH CODE § 16-10a-
    840(4).
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    RAWCLIFFE v. ANCIAUX
    Opinion of the Court
    the plain language); see also UTAH CODE § 16-10a-842(1) (providing
    for director liability if a director “votes for or assents to a
    distribution” that violates the URBCA “or the articles of
    incorporation,” but only if “the director’s duties were not performed
    in compliance with Section 16-10a-840”). Otherwise, if it is not a
    breach of subsection (4), the “director or officer is not liable to the
    corporation [or] its shareholders,” absent some other statutory
    authorization. UTAH CODE § 16-10a-840(4) (emphasis added).
    ¶12 Subsection (4) mandates that a corporation or shareholder
    prove two things before a director or officer can be held liable:
    (1) that the director or officer breached a duty enumerated in Utah
    Code section 16-10a-840(1); and (2) that the director or officer
    breached the duty with a mental state listed in Utah Code section 16-
    10a-840(4)(b). According to the plain language in subsection (4), both
    a breach of a standard of conduct in subsection (1) and a mental state
    listed in subsection (4)(b) are required to hold a director or officer
    liable. We will first discuss the standards of conduct that corporate
    directors and officers owe under the URBCA and then the mental
    states required to establish liability.
    A. Standards of Conduct Under Utah Code Section 16-10a-840(4)(a)
    ¶13 Under Utah Code section 16-10a-840(4)(a), to determine
    whether a corporate director or officer is liable to the corporation or
    its shareholders the first step of the analysis is to determine whether
    the “director or officer has breached or failed to perform the duties
    of the office in compliance with this section.” The only duties
    identified in section 16-10a-840 are located in subsection (1). Utah
    Code section 16-10a-840(1) provides that:
    (1) Each director shall discharge the director’s
    duties as a director, including duties as a
    member of a committee, and each officer with
    discretionary authority shall discharge the
    officer’s duties under that authority:
    (a) in good faith;
    (b) with the care an ordinarily prudent person in
    a like position would exercise under similar
    circumstances; and
    (c) in a manner the director or officer reasonably
    believes to be in the best interests of the
    corporation.
    ¶14 A claim against a corporate officer or director must establish
    a breach of one of these duties or otherwise establish a breach of this
    6
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                             Opinion of the Court
    subsection. Cf. McLaughlin v. Schenk, 
    2009 UT 64
    , ¶ 16, 
    220 P.3d 146
    (“Under the [URBCA], directors and officers are required to carry
    out their corporate duties in good faith, with prudent care, and in the
    best interest of the corporation.” (citing UTAH CODE § 16-10a-840
    (2005))). Section 16-10a-840(1) codified the common law duties
    identified in our precedent, but the statute does not provide
    definitions of the enumerated duties beyond what is written in
    subsection (1). 7 “When the legislature ‘borrows terms of art in which
    are accumulated the legal tradition and meaning of centuries of
    practice, it presumably knows and adopts the cluster of ideas that
    were attached to each borrowed word in the body of learning from
    which it was taken.’” Maxfield v. Herbert, 
    2012 UT 44
    , ¶ 31, 
    284 P.3d 647
    (citation omitted). Thus, the common law assists in defining the
    scope of the duty, as long as the duty itself is identified by the plain
    language of the statute and our common law does not conflict with
    any statutory guidance on the scope of that duty. 8
    7 The legislature appears to have codified the common law duties
    of good faith, care, and loyalty. Subsection (1)(a) corresponds to the
    common law duty of good faith. Subsection (1)(b) appears to codify
    the duty of care. Compare UTAH CODE § 16-10a-840(1)(b) (Directors
    must act “with the care an ordinarily prudent person in a like
    position would exercise under similar circumstances . . . .”), with
    Warren v. Robison, 
    57 P. 287
    , 291 (Utah 1899) (“[D]irectors . . . must
    exercise ordinary care, skill, and diligence. . . . [I]t is necessary for
    them to give the business under their care such attention as an
    ordinarily discreet business man would give to his own concerns
    under similar circumstances . . . .”). Subsection (1)(c) appears to
    codify the duty of loyalty. Compare UTAH CODE § 16-10a-840(1)(c)
    (Directors have the duty to act “in a manner the director . . .
    reasonably believes to be in the best interests of the corporation.”),
    with Nicholson v. Evans, 
    642 P.2d 727
    , 730 (Utah 1982) (the duty of
    loyalty requires directors “to use their ingenuity, influence, and
    energy, and to employ all the resources of the corporation, to
    preserve and enhance the property and earning power of the
    corporation, even if the interests of the corporation are in conflict
    with their own personal interests”).
    8  The mandatory language of Utah Code section 16-10a-840(4),
    stating that a director or officer “is not liable” unless she violates
    subsection (4), is very broad. While this subsection, and its
    incorporation of subsection (1), appears to codify the common law
    (continued . . .)
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    RAWCLIFFE v. ANCIAUX
    Opinion of the Court
    ¶15 Mr. Rawcliffe’s arguments only fall under the duty of good
    faith, identified in subsection (1)(a), and the duty to act in a manner
    that the director or officer reasonably believes to be in the best
    interests of the corporation, identified in subsection (1)(c). We now
    discuss the scope of these two duties, but do not address the scope of
    the duty identified in subsection (1)(b), because Mr. Rawcliffe does
    not argue a breach of that duty.
    ¶16 Mr. Rawcliffe cites Glen Allen Mining Co. v. Park Galena
    Mining Co., for the scope of the first listed duty—the duty of good
    faith—arguing that it requires all the acts of the directors and officers
    to “be for the benefit of the corporation and not for their own
    benefit. . . . They are not permitted to profit as individuals by virtue
    of their position.” 
    296 P. 231
    , 240 (Utah 1931). However, this
    statement conflicts with other portions of the URBCA leading us to
    reject it as an accurate statement of “good faith” under Utah Code
    section 16-10a-840(1)(a). For instance, the URBCA authorizes the
    board of directors to set their own compensation, UTAH CODE § 16-
    10a-811, and to “determine the terms upon which” shares, stock
    options, or other securities “are issued, their form and content, and
    the consideration for which the shares are to be issued,” 
    id. § 16-10a-
    624(1). This leads us to believe that the duty of good faith under the
    URCBA does not prohibit directors from personally benefitting from
    their position, subject to some restrictions. See C & Y Corp. v. Gen.
    Biometrics, Inc., 
    896 P.2d 47
    , 54 (Utah Ct. App. 1995) (“[S]o long as
    corporate officers [or directors] act fairly and in good faith, they are
    not precluded from dealing or contracting with the corporation
    merely because they are its officers [or directors].” (second and third
    alterations in original) (quoting Runswick v. Floor, 
    208 P.2d 948
    , 951
    (Utah 1949))); Branch v. W. Factors, Inc., 
    502 P.2d 570
    , 571 (Utah 1972)
    (stating that directors are not precluded from dealing with the
    corporation unless “there is an entire absence of . . . good faith” or
    there is “fraud and collusion” (citation omitted)).
    (continued . . .)
    duties held by corporate officers and directors, such duties are now
    creatures of statute and may be modified as the legislature sees fit.
    Thus, the common law of corporate fiduciary duties applies only
    insofar as it does not conflict with the statute. Whether the common
    law fiduciary duties exist independent of the statute remains an
    open question, as the parties concede that the statute applies to
    Mr. Rawcliffe’s fiduciary duty claims in this case.
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                             Opinion of the Court
    ¶17 To breach the duty of good faith, the director or officer must
    typically act in bad faith. See Hansen v. Granite Holding Co., 
    218 P.2d 274
    , 280 (Utah 1950) (the defendants agreed with the formulation of
    the good faith standard, arguing only that “no bad faith has been
    shown”); Chapman v. Troy Laundry Co., 
    47 P.2d 1054
    , 1064 (Utah 1935)
    (stating that when a director breaches the duty of good faith, “they
    are guilty of bad faith”). Bad faith involves some form of
    “[d]ishonesty of belief, purpose, or motive.” 9 Bad Faith, BLACK’S LAW
    DICTIONARY (10th ed. 2014); see also In re Walt Disney Co. Derivative
    Litig., 
    906 A.2d 27
    , 64–67 (Del. 2006). Thus, this duty is breached
    when a director or officer intentionally harms the corporation,
    intentionally benefits herself to the detriment of the corporation,
    displays an intentional dereliction of duty or a conscious disregard
    for her responsibilities, or takes some similar action. 10 See Glen Allen
    Mining 
    Co., 296 P. at 241
    (holding that directors act in bad faith when
    they take any action “looking to the impairment of corporate rights,
    9 There may be other ways to violate the duty of good faith that
    do not necessarily require intentional or willful misconduct. The
    statutory scheme indicates that gross negligence could also apply to
    a violation of the duty of good faith as Utah Code section 16-10a-
    840(4)(b) does not limit the application of “gross negligence” to any
    one duty under Utah Code section 16-10a-840(1). See MODEL BUS.
    CORP. ACT § 8.31 cmt. at 8-241 (AM. BAR ASS’N 2013 Revision) (stating
    that “decision-making outside the bounds of reasonable judgment” –
    that could include such things as “an abuse of discretion,”
    “constructive fraud,” or “reckless indifference” – “can give rise to an
    inference of bad faith”). However, the determination of this question
    is not necessary to this case. We merely note that intentionally or
    willfully taking an action that the director knows is not in the best
    interests of the corporation is evidence of bad faith and is a violation
    of the duty of good faith. See Carsanaro v. Bloodhound Techs., Inc., 
    65 A.3d 618
    , 638 (Del. Ch. 2013) (“The occasions for the determination
    of honesty, good faith and loyal conduct are many and varied, and
    no hard and fast rule can be formulated.” (citation omitted)).
    10 In McLaughlin, this court held that, under the URBCA, directors
    of closely held corporations owe the heightened fiduciary duty of the
    utmost good faith. 
    2009 UT 64
    , ¶ 42. While this varies somewhat
    from the traditional duty of good faith, we held that such a
    heightened duty exists in closely held corporations through our
    interpretation of the statute itself. 
    Id. ¶ 20
    (interpreting the statute
    “in a way that achieves the intent and goal of the Act as a whole”).
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    RAWCLIFFE v. ANCIAUX
    Opinion of the Court
    the sacrifice of corporate interests, the retardation of the objects of
    the corporation, and more especially the destruction of the
    corporation itself”); In re Walt 
    Disney, 906 A.2d at 67
    (Bad faith
    includes “the intent to violate applicable positive law, or . . .
    intentionally fail[ing] to act in the face of a known duty to act,
    demonstrating a conscious disregard for [a director’s] duties.”
    (citation omitted)).
    ¶18 The third duty, codified under subsection (1)(c), requires
    that a director act in a manner which she “reasonably believes to be
    in the best interests of the corporation.” UTAH CODE § 16-10a-
    840(1)(c). This duty significantly overlaps with the duty of good faith
    codified in subsection (1)(a). Some jurisdictions have even classified
    the duty of good faith as a subset of the duty of loyalty. See, e.g.,
    Stone ex rel. AmSouth Bancorporation v. Ritter, 
    911 A.2d 362
    , 370 (Del.
    2006) (stating that, “good faith ‘is a subsidiary element[,]’ i.e., a
    condition, ‘of the fundamental duty of loyalty.’” (alteration in
    original) (citation omitted)). However, the statutory scheme compels
    us to recognize differences between each of the three duties listed in
    Utah Code section 16-10a-840(1). For instance, the URBCA allows
    corporations to indemnify their directors for a breach of the statutory
    duty of care identified in Utah Code section 16-10a-840(1)(b), but
    does not allow them to indemnify their directors for a breach of the
    duty of good faith identified in section 16-10a-840(1)(a), or a breach
    of the duty of loyalty identified in section 16-10a-840(1)(c). See UTAH
    CODE § 16-10a-902(1) (“[A] corporation may indemnify . . . a
    director[] against liability incurred . . . if: (a) his conduct was in good
    faith; and (b) he reasonably believed that his conduct was in, or not
    opposed to, the corporation’s best interests . . . .”).
    ¶19 One difference between subsections (1)(a) and (1)(c) is the
    mental state required under the plain language of the statute. When
    a director breaches the duty of good faith in (1)(a), she typically does
    so through intentional or willful misconduct. When a director
    breaches (1)(c) however, she must be acting on an unreasonable
    belief that her actions would be in the best interest of the company.11
    11 The Delaware Supreme Court made it clear that one of the
    primary distinctions between the duty of good faith and the duty of
    care is the mental state required, but acknowledged that there is a
    large amount of overlap between those two duties as well. In re Walt
    
    Disney, 906 A.2d at 65
    (“The conduct that is the subject of due care
    may overlap with the conduct that comes within the rubric of good
    (continued . . .)
    10
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                             Opinion of the Court
    Thus, to adequately discharge her statutory duty of loyalty, the
    director must subjectively believe her actions are in the best interest
    of the corporation, and her subjective belief must be objectively
    reasonable—the reasonable person in those circumstances would
    likewise believe that the action would be in the best interests of the
    corporation. See MODEL BUS. CORP. ACT § 8.30 cmt. at 8-196 (AM. BAR
    ASS’N 2013 Revision) (“The phrase ‘reasonably believes’ is both
    subjective and objective in character. Its first level of analysis is
    geared to what the particular director, acting in good faith, actually
    believes . . . . The second level of analysis is focused specifically on
    ‘reasonably.’”). 12 Therefore, to breach (1)(c), the director must take
    some action that she either knows is not in the best interests of the
    corporation, or unreasonably or negligently believes is in the best
    interests of the corporation. Most importantly for this case, if the best
    interests of the corporation are served by the director’s actions then
    there is no claim under subsection (1)(c).
    (continued . . .)
    faith in a psychological sense, but from a legal standpoint those
    duties are and must remain quite distinct.”(footnote omitted)). While
    explaining this overlap and the distinctions between these duties the
    court stated that, in some cases, “two states of mind coexist in the
    same person: subjective bad intent (which would lead to a finding of
    bad faith) and gross negligence (which would lead to a finding of a
    breach of the duty of care).” 
    Id. at 65
    n.104. Thus, there are instances
    in which a director may breach the duty of care and the duty of good
    faith through the same conduct. Intentional or willful misconduct
    requires us to look into the subjective mental state of the director,
    whereas the URBCA’s codification of the duty of care is measured
    from an objective standard. See UTAH CODE § 16-10a-840(1)(b)
    (director must discharge duties “with the care an ordinarily prudent
    person in a like position would exercise under similar
    circumstances”).
    12 The URBCA is largely based on the 1984 version of the Model
    Business Corporation Act. UTAH BUS. CORP. ACT REVISION
    COMMITTEE, OFFICIAL COMMENTARY TO UTAH REVISED BUS. CORP. ACT
    1 (1992). While these comments are based on the 2013 version of the
    model act, they discuss the “standards of conduct” that have existed
    since the “1969 Model Act,” and are thus informative of the proper
    interpretation of the standards of conduct under the URBCA. MODEL
    BUS. CORP. ACT § 8.30 cmt. at 8-193 (AM. BAR. ASS’N 2013 Revision).
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    RAWCLIFFE v. ANCIAUX
    Opinion of the Court
    B. Standards of Liability Under Utah Code Section 16-10a-840(4)(b)
    ¶20 While Utah Code section 16-10a-840(1) establishes the
    standards of conduct for officers and directors, Utah Code section
    16-10a-840(4)(b) establishes the standards of liability. After
    establishing that a director or officer has breached a duty under
    subsection (1), the corporation or shareholder must prove that the
    duty was breached with any of the mental states noted in subsection
    (4)(b), that codifies, to some extent, the business judgment rule.
    Mr. Rawcliffe cites a string of Delaware cases for the proposition that
    the business judgment rule does not apply to “directoral self-
    compensation decisions.” See, e.g., Telxon Corp. v. Meyerson, 
    802 A.2d 257
    , 265 (Del. 2002). While this may be persuasive authority, and we
    can see the policy reasons for such a rule, we are bound by the plain
    language of the URBCA, which does not provide for any exceptions
    to the application of subsection (4)(b). As noted above, the language
    of the statute clearly spells out the elements that a corporation or
    shareholder must establish to hold directors or officers liable for
    their official acts.
    ¶21 Subsection (4)(b) provides that a director or officer can be
    liable for a breach of duty only if “the breach or failure to perform [a
    duty] constitutes gross negligence, willful misconduct, or intentional
    infliction of harm on the corporation or the shareholders.” UTAH
    CODE § 16-10a-840(4)(b). A director may breach one of the standards
    of conduct identified in subsection (1), but can be held liable only if
    her conduct falls under one of the mental states in subsection (4)(b).
    Thus, a director may act negligently in violating her duty to act in
    the best interests of the corporation, but unless her negligence rises
    to the level of gross negligence, she “is not liable to the corporation
    [or] its shareholders” for breaching a standard of conduct. 
    Id. § 16-
    10a-840(4).
    ¶22 The mental states in subsection (4)(b) range from “utter
    indifference . . . at best [to] a concerted effort to destroy the business
    at worst.” Wachocki v. Luna, 
    2014 UT App 139
    , ¶ 10, 
    330 P.3d 717
    (footnote omitted). Gross negligence is the minimum standard
    required to hold a director liable under the URBCA. “[G]ross
    negligence is ‘the failure to observe even slight care; it is carelessness
    or recklessness to a degree that shows utter indifference to the
    consequences that may result.’” Penunuri v. Sundance Partners, Ltd.,
    12
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                             Opinion of the Court
    
    2017 UT 54
    , ¶ 35, --- P.3d --- (quoting Blaisdell v. Dentrix Dental Sys.,
    Inc., 
    2012 UT 37
    , ¶ 14, 
    284 P.3d 616
    ). 13
    ¶23 While this court has never expressly defined “willful
    misconduct” in the context of corporate duties, we have defined it in
    other situations. In the judicial discipline context, we determined
    that a “wrongful purpose element should be necessary” to find
    willful misconduct. In re Worthen, 
    926 P.2d 853
    , 869 (Utah 1996). In
    the tort context, we held that willful misconduct, under the
    Limitation of Landowner Liability Act, “incorporates the elements of
    knowledge of the dangerous condition and of the fact that serious
    injury is a probable result, and inaction in the face of such
    knowledge . . . .” Golding v. Ashley Cent. Irrigation Co., 
    793 P.2d 897
    ,
    901 (Utah 1990); see also Atkin Wright & Miles v. Mountain States Tel. &
    Tel. Co., 
    709 P.2d 330
    , 335 (Utah 1985) (“Willful misconduct goes
    beyond gross negligence in that a defendant must be aware that his
    conduct will probably result in injury.”). Thus, the director or officer
    must take an action or fail to act when she knows that the action or
    failure to act will likely result in harm to the corporation.
    ¶24 The final mental state under subsection (4)(b) is the
    “intentional infliction of harm on the corporation or the
    shareholders.” UTAH CODE § 16-10a-840(4)(b). Under this mental
    state, not only does the director or officer know that the corporation
    is likely to be harmed by a certain action, but also that the director or
    officer’s actions are taken with the intent to harm the corporation or
    its shareholders.
    II. MR. RAWCLIFFE HAS FAILED TO STATE A CLAIM
    ¶25 Having determined the proper analysis under Utah Code
    section 16-10a-840, we now turn to Mr. Rawcliffe’s complaint to
    13 In Penunuri, we discussed, without determining, the mental
    state required for gross negligence. 
    2017 UT 54
    , ¶ 38 n.59. We
    recognized that some authorities, including some of our own
    precedent, “imply that a plaintiff must prove that a defendant acted
    with a certain mental state with respect to the risk created. But we
    have also suggested that gross negligence can be shown even
    without a ‘knowing’ state of mind.” 
    Id. (citations omitted).
    We do not
    conclusively address this issue here as it is not necessary to the
    outcome of this case. Under either standard, we determine that
    Mr. Rawcliffe has failed to state a claim for relief because he has
    failed to adequately allege that the Compensation Committee
    actually harmed the corporation or violated the purposes of the Plan.
    13
    RAWCLIFFE v. ANCIAUX
    Opinion of the Court
    determine if he has adequately pled causes of action under this
    section. Mr. Rawcliffe brought claims against the members of the
    Compensation Committee for breach of fiduciary duty and waste of
    corporate assets in authorizing the spring-loaded SSARs, and claims
    against one other director and several officers for breach of fiduciary
    duty and unjust enrichment for receiving the spring-loaded SSARs.
    We first discuss the pleading standard that Mr. Rawcliffe must meet,
    then review his claims against the members of the Compensation
    Committee. Finally, we turn to his claims against the other director
    and corporate officers.
    A. We Apply Utah Rule of Civil Procedure 9(c) to This Case
    ¶26 The district court held that Utah Rule of Civil Procedure
    9(c), 14 requiring a plaintiff to plead fraud with specificity, applied to
    Mr. Rawcliffe’s breach of fiduciary duties claims because “spring-
    loading sound[s] in fraud.” It relied on State v. Apotex Corp. for its
    statement that rule 9(c) “is not limited to allegations of common law
    fraud,” but instead “reach[es] all circumstances where the pleader
    alleges the kind of misrepresentations, omissions, or other
    deceptions covered by the term ‘fraud’ in its broadest dimension.” 
    2012 UT 36
    , ¶ 22, 
    282 P.3d 66
    (citation omitted). Mr. Rawcliffe does not
    challenge this holding on appeal, so we review his complaint to
    determine if it “state[s] with particularity the circumstances
    constituting” breach of fiduciary duty.15 UTAH R. CIV. P. 9(c).
    However, “intent, knowledge, and other conditions of a person’s
    mind may be alleged generally.” 
    Id. Thus, he
    must allege facts
    surrounding the actions the Compensation Committee took with
    particularity, but their intent can be pled generally. While intent
    14 The district court actually applied the old Utah Rule of Civil
    Procedure 9(b), which stated that, “In all averments of fraud or
    mistake, the circumstances constituting fraud or mistake shall be
    stated with particularity. Malice, intent, knowledge, and other
    condition of mind of a person may be averred generally.” UTAH R.
    CIV. P. 9(b) (2015). However, because there is no substantive
    difference concerning fraud between the old rule 9(b) and the new
    rule 9(c), we cite the new rule.
    15We do not hold that the heightened pleading standard in Utah
    Rule of Civil Procedure 9 applies to breach of fiduciary duty claims.
    We merely apply that standard because Mr. Rawcliffe waived any
    argument that his complaint should be subject to the general
    pleading standard in Utah Rule of Civil Procedure 8.
    14
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                             Opinion of the Court
    need only be pled generally, we still “need not accept [as true]
    extrinsic facts not pleaded nor need we accept legal conclusions in
    contradiction of the pleaded facts.” Am. W. Bank Members, L.C. v.
    State, 
    2014 UT 49
    , ¶ 7, 
    342 P.3d 224
    (citation omitted).
    B. Mr. Rawcliffe’s Claims Against the Compensation Committee
    ¶27 At oral argument, Mr. Rawcliffe cited two allegations in his
    complaint that he argues most strongly show a breach of fiduciary
    duty by the members of the Compensation Committee and meet the
    heightened pleading standard. First, the complaint alleges that “the
    members of the Board’s Compensation Committee . . . knowingly
    and deliberately violated USANA’s stockholder-approved equity
    plan.” The allegation that the Compensation Committee violated the
    Plan is a conclusory statement that we do not assume is true, absent
    additional allegations supporting it. See Am. W. Bank Members, 
    2014 UT 49
    , ¶ 7. Second, the complaint alleges that “the Compensation
    Committee deliberately granted the SSARs . . . [to] ensure that the
    SSARs carried an artificially low exercise price,” and that the
    committee thereby “improperly violated the Plan by granting
    awards which they knew would be ‘in the money’ once the positive
    news . . . was disclosed the following day.” At best, these two
    allegations combine to allege that the Compensation Committee
    knowingly and deliberately approved spring-loaded SSARs.
    ¶28 However, Mr. Rawcliffe conceded on appeal that the
    Compensation Committee complied with the “strict letter” of the
    Plan when it authorized the spring-loaded SSARs. He argues only
    that the Compensation Committee violated “the spirit and intent” of
    the Plan when they “us[ed] non-public, inside information to
    manipulate ‘fair market value’ to benefit themselves.” We agree with
    Mr. Rawcliffe that if, and we emphasize if, the directors intended to
    circumvent the purposes of the Plan to benefit themselves to the
    detriment of the corporation or its shareholders, even if they
    complied with the “letter” of the Plan, he has adequately pled a
    breach of the duty of good faith. However, we do not agree with
    Mr. Rawcliffe’s analysis of what purposes the Plan intended to
    fulfill, and hold that spring-loading does not, per se, violate those
    purposes. 16
    16 The Plan was attached to Mr. Rawcliffe’s Verified Stockholder
    Derivative Complaint as Exhibit A. Because it was attached, and was
    therefore a part of the pleading, we may review it on a motion to
    dismiss without converting the motion into a motion for summary
    (continued . . .)
    15
    RAWCLIFFE v. ANCIAUX
    Opinion of the Court
    ¶29 The Plan is a document that governs the procedures the
    Compensation Committee must follow when it authorizes equity
    incentive awards. We interpret the governing documents of a
    corporation the same way we interpret a contract. Dansie v. City of
    Herriman, 
    2006 UT 23
    , ¶ 6, 
    134 P.3d 1139
    (interpreting articles of
    incorporation “using the same approach that we apply to the
    interpretation of contracts generally”). Our purpose in interpreting a
    contract is to “ascertain the intentions of the parties to the contract.”
    WebBank v. Am. Gen. Annuity Serv. Corp., 
    2002 UT 88
    , ¶ 17, 
    54 P.3d 1139
    . “In interpreting a contract, [w]e look to the writing itself to
    ascertain the parties’ intentions, and we consider each contract
    provision . . . in relation to all of the others, with a view toward
    giving effect to all and ignoring none.” 
    Id. ¶ 18
    (alterations in
    original) (internal quotations marks omitted). While interpreting
    such a document, we look first to “the plain language of its text.”
    Dansie, 
    2006 UT 23
    , ¶ 6.
    ¶30 The plain language of the Plan clearly denotes its purposes.
    First, the Plan defines fair market value as the “mean between the
    highest and lowest selling price of a share of Common Stock on the
    principal exchange on which shares of Common Stock are then
    trading” on the date on which the equity incentive award is
    announced. If the board of directors and shareholders who approved
    the Plan intended “fair market value” to mean something different
    (such as the actual value of the shares based on all non-public
    information rather than its market value based on its current price
    on the stock market) they would have stated as much. We cannot
    read into the Plan a “spirit and intent” that runs counter to what is
    actually written.
    ¶31 Additionally, the Plan specifically lays out its purposes.
    Article I of the Plan provides that its four purposes are to:
    (1) Closely associate the interests of management . . .
    with the shareholders of the Company by
    reinforcing the relationship between participants’
    rewards and shareholder gains;
    (2) Provide management and employees with an
    equity ownership in the Company commensurate
    (continued . . .)
    judgment. See Oakwood Vill. LLC v. Albertsons, Inc., 
    2004 UT 101
    ,
    ¶¶ 12–13, 
    104 P.3d 1226
    .
    16
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                            Opinion of the Court
    with Company performance, as reflected in
    increased shareholder value;
    (3) Maintain competitive compensation levels; and
    (4) Provide an incentive to management and
    employees to remain in continuing employment
    with the Company and to put forth maximum
    efforts for the success of its business.
    ¶32 Article I ends by stating that the Plan is “intended to
    provide flexibility to the Company in its ability to motivate, attract,
    and retain the services of members of the Board . . . upon whose
    judgment, interest, and special effort the successful conduct of the
    Company’s operation is largely dependent.” The Plan also gives the
    Compensation Committee the “exclusive power, authority and
    discretion to” determine the “number of shares of Stock” that should
    be issued as an incentive, and the “terms and conditions of any
    Award . . . including, but not limited to, the exercise price.” It is
    difficult to imagine that such a broadly-worded document intends to
    completely prohibit spring-loading when it grants the Compensation
    Committee such large discretion in determining the amount of
    SSARs that can be awarded. If the Compensation Committee
    believed that spring-loading would violate the Plan or a standard of
    conduct under the URBCA, they could have simply awarded
    themselves and the other defendants a larger number of SSARs to
    make up the difference in profit from not spring-loading their
    awards. The “spirit” of the Plan is detailed quite well by the Plan
    itself, and we cannot say that spring-loading per se violates any of
    these purposes.
    ¶33 As spring-loading is not a per se violation of the Plan, the
    proper question is whether the directors and officers determined, in
    good faith, that the amount of spring-loaded SSARs and their
    attendant value met the purposes laid out in Article I. Thus,
    Mr. Rawcliffe would have to plead facts sufficient to show: 1) that
    the value of the awards were determined in bad faith or that the
    value of the awards did not serve the best interests of the
    corporation, see supra ¶¶ 13–19; UTAH CODE § 16-10a-840(1), (4)(a);
    and 2) that the Compensation Committee approved the awards with
    the intent to harm the corporation or that they were utterly
    indifferent to the fact that the awards would harm the corporation,
    see supra ¶¶ 20–24; UTAH CODE § 16-10a-840(4)(b).
    ¶34 In determining whether the corporation was actually
    harmed, or that the Compensation Committee intended to harm the
    corporation, we must look again to the purposes of the Plan. If the
    17
    RAWCLIFFE v. ANCIAUX
    Opinion of the Court
    value of the spring-loaded SSARs, or the value of any equity
    incentive award, meets the purposes laid out in the Plan, then
    USANA and its shareholders have not been harmed. Indeed, if the
    purposes of the Plan have been met, then the spring-loaded SSARs
    have benefited USANA and its shareholders by incentivizing its
    officers. The shareholder-approved Plan details what the corporation
    and its shareholders believe is in their best interests. We are bound
    by the plainly stated purposes of the Plan in determining what is in
    the corporation’s best interests. If the Compensation Committee
    takes an action that is in the corporation’s best interests, then the
    corporation has not been harmed.
    ¶35 Mr. Rawcliffe alleges that the awards were “intended to and
    did line the pockets of the [defendants] at the expense of USANA
    and its shareholders.” But this does not show that the purposes of
    the Plan were violated. Every compensation decision enriches the
    recipient at the expense of the company. One of the primary
    purposes of the Plan is to incentivize directors and officers to stay
    with the corporation by enriching them. The SSARs clearly met this
    purpose by 1) increasing the compensation of the directors and
    officers and 2) maintaining a 23-to-42 month vesting period, thereby
    incentivizing the directors and officers to stay with the company (so
    that they could actually exercise the SSARs) and continue to work
    hard to increase the company’s stock price (to make sure the SSARs
    were “in the money” and to maximize their value).
    ¶36 Mr. Rawcliffe did not allege that the defendants were over-
    compensated, just that they received spring-loaded SSARs.
    Essentially, Mr. Rawcliffe argues that spring-loaded equity incentive
    awards are a per se violation of the Plan’s purposes. 17 We do not
    17 Mr. Rawcliffe acknowledged in his brief that he did “not allege
    that the Directors and Officers were not entitled to receive
    compensation for their roles at USANA, nor does he allege that the
    Directors and Officers were not entitle to receive SSARs at all. To the
    contrary, the Complaint acknowledges that the Plan expressly
    permits the Compensation Committee to grant properly priced
    SSARs and other types of equity awards . . . . What Rawcliffe alleges,
    however, is that the Directors and Officers were not entitled to
    receive spring-loaded SSARs.” His only argument that the SSARs
    were not properly priced is that they were spring-loaded. Thus, he
    argues that spring-loading is a per se violation of the Plan’s
    purposes.
    18
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                             Opinion of the Court
    agree. To meet rule 9(c)’s standard of pleading, Mr. Rawcliffe needed
    to plead something more to show how these particular awards
    violated the purposes of the Plan, thereby harming the company.
    ¶37 We can imagine instances in which spring-loading would be
    a breach of one of the standards of conduct listed in Utah Code
    section 16-10a-840(a) and would also be done with a mental state in
    section 16-10a-840(4)(b) that is required to hold the director liable. As
    an example, to survive a motion to dismiss, the complaint would
    have to allege that the Compensation Committee acted in bad faith
    by awarding spring-loaded SSARs that were not tied to “shareholder
    gains” or “increased shareholder value,” or that they somehow
    violated other purposes laid out in Article I or inferred from the text
    of the Plan. The complaint would also have to allege that the
    Compensation       Committee        intentionally    over-compensated
    themselves, or that they were utterly indifferent to the fact that they
    were over-compensating themselves and the other defendants. See
    generally UTAH CODE § 16-10a-840(4)(b).
    ¶38 However, Mr. Rawcliffe has failed to allege any facts
    showing that the Compensation Committee did not meet the
    purposes of the Plan in awarding the spring-loaded SSARs.
    Additionally, he has not alleged any facts sufficient to show that the
    Compensation Committee was utterly indifferent or intentionally
    violated the purposes of the Plan. He simply alleges that the
    Compensation Committee “knowingly spring-loaded” the SSARs.
    But incentivizing the directors and officers by awarding them with
    bonuses is one of the primary purposes of the Plan, so we cannot see
    how it harmed the corporation absent something more. We affirm
    the district court’s dismissal of Mr. Rawcliffe’s breach of fiduciary
    duty claim against the members of the Compensation Committee.
    ¶39 Mr. Rawcliffe’s claim for corporate waste against the
    Compensation Committee members is likewise unavailing. While we
    have mentioned the claim of corporate waste before, we have never
    actually defined its scope or applied it in a case. See, e.g., Reedeker v.
    Salisbury, 
    952 P.2d 577
    , 587 n.11 (Utah Ct. App. 1998) (stating that the
    parties argued over whether a claim for corporate waste exists in
    Utah, but the court “need not decide this issue”); Equitable Life & Cas.
    Ins. Co. v. Inland Printing Co., 
    484 P.2d 162
    , 163 (Utah 1971) (saying
    that “[d]irectors or officers may be liable to the corporation or
    stockholders for mismanagement of the business of the corporation
    or waste of its assets” without defining or applying any standard);
    Arndt v. First Interstate Bank of Utah, N.A., 
    1999 UT 91
    , ¶ 18, 
    991 P.2d 584
    (mentioning corporate waste without applying it or addressing
    its scope).
    19
    RAWCLIFFE v. ANCIAUX
    Opinion of the Court
    ¶40 On appeal, Mr. Rawcliffe does not argue what the standard
    should be for a claim of corporate waste. He merely spends a single
    paragraph making the bald assertion that spring-loaded SSARs are a
    waste of corporate assets because a Delaware court has said as much.
    He neither recites the standard for corporate waste in Delaware, nor
    argues why we should adopt such a standard. “[W]e are not a
    depository in which the appealing party may dump the burden of
    argument and research.” Bank of Am. v. Adamson, 
    2017 UT 2
    , ¶ 11, 
    391 P.3d 196
    (citation omitted). This is especially true when the appellant
    seeks to impose liability under a theory that has not been applied
    before in this jurisdiction. We hold that Mr. Rawcliffe has failed “to
    carry [his] burden of persuasion on appeal,” and we affirm the
    district court. 
    Id. ¶ 12
    (citation omitted).
    C. Mr. Rawcliffe’s Claims Against the Other Director and Officers
    ¶41 Finally, we dismiss Mr. Rawcliffe’s claims against the other
    defendants who passively received the spring-loaded SSARs.
    Mr. Rawcliffe brought claims against one director and several
    officers for breach of fiduciary duty and unjust enrichment. As we
    have already dismissed his claim for breach of fiduciary duty against
    the members of the Compensation Committee, who actively
    approved the SSARs, we cannot see how a director or officer who
    passively received the SSARs breached a fiduciary duty or violated
    the “spirit” of the Plan.
    ¶42 Additionally, we hold that Mr. Rawcliffe has failed to state a
    claim for unjust enrichment. We cannot see how it is inequitable for
    the director and officers to retain the benefit of the spring-loaded
    SSARs. See Desert Miriah, Inc. v. B & L Auto, Inc., 
    2000 UT 83
    , ¶ 13, 
    12 P.3d 580
    (Unjust enrichment requires that “the acceptance or
    retention by the conferee of the benefit [must be] under such
    circumstances as to make it inequitable for the conferee to retain the
    benefit without payment of its value.” (citation omitted)). According
    to the facts pled in the complaint, the Compensation Committee
    approved the spring-loaded SSARs in strict compliance with the
    “letter” of the Plan, and the spring-loaded SSARs did not violate any
    of the purposes of the Plan. Unless he were to allege that the director
    and officers were over-compensated, or that the awards somehow
    violated the Plan, it is not unjust for the director and officers to keep
    20
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                             Opinion of the Court
    their awards. 18 We affirm the district court’s dismissal of the
    remaining defendants in the action.
    CONCLUSION
    ¶43 The Utah Revised Business Corporation Act establishes
    when a corporate director or officer may be held liable to the
    corporation or its shareholders for her official acts. Mr. Rawcliffe has
    failed to allege sufficient facts to establish any breach of such a duty.
    We cannot say that spring-loading SSARs constitutes a per se
    violation of USANA’s 2006 Equity Incentive Plan, and Mr. Rawcliffe
    has failed to allege any facts supporting the inference that the
    defendants intended to harm, or actually harmed the corporation.
    We affirm the district court’s dismissal of this case without
    prejudice.
    18   We also note that this claim may be barred by Utah Code
    section 16-10a-840(4), because that section limits director and officer
    liability. However, neither party made this argument, so we do not
    address this question.
    21