Macris v. Sevea International, Inc. , 739 Utah Adv. Rep. 50 ( 2013 )

2013 UT App 176_________________________________________________________
THE UTAH COURT OF APPEALS
MICHAEL N. MACRIS,
Plaintiff and Appellee,
v.
SEVEA INTERNATIONAL, INC.; JERRY SAXTON;
KATIE SAXTON; MICHAEL CONNOR; SEVEA INTERNATIONAL
PRODUCTIONS, LLC; AMERICAN EQUITIES MANAGEMENT, LLC;
AND ANGELS OF AMERICA, LLC,
Defendants and Appellants.
Opinion
No. 20110439‐CA
Filed July 18, 2013
Third District, Salt Lake Department
The Honorable Paul G. Maughan
No. 070903010
Zachary E. Peterson and Steven H. Bergman,
Attorneys for Appellants
Robert K. Hilder, Attorney for Appellees
JUDGE CAROLYN B. MCHUGH authored this Opinion, in which
JUDGES GREGORY K. ORME and MICHELE M. CHRISTIANSEN
concurred.
McHUGH, Judge:
¶1 Jerry Saxton, Katie Saxton, Michael Connor, Sevea
International Productions, LLC, American Equities Management,
LLC, and Angels of America, LLC (collectively, Appellants) appeal
the trial court’s entry of judgment in favor of Michael N. Macris.
We affirm in part, reverse in part, and remand for further
proceedings consistent with this opinion.
Macris v. Sevea Int’l, et al.
BACKGROUND
¶2 Macris and Christina McNally formed Sevea International,
Inc. (Sevea) in February 2006, for the purpose of marketing and
selling, among other products, customized artificial fingernails.1 In
developing the artificial fingernails, Sevea utilized certain patents,
inventions, and discoveries that were transferred to Sevea by
Artificial Nail Technologies, Inc. (ANT) pursuant to an asset
contribution agreement dated February 28, 2006. The asset
contribution agreement also required Sevea to issue ANT ten
million shares of Sevea stock. Additionally, Dr. Craig Gifford, a
principal and shareholder in ANT and an inventor on the patents,
was to assign those patents to Sevea by March 27, 2006.
¶3 In March 2006, Jerry Saxton invested $250,000 in Sevea, and
on April 15, 2006, Macris became a shareholder of Sevea. However,
on April 17, 2006, ANT elected to terminate the asset contribution
agreement on the ground that Sevea never issued the ten million
shares of Sevea stock to ANT. Shortly thereafter, ANT filed a
federal lawsuit (the Federal Lawsuit) against Sevea and Macris
seeking the return of its intellectual property held by Sevea and a
declaratory judgment that the asset contribution agreement had
terminated.
¶4 In June 2006, Jerry Saxton invested another $500,000 in
Sevea. By August 4, 2006, Macris owned six million shares, Jerry
Saxton and his wife, Katie Saxton, together owned six million
shares, and McNally owned one‐and‐a‐half million shares of Sevea
stock. Macris served as Sevea’s Secretary/Treasurer and as a
director, Jerry Saxton served as Sevea’s CEO and as a director, and
Katie Saxton served as Sevea’s marketing director. At about that
time, Sevea entered into an employment agreement with Gifford
that included a non‐compete provision precluding him from
1. McNally has never been a party to these proceedings.
20110439‐CA 2 2013 UT App 176Macris v. Sevea Int’l, et al.
working for a competing artificial fingernail‐making entity for
three years after termination of the employment agreement.
¶5 On or about September 12, 2006, Sevea entered into an
agreement with Macris Enterprises, LLC, making it the base level
of a multi‐level marketing program selling Sevea products under
which all other distributors would be formed. On or about
September 29, 2006, Macris, McNally, and the Saxtons entered into
a voting agreement (the Voting Agreement) that required Macris
and Jerry Saxton to agree on all decisions for the operation of
Sevea. The Voting Agreement did not include procedures to be
followed in the event that Macris and Jerry Saxton became
deadlocked.2 By October 2006, Sevea began selling its product in
earnest.
¶6 By December 2006, problems had developed between Macris
and Jerry Saxton regarding the management of Sevea. After
attempts to resolve those issues failed, Jerry Saxton unilaterally
declared Sevea closed, terminated all of Sevea’s employees, and
moved all of the company’s manufacturing equipment, computers,
intellectual property, and other assets to a different office location
in Utah. Jerry Saxton formed a new company called Sevea
International Productions, LLC (Sevea Productions), rehired
Gifford and several other Sevea employees, and continued to
develop, manufacture, and sell the same type of artificial
fingernails previously sold by Sevea. Sevea Productions also used
the same trade name and telephone number as Sevea and wrote to
Sevea’s distributors suggesting that they become wholesale
distributors for the new company.
¶7 On February 22, 2007, Macris filed a complaint in the Third
District Court asserting a derivative action on behalf of Sevea
against the Saxtons, Gifford, and another party not involved in this
2. Because the Voting Agreement also provided that only Macris
and Jerry Saxton could vote, this omission was significant.
20110439‐CA 3 2013 UT App 176Macris v. Sevea Int’l, et al.
appeal for breach of fiduciary duties, conversion of corporate
assets, and interference with Sevea’s prospective contractual
rights.3 Macris simultaneously sought a temporary restraining
order and preliminary injunction prohibiting the Saxtons, Gifford,
and Sevea Productions from violating various agreements,
including Gifford’s non‐compete agreement, and requiring the
return of Sevea’s equipment, computers, intellectual property,
records, and other assets.
¶8 The trial court granted the temporary restraining order
against Gifford on March 2, 2007, and held an evidentiary hearing
on the motion for preliminary injunction on April 11 and 12, 2007.
The trial court issued a memorandum decision granting the
preliminary injunction on behalf of Sevea against Gifford, the
Saxtons, and Sevea Productions. The preliminary injunction
enjoined Gifford from violating the non‐compete agreement and
enjoined the Saxtons and Sevea Productions from “developing,
manufacturing, and/or selling custom fitting, reusable, mass‐
produced fingernails”; “from engaging in any business enterprise
utilizing deceptively similar names to [Sevea]”; “from obtaining,
using, or disclosing any confidential, proprietary trade secret
information belong[ing] to [Sevea]”; and “from removing, hiding,
secreting, harming, injuring, or in any manner altering the
inventory, sales materials, accounting books and records,
[d]istributor files, customer files, fixtures, and equipment, and any
and all other documents and assets of [Sevea].” The injunction also
required the Saxtons and Gifford to relinquish all Sevea inventory
to Macris, for and on behalf of Sevea.
¶9 The Saxtons and Gifford filed an emergency motion to
modify the preliminary injunction, asking the trial court “to clarify
3. Subsequently, on April 14, 2008, Macris filed an amended
verified complaint that added individual claims for, among other
things, malicious prosecution against the Saxtons and Gifford and
slander against Jerry Saxton.
20110439‐CA 4 2013 UT App 176Macris v. Sevea Int’l, et al.
that Sevea will be managed and controlled in accordance with the
Voting Agreement and that the [preliminary injunction] is not to be
construed as termination [of the Voting] Agreement.” They also
filed a motion requesting that a custodian be appointed to whom
the Sevea assets could be returned, indicating that “[a] custodian
could ensure that Sevea could continue to operate to provide
employment for Sevea employees and produce nail products for
sale by Sevea’s distributors while Sevea’s directors resolve their
internal disputes.” In response, Macris argued that the Voting
Agreement was terminated because Sevea had ceased doing
business or, in the alternative, that he should be appointed as the
custodian if the trial court decided that a custodian was
appropriate.
¶10 On July 16, 2007, the trial court approved the appointment
of a custodian and ordered the parties to agree upon an individual
to serve in that capacity within ten days, but it declined to
determine the continuing validity of the Voting Agreement at that
time. The parties agreed to designate Gil Miller as the custodian.
Subsequently, the Saxtons and Gifford filed several motions
seeking to modify or dissolve the preliminary injunction, claiming
that it was overbroad and unnecessary based on the appointment
of the custodian and other changed circumstances. The trial court
denied these motions.
¶11 Instead of turning Sevea’s assets over to the custodian, the
Saxtons and Gifford removed them from Sevea’s Utah facilities. It
was later discovered that in May and August 2007, shortly after the
appointment of the custodian, Jerry Saxton and Gifford moved
Sevea’s manufacturing equipment, computers, files, and business
records to Texas. In response, Macris filed a motion to hold the
Saxtons and Gifford in contempt for violating the preliminary
injunction. The trial court held an evidentiary hearing on that
motion on December 17, 2007.
¶12 On December 19, 2007, the trial court entered an order for
civil contempt (the First Contempt Order) finding that
20110439‐CA 5 2013 UT App 176Macris v. Sevea Int’l, et al.
“[Appellants’] attorney . . . admitted in open court [that] . . . [Jerry]
Saxton and . . . Gifford removed equipment, records and computers
in violation of the Court’s Preliminary Injunction Order.” The trial
court further found that Appellants had continued to produce
artificial fingernails after the preliminary injunction was issued;
that Appellants sold the nails to individuals and nail salons who
comprised the same customer base that had previously purchased
from Sevea; that the name Sevea had been used by Appellants on
buildings in Texas; and that “[t]he same pictures owned and used
by Sevea in advertising brochures are now in the public market
place again promoting nail products, despite [Appellants’] claims
they have no knowledge thereon,” which the court found not to be
credible. In addition, the trial court found that Gifford’s
employment was “continued through a series of manipulations,
including . . . forming new companies (including but not limited to
[Angels of America, LLC,] and [American Equities Management,
LLC,]) of which . . . [the] Saxtons and . . . Gifford and his wife are
owners,” and that these companies were “a sham and [were] an
attempt to try to avoid the Preliminary Injunction.” The trial court
further found that Appellants “kept . . . equipment and records in
Texas, computers and records . . . have not [been] returned to the
possession of the custodian of [Sevea],” and that “Gifford has
removed information and data from computers and has made
copies of the information or placed it on other computers in his
possession.”
¶13 As a sanction for this contemptuous conduct, the trial court
ordered that the Saxtons and Gifford each pay a $1,000 fine and
sentenced each of them to thirty days in jail. However, the trial
court suspended the sentence to allow the Saxtons and Gifford an
opportunity to purge their contempt. The trial court also ordered
Appellants to comply with all the terms of the preliminary
injunction, including Gifford’s non‐compete agreement, and
ordered them to return the balance of the equipment, computers,
servers, intellectual property, and all records and documents to the
custodian within seven days.
20110439‐CA 6 2013 UT App 176Macris v. Sevea Int’l, et al.
¶14 In March 2008, Macris filed a second motion seeking to hold
Appellants in contempt of the preliminary injunction order as well
as the trial court’s First Contempt Order. Among other things,
Macris’s motion alleged that Appellants had failed to return
Sevea’s equipment and to pay the court‐imposed fees.
Subsequently, a forensic evaluation of Gifford’s laptop computer
indicated that scrubbing and deletion efforts had been employed
to purge information from it. Specifically, Macris alleged that
hundreds of thousands of electronic files were deleted from the
laptop as well as Sevea Productions’ server in violation of the trial
court’s First Contempt Order.
¶15 The trial court held an evidentiary hearing on October 21,
2008, to address the various allegations of contempt. Michael
Connor, a former Sevea employee whom Jerry Saxton terminated
and then rehired to work for Sevea Productions, testified that
Gifford had directed him to delete the files from Sevea
Productions’ server. Because Jerry Saxton and Gifford’s attorney
told Gifford that he need not appear, Gifford was not present at the
hearing. At the conclusion of the hearing, the trial court issued an
oral ruling (the Second Contempt Order) holding Gifford in
contempt and requiring him to serve a thirty‐day jail sentence.
¶16 On August 15, 2008, Macris moved to strike Appellants’
pleadings due to their spoliation of evidence and for committing
fraud upon the trial court. After briefing and an evidentiary
hearing, the trial court denied Macris’s motion, noting that “certain
of the [Appellants’] conduct in this matter has indeed bordered on
fraud upon this Court and upon the other parties to this action” but
concluding that striking Appellants’ pleadings was “simply too
severe a sanction” at that time.
¶17 Macris filed a renewed motion for contempt against Saxton
on December 18, 2008. Before the trial court could hold an
evidentiary hearing on Macris’s renewed contempt motion,
additional incidents occurred. On March 17, 2009, the trial court
held a hearing and issued an order that Macris’s expert witness be
20110439‐CA 7 2013 UT App 176Macris v. Sevea Int’l, et al.
allowed to enter the Saxtons, American Equities Management, and
Sevea Productions’ premises in Texas to conduct forensic imaging
of all computer hard drives and storage devices. The court also
ordered Jerry Saxton to make his personal laptop computer
available for inspection. The computers and equipment were to be
made available no later than March 19, 2009. Despite the trial
court’s order, Appellants denied Macris’s expert access to the
computers. As a result, the trial court extended the time to make all
of the computer hard drives and storage devices available for
forensic imaging until March 25, 2009. The trial court also ordered
that the Saxtons be available for depositions during a six‐day
period in April 2009 and set a May 5 and 6, 2009 hearing date on
Macris’s renewed motion for contempt.
¶18 The Saxtons failed to appear for depositions during the
designated period. The Saxtons and Connor failed to appear at the
May 5 and 6, 2009 contempt hearing. However, Gifford and his
wife did appear. Gifford testified that while he had scrubbed
electronic files from his laptop computer, he had neither deleted
nor ordered the deletion of any files from Sevea Productions’
server. Furthermore, Gifford indicated that he was physically
present in Utah when the deletion of the files from Sevea
Productions’ server took place in Texas.
¶19 After the hearing, the trial court issued an order and entry
of judgment (the Final Contempt Order). The trial court found,
among other things, that the Saxtons had violated the trial court’s
order to appear for depositions during the designated six‐day
period; that Jerry Saxton and Connor had committed perjury
during the course of the October 21, 2008 hearing, taking advantage
of the fact that Gifford had been told by Jerry Saxton and his
attorney that he need not appear; and that Appellants had violated
the trial court’s orders by refusing Macris’s expert access to a
portion of the building where the artificial nails were being
manufactured. In all, the Final Contempt Order includes over fifty
findings involving multiple instances of contempt, spoliation of
evidence, discovery violations, and acts of perjury by Appellants
20110439‐CA 8 2013 UT App 176Macris v. Sevea Int’l, et al.
from the date of issuance of the preliminary injunction in May 2007
through August 2009. Based on Appellants’ repeated
contemptuous conduct, the trial court struck their pleadings and
entered default judgment against them.4
¶20 In September 2009, the trial court held a bench trial on the
issues of damages. The Saxtons again failed to appear. Both Macris
and Appellants offered expert testimony on the value of the lost
business opportunity and ownership of Sevea, as well as the loss
of income from Macris’s distributorship interest. While Macris’s
expert testified that the total loss amounted to $5,926,000, including
$4,400,000 attributable to the value of Sevea, Appellants’ expert
valued Sevea at $227,712. In addition, Macris testified concerning
the damages he had suffered due to the Saxtons’ slander and
malicious prosecution. Based on the evidence presented, including
Macris’s testimony regarding the Saxtons’ wealth, the trial court
entered a memorandum decision on December 4, 2009, awarding
Macris and Macris Enterprises damages “[w]ith respect to Macris
Enterprises’ lost distributorship income and, as a corollary, the
value of the ownership interest in Sevea.” The trial court calculated
Macris’s lost distributorship income and ownership interest in
Sevea by determining the value of the company immediately
before Appellants misappropriated its assets and then awarded
Macris half that amount. The trial court also awarded Macris actual
damages for slander per se, malicious prosecution,5 and punitive
damages for “misconduct [that was] ongoing, egregious and
reprehensible.”
4. Appellants’ present counsel did not participate in the trial
proceedings that resulted in the contempt sanctions. Counsel for
both sides on appeal have performed professionally before this
court.
5. Although the court entered judgment for abuse of process, the
amended verified complaint actually asserts a claim for malicious
prosecution. For purposes of our analysis, we refer to this claim as
malicious prosecution.
20110439‐CA 9 2013 UT App 176Macris v. Sevea Int’l, et al.
¶21 On April 1, 2011, the overall award was reduced to a written
judgment in favor of Macris against Appellants for $113,856, jointly
and severally, “as a result of default being entered against them
[for] . . . breaches of fiduciary duties, conspiracy to breach fiduciary
duties, conversion, and interference with contractual relations”;
judgment in favor of Macris in the amount of $10,000 against the
Saxtons, jointly and severally, for malicious prosecution; judgment
in favor of Macris in the amount of $100,000 against Jerry Saxton
for slander per se; and judgment in favor of Macris for $1,119,280
in punitive damages against Appellants, jointly and severally, “for
their willful and malicious conduct.” The trial court also awarded
Macris $300,000 in attorney fees. Appellants filed a timely appeal
from the judgment against them.
ISSUES AND STANDARDS OF REVIEW
¶22 Appellants contend that the trial court exceeded its
discretion by striking their pleadings and entering default
judgment against them. “As a general rule, district courts are
granted a great deal of deference in selecting discovery sanctions,
and we overturn a sanction only in cases evidencing a clear abuse
of discretion.” Kilpatrick v. Bullough Abatement, Inc., 2008 UT 82,
¶ 23, 199 P.3d 957. Furthermore, a trial court has inherent authority
to strike a party’s pleadings as a sanction for contempt. Chen v.
Stewart, 2005 UT 68, ¶ 43, 123 P.3d 416 (“[A] court has the inherent
authority to strike a party’s pleadings and enter a default judgment
if the party engages in conduct designed to improperly influence
the court’s decision on the merits of the case, such as perjury or
obstruction of justice, or if the conduct itself tends to demonstrate
bad faith or a lack of merit.”).
¶23 Appellants next argue that the trial court erred when it
denied their motion to dismiss the derivative proceedings. “The
propriety of a trial court’s denial of a motion to dismiss is a
question of law that we review for correctness.” Buckner v. Kennard,
2004 UT 78, ¶ 9, 99 P.3d 842. “Only if it is clear that the claimant is
20110439‐CA 10 2013 UT App 176Macris v. Sevea Int’l, et al.
not entitled to relief under any state of facts that could be proven
to support the claim should a motion to dismiss be granted.” Id.¶24 Appellants also claim that the trial court exceeded its
discretion in granting Macris’s motion for a preliminary injunction
and then failing to dissolve it based on new facts and changed
circumstances. “A trial court’s decision to grant a preliminary
injunction is reviewed for abuse of discretion.” Chen v. Stewart,
2004 UT 82, ¶ 27, 100 P.3d 1177. “[I]n granting or refusing
interlocutory injunctions the court shall similarly set forth the
findings of fact . . . , [which] shall not be set aside unless clearly
erroneous, and due regard shall be given to the opportunity of the
trial court to judge the credibility of the witnesses.” Utah R. Civ. P.
52(a).
¶25 Appellants further claim that the trial court exceeded its
discretion in denying their motion for a stay pending resolution of
the Federal Lawsuit. We review a trial court’s decision to deny a
motion to stay for abuse of discretion. Lewis v. Moultree, 627 P.2d
94, 96 (Utah 1981) (“It lies within the inherent powers of the courts
to grant a stay of proceedings. It is a discretionary power . . . .”).
¶26 Last, Appellants contend that the trial court erred in
awarding actual damages unsupported by the record and in
awarding punitive damages that are excessive and also
unsupported. “We review for an abuse of discretion the trial
court’s determination that [Macris] failed to introduce sufficient
evidence to establish damages, and we will not overturn the trial
court’s decision unless there was no reasonable basis for the
decision.” See Richards v. Brown, 2009 UT App 315, ¶ 12, 222 P.3d
69. “Whether punitive damages [should be] awarded is generally
a question of fact within the sound discretion of the [fact finder],
and will not be disturbed absent an abuse of discretion.” Long v.
Stutesman, 2011 UT App 438, ¶ 14, 269 P.3d 178 (alterations in
original) (citation and internal quotation marks omitted). In
Crookston v. Fire Insurance Exchange, 817 P.2d 789 (Utah 1991),
holding modified by Westgate Resorts, Ltd. v. Consumer Protection
20110439‐CA 11 2013 UT App 176Macris v. Sevea Int’l, et al.
Group, LLC, 2012 UT 55, 285 P.3d 1219, the Utah Supreme Court
listed seven factors to be considered in assessing the amount of
punitive damages awarded. Id. at 808; see also Smith v. Fairfax
Realty, Inc., 2003 UT 41, ¶ 32, 82 P.3d 1064. The Utah Supreme
Court “has adopted a de novo standard for reviewing jury and trial
court conclusions under the Crookston factors.” Smith, 2003 UT 41,
¶ 31.
ANALYSIS
I. Default Judgment
A. Dismissal as a Sanction
¶27 Appellants argue that the trial court exceeded its discretion
by striking their pleadings and entering default judgment against
them. Rather than challenging the trial court’s finding that
Appellants were in contempt for numerous violations of the trial
court’s prior orders, or even mentioning the many discovery
violations that the trial court relied on in striking their pleadings,
Appellants argue that their conduct was a result of the trial court’s
error in permitting Macris to bring the derivative action and its
abuse of discretion in issuing the preliminary injunction.
¶28 Appellants’ attempt to shift responsibility for their blatant
violations of binding orders to the trial court is entirely
inappropriate. As the Utah Supreme Court has made clear, “[t]he
proper method for contesting an adverse ruling is to appeal it, not
to violate it.” State v. Clark, 2005 UT 75, ¶ 36, 124 P.3d 235.
Moreover, “[t]he orderly and expeditious administration of justice
by the courts requires that an order issued by a court with
jurisdiction over the subject matter and person must be obeyed by
the parties until it is reversed by orderly and proper proceedings.”
Maness v. Meyers, 419 U.S. 449, 459 (1975); see also United States v.
United Mine Workers of Am., 330 U.S. 258, 293 (1947) (“[A]n order
issued by a court with jurisdiction over the subject matter and
20110439‐CA 12 2013 UT App 176Macris v. Sevea Int’l, et al.
person must be obeyed by the parties until it is reversed by orderly
and proper proceedings. This is true without regard even for the
constitutionality of the Act under which the order is issued.”
(citation omitted)). Thus, even if the trial court did err or exceed its
discretion during the trial court proceedings, Appellants were
obligated to comply with the trial court’s orders and assert their
challenges through orderly and proper proceedings. Appellants’
dissatisfaction with the trial court’s orders does not relieve them
from the consequences of their numerous willful violations of those
orders. See State v. Cherryhomes, 840 P.2d 1261, 1264 (N.M. Ct. App.
1992) (“Willful violation of a court’s order without testing its
validity through established processes directly affects a court’s
ability to discharge its duties. Such a direct affront to the power of
the court cannot be tolerated.” (citations omitted)).
¶29 In reviewing Appellants’ challenge to the sanction imposed
for the violations of the trial court’s orders, we first “consider
whether the district court was justified in ordering sanctions.” See
PC Crane Serv., LLC v. McQueen Masonry, Inc., 2012 UT App 61,
¶ 32, 273 P.3d 396; see also Utah R. Civ. P. 37(e)(2) (“[T]he court in
which the action is pending may impose appropriate sanctions for
the failure to follow its orders, including . . . dismiss[ing] all or part
of the action, strik[ing] all or part of the pleadings, or render[ing]
judgment by default on all or part of the action . . . .”); Kilpatrick v.
Bullough Abatement, Inc., 2008 UT 82, ¶¶ 22–24, 199 P.3d 957(requiring a finding that the party’s behavior merits sanctions
under rule 37 of the Utah Rules of Civil Procedure). “Sanctions are
warranted [under rule 37] when (1) the party’s behavior was
willful; (2) the party has acted in bad faith; (3) the court can
attribute some fault to the party; or (4) the party has engaged in
persistent dilatory tactics tending to frustrate the judicial process.”
Kilpatrick, 2008 UT 82, ¶ 25 (citation and internal quotation marks
omitted). If we deem the sanctions justified, “[w]e then review the
type and amount of sanctions for abuse of discretion.” PC Crane,
2012 UT App 61, ¶ 32. Although dismissing an action is a severe
sanction, “it is clear from the language of rule 37 that it is within a
trial court’s discretion to impose such a sanction.” Allen v.
20110439‐CA 13 2013 UT App 176Macris v. Sevea Int’l, et al.
Ciokewicz, 2012 UT App 162, ¶ 32, 280 P.3d 425 (citation and
internal quotation marks omitted); accord Daynight, LLC v.
Mobilight, Inc., 2011 UT App 28, ¶ 3, 248 P.3d 1010 (mem.). In order
to meet their burden in showing that the trial court exceeded its
discretion in striking their pleadings and entering judgment against
them, Appellants “must show either that the sanction is based on
an erroneous conclusion of law or that the sanction lacks an
evidentiary basis.” See SFR, Inc. v. Comtrol, Inc., 2008 UT App 31,
¶ 14, 177 P.3d 629 (citation and internal quotation marks omitted).
Appellants have not met this burden.
¶30 The trial court determined that Appellants’ misconduct was
ongoing, egregious, and reprehensible. The record overwhelmingly
supports that assessment as well as the trial court’s decision to
enter default judgment. The trial court made extensive factual
findings that span over twenty‐three pages of the Final Contempt
Order, which outline the numerous discovery violations and
contemptuous actions resulting from Appellants’ willfulness, bad
faith, fault, and persistent dilatory tactics. Furthermore, the trial
court acknowledged the severity of the sanction but specifically
determined that Appellants’ conduct warranted striking their
pleadings and entering default against them. In particular, the trial
court indicated that the Appellants had been “previously and
sufficiently given full and appropriate notice and warning of the
significance and severity of the Court’s sanctions available to it.”
The trial court also documented the “great lengths” to which it had
gone “to give warnings and impose non‐dispositive sanctions upon
[Appellants] for [their] contemptuous conduct and bad‐faith
discovery tactics.” The trial court’s decision to strike the
Appellants’ pleadings was based on its finding “that all such prior
warnings and less‐severe sanction[s] have been ineffective” and
that Appellants “have repeatedly and continuously shown a brazen
disrespect for the authority and orders of [the] Court, and have
willfully and knowingly violated [the] Court’s orders, in an
attempt to hide, destroy, or conceal evidence relevant to this case
and to frustrate the discovery process, to the detriment of
[Macris].” The trial court also found that the contemptuous
20110439‐CA 14 2013 UT App 176Macris v. Sevea Int’l, et al.
conduct was likely to continue and would “undermine and erode
the public confidence in [the trial] Court and the judicial system in
its entirety, as well as severely prejudice [Macris].” Based on this
careful assessment of the severity of the conduct and the inability
to correct it with less draconian means, the trial court ruled that
“dispositive sanctions against [Appellants] are warranted, in the
form of striking [their] pleadings, with default judgment to be
entered against them.”
¶31 The record reflects that the trial court was well within its
authority to strike Appellants’ pleadings and enter default
judgment against them. See Chen v. Stewart, 2005 UT 68, ¶ 43, 123
P.3d 416 (“[A] court has the inherent authority to strike a party’s
pleadings and enter a default judgment if the party engages in
conduct designed to improperly influence the court’s decision on
the merits of the case, such as perjury or obstruction of justice, or
if the conduct itself tends to demonstrate bad faith or a lack of
merit.”). As a result, Appellants are deemed to have admitted the
well‐pleaded facts of Macris’s amended complaint. See Skanchy v.
Calcados Ortope SA, 952 P.2d 1071, 1076 (Utah 1998) (“Only
well‐pled facts alleged in the pleadings of the nondefaulting party
are binding and can support the default judgment.”).6
6. Our determination that the trial court did not exceed its
discretion in entering default judgment against Appellants renders
moot their claims that the trial court abused its discretion in
granting Macris’s motion for a preliminary injunction and in
denying their motion for a stay pending resolution of the Federal
Lawsuit. See Burkett v. Schwendiman, 773 P.2d 42, 44 (Utah 1989)
(mem.) (“A case is deemed moot when the requested judicial relief
cannot affect the rights of the litigants.”); see also Waterford Tower
Condominium Ass’n v. TransAmerica Real Estate Grp.,
2006‐Ohio‐508U, ¶ 35 (Ohio Ct. App.) (“Because we affirm the trial
court’s denial of [appellant’s] motion for relief from judgment and
allow the trial court’s default judgment to stand, we find
[appellee’s] assignment of error is moot . . . .”); cf. Schoney v.
(continued...)
20110439‐CA 15 2013 UT App 176Macris v. Sevea Int’l, et al.
B. Derivative Claims
¶32 Appellants additionally argue that the trial court erred by
entering default judgment on the derivative claims because
Macris’s amended verified complaint fails to allege that he made
a demand on Sevea as required by rule 23A of the Utah Rules of
Civil Procedure. See Utah R. Civ. P. 23A(a)(4)–(5) (requiring the
shareholder to set forth in the complaint the efforts to obtain the
desired action from the company or the reasons for failing to make
that effort). “A shareholder may not commence a derivative
proceeding until . . . a written demand has been made upon the
corporation to take suitable action . . . .” Utah Code Ann. § 16‐10a‐
740(3)(a)(i) (LexisNexis Supp. 2012). A complaint asserting a
derivative claim must “either expressly allege that demand was
made on the [company] or plead with particularity why such
demand would be futile.” GLFP, Ltd. v. CL Mgmt., Ltd., 2007 UT
App 131, ¶ 29, 163 P.3d 636. In order for “that exception to be
satisfied, the circumstances [must be] such that such a demand
would be futile and unavailing.” Dansie v. City of Herriman, 2006
UT 23, ¶ 24, 134 P.3d 1139 (alteration in original) (citation and
internal quotation marks omitted) (referring to the exception under
rule 23A and under the analogous provision of the Utah Revised
Nonprofit Corporation Act). “Therefore, we must examine first
whether [Macris] did allege with particularity why demand would
be futile and whether that allegation establishes that demand
would have been futile and unavailing.” See id.
6. (...continued)
Memorial Estates, Inc., 790 P.2d 584, 587 (Utah Ct. App. 1990)
(“Because the court’s entry of default judgment is fully supported
as indicated by the foregoing analysis, and entry of the default
judgment was sufficient, by itself, to dispose of the case, we need
not address the issue of whether the entry of summary judgment
was also proper in this case.”).
20110439‐CA 16 2013 UT App 176Macris v. Sevea Int’l, et al.
¶33 Here, Macris’s amended verified complaint states, “It is, and
will be, impossible to obtain any action by Sevea to redress the
wrongs by the defendants herein for the reason that Sevea is
equally controlled by plaintiff Macris and defendant Jerry Saxton
who, in significant part, committed the wrongful acts below
alleged.” The amended verified complaint further alleges that the
Voting Agreement “vest[s] corporate shareholder power in a
‘Committee’, the only members of which were plaintiff Macris and
defendant Jerry Saxton,” but does not address how to resolve a
deadlock between them. The amended verified complaint then
describes in detail Jerry Saxton’s unilateral decisions to cease
Sevea’s operations; to remove its “inventory, sales materials,
accounting books and records, [d]istributor files, customer files,
and equipment”; to terminate and rehire Sevea’s employees to
work for a competing business; to use a deceptively similar name
and the same telephone number for the competing business; and
to contact Sevea’s distributors and inform them that “‘[n]ail
production will continue under a new company.’”
¶34 The amended verified complaint establishes that Macris
needed Jerry Saxton’s approval before Sevea could pursue the
derivative claims directly. However, the claims were based on
allegations of wrongdoing against Jerry Saxton. Under these
circumstances, we agree with the trial court that “Macris has
alleged facts which . . . would qualify him for the ‘futility
exception’ to the requirement that demand be made before a
shareholder can initiate a derivative action.”
II. Damages
¶35 Appellants next assert that none of the actual damages
awarded to Macris are supported by the evidence. They also
contend that the damages on the derivative claims must be
awarded to Sevea, not to Macris. Additionally, Appellants argue
that the punitive damages award is excessive. “It is well settled
that, although the plaintiff has the burden of proving the fact,
20110439‐CA 17 2013 UT App 176Macris v. Sevea Int’l, et al.
causation, and amount of damages, he need only do so with
reasonable certainty rather than with absolute precision.” Alta
Health Strategies, Inc. v. CCI Mech. Serv., 930 P.2d 280, 286 (Utah Ct.
App. 1996) (citation and internal quotation marks omitted).
“[A]lthough damages may not be determined by speculation or
guesswork, evidence allowing a just and reasonable estimate of the
damages based on relevant data is sufficient.” Id. (alteration in
original) (citation and internal quotation marks omitted).
A. Derivative Claims
¶36 First, Appellants contend that “Macris provided no evidence
that [Appellants’] actions caused a decrease in the value of [Sevea].”
According to Appellants, “[t]he value of [a] business as [of] a
certain date is not an appropriate measure of damages for a
derivative claim for breach of fiduciary duty, conversion, or
interference with contractual relations.” While we agree that the
damage to a corporation can be proved by comparing its value
before and after the wrongful conduct and showing a decrease, that
is not how Appellants’ expert calculated damages here. See Arndt
v. First Interstate Bank of Utah, NA, 1999 UT 91, ¶ 22, 991 P.2d 584(noting that a claim was derivative because it sought damages for
the decreased value of the partnerships); Stocks v. United States Fid.
& Guar. Co., 2000 UT App 139, ¶ 16, 3 P.3d 722 (same). Macris’s
expert, Christopher Howard, and Appellants’ expert, Richard
Hoffman, offered different theories concerning the proper measure
of damages for the derivative claims. Howard used various models
and assumptions to calculate the value of Sevea, assuming
hypothetically that its assets and employees had not been
wrongfully converted and that the business enjoyed significant
increases in sales. Based on these projections, he concluded that the
losses to Sevea caused by Appellants’ breaches of fiduciary duty,
conversion, and interference with contractual relations was
$5,926,000. Hoffman disagreed with those projections and opined
that, even if Appellants had not removed Sevea’s equipment,
employees, and customers, the company could not have continued
20110439‐CA 18 2013 UT App 176Macris v. Sevea Int’l, et al.
in business because its liabilities greatly exceeded its assets.
Therefore, Hoffman concluded that the damages to Sevea could be
measured by its liquidation value, which he calculated as $227,712.
¶37 The trial court was not persuaded by Macris’s expert
because his opinions “fundamentally lack basis, are not based on
conventional methods of assessing damages and are inconsistent
with the standards applicable to the valuation of such an interest.”
The trial court further determined, “Howard’s projections
concerning the level of growth and profitability are simply
inaccurate and inconsistent with Sevea’s actual economic reality.”
Instead, the trial court agreed with Hoffman and found that “the
value of Sevea as of December 31, 2006, was $227,712.” While the
trial court does not expressly discuss the components of that
valuation in its decision, Hoffman explained that his damage
calculation was based on his conclusion that Sevea was essentially
bankrupt before Appellants looted its assets and that it would have
been forced to liquidate even in the absence of Appellants’
wrongful conduct. By adopting Hoffman’s valuation figure, the
trial court also implicitly adopted his assumption that the proper
measure of the damages caused to Sevea by Appellants’ breaches
of fiduciary duty, conversion, and interference with contractual
relationships is the amount Sevea could have received for its assets
upon liquidation in December 2006. We are not convinced that the
trial court exceeded its discretion by adopting the damage theory
advanced by Appellants.
¶38 After adopting Appellants’ damage figure, the trial court
awarded half of that amount, $113,856, to Macris. Appellants argue
that, even if damage to Sevea had been proved, the trial court erred
in awarding those damages to Macris individually based on the
derivative claims. We agree.
¶39 In Richardson v. Arizona Fuels Corp., 614 P.2d 636 (Utah 1980),
the Utah Supreme Court explained that “any compensatory
damages which may be recovered on account of any breach by
defendants of their fiduciary duty as directors and officers or
20110439‐CA 19 2013 UT App 176Macris v. Sevea Int’l, et al.
arising as a result of mismanagement of the corporation by
defendants belong to the corporation and not to the stockholders
individually.” Id. at 640 (emphasis added); see also Angel Investors,
LLC v. Garrity, 2009 UT 40, ¶ 31, 216 P.3d 944 (“[T]he damages that
the individual [defendants] would pay as a result of the derivative
action would be paid out to all [company] shareholders in the
winding up after dissolution . . . .”).
¶40 Accordingly, if an action is brought as a derivative claim,
any recovery belongs to the corporation. See, e.g., Ross v. Bernhard,
396 U.S. 531, 538 (1970) (“The proceeds of the [derivative] action
belong to the corporation . . . .”); Rothenberg v. Security Mgmt. Co.,
667 F.2d 958, 960 n.3 (11th Cir. 1982) (“A shareholder receives no
direct benefit from a derivative suit; any recovery belongs to the
corporation.”). This is because the shareholder is entitled to his pro
rata benefit based on stock ownership only after the recovery is
subject “to the claims of the corporation’s creditors and to the
corporate tax consequences.” John W. Welch, Shareholder Individual
and Derivative Actions: Underlying Rationales and the Closely Held
Corporation, 9 J. Corp. L. 147, 150 (1984) (citation omitted); see also
Peter H. Donaldson, Breathing Life Into Aurora Credit Services, Inc.
v. Liberty West Development, Inc.: Utah’s Close Corporation
Exception to the Derivative Lawsuit Requirement and the Case for Strong
Fiduciary Duties in Close Corporations, 2002 Utah L. Rev. 519, 523
(2002) (“[W]ith very few exceptions, recovery in a derivative action
belongs to the corporation, and like any other corporate asset is
subject to preexisting creditor and tax claims, whereas an
individual recovery will go directly to the shareholder and will not
be subject to the claims of corporate creditors.”).
¶41 Here, Macris’s amended verified complaint asserts
derivative claims. Indeed, the amended verified complaint alleges
that “Macris, on behalf of Sevea, is entitled to the imposition of a
constructive trust created for the benefit of the remaining
shareholders and to the exclusion of the Saxtons, with said trust
holding all the assets of Sevea.” Despite Macris’s request for the
20110439‐CA 20 2013 UT App 176Macris v. Sevea Int’l, et al.
creation of a constructive trust, the trial court’s December 4, 2009
memorandum decision determined that “the value of Sevea as of
December 31, 2006, was $227,712” and that Macris was individually
“entitled to one‐half of this amount,” $113,856, for both or either
Macris’s and Macris Enterprises’s business interest losses.
Thereafter, when the trial court entered its final judgment on
April 1, 2011, it ordered “[t]hat judgment be entered in favor of
[Macris] in the amount of $113,856 against [Appellants], jointly and
severally, as a result of default being entered against them on
[Macris’s] breaches of fiduciary duties, conspiracy to breach
fiduciary duties, conversion, and interference with contractual
relations causes of action.” These claims are classically derivative.
See generally Aurora Credit Servs., Inc. v. Liberty W. Dev., Inc., 970
P.2d 1273, 1280–81 (Utah 1998). Accordingly, the trial court erred
by awarding damages directly to Macris rather than to Sevea on
behalf of all of its shareholders and creditors. We therefore vacate
the award of damages to Macris on the derivative claims and
remand for the trial court to award the damages for those claims to
Sevea for appropriate distribution by the custodian.
B. Malicious Prosecution
¶42 Next, we consider Appellants’ challenge to the trial court’s
award of damages in favor of Macris in the amount of $10,000
against the Saxtons, jointly and severally, for malicious
prosecution. Macris testified that as a result of the Saxtons’ false
statements to the police, he was charged with electronic
communications harassment and that, as a direct result, he
incurred legal fees and travel expenses for numerous criminal court
appearances.7 Although Macris calculated his damages at $100,000,
the trial court concluded that this request did “not represent a
reasonable estimate of [Macris’s] loss.” Instead, after “taking into
account the various expenses incurred by . . . Macris, as well as his
7. The criminal case was subsequently dismissed for lack of
evidence.
20110439‐CA 21 2013 UT App 176Macris v. Sevea Int’l, et al.
lost time and effort,” the trial court determined that an award of
$10,000 in damages was appropriate. Appellants have not
demonstrated that the trial court exceeded its discretion in so
concluding.
C. Slander Per Se
¶43 Appellants also claim that the trial court exceeded its
discretion in awarding $100,000 in damages against Jerry Saxton
for slander, arguing that Macris failed to provide evidence of his
damages. Although Macris was unable to quantify his specific
damages, the trial court awarded him $100,000 in general damages
based on its conclusion that the false statements constituted slander
per se.
In order to constitute slander per se, without a
showing of special harm, it is necessary that the
defamatory words fall into one of four categories:
(1) charge of criminal conduct, (2) charge of a
loathsome disease, (3) charge of conduct that is
incompatible with the exercise of a lawful business,
trade, profession, or office[,] and (4) charge of the
unchastity of a woman.
Allred v. Cook, 590 P.2d 318, 320 (Utah 1979). Here, Macris provided
unrefuted testimony that Jerry Saxton told numerous individuals
that Macris had embezzled Sevea’s funds and that Jerry Saxton
made statements to Sevea’s employees that Macris was a thief and
had stolen from Jerry Saxton, that Macris has “connections” and
can “bump people off” and “leave a body in the desert to die,” that
Macris had a drug problem and a criminal history, and that Macris
was a violent person. We agree with the trial court that these
statements constitute slander per se because they allege that Macris
was involved in criminal activity and conduct incompatible with
the exercise of a lawful business, trade, profession, or office. See id.20110439‐CA 22 2013 UT App 176Macris v. Sevea Int’l, et al.
¶44 Unlike ordinary slander, “[s]lander per se does not require
a showing of special damages because damages and malice are
implied.” See id. at 321. Thus, the trial court was justified in
awarding general damages for the loss of reputation, shame, or
emotional impact suffered by Macris. “[G]eneral damages are those
which, from the common sense and experience of mankind, would
naturally be expected to result from that type of a wrong to any
person so injured.” Prince v. Peterson, 538 P.2d 1325, 1328 (Utah
1975). As to the amount of the damages awarded, this court “will
not overturn the trial court’s decision unless there was no
reasonable basis for the decision.” Richards v. Brown, 2009 UT App
315, ¶ 12, 222 P.3d 69.
¶45 Macris testified that as a result of Jerry Saxton’s slanderous
statements, “[he] didn’t sleep, [he] didn’t eat,” his business was
negatively impacted, and he lost “some personal and some
business relationships.” The trial court found Macris’s testimony
regarding Jerry Saxton’s false statements and their negative impact
on Macris to be credible. Accordingly, there was a reasonable basis
for the trial court’s award of $100,000 in general damages for
slander per se, and we decline to overturn it.
D. Punitive Damages
¶46 Last, Appellants contend that the punitive damages award
of $1,119,280 was excessive, not supported by the evidence, and at
odds with the factors outlined in Crookston v. Fire Insurance
Exchange, 817 P.2d 789 (Utah 1991), holding modified by Westgate
Resorts, Ltd. v. Consumer Protection Group, LLC, 2012 UT 55, 285 P.3d
1219. In Crookston, the Utah Supreme Court articulated certain
factors that a court should use to assess punitive damages,
including
(i) the relative wealth of the defendant; (ii) the nature
of the alleged misconduct; (iii) the facts and
circumstances surrounding such conduct; (iv) the
20110439‐CA 23 2013 UT App 176Macris v. Sevea Int’l, et al.
effect thereof on the lives of the plaintiff and
others;[8] (v) the probability of future recurrence of
the misconduct; (vi) the relationship of the parties;
and (vii) the amount of actual damages awarded.
Id. at 808.
¶47 In assessing whether those factors have been correctly
applied, our supreme court has further explained that “where the
punitives are well below $100,000, punitive damage awards
beyond a 3 to 1 ratio to actual damages have seldom been upheld
and that where the award is in excess of $100,000, we have
indicated some inclination to overturn awards having ratios of less
than 3 to 1.” Id. at 810. When a punitive damages award “exceeds
the ratios set by our past pattern of decision,” the supreme court
has instructed that “the trial judge must make a detailed and
reasoned articulation of the grounds for concluding that the award
is not excessive in light of the law and the facts.” Id. at 811. In doing
so, the trial judge should consider the seven Crookston factors,
“unless some other factor seems compelling to the trial court.” Id.
The trial judge may
explain why the large ratio of punitives to actuals is
necessary in the context of the particular case in
order to further the purposes of punitive damages by
punishing and deterring outrageous and malicious
conduct [or conduct which manifests a knowing or
reckless indifference toward, and disregard of, the
rights of others] which is not likely to be deterred by
other means. In sum, the trial judge’s articulation
8. The Utah Supreme Court clarified in Westgate Resorts, Ltd. v.
Consumer Protection Group, LLC, 2012 UT 55, 285 P.3d 1219, that this
fourth “‘harm to others’ [factor] may only be used to assess
reprehensibility, but may not be used to directly punish a
defendant for harm caused to nonparties.” Id. ¶ 14.
20110439‐CA 24 2013 UT App 176Macris v. Sevea Int’l, et al.
should explain why the award is not excessive
despite the fact that it exceeds the general pattern of
awards upheld in our prior cases.
Id. (alteration in original) (citations and internal quotation marks
omitted).
¶48 In the present case, the trial court explained its decision to
award punitive damages, stating, “[Appellants’] misconduct has
been ongoing, egregious and reprehensible.” It further noted that
Appellants “have impacted . . . Macris’s life on both personal and
professional levels in a multitude of ways” and “have ignored [the]
Court’s Orders and have acted with absolute impunity to [the]
Court’s directions, consistently acting in ways to hinder this
process in furtherance of their own self‐interests.” In addition, the
trial court “expressly [found] that there is an undoubted
probability of future recurrence of their misconduct” and that
Macris had “presented clear evidence of . . . [Appellants’] relative
wealth,” while “the Saxtons did not appear at the trial and did not
present any evidence of their inability to pay a large award of
punitive damages.” Because “the Saxtons abused their relationship
with [Macris] and took advantage of him to further their economic
interests,” the trial court awarded punitive damages in the amount
of $1,119,280.
¶49 Appellants first argue that the trial court’s failure to make a
specific finding as to the Saxtons’ wealth prevented a reasoned
analysis of the first Crookston factor. However, this court has
previously recognized that “[a]lthough relative wealth is a factor
to be considered, . . . the introduction of evidence as to the relative
wealth of the defendant is not a technical prerequisite to an award
of punitive damages.” Lawrence v. Intermountain, Inc., 2010 UT App
313, ¶ 20, 243 P.3d 508 (citation and internal quotation marks
omitted). “Furthermore, [defendants] may not simply remain
secretive regarding their incomes and assets in an attempt to
thwart the assessment of a punitive damages award . . . .” Id. Jerry
20110439‐CA 25 2013 UT App 176Macris v. Sevea Int’l, et al.
Saxton chose not to appear at the damages hearing. In his absence,
Macris gave unchallenged testimony that Jerry Saxton’s net worth
was in excess of $10 million, that Jerry Saxton claimed that he had
the ability to earn $200,000 per month “in [his] sleep,” that the
Saxtons had listed their Salt Lake City home for just under
$2 million, and that the home contained $400,000 to $500,000 worth
of furnishings. Furthermore, Macris testified that Jerry Saxton
owned multiple homes, planes, and businesses. Accordingly, the
trial court adequately considered the first Crookston factor.
¶50 Appellants next contend that punitive damages can be
awarded only to punish the party for the outrageousness of the
conduct establishing liability for the claims asserted and not as a
sanction for discovery abuses or contempt. However, that position
was rejected by the Utah Supreme Court in Diversified Holdings, LC
v. Turner, 2002 UT 129, 63 P.3d 686. There, the supreme court
explained,
Behaviors that undermine the efficiency and integrity
of the judicial process may also be considered under
the rubric of the second Crookston [] factor[, i.e., the
nature of the alleged misconduct]; in Campbell [v.
State Farm Mutual Automobile Insurance Co., 2001 UT
89, 65 P.3d 1134, rev’d on other grounds, 538 U.S. 408(2003),] we singled out for censure the defendant’s
systematic destruction of documents related to its
challenged activities and its policy of harassing and
exhausting legal opponents.
Id. ¶ 17 (citing Campbell, 2001 UT 89, ¶¶ 30–31). While the trial
court was free to consider that it had already imposed various
sanctions on Appellants throughout the proceedings—including
fines, jail time, attorney fees, striking their pleadings, and entering
default judgment against them—it could also consider the nature
of Appellants’ contemptuous conduct in determining the
appropriate amount of punitive damages. Thus, we affirm the trial
20110439‐CA 26 2013 UT App 176Macris v. Sevea Int’l, et al.
court’s determination that an award of punitive damages is
warranted.
¶51 Appellants also contend that there is an insufficient basis to
justify a punitive damage award with a ratio of 5 to 1. Because the
trial court did not “explain why the large ratio of punitives to
actuals is necessary in the context of [this] particular case,” we
agree. See Crookston v. Fire Ins. Exch., 817 P.2d 789, 811 (Utah 1991),
holding modified by Westgate Resorts, Ltd. v. Consumer Prot. Grp., LLC,
2012 UT 55, 285 P.3d 1219. The punitive damages award here is
outside the range traditionally upheld in Utah because it greatly
exceeds $100,000 and is significantly more than three times the
amount of the actual damages awarded. While the trial court
generally discussed the Crookston factors in determining that
punitive damages should be awarded, it did not address the
propriety of the 5 to 1 ratio of the $1,119,280 in the amount of
punitive damages awarded to the $223,856 in actual damages. See
id. at 808, 810–11. While a ratio exceeding 3 to 1 for awards greater
than $100,000 may be upheld based on appropriate facts, see Smith
v. Fairfax Realty, Inc., 2003 UT 41, ¶¶ 47–48, 82 P.3d 1064 (upholding
a punitive damage award with a ratio of 5.5 to 1 where “the
evidence in the record and [the Utah Supreme Court’s] overall
analysis support[ed] an award of this amount as a serious
reprimand for [defendant’s] actions to deter future misconduct”),
it comes with a presumption of excessiveness, see Diversified
Holdings, 2002 UT 129, ¶ 24 (“[A]n award that falls outside certain
parameters will . . . elicit more searching judicial scrutiny.”).
¶52 Thus, while we affirm the trial court’s conclusion that
Appellants’ conduct was outrageous and offensive, thereby
justifying an award of punitive damages, we remand to the trial
court for an explanation of the unusually high ratio of the amount
of punitive damages to the amount of actual damages. See
Crookston, 817 P.2d at 813 (“[W]e plainly fix the primary
responsibility of reviewing the amount of punitive damage awards
on the court best equipped to perform such a review—the trial
20110439‐CA 27 2013 UT App 176Macris v. Sevea Int’l, et al.
court.”). In doing so, the trial court should first recalculate the
amount of actual damages in accordance with this decision. It
should then determine the appropriate amount of punitive
damages. If the punitive damages remain greater than $100,000 and
more than three times the actual damages, the trial court should
provide an explanation of why exceeding the traditional limits on
such awards is warranted under the facts of this case.
III. Attorney Fees on Appeal
¶53 Macris argues that he is entitled to an award of attorney fees
incurred on appeal. “[W]hen a party who received attorney fees
below prevails on appeal, the party is also entitled to fees
reasonably incurred on appeal.” Valcarce v. Fitzgerald, 961 P.2d 305,
319 (Utah 1998) (citation and internal quotation marks omitted).
We therefore award Macris partial attorney fees on appeal. Because
Macris prevailed only in part on appeal, we remand to the trial
court for a determination of the appropriate amount of attorney
fees and costs incurred with respect to the issues on which he was
successful on the appeal.
CONCLUSION
¶54 The trial court acted within its discretion in striking
Appellants’ pleadings and entering default judgment against them.
The trial court did not exceed its discretion in calculating the
amount of damages on Macris’s derivative claims, but it did err in
awarding those damages to Macris individually rather than to
Sevea. Therefore, we remand to the trial court with instructions to
award the damages for the derivative claims to Sevea for
appropriate distribution by the custodian. The trial court did not
exceed its discretion in awarding compensatory damages for
malicious prosecution and slander per se. Last, the trial court’s
award of punitive damages is presumptively excessive and the trial
court has provided no explanation for why a greater ratio of
20110439‐CA 28 2013 UT App 176Macris v. Sevea Int’l, et al.
punitive damages to actual damages is justified here. We therefore
remand to the trial court for reconsideration of the punitive
damage award in light of the final amount of actual damages
awarded to Macris after remand and the guidance provided in this
opinion. Macris is entitled to attorney fees reasonably incurred on
appeal for the issues on which he was successful, and we remand
to the trial court for a determination of that amount.
20110439‐CA 29 2013 UT App 176