First American Title Insurance v. Northwest Title Insurance

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS October 9, 2018
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
FIRST AMERICAN TITLE INSURANCE
COMPANY; FIRST AMERICAN TITLE
COMPANY, LLC.,
Plaintiffs - Appellees,
v. No. 17-4086
NORTHWEST TITLE INSURANCE
AGENCY; MICHAEL SMITH; KRISTI
CARRELL,
Defendants - Appellants,
and
JEFF WILLIAMS,
Defendant.
_________________________________
Appeal from the United States District Court
for the District of Utah
(D.C. No. 2:15-CV-00229-DN)
_________________________________
Mary Anne Q. Wood (Stephen Q. Wood, with her on the briefs), Wood Balmforth LLC,
Salt Lake City, Utah, for Defendants-Appellants.
Matthew L. Lalli (Mark O. Morris, Bret R. Evans, and W. Danny Green, with him on the
brief), Snell & Wilmer, L.L.P., Salt Lake City, Utah, for Plaintiffs-Appellees.
_________________________________
Before TYMKOVICH, Chief Judge, LUCERO, and HARTZ, Circuit Judges.
_________________________________
HARTZ, Circuit Judge.
_________________________________
This is an appeal from a large jury award based on breaches of contractual and
fiduciary duties by employees of a title company who left to form a competing company
and encouraged former coemployees to join them. The plaintiffs below were two wholly
owned subsidiaries of First American Financial Corporation: First American Title
Insurance Company (FA Company) and First American Title Company, LLC (FA LLC)
(collectively Plaintiffs). The defendants below who are appealing the judgment
(Defendants) are Michael Smith, Kristi Carrell, and Northwest Title Insurance Agency,
LLC. Jeffrey Williams was also a defendant below but is not a party to the appeal.
Defendants raise numerous grounds on appeal, many of which have not been adequately
preserved or presented. Exercising appellate jurisdiction under 28 U.S.C. § 1291, we
affirm.
I. BACKGROUND
A. Factual History
The individual defendants originally worked for Equity Title Insurance Agency,
Inc. Carrell became the vice president and manager of Equity’s office in West Jordan,
Utah. Smith was Equity’s chief operations officer and general counsel. Both signed
employment agreements with Equity. Carrell’s agreement, executed in August 2003,
contained a noncompete clause stating that “[d]uring [her] employment with Equity Title
and for a period of one year thereafter, [she] may not participate in any competing title
insurance or escrow business within a 40-mile radius of any of Equity Title’s offices.”
2
Aplt. App., Vol. IV at 935. Smith’s agreement, executed in August 2004, limited
Smith’s right to compete with Equity during and after his employment there, and
contained a nonsolicitation provision barring him from trying to recruit away Equity
employees. 1 In May 2006 Williams signed an employment agreement with Equity to
serve as the senior vice-president for Equity’s escrow operations. It also contained
nonsolicitation and noncompete provisions.
Between 2003 and February 2009, FA Company acquired all of Equity’s stock: a
50% share between 2003 and 2005; a 45% share in October 2008; and the remaining 5%
in February 2009. The October 2008 purchase was effected through a Stock Purchase
1
The noncompetition provision read in relevant part:
During his employment with Equity, and for a period of one (1) year
thereafter, if terminated for “Cause” . . . , Smith shall not, directly, or
indirectly, either as an employee, employer, consultant, director, or in any
other individual or representative capacity, engage or participate in any
business that is in competition in any manner whatsoever with the business
of Equity, covering an area in all directions 100 miles from any of the
offices of Equity. . . . Notwithstanding the foregoing, nothing herein shall
restrict Smith’s right to practice law subsequent to the termination of his
employment with Equity; provided, however, that Smith shall not be
employed by any person or entity engaged in the title insurance business.
Aplt. App., Vol. III at 583–84. The nonsolicitation provision read in relevant part:
During his employment with Equity, and for a period of one (1) year
thereafter, Smith, on behalf of himself or any other person or entity, shall
not hire, attempt to hire, recommend for hire, or employ, directly or
indirectly, any employee of Equity. During this one-year period of time,
Smith shall not encourage or induce any employee of Equity to resign from
Equity or assist any other employer in recruiting or hiring any employee
away from Equity.
Id. at 584.
3
Agreement (SPA). After the final February 2009 purchase, Equity became a wholly
owned subsidiary of FA Company.
In November 2012, Equity and FA LLC filed a merger plan with Utah regulators.
Merger documents stated that Equity and FA LLC would “merge into a single entity”—
which would be FA LLC, a subsidiary of First American Financial Corporation. Aplt.
App., Vol. III at 754.
After FA Company acquired all the stock of Equity, employees at the title-
company office were required to review various documents, including the First American
Employee Handbook (the Employee Handbook) and the Code of Ethics and Conduct (the
Code of Ethics). The Employee Handbook required that employees use office equipment
only for company business and limited personal matters; it also barred outside business
activity competing with First American. The Handbook referred to the Code of Ethics,
which contained similar restrictions on the use of company equipment and outside
employment. Office records indicate that Smith, Carrell, and Williams reviewed the
Employee Handbook and the Code of Ethics.
Smith’s efforts to create Northwest began in late 2014. On March 9, 2015,
Northwest opened for business and Smith quit his FA LLC job. The following day,
Carrell resigned and started at Northwest. Within two weeks, at least 25 other employees
defected as well.
B. Procedural History
FA Company and FA LLC (referred to individually and jointly throughout the
litigation simply as First American) promptly sued Northwest, Smith, Carrell, and
4
Williams, alleging, among other things, (1) breach of contract against Smith, Carrell, and
Williams (based on their Equity employment agreements, the Employee Handbook, and
the Code of Ethics); (2) tortious interference with contract against Northwest, Smith,
Williams, and Carrell; (3) breach of fiduciary duty against Smith; (4) tortious interference
with economic relations against Northwest; and (5) civil conspiracy against all the
defendants.
Before trial Plaintiffs agreed to dismiss some claims and the court granted
summary judgment against Plaintiffs on the tortious-interference claims against Carrell
and Williams. Plaintiffs also enjoyed some victories. The district court granted them
partial summary judgment, holding that (1) the Equity employment contracts had legally
transferred to First American; (2) Williams and Carrell—but not Smith—had breached
their employment contracts’ noncompete provisions; and (3) Smith and Williams had
breached their employment contracts’ nonsolicitation provisions. The court clarified,
however, that it had not “resolve[d] all issues related to validity of the contracts, such as
reasonableness of scope and duration; First American’s performance; or whether First
American suffered damages.” First Am. Title Ins. Co. v. Nw. Title Ins. Agency, LLC, No.
2:15-cv-00229-DN, 2016 WL 6091540, at *15 (D. Utah Oct. 18, 2016) (First American
I). Later it rejected several potential defenses against the enforceability of the Equity
employment agreements, the Employee Handbook, and the Code of Ethics, such as
unconscionability and alleged material breach by Plaintiffs. See First Am. Title Ins. Co.
v. Nw. Title Ins. Agency, LLC, No. 2:15-cv-00229-DN, 2016 WL 6902473, at *3 (D. Utah
Nov. 23, 2016) (First American II).
5
At the first phase of the trial, which addressed liability and compensatory
damages, the jury found Smith, Williams, and Carrell liable for breach of contract, Smith
liable for breach of fiduciary duty, and Smith and Northwest liable for tortious
interference with contract; but it found Northwest not liable for tortious interference with
business relations and Defendants not liable for civil conspiracy. It awarded Plaintiffs
$1.625 million from Smith; $50,000 each from Carrell and Williams; and $1 million from
Northwest. After the second phase of the trial, which addressed punitive damages, the
jury awarded Plaintiffs an additional $500,000 from Northwest. The court later awarded
Plaintiffs attorney fees of almost $2.9 million.
II. ANALYSIS
A. Standing
Defendants argue that Plaintiffs failed to establish constitutional standing to bring
their claims. Although we doubt that Defendants preserved this issue in the district court,
constitutional standing is a jurisdictional matter that must be addressed even if raised for
the first time on appeal. See New England Health Care Emps. Pension Fund v.
Woodruff, 512 F.3d 1283, 1288 (10th Cir. 2008).
Defendants assert that the district court “erred by disregarding the [Plaintiffs’]
burden to each prove their separate and distinct standing to sue for each cause of action.”
Aplt. Br. at 34. Regarding the breach-of-contract claims, they complain that Plaintiffs
“proceeded jointly on the breach of contract claims in the common name of their parent
company ‘First American,’ without even attempting to prove which entity, if any, had the
right to enforce the Equity Agreements” and, similarly, that Plaintiffs “did not attempt to
6
prove which entity, if any, was a party to the First American Employee Handbook and
Code of Ethics.” Id. at 36–37. They then add that Plaintiffs “also improperly proceeded
jointly as ‘First American’ on their tortious interference and breach of fiduciary duty
claims.” Id. at 38 (footnotes omitted). Defendants’ arguments are misguided.
“Article III of the Constitution limits federal-court jurisdiction to ‘Cases’ and
‘Controversies.’ Those two words confine the business of federal courts to questions
presented in an adversary context and in a form historically viewed as capable of
resolution through the judicial process.” Massachusetts v. EPA, 549 U.S. 497, 516
(2007) (internal quotation marks omitted). “At bottom, the gist of the question of
standing is whether petitioners have such a personal stake in the outcome of the
controversy as to assure that concrete adverseness which sharpens the presentation of
issues upon which the court so largely depends for illumination.” Id. at 517 (internal
quotation marks omitted). Consequently, the elements of constitutional, Article III
standing are “(1) injury in fact that is (2) traceable to the defendant and (3) redressable by
the court.” Jackson v. Volvo Trucks N. Am., Inc., 462 F.3d 1234, 1241 (10th Cir. 2006).
As we have noted:
The purpose of the standing inquiry is not to determine whether a party has
proven its case but to gauge whether it should be granted access to the
federal courts. The focus of the injury element is on ensuring a legitimate
dispute between the parties. A plaintiff who is personally harmed has a
stake in the litigation and is not a mere intermeddler. For this reason, the
issue generally arises in the constitutional or public law context and is
rarely implicated in private civil disputes.
Id. at 1241–42 (citations omitted).
7
All three elements of constitutional standing are clearly satisfied for the Utah title
company that lost key employees and clients to Northwest. There was evidence, which
the jury believed, that its business was injured, the injury was caused by Defendants, and
damages would provide redress for the injury. We have before us a proper Case or
Controversy. There may be some question as to what entity—FA Company, FA LLC, or
both—speaks for that Utah title company (although the portion of the record before us
shows that the business was part of FA LLC). But that raises the question of who is (are)
the real party (parties) in interest, which is not a jurisdictional issue. See Norris v.
Causey, 869 F.3d 360, 366–67 (5th Cir. 2017) (The defendants’ argument that the
plaintiffs’ claim belonged to the bankruptcy trustee was a real-party-in-interest issue, not
a matter of constitutional standing, because they certainly had standing: “The
[plaintiffs’] injury is clear: They lost thousands of dollars. They argue that [the
defendants’] diversion of funds caused that injury. And this litigation can redress the loss
through damages, as the judgment demonstrates.”); Cranpark, Inc. v. Rogers Grp., Inc.,
821 F.3d 723, 730 (6th Cir. 2016) (“one who sells his interest in a cause of action is not
deprived of Article III standing, but he is susceptible to a real-party-in-interest
challenge”); Whelan v. Abell, 953 F.2d 663, 671–72 (D.C. Cir. 1992); see generally 6A
Charles Alan Wright et al., Federal Practice & Procedure § 1542, at 468, 471–75 (3d ed.
2010) (distinguishing real party in interest and standing); 13A Charles Alan Wright et al.,
Federal Practice & Procedure § 3531, at 1, 23 (3d ed. 2008) (suggesting that concept of
real party in interest is a better fit than standing in context of private disputes).
8
To the extent that Defendants are raising a real-party-in-interest issue, they have
waived that issue—in two ways. First, by including only a small fraction of the trial
transcript in its appendix on appeal, they have precluded this court from examining the
factual basis for the real-party-in-interest status of either plaintiff. Second, the parties
saw fit to treat both FA LLC and FA Company as one entity, at least for trial purposes,
and so stipulated. The district court’s preliminary (that is, before opening statements)
Instruction No. 8, which is not challenged on appeal, states as follows:
The plaintiffs and the defendants have stipulated—that is they have
agreed—to certain facts. You must therefore treat those facts as
conclusively proven. I will now read the stipulated facts:
* * *
Over time [FA Company] acquired ownership in Equity, and in 2012, [FA
LLC] merged with Equity. [FA Company] and [FA LLC] are referred to
as “First American.”
Aplt. App., Vol. XXIV at 6657 (emphasis added). In sum, Defendants are not entitled to
relief on this argument.
B. Summary Judgment on Contract Enforceability
Defendants challenge the district court’s ruling on Plaintiffs’ motion for partial
summary judgment that their signed employment agreements with Equity were still in
effect when they quit their jobs to work for Northwest. They contend that the
agreements’ “restrictive covenants . . . were no longer valid and enforceable at the time
[Smith, Carrell, and Williams] began working for Northwest . . . .” Aplt. Br. at 41. We
are not persuaded.
9
To begin with, the validity of the contracts was not affected by FA Company’s
purchase of Equity’s stock or the merger of Equity into FA LLC. When FA Company
purchased some, then most, then all of Equity’s stock, the change in the ownership of
Equity’s corporate stock did not affect Equity’s contract rights or liabilities. See 11
William Meade Fletcher, Fletcher Cyclopedia of the Law of Corporations § 5100 (2011)
(“A change in the personnel of the shareholders does not affect the corporate debts,
obligations or liabilities.”); Corp. Express Office Prods., Inc. v. Phillips, 847 So. 2d 406,
407, 412, 414 (Fla. 2003) (purchase of 100% of corporation’s stock does not affect
enforceability of noncompete provisions of employee contracts); see also Sachs v. Lesser,
163 P.3d 662, 674 n.18 (Utah Ct. App. 2007) (“[I]n a stock purchase transaction the
corporation’s assets remain titled in the [original] corporation’s name.” (internal
quotation marks omitted)), rev’d on other grounds, 207 P.3d 1215 (Utah 2009).
Nor does a merger ordinarily in itself affect the rights, liabilities, or validity of a
corporation’s contracts. At the time of the merger Equity was a Utah corporation and FA
LLC was a Delaware limited-liability company. The merger agreement stated that the
two entities were being merged “into a single entity pursuant to [the merger agreement]
and the applicable laws of the States of Utah and Delaware.” Aplt. App., Vol. III at 754. 2
The merger agreement provided that “[a]ll the assets, rights, privileges, powers,
immunities, purposes and property (real, personal, intellectual and mixed), of [Equity and
2
After the merger, Equity ceased to exist. See Aplt. App., Vol. III at 755 (“[T]he
separate existence of [Equity] shall cease . . . and it shall be merged with and into [FA
LLC].”).
10
premerger FA LLC], and all debts due to either of them, shall be transferred to and vested
in the [postmerger FA LLC entity].” Id. at 755. This provision aligns with the corporate
law of both Utah and Delaware. See Utah Code Ann. § 16-10a-1106(1)(b); Aetna Life &
Cas. v. United Pac. Reliance Ins. Cos., 580 P.2d 230, 232 (Utah 1978); Del. Code Ann.
tit. 8, § 259(a); Del. Ins. Guar. Ass’n v. Christiana Care Health Servs., Inc., 892 A.2d
1073, 1077–78 (Del. 2006).
Defendants dispute this settled law, asserting that two opinions from other
jurisdictions show that one entity’s stock purchase of another entity terminates the
acquired entity’s contractual employment relationships. But one is unpersuasive and the
other is readily distinguishable. In Joyner Sports Medicine Institute, Inc. v. Stejbach, a
Pennsylvania state trial court held that one entity’s stock purchase of another entity
terminated certain employees’ employment relationships with the acquired entity, thus
starting the time period for noncompete provisions in the employees’ employment
agreements. 45 Pa. D. & C. 4th 242, 245, 250 (Pa. Ct. Com. Pl. Dauphin Cty. 1999). But
the court reached this conclusion by ignoring the settled distinction between a stock-
purchase agreement and an asset-purchase agreement. See id. at 249. We share the
doubts of a Pennsylvania federal district court that the decision expresses Pennsylvania
law. See Siemens Med. Sols. Health Servs. Corp. v. Carmelengo, 167 F. Supp. 2d 752,
759–60 (E.D. Pa. 2001).
The other opinion cited by Defendants is OfficeMax, Inc. v. Levesque, 658 F.3d 94
(1st Cir. 2011), in which the court held that a noncompete provision did not carry over to
employment by a corporation after its shares were sold. The employees worked for
11
LS&H, all of whose stock was purchased by BCOP. See id. at 95. On the eve of the
purchase, BCOP asked LS&H to solicit from the employees noncompetition agreements
applicable for “a period of 12 months after termination of my employment with LS&H.”
Id. (emphasis omitted). Two days before the purchase was executed, LS&H paid each
employee $2,500 to sign the agreement. See id. at 96. The clear import of the agreement
was to prevent the employee from competing with BCOP for a year after the stock
purchase. The preamble stated that the agreement was in anticipation of the purchase: “I
understand that [BCOP] plans to purchase [LS&H]. I execute this Agreement in
contemplation of that transaction, knowing that [LS&H] is tendering the consideration on
behalf of BCOP and intending that my obligations, duties, and promises in this
Agreement are for the benefit of BCOP.” Id. at 96 (internal quotation marks omitted).
And the agreement indicated that the one-year period was measured from the date of the
sale to BCOP, but the period could be extended in a future agreement:
I agree that this Agreement shall be freely assignable by [LS&H] to BCOP
in the event of and upon the closing of the sale of stock of [LS&H] to
BCOP. I further agree that if requested by BCOP, and for the
consideration stated above, I will sign a noncompetition agreement in
substantially the same form as this Agreement and which names BCOP as
the employer.
Id. (emphasis added) (internal quotation marks omitted).
There are no circumstances remotely like that in this case. Nothing in the Equity
employment agreements or the circumstances surrounding their execution indicated that
12
they were dependent on who owned Equity. Nothing we say in resolving the issue before
us is inconsistent with the decision in OfficeMax. 3
Defendants next argue that Plaintiffs made an admission establishing that their
noncompetition contracts did not bar Defendants from joining Northwest. Noting that the
contracts restrict their right to compete “[d]uring [their] employment with Equity, and for
a period of one (1) year thereafter,” they contend that Plaintiffs made a binding judicial
admission that their employment with Equity ended in October 2008, when FA Company
completed the acquisition of all of Equity’s stock, so the one-year restriction on
competition ended years before they left for Northwest. The purported admission was the
statement in Plaintiff’s complaint that “Smith, Williams, and Carrell became employees
of First American on or about October 16, 2008, as a result of [the SPA] . . . .” Aplt.
App., Vol. I at 73 (emphasis added). Perhaps this could be read as an allegation that as a
3
Defendants argue that the district court improperly construed the noncompetition
agreement by relying on “general corporate purpose” and a mistaken view of the
absurdity doctrine. But any such error by the district court is irrelevant at this stage of the
proceeding. Our review of contract interpretation is de novo. See Cellport Sys., Inc. v.
Peiker Acustic GMBH & Co. KG, 762 F.3d 1016, 1022 (10th Cir. 2014). And we have
not relied on either challenged doctrine. Embedded in Defendants’ general-corporate-
purpose discussion, however, is a distinct argument: Defendants suggest that “[b]y
holding that [Defendants] had contractual obligations to both Equity and First American,
the court improperly expanded the scope of the restrictive covenants to include a massive
company with subsidiaries and offices around the world.” Aplt. Br. at 45. This would be
a decent argument to prevent expansion of the geographical scope of the noncompetition
agreements beyond what was contemplated in the original contracts with Equity. But
among Defendants’ noncompete provisions, the one with the smallest geographic scope
barred competition within 40 miles of any Equity office. When Smith, Carrell, and
Williams signed their employment agreements, Equity had an office at 2180 South 1300
East, Salt Lake City, Utah. This is less than a mile from Northwest’s future main office
at 2150 South 1300 East. Enforcement of the noncompetition agreement in this context
is not an improper expansion of the obligation.
13
result of the SPA, Defendants were no longer employees of Equity. But even if this
allegation in the complaint (which was denied by Defendants in their answer) could
otherwise be considered a binding judicial admission, we decline to treat it as an
admission because it is a statement of law rather than fact. We have repeatedly declared
that “admissions” of law are ordinarily not binding. See Z.J. Gifts D-4, L.L.C. v. City of
Littleton, 311 F.3d 1220, 1233 (10th Cir. 2002), rev’d on other grounds sub nom. City of
Littleton v. Z.J. Gifts D-4, L.L.C., 541 U.S. 774 (2004); Gust v. Jones, 162 F.3d 587, 598
(10th Cir. 1998); Guidry v. Sheet Metal Workers Int’l Ass’n, Local No. 9, 10 F.3d 700,
715–16 (10th Cir. 1993), modified on other grounds by Guidry v. Sheet Metal Workers
Nat’l Pension Fund, 39 F.3d 1078 (10th Cir. 1994) (en banc). Plaintiffs contended in
their brief on appeal that the assertion in the Complaint “was a legal conclusion as to the
effect of the SPA; it cannot be considered a judicial admission.” Aplee. Br. at 34.
Defendants did not argue to the contrary in their appellate briefs. We therefore reject
their judicial-admission argument. 4
Finally, Defendant Carrell asserts that the district court “failed to recognize that
the SPA does not identify [her employment contract] as an enforceable employment
agreement.” Aplt. Br. at 46 (additional capitalization omitted). The SPA’s
Representations section has a subsection titled “Material Contracts” stating that,
“[e]xcept as set forth in Schedule 2.9(a), [Equity] is not bound by any oral or written
contract . . . relating to the employment of any Person.” Aplt. App., Vol. XX at 5322
4
For the same reason, we reject Defendants’ claim that the district court erred in refusing
their proposed Instruction No. 1, which dealt with judicial admissions.
14
(emphasis omitted). Although the employment agreements with Smith and Williams are
on the schedule, Carrell’s employment agreement is not. The upshot, Defendants argue,
is that the Carrell agreement “did not pass to ‘First American’ as part of the . . . SPA.”
Aplt. Br. at 46. We beg to differ. The purpose of the Material Contracts subsection was
to inform FA Company of various potential obligations of Equity arising from contracts
to which it was a party; nothing in the section indicates any intent to disclaim any
contracts.
Perhaps Equity did not think that the agreement was material to the company’s
financial condition. But if it was wrong in omitting that agreement from the schedule,
that error does not free Carrell from the rights and duties established by that agreement.
After all, Carrell was not a party to the SPA and could not claim any reliance on the
omission of her agreement from the schedule. The remedy, if any, for Equity’s error
would be an action by FA Company against Equity for a material omission of a potential
liability in the SPA.
C. Jury Instructions
Defendants raise numerous complaints about the jury instructions. We first
address their complaint that the district court failed to include all or part of their proffered
Instruction Nos. 16–18, 46–47, and 78. We need not address the substance of the
instructions, because Defendants did not properly object in district court to their
omission.
Under Fed. R. Civ. P. 51(c)(1), “A party who objects to an instruction or the
failure to give an instruction must do so on the record, stating distinctly the matter
15
objected to and the grounds for the objection.” And under Fed. R. Civ. P. 51(d)(1), “A
party may assign as error: . . . a failure to give an instruction, if that party properly
requested it and—unless the court rejected the request in a definitive ruling on the
record—also properly objected.” The advisory committee note to the 2003 amendment
to the Rule explains why it is not enough simply to tender an instruction:
Many cases hold that a proper request for a jury instruction is not alone
enough to preserve the right to appeal failure to give the instruction. The
request must be renewed by objection. This doctrine is appropriate when
the court may not have sufficiently focused on the request, or may believe
that the request has been granted in substance although in different words.
But this doctrine may also prove a trap for the unwary who fail to add an
objection after the court has made it clear that the request has been
considered and rejected on the merits. [Rule 51(d)(1)(B)] establishes
authority to review the failure to grant a timely request, despite a failure to
add an objection, when the court has made a definitive ruling on the record
rejecting the request.
Fed. R. Civ. P. 51 advisory committee’s note to 2003 amendment.
Defendants have failed to point to any place in the record where they satisfied
these requirements for properly objecting to any of the omitted instructions: for none of
those instructions did they identify the specific instruction and distinctly state the grounds
for an objection to its omission. They do, however, argue that they did not need to object
because the district court issued a “definitive ruling” rejecting the proposed instructions.
They point to the following email from the district court to counsel:
Counsel,
I attach a copy of the latest version of the proposed jury instructions. We
will discuss these Monday afternoon.
These take into account:
• The parties original proposed instructions
16
• The court’s first proposed instructions
• The court’s additional ins[t]ructions
• The parties’ additional proposals
I apologize for not tracking all the changes from the previous version. It
became too messy. Redlining was reserved for modifications of previously
proposed instructions. Entirely new instructions have no redlining.
Formatting changes are not redlined.
I also attach a separate document with tracked changes that only includes
the instruction on lawyers as expert witnesses. This is modified from the
instruction I read to the jury because it now deals with two witnesses. The
final version of this instruction is included in the large set of instructions.
Aplt. App., Vol. XXIII at 6336 (citations and emphasis omitted).
This is not a definitive ruling as contemplated by the Rule. The most that could be
said of the email is that the district court is reporting that it has reviewed the various
proposed instructions and is planning to give the attached instructions. The email does
not state that the court is attaching the final jury instructions. It says, “I attach a copy of
the latest version of the proposed jury instructions.” Id. (emphasis added). And then it
states, “We will discuss these Monday afternoon,” thereby giving counsel plenty of
opportunity to point out errors. Id. The district court was hardly setting “a trap for the
unwary.” Fed. R. Civ. P. 51 advisory committee’s note to 2003 amendment.
A district court’s simple failure to give a proposed instruction is not a “definitive
ruling” that excuses an objection under Fed. R. Civ. P. 51(d)(1). Otherwise a party could
comply with Rule 51 simply by tendering proposed instructions, a proposition this court
has repeatedly rejected. See Beaudry v. Corr. Corp. of Am., 331 F.3d 1164, 1168 n.6
(10th Cir. 2003) (“Merely tendering proposed instructions to a court is insufficient to
comply with the strictures of Fed. R. Civ. P. 51.”); Comcoa, Inc. v. NEC Tels., Inc., 931
17
F.2d 655, 660 (10th Cir. 1991) (“[T]he offering of a proposed instruction does not
preserve a challenge to the court’s instructions under Rule 51, absent a specific
objection.” (internal quotation marks omitted)); Aspen Highlands Skiing Corp. v. Aspen
Skiing Co., 738 F.2d 1509, 1515 (10th Cir. 1984) (same), aff’d, 472 U.S. 585 (1985). For
the denial of the proposed instruction to be a definitive rejection of the argument raised
on appeal in support of the instruction, the district court must expressly reject that
specific argument. Absent such a rejection we cannot tell whether the district court might
have changed its mind after a proper objection because it had not previously “sufficiently
focused on the request, or [believed] that the request [had] been granted in substance
although in different words.” Fed. R. Civ. P. 51 advisory committee’s note to 2003
amendment.
When there has not been a proper objection to failure to give an instruction, our
review is limited to review for plain error. See Fed. R. Civ. P. 51(d)(2). To establish
plain error, one must show “(1) error, (2) which is plain, (3) which affects substantial
rights, (4) and which seriously affects the fairness, integrity, or public reputation of
judicial proceedings.” Somerlott v. Cherokee Nation Distribs., Inc., 686 F.3d 1144, 1151
(10th Cir. 2012). But Defendants do not argue plain error in their opening brief.
Ordinarily an appellant’s failure to raise an issue in its opening brief waives the issue.
See In re Motor Fuel Temperature Sales Practices Litig., 872 F.3d 1094, 1105 n.2 (10th
Cir. 2017).
Defendants’ challenges to the instructions that were given fare no better. First,
they complain about Instruction Nos. 10 and 29. But their opening brief makes no effort
18
to show that they preserved their challenges below. And their effort to do so in the reply
brief comes up far short. Some of the record citations they provide in support do not
even plausibly deal with Instruction Nos. 10 and 29. And of the remaining four citations,
two reference their early objections to the Plaintiffs’ proposed jury instructions, not the
court’s instructions; the third is to their pleading entitled “Defendants’ Corrections to
Proposed Jury Instructions,” which nowhere specifically discusses Instruction Nos. 10
and 29; and the fourth is to a posttrial new-trial motion, a filing too late to contain a
proper Rule 51 objection, see Fed. R. Civ. P. 51(b)(1), (c)(2) (timely objections under
Rule 51 are to court’s proposed instructions and are to be made “before instructing the
jury and before final jury arguments”).
Defendants’ remaining arguments concern the district court’s fiduciary-duty
instructions. First, they complain that the instruction that fiduciaries must “fully disclose
information about matters affecting the principal’s business” was “overly broad” because
under Utah law, employees, and even lawyers, have a “clear right . . . to plan to
compete . . . without disclosing those plans to the employer.” Aplt. Br. at 53–54. We
note that two of the district court’s final instructions address this point. See Aplt. App.,
Vol. XXV at 6683 (Instruction No. 33) (“[B]ecause of society’s legitimate interest in
encouraging competition, unless there is a contractual or legal obligation to the contrary,
an employee may properly plan to go into competition with his employer and may take
active steps to do so while still employed and has no general duty to disclose his plans to
his employer and, further, he may secretly join other employees in the endeavor without
violating any duty to his employer.”); id. at 6684 (Instruction No. 34) (“In the absence of
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any agreement or other legal obligation to the contrary, an employee, including a lawyer,
may [1] properly plan to go into competition with his employer; [2] take active steps to
do so while still employed and has no general duty to disclose his plans to his employer;
and [3] secretly join other employees in the endeavor.”). In any event, Plaintiffs did not
preserve this argument by objecting on this ground to the district court’s proposed
instructions.
Defendants’ other challenges to the court’s instructions on fiduciary duty concern
an instruction saying that attorneys cannot “represent interests adverse to those of the
client during the attorney-client relationship” and cannot “conceal facts . . . nor in any
way deceive the client.” Aplt. Br. at 54; cf. Aplt. App., Vol. XXV at 6700. Defendants
argue that this instruction ignored two points of Utah law: that an attorney’s fiduciary
duties are limited to the representation’s scope (the subject of the legal services
provided), and that simultaneous representation of clients whose adverse interests are
only economic does not require disclosure and consent.
But Defendants did not preserve the simultaneous-representation issue. Although
they proffered instructions stating the proposition, they did not object to the district
court’s failure to give the instructions.
Defendants did specifically object that the instructions should have informed the
jury that an attorney’s fiduciary duties are limited to matters within the scope of the
attorney’s representation. What they failed to do, however, was provide any guidance or
argument to the district court regarding what is meant by that limitation in the context of
an attorney (such as Smith) representing an organization. Defendants were well aware of
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persuasive authority indicating that the scope of representation is quite broad in that
context. In the report he submitted to Defendants and the court, Plaintiffs’ legal-ethics
expert explained the applicability of § 96 of the Restatement (Third) of the Law
Governing Lawyers. Section 96(1)(a) states: “When a lawyer is employed or retained to
represent an organization[,] the lawyer represents the interests of the organization as
defined by its responsible agents acting pursuant to the organization’s decision-making
procedures.” And § 96(2) imposes a correspondingly broad duty:
If a lawyer representing an organization knows of circumstances indicating
that a constituent of the organization has engaged in action or intends to act
in a way that violates a legal obligation to the organization that will likely
cause substantial injury to it, or that reasonably can be foreseen to be
imputable to the organization and likely to result in substantial injury to it,
the lawyer must proceed in what the lawyer reasonably believes to be the
best interests of the organization.
Yet Defendants’ objections to the fiduciary-duty instructions made no attempt to provide
contrary authority, or even reasoned argument, regarding organizational representation.
Absent an argument explaining why the court’s instructions would be incorrect,
misleading, or prejudicial in the context of the specific case being tried, Defendants’
objections were not adequately presented. And, to repeat the refrain, Defendants do not
argue plain error on appeal.
D. Damages
At trial, Plaintiffs’ damages expert, Rick Hoffman, testified to the damages
suffered by First American. He assumed, among other things, that Plaintiffs proved their
causes of action. He calculated that First American’s lost profits between March and
December 2015 were $2,067,000 and that the risk-adjusted lost profits First American
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would lose over the next ten years was slightly over $14 million. The jury awarded a
total of $2,725,000. We can ascertain its thinking from the “Summary of Damages”
section of the special-verdict form, which we quote in full:
You were instructed that the amount of damages you award may overlap
among the defendants and among the claims, so that the total amount of
damages to be awarded to First American need not necessarily be the sum
of the damages amounts you have found above, if any, and must not exceed
the sum of the damages amounts you have found above, if any. It is
possible that the same damages may be caused by more than one wrongful
act and by more than one defendant. It is possible to find a defendant
liable on multiple claims or find several defendants liable on a single
claim.
Please answer these questions to ensure that double recovery to First
American does not occur, but that full recovery to First American is
granted.
1. Fill in the amount of damages you awarded for the following claims.
If you did not enter damages for a claim, enter “0”:
Michael Smith breach of contract $500,000
Jeff Williams breach of contract $50,000
Kristi Carrell breach of contract $50,000
Michael Smith breach of fiduciary duty $600,000
Tortious Interference with Contracts—
$525,000
Michael Smith
Tortious Interference with Contracts—Northwest $1,000,000
Tortious Interference with business relations—
$0
Northwest
Civil conspiracy $0
The total amount of damages to be awarded to First American is
$2,725,000.
Aplt. App., Vol. XXIV at 6577–78 (cross-references to verdict-form sections omitted).
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Defendants raise several challenges to the damages award. We reject them all.
First, they claim that the court committed error in failing to apportion damages between
the two Plaintiffs. But as we have already noted, all the parties tried the case without
distinguishing between the two entities. And Defendants never made this plaintiff-
segregation argument below, nor do they argue plain error on appeal. The issue is
therefore waived.
Next, Defendants complain that Plaintiffs’ evidence did not apportion the damages
by cause of action or defendant. But the evidence necessary to support damages depends
on the nature of the case. See, e.g., Brunswick Corp. v. Spinit Reel Co., 832 F.2d 513,
526 (10th Cir. 1987) (“Evidence of the amount of damages may be circumstantial and
inexact. [I]n a case . . . where the wrong is of such a nature as to preclude exact
ascertainment of the amount of damages, plaintiff may recover upon a showing of the
extent of the damages as a matter of just and reasonable inference, although the result
may be only an approximation.” (internal quotation marks omitted)); Milgo Elec. Corp.
v. United Bus. Commc’ns, Inc., 623 F.2d 645, 665 (10th Cir. 1980) (damages calculations
containing “a degree of uncertainty” are acceptable when the uncertainty “is a necessary
result of the nature of the case”). The same principle applies to apportionment of
damages. When the damages are lost profits, the nature of the case generally does not
allow pinpointing any particular act by any particular defendant as the cause of any
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particular dollar of lost profits. All the jury can do is make an informed judgment of how
to apportion the loss among causes of action and defendants. 5
And that is exactly what the jury did here. In the Summary of Damages section of
the special-verdict form, the jury set forth the total damages suffered by Plaintiffs as
$2,725,000. It then divvied that sum up among the various causes of action and
defendants. There was no duplication of damages in this case. If the jury had awarded
any duplicative (overlapping) damages, the total amount of damages to be awarded to
Plaintiffs would have been less than the sum of the component awards. For example, if
the jury thought that the total award against Northwest for tortious interference with
contracts ($1 million) encompassed the same damages as those awarded against Smith for
tortious interference ($525,000), then it would have reduced the total amount of damages
to be awarded to First American by $525,000 ($2,200,000 instead of $2,725,000). True,
the district court instructed the jury that it “may take action to ensure that double
recovery does not occur,” Aplt. App., Vol. XXV at 6710; but there was no need for the
jury to take the court up on that offer. The verdict form makes clear that the jury itself
was intent on avoiding double recovery. If the court were to reduce any of the
component awards on the ground that there was duplication, then First American would
not be awarded the total damages found by the jury.
5
We note that the expert did draw a distinction between immediate lost profits and the
profits that would accrue in the coming years from losing future business from its
customers. Because the total jury award is much closer to the expert’s calculation of the
amount of immediate lost profits, it appears that the jury associated the claim of tortious
interference with business relations, on which it ruled against Plaintiffs, with the alleged
loss of future business.
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Defendants do make some reasonable observations about the jury awards. They
note that the jury awarded $600,000 in lost profits against Smith for breach of fiduciary
duties, $525,000 for lost profits against Smith on the tortious-interference claim against
him, and $1 million against Northwest for tortious interference with contract, when all
three claims are “premised on the same conduct—Smith’s breach of fiduciary duty.”
Aplt. Br. at 60. Perhaps it would have been more logical for the jury to award $1,125,000
against Smith for breach of fiduciary duty and the same amount against Northwest for
tortious interference. (The tortious-interference judgment against Smith would
necessarily be lower because he could not interfere with his own contract. See Leigh
Furniture & Carpet Co. v. Isom, 657 P.2d 293, 301 (Utah 1982), overruled on other
grounds by Eldridge v. Johndrow, 345 P.3d 553, 556 (Utah 2015).) But where is the
prejudice to Defendants? The jury clearly tried to apportion all the damages to avoid any
duplication. If it had done what Defendants apparently would have preferred, each of
them would have been jointly and severally liable for a significantly larger judgment.
Indeed, Smith and Northwest could each be liable for Plaintiffs’ total damages of
$2,725,000 (although the court would have to protect them against double recovery once
the full amount had actually been paid). That could hardly have been in the interest of
any defendant.
The same point can be made about Defendants’ contention that “the damages
award is inherently inconsistent.” Aplt. Br. at 62. For example, they point out that the
jury awarded $50,000 each against Carrell and Williams for breach of contract but
awarded $525,000 against Smith for his “interference with those same contracts.” Id.
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But would Defendants have preferred that the damages awards against Carrell and
Williams were larger, instead of having Smith relieve them from much of what could
have been their joint and several liability?
In short, it is clear that the jury believed that Defendants’ conduct altogether
caused First American to lose $2,725,000 in profit. If their apportionment of that sum
among Defendants on the various causes of action seems peculiar, we fail to see how
Defendants were injured thereby.
E. Attorney Fees
Finally, Defendants raise two arguments why the district court’s attorney-fee
award was in error. “Generally speaking, we review the decision to award attorney fees,
and the amount awarded, for abuse of discretion,” though any legal analysis underlying
the award is reviewed de novo. Xlear, Inc. v. Focus Nutrition, LLC, 893 F.3d 1227, 1233
(10th Cir. 2018) (brackets and internal quotation marks omitted).
Defendants’ first argument concerns an alleged failure to split up fees by claim.
They argue that under Utah law a prevailing party seeking fees must allocate time
incurred between compensable and noncompensable claims. Here, they suggest, the only
claims for which Plaintiffs were entitled to fees were the breach-of-contract claims
against Smith and Williams based on their signed employment agreements—only those
contracts had a fees provision—and further, Plaintiffs were only “partially successful” on
those claims. Aplt. Br. at 63. Yet Plaintiffs did not segregate their fees by compensable
and noncompensable claims. Under Utah law, however, parties need not segregate fees
for compensable and noncompensable claims if the claims “sufficiently overlap and
26
involve the same nucleus of facts.” Daynight, LLC v. Mobilight, Inc., 248 P.3d 1010,
1013 (Utah Ct. App. 2011). And here, Plaintiffs’ breach-of-contract claims “sufficiently
overlap with” and “involve the same nucleus of facts” as Plaintiffs’ other claims. The
essence of this case—as Plaintiffs aptly put the point—is that “multiple high-level
employees of First American with non-compete, non-solicitation, and non-disclosure
agreements formed, organized, and operated a competing title insurance business in
violation of their duties to First American.” Aplt. App., Vol. XXVIII at 7604. The
conduct through which the individual Defendants violated their contractual obligations
plainly overlaps with the conduct underlying the various other causes of action here.
Defendants’ second argument is that the fee award was too high. They emphasize
that Plaintiffs received only $550,000 in damages on claims for which they were entitled
to fees (the breach-of-contract claims), and “were not successful on the majority of their
claims and only recovered a fraction of the [$14 million] in damages they requested.”
Aplt. Br. at 65. But in Utah, “[t]he total amount of the attorneys fees awarded in [a] case
cannot be said to be unreasonable just because it is greater than the amount recovered on
the contract,” and “[t]he amount of the damages awarded in a case does not place a
necessary limit on the amount of attorneys fees that can be awarded.” Dixie State Bank v.
Bracken, 764 P.2d 985, 990 (Utah 1988) (internal quotation marks omitted). We may not
have awarded the same amount, but we see no abuse of discretion.
III. CONCLUSION
We AFFIRM the judgment of the district court. We GRANT Defendants’
motion to supplement the appendix.
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