Rodaric Group v. Ryan

IN THE UTAH COURT OF APPEALS
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Rodaric Group, LLC; Action Investment ) MEMORANDUM DECISION
Services, LLC; Lee Jackson; and Richard )
Jackson, ) Case No. 20101003‐CA
)
Plaintiffs and Appellees, )
) FILED
v. ) (April 26, 2012)
)
W. Kelly Ryan, ) 2012 UT App 127)
Defendant and Appellant. )
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Fourth District, Provo Department, 070402054
The Honorable Steven L. Hansen
Attorneys: Nathan E. Burdsal and Hutch U. Fale, Orem, for Appellant
Keith W. Meade and Bradley M. Strassberg, Salt Lake City, for
Appellees
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Before Judges Voros, Thorne, and Roth.
ROTH, Judge:
¶1 W. Kelly Ryan appeals from the district court’s entry of default judgment against
him for failure to appear for trial. Ryan asserts that he was represented by counsel and
ready to proceed with trial. We reverse the entry of default judgment and remand for
additional proceedings.
¶2 Ryan was one of multiple defendants in a securities fraud action initiated by
Rodaric Group, LLC; Action Investment Services, LLC; Lee Jackson; and Richard
Jackson (collectively, Rodaric Group). Several defendants were dismissed from the
litigation, and eventually the number of defendants dwindled to four, including Ryan.
On March 15, 2010, the district court held a pretrial conference, at which time it
scheduled a bench trial beginning August 2, 2010. Ryan, who lived in Washington and
was representing himself, asked to appear at the pretrial conference telephonically, but
that request was denied, and as a result, he did not appear. The court entered an order,
setting a final pretrial conference for July 19, 2010, at which “[a]ll parties and all counsel
are to be present.” Ryan, still pro se, did not appear at the final pretrial conference after
his request to appear telephonically was again denied, but the court entered no
sanction. Ryan did appear in person for trial on August 2, 2010. Because of scheduling
issues, however, the parties agreed to continue the matter until November 8, 2010, for
an eight‐day trial. The district court directed the parties to “be prepared and ready to
go” at that time and several times urged Ryan to obtain counsel.
¶3 On November 8, 2010, Ryan did not appear for trial. The trial did not proceed
that day, however, because Plaintiffs’ counsel represented to the court that the parties
had “reached a global settlement” and was granted a continuance until the following
day. On November 9, Rodaric Group finalized a settlement with all remaining
defendants, except Ryan. Once the court indicated its approval of the settlement,
Nathan E. Burdsal, who had been representing one of the other defendants, entered an
appearance for Ryan in open court. Burdsal explained that because Rodaric Group was
seeking joint and several liability, he had had a conflict in representing Ryan while also
representing another defendant, but once his other client had settled, he was free to
enter his appearance for Ryan, who had requested that Burdsal represent him at trial.
Burdsal further stated that he was “still prepared for the trial” and “would like to go
forward with the trial” without “any additional time.” Rodaric Group objected to
Burdsal’s entry of appearance and moved to strike Ryan’s answer and to proceed by
proffer. The district court allowed Burdsal to enter an appearance on behalf of Ryan but
granted Rodaric Group’s motion to strike the answer and entered a default judgment
based on evidence proffered by Rodaric Group. Burdsal objected to both the entry of
default and the court receiving evidence by proffer. In granting the default, the court
cited Ryan’s failure to appear for the first day of trial as the basis for its decision but did
not specify under which rule it was entering the default judgment. In a later written
decision denying Ryan’s motion to set aside the default judgment, the court explained
that it struck Ryan’s answer and entered default judgment against him as a sanction
under rule 16(d) of the Utah Rules of Civil Procedure for failing to obey a pretrial order
instructing Ryan to appear at the bench trial. See generally Utah R. Civ. P. 16(d) (2010)
(“If a party fails to obey a . . . pretrial order, . . . the court, upon motion or its own
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initiative, may take any action authorized by Rule 37(b)(2).”)); id. R. 37(b)(2) (detailing
sanction options, which include striking pleadings and entering default judgment).1
¶4 While we recognize that Ryan had been noncompliant with the court’s previous
orders that he appear at court proceedings, the factual basis the district court recited as
the basis for entering default judgment against Ryan is inaccurate. Ryan, in fact,
appeared at trial through his counsel, Burdsal, who was, in the words of the court’s
pretrial warning, “prepared and ready to go.” See generally Utah R. Civ. P. 55(b)(1)(A)
(2012) (authorizing default judgment when a party fails to appear); Ogawa v. Ogawa, 221
P.3d 699, 707 (Nev. 2009) (reversing the entry of default judgment against a defendant
who appeared through counsel, and collecting cases from other jurisdictions that have
held the same). The court had not issued any order requiring Ryan to appear
personally at trial. See Utah R. Civ. P. 16(d) (2010) (authorizing a court to enter default
judgment as a sanction for failing to follow a pretrial order); Rocky Produce, Inc. v.
Frontera, 449 N.W.2d 916, 917 (Mich. Ct. App. 1989) (“[A]bsent a subpoena or order
from the court to appear, a [represented] defendant in a civil case is not required to
appear in person for a scheduled trial.”); cf. Von Hake v. Thomas, 759 P.2d 1162, 1172
(Utah 1988) (stating that for a party to be held in contempt for failing to comply with a
court order, the court must find that the party knew what he was required to do, was
able to comply, and willfully failed to comply), superseded by statute on other grounds as
stated in State v. Hurst, 821 P.2d 467, 469 n.1 (Utah Ct. App. 1991). In fact, the court had
repeatedly and strongly advised Ryan to obtain counsel because “all parties in all cases
that represent themselves . . . are at a distinct disadvantage.” Ryan admittedly failed to
appear either personally or through counsel for the first day of trial, but this did not
appear to have prejudiced Rodaric Group. To the contrary, it was Rodaric Group that
requested a continuance based on its representation that it had reached a global
settlement with the defendants. When it became clear that Ryan was not going to settle,
he appeared through counsel, Burdsal, and represented through that counsel that he
was ready to proceed with the trial without delay. Furthermore, counsel objected on
the record to proceeding by proffer, stating that Rodaric Group would not be
“prejudice[d] by making [it] prove [its] case” and indicating that he thought Ryan
should “get an opportunity to have his attorney present [defense] evidence for him”
1
Rule 16 and rule 37 of the Utah Rules of Civil Procedure have been recently
amended. See generally Utah R. Civ. P. 16 amend. notes (2012); id. R. 37 amend. notes.
The new rules only affect cases filed on or after November 1, 2011, however, and we
therefore cite to the preamendment version of these rules.
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rather than “mov[ing] ahead via proffer.” Counsel also objected to the sufficiency of the
proffer. On these facts, there is no basis for entering default judgment against Ryan as a
consequence of his failing to appear personally for trial. We therefore reverse the entry
of default judgment and remand to the district court for additional proceedings.2
¶5 Reversed and remanded.
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Stephen L. Roth, Judge
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¶6 WE CONCUR:
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J. Frederic Voros Jr.,
Associate Presiding Judge
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William A. Thorne Jr., Judge
2
Ryan also asks that we rule as a matter of law that Rodaric Group cannot
recover against Ryan as an officer or director because the corporation for which he
works has not itself been held liable. See generally Utah Code Ann. § 61‐1‐22(4)(a) (2011)
(stating that officers or directors may be held jointly and severally liable with the
corporation when that corporation is found to be a seller in violation of the securities
act). He also claims that Rodaric Group is precluded from recovering by the doctrine of
res judicata. Although the issues were raised in the district court at the November 9
hearing, they were not fully developed below, and we will not review them in the first
instance. See generally 438 Main St. v. Easy Heat, Inc., 2004 UT 72, ¶ 51, 99 P.3d 801(declining to consider issues on appeal that have not yet been presented in a manner
that allowed the district court an opportunity to rule). Ryan is free to raise those issues
in the district court on remand, as appropriate.
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