Advanced Forming Technologies, LLC v. Permacast, LLC

2015 UT App 7_________________________________________________________
THE UTAH COURT OF APPEALS
ADVANCED FORMING TECHNOLOGIES, LLC,
Plaintiff and Appellant,
v.
PERMACAST, LLC; GARY CRADDOCK; AND
PAXTON CRADDOCK,
Defendants and Appellees.
Opinion
No. 20130949-CA
Filed January 8, 2015
Third District Court, West Jordan Department
The Honorable Barry G. Lawrence
No. 090404693
Michael A. Stout and Jack W. Reed,
Attorneys for Appellant
Peter H. Barlow, Sadé A. Turner,
and S. Spencer Brown, Attorneys for Appellees
JUDGE GREGORY K. ORME authored this Opinion, in which
JUDGES JAMES Z. DAVIS and KATE A. TOOMEY concurred.
ORME, Judge:
¶1 Advanced Forming Technologies, LLC (AFTEC) appeals the
trial court’s grant of summary judgment in favor of Permacast, LLC
and two of its principals, Gary Craddock and Paxton Craddock
(collectively, Permacast). Because Permacast failed to show that it
was entitled to judgment as a matter of law, we reverse.
Advanced Forming Technologies, LLC v. Permacast, LLC
BACKGROUND1
¶2 AFTEC is a Utah company that manufactures and licenses
a patented concrete wall system called StoneTree. In March 2006,
Permacast secured a license to use the StoneTree system for a
territory in Florida.2 According to the licensing agreement,
Permacast would purchase the StoneTree proprietary equipment
from AFTEC for an amount exceeding $260,000 and pay it $5,000
per year as a licensing fee. AFTEC did not receive any commission
on the walls that Permacast built. Among other things, the
agreement required Permacast to actively market the StoneTree
brand by putting a link to AFTEC’s website on Permacast’s
website, using the StoneTree logo on all promotional materials, and
marking the StoneTree name on all equipment and finished
concrete walls.
¶3 Nearly three years later, AFTEC wrote a letter to Permacast
asserting that Permacast had violated the licensing agreement by
failing to properly mark the StoneTree system components it
installed, claiming AFTEC’s intellectual property as its own,
providing sub-standard installation, marketing the StoneTree
system outside of its authorized territory, and promoting and using
a competing system. AFTEC also complained that Permacast had
not put a link on its website to AFTEC’s website. As a result,
AFTEC terminated the licensing agreement on February 19, 2009.
¶4 Two weeks later, AFTEC sued Permacast for breach of
contract and interference with economic and contractual relations.
After the original deadlines for discovery had passed, both AFTEC
1. In reviewing a trial court’s grant of summary judgment, we
recite the facts and all reasonable inferences drawn therefrom in the
light most favorable to the non-moving party—in this case, AFTEC.
See Orvis v. Johnson, 2008 UT 2, ¶ 6, 177 P.3d 600.
2. When Permacast first entered into the licensing agreement with
AFTEC, it operated under a different name. For the sake of clarity,
we use “Permacast” throughout.
20130949-CA 2 2015 UT App 7Advanced Forming Technologies, LLC v. Permacast, LLC
and Permacast decided they needed more time. They stipulated
to—and the court approved—an open-ended discovery period that
has not been modified since.
¶5 In June 2012, Permacast moved for summary judgment,
arguing that AFTEC “failed to provide any evidence showing
damages” on either its breach-of-contract or economic-interference
claim. In its opposition memorandum, AFTEC argued that it could
prove the fact of damages, even if it could not yet specify the
precise amount of damages. AFTEC estimated that from 2006 to
2008, it spent approximately $1.3 million in advertising, marketing,
web design, and technical support for its licensees. AFTEC claimed
that about $560,000 of those costs were allocable to Permacast.
AFTEC argued that because of Permacast’s breach, the money had
been wasted and should be considered as damages. Gale Stott, the
owner of AFTEC, admitted in a deposition that he would need an
expert to prove AFTEC’s damages. AFTEC also argued that
Permacast’s motion was premature because discovery was still
open. Because of this, AFTEC asserted that it needed only “to show
generally, as is allowed in the pleading stage, the amount of its
alleged damages and then quantify those damages through further
fact and expert discovery.”
¶6 The trial court determined that the $560,000 in damages that
AFTEC claimed was “not sufficiently broken down into actual
damages” and agreed that an expert witness would be required to
establish damages. Because AFTEC had not sought a continuance
under rule 56(f) of the Utah Rules of Civil Procedure to provide
expert–witness testimony, the trial court granted Permacast’s
motion for summary judgment. AFTEC appeals.
ISSUE AND STANDARD OF REVIEW
¶7 AFTEC appeals the trial court’s grant of summary judgment.
We review the trial court’s legal conclusions and ultimate grant or
denial of summary judgment for correctness. See Orvis v. Johnson,
2008 UT 2, ¶ 6, 177 P.3d 600.
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ANALYSIS
¶8 Resolution of this appeal turns on the proper application of
rule 56 of the Utah Rules of Civil Procedure. To begin with, rule
56(b) provides that a defendant “may, at any time, move for
summary judgment.” Utah R. Civ. P. 56(b). As a result, a defendant
may move for summary judgment before discovery is closed, as
happened here. If a defendant chooses to do so, it bears the burden
of proving it is entitled to judgment as a matter of law. See id. R.
56(c); Jones & Trevor Mktg., Inc. v. Lowry, 2012 UT 39, ¶ 29, 284 P.3d
630. A plaintiff may avoid the entry of summary judgment against
it either by establishing that the material facts on which the
defendant relies are disputed or that, even if the facts are as the
defendant claims, the defendant is not entitled to judgment as a
matter of law. See Jones & Trevor, 2012 UT 39, ¶ 29. If a plaintiff is
not prepared to oppose a properly framed motion at that time, it
can seek a continuance under rule 56(f). See Utah R. Civ. P. 56(f).
¶9 When a moving party makes and supports a motion for
summary judgment, the non-moving party “may not rest upon the
mere allegations or denials of the pleadings, but the response . . .
must set forth specific facts showing that there is a genuine issue
for trial.” See id. R. 56(e). If, however, the moving party fails to
properly support its motion for summary judgment, the non-
moving party is permitted to “rest on the allegations in [its]
pleadings.” See Parrish v. Layton City Corp., 542 P.2d 1086, 1087
(Utah 1975).
¶10 In this case, it appears that there was not a genuine issue of
material fact. But the thrust of Permacast’s motion was not that it
was entitled to judgment as a matter of law given those facts.
Rather, Permacast claimed that AFTEC had not provided adequate
evidence of damages and had failed to disclose any expert
witnesses. In reply, AFTEC claimed it spent $560,000 in advertising,
marketing, and support that was allocable to Permacast, but
AFTEC admitted that it had not yet identified an expert witness
20130949-CA 4 2015 UT App 7Advanced Forming Technologies, LLC v. Permacast, LLC
able to fully calculate and explain its damages.3 It is undisputed
that AFTEC will eventually require an expert witness to prove
damages—especially considering that “[a]dvertising and marketing
costs considered alone . . . do not provide evidence of either the fact
or the amount of . . . damages.” Stevens–Henager Coll. v. Eagle Gate
Coll., 2011 UT App 37, ¶ 26, 248 P.3d 1025. Permacast, AFTEC, and
the trial court all agree that AFTEC will eventually need an expert
witness to prove its case and that it has not yet engaged an expert
witness. They disagree only about where this leaves AFTEC in the
face of Permacast’s motion for summary judgment.
¶11 As indicated above, having filed its motion for summary
judgment before the close of discovery and before any obligation
on the part of AFTEC to retain an expert had ripened, Permacast
was required to prove that it was “entitled to a judgment as a
matter of law.” See Utah R. Civ. P. 56(c). Permacast failed to do so.
In fact, Permacast failed to even assert that it was entitled to
judgment as a matter of law. Instead, it focused on the facts of
record and claimed only that “AFTEC has failed to provide any
evidence showing damages.” Considering that discovery has not
yet closed, there is nothing unusual or inappropriate about the fact
that AFTEC has not yet proved its damages. There appears to be no
legal basis for requiring a plaintiff to prove its damages before
presentation of its case-in-chief at trial, unless it is required to do so
in the face of a well-supported motion for summary judgment
3. On appeal, AFTEC argues that the trial court should have
granted a continuance under rule 56(f) because AFTEC
substantively argued that it needed more time to present an expert
witness even if it did not explicitly make a rule 56(f) motion. But in
response to the trial court’s questions about why AFTEC had not
filed a rule 56(f) motion, AFTEC affirmatively represented that it
did not need a continuance under rule 56(f). Therefore, if the trial
court erred in any way regarding rule 56(f), that error was invited
by AFTEC, and we do not address it. See State v. Dunn, 850 P.2d
1201, 1220 (Utah 1993).
20130949-CA 5 2015 UT App 7Advanced Forming Technologies, LLC v. Permacast, LLC
purporting to demonstrate that plaintiff suffered no damages as a
matter of law.4
¶12 In some cases, apparently including this one, expert
testimony is required to prove an element of a claim. See, e.g.,
Morgan v. Intermountain Health Care, Inc., 2011 UT App 253,
¶¶ 14–16, 263 P.3d 405. If a plaintiff in such a case fails to designate
an expert before the close of discovery or other stated deadline for
doing so, the plaintiff, as a matter of law, will be incapable of
proving its claim and summary judgment will be appropriate. See
id. ¶¶ 5, 18; Paget v. Department of Transp., 2014 UT App 62, ¶ 4, 322
P.3d 1180 (holding, in a case where the deadline for designating
experts had come and gone, that “even though UDOT has not
established that its design met the applicable standard of care as a
matter of law, our determination that the trial court did not err in
excluding the Pagets’ expert leads us to the conclusion that
summary judgment in favor of UDOT was appropriate”). In
essence, this scenario compels a legal determination that the
plaintiff will never be able to prove a necessary element of its claim,
as opposed to the circumstances in the case before us, namely that
the plaintiff has not yet, with discovery still ongoing, proven a
necessary element of its claim.
¶13 In this case, both parties agreed to an open-ended discovery
period, and this arrangement, approved by the trial court, had not
been modified when Permacast brought its motion for summary
judgment. Without a discovery cut-off or a deadline for designating
expert witnesses, AFTEC was still free to line up an expert witness
4. Parties are required to include in their initial disclosures “a
computation of any damages claimed and a copy of all
discoverable documents or evidentiary material on which such
computation is based, including materials about the nature and
extent of injuries suffered.” Utah R. Civ. P. 26(a)(1)(C). This sharing
of information is for discovery purposes, and it must be
supplemented, as necessary, if “incomplete or incorrect.” See id. R.
26(d)(5).
20130949-CA 6 2015 UT App 7Advanced Forming Technologies, LLC v. Permacast, LLC
who could testify about the lost profits or other damages resulting
from Permacast’s breaches.
¶14 The trial court appears to have believed, however, that the
case had dragged on for too long, noting that the hearing for
summary judgment took place “nearly four years after the
Complaint was filed.” While this is certainly a long time—and in a
more typical case, with the usual array of pretrial deadlines in
place, it would most likely be well beyond the deadline for
concluding discovery and designating expert witnesses—it was
inconsequential in this case given the open-ended discovery
agreement of the parties that was approved by the court, albeit
through a judge previously assigned to the case, and which was
still in effect.
¶15 If Permacast determined that the open-ended discovery
protocol was no longer satisfactory or was being abused by
AFTEC, it could have requested a status conference at any time,
according to the terms of the discovery order, “to set firm dates.”
It did not do so. Instead, Permacast moved for summary judgment.
That motion did not demonstrate its entitlement to judgment as a
matter of law but argued only that AFTEC had failed to “provide
any evidence showing damages.” Permacast did not argue that
AFTEC would never be able to prove damages. And it did not
argue—as, indeed, it could not—that the deadline for AFTEC to
line up an expert witness had come and gone. As a matter of law,
it is impossible at this point in the discovery process to conclude
that AFTEC will never be able to provide evidence of damages.
Therefore, Permacast’s motion for summary judgment should have
been denied.
CONCLUSION
¶16 Because Permacast failed even to assert that it was entitled
to judgment as a matter of law, much less to prove it, we conclude
that Permacast did not properly make and support its motion for
summary judgment. See Utah R. Civ. P. 56(e). Accordingly, AFTEC
20130949-CA 7 2015 UT App 7Advanced Forming Technologies, LLC v. Permacast, LLC
was not required to “set forth specific facts showing that there
[was] a genuine issue for trial.” See id. Instead, AFTEC should have
been permitted to “rest on the allegations in [its] pleadings,” see
Parrish v. Layton City Corp., 542 P.2d 1086, 1087 (Utah 1975),
pending the close of discovery and the expiration of the time
available to it for engaging an expert. Accordingly, we reverse the
trial court’s grant of summary judgment and remand for trial or
such other proceedings as may now be in order.
20130949-CA 8 2015 UT App 7