Reperex Inc. v. Child, Van Wagoner and Bradshaw

2017 UT App 25THE UTAH COURT OF APPEALS
REPEREX INC., BRAD BALL, AND DAVID BALL,
Appellants,
v.
CHILD, VAN WAGONER & BRADSHAW; J. RUSSTON BRADSHAW;
COLDWELL BANKER COMMERCIAL; AND DUANE BUSH,
Appellees.
Opinion
No. 20150246-CA
Filed February 9, 2017
Third District Court, Salt Lake Department
The Honorable Todd M. Shaughnessy
No. 110916924
J. Spencer Ball, Attorney for Appellants
Tyler S. Foutz, Attorney for Appellees Child, Van
Wagoner & Bradshaw and J. Russton Bradshaw
Shane W. Norris, Attorney for Appellees Coldwell
Banker Commerical and Duane Bush
JUDGE J. FREDERIC VOROS JR. authored this Opinion, in which
JUDGES GREGORY K. ORME and MICHELE M. CHRISTIANSEN
concurred.
VOROS, Judge:
¶1 Reperex Inc., Brad Ball, and David Ball (collectively, the
Buyers) purchased a business with the help of business
brokerage Coldwell Banker Commercial and its agent Duane
Bush (collectively, the Broker). Accountant J. Russton Bradshaw
and his firm Child, Van Wagoner & Bradshaw (collectively, the
Accountant) provided the Buyers with financial information
about the business. The business ultimately failed. The Buyers
claimed that the Broker and the Accountant had misrepresented
the financial strength of the business and sued both for fraud,
Reperex Inc. v. Child, Van Wagoner & Bradshaw
negligent misrepresentation, and breach of fiduciary duty. The
district court dismissed all claims against the Broker and the
claims of negligent misrepresentation and breach of fiduciary
duty against the Accountant. The remaining fraud claim against
the Accountant went to trial, and the jury returned a verdict in
favor of the Accountant. The Buyers appeal.
¶2 We affirm the dismissal of the Buyers’ claims against the
Accountant and the trial verdict in favor of the Accountant. We
vacate the dismissal of the Buyers’ claims against the Broker and
remand the case for further proceedings.
BACKGROUND1
¶3 In July 2008 the Buyers contacted the Broker, expressing
interest in acquiring a new business. The Broker introduced the
Buyers to May’s Custom Tile (the Business). The Business had an
agreement with the Broker to ‚find buyers‛ and to ‚arrange and
negotiate the sale, merger, lease, or trade [of] . . . the assets of the
Company.‛ The Buyers met with the Broker and the owner of
the Business, Steve May (the Seller), several times to discuss
purchasing the Business. The Broker told the Buyers that he
would represent both the Buyers and the Seller in a ‚dual agency
capacity.‛
¶4 The Seller had originally hired the Accountant to prepare
tax returns for the Business. When the Seller decided to sell the
Business in 2008, he asked the Accountant to provide financial
1. When reviewing a district court’s rulings on both a motion for
judgment on the pleadings and a summary judgment motion,
we recite the facts and all reasonable inferences drawn therefrom
in a light most favorable to the non-moving party, here the
Buyers. See Poteet v. White, 2006 UT 63, ¶ 7, 147 P.3d 439(summary judgment motion); Pierucci v. U.S. Bank, NA, 2015 UT
App 80, ¶ 8, 347 P.3d 837 (motion for judgment on the
pleadings).
20150246-CA 2 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
records and tax returns to an unrelated potential buyer (the
Potential Buyer). The Accountant provided the requested
documents to the Potential Buyer and answered his questions,
which were relayed to him by email through the Broker. After
the Potential Buyer learned that the Business’s largest client
(comprising a significant share of its 2007 sales) had filed for
bankruptcy, he opted not to purchase the Business.
¶5 When the Buyers later expressed interest in the Business,
the Seller asked the Accountant to provide the Broker with
‚similar documents‛ to those he had earlier provided to the
Potential Buyer. Because of the confidential nature of the client
list and other documents, the Seller was reluctant to hand over
copies of the Business’s records and other financial documents,
but he agreed to let the Buyers review the records at the
Accountant’s office in a due diligence meeting.
¶6 The Buyers met with the Accountant, the Broker, and the
Seller to conduct the due diligence meeting. The meeting lasted
two hours or less; the Seller paid the Accountant for his time.
The meeting was the only direct interaction between the
Accountant and the Buyers. While the parties disagree about
what occurred at the meeting, it is undisputed that the parties
were all present and that the Buyers reviewed many of the
Business’s financial records—including tax returns and other
financial statements compiled by the Accountant.
¶7 After examining the business records provided by the
Accountant, the Buyers purchased the Business. In connection
with the purchase, the Buyers signed a broker agreement for sale
of assets that included a non-reliance clause, limiting the liability
of the Broker:
Buyer hereby acknowledges that Buyer is relying
on its own inspection of the involved business and
the representations of the Seller and not of [the
Broker] and/or any of its agents or employees with
regards to the prior operating history of the
business, the value of the assets being purchased
20150246-CA 3 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
and all other material facts of Seller in completing
the transaction as evidenced by the Agreement for
Purchase and Sale together with its attachments.
Buyer further acknowledges that neither [the
Broker] nor any of its agents and/or employees
have verified the representations of the Seller, and
should any representations be untrue, Buyer agrees
to look solely to Seller for relief and to indemnify
[the Broker], its agents and employees and hold
them harmless in connection with all losses and
damages caused to Buyer thereby.
¶8 After the Buyers purchased the Business, they learned
that the Business was ‚not as advertised.‛ The Broker had given
the Buyers financial statements showing that the 2006 profits
totaled over $300,000. The Broker did not tell the Buyers that the
Accountant had sent him an email indicating that, in reality, the
Business had made just over $74,000 in 2006.
¶9 The Buyers had also specifically asked the Broker about
whether the Seller had commingled funds between the Business
and another business he owned. The Broker responded that the
Broker could not list or market a company for sale if there was
any commingling. However, the Accountant had told the Broker
that his firm had ‚not clean[ed] up‛ the Business’s 2006
financials. The Accountant had earlier told the Broker by email,
‚The sales are OK. But the expenses are a bit shakey. . . . Keep in
mind there was a lot of intercompany commingling between [the
Business] and [the Seller’s other business].‛ The Broker also
knew, but did not inform the Buyers, that one of the Business’s
largest clients, a real estate developer called Promontory, had
filed for bankruptcy. Promontory accounted for a significant
share of the Business’s profits the previous year. Indeed,
Promontory’s bankruptcy was the very reason the Potential
Buyer lost interest in the Business.
¶10 The Buyers had also asked the Broker about the licensing
requirements necessary to run the Business. The Broker
informed the Buyers that they could get a contractor’s license in
20150246-CA 4 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
90 days; in reality, the Buyers needed three years to qualify for
the license.
¶11 The Buyers sued the Broker for fraud, negligent
misrepresentation, and breach of fiduciary duty. The Broker
moved for judgment on the pleadings, arguing that the non-
reliance clause in the broker agreement barred the Buyers’
claims. The district court granted judgment on the pleadings on
the claims of fraud and negligent misrepresentation, but not on
the claim of breach of fiduciary duty. The Broker then filed a
motion for summary judgment on the breach of fiduciary duty
claim. The Broker argued that summary judgment was proper
because the Buyers had failed to designate an expert witness to
establish the elements of their breach of fiduciary duty claim.
The district court granted the Broker summary judgment against
the Buyers on that basis.
¶12 The Buyers also sued the Accountant for fraud, negligent
misrepresentation, and breach of fiduciary duty. The Accountant
moved for summary judgment. The Accountant argued, among
other things, that the Buyers were not in privity of contract with
the Accountant, that they had not satisfied any exceptions to the
requirement of privity, and thus that their claims are barred. The
district court granted summary judgment on the claims of
negligent misrepresentation and breach of fiduciary duty. The
court held a four-day jury trial on the remaining fraud claim.
The Buyers requested a jury instruction on fraudulent
nondisclosure, which included the element of duty. The district
court denied the requested instruction, ruling that its previous
grant of summary judgment in favor of the Accountant as to the
negligence claim (with duty as one of the four elements)
precluded a conclusion that the Accountant owed a duty that
would support a claim of fraudulent nondisclosure. The jury
returned a verdict in favor of the Accountant on the fraud claim.
¶13 The Buyers appeal the dismissal of their claims against
the Broker and the dismissal of their claims of negligent
misrepresentation and breach of fiduciary duty against the
Accountant. They also appeal the district court’s refusal to
20150246-CA 5 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
include a jury instruction for fraudulent nondisclosure on the
fraud claim against the Accountant.
ISSUES ON APPEAL
¶14 First, the Buyers contend that the district court erred in
dismissing their claims of fraud and negligent misrepresentation
against the Broker based on the non-reliance clause in the broker
agreement.
¶15 Second, the Buyers contend that the district court erred in
granting summary judgment in favor of the Broker on the
Buyers’ breach of fiduciary duty claim on the ground that the
Buyers had not designated an expert witness.
¶16 Third, the Buyers contend that the district court erred in
granting summary judgment in favor of the Accountant on their
claims of negligent misrepresentation and breach of fiduciary
duty.
¶17 Finally, the Buyers contend that the district court erred in
refusing to instruct the jury on fraudulent concealment and
fraudulent nondisclosure.
ANALYSIS
I. Non-Reliance Clause
¶18 The Buyers contend that the district court erred when it
granted the Broker’s motion for judgment on the pleadings. ‚The
grant of a motion for judgment on the pleadings is reviewed
under the same standard as the grant of a motion to dismiss, i.e.,
we affirm the grant of such a motion only if, as a matter of law,
the plaintiff could not recover under the facts alleged.‛ Estrada v.
Mendoza, 2012 UT App 82, ¶ 2, 275 P.3d 1024 (citation and
internal quotation marks omitted). ‚The grant of a motion to
dismiss is thus a matter of law, which we review for
20150246-CA 6 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
correctness.‛ Thimmes v. Utah State Univ., 2001 UT App 93, ¶ 4,
22 P.3d 257 (citation and internal quotation marks omitted).
¶19 The district court dismissed the Buyers’ claims of fraud
and negligent misrepresentation against the Broker. The court
concluded that the ‚underlying facts‛ of the Buyers’ claims were
‚essentially identical to those in Ruf, Inc. v. Icelandic Investments,
Inc.,‛ 1999 UT App 103U. In Ruf, this court stated that ‚[t]o
prove fraud or negligent misrepresentation, appellants must
show, among other things, that they reasonably relied on the
false or misleading representation.‛ Id. para. 2. We concluded
that appellants could not show that they had relied on false or
misleading representations because ‚appellants signed an
agreement expressly stating that appellants would not and could
not rely on any representation made by broker,‛ and that this
non-reliance clause ‚precludes appellants from contending that
they relied on any representation made by broker.‛ Id. (footnote
omitted).
¶20 Relying on Ruf, the district court concluded that the
Buyers as ‚the purchaser[s] of a business could not, as a matter
of law, rely on statements made by a broker in the face of
[a] . . . non-reliance clause.‛ The court also noted that the non-
reliance clause in Ruf was virtually identical to the clause in the
agreement the Buyers had signed. ‚Thus,‛ the court reasoned,
‚based on the logic and reasoning of Ruf, [the Buyers’] claims for
fraud and negligent misrepresentation fail as a matter of law.‛
¶21 The Buyers contend that Ruf is no longer good law. They
further argue that the clause in their agreement with the Broker
is distinguishable from the clause at issue in Ruf.
¶22 ‚A release is a type of contract and may generally be
enforced or rescinded on the same grounds as other contracts.‛
Horgan v. Industrial Design Corp., 657 P.2d 751, 753 (Utah 1982).
‚*A] contract clause limiting liability will not be applied in a
fraud action. The law does not permit a covenant of immunity
which will protect a person against his own fraud on the ground
of public policy. A contract limitation on damages or remedies is
20150246-CA 7 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
valid only in the absence of allegations or proof of fraud.‛ Lamb
v. Bangart, 525 P.2d 602, 608 (Utah 1974). ‚‘If a party’s
manifestation of assent is induced by either a fraudulent or a
material representation by the other party upon which the
recipient is justified in relying, the contract is voidable by the
recipient.’‛ Miller v. Celebration Mining Co., 2001 UT 64, ¶ 10, 29
P.3d 1231 (quoting Restatement (Second) of Contracts § 164(1)
(Am. Law Inst. 1981)). ‚Accordingly, a release will be voidable if
it was an integral part of a scheme to defraud.‛ Ong Int’l (USA)
Inc. v. 11th Avenue Corp., 850 P.2d 447, 453 (Utah 1993).
¶23 ‚To successfully establish fraud, appellants must state
with particularity facts establishing that a sufficient causal
connection exists between [a defendant’s] alleged fraud and the
procurement of the release in [an] agreement.‛ Otsuka Electronics
(USA, Inc.) v. Imaging Specialists, Inc., 937 P.2d 1274, 1280 (Utah
Ct. App. 1997). ‚One of the elements of fraud that a plaintiff
must prove is that he or she, acting reasonably and in ignorance
of the statement’s falsity, did in fact rely upon the
misrepresentation.‛ Robinson v. Tripco Inv., Inc., 2000 UT App
200, ¶ 19, 21 P.3d 219 (citations and internal quotation marks
omitted). ‚To determine whether the reliance was reasonable,
the reliance must be considered with reference to the facts of
each case.‛ Id. ¶ 20 (citation and internal quotation marks
omitted). ‚[A] plaintiff may justifiably rely on positive assertions
of fact without independent investigation. It is only where,
under the circumstances, the facts should make it apparent to
one of his knowledge and intelligence, or he has discovered
something which should serve as a warning that he is being
deceived, that a plaintiff is required to make his own
investigation.‛ Id. (citation and internal quotation marks
omitted).
¶24 The district court concluded that the ‚underlying facts‛ of
the Buyers’ claims were ‚essentially identical to those in Ruf.‛
The language of the release of liability in Ruf does closely track
the language of the release included in the Buyers’ agreement of
sale with the Broker. See Ruf, 1999 UT App 103U, para. 2. Both
20150246-CA 8 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
releases ‚contractually define[] roles, identif[y] the source of any
representations, highlight[] the obligation of the buyer to verify
information, and preclude[] reliance on any representation made
by broker‛—all characteristics that the Ruf court used to
distinguish the Ruf release from other releases that ‚broadly
limit[] liability.‛ Id. para. 2 n.1.
¶25 Ruf distinguished another case, Ong, on the ground that
the release at issue there ‚broadly limit[ed] liability.‛ Id. para. 2
n.1 (citing Ong, 850 P.2d at 453). But as the authorities cited
above make clear, the distinction is not between broad
provisions and specific ones, but between provisions that are
procured by fraud or integral to a scheme to defraud and those
that are not.
¶26 Moreover, in the provision at issue here, the Broker
represented ‚that neither [the Broker] nor any of its agents
and/or employees have verified the representations of the
Seller.‛ But the Buyers allege that this representation by the
Broker is false—that the Broker did in fact attempt to verify
certain representations of the Seller and found them to be false.
As the Buyers argue, this provision ‚does not at all contemplate
that the broker would fraudulently filter the information‛ and
then provide facts ‚which the broker knew were plainly false by
reason of the reports and documents they filtered out.‛
¶27 We understand how Ruf may reasonably be read as filling
an interstice in Utah fraud jurisprudence. But we do not read Ruf
as embedding any new rule into the law of fraud in Utah. Ruf
was an unpublished memorandum decision.2 ‚A memorandum
2. The court no longer designates opinions or memorandum
decisions as ‚for official publication‛ or ‚not for official
publication,‛ leaving the decision of which memorandum
decisions and opinions warrant publication to the marketplace.
Memorandum decisions of the Utah Court of Appeals are now
published routinely by West Publishing, LexisNexis, and others.
20150246-CA 9 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
decision may not be used to render a decision in any matter not
clearly and unequivocally disposed of on the basis of well-
established Utah case law or Utah statute.‛ Grand County v.
Rogers, 2002 UT 25, ¶ 14, 44 P.3d 734. Unpublished
memorandum decisions are not used to announce a legal rule
that is ‚new, or novel, or has not previously been applied to a
matter of the type on appeal.‛ Id. They are intended to ‚add
nothing to the body of the law.‛ Id. ¶ 17. Of course, ‚in those
rare instances when some new legal rule is inadvertently
announced by way of a memorandum decision, authorizing
citation to that decision will assure consistency in the law.‛ Id.But the fact that no appellate court has cited Ruf in 18 years
reinforces our conclusion that it did not alter the law of fraud in
Utah. In any event, to the extent Ruf would dictate a different
result than would the general rules applied by our supreme
court in Lamb, Miller, and Ong, we disavow it.
¶28 Whether the Buyers’ claim prevails in the face of the non-
reliance clause depends not on the breadth of the clause as
suggested by Ruf, but on allegations or proof of fraud, including
whether the clause was procured by fraud or integral to a
scheme to defraud. See Lamb, 525 P.2d at 608; Ong, 850 P.2d at
453. Viewing the Buyers’ alleged facts and all reasonable
inferences from them in favor of the Buyers, we conclude that
those facts, if proven, could reasonably support a finding that
the non-reliance provision satisfied this standard. We therefore
conclude that the district court incorrectly granted the Broker’s
motion for judgment on the pleadings. Accordingly, we vacate
the dismissal of the Buyers’ fraud claims against the Broker. See
Thimmes v. Utah State Univ., 2001 UT App 93, ¶ 4, 22 P.3d 257.
II. Expert Witness
¶29 The Buyers contend that the district court erred in
granting summary judgment in favor of the Broker on their
claim of breach of fiduciary duty. They argue that they ‚do not
need an expert witness to prove broker fraud to a jury.‛
20150246-CA 10 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
¶30 The Broker responds that the district court ‚correctly
dismissed [the Buyers’] final cause of action for breach of
fiduciary duty because [the Buyers] could not satisfy the
requisite elements of the cause of action without the testimony of
an expert witness.‛ Expert testimony was necessary, the Broker
argues, to ‚establish the appropriate standard of care for, and
duties owed by, a reasonable mergers and acquisitions agent or
business broker‛ and to determine whether the Broker’s actions
fell below that standard.
¶31 The Buyers alleged in their complaint that the Broker had
a fiduciary duty to the Buyers as their real estate agent to
represent them in their purchase of the Business and their option
to purchase a different business. Further, they alleged that the
Broker breached that fiduciary duty by failing to make several
disclosures to the Buyers: (1) the bankruptcy of Promontory, a
customer that accounted for a significant share of the Business’s
revenue; (2) the need to have a contractor’s license; (3) the
delinquency of accounts; and (4) the existence of substantial bad
debt held by the Business. In fact, the Buyers allege, when they
inquired if the Business had any bad debt, they were told the
Business had no significant bad debt at all.
¶32 The district court ruled that the Buyers ‚must have expert
testimony to establish the standard of care to be applied to [the
Broker] under the facts of the case and to assist a jury in
determining whether [the Broker’s] conduct satisfied the
applicable standard.‛ The court ruled on summary judgment
that it was not ‚within the knowledge of the average person
what particular duties and responsibilities a business broker
would owe in connection with transmitting information to a
prospective buyer,‛ and consequently that the Buyers needed
‚expert testimony to establish that standard of care.‛ Because the
Buyers had not designated an expert witness, the court ruled
that the Buyers’ breach of fiduciary duty claim failed ‚as a
matter of law.‛
¶33 ‚An appellate court reviews a [district] court’s legal
conclusions and ultimate grant or denial of summary judgment
20150246-CA 11 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
for correctness, and views the facts and all reasonable inferences
drawn therefrom in the light most favorable to the nonmoving
party.‛ Orvis v. Johnson, 2008 UT 2, ¶ 6, 177 P.3d 600 (citations
and internal quotation marks omitted).
¶34 ‚To prove a breach of fiduciary duty claim, a plaintiff
must demonstrate that the defendant owed a duty, the
defendant breached the duty, the plaintiff suffered damages, and
the plaintiff’s damages were actually and proximately caused by
the defendant’s breach.‛ Giles v. Mineral Resources Int’l, Inc., 2014
UT App 259, ¶ 6, 338 P.3d 825. ‚Utah courts have held that
expert testimony may be helpful, and in some cases necessary, in
establishing the standard of care required in cases dealing with
the duties owed by a particular profession.‛ Preston & Chambers,
P.C. v. Koller, 943 P.2d 260, 263 (Utah Ct. App. 1997). Specifically,
‚[e]xpert testimony is required [w]here the average person has
little understanding of the duties owed by particular trades or
professions . . . .‛ Id. (second alteration in original) (citation and
internal quotation marks omitted). But ‚expert testimony may be
unnecessary where the propriety of the defendant’s conduct ‘is
within the common knowledge and experience’‛ of a layperson.
Id. at 263–64 (quoting Nixdorf v. Hicken, 612 P.2d 348, 352 (Utah
1980)).
A. Duty
¶35 The parties’ briefs discuss whether the Broker owed a
fiduciary duty to the Buyers. But in his deposition, Duane Bush
acknowledged that he had a fiduciary duty to the Buyers.
Furthermore, the Offer of Purchase and Sale of Assets
Agreement, which is signed by the Broker, stated that ‚both
Listing agent and Selling agent represent the Seller and buyer.‛
(The emphasized words are hand-written.) Regarding the
existence of a duty, the district court observed that the Buyers
had argued that ‚we don’t have to deal with the . . . question,‛
because the Broker ‚admitted that there was a . . . duty owing.‛
The court later asked the Broker, ‚just assume that a fiduciary
duty does exist between the broker [and the Buyers]; does that
20150246-CA 12 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
change the landscape?‛ The Broker’s counsel responded, ‚No,
not in this case; not at all. His testimony was he had a duty to
both sides, and he did. If he knew that there was a
misrepresentation being made, certainly he would have a duty
to tell the other side.‛
¶36 The court concluded that the issue before it was to
determine the applicable ‚standard of care that a business broker
would have as opposed to the existence of a duty.‛ No party has
appealed this ruling of the district court. Accordingly, we do not
address the question of whether the Broker owed the Buyers a
duty here. We assume that it did.
B. Standard of Care
¶37 The Buyers contend that expert testimony was not
necessary for a jury to determine whether the Broker’s actions
breached the fiduciary duty it owed to the Buyers. The Broker
responds that expert testimony was necessary to aid the jury
‚because Buyers could not satisfy the requisite elements of the
cause of action without the testimony of an expert witness.‛
¶38 The district court ruled that expert testimony was
necessary and granted summary judgment to the Broker because
the Buyers lacked an expert witness. The court reasoned that an
expert was necessary to establish the standard of care a business
broker would owe in connection with analyzing or transmitting
information to a prospective buyer of a business because that
knowledge was not within the common knowledge of the
average person:
I don’t think that it is within the knowledge of the
average person what particular duties and
responsibilities a business broker would owe in
connection with transmitting information to a
prospective buyer, and the extent to which a
broker would be obligated to potentially
employ . . . leagues of experts in various disciplines
to be able to analyze the data that’s being provided
20150246-CA 13 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
in order to . . . understand it, and then be able to
know whether they have an obligation to relay the
information.
¶39 In Hermansen v. Tasulis, 2002 UT 52, 48 P.3d 235, our
supreme court held that a real estate broker has a duty to be
‚honest, ethical, and competent‛ and to ‚deal fairly and
honestly, despite the fact that the broker is acting primarily as
the seller’s agent.‛ Id. ¶¶ 20, 22 (citation and internal quotation
marks omitted). These duties required the broker ‚to disclose
facts materially affecting the value or the desirability of the
property that were known to him.‛ Id. ¶ 20 (citation and internal
quotation marks omitted). And in Gilbert Development Corp. v.
Wardley Corp., 2010 UT App 361, 246 P.3d 131, this court held
that a real estate agent ‚could not misrepresent, either
affirmatively or by omission,‛ its client’s ‚financial condition or
ability to perform.‛ Id. ¶ 24. The Broker does not challenge these
standards or deny that they apply to a business broker as well as
a real estate broker. In fact, in arguing that Hermansen and Gilbert
did not overrule Ruf, Inc. v. Icelandic Investments, Inc., 1999 UT
App 103U, the Broker states, ‚Nothing in Ruf implied or stated
that a business broker does not have a duty to the other side of a
transaction to be ‘honest, ethical or competent.’‛ (Emphasis
added.)
¶40 Few Utah decisions deal with business brokers. Indeed,
Ruf is the only one of which we are aware. But we agree with the
apparent concession of the parties that, at least where, as here,
the business being sold includes real property, the standard of
care for business brokers is not lower than the standard of care
for real estate brokers. Business brokers must deal fairly and
honestly; be honest, ethical, and competent; and not
misrepresent, either affirmatively or by omission, their client’s
financial condition or ability to perform. See Hermansen, 2002 UT
52, ¶¶ 20, 22; Gilbert, 2010 UT App 361, ¶ 24.
¶41 However, these cases do not obligate a seller’s business
broker, in the district court’s words, ‚to potentially
employ . . . leagues of experts in various disciplines to be able to
20150246-CA 14 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
analyze the data that’s being provided in order to . . . understand
it, and then be able to know whether they have an obligation to
relay the information.‛ Absent expert testimony, the case law
does not impose on business brokers an affirmative obligation to
master the details of its client’s business and communicate them
to a potential buyer; but brokers must treat a potential buyer
fairly and honestly with respect to the information they do
know.
¶42 Thus, the question on appeal resolves to whether the
present case is so factually complex that a jury of laypersons
could not apply the foregoing standards.
C. Complexity
¶43 Under Utah law, expert testimony may be necessary to
‚establish[] the standard of care required in cases dealing with
the duties owed by a particular profession,‛ especially where the
average person has little understanding of the duties owed by a
particular profession, or the case involves complex allegations.
Preston & Chambers, P.C. v. Koller, 943 P.2d 260, 263 (Utah Ct.
App. 1997). But ‚expert testimony may be unnecessary where
the propriety of the defendant’s conduct is within the common
knowledge and experience‛ of the jury. Id. at 263–64 (citation
and internal quotation marks omitted).
¶44 The central question on appeal is whether this case is one
where expert testimony was necessary to explain the
complicated duty and breach issues, or one where expert
testimony was not necessary because the breach was within the
‚common knowledge and experience‛ of the jury. Compare
Posner v. Equity Title Ins. Agency, Inc., 2009 UT App 347, ¶¶ 21–
22, 222 P.3d 775, abrogated on other grounds by Coroles v. State, 2015
UT 48, ¶ 23, 349 P.3d 739, with White v. Jeppson, 2014 UT App 90,
¶¶ 19–23, 325 P.3d 888.
¶45 The Broker asserts that Posner ‚is on all fours with this
case and is dispositive.‛ See Posner, 2009 UT App 347. In Posner, a
property seller sued his real estate broker for breach of fiduciary
20150246-CA 15 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
duty after the buyers failed to repay a seller-financed loan. Id.
¶¶ 2–7. The seller and broker negotiated a fairly complex sale
that included partial seller financing, a surety bond, an out-of-
state seller, and split closing dates. See id. ¶ 22. The district court
granted summary judgment to the broker after the seller did not
designate an expert to provide expert testimony regarding the
duties involved in the sale. Id. ¶¶ 22, 28. We determined that a
layperson could not readily have comprehended the broker’s
fiduciary duties ‚in this complex transaction,‛ and thus agreed
with the district court that expert testimony was necessary to
prove the broker’s alleged breach of those duties. Id. ¶ 22.
¶46 Posner discussed ‚factually distinguishable and
unpersuasive‛ cases. Id. Among them was Reese v. Harper, 329
P.2d 410 (Utah 1958). Reese hinged on the fact that the agent had
been employed by the seller to sell real estate for $45,000,
approximately $15,000 of which would pay off encumbrances on
the property, leaving the seller with a net profit of $30,000. See id.
at 411. The agent in Reese presented the seller with an offer of
$30,000 that appeared to have the buyer pay off the
encumbrances, but which actually had the seller pay them off,
thus bringing the seller’s net sale total to approximately $15,000.
See id. at 411–12. Because the agent failed to disclose this fact—a
fact that decreased the seller’s gain by roughly half—the Reese
court affirmed the jury’s determination that the agent had
breached a fiduciary duty to seller. See id. at 413. This court
concluded that the facts in Reese were ‚not as complex‛ as the
facts in Posner, and in any event, the supreme court in Reese did
not address the issue of when an expert witness is required.
Posner, 2009 UT App 347, ¶ 22 n.7.
¶47 The Buyers rely on White v. Jeppson, 2014 UT App 90, 325
P.3d 888. In White, two plaintiffs enrolled in a financial education
course and personal financial coaching lessons with the
defendants ‚to learn how to manage money more effectively.‛
Id. ¶ 2. The defendants soon began offering the plaintiffs various
‚investment opportunities.‛ Id. In total, the plaintiffs agreed to
invest in four deals negotiated by the defendants—at a net
20150246-CA 16 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
economic loss to the plaintiffs. Id. ¶¶ 3–9. The district court ruled
that the case involved ‚complex real estate investments that
involved multiple parties and types of properties, and various
financing arrangements spanning a period of several years,‛ and
dismissed plaintiffs’ breach of fiduciary duty claim for failure to
designate an expert. Id. ¶¶ 9, 21.
¶48 On appeal, this court reversed because the district court’s
‚blanket approach‛ failed to ‚carefully analyze the need for
expert testimony on a claim-by-claim, element-by-element
basis . . . .‛ Id. ¶ 22. For one of the investments in particular, the
plaintiffs claimed that the defendants breached their fiduciary
duty by lying about their participation in the investment and
having previously received ‚big checks‛ from the investment. Id.
¶ 23. We held that whether the promoter had ‚received ‘big
checks’ from the investment is a clear example of where expert
testimony is not needed.‛ Id. Exaggerating the return on an
investment, we observed, ‚is certainly ‘within the common
knowledge and experience’‛ of a jury. Id. (quoting Nixdorf v.
Hicken, 612 P.2d 348, 352 (Utah 1980)).3
¶49 We conclude that the Buyers’ claims here are not so
complex as to require expert testimony. First, the Buyers allege
that the Broker assured them that the Business’s profits were
$371,000, when in fact they were only $74,000. Second, the
Buyers allege that the Broker assured them that it could not sell a
business if there were any commingling of funds, when in fact
the Accountant had specifically told the Broker that ‚there was a
lot of intercompany commingling‛ between the Business and the
Seller’s other business. Third, the Buyers allege that the Broker
3. Although the White court deemed the ‚big checks‛ claim to be
a clear example of where expert testimony is not needed, we
remanded for the district court to analyze the need for expert
testimony on each of the plaintiffs’ remaining—and otherwise
unarticulated—claims. White v. Jeppson, 2014 UT App 90, ¶¶ 23–
24, 325 P.3d 888.
20150246-CA 17 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
assured them that they would be able to secure the license
needed to operate the Business in 90 days, when in fact it would
take them at least three years. Finally, the Buyers allege that the
Broker knew but failed to tell them that the Business’s largest
client had filed for bankruptcy. These claims are similar in
complexity to the agent’s misrepresentation in Reese and the
broker’s claims of ‚big checks‛ in White.
¶50 We recognize that the sale of an operating business may
exceed in complexity many commercial real estate sales, most
investments, and nearly all residential real estate sales. But, as
we explained in White, the complexity of the claim, not the
complexity of the transaction, determines whether expert
testimony is required. And, because the Buyers’ claims here
resemble the plaintiffs’ claims we analyzed in White, we
conclude that the Buyers’ claims here are ‚within the common
knowledge and experience‛ of the jury. See White, 2014 UT App
90, ¶ 23 (citation and internal quotation marks omitted).
¶51 In sum, we conclude that the district court incorrectly
ruled that expert testimony was necessary for the Buyers to
prevail on their breach of fiduciary duty claim. We thus vacate
the dismissal of the Buyers’ breach of fiduciary duty claim
against the Broker and remand the case to the district court.
III. Accountant Liability
¶52 The Buyers contend that the district court erred in
granting summary judgment in favor of the Accountant on their
claims of negligent misrepresentation and breach of fiduciary
duty. Specifically, the Buyers argue that an exception to Utah
Code section 58-26a-602 (the Accountant Liability Statute) makes
the Accountant liable to the Buyers.4
4. Although the Buyers contend that they ‚were in full privity of
contract with *the Accountant+ as a third party beneficiary,‛ the
Buyers fail to demonstrate any contractual agreement that
(continued…)
20150246-CA 18 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
¶53 The Accountant responds that the district court properly
granted summary judgment. The Accountant maintains that the
Accountant Liability Statute shields him from liability because
no contractual privity exists between himself and the Buyers and
because the Buyers cannot meet the statute’s exception requiring
a ‚writing‛ between the Accountant and the Seller stating an
intent for the Buyers to rely on his work. See Utah Code Ann.
§ 58-26a-602 (LexisNexis 2016).
¶54 The district court ruled that the Buyers had not satisfied
the writing exception and thus granted summary judgment in
favor of the Accountant on the Buyers’ negligent
misrepresentation and breach of fiduciary duty claims.
Addressing contractual privity, the court determined, ‚It is
undisputed that Defendants and Plaintiffs were not in privity of
contract for the purpose of Defendants providing accounting
services to Plaintiffs.‛ Addressing the writing exception, the
court concluded that it was undisputed that no writing existed
from the Accountant to the Seller, to the Business, or to the
Buyers that would satisfy the statute.
¶55 ‚An appellate court reviews a trial court’s legal
conclusions and ultimate grant or denial of summary judgment
for correctness, and views the facts and all reasonable inferences
drawn therefrom in the light most favorable to the nonmoving
(…continued)
actually created, as they argue, an ‚accountant-client
relationship.‛ Moreover, the Buyers fail to cite any relevant case
law showing why—even if they were named third party
beneficiaries—being a third party beneficiary, contrary to its
usual connotation, satisfies the privity requirement in Utah Code
section 58-26a-602. An inadequately briefed claim is by
definition insufficient to discharge an appellant’s burden to
demonstrate trial court error. See Salt Lake County v. Butler,
Crockett & Walsh Dev. Corp., 2013 UT App 30, ¶ 37 n.5, 297 P.3d
38.
20150246-CA 19 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
party.‛ Orvis v. Johnson, 2008 UT 2, ¶ 6, 177 P.3d 600 (citations
and internal quotation marks omitted).
¶56 Utah’s Certified Public Accountant Licensing Act
regulates various aspects of the accounting profession. Utah
Code Ann. § 58-26a-101. The Accountant Liability Statute states
the general rule that licensed Utah accountants are not liable to
those with whom they are not in privity of contract. Id. § 58-26a-
602. But it also contains two exceptions, one for fraud and one
for writings:
A licensee, a CPA firm registered under this
chapter, and any employee, partner, member,
officer, or shareholder of a licensee or CPA firm are
not liable to persons with whom they are not in
privity of contract for civil damages resulting from
acts, omissions, decisions, or other conduct in
connection with professional services performed
by that person, except for:
(1) acts, omissions, decisions, or conduct
that constitute fraud or intentional
misrepresentations; or
(2) other acts, omissions, decisions, or conduct,
if the person performing the professional
services:
(a) knew that a primary intent of the client
was for the professional services to benefit
or influence the particular person seeking to
establish liability; and
(b) identified in writing to the client that the
professional services performed on behalf of
the client were intended to be relied upon
by the particular person seeking to establish
liability.
20150246-CA 20 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
Id. Our supreme court has explained that this ‚statutory
language unambiguously sets forth a default rule with two
exceptions: Accountants ‘are not liable to persons with whom
they are not in privity of contract . . . except for’ (1) cases of fraud
or intentional misrepresentations or (2) cases where the
accountant (a) knew the client intended the third party to rely
and (b) the accountant ‘identified in writing to the client’ an
intent that the plaintiff rely.‛ Reynolds v. Bickel, 2013 UT 32, ¶ 11,
307 P.3d 570 (quoting Utah Code Ann. § 58-26a-602).
¶57 In Reynolds, our supreme court provided guidance on the
exception at issue. There, an accountant provided accounting
services to three companies in preparation for their sale. Id. ¶ 2.
The companies were owned by the seller, but the seller conceded
that he was not in privity with the accountant. Id. ¶¶ 2, 8.
However, over approximately three months, the accountant
exchanged at least twenty-five emails and eleven spreadsheets
with the companies’ in-house accountant; most of these
exchanges discussed strategies to decrease the seller’s tax
liability. See id. ¶¶ 3, 13. After the seller sold the companies, the
parties discovered that the accountant had underestimated the
seller’s personal tax liability by approximately $1.5 million. Id.
¶ 4. The seller sued the accountant. Id.
¶58 The key question in Reynolds was whether the accountant
could be liable to the seller under the Accountant Liability
Statute. Because the seller conceded a lack of privity between
himself and the accountant and fraud was not alleged, the
appeal turned on the writing exception in subsection (2) of the
statute. See Utah Code Ann. § 58-26a-602(2)(b). The seller
‚presented the court with twenty-five emails and eleven
spreadsheets‛ which he contended satisfied the writing
requirement of section 602(2)(b). Reynolds, 2013 UT 32, ¶ 13. The
accountant responded that the emails and spreadsheets were
insufficient ‚because no single writing explicitly state[d] that
‘the [accountants] intended for [the seller] to rely on the work
that [the accountants] were performing.’‛ Id. ¶ 15.
20150246-CA 21 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
¶59 Our supreme court held that ‚one or more
writings . . . may be considered together . . . if there is a nexus
between them.‛ Id. ¶ 17. The court next concluded that a nexus
existed between the writings because they ‚expressly
referenced‛ each other and manifested an ‚‘implied reference’ to
one another . . . .‛ Id. ¶¶ 19–20. ‚The common theme of the e-
mail and spreadsheets [was] the tax implications for [the seller]
of the sale of the . . . Companies.‛ Id. ¶ 20. The accountant knew
that the seller ‚was the only person or entity who could benefit‛
from the accountant’s advice. Id. ¶ 21. Thus, when the
accountant exchanged emails with the companies’ in-house
accountant regarding the tax consequences of the sale for the
seller, ‚he was impliedly communicating ‘that [his] professional
services . . . were intended to be relied upon by’ [the seller].‛ Id.(first alteration and ellipsis in original) (quoting Utah Code Ann.
§ 58-26a-602(2)(b)).
¶60 The statute as interpreted by Reynolds controls here. The
exception includes two elements. The first is that the person
performing the professional services ‚knew that a primary intent
of the client was for the professional services to benefit or
influence the particular person seeking to establish liability.‛
Utah Code Ann. § 58-26a-602(2)(a). The Accountant’s
participation in the due diligence meeting and his admission that
he provided the Buyers with the same documents he had
previously provided to the Potential Buyer may well satisfy this
element.
¶61 The second element requires that the person performing
the professional services ‚identified in writing to the client that
the professional services performed on behalf of the client were
intended to be relied upon by the particular person seeking to
establish liability.‛ Id. § 58-26a-602(2)(b). Here, the Accountant
did not identify in one or a series of writings to the Seller that
anyone intended the Buyers to rely on his services. Thus, the
Buyers cannot satisfy the writing exception to the Accountant
Liability Statute. See id. § 58-26a-602.
20150246-CA 22 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
¶62 The Buyers argue that various emails between the
Accountant and the Broker satisfy the writing requirement. But
these emails never mention the Buyers. They name only the
Potential Buyer; the Buyers have produced no email from the
Accountant that even by implication identifies them. And the
statutory requirement is precise: the writing must indicate an
intent that the services be relied on by ‚the particular person
seeking to establish liability‛—here, the Buyers. See id.5
¶63 The Buyers further argue that the Accountant’s delivery
of various financial documents to the Buyers during the due
diligence meeting should satisfy the writing requirement
because the Accountant provided the Potential Buyer with the
same documents, and the documents were discussed in emails
mentioning the Potential Buyer. Again, the Accountant’s
delivery of documents to the Buyers during the due diligence
meeting would likely satisfy the first prong of section 58-26a-
602—the Accountant’s knowledge that the Buyers were relying
on his work—but the second requirement remains unsatisfied.
Because none of the financial documents the Accountant gave to
the Buyers at the due diligence meeting mentioned the Buyers,
the writing exception does not apply. See id.6
5. Reynolds v. Bickel notes that ‚the statute does not specify
whether ‘intended’ refers to the client or the accountant,‛ but
concludes that the ‚ambiguity is immaterial here because the
writings clearly evince intent on the part of both the client and
the accountant.‛ 2013 UT 32, ¶ 22, 307 P.3d 570. The ambiguity is
immaterial here also, but for the opposite reason: no writings
evince intent on the part of either the Buyers or the Accountant.
6. We acknowledge that circumstantial evidence strongly
indicates that the Seller, the Broker, and the Accountant all
intended the Buyers to rely on the Accountant’s services. This
evidence would thus appear to satisfy the policy or intent of the
writing exception. But ‚*o+ur task is to interpret the words used
(continued…)
20150246-CA 23 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
¶64 Consequently, the district court correctly ruled that no
writing satisfies the exception to the Accountant Liability
Statute’s privity requirement. We therefore affirm the summary
judgment on the Buyers’ remaining claims against the
Accountant.
IV. Jury Instruction on Fraudulent Nondisclosure
¶65 The Buyers contend that the district court erred in
rejecting their proposed jury instruction on fraudulent
nondisclosure.
¶66 The Accountant responds that the district court correctly
declined to instruct the jury on fraudulent nondisclosure. The
Accountant argues that ‚the finding of a duty or special
relationship is a key element of fraudulent nondisclosure*,+‛ and
the district court had already ruled that no duty existed between
the Accountant and the Buyers under the Accountant Liability
Statute. The Accountant also argues that the Buyers never
alleged fraudulent nondisclosure as a cause of action and thus
are not entitled to an instruction on that claim.
¶67 The district court rejected the Buyers’ proposed
instruction on the ground that the court had already
‚effectively . . . determined there was no duty‛ when it
dismissed the Buyers’ negligent misrepresentation claim at
summary judgment.
(…continued)
by the legislature, not to correct or revise them. When the words
are clear, however incongruous they may appear in policy
application, we will interpret them as written, leaving to the
legislature the task of making corrections when warranted.‛
State v. Wallace, 2006 UT 86, ¶ 9, 150 P.3d 540. And with rare
exception, our role requires us to apply the text of the statute,
not its policy. See Rothstein v. Snowbird Corp., 2007 UT 96, ¶ 10,
175 P.3d 560.
20150246-CA 24 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
¶68 ‚Whether the trial court’s refusal to give a proposed jury
instruction constitutes error is a question of law, which we
review for correctness.‛ State v. Hamilton, 827 P.2d 232, 238 (Utah
1992). The determination of whether a legal duty exists ‚is a
purely legal question,‛ which we also review for correctness.
Yazd v. Woodside Homes Corp., 2006 UT 47, ¶ 14, 143 P.3d 283.
¶69 To prevail on a claim of fraudulent nondisclosure, a
plaintiff must prove by clear and convincing evidence that
(1) the defendant had a legal duty to communicate information,
(2) the defendant knew of the information he failed to disclose,
and (3) the undisclosed information was material. Hess v.
Canberra Dev. Co., 2011 UT 22, ¶ 29, 254 P.3d 161. As explained
above, the district court correctly ruled that, under the
Accountant Liability Statute, the Accountant owed no duty to
the Buyers.
¶70 Here, the Buyers argue that the factual circumstances of
this case—particularly the Accountant’s role in the due diligence
meeting—created a duty from the Accountant to the Buyers. The
Buyers cite to Yazd v. Woodside Homes, which recognized that a
duty between parties otherwise lacking privity may arise if a
‚special relationship exists.‛ See 2006 UT 47, ¶ 18 (citations and
internal quotation marks omitted).
¶71 ‚There are occasionally instances in which a court is
called upon to make policy choices based on assessments of
social, economic, and technological conditions,‛ such as when
‚policy considerations bear on a subject lodged firmly within the
court’s sphere, like the common law . . . .‛ Id. ¶¶ 19–20. But for
the accounting profession, the legislature has occupied the field.
It has crafted a statute adopting the general rule that accountants
owe no duty to those with whom they are not in privity and
defining with considerable precision the exceptions to that
general rule. See Utah Code Ann. § 58-26a-602 (LexisNexis 2016).
Absent any constitutional concerns, which the Buyers do not
assert, we are not at liberty to graft onto the statute an exception
that our legislature chose not to include.
20150246-CA 25 2017 UT App 25Reperex Inc. v. Child, Van Wagoner & Bradshaw
¶72 Because the court correctly concluded that the Accountant
did not owe the Buyers a duty under the Accountant Liability
Statute, it correctly refused to give the jury instruction on
fraudulent nondisclosure. See Hamilton, 827 P.2d at 238. We thus
affirm the district court’s ruling on this point.
CONCLUSION
¶73 For the foregoing reasons, we affirm the judgment with
respect to the Buyers’ claims against the Accountant, and we
vacate the dismissal of the Buyers’ claims against the Broker. We
therefore remand the case for further proceedings.
20150246-CA 26 2017 UT App 25