Giles v. Mineral Res. Int'l, Inc.

• Citation: 338 P.3d 825,2014 UT App 259
• Decision Date: 30 October 2014
• Docket Number: No. 20130694–CA.,20130694–CA.
• Court: Court of Appeals of Utah
• Parties: James GILES, Plaintiff and Appellee, v. MINERAL RESOURCES INTERNATIONAL, INC., Defendant and Appellant.

338 P.3d 825
2014 UT App 259

James GILES, Plaintiff and Appellee
v.
MINERAL RESOURCES INTERNATIONAL, INC., Defendant and Appellant.

No. 20130694–CA.

Court of Appeals of Utah.

Oct. 30, 2014.

338 P.3d 826

Zane S. Froerer and Paul H. Johnson, for Appellant.

Donald L. Dalton, for Appellee.

Judge JOHN A. PEARCE authored this Opinion, in which Judges GREGORY K. ORME and MICHELE M. CHRISTIANSEN concurred.

Opinion

PEARCE, Judge:

¶ 1 This appeal concerns a breach of fiduciary duty claim that was the subject of a successful summary judgment motion. Mineral Resources International, Inc. (MRI) challenges the district court's grant of summary judgment in favor of James Giles and award of attorney fees to Giles. The district court ruled that MRI had not presented sufficient evidence of actual damages caused by the alleged breach of the duty Giles owed MRI. On appeal, MRI contends that it presented sufficient evidence of damages to survive summary judgment. MRI further contends that even if the evidence of actual damages was insufficient, summary judgment was inappropriate because MRI claimed it was entitled to nominal damages. Lastly, MRI posits that the award of attorney fees was improper because the underlying attorney fees clause was part of a contract between Giles and MRI and the breach of fiduciary duty claim sounded in tort rather than contract.

¶ 2 “On appeal from a district court's summary judgment ruling, we view the facts and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party and review the court's legal conclusions and ultimate grant or denial of summary judgment for correctness.” Judge v. Saltz Plastic Surgery, PC, 2014 UT App 144, ¶ 13, 330 P.3d 126 (citation and internal quotation marks omitted).

¶ 3 MRI employed Giles from 1995 to 2010 as an international sales representative. Giles signed non-compete and nondisclosure agreements that MRI prepared. MRI assigned Giles to handle sales in Asia and the Pacific Rim. During this time, Giles developed a strong relationship with a regional distributor, HCI, which sold MRI's products in the Philippines. HCI and MRI entered into a five-year broker agreement in September 2003.

¶ 4 MRI's product line included the dietary supplement Concentrated Mineral Drops. In February 2008, Giles helped HCI file an application to use a logo depicting the stylized letters “CMD” as a trademark. MRI started using the CMD trademark for its Concentrated Mineral Drops “no later than July of 2008.”¹ In September 2009, MRI discovered HCI's trademark application and confronted Giles about it. Giles claimed that HCI had filed the application on behalf of MRI and that HCI would resolve the situation by allowing its application to lapse. The

338 P.3d 827

application did not lapse until the spring of 2012, although HCI apparently took no further action to advance the application.

¶ 5 In December 2009, MRI asked Giles to sign a revised non compete agreement, but he refused. Giles then terminated his employment with MRI in February 2010. In November 2011, Giles brought an action seeking a declaration that the original non-compete agreement was unenforceable. MRI filed a counterclaim against Giles combined with a third-party complaint naming ten John Does as defendants. Giles moved to dismiss the combined counterclaim and third-party complaint. After a hearing in February 2012, the district court dismissed without prejudice MRI's third-party complaint and the breach-of-contract portion of MRI's counterclaim. The remainder of the counterclaim is the breach of fiduciary duty cause of action currently before us on appeal.² At a June 2013 hearing, the district court noted that MRI had not conducted any discovery in the nineteen months since the case had been filed in November 2011. The district court ruled that the claimed damages were “all speculation” and that there was no evidence “to support the claim that somehow Mr. Giles is responsible for the loss of sales.” It therefore granted Giles's motion for summary judgment and awarded him attorney fees. MRI appeals those decisions.

I. Actual Damages

¶ 6 MRI first contends that the district court erred in determining that MRI had failed to present sufficient evidence of actual damages caused by Giles's actions. We review this determination for correctness. Judge v. Saltz Plastic Surgery, PC, 2014 UT App 144, ¶ 13, 330 P.3d 126. 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.See Christensen & Jensen, PC v. Barrett & Daines, 2008 UT 64, ¶ 23, 194 P.3d 931. The district court did not address the first three elements, because it determined that no reasonable finder of fact could conclude that Giles's actions caused the damages MRI alleged.

¶ 7 “Proximate cause is an issue of fact.” Harline v. Barker, 854 P.2d 595, 600 (Utah Ct.App.1993). Where summary judgment is sought due to a lack of evidence of causation, such judgment is appropriate “only if there is no evidence upon which a reasonable jury could infer causation.” Id. However, “[o]n appeal from a district court's summary judgment ruling, we view the facts and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party.” Judge, 2014 UT App 144, ¶ 13, 330 P.3d 126 (emphasis added) (citation and internal quotation marks omitted). Reasonable inferences must be more than speculation and conjecture. State v. Cristobal, 2010 UT App 228, ¶ 7, 238 P.3d 1096. “It is well established that an inference would be unreasonable if it would permit a jury to base its verdict on mere speculation and conjecture.” Owen v. Burcham, 100 Idaho 441, 599 P.2d 1012, 1019 (1979) (citing cases from three federal circuits). “While a plaintiff facing summary judgment ‘is entitled to all favorable inferences, [a plaintiff] is not entitled to build a case on the gossamer threads of whimsy, speculation and conjecture.’ ” Judge, 2014 UT App 144, ¶ 15, 330 P.3d 126 (quoting Ladd v. Bowers Trucking, Inc., 2011 UT App 355, ¶ 7, 264 P.3d 752 ). “Plaintiffs therefore must spin together myriad facts into a durable thread that reasonably connects defendant's breach to plaintiffs' injury.” Kilpatrick v. Wiley, Rein & Fielding, 909 P.2d 1283, 1292 (Utah Ct.App.1996) (emphasis added).

¶ 8 MRI argued that Giles breached his fiduciary duties in 2008 by helping HCI file the trademark application and that it was “reasonable to conclude” that Giles's actions “directly contributed to creating a conflict between” MRI and HCI. MRI claims that this conflict caused HCI to reduce its orders from MRI by ten percent between 2010 and

338 P.3d 828

2011 and by approximately fifty percent between 2011 and 2012. In 2013, after the onset of this litigation, HCI stopped communicating with MRI and instead announced plans to buy similar products from a different company.³ MRI admitted that it was “not certain exactly what portion of ... lost sales” could be attributed to Giles's actions but asserted that “it is reasonable to conclude that [those] actions were a substantial factor in losing [HCI] as a customer, and that [MRI] has suffered damages as a result.”

¶ 9 The district court ruled that MRI had not established sufficient facts to allow a reasonable jury to infer causation. According to the district court, the causal thread between Giles's actions and the alleged damages was “all speculation.” The court stated that it could not “find any proximate cause here that Mr. Giles is responsible” for MRI's loss of sales to HCI.⁴ On appeal, MRI renews its assertion that Giles “assist[ed][HCI] in breaching their broker agreement with MRI in an apparent attempt to ‘pirate’ one of MRI's most valuable trademarks.” MRI argues that the trademark dispute “created a reasonable inference—based on circumstantial evidence—that Giles took actions during the period of his employment with MRI ... which ultimately resulted in MRI losing [HCI] as a customer.”

¶ 10 The district court did not err in determining that these speculative and conclusory claims are insufficient to permit a reasonable finder of fact to conclude that the alleged breach actually caused the alleged damages. Viewing the facts in the light most favorable to MRI, Giles helped HCI file a trademark application in 2008 that infringed on MRI's intellectual property. Giles left MRI in 2010, and any contractual obligation he owed MRI expired two years later. In 2013, HCI decided to stop buying MRI's products after placing progressively smaller orders with MRI for the two preceding years. MRI has adduced no evidence linking HCI's purchasing decisions to Giles's role in the trademark application. Instead, MRI speculates that Giles's assistance in 2008 may have fueled a slow-burning conflict that resulted in a loss of business some four years later. These events, standing alone, are too far removed in type and time for a reasonable inference to be drawn that one caused the other. It follows that MRI has not carried its burden on appeal of demonstrating error in the district court's determination.

II. Nominal Damages

¶ 11 MRI next contends that the district court...