ASC Utah, Inc. v. Wolf Mountain Resorts, L.C.

• Decision Date: 19 November 2010
• Docket Number: No. 20090599.,20090599.
• Citation: 245 P.3d 184,2010 UT 65
• Parties: ASC UTAH, INC. dba The Canyons, Plaintiff, Counterclaim Defendant and Appellee, v. WOLF MOUNTAIN RESORTS, L.C., Defendant, Counterclaim Plaintiff and Appellant. Wolf Mountain Resorts, L.C., Plaintiff, v. ASC Utah, Inc. dba The Canyons, Defendant. Stephen A. Osguthorpe, et al., Plaintiffs, v. Wolf Mountain Resorts, L.C., Defendant. Enoch Richard Smith, as the Personal Representative of the Estate of Enoch Smith, Jr., Intervenor. Stephen A. Osguthorpe, et al, Plaintiffs, v. ASC Utah, Inc. dba The Canyons, Defendant.
• Court: Utah Supreme Court

245 P.3d 184
2010 UT 65

ASC UTAH, INC. dba The Canyons, Plaintiff, Counterclaim Defendant and Appellee,
v.
WOLF MOUNTAIN RESORTS, L.C., Defendant, Counterclaim Plaintiff and Appellant.
Wolf Mountain Resorts, L.C., Plaintiff,
v.
ASC Utah, Inc. dba The Canyons, Defendant.
Stephen A. Osguthorpe, et al., Plaintiffs,
v.
Wolf Mountain Resorts, L.C., Defendant.
Enoch Richard Smith, as the Personal Representative of the Estate of Enoch Smith, Jr., Intervenor.
Stephen A. Osguthorpe, et al, Plaintiffs,
v.
ASC Utah, Inc. dba The Canyons, Defendant.

No. 20090599.

Supreme Court of Utah.

Nov. 19, 2010.

245 P.3d 187

John P. Ashton, Clark K. Taylor, John R. Lund, Kara Pettit, Salt Lake City, for plaintiffs.

David M. Wahlquist, Ryan B. Frazier, Salt Lake City, Bruce C. Moore, Scott Mahady, Eugene, OR, for defendants.

DURHAM, Chief Justice:

INTRODUCTION

¶ 1 This case presents two issues: (1) whether the district court has jurisdiction to find that a party waived its contractual right of arbitration under Utah Code section 78-31a-4 (1996),¹ and (2) whether the district court erred in holding that Wolf Mountain waived any potential contractual right to arbitration. We hold that the district court has such jurisdiction, and that it was correct in holding that Wolf Mountain waived any potential contractual right to arbitration.

BACKGROUND

¶ 2 On July 3, 1997, Wolf Mountain Resorts, L.C. (Wolf Mountain) and ASC Utah, Inc., dba The Canyons (ASCU) entered into a Ground Lease agreement (Ground Lease) concerning the property now known as "The Canyons Ski Resort" (The Canyons). In the Ground Lease, Wolf Mountain agreed to lease The Canyons to ASCU for up to 200

245 P.3d 188

years. The Ground Lease requires ASCU to make annual rent payments to Wolf Mountain, develop the property, and pay Wolf Mountain a percentage of the costs of development. As ASCU develops the property, the Ground Lease provides that ASCU may exercise an exclusive option to transfer title of the property from Wolf Mountain to ASCU.

¶ 3 In 1999, pursuant to the Ground Lease, ASCU, Wolf Mountain, Summit County, and various other landowners not participating in this litigation entered into an Amended and Restated Development Agreement for the Canyons Specially Planned Area (SPA Agreement). The SPA Agreement outlines how The Canyons will be developed. Since 1997, in accordance with the Ground Lease and SPA Agreement, ASCU has invested a significant amount of money in developing The Canyons, greatly increasing the number of skier visits each year. Wolf Mountain and ASCU, however, have had disputes about these agreements that have hindered the development of The Canyons, including impeding the construction of a golf course that had been contemplated in the SPA Agreement.

¶ 4 In March 2006, Wolf Mountain issued a Default Notice to ASCU, alleging that ASCU had breached terms of the Ground Lease and threatening to terminate the Ground Lease. In response, ASCU filed a Complaint seeking declaratory relief related to the Default Notice and successfully moved for a preliminary injunction. Soon after, ASCU filed its First Amended Complaint, claiming that Wolf Mountain had breached the Ground Lease, including its duties to assist in land development pursuant to the SPA Agreement, which the Ground Lease incorporates. Wolf Mountain responded by filing an Answer and Counterclaim, and a First Amended Complaint against ASCU in a separate action. That action and others were consolidated into this case. Since the fall of 2006, Wolf Mountain and ASCU have been actively engaged in litigation, including extensive discovery and pretrial motions.

¶ 5 This discovery included the exchange of copious quantities of written discovery, the issuance of subpoenas duces tecum, and the taking of over 32 depositions. Specifically, Wolf Mountain served ASCU with four sets of Requests for Production of Documents, containing more than 400 separate requests; two sets of Interrogatories, containing 48 separate queries; and two sets of Requests for Admission, containing 45 separate requests. As of May 2009, ASCU had produced over 150,000 pages of documents. In addition, Wolf Mountain responded to multiple rounds of written discovery, amended and supplemented its discovery responses, and subpoenaed documents from numerous third parties. The district court even appointed a special master to assist with this extensive discovery because of ongoing disputes between the parties.

¶ 6 In addition to discovery matters, the district court has heard and ruled upon numerous motions, including several motions filed by Wolf Mountain. For instance, Wolf Mountain filed a motion to dismiss, a stipulated motion for case management order, a motion to compel responses to witness discovery requests, a motion for an order increasing the bond posted by ASCU for preliminary injunction, motions relating to various scheduling issues, a motion to amend the case management order, motions to compel depositions, and motions to compel responses to subpoenas.

¶ 7 On March 12, 2009, nearly three years after this suit began, Wolf Mountain filed a Motion for Leave to add several new parties to the litigation. The district court denied Wolf Mountain's motion, citing to "the delay and lack of viable explanation for the delay and prejudice to all parties in allowing this late amendment."

¶ 8 Following the district court's denial of its Motion for Leave to add additional parties, Wolf Mountain filed a Demand for Arbitration against several parties to the SPA Agreement, including both third parties and ASCU, based on an arbitration provision contained in the SPA Agreement (Arbitration Provision). It also filed a Motion to Compel Arbitration. Until this point, three years into the litigation and after extensive discovery and numerous pretrial motions, Wolf Mountain had never asserted the right to arbitration in any of its pleadings, and had not previously made the court or ASCU

245 P.3d 189

aware of its desire to seek arbitration. In fact, while fully aware of the Arbitration Provision from the outset of the litigation, Wolf Mountain admits that it had chosen to interpret the provision as not allowing it to initiate arbitration, and that it had specifically argued that it was not required to arbitrate disagreements relating to the SPA Agreement.

¶ 9 Wolf Mountain explains that it sought to pursue arbitration at this point in the proceedings in response to the district court's ruling rejecting its motion to add new parties to the suit. However, in that opinion, the district court specifically noted that its decision was not based on the Arbitration Provision: "While the court need not and does not base its decision on this argument, the court agrees with third party defendants that the SPA Agreement does require arbitration." The district court further explained its position in a later order when it stated:

This court did not rule ... that Wolf [Mountain] MUST or COULD or SHOULD arbitrate.... This Court specifically stated it was NOT basing its decision to disallow third parties to be joined on the arbitration provision of the SPA agreement, but on Rule 14 and for other reasons.... This court did NOT rule that Wolf [Mountain] had a right to arbitrate.

The district court denied Wolf Mountain's Motion to Compel Arbitration on the grounds that Wolf Mountain had waived any potential right to arbitration by participating in litigation to a point inconsistent with an intent to arbitrate and causing prejudice to ASCU as a result. Wolf Mountain responded by filing a notice of appeal of the district court's denial of Wolf Mountain's Motion to Compel Arbitration pursuant to the Utah Uniform Arbitration Act, Utah Code Ann. § 78-31a-19 (1999).

¶ 10 This court has jurisdiction to hear the claim under Utah Code sections 78-31a-19(1) (1999) and 78A-3-102(3)(j) (Supp.2010).

STANDARD OF REVIEW

¶ 11 "The interpretation of a statute is a question of law that we review for correctness...." Jaques v. Midway Auto Plaza, Inc., 2010 UT 54, ¶ 11, 240 P.3d 769. On the other hand, determining "whether a contractual right of arbitration has been waived presents mixed questions of law and fact." Pledger v. Gillespie, 1999 UT 54, ¶ 16, 982 P.2d 572. However, when a district court denies a motion to compel arbitration based on documentary evidence alone, it is a legal conclusion that is reviewed for correctness. See McCoy v. Blue Cross & Blue Shield of Utah, 1999 UT App 199, ¶ 10, 980 P.2d 694.

ANALYSIS

¶ 12 We first address whether the district court had jurisdiction to find that a party waived a contractual right of arbitration under section 78-31a-4, and then examine whether the district court erred in holding that Wolf Mountain had waived any potential right to arbitration.

I. THE DISTRICT COURT HAD JURISDICTION TO FIND THAT WOLF MOUNTAIN WAIVED A CONTRACTUAL RIGHT OF ARBITRATION UNDER SECTION 78-31a-4

¶ 13 Wolf Mountain argues that section 78-31a-4 of the Utah Arbitration Act creates a mandatory statutory right that cannot be waived, and therefore the district court did not have jurisdiction to find that Wolf Mountain had waived any potential contractual right of arbitration. Based on this argument, Wolf Mountain urges this court to overrule Chandler v. Blue Cross Blue Shield of Utah, 833 P.2d 356 (Utah 1992), and its progeny. We hold that section 78-31a-4 is not mandatory or jurisdictional, and that the Utah Arbitration Act does not bar courts from applying equitable contract principles to arbitration agreements. As a result, Wolf Mountain has not met its burden of persuading us to overrule our precedent. Therefore, under section 78-31a-4, courts may find that a party has waived its right to arbitration in accordance with the framework set forth in Chandler and its progeny.

245 P.3d 190

A. Section 78-31a-4 Is Not Mandatory or Jurisdictional

¶ 14 Wolf Mountain contends that section 78-31a-4 of the Utah Arbitration Act is mandatory and jurisdictional,² leaving the district court without...