Butler v. Mediaport Entm't Inc.

• Decision Date: 24 March 2022
• Docket Number: 20200465-CA
• Citation: 508 P.3d 619
• Parties: Jon F. BUTLER, Appellant and Cross-appellee, v. MEDIAPORT ENTERTAINMENT INC. and Red Touch Media Ltd., Appellees and Cross-appellants.
• Court: Utah Court of Appeals

508 P.3d 619

Jon F. BUTLER, Appellant and Cross-appellee,

v.MEDIAPORT ENTERTAINMENT INC. and Red Touch Media Ltd., Appellees and Cross-appellants.

No. 20200465-CA

Court of Appeals of Utah.

Filed March 24, 2022

Diana J. Huntsman and David C. Harless, Attorneys for Appellant and Cross-appellee

Barry N. Johnson, Daniel K. Brough, and Ryan M. Merriman, Attorneys Appellees and Cross-appellants

Judge Ryan M. Harris authored this Opinion, in which Judges Jill M. Pohlman and Ryan D. Tenney concurred.

Opinion

HARRIS, Judge:

¶1 The district court excluded all evidence supporting Jon F. Butler's counterclaims—filed against his former employer in litigation over the validity of a specific employment agreement—because Butler made only vague disclosures regarding the computation of his claimed damages. The court then summarily dismissed those counterclaims for lack of evidence. Butler appeals that dismissal, asserting that his damages disclosures were sufficient or, in the alternative, that his failure to make proper disclosures was harmless under the circumstances. Butler's former employer—Mediaport Entertainment Inc. (Mediaport)—cross-appeals the denial of its motion for attorney fees. We affirm the district court's rulings in all respects.

BACKGROUND

¶2 In 2001, Butler founded a company—Mediaport—to market and sell a system he invented for selecting and downloading music tracks onto a CD or similar device. Some years later, Mediaport was acquired by Red Touch Media Ltd., and Butler continued to work for the company after the acquisition. For ease of reference, unless otherwise specified, we refer to the company simply as "Mediaport," regardless of whether our reference points to a pre-acquisition or post-acquisition event.

¶3 In 2012, roughly a year after the acquisition, Butler provided the company's new owners with a copy of an employment agreement (the Agreement) that he claimed he and Mediaport had entered into before the acquisition. The Agreement contained provisions stating that, upon his termination for any reason other than for cause, Butler would "be entitled to severance in an amount equal to three (3) full years of Base Salary," as well as "all compensation and benefits earned but not yet paid," including credit for "unused vacation, sick and personal days." "Base Salary" is defined in the Agreement by reference to an attached "Schedule A," which in turn specifies that Butler's "Base Salary," as of July 1, 2003, was $130,000 per year. The Agreement also provided that "[a]ny dispute, controversy, or questions arising under, out of, or relating to this Agreement ... shall be referred for arbitration," and that, "[i]n connection with any arbitration, the prevailing party shall be entitled to recover its costs and reasonable attorneys’ fees."

¶4 In February 2013, Mediaport terminated Butler's employment, and Butler claimed entitlement to the severance benefits discussed in the Agreement. But Mediaport refused to pay those benefits, apparently espousing the belief that the Agreement was neither valid nor enforceable, and that it had additionally been superseded by another arrangement. That same month, Mediaport initiated this lawsuit, stating several claims for relief against Butler, including damages claims, but chiefly a request for a judicial declaration that the Agreement was unenforceable and that Mediaport owed Butler nothing.

¶5 Butler responded by filing a counterclaim. In addition to claims for declaratory and injunctive relief regarding the Agreement's validity, Butler's initial counterclaim contained two different claims for damages: one for breach of contract and another for conversion. Butler later amended his pleading to include additional damages claims; as amended, Butler's counterclaim stated five such claims against Mediaport. First, Butler accused Mediaport of breaching the termination and severance provisions of the Agreement; on this claim, Butler sought "a sum exceeding one million dollars ($1,000,000.00)."¹ Second, Butler set forth a claim for breach of the implied covenant of good faith and fair dealing, accusing Mediaport of "diluting his shares" of stock in the company and damaging him "in an amount to be determined at trial, but in no event less than $150,000.00." Third, Butler stated a claim of conversion, accusing Mediaport of improperly taking some of his personal items from his office while he was away, and asserting that he had been damaged "in an amount to be determined by the fact-finder." Fourth, Butler set forth a defamation claim, accusing Mediaport of "ma[king] and publish[ing] false statements" about him, and damaging him in an unspecified amount. Finally, Butler accused Mediaport of tortiously interfering with his business and contractual relations, asserting that he had been damaged "in an amount to be proven at trial, but no less than $200,000.00." Butler also sought "costs and attorneys’ fees" under the "terms of the [Agreement]." Butler attached a copy of the Agreement to his amended counterclaim.

¶6 Butler's initial disclosures—which he served on Mediaport after filing his initial counterclaim but before filing the amended one—contained the following damages disclosure, quoted here in its entirety:

Because of the lack of documents available to [Butler], he cannot provide an exact calculation of damages at this time. It is estimated that the damages suffered by [Butler] approximate $900,000.

Butler's initial disclosures contained no further computation or categorization of damages, nor any explanation of how he arrived at the $900,000 figure. Butler produced some 150 pages of documents with his initial disclosures, but none of those documents purported to offer any computation of damages. And although Butler once supplemented his initial disclosures, that supplement did not provide any additional information regarding computation of damages. Butler never supplemented his damages disclosures.

¶7 During the discovery period, Mediaport asked Butler via interrogatory to "[i]dentify all facts supporting your allegation, contained in ... the Counterclaim, that ... [Mediaport is] indebted to [Butler] for accrued benefits under the terms of [the Agreement] in a sum exceeding on[e] million dollars ($1,000,000)." Butler responded as follows:

All of [Butler's] records were either turned over to Mediaport ... or were retained by the company .... For this reason [Butler] cannot respond with certainty to this interrogatory. [Mediaport has] the [Agreement], which speaks for itself. Specifically, the contract called for severance benefits, which included, but were not limited to, payment of three times the annual salary, compensation for benefits, and pre-payment of legal fees in litigation to enforce the contract. These severance benefits have not been paid and are estimated to exceed $1,000,000.00 in value.

¶8 Mediaport also took Butler's deposition and asked him questions about his claim for breach of the termination and severance provisions contained in the Agreement. When asked what his base salary was when he first had one, Butler responded that it was "130." But Butler maintained that he had never actually been paid $130,000 per year because Mediaport had been "deferring" some of his compensation; he also had a hard time answering questions related to how much salary he had actually been paid while in Mediaport's employ.

¶9 During the deposition, Mediaport asked Butler questions about a letter (the Hubbard Letter) that had been written by Mediaport's chief operating officer (COO) in 2012, just months before Butler was terminated. That letter contained a tally of the value of the vacation and sick days Butler had purportedly accrued, as well as two alternative tallies of the deferred compensation Butler had purportedly accrued. The Hubbard Letter also contained a reference to a possible increase in Butler's base salary, from $130,000 to $190,000.

¶10 The fact discovery period ended in June 2015. After that, the litigation stagnated for several years, with neither party taking any meaningful action to move it forward toward trial. Finally, in early 2018, Mediaport filed a motion in limine seeking to exclude all of Butler's damages-related evidence, asserting that Butler had failed to comply with the disclosure obligations set forth in rule 26(a)(1) of the Utah Rules of Civil Procedure. At the same time, Mediaport also filed a motion for summary judgment, arguing that, if its motion in limine were granted, Butler would be bereft of evidence supporting his claimed damages and that all his claims would on that basis be subject to dismissal.

¶11 After full briefing and oral argument, the district court granted both motions, but only in part. The court first determined that Butler's damages disclosures "fail[ed] to meet the requirements of" rule 26(a)(1). The court next examined whether Butler's noncompliance with the rule's requirements was harmless and determined that, for many of his counterclaims, it was not. Regarding all of Butler's claims other than the one for breach of contract, the court concluded that Butler's faulty disclosures had harmed Mediaport because those claims alleged nonspecific damages and Butler had made no effort, during discovery or otherwise, to illuminate the amount of damages he sought on those claims. The court therefore excluded all of Butler's damages-related evidence related to those claims, and ruled that Mediaport was entitled to summary judgment on each of them due to Butler's inability to prove damages.

¶12 With regard to Butler's claim for breach of contract, however, the district court's ruling was more complex. The court concluded that Mediaport was in possession of sufficient information—through sources other than Butler's initial disclosures (specifically, from Butler's counterclaim and from information learned during discovery)—to be able to understand and defend against Butler's claim for payment of three times his base salary upon termination. In the court...