Coroles v. Sabey, 20020407-CA.

• Decision Date: 17 October 2003
• Docket Number: No. 20020407-CA.,20020407-CA.
• Citation: 2003 UT App 339,485 Utah Adv. Rep. 3,79 P.3d 974
• Parties: James and Marjorie COROLES, Brian Rueckert, Lennie and Beverly Bane, David and Sharon Boll, Johannes Janssen, John Karg, Jeffrey L. Miller, Dinesh C. Patel, Bradley R. Peterson, Mark Peterson, Dorsena Picknell, Ramesh K. Prakash, Gordon L. Smith, Tori Smith, Max M. Steele, Stan J. Beus, Steven R. Beus, Michael C. Gleave, Dan Jolley, Tad Gygi, Scott H. Frogley, Jerry M. Frisch, Paul Nagel, M. Sean Brown, Hillary Drammis, Joseph Buzas, Kent Danjanovich, Shane and Bobi Owen, Barton T. Gleave, Brian Neilson, Mark Reichman, Jeffery Smith, Brad Collings, Tim Jolsen, Jayanti Govindji, Tony Owen, Jeff Oviatt, Richard Jones, and Craig Jacobs, Plaintiffs and Appellants, v. Scott R. SABEY, an individual; Day, Shell & Liljenquist, a limited liability Corporation; Fabian & Clendenin, a professional Corporation; Mark Cotter, an individual; Frank Suitter, an individual; Suitter Axland, a professional law corporation; Ernest Ganter, an individual; Albrecht Ganter, an individual; Constance Ganter, an individual; and Brauerei Ganter GmbH & Co. KG, a German Corporation, Defendants and Appellees.
• Court: Utah Court of Appeals

79 P.3d 974

2003 UT App 339

485 Utah Adv. Rep. 3

James and Marjorie COROLES, Brian Rueckert, Lennie and Beverly Bane, David and Sharon Boll, Johannes Janssen, John Karg, Jeffrey L. Miller, Dinesh C. Patel, Bradley R. Peterson, Mark Peterson, Dorsena Picknell, Ramesh K. Prakash, Gordon L. Smith, Tori Smith, Max M. Steele, Stan J. Beus, Steven R. Beus, Michael C. Gleave, Dan Jolley, Tad Gygi, Scott H. Frogley, Jerry M. Frisch, Paul Nagel, M. Sean Brown, Hillary Drammis, Joseph Buzas, Kent Danjanovich, Shane and Bobi Owen, Barton T. Gleave, Brian Neilson, Mark Reichman, Jeffery Smith, Brad Collings, Tim Jolsen, Jayanti Govindji, Tony Owen, Jeff Oviatt, Richard Jones, and Craig Jacobs, Plaintiffs and Appellants, v. Scott R. SABEY, an individual; Day, Shell & Liljenquist, a limited liability Corporation; Fabian & Clendenin, a professional Corporation; Mark Cotter, an individual; Frank Suitter, an individual; Suitter Axland, a professional law corporation; Ernest Ganter, an individual; Albrecht Ganter, an individual; Constance Ganter, an individual; and Brauerei Ganter GmbH & Co. KG, a German Corporation, Defendants and Appellees.

No. 20020407-CA.

Court of Appeals of Utah.

October 17, 2003.

Britton M. Worthen, Leo R. Beus, and K. Scott Hadford, Beus Gilbert PLLC, Scottsdale, Arizona; John C. Rooker, Hanks Rooker & Denning PC, Salt Lake City; and Michael Goldsmith, BYU Law School, Provo, for Appellants.

Alan L. Sullivan, Matthew L. Lalli, Amy F. Sorenson, Snell & Wilmer, Richard D. Burbidge, Jason D. Boren, Stephen B. Mitchell, Burbidge & Mitchell, J. Michael Hansen, Nelson Chipman Quigley & Hansen, David B. Watkiss, and Craig H. Howe, Ballard Spahr Andrews & Ingersoll, Salt Lake City, for Appellees.

Before JACKSON, P.J., and BENCH and ORME, JJ.

OPINION

ORME, Judge:

¶ 1 Plaintiffs appeal the dismissal of their complaint related to their substantial losses from an unprofitable investment. We affirm.

BACKGROUND

¶ 2 According to the complaint,¹ "Plaintiffs are a group of individual investors" in a company called Ganter USA. This company was created and incorporated in January 1997 as a vehicle for bringing the products of Brauerei Ganter GmbH & Co. KG (Ganter Germany), "a major German beer company," to the United States. The venture failed, however, and as a result, Plaintiffs each lost the thousands of dollars they had invested,² amounting to more than $4.6 million collectively.

¶ 3 Defendants, all of whom played some role in the Ganter USA venture and allegedly misrepresented information about Ganter USA to Plaintiffs, can be divided into two groups. The first group, the Ganter defendants, consists of Ganter Germany, a corporation, and Ernst, Constance, and Albrecht Ganter, individuals who were principals of Ganter Germany and directors of Ganter USA. It was these individuals who desired to bring Ganter Germany's products to the United States in the first place. To this end, they recruited Angelo Degenhardt, a Salt Lake City area restaurant owner who also hoped to open a brewpub, "to direct their American venture." According to the complaint, Mr. Degenhardt made several misrepresentations to Plaintiffs regarding Ganter USA during the process of raising funds for the company, and Plaintiffs relied on these misrepresentations in making their investment decisions.³

¶ 4 The other group of defendants, "the professional defendants," consists of attorneys Scott Sabey, Mark Cotter, Frank Suitter, and the law firms for which all three attorneys worked.⁴ Mr. Sabey was the first attorney to assume a role in this venture. He met with Ernst and Constance Ganter and Mr. Degenhardt in December 1996, before Ganter USA was formed, at which time he learned of the Ganters' desire to bring Ganter products to the United States and advised the three to create Ganter USA as a vehicle for doing so. When the Ganters and Mr. Degenhardt decided to follow this advice, Mr. Sabey drafted the incorporation documents and an offering memorandum⁵ to solicit financial support. This offering memorandum, upon which some of the plaintiffs relied in making their investment decision, is now alleged to contain various omissions and misrepresentations.⁶

¶ 5 Ernst Ganter hired Mr. Cotter and Mr. Suitter at a later date, in January 1998,⁷ to represent Ganter Germany and also to assist with some of Ganter USA's projects.⁸ In the course of their work for the Ganter companies, it is alleged, both Mr. Cotter and Mr. Suitter became aware of the misleading information upon which Plaintiffs were relying, including the offering memorandum, yet they remained silent with regard to this knowledge.

¶ 6 Due to their lost investment and the many wrongs they contend that Defendants committed in the process, Plaintiffs sued Defendants, alleging thirteen different causes of action. Plaintiffs' complaint consists of 725 paragraphs spanning 136 pages, the first 646 paragraphs and 125 pages of which are alleged facts.

¶ 7 Plaintiffs' thirteen causes of action fall into four general categories. The first category, "primary fraud" claims, includes the claims of common law fraud, negligent misrepresentation/omission, and securities fraud. The second category, which we will term "secondary fraud" claims, includes civil conspiracy and aiding and abetting fraud. The "unfairness and interference" claims consist of unjust enrichment/constructive trust, conversion, interference with contract, and interference with business relations. The final category of claims are those claims that were actually wrongs against Ganter USA, which Ganter USA assigned to Plaintiffs. These "assigned" claims include breach of fiduciary duty, aiding and abetting breach of fiduciary duty, breach of contract, and breach of the covenant of good faith and fair dealing.

¶ 8 After Plaintiffs filed their complaint, some of Defendants moved to dismiss it as inadequate under rules 9(b) and 12(b)(6) of the Utah Rules of Civil Procedure. In their response to this motion, Plaintiffs defended their complaint and urged the trial court to deny Defendants' motion to dismiss. Also, at the end of their response, Plaintiffs included a one-paragraph request that they be granted leave to amend the complaint in the event the court found it to be inadequate.⁹

¶ 9 The trial court held a hearing on the motion to dismiss, and at the end of the hearing, it dismissed the claims of aiding and abetting breach of fiduciary duty, aiding and abetting fraud, and unjust enrichment.¹⁰ It also entirely dismissed from the lawsuit the defendant Constance Ganter.

¶ 10 Then, in a subsequently released memorandum decision, the court addressed the remaining claims and dismissed all of them. It stated that the dismissal of the entire complaint was "without prejudice," but it denied Plaintiffs the opportunity to amend the complaint.

¶ 11 According to the memorandum decision, the trial court's reason for dismissing the primary fraud claims was that "the plaintiffs ha[d] failed to plead their claims of fraud with particularity." It dismissed the assigned claims of breach of fiduciary duty and breach of contract because, it said, "even if the defendants made the alleged misrepresentations and omissions to the plaintiffs, Ganter USA would have been the benefactor and not the victim of these actions. In other words, the Complaint contains no allegations of damage to Ganter USA as a result of these actions."

¶ 12 The court's reason for dismissing the remaining claims was that they were "predicated on the fraud and breach claims, [so] the dismissal of the [fraud and breach] causes of action[ ] result[ed] in a dismissal of the plaintiffs' entire Complaint."

¶ 13 As for Plaintiffs' hope to amend their complaint, the court recognized

that alternatively it could have given the plaintiffs leave to amend their Complaint. However, the plaintiffs have already filed an unusually long voluminous Complaint. Plaintiffs still contend they've pled fraud with particularity. The Complaint, despite its extraordinarily lengthy content, does not allege fraud with particularity and counsel's failure to see this[ ] causes this Court concern about the value of allowing an Amended Complaint, at this time. There is nothing to indicate to the Court that an amendment would resolve these problems. Therefore, ... leave to amend is denied.

¶ 14 Plaintiffs now appeal the dismissal of their complaint. They also appeal the denial of their request for leave to amend the complaint.

ISSUES AND STANDARDS OF REVIEW

¶ 15 This appeal presents two issues. The first issue is whether the trial court erred in dismissing Plaintiffs' complaint. "Because the propriety of a motion to dismiss is a question of law, we review for correctness, giving no deference to the decision of the trial court." Krouse v. Bower, 2001 UT 28, ¶ 2, 20 P.3d 895.

¶ 16 The second issue concerns the propriety of the trial court's refusal to grant Plaintiffs leave to amend their complaint. "We will not disturb a trial court's ruling on a motion to amend a complaint absent a clear abuse of discretion. Under that standard, `"we will not reverse unless the decision exceeds the limits of reasonability."'" Neztsosie v. Meyer, 883 P.2d 920, 922 (Utah 1994) (quoting Crossland Sav. v. Hatch, 877 P.2d 1241, 1243 (Utah 1994)) (other citations omitted).

ANALYSIS

I. DISMISSAL OF THE COMPLAINT

A. Claims Not Before Us

¶ 17 Before proceeding, we pause to point out that Plaintiffs have not briefed, and have therefore waived the opportunity to appeal, the dismissal of five of their thirteen causes of action: the unfairness and interference claims and the negligent misrepresentation/omission claim.

¶ 18 While section I of Plaintiffs' brief is entitled "THE TRIAL COURT ERRED IN DISMISSING THE ENTIRE COMPLAINT," this reference to "the entire complaint," by itself, certainly does not constitute the analysis required to sustain the five claims that we are now holding to be waived, see Utah R.App. P. 24(a)(9) ("The...