Hudgens v. Prosper, Inc.

• Decision Date: 23 November 2010
• Docket Number: No. 20090391.,20090391.
• Citation: 2010 UT 68,243 P.3d 1275
• Parties: Chad HUDGENS, Plaintiff and Appellant, v. PROSPER, INC., and Joshua Christopherson, Defendants and Appellees.
• Court: Utah Supreme Court

243 P.3d 1275

2010 UT 68

Chad HUDGENS, Plaintiff and Appellant,

v.PROSPER, INC., and Joshua Christopherson, Defendants and Appellees.

No. 20090391.

Supreme Court of Utah.

Nov. 23, 2010.

Sean N. Egan, Salt Lake City, for plaintiff.

Evan A. Schmutz, Andy V. Wright, Provo, for defendants.

DURRANT, Associate Chief Justice:

INTRODUCTION

¶ 1 This appeal arises from the district court's dismissal of claims made by ChadHudgens against Prosper, Inc., and Joshua Christopherson (collectively, "Prosper") for injuries related to the alleged waterboarding of Mr. Hudgens by Mr. Christopherson. Prosper filed a motion to dismiss Mr. Hudgens's complaint, which the district court granted. Before the order dismissing Mr. Hudgens's claims was entered, however, Mr. Hudgens filed a motion for leave to amend his complaint. The district court denied Mr. Hudgens leave to amend and dismissed his claims with prejudice. Mr. Hudgens asks that we review (1) whether the district court erred when it dismissed his substantive claims and (2) whether the district court abused its discretion when it refused to grant Mr. Hudgens leave to amend his complaint. We conclude that the district court abused its discretion when it denied Mr. Hudgens's motion for leave to amend because the district court's order denying leave to amend failed to provide adequate reasons for the denial. Because we find that the district court abused its discretion in denying Mr. Hudgens leave to amend, we decline to review Mr. Hudgens's substantive claims and the dismissal of those claims by the district court. Accordingly, we reverse and remand for further proceedings.

BACKGROUND

¶ 2 Because this is an appeal from dismissal under Utah Rule of Civil Procedure 12(b)(6), we must accept all of Mr. Hudgens's factual allegations as true.¹ The facts in this section are set forth in accordance with this standard.

¶ 3 This case arises from an incident that occurred on May 29, 2007. At that time, Mr. Hudgens was an employee of Prosper under the direct supervision of Mr. Christopherson. During the ten months that Mr. Hudgens worked for Prosper, Mr. Christopherson had engaged in numerous questionable management practices. Specifically, when an employee did not meet performance goals, Mr. Christopherson would draw a mustache on the employee using permanent marker or he would remove the employee's chair. Additionally, he would patrol the employees' work area with a wooden paddle, which he would use to strike desks and tabletops. Prosper was aware of Mr. Christopherson's actions and encouraged his behavior because it led to increased revenue.

¶ 4 On May 29, 2007, Mr. Christopherson asked for volunteers for a new motivational exercise. He offered no explanation to his team members regarding the nature of the exercise. In his search for volunteers, Mr. Christopherson challenged the loyalty and determination of his team members. Mr. Hudgens volunteered to be a part of the exercise to prove his loyalty and determination. Mr. Christopherson then led his team members to the top of a hill near Prosper's office. Once on the hill, Mr. Christopherson ordered Mr. Hudgens to lie down, facing up, with his head pointed downhill. Mr. Christopherson ordered other team members to hold Mr. Hudgens down by his arms and legs. Mr. Christopherson then slowly poured water from a gallon jug over Mr. Hudgens's mouth and nose so that he could not breathe.² Mr. Hudgens struggled and tried to escape but, at Mr. Christopherson's direction, the other team members held him down. After concluding the exercise, Mr. Christopherson instructed his team members that they should work as hard at making sales as Mr. Hudgens had worked at trying to breathe.

¶ 5 Mr. Hudgens reported the incident to Prosper's human resources department. Prosper took no action in response to the incident prior to the time that Mr. Hudgens quit working for Prosper. Mr. Hudgens quit working because the waterboarding incident caused him to suffer sleeplessness, anxiety, depression, and to feel sick to his stomach at work. Because of the distress caused by the incident, Mr. Hudgens has undergone psychological counseling and has suffered physical and emotional harm.

¶ 6 Approximately seven months after the incident, on January 15, 2008, Mr. Hudgens filed a complaint against Prosper and Mr. Christopherson asserting four causes of action. First, Mr. Hudgens alleged common law assault and battery against Prosper and Mr. Christopherson. Second, Mr. Hudgens alleged intentional infliction of emotional distress against Prosper and Mr. Christopherson. Third, Mr. Hudgens alleged Prosper and Mr. Christopherson had wrongfully terminated him from his position. Finally, Mr. Hudgens alleged that Mr. Christopherson had intentionally interfered with his contractual relationship with Prosper.³

¶ 7 Prosper filed a motion to dismiss the complaint and argued that Mr. Hudgens had failed to allege sufficient facts to demonstrate any claim for relief. Prosper argued that the claims of common law assault, battery, and intentional infliction of emotional distress were barred by the exclusivity provision of the Utah Workers Compensation Act. Specifically, Prosper argued that although there is an exception to the exclusivity provision for certain intentional acts, Mr. Hudgens's claim failed to fit into the exception because his complaint did not allege the necessary mental state. As to the claim of wrongful termination, Prosper argued that under Utah's at-will employment doctrine, Mr. Hudgens failed to state a claim for wrongful termination. Specifically, Prosper acknowledges a public policy exception to the at-will employment doctrine, but contends that Mr. Hudgens's claim does not fit into the public policy exception because Mr. Hudgens failed to identify a public policy on which he relied and failed to establish facts necessary to support his claim.

¶ 8 Mr. Hudgens responded to Prosper's motion to dismiss by arguing that, because his complaint alleged and specifically identified Mr. Christopherson's actions as intentional, the complaint satisfied the relevant standard for stating a claim. Mr. Hudgens also identified a number of statutory and common law public policies that supported his claim for wrongful discharge. Finally, Mr. Hudgens, in his memorandum opposing the motion to dismiss, sought leave to amend his original complaint. He argued that if the allegations in the original complaint were deemed insufficient, then he should be entitled to an opportunity to cure those defects. Mr. Hudgens sought leave to amend only in that memorandum; he did not, at that time, file a separate motion for leave to amend.

¶ 9 In a ruling issued on July 23, 2008, the district court dismissed Mr. Hudgens's complaint without prejudice. The court concluded that Mr. Hudgens's complaint failed to state a claim for common law assault, battery, or intentional infliction of emotional distress because the purpose of Mr. Christopherson's exercise was to motivate his team members, not to injure Mr. Hudgens. The court also concluded that Mr. Hudgens's complaint failed to state a claim for wrongful termination because it failed to adequately allege the violation of a public policy. The district court also denied Mr. Hudgens leave to amend his complaint, holding that Mr. Hudgens had failed to properly move the court for leave to amend because, rather than filing a motion for leave to amend, Mr. Hudgens incorporated his request for leave to amend into his Memorandum in Opposition to Prosper's Motion to Dismiss. The court indicated that the claims were to be dismissed without prejudice and instructed Prosper to draft an order reflecting its ruling. Prosper delivered that order to Mr. Hudgens on September 17, 2008, and the court signed it on October 8, 2008.

¶ 10 Between the delivery of the draft order to Mr. Hudgens's attorney and the signing of the order by the district court judge, Mr. Hudgens filed a motion for leave to amend his complaint. Mr. Hudgens's motion identified the liberal standard for granting leave to amend and highlighted the fact that Prosper would not be prejudiced if leave were granted because the litigation was in a relatively early stage. Included with the motion for leave to amend was Mr. Hudgens'sproposed amended complaint. The amended complaint included additional facts and allegations intended to cure the original complaint's deficiencies as identified by the district court.

¶ 11 In spite of this motion to amend, the district court signed Prosper's proposed order dismissing Hudgens's claims without prejudice. Even though it had successfully obtained the dismissal of Hudgens's claims, Prosper moved the court to amend the order so that the claims would be dismissed with prejudice. In seeking dismissal of the claims with prejudice and arguing against Hudgens's motion to amend, Prosper argued that leave should be denied because the facts in the amended complaint were inconsistent with the facts as set forth in the original complaint, and that the original complaint could not be superseded unless these factual discrepancies were adequately explained. Prosper also argued that the amendment was futile because even if the court were to grant leave to amend and accept the new complaint, the complaint would still fail to state legally sufficient claims for assault, battery, intentional infliction of emotional distress, and wrongful termination.

¶ 12 The court denied Mr. Hudgens's motion for leave to amend and granted Prosper's motion to amend the court's prior order to dismiss all of Mr. Hudgens's claims with prejudice. Although the district court directed Prosper to draft the amended order, Prosper failed to do so. Presented with this delay, Mr. Hudgens's counsel drafted a proposed order and presented it to the court. The relevant portion of this order states as follows:

Having considered the submissions of the parties, having heard oral argument from counsel and for good cause otherwise

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