Macris & Associates, Inc. v. Images & Attitude, Inc.
| Decision Date | 19 June 1997 |
| Docket Number | No. 960218-CA,960218-CA |
| Citation | 941 P.2d 636 |
| Parties | 319 Utah Adv. Rep. 33 MACRIS & ASSOCIATES, INC., Plaintiff and Appellee, v. IMAGES & ATTITUDE, INC., a Utah corporation; and Thomas Mower, an individual, Defendants and Appellants. |
| Court | Utah Court of Appeals |
Dennis K. Poole and Andrea Nuffer, Dennis K. Poole & Associates, Salt Lake City, for Defendants and Appellants.
Stephen T. Hard, Roger D. Sandack, and Steven E. McCowin, Giauque, Crockett, Bendinger & Peterson, Salt Lake City, for Plaintiff and Appellee.
Before BILLINGS, JACKSON and ORME, JJ.
Images & Attitude, Inc. (Images) appeals from the trial court's grant of partial summary judgment in favor of Macris & Associates, Inc. (M & A), dismissing Images's fraudulent inducement claim against M & A based on collateral estoppel, and from the trial court's judgment in favor of M & A on the remaining claims. We affirm.
Images is a multilevel marketing company which markets health and beauty products. In 1989, Thomas Mower, president of Images, entered into negotiations with Michael Macris, who was acting on behalf of two corporations: Affinity, Inc. (Affinity), a nail system manufacturing company, and M & A, a marketing company. As a result of these negotiations, Images entered into two related contracts: (1) a supply contract with Affinity, under which Affinity was to supply nail gels and lamp housings to Images for use in assembling nail care kits ("Affinity contract"), and (2) a distributorship contract with M & A, under which M & A was to market the nail products in Images's marketing program ("M & A contract"). Under the M & A contract, M & A was "autoqualified," which meant that the usual distributor requirements of the Images marketing plan were waived, and M & A was to be paid at the highest level provided for in the marketing plan without having to meet any of the usual qualifications for being compensated at that level. M & A was to be entitled to autoqualification status as long as M & A was "active in promoting Images and Images products."
A number of disputes then arose between the parties, including disputes over the nail gel Affinity was providing Images, to which several users had developed irritation problems, and over Michael Macris's testing of other nail gels. In March 1991, Images notified M & A that it was discontinuing M & A's autoqualification status for lack of activity. Later in that same month, Images notified M & A that it was considering terminating the M & A distributorship entirely.
In April 1991, M & A filed this action for breach of the M & A contract. Images counterclaimed, asserting, among other things, that M & A breached the M & A contract, that M & A was the alter ego of Macris, and that Macris fraudulently induced Images into entering into the M & A contract.
At about the same time M & A initiated this action, Affinity initiated an arbitration proceeding against Images, alleging breach of the Affinity contract. In May 1992, the arbitrator in that proceeding determined that Images had breached its contract with Affinity and awarded Affinity damages. This arbitration award was entered as a judgment in district court in June 1992. Images then filed a complaint in district court, alleging that it had been fraudulently induced into entering into the Affinity contract and asking that the arbitration award and judgment in Affinity's favor be set aside. In addition, Images filed arbitration proceedings against Affinity, also arguing in those proceedings that it had been fraudulently induced into contracting with Affinity. In November 1993, the arbitrator dismissed Images's fraudulent inducement claim on summary judgment.
Following the arbitrator's dismissal of Images's fraudulent inducement claim against Affinity, M & A moved for summary judgment on the fraudulent inducement claim in this litigation, arguing that Images's fraudulent inducement claim in this case was barred under the collateral estoppel doctrine. The trial court granted M & A's motion for summary judgment on the fraudulent inducement claim.
After a trial on the remaining issues, the trial court entered judgment in favor of M & A. The trial court concluded, among other things, that M & A did not materially breach the contract with Images, but that Images had materially breached the contract by discontinuing M & A's autoqualification status and by failing to pay M & A under the parties' contract. The trial court also concluded that M & A was not the alter ego of Macris. The trial court awarded M & A $360,681.20 plus interest in damages. Images appeals.
On appeal, Images argues that the trial court erred in dismissing its fraudulent inducement claim on the basis of collateral estoppel. Images also asserts that the trial court erred in determining that M & A was not the alter ego of Michael Macris, or that Macris was not the agent of M & A, and that Macris's competitive activities were therefore not attributable to M & A. Finally, Images asserts that the trial court erred in excluding Images's witness, William Crismon, from testifying at trial.
Images first argues the trial court erred in dismissing Images's fraudulent inducement claim against M & A on summary judgment. Summary judgment is appropriate only where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. See Utah R. Civ. P. 56(c). Because summary judgment presents only questions of law, we review the trial court's determinations under a standard of correctness, according no deference to the trial court's legal conclusions. See Cook v. Zions First Nat'l Bank, 919 P.2d 56, 59 (Utah.Ct.App.), cert. denied, 925 P.2d 963 (Utah 1996).
In dismissing Images's fraudulent inducement claim on summary judgment, the trial court concluded that Images was collaterally estopped from relitigating the fraudulent inducement claim against M & A based on the Affinity arbitration proceedings. The court specifically determined that "[c]ollateral estoppel applies to issues decided on summary judgment" and "to issues decided in arbitration proceedings." The court further found that "[t]he issue as to whether Mr. Macris fraudulently induced the Defendants has already been fully and fairly litigated in a prior arbitration proceeding" and "[t]he prior arbitration proceeding found that no fraudulent inducement had occurred."
Collateral estoppel, also referred to as issue preclusion, prevents the relitigation of issues raised, litigated, and resolved in a previous action. "Under this doctrine, the relitigation of factual issues that have once been litigated and decided is precluded even if the claims for relief in the two actions are different, and even if only 'the party against whom the doctrine is asserted was a party or in privity with a party to the prior adjudication.' " Mel Trimble Real Estate v. Monte Vista Ranch, Inc., 758 P.2d 451, 453 (Utah.Ct.App.1988) (citation omitted) (emphasis in original).
The party seeking to invoke the doctrine of collateral estoppel must establish four elements:
First, the issue challenged must be identical in the previous action and in the case at hand. Second, the issue must have been decided in a final judgment on the merits in the previous action. Third, the issue must have been competently, fully, and fairly litigated in the previous action. Fourth, the party against whom collateral estoppel is invoked in the current action must have been either a party or privy to a party in the previous action.
Jones, Waldo, Holbrook & McDonough v. Dawson, 923 P.2d 1366, 1370 (Utah 1996).
On appeal, Images argues the trial court erred in concluding that collateral estoppel applies because: (1) the fraudulent inducement issue in this case is not identical to that decided in the prior proceeding, and (2) Images was not afforded a full and fair opportunity to litigate the issue in the prior proceeding because the fraudulent inducement claim was decided on a motion for summary judgment in that proceeding. Images also asserts the trial court erred in granting summary judgment on the ground of collateral estoppel because, by failing to present the record of the prior proceeding to the trial court, M & A failed to meet its burden below of establishing the elements of collateral estoppel.
We first address Images's argument that the trial court erred in granting summary judgment because M & A did not meet its burden of establishing that collateral estoppel applied in this case. Images specifically asserts that M & A failed to meet its burden below of establishing either that the issue in this case is identical to that of the prior proceeding or that Images had a full and fair opportunity to litigate the issue in the earlier proceeding.
In general, the party asserting collateral estoppel has the burden of establishing the elements of collateral estoppel. See Timm v. Dewsnup, 851 P.2d 1178, 1184 (Utah 1993). Images argues that M & A failed to meet this burden because M & A merely asserted, without providing any evidence to support its assertions, that the elements of the doctrine were met. Images points out that M & A did not offer any transcripts of the arbitration hearing, and did not attach any part of the record from the arbitration proceedings. Therefore, in deciding that the arbitration ruling had preclusive effect, the trial court relied only on the order from the arbitration proceeding, which stated: "Affinity made no misrepresentations of material facts to [Images] to induce [Images] to enter into the Agreement and [Images], in any event, did not reasonably rely on the alleged misrepresentations."
This court has previously considered, in a similar context, the burden a party bears in establishing the elements of collateral estoppel. See Trimble, 758 P.2d at 453-55. In Trimble, the plaintiff, a real estate broker, brought an action to recover a real estate...
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